Hillenbrand Inc

Good morning, everyone, and welcome to Hillbrand's fourth quarter fiscal 2020 earnings conference call. A replay of this call will be available until midnight Eastern time, November 26, 2020, by dialing 1-855-859-2056, toll-free in the United States and Canada, or 1-404-537-3406 internationally. and using the conference ID number 9256319. This webcast will be archived on the company's website at irhillbrand.com through Friday, December 11, 2020. If you ask a question during today's call, it will be included in any future use of this recording. Also note that any recording transcript or other transmission of the text or audio is not permitted without Hillbrand's written consent. At this time, it's my pleasure to turn the conference Over to Rich Dudley, Senior Director of Investor Relations. Mr. Dudley, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Hill & Brand's fourth quarter fiscal 2020 conference call. I'm joined by our President and CEO, Joe Raver, and our Senior Vice President and CFO, Christina Cernelia. I'd like to direct your attention to the supplemental slides posted on our IR website that we'll be referencing on today's call. Today marks my last earnings conference call as I've taken on a new finance role within Hillenbrand. I've enjoyed serving in this important position over the last two and a half years. I want to take the opportunity to thank you for your trust and partnership. I'm very happy to welcome Kaveh Bakhtiari as our new investor relations director. Kaveh and I will work closely together over the coming weeks to ensure a smooth transition. Let me quickly address two items before turning the call over to Joe. First, during the fiscal fourth quarter, we changed the names of two of our reportable segments in order to better reflect the nature of business activities and end market exposure for these segments. As a result, the former Process Equipment Group segment has been renamed Advanced Process Solutions, or APS, and the former Millicron segment has been renamed Molding Technology Solutions, or MTS. we believe these names better capture the nature of activities and feature opportunities for these segments. We'll continue to use the Millicron brand name for our injection molding product line. Second, turning to slide four, I'll remind you that our comments may contain certain forward-looking statements that are subject to the safe harbor provisions of U.S. federal securities laws. These statements are not guarantees of future performance and our actual results could differ materially. Also during the course of this call, we will be discussing certain non-GAAP operating performance measures, including pro forma comparisons for the molding technology solution segment. I encourage you to review slide four of the presentation and our 10-K, which can be found on our website, for a deeper discussion of forward-looking statements and the risk factors that could impact our actual results. With that, I'll turn the call over to Joe.

Thank you, Rich, and good morning, everyone. Thanks for joining us today. And all of us at Hill & Brand hope that you and your families are doing well and staying safe. Before we start, I want to take a moment to thank Rich for his contribution to Hill & Brand's investor relations and wish him continued success in his new role. I'd also like to welcome Kaveh to Hill & Brand. Kaveh brings over a decade of finance and investor relations experience, most recently at Forst & Brand. We're committed to building effective and productive relationships with our shareholders And we look forward to Kaveh continuing that effort as we strive to provide clear, timely, and relevant communications. I also want to acknowledge Hill & Brand's employees, who despite the challenges brought on by the COVID-19 pandemic, continue to serve our customers and deliver on our mission every day. We applaud their hard work and remain steadfast in our commitment to ensure the health and well-being of the 11,000 Hill & Brand employees and their families, our customers and partners, and the communities in which we operate around the globe. We continue to follow the guidance of health experts around the world and are taking the necessary precautions to help reduce the spread of the virus. As you saw from the release last night, we finished fiscal 2020 with a strong fourth quarter. Before I get into the quarter, however, I want to take a few minutes to reflect on the entirety of fiscal 2020 and to report on our progress against the execution of a long-term strategy. Our vision is to shape Hillenbrand into a world-class global industrial company with a proven record of success driven by the Hillenbrand operating model. And to that end, over the past several years, we've consistently articulated four key strategic pillars. The first is to strengthen and build business platforms, both organically and through M&A. The Millicron acquisition represents a major step in the execution of this strategic pillar. With the Millicron acquisition, we added industry-leading and complementary hot runner and injection molding product lines to the Hillenbrand portfolio, further strengthening our customer offering, increasing our global scale, and enhancing our capabilities across the entire plastics value chain. from base resin production all the way through recycling. As we look forward, beyond the integration and the current market uncertainty, we see the potential for solid growth, both organically and through M&A in both the hot runner and injection molding product lines. In addition to the Millicron acquisition, we have strengthened and focused the advanced process solution segment. Investments and innovation in our Coperian branded products and solutions have led to revenue growth and improved margins. And we believe that we've positioned this part of our business very well for increased profitable growth, both organically and through acquisition. This year, we announced the planned divestiture of three smaller businesses within advanced process solutions, which we believe will help sharpen our focus on our larger