Avient Corporation

Good morning, ladies and gentlemen, and welcome to the Aviant Corporation third quarter 2020 conference call. My name is Crystal, and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will have a question and answer session at the end of the conference. As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Joe DeSalvo, Vice President, Treasurer, and Investor Relations. Please proceed.

Thank you, Crystal. Good morning and welcome to everyone joining us on the call today. Before beginning, we'd like to remind you that statements made during this conference call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties. any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statement. Some of these risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission, as well as in today's press release. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the earnings release posted on the Aviant website where the company describes the non-GAAP measures and provides a reconciliation for the most comparable GAAP financial measures. Joining me today is our Chairman, President, and Chief Executive Officer, Bob Patterson, and Senior Vice President and Chief Financial Officer, Jamie Beggs. Also joining us for his last earnings conference call is Brad Richardson, our previous Executive Vice President and Chief Financial Officer who announced his retirement a couple of months ago. Now I will turn the call over to Bob for some opening comments.

Well, thanks, Joe, and good morning, everyone. I'd like to start with words of support for those who've been impacted by the coronavirus. The pandemic is far from over, and we remain mindful of the many ways it is impacting people around the world. Our heartfelt appreciation goes out to the countless frontline workers and first responders as they continue to play such an important role in the response and recovery effort. This is our first quarter that we are reporting results that include the Clariant Master Batch business, which we acquired on July 1st. At that time, we welcomed over 3,500 associates to our newly named company, Avian. And we took a big step forward in our specialty transformation journey. It's created tremendous energy internally with our associates, our customers are viewing us as a specialty partner, and our performance in this challenging environment is demonstrating the strength of our diverse and resilient portfolio. I'm pleased to report that we delivered third quarter adjusted EPS of $0.54, excluding the impact of purchase accounting step-up depreciation and amortization. Inclusive of the step-up DNA, we reported adjusted EPS of $0.46, and this is $0.03 better than we expected in our pre-announcement in September and exceeds the $0.44 we reported last year. The three cent improvement from when we met or talked a month ago was driven by a strong finish to the quarter, with September sales growing 6% over the prior year. And particularly encouraging was that the increased demand in September wasn't isolated to one segment or region. All grew sales for the month. The last couple of quarters have been challenging, for sure. But we, our customers, and our shareholders have clearly benefited from the execution of our strategy to reposition our portfolio in recent years. Through our divestiture of PPS and organic growth emphasis, we have greater exposure to more stable, higher value end markets, such as packaging, consumer, and healthcare. These three areas now represent nearly 60% of our sales. The Clarion Master Batch integration is going extremely well. As we announced in September, we have increased our synergy target from $60 million to $75 million. The increase is a result of the time that we have been able to spend with a talented management team that came with the business. We were not only able to validate our initial synergy estimate, but gain confidence as a team in our ability to do more. And I think this is important to remember. We didn't just acquire incredible technology, deep customer relationships, and well-run facilities. We acquired tremendous talent with a passion for innovation and serving customers with excellence. And they are immediately embracing our strategy and our culture. And that's what is making this the greatest impact in our first quarter together. And it has me more confident than ever about our future as Avian. Another bright spot, of course, is our specialty engineer materials segment. EM had record third quarter operating income of nearly $25 million. That's a 27% increase over last year. The growth was driven by continued momentum in our composites platform, which has benefited from consumer demand for outdoor high-performance products. Recall that our composite business was break-even only a couple years ago. In this quarter, our composite business achieved 17% return on sales. We executed our invest-to-growth strategy, by making investments in sales, marketing, and technology. And it's paying off, and we expect that our composites platform will continue to be a key revenue and growth driver for Avian in the future. To give us more detail on the third quarter, I'm very pleased to introduce Jamie Beggs, our new CFO. I'm thrilled to have her join us and thankful for the seamless transition that's been occurring with her and Brad over the last several weeks. Jamie?