Enerpac Tool Group Corp.

Ladies and gentlemen, thank you for standing by. Welcome to InterPAC Tool Group's second quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star filed by the number one on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded March 19, 2020. It's now my pleasure to turn the conference over to Barb Bolins, Executive Vice President, Chief Strategy Officer. Please go ahead, Ms. Bolins.

Thank you, Kevin. Good morning, and thank you for joining us on InterPAC Tool Group's second quarter 2020 earnings conference call. On the call today to present the company's results are Randy Baker, President and Chief Executive Officer, Rick Dillon, Chief Financial Officer, and Jeff Schmeling, Chief Operating Officer. Also with us are Bobby Belsner, Director of IR and Strategy, Thad Brissetti, General Counsel, and Brian Johnson, Chief Accounting Officer. As many of us are doing these days, we are practicing social distancing, and we do have people calling in from various sites. So apologies in advance if there are handoffs that take a little longer than usual. Our earnings release and slide presentation for today's call are available on our website at enterpactoolgroup.com in the investor section. Please go to slide two. During today's call, we will reference non-GAAP measures such as adjusted profit margins and adjusted earnings. You can find a reconciliation of non-GAAP measures to GAAP in the schedules to this morning's release. We would also like to remind you that we will be making statements in today's call and presentation that are not historical facts and are considered forward-looking statements. We are making those statements pursuant to the safe harbor provisions of federal securities law. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecasts, anticipated results, or other forward-looking statements. Consistent with how we have conducted prior calls, we ask that you follow our one question, one follow-up practice in order to keep today's call to an hour and also allow us to answer questions from as many participants as possible. Thank you in advance for your participation, and now I'll turn the call over to Randy.

Thanks, Barb, and good morning, everybody. We're going to start today on slide three. Before we review the details on the quarter, we have two special topics which deserve additional clarity. Obviously, the coronavirus, which has captured world headlines, has had an impact on companies, and Interpac is no exception. During the quarter, our Asian operations experienced a sales decline of approximately $2 million, with resulting operating profit headwinds of approximately $1 million. The China operations have been effectively idled for half the quarter, and we saw increased travel and customer issues in most of Asia. Our supply chain team has done an excellent job of providing alternate solutions to our component supply to ensure plants around the world were able to continue with mental disruption. We have developed emergency contingency plans to handle potential quarantines and enacted protocol for employees at all of our locations. Our number one priority is to keep our employees and their families safe. Secondly, the oil and gas industry has experienced one of the largest price reductions in many years. This will impact all aspects of the energy industry, but the most pronounced effect will be felt in the upstream and CapEx. As many of you are aware, we exited most of the upstream portion of the oil and gas industry which will help the impact to our sales and service revenue. Existing midstream and downstream assets will require significant maintenance to maintain production capacity, but we expect a very conservative spending profile. Additionally, the coronavirus is limiting access to job sites all over the world, which will affect our service operations. Approximately 25 to 30% of our revenue participates in the oil and gas sector, and we expect to see reductions on the back half every year. The combination of the coronavirus and the oil disruption has created a very unpredictable market. We have an experienced team, dedicated employees, and the financial strength to withstand these temporary headwinds. To date, we have not seen any material changes to our incoming order rates in North America and Europe, but we know there will be an impact. As we progress through the quarter, we'll provide additional updates as we have more clarity to the changing business dynamics. Now, moving over to slide four. Our second quarter was one of the most volatile we've seen in many years. We started the quarter with somewhat sluggish sales volume, which improved in the latter part of February. North America was affected by increased distributor inventory constraints, and the Middle East was affected by the abrupt oil price decline. Of the 13 vertical markets, many are experiencing declines, which has affected sales in both regions. Aerospace continues to be positive, and we received multiple large orders during the quarter. And as I mentioned earlier, Asia has been heavily impacted by the coronavirus. Europe was our best performing region and exceeded sales expectations for the quarter and on a year-to-date basis. The impact of core sales was significant in the quarter, resulting in a consolidated growth rate of down 10%, 4% from products and 28% from service. Despite the decline in sales expectations, we were able to maintain our results within the guidance range. Additionally, we were able to improve our capital employed and resulting cash use in the quarter versus our prior year results. Our balance sheet is in great shape. With the net debt at a very low level, resulting in a leverage of only 1.3. Overall, our second quarter has been difficult, but we remain focused on our Interpac tool group strategy and the discipline approach to driving results. And moving over to slide five, on the positive side, we continue to make progress towards our strategy and the creation of a top performing tool company. Core sales was impacted by the market conditions. However, our new product development effort has added three new families to our catalog and exceeded our 10% new product sales contribution goal. Also, on a year-to-date basis, new product sales has contributed over 10% to our volume, which has softened the impact of these unstable conditions. On the acquisitions front, we completed our first addition to the Interpac tool group, The HDL company, based in Newcastle, UK, is a high-quality bolting equipment manufacturer and distributor. The acquisition has provided several new product additions, which has effectively completed our bolting tool lineup. The Interpac Tool Group will have one of the most comprehensive torque equipment lineups spanning the premium extreme duty to the economy product capable of serving all of the global installed base. Secondly, they bring significant experience in rental, sales, and processes, which will enhance our European operations. And lastly, the H-Dale manufacturing location will become our global headquarters for engineering, manufacturing, and management of the bolting business. This consolidation has already begun and will deliver significant synergies upon its completion in our fiscal 2021. Rick will review the details of our cost and structural efficiency project associated with the divestiture of the engineering solutions business. However, I'm very pleased with the progress, which has accelerated our cost reductions, which will deliver between 10 and 12 million of savings annually. Most importantly, we are on track to achieve our 20% EBITDA target run rate as we exit our fiscal 2020, absent any significant changes to our business from the volatile market and environment we are in today. I'm going to turn the call to Rick now, He's going to run through the details on the quarter, and then I'm going to come back with a summary. Over to you, Rick.