ATI Inc. (ATI) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Allegheny Technologies Incorporated. Please note that today's meeting is being recorded. It is now my pleasure to turn the meeting over to Diane Creel, Chair of ATI's Board of Directors. Ms. Creel, the floor is yours.

Good morning, ladies and gentlemen. I'm Diane Creel, Chair of the Board of Directors of Allegheny Technologies Incorporated. It's 11:00 a.m. and in accordance with the notice of the meeting, I call to order the 2021 Annual Meeting of Stockholders of ATI. Today's virtual meeting is a live audio webcast. As previously announced, ATI chose to conduct today's meeting in a virtual-only format in light of ongoing national health concerns. We believe in engaging our stockholders and that under the current circumstances, this technology provides the greatest opportunity for your participation in today's meeting, regardless of your physical location. We will conduct the meeting in accordance with the agenda and the rules and procedures of conduct that are available in the file section in the lower left corner of the meeting center screen. Before the business of the meeting begins, I'd like to make certain introduction. Participating in today's webcast are Bob Wetherbee, ATI's President and Chief Executive Officer, and a member of the Board; and Elliot Davis, ATI's Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Davis will act as Secretary of this meeting. Also participating and representing the company's independent auditors is [ Michael DeVeau ], a partner of Ernst & Young LLP. If questions arise during the discussion period that Ernst & Young should appropriately address, he will be glad to respond. Finally, Amanda Skov, the company's Assistant General Counsel and Assistant Secretary, is also present and has been duly sworn to perform the duties of the inspector of elections. I would also like to welcome the other members of our Board of Directors, who are participating in today's meeting in a listen-only mode. I would now like to ask Mr. Davis to report on the mailing of the notice of this meeting and the presence of a quorum.

Thank you, Madam Chair. This meeting is held pursuant to the printed notice dated April 5, 2021, that was mailed commencing on that date to each stockholder of record as of March 22, 2021. A list of stockholders entitled to vote at this meeting has been available for at least 10 days prior to this meeting in accordance with Delaware Law. All documents concerning the call and notice of the meeting will be filed with the records of the meeting. The count of shares present, immediately before the meeting began, indicate that 114,290,432 shares of the company's common stock were present in person or by proxy. This is approximately 90% of all shares entitled to vote at this meeting. A quorum is present at the meeting.

Since the meeting has been duly called and a quorum is present, the meeting is ready to transact business. The polls for each matter to be voted on at this meeting are now open at 11:04 a.m. today, May 20, 2021. If you have not voted or wish to change your vote, you may do so now by clicking on the link provided online. Any stockholder who has already voted and does not want to change that vote, may not take any further action at this time. Will the Secretary please introduce the 3 matters for stockholder consideration.

Thank you, Madam Chair. The matters for consideration by the stockholders today are: one, the election of 3 directors; two, an advisory vote regarding the 2020 compensation of the company's named executive officers; and three, ratification of the selection of Ernst & Young LLP as independent auditors for 2021. These matters are described in detail in the proxy statement. The results of the advisory vote are not binding on the company.

Thank you, Mr. Secretary. We will now allow a few moments for any remaining online voting. [Voting]

I now declare the polls closed for the matters voted on at this meeting as of 11:06 a.m. today, May 20, 2021. Will the Secretary please report the preliminary results of the voting.

Thank you, Madam Chair. The inspector of elections counted the ballots and proxies, and has reported the following: a total of 114,290,432 shares of the company's common stock are present at the meeting in person or by proxy. The preliminary voting results are as follows: with respect to the election of directors, the 3 nominees named in the proxy statement for this meeting received the highest number of votes cast; in an advisory vote, the stockholders have voted to approve the 2020 compensation of the company's named executive officers; and the stockholders have voted to ratify the selection of Ernst & Young LLP as independent auditors for the year 2021. These voting results are preliminary. Final results will be reported on a Form 8-K to be filed with the SEC next week. The final report of the inspector of elections will be filed with the records of the meeting. Madam Chair, that concludes my report of the preliminary results of the voting.

Ladies and gentlemen, this concludes the official portion of our meeting. And I declare the meeting to be formally adjourned at 11:07 a.m. today, May 20, 2021. I would like to just pause for a moment to thank our shareholders, directors and management team for allowing me to serve ATI for 26 years as a Director and more recently, as Board Chair. I would also like to thank Jim Rohr, John Pipski for their service to our Board as they retire today as well. It is with personal sadness but professional pride as I leave my friends and colleagues today. Know that my wish for continued success will always be with you. I will now turn this over to Bob Wetherbee.

