Timna Tanners: Wanted to point out, you’re the only company in our coverage that actually used the R word. So just thought we’d probe that a little bit with recessionary risk. It seems like your point was really to say that that’s outside of your focal area. So just also picked up a little bit of commentary about ability to kind of maybe pivot away from some of these lower-margin operations. And I just wanted a little bit more color on how that could proceed going forward and how that might contribute to your margin expansion you talked about in AA&S?
Bob Wetherbee: Well, I’ll let Don talk a little bit about the margin expansion piece, but we use 2 words to start with our — you heard the recessionary part, but that’s really only about 15% of our AA&S segment. So it’s a small part. We’re spending a lot more time on the product, that’s the ramp ramp ramp in aerospace, right? So I think that’s fair. But Don, how would you answer Tim this question around the margins.
Don Newman: Well, first, we’ve been pretty purposeful at changing the mix in the AA&S segment. And we’ve talked about the fact that we want to continue to shift away from the industrial exposures and really shift toward or A&D method. And so in that regard, just this last quarter, you would have seen that our &D% share within AA&S increased about 800 basis points. And now the share within that segment is 35%. So more than 1/3 of that portfolio. So doing things like that is a key part of us improving our margins. We’ve also been really purposeful in our transformation, changing our footprint, making sure that we’re improving our flow paths, and really rightsizing cost structures in order to support this value-add strategy we’re running, which should be beneficial. We’re already seeing the benefits of that transformation, and there’s more to come. So that’s what I would share, Timna
Timna Tanners: That’s what it seems like. I just to clarify that. It seems like you want to keep some optionality in some of these end markets like energy that should be on the come, but trying to deemphasize maybe some of the other areas, if that’s a fair.
Don Newman: You are absolutely right. And even within energy, by the way, there’s specialty energy and there’s oil and gas. Oil and gas, we view as more of that industrial demand commodity-driven whereas specialties is where we want to play. So we’re being pretty refined and focused in terms of where we want to fight this business.
Timna Tanners: And then a follow-up, more of a modeling question. Just we didn’t see a big decrease in the share count from the buybacks. And just in general, with great progress on reducing your pension liability there. Should we expect to see kind of an acceleration of buybacks going forward and see that share count come down?
Don Newman: Yes, it’s a fair assumption. So far, in the last 2 years, we’ve had $225 million of buyback programs. We’re going to finish the current program. There’s $30 million left on it, Timna, that’s not the last program. Our focus is set this business up to generate max cash flow, and then we have a really clear, balanced strategy to grow the business with that capital to de-lever. And then we very much enjoy returning capital to shareholders. So imagine that, that is going to be a key to our deployment going forward.
Operator: Our next question comes from Gautam Khanna from TD Cowen. Your line is open. Please go ahead.
Gautam Khanna: I wanted to make sure I heard something right. Were there any operational challenges in the third quarter at HPMC?
Don Newman: I would say there was one that we noted — Bob actually noted in his prepared remarks, and that was we did have an outage in one of one our facilities to Lockport facility where we had a transformer outage. And that was actually a really good outcome, and I think a positive indicator. We — when Bob mentioned it, he said, “Hey, this was an event that happened, but we’re covering it when it comes to our earnings guidance for Q4. So here are some key takeaways that I would mention. One is that was a transformer failure. It could have been an extended outage, but our team did an amazing job really getting it back online. So the outage is fully behind us, and it was in Q3. So a fair question, Gautam as well, so why did you — why did you guys share it if you’re going to cover the consequences of that outage.
And number one, I think you’re probably picking up transparency is very important to this management team. So we want to share with investors when events like that happen. I think it’s also a pretty good indicator, by the way, the financial and operational strength that we have in this business to be able to deal with something like that quickly and then manage the financial consequences of it. So one way to think about that outage is because the facility was down for about 21 days, that meant that we weren’t getting the production cycles that we otherwise would have and the products that are coming off of that facility are pretty strong demand, and we’re selling out of our backlog. So you do the math on what would the sales consequence to that being, you’ll be in the range of about $35 million that would hit us in Q4.
However, as Bob said, our team is really covering that divot is the way we described it. And so when it comes to our Q4 guidance, we held our Q4 guidance. We’re going to cover the consequences of that $35 million by reprioritizing other finishing activities that we’ve got going on and interest of cost actions. So I think it’s — that’s one operational challenge I would mention, but I think it’s important in that context.
Bob Wetherbee: I think to add a little color to that to the one ATI strategy that Adam’s probably heard us talk about for many years is really taking bold in the melt side. And so when we have an issue, whether it’s titanium or nickel, it has a modest effect on both segments because we leverage that capacity to feed both segments. But I think in this particular case, that’s probably where Gautam picked up HPMC little bit but we’re going to work through it and certainly have worked through it. And it’s part of realigning the production, the debottlenecking, all that kind of stuff that allows us to cover the divid in Q4.
Gautam Khanna: And was actually a financial impact — yes. That very much else. So was there a financial impact in Q3 that you could there whether it be loss absorbed? Okay.
Don Newman: Yes, there was not. We had a particular a little small bucket of incremental costs that we adjusted for. But when you look at the adjusted EBITDA the answer is no. There’s no consequence there.
Gautam Khanna: And just a quick follow-up. Just what are your preliminary views on the airframe business next year in terms of rate of growth relative to the jet engine business?
