Barrick Mining Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Barnes Group Inc. Third Quarter 2020 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mr. Bill Pitts, Director of Investor Relations. Please go ahead.

Thank you, Sharon. Good morning, and thank you for joining us for our third quarter 2020 earnings call with Mayor Barnes Group's President and Chief Executive Officer, Patrick Dempsey, and Senior Vice President of Finance and Chief Financial Officer, Chris Stevens. If you have not received a copy of our earnings press release, you can find it on the investor relations section of our corporate website at bginc.com. During our call, we will be referring to the earnings release supplement slides which are also posted on our website. Our discussion today includes certain non-GAAP financial measures which provide additional information we believe is helpful to investors. These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of our press release and in the form 8K submitted to the Securities and Exchange Commission. Be advised that certain statements we make on today's call, both during the opening remarks and during the question and answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC. These filings are available through the investor relations section of our corporate website at BGINC.com. Let me now turn the call over to Patrick for his opening remarks. Then Chris will provide a review of our financial results. After that, we will open up the call for questions. Patrick?

Thank you, Bill, and good morning, everyone. For the third quarter, Barnes Group delivered respectable financial performance as we continued to manage through the challenging environment presented by the ongoing global COVID-19 pandemic. We generated earnings per share towards the high end of our July outlook, and our cash generation continues to be good. We also saw incremental sales growth in both of our operating segments over the second quarter, with promising signs of recovery in our industrial business and the moving on from what we believe was the second quarter revenue trough in our aerospace business. Clearly, there remains a lot of uncertainty, but we can see signs of a path to recovery with more clarity. Given our strong management team and thoughtful actions, we expect to drive profitable performance throughout this challenging period. while maintaining a sharp focus on accelerating our key strategic initiatives to position the business for future growth. For the third quarter, total sales decreased 28% over the prior year period, with organic sales down 26%, driven by lower volumes given the pandemic's impact on our end markets. On a positive note, total sales did improve 14% sequentially from the second quarter, primarily driven by the performance of our industrial segment. Adjusted operating income decreased 53% compared to a year ago, while adjusted operating margin declined 640 basis points to 11.7%. Earnings per share were 30 cents, down 66% from last year. Obviously, significant declines from a year ago, but somewhat better than expectations we laid out in July. More importantly, total sales improved sequentially through the quarter. At the same time, cash performance was once again solid, and our leverage continues to remain manageable. Ongoing cost management and further working capital improvements in the quarter also helped to mitigate some of the impact of lower demand. Moving now to a discussion of our business segments and end markets. At industrial, we're seeing some of our end markets exhibiting positive signs of recovery, coinciding with what has been a rapid increase of manufacturing PMIs. US and Europe PMIs have risen substantially from their second quarter lows, and China has strengthened its already favorable reading. Exiting the third quarter, all had solid PMI readings of 53 or better. Overall, Segment booked to bill was slightly better than one times, and orders grew 24% sequentially from the second quarter. In our molding solutions business, sales of medical molds and hot runners remained solid. And for the second consecutive quarter, we saw a nice year-over-year pickup in both packaging and personal care orders, reflecting the release of previously deferred projects. Correspondingly, we generated a sequential sales increase in both of these end markets in the quarter. In our automotive hot runner business, while sales were relatively flat to the second quarter, orders saw a sequential bump as a few postponed projects were released. We're seeing this market slowly ramping, in part driven by the influence of new electric vehicles. In our force and motion control business, Sheet metal forming markets saw modest sequential improvement in orders and sales, while general industrial orders and sales likewise trended positively. At engineered components, general industrial and markets experienced a meaningful sequential bump in orders and sales, another positive signal and fully aligned with the trend in manufacturing PMIs. Our global automotive production markets saw the most sequential improvement. which was foreshadowed by the positive auto production forecast trend we highlighted last quarter. While global automotive production