Barrick Mining Corporation

Hello and welcome to the Barnes third quarter 2023 earnings conference call and webcast. 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. I will now turn the conference over to Bill Pitts, Vice President of Investor Relations. Please go ahead.

Thank you, JL. Good morning and thank you for joining us for our third 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 Streich. 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 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 on 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'll open up the call for questions. Tom. Thank you, Bill.

And good morning, everyone. It was a particularly intensive third quarter. in which we made significant progress towards several strategic objectives. We have aggressively moved Barnes to a more balanced, value-driven business through execution of our strategic priorities to drive core business execution, scale aerospace, and optimize industrial. While we are pleased with progress in several areas, our success to date has unfortunately been asymmetric. Across the organization, overhead remains stubbornly high, and whilst it is being methodically addressed, it has been a slower than desired pace. Aerospace has demonstrated it's on the right path convincingly. While performance is generally strong, it is not perfect given two struggling aerospace manufacturing facilities. Industrial has proven to be much more challenging than originally anticipated. Structural changes needed to integrate, consolidate, and rationalize that portion of our portfolio are well underway, including additional initiatives commenced in the third quarter. There remains considerable work to complete, leveraging the foundational elements we have painstakingly put in place. However, progress will not be linear. Our strategy to enhance and grow our aerospace business took a major leap forward. During the quarter, we successfully recapitalized the company's debt and completed our acquisition of MB Aerospace earlier than expected. We welcome the MB Aerospace team to Barnes and celebrate the largest acquisition in the company's history. This is a major step to establishing a more balanced portfolio overall for Barnes. We're off to a fast and effective start integrating MB Aerospace and have established traction to deliver the synergies we referenced when we announced the acquisition. The emphasis on driving integration and synergies from day one is a significant shift from our previous acquisition practices. The benefits are already apparent in how the teams are engaging and the pace of integration is progressing on all fronts. This approach will set the standard for future deals to ensure success. With respect to aerospace performance, last quarter we identified two facilities operating inefficiently and weighing on our results. One of the facilities, an OEM location, is starting to turn the corner as we head into the fourth quarter. The other, an aftermarket facility, continues to face challenges. The ultimate fix for this facility requires a ramp in commercial activities to build a robust pipeline that generates additional bookings. Continued corrective actions and investments are being implemented to bring these facilities to higher levels of performance as we move into next year. Previously announced transformation products touching aerospace are making steady progress to increase capacity and capabilities. These investments secure our ability to grow across our aerospace on markets with all customers. Our fourth quarter forecast looks solid, and we believe that we are well positioned heading into 2024. In addition, we recently announced two extended long-term agreements with Safran. The first agreement is for the repair and overhaul of components for the LEAP and CFM engine programs reflecting Barnes Aerospace expertise in machining and assembly of complex engine components. In the second agreement, we extended a CFM56 component repair agreement, which will secure this mutually beneficial program over the long term. Combined, we expect these to represent over $65 million in future revenues. To close my remarks on aerospace, one of the more promising developments with our now larger business is new commercial opportunities. Customers recognize our expanded capabilities and have already engaged with our combined commercial and engineering teams to identify work packages that we have not participated in previously. We look forward to sharing more details on these new opportunities with you at the appropriate time. At industrial, our core business execution is unacceptable, which is driving a very strong mandate for continued change. This includes cost rationalization efforts within motion control solutions and restructuring within molding solutions. My direct involvement in industrial operations leadership, which began in May, is providing firsthand appreciation of the need for ongoing strategic, operational, and leadership changes. These changes are actively being made to streamline excessive overhead, strengthen commercial go-to-market strategies, and improve manufacturing and capacity and capability. Our integrate, consolidate, rationalize products are generally delivering expected results. However, we are seeing leakage of these benefits due to ongoing pressures of the weak China markets and continued inflation of labor and materials. We have made progress on our manufacturing facility optimization products with the closure of manufacturing plants in molding solutions and motion control solutions. This includes the closure of our associated spring plant in Bristol, Connecticut. Additionally, some smaller underperforming technology and service centers in our automation business have also been shut down. At Molding Solutions, we implemented a restructuring project with objectives to integrate the business comprehensively and streamline the organization. These changes included integrating our commercial capabilities to more aggressively sell our systems and services globally, optimizing the effectiveness and efficiency of our global manufacturing footprint, accelerating our technical leadership in bringing new products and services to market, and streamlining back office business processes and analysis. During the quarter, we took an additional restructuring charge to accomplish the above. These changes also coincide with several leadership changes. We reduced the size of the leadership team at Molding Solutions and implemented additional overhead reductions across the business, significantly reducing complexity and expense. I am also pleased to share that earlier this week we appointed a new president of Molding Solutions. Marcello Vendimati, who has led the transformation of our automation business over the past two years, will move into Molding Solutions' president role full-time effective November 1st. This move created an opportunity for an additional internal promotion. Emanuele Orlando, who is instrumental in reinvigorating the growth of our multi-cavity business, will now transition to lead the automation business. Our motion control solutions business, which manufactures auto component parts, is feeling the effects of the ongoing United Auto Workers strike. While the third quarter impacts were isolated, we expect shipment delays and lagging orders in the fourth quarter. Our preliminary estimate is $6-plus million in revenue impact and a $1.5-plus million profit impact in the fourth quarter. However, the unpredictability of the strike may also require additional layoffs or furloughs to mitigate additional impacts. If the duration of the work stoppage continues, there is a risk of broader contagion to our nitrogen gas products and automotive hot runner product lines. At Automation, we continue to anticipate full-year growth despite a large distribution partner significantly lowering volume in 23. The year-over-year growth offsetting this major headwind speaks to the effectiveness of our refreshed commercial strategies. We are also working closely with our distribution partner to course correct demand trends. The distributor is projecting a 2024 recovery in core product lines and is also adding our vacuum product line to their sales channel. Overall, however, as we look to the fourth quarter, our industrial outlook is eroded on industry dynamics, softening demand, and inflationary pressure. In closing, we are aggressively moving Barnes to a more balanced value-driven business through execution of our strategic priorities to drive core business execution, scale aerospace, and optimize industrial. Significant progress has been made in strategically adding to our aerospace business with the addition of MB Aerospace in the quarter. Progress towards previously announced restructuring actions continues as planned across all businesses. And in industrial, major structural changes are being implemented to reduce costs and enhance our commercial capabilities. While industrial progress is not moving at the desired pace yet, Specific targeted actions are underway, and our commitment to achieving the industrial turnaround remains very strong. Let me now pass the call over to Julie for a discussion of our third quarter performance as well as some end market color.