Barrick Mining Corporation

Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes first quarter 2023 earnings conference call and webcast. Today's conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you. And I will now turn the conference over to Bill Pitts, Vice President of Investor Relations. You may begin.

Thank you, Abby. Good morning, everyone. And thank you for joining us for our first quarter 2023 earnings call. With me are Barnes President and Chief Executive Officer Thomas Hook and Senior Vice President Finance and Chief Financial Officer Julie Stryke. 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 onebarnes.com. That's O-N-E-B-A-R-N-E-S.com. During our call, we will be referring to the earnings release supplemental slides, which are also posted on the 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 onebarns.com. Let me now turn the call over to Tom for his opening remarks. Then Julie will provide a review of our financial performance and details of our updated 2023 outlook. After that, we will open up the call for questions. Tom.

Thank you, Bill, and good morning, everyone. As we exit 2022 and enter 2023, Barnes is fully focused on driving core business execution and demonstrating meaningful advancement in our transformation journey. While I am pleased with the progress and energy to date, there remains considerable work to do. Julie will talk about our first quarter financial performance in a few moments. I would like to take time this morning to address the meaningful transition actions underway at Barnes. There are numerous products progressing across the company that will significantly rationalize overhead as we move from the holding company structure to a more agile operating architecture. These include streamlining corporate and segment overhead costs to enable Barnes to compete more effectively in the markets we serve. All levels of leadership will be structured to better serve the needs of the operating businesses to drive business performance and to support our integrate, consolidate, and rationalize initiatives. Our restructuring and transformation execution remains on track for Phases 1 and 2, announced in July and October, respectively. Collectively, we anticipate approximately $26 million of annual savings, with total restructuring costs of $29 million for these phases. We expect to achieve run rate savings in 2024. We are now ready to announce the final significant phase of our restructuring and transformation program. Phase three will impact our industrial and aerospace segments and address functional efficiencies globally. These products will be implemented over the next 24 months. Phase three will include aerospace and industrial facility transfers of work to generate production efficiencies and reduce costs. Last week, we engaged with the Works Council at one of our German facilities and provided notice to employees at a second facility in Germany. Some work from these locations will transition to existing production facilities in Italy and China. In the US, The company has elected to freeze the benefits associated with one of its defined benefit pension plans, which will provide pension savings over time. We will share further program details as they unfold. The total investment for Phase 3 is forecast to be $58 million, including $28 million of restructuring charges, $16 million of external transformation-related charges, most of which were incurred in the first quarter, and 14 million of capital investment. For phase three, we anticipate run rate savings of approximately $27 million in 2025. We will continue to dedicate resources to lead the execution of this program so we deliver products on time and budget. Our operations and functional teams will remain focused on delivering core business execution. With the appropriate deployment of resources, You can drive enhanced bottom-line profitability effectively as each initiative is fully implemented. We will continue to provide quarterly updates on the progress being made with the company's transformation. Moving to our business operations, I am encouraged by the organic orders and sales growth this quarter at Industrial compared to a year ago. Our targeted growth areas in the automation business and multi-cavity mold systems within our molding solutions business performed well. The same is true at Motion Control Solutions, which benefited from an automotive customer stocking order and sales ahead of our Bristol plant closure. We will see a continued benefit in the second quarter as well. Therefore, a few top-line positives to celebrate in the quarter. However, we delivered asymmetric performance given lower organic orders and sales for our automotive hot runner product line within our molding solutions. China was particularly soft. Also, the sheet metal forming product lines with motion control solutions generated more organic orders, though delivered a modest increase in organic sales compared to a year ago. The European market impacted this product line. Regarding industrials' bottom line, adjusted operating margin improved modestly year over year. However, margins remain below our expectations. Positive pricing actions are taking hold and making a difference, but clearly inflationary pressures persist. Additionally, with molding solutions, an unfavorable mix of lower hot runners and higher mold systems had a detrimental impact on industrials margin. To address pipeline opportunities, commercial feet on the street investments are being made to produce a strengthening sales funnel. That is our expectation to deliver sales growth across all industrial business units in 2023, and building the pipeline is the first step. At Aerospace, the broad-based recovery continues with deepening customer relationships, generating strong orders across single aisle and wide body platforms. The orders pipeline for both the OEM and aftermarket businesses is ahead of plan. We anticipate continued order strength with improving operational and on-time delivery performance. Additionally, Our re-energized commercial outreach is presenting growth avenues with both new and existing customers. Aerospace industry trends have been favorable, with the International Air Transport Association, IATA, recently reporting that February global domestic travel was up more than 25% versus a year ago, and at over 97% of February 2019 levels. International traffic was up nearly 90% for February versus a year ago and has reached approximately 78% of 2019 levels. With China's reopening, the Asia-Pacific region has seen a strong rebound. Air freight metrics likewise saw sequential improvement in February. While there are concerns regarding the global economy, air travel continues to demonstrate solid recovery and demand trends point to further improvement. These trends support our favorable view for both the OEM and aftermarket businesses. On the top line, we're generating solid revenue growth with steadily improving operational execution and efficiency. With respect to bottom line profitability, we see productivity initiatives and solid management execution driving improvement. Some of our facilities are delivering performance recovery at pace, though this is not universal. The good news is that each operational site is demonstrating performance improvement and additional productivity actions are targeted, especially within facilities where there is a significant percentage of newly hired team members. In addition, we expect mitigation of inflationary pressures through ongoing contractual price recovery and other actions. Overall, I'm pleased with the performance and competitive positioning of our aerospace business. Let me take a moment to comment on capital deployment in our portfolios. As previously discussed, industrial M&A activity remains paused until core business execution is stronger and more consistent. That said, we continue to identify opportunities to drive enterprise value in a more compelling fashion via ongoing strategic evaluation of our industrial portfolio of businesses, brands, and products. Within aerospace, we are evaluating targeted M&A opportunities with a focus on assets with a strong strategic fit with significant post-closed integration opportunities and revenue and cost synergies. Before concluding, as you may have seen with last week's announcement, Steve Muehl, our industrial segment president, has resigned his position to accept a role in another company. I'd like to thank Steve for his leadership and contributions to Barnes since joining us in 2019. I know the Barnes team wishes Steve well in his new position. In closing, We stay highly focused on driving core business execution and delivering the full value embedded in our portfolio of strong brands and leading industrial technologies. Our major restructuring and transformation program has moved past planning and comprehensively into execution. We are committed to enhancing operational and financial performance to deliver the benefits and savings of this key initiative. Let me now pass the call over to Julie for a discussion of our first quarter performance, as well as some end market column.