is still anticipated to be meaningfully down in 2020, next year's growth is projected to be up in the mid teens. In our automation business, we saw a solid quarter of performance with both year over year and sequential improvement in orders and sales. Demand for our end-of-arm tooling solutions in various automotive applications saw a nice bounce, while precision grippers for medical and pharma applications also remain a bright spot. For the segment, we continue to forecast sequential orders and sales improvement into the fourth quarter as the recovery progresses, albeit at a measured pace. Moving now to our aerospace business. In the third quarter, total Barnes Aerospace sales were down nearly 50%, with OEM down 44% and aftermarket down 58%. Commercial aviation remains significantly disrupted by the global pandemic, yet passenger traffic has improved from the lows of April. In the short term, we expect our OEM business to see soft demand for its manufactured components as aircraft, production rates of both Boeing and Airbus have been lowered. Although we expect our OEM sales to improve sequentially in the fourth quarter, getting back to pre-pandemic levels is forecasted to take several years. In the aftermarket, lower aircraft utilization and weakened airline profitability will no doubt result in a slow recovery as less maintenance is required and or gets deferred. However, As commercial flights return, with domestic travel happening sooner than international demand, we anticipate volumes in our aftermarket business to gradually pick up. For the fourth quarter, we forecast flattish sequential aftermarket sales. Despite a second consecutive quarter of 50% down sales, aerospace delivered adjusted operating margin of close to 10%. a tribute to the quality of the team. Also, while addressing the substantial day-to-day challenges of the current environment, Barnes Aerospace improved its position by securing a long-term agreement with GE Aviation for the manufacture of existing and additional components on the LEAP engine program. With this agreement, we'll employ our expertise and technology in the machining and assembly of complex hot section engine components. The agreement provides for an increase of production share for select parts on LEAP engine programs, extends the term of previous agreements by 10 years for select parts, and expands our portfolio of components on LEAP engines. Inclusive of the contract extension benefit, the estimated sales is over $700 million through 2032. Just before I close today, I'd like to take a few minutes to talk about another very important aspect of our business, which is environmental, social, and governance, or ESG matters, and to highlight the progress we are making. At Barnes Group, we are committed to being an exemplary corporate citizen, and we take that responsibility very seriously. In doing so, over the last several years, we've worked to further our ESG progress and have recently published our sixth annual ESG Corporate Social Responsibility Report. You can find that report and a summary of our ESG efforts on our company website under About BGI. At Barnes, we began our ESG journey several years ago by educating ourselves on the global standards for measuring and reporting sustainability progress. Barnes Group's ESG efforts are currently focused on aligning our sustainability actions around the Global Reporting Initiative, or GRI. The GRI is a common language used by organizations to report on their sustainability impacts in a consistent and credible way. Our teams are engaged in several projects that will illustrate to our varied stakeholders how we are striving to meet those sustainability standards. I'm also proud to report that we have recently established environmental targets for 2025. As a company, we will work to reduce the energy we use in our factories as measured in carbon dioxide equivalents by 15%, reduce the amount of water we use by 20%, and reduce the amount of industrial process waste we generate from our manufacturing operations by 15%. These efforts are a testament to our Barnes Enterprise System. Reducing all types of waste and inefficiencies to achieve operational excellence is a hallmark of our operating system and demonstrates our commitment to running sustainable businesses that conserve natural resources while minimizing the impact of our footprint on the environment. So, to conclude, We continue to effectively manage our business as we deal with the disruptive effects of the pandemic on our end markets. Across the company, we've been focused on the safety of our employees, protecting profitability, and driving cash performance. At the same time, we are pursuing various opportunities for growth, like the recent GE deal, to better position Barnes Group to leverage the speed at which we exit the current downturn. As difficult as the last couple of quarters have been, I am very proud of the Barnes team and encouraged by the direction of our progress. And while the level of uncertainty remains elevated, I am very optimistic that our end markets have begun the recovery and that the future looks promising. Now, let me turn the call over to Chris for a discussion on the financial details.