Thanks, Diane. And the past year has been extraordinary, a rapid deterioration in business conditions with COVID, amplified by significant uncertainty drove an urgency to take action for the good of our business. Our team persevered and focused on doing the right things quickly and decisively. Together, we positioned ATI to emerge from the crisis as a stronger company focused on aerospace and defense. Was it stressful for the organization? You bet. Have our markets completely recovered? Not yet. Has it helped us to galvanize as a company? Absolutely. We know who we are and what we need to accomplish. We're sharpening our product focus and optimizing our assets. As signs of recovery emerge, we're positioned for a strong future. While uncertainties remain, today, I'll talk about 3 keys to our ability to achieve success: our commitment to drive shareholder value, our Board and our team. The first key: our commitment to drive shareholder value. ATI is a great company with unique capabilities, extraordinary technology and a strategic approach that guides us to achieve our vision. As shareholders, you've chosen to invest in us and we understand and appreciate the responsibility that brings. We're committed to creating value for you. We look forward to achieving ATI's long-term success together. Let's talk about the second key to our success: our Board. I appreciate the ongoing support and counsel of our Board of Directors. Their extensive knowledge, experience and insight has helped us to navigate the past year. Each member serves as an excellent steward as we manage through the short term and pursue profitable growth, and increase shareholder value over the long term. I thank each of our Directors for their service. Three of our long-standing board members are retiring this year after outstanding service to ATI: our Board Chair, who you heard from this morning, Diane Creel; and Directors John Pipski and Jim Rohr. Their leadership and commitment to ATI has helped us set our company on a path of tremendous opportunity and success. On behalf of the Board and the rest of the ATI team, I say thank you and best wishes. And from a personal perspective, I thank Diane, John and Jim. Your counsel, coaching and I must admit, sometimes even cajoling, have been extremely helpful to me. I'm deeply honored and humbled by the opportunity to succeed Diane and chairing your Board, and look forward to what we will accomplish. And finally, the third component of our success: our team, our relentless committed people. Our team's extraordinary support for each other's health and welfare allowed us to maintain on-time delivery of the mission-critical parts and materials our customers need, and to adapt to changing demand throughout the global pandemic. It hasn't been easy and I thank every ATI employee for their commitment and steadfast support through a very challenging time. That same dedication enables us to continue delivering on our commitments during the strike initiated by the United Steelworkers at several facilities within our Specialty Rolled Products business. Eight weeks into this strike, our business continuity plan is well underway. We're on track to reach target temporary workforce levels by June. Our operations are gaining momentum every day as we deliver on orders at the required quality levels. That's thanks to our incredible team of salaried and nonrepresented employees from the SRP business unit as well as other business units across ATI who are providing support. I want to take a moment to say thank you to this dedicated group. They're protecting our customers and our business for the future. As I conclude my remarks today, I want to take a minute to address an issue that is important to ATI and an important subset of our shareholders and the ATI team. That's our employees represented by the United Steelworkers, who are currently on strike. The critical issue that separates us is how we control health care cost inflation moving forward. It's not just about nominal monthly premiums. We must create an appropriate and predictable cost structure for this business. And as such, we need an equitable mechanism to mitigate the impact of health care cost inflation. At the current pace with the current and continuing inflation rates, health care costs nearly double every 10 years. We need to address it now, so everyone is motivated to contain these costs. We're not walking away from our support. Under our proposal, we'll continue what we currently pay and even absorb a large amount of future increases by providing an above-market plan design with modest below-market monthly premiums. We believe the health care proposal we have on the table, combined with the substantive wage increases and a lump sum payment is generous, related to the performance of the Specialty Rolled Products business. Each business unit must stand on its own financially. And as we've shared in other public forums, the financial performance for the business covered by this agreement has been challenged for some time. We are committed and investing to fix it. Equally important, our health care proposal is in line with plans agreed to by the United Steelworkers at other ATI locations, and more specifically, at competitor facilities that compete with ATI for orders every day. The union's demands put Specialty Rolled Products and the future of these jobs at a significant competitive disadvantage now and into the future. It's not just an issue between company and bargaining unit, all employees and the communities where they live stand to lose. We have a generous offer on the table and are committed to negotiating an agreement that both rewards our hardworking employees and contributes to the long-term viability of our SRP business and its ability to create additional shareholder value. With that, thank you for attending today's annual meeting. I'll now address your questions submitted online prior to and during today's meeting. As I've already provided our perspective on the strike, the negotiating teams are focused on the specifics of reaching a competitive agreement and have a meeting scheduled with a federal mediator tomorrow. So I'll leave any discussion on that topic to that forum. If you're a USW-represented ATI employee and have ideas about how to resolve the strike, I encourage you to talk to your union representatives. So let's go to the questions.

Yes, Bob. We do have a shareholder question, which I'll read for the benefit of everyone on the call, so you can respond.

Thank you.

We believe that the company's executive compensation plans should be designed primarily to drive the successful execution of the Board's long-term strategic business plan. Today's public company executive compensation plans are largely formulaic peer-related plans, with simplistic annual say-on-pay voting, reinforcing plan marginating. Would you speak to whether Allegheny Technologies might be better served by an executive compensation plan tailored specifically to the company's particular circumstances and its unique long-term strategic business plan. Thank you.

Thank you, Elliot. ATI does have an executive compensation plan that is tailored to specific circumstances and the long-term strategic business plan. Let me talk a little bit about that. In addition to the market competitive base salaries, our compensation plan has 3 components. The first one is around personal goals, which really drives near-term actions that position for the future, may not have direct benefit in the current year but really drive our leaders to focus on the steps we need to take for the long term. Second component is it has financial metrics that involve capital expenditures for strategic capabilities. So our current year compensation does include taking steps for the long term and is aligned with our strategy. And lastly, we're aligned with creating shareholder value and making sure we're aligned with the expectations of our shareholders. So I think from that perspective, we do have a plan that really does align with the long-term strategic business plan.

Okay. That concludes the meeting. Thank you for joining us today. That concludes our meeting.

This concludes the meeting. You may now disconnect.