platforms and accelerate debt reduction. Our second strategic pillar is to manage Batesil for cash. Batesil has a long history of manufacturing excellence in burial caskets and its deep and long-standing customer relationships make it an industry leader. Batesil has historically been less sensitive to economic cycles and has provided solid and predictable cash flow that we can invest in growth businesses. Batesil's outstanding performance in fiscal year 2020 is a result of simplifying business processes, improving quality, and aggressively managing its cost structure, while maintaining its ability to meet customers' needs in a time of elevated demand associated with the pandemic. Importantly, Basel fulfilled its role in our portfolio this year as we leveraged the robust cash flow it generated to pay down debt and strengthen our balance sheet. The third pillar of our strategy is to build a scalable foundation for growth using the Hillenbrand operating model. The acquisition of Millicron not only helps us expand our presence across the plastic value chain, but it also provides a unique opportunity for us to transform and scale many shared back office functional business processes in areas such as information technology, human resources, health and welfare benefits, and finance. We believe that our efforts to standardize processes and services and to leverage best practices across our operating companies globally will drive meaningful efficiencies, improve effectiveness and quality, and provide a scalable foundation for future growth. We're also driving efficiencies and best practices in operations by leveraging our combined spend through our global supply management group, and driving lean business practices, which are at the core of the Hillenbrand operating model to improve safety, quality, delivery, cost, and working capital. As many of you know, effectively executing the Millicron integration was a top priority during fiscal 2020. And despite the challenges associated with the COVID-19 pandemic, we delivered on targeted year one cost synergies at an accelerated rate compared to our original goal and we increased the three-year run rate synergy targets from $50 million to $75 million. In addition, we completed the divestiture of Simcool in our fiscal second quarter. Our dedicated integration management office and integration teams continue to drive the integration, and we expect their efforts to contribute to top-line growth, continued margin expansion, and strong free cash flow. While COVID-19 has created some unique challenges, our team pulled together under difficult conditions and delivered strong results to date. Our fourth and final strategic pillar is to effectively deploy strong free cash flow. We have a track record of maintaining a flexible balance sheet so we can grow both organically and through strategic acquisition. Additionally, we have a history of quickly reducing leverage following acquisitions. We're employing that playbook now and prioritizing debt pay down. During the past quarter, we made a significant dent in our net leverage ratio, finishing below our original target of 2.7 times net debt to EBITDA, less than 12 months after closing on Millicron. We're confident in our continued ability to generate robust free cash flows to pay down debt, invest for growth, and return capital to shareholders. In summary, the company made significant strides executing our strategy this past year, and we feel very confident in our ability to create long-term shareholder value over the coming quarters and years. Now let me turn to some highlights for the quarter. Total company performance exceeded our internal expectations, driven by the stronger than expected recovery in certain industrial end markets. continued elevated volume at Batesville, and generally strong execution and disciplined expense management across all the segments. In the molding technology solution segment, Hot Runner Systems orders continued to improve as demand for medical products and electronics remained strong. And in injection molding, we saw strength in orders both in India and North America as order activity picked up in consumer goods, packaging, automotive, and construction. We finished the fourth quarter with the best order rates and backlog for injection molding in over two years. We also saw parts and service orders pick up as we moved through the fourth quarter. In the advanced process solution segment, orders for large polyolefin systems remained strong. As we alluded to on our last call, we booked more than $100 million in new large-scale plastics projects in the fourth quarter. These orders contributed to record backlog in the segment. Despite some slowdown in North American polyethylene projects, the pipeline for new large systems remains healthy globally with continued strength in Asia. Orders for our smaller mid-cycle products and aftermarket parts and service continue to be down in the quarter due to end market weakness. All three segments delivered robust cash flow in the quarter on the strength of their operating results and actions taken to reduce expenses and carefully manage working capital. We remain cognizant of balancing the near and long-term needs of the business, and we continue to invest in high-return projects, including product development and innovation. And as I mentioned earlier, we meaningfully improved the health of our balance sheets during the quarter. Christina will provide more detail on our results in a moment, but first, I want to report a new addition to our executive leadership team. i'm pleased to welcome pete dyke as our chief human resources officer he brings more than 25 years of human resources experience in industrial companies including 14 years at pentair i know i speak for the entire team when i say that i look forward to working with pete to continue to execute the millicron integration and our hr transformation and to build talent across the enterprise at this time i'll turn it over to christina to provide more specific details on our overall financial performance, segment performance, and outlook.