Enerpac Tool Group Corp.

Greetings, and welcome to the InterPAC Tool Group first quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Bobby Belsner. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us for Interpac Tool Group's first quarter fiscal 21 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 Barb Bolins, Chief Strategy Officer, Fabrizetti, General Counsel, and Brian Johnson, Chief Accounting Officer. Our earnings release and slide presentation for today's call are available on our website at enterpactoolgroup.com in the investor section. We are also recording this call and will archive it on our website. 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 to GAAP measures in the schedules to this morning's release. We also would 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've 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 address questions from as many participants as possible. Thank you in advance for your cooperation. Now I will turn the call over to Randy.

Thanks, Bobbie, and good morning, everybody. I hope everybody's safe and healthy and getting ready for a great holiday week here. And we're going to start today on slide three, but before we review the details in the quarter, I'd like to go over the status of InterPAC and how the state of the world is affecting us. Starting with health and safety, InterPAC continues to operate under essential worker status. We have approximately 40% of our employees working from home offices while only mandatory personnel are on sites. The increased infection rates has caused concerns in North America and other countries, which facilitated our heightened safety measures. Our objective remains keeping all of our employees safe and providing the best possible work environment. During the quarter, we experienced two quarantine events requiring partial production stoppage at two locations affecting both Interpac and Cortland. Our screening processes coupled with contact tracing were successful in avoiding a full site quarantine and lowered the impact to both production and sales. Additionally, our sales and marketing teams around the world are continuing our cautious approach to customer visits while actively promoting Interpac tools. Moving on to a more positive side, Interpac tool group improved sequentially versus our fourth quarter of fiscal 2020. All aspects, including sales, profit, incremental margins, and cash improved and further supports the quality of Interpac's earnings potential. Our swift actions to control cost and drive decremental margins beat our expectations. Secondly, our focus on working capital has delivered positive cash flow, which is typically not the case in our first quarter. We remain very focused on executing our strategy and protecting the key elements of our organic growth to ensure our company is healthy post-pandemic. It's critical to our management team that we continue to deliver great new products and provide the best sales support to our dealer network. We launched three new product families and maintained our 10% new product objectives in the quarter. Lastly, supporting our local community where Interpac resides and work is very important to us, and that's why we've launched a new program to provide educational resources and scholarships. We firmly believe that Interpac must be a leader in our community and be an employer where all employees feel welcome and proud to be part of the team. Moving over to slide four, The sequential order rates improved in our quarter, with some wider deviations due to large orders in the prior year. In comparison to fiscal 2020, we are now down in the low teens, which continue to improve in December. Our prediction of a gradual return to a normal business environment has progressed, and we expect this to continue absent a major resurgence in the virus. Consistent with prior quarters, several of our 13 vertical markets experienced sales growth, particularly in military aerospace and alternative energy. Conversely, many markets are still impacted by the pandemic and the resulting sales demand. Moving over to slide five, as I mentioned earlier, our first quarter met our expectation in many of the key financial metrics. Sales grew sequentially versus our fourth quarter. However, core sales declined by 18% versus our fiscal 2020, comprised of 16% down in products and 24% down in service. Despite the lower sales, we were able to control our costs and deliver an even margin at near parity with 2020 fiscal results. Our decremental margins in the quarter were 18%, which is sequentially better than our fourth quarter and well below our stated range of 35% to 45%. This resulted in an EPS of $0.09 per share, which is also a marked improvement over the fourth quarter. From a cash flow perspective, we were able to generate positive cash versus usage in the first quarter of fiscal 2020. This was a direct result of our focus on inventory and receivables to ensure the best possible working capital results. At the end of the quarter, our net leverage remained positive at 1.9 times, which is a great indication of the health of InterPAC. Originally, our core sales results varied based on the impact of the pandemic and the strength of the underlying vertical markets. European operations was our best performing region, which grew moderately in the quarter versus fiscal 2020. Our European team performed very well in focusing on driving sales while maintaining a safe work environment. The Americas continued to slowly return to normal and were down in the high teens. This improved sequentially during the quarter, and we believe this trend will continue. Asia-Pacific declined in the low 20% range, which was affected by increased pandemic shutdowns in Southeast Asia and helped by the Chinese market, which has largely returned to normal. And lastly, Mideast operations were down in the mid-30% range, which continues to be impacted by oil prices and the effect of the pandemic. Now, in summary, we are pleased with the sequential improvement of our company. as we navigate the impact of the pandemic. Our focus on cost and key areas we can control has supported our improved earnings and laid the groundwork for a top-performing company. I'm going to turn the call over to Jeff and Rick now to review the details in the quarter, then I'll come back with the market projections and some closing comments.