TriMas Corporation

Please stand by. We're about to begin. Good day, everyone, and welcome to this TRiMAS First Quarter 2022 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Sherry Lauterbach. Please go ahead, ma'am.

Thank you, and welcome to TRiMAS Corporation's First Quarter 2022 Earnings Call. Participating on the call today are Thomas Amato, TRiMAS's President and CEO, and Scott Mell, our Chief Financial Officer. We'll provide our prepared remarks on our results and outlook, and then we'll open the call up for your questions. In order to assist with review of our results, we have included the press release and PowerPoint presentation on our company website under the investor section. In addition, a replay of this call will be available later today by calling 888-203-1112 with a replay code of 221-9626. Before we get started, I would like to remind everyone that our comments today, which are intended to supplement your understanding of TriMAS, may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K and our First Quarter 10-Q that will be filed later today for a list of factors that could cause our results to differ from those anticipated in any forward-looking statement. Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website where considerably more information may be found. In addition, we would like to refer you to the appendix in our press release issued this morning or included as part of this presentation for the reconciliations between GAAP and non-GAAP financial measures used during this conference call. Today, the discussion on the call regarding our financial results will be on an adjusted basis, excluding the impact of special items. With that, I will turn the call over to Tom Amato, Trimus' president and CEO. Tom?

Thank you, Sherry. Good morning, and welcome to our first quarter earnings call. Let's turn to slide three. Overall, we are pleased to report positive results again this quarter. Between the period of time when we completed our planning models which was near the end of last year, and when we reported our 2021 performance just nine weeks ago, we started to recognize an increasingly difficult macroeconomic environment developing from inflationary pressures and effects from the regional issues in Eastern Europe and China. Despite continued operational challenges as a result of the pandemic-related labor constraints and more recent challenges in production input costs and supply constraints, We are reporting today earnings per share of 50 cents, which is in line with our plan. Our continued solid performance is a direct result of the dedication and commitment of our global team, who is focused on meeting the needs of our customers in a diverse set of end markets, all while navigating very dynamic and often differing regional environments. Before going through more details on our results for the quarter, I would like to update our investors on one of our more significant capital investments, which we initiated in 2020. As discussed on prior earnings calls, this is our new TriMass Packaging Manufacturing Plant in New Albany, Ohio. As a reminder, in collaboration with one of our largest customers, we began investing in a new 235,000 square foot, highly automated facility localizing foaming dispenser production in the United States, upgrading our manufacturing processes, and allowing for additional production floor space for future growth in the U.S. I am pleased to report that we are on track to launch this facility during the second half of this year. Also, we did not contemplate at the time of approving this project some of the geopolitical challenges that exist in the current business environment. Given this dynamic, we are now gaining additional commercial interest in our available future capacity in this new U.S. location, which we believe will benefit our organic growth well into the future. I look forward to updating our investors on the development of our New Albany, Ohio manufacturing location on future earnings calls. I would also like to update our investors on progress regarding share repurchases. For the quarter, we purchased approximately 282,000 shares for a net reduction of 0.5% of total shares outstanding. We added further to the share buyback position in April, which in total reduced our net shares outstanding by 1% from the end of 2021. At the end of the first quarter, we had approximately 133 million available under our 2018 share repurchase authorization. We plan to continue to take advantage of this tax efficient approach to return capital to our shareholders, particularly as we internally weigh our long-term potential against current market valuations. Additionally, we have completed our second dividend payment in March and declared our third dividend payment to shareholders of record on May 5th, 2022. Between share repurchases and dividend payments, We are on pace to return at least 1.5% yield to our shareholders in 2022, while continuing to invest in our capital expenditure and acquisition strategy, all while maintaining a strong balance sheet. Let's turn to slide four, where I'll cover our financial performance for the quarter. As noted, despite a very dynamic operating and demand environment, we are pleased with the results for this quarter. Sales were $224.3 million, up 8.5% as compared to the prior year quarter, driven by organic sales, which were up 5.3%, and acquisition sales, which contributed 4.3%, offset by foreign currency exchange of 1.1%. Sales were up significantly in our specialty product segment, driven by industrial demand in the United States for steel cylinders, and engines and related maintenance parts for remote power generation applications. Sales were also up within TriMAS packaging, in line with our internal planning, and sales were flat as compared to the prior year quarter within TriMAS Aerospace. Adjusted operating profit for the quarter was $26.2 million, or 11.7% of sales, which was flat as compared to the prior year quarter, and 128 basis points lower in margins. The margin impact was driven by a less favorable product mix, primarily in aerospace, as well as continued pandemic-related operating challenges and higher energy costs, which Scott will discuss further when he covers our segment performance. Adjusted net income was $17.6 million, up 1% from the prior year quarter. Even though operating profit was relatively flat, our net income performance did benefit from lower currency-related charges. As noted, earnings per share was 50 cents, up slightly as compared to the prior year quarter. Finally, adjusted EBITDA was $42.3 million, or 18.9% of sales, and LTM EBITDA was $173.8 million, as compared to the prior quarter of $172 million, continuing our momentum of LTM EBITDA growth despite the many input cost challenges we are managing through today. If we turn to slide five, I will briefly cover our balance sheet and cash flow for the quarter. Trimass continues to maintain a strong balance sheet. Our net debt for the quarter was $335.2 million, with the resulting leverage of just under two times, despite funding three recent acquisitions and stock purchases as noted. As a reminder, we refinanced our fixed-rate debt, upsizing our capacity and locking in a rate of 4.8% in the first quarter of last year. On a comparable basis, in the prior year quarter, we had not yet paid off our prior fixed-rate debt and fees, so the debt and cash values do not provide for a good comparison. Free cash flow was slightly negative, as we anticipated, which was driven by management-led decisions to buy ahead on certain raw materials and components to potentially mitigate against supply constraints. Additionally, our first quarter free cash flow tends to be our lowest cash generation quarter. As I said, I want to again thank our global TriMAS team for their navigation during this continued time of uncertainty. And as we report, another quarter with solid performance. Let me now turn the call over to Scott, who will take us through segment performance. Scott? Thanks, Tom.