NYSE:B Barnes Group Q4 2023 Earnings Report $47.48 0.00 (0.00%) As of 01/27/2025 Earnings HistoryForecast Barnes Group EPS ResultsActual EPS$0.41Consensus EPS $0.35Beat/MissBeat by +$0.06One Year Ago EPS$0.52Barnes Group Revenue ResultsActual Revenue$415.50 millionExpected Revenue$420.47 millionBeat/MissMissed by -$4.97 millionYoY Revenue Growth+32.50%Barnes Group Announcement DetailsQuarterQ4 2023Date2/16/2024TimeBefore Market OpensConference Call DateFriday, February 16, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Barnes Group Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 16, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning. My name is Christa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Barnes Fourth Quarter and Full Year Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:28Thank you. I would now like to turn the conference over to Bill Pitts, Vice President of Investor Relations. Bill, you may begin your conference. Speaker 100:00:37Thank you, Christa. Good morning and thank you for joining us for our Q4 full year 2023 earnings call. With me are Barnes' President and Chief Executive Officer, Thomas Hook Senior Vice President, Finance and Chief Financial Officer, Julie Strike and Ian Reason, President of Barnes Aerospace. You can access all earnings related materials on the Investor Relations section of our corporate website atonebarnes.com. That's onebarnes.com. Speaker 100:01:13During our call, we will be referring to the earnings supplement presentation. 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 8 ks submitted to the Securities and Exchange Commission. Of note, as we announced in today's earnings press release, following the acquisition of MB Aerospace, the company is introducing adjusted EBITDA metrics to its reporting and outlook, which Julie will discuss in greater detail. Speaker 100:02:02Be 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, which are available on the Investor Relations section on 1barnes.com. I'll now turn the call over to Tom for his opening remarks, then Ian will comment on our Aerospace business and progress on the MB Aerospace acquisition. After that, Julie will provide a review of our financial performance and details of our initial 2024 outlook. Speaker 100:02:57Then we'll open up the call for questions. Tom? Speaker 200:03:01Thank you, Bill. Of the Barnes Aerospace Business. As we transform our portfolio toward a majority contribution from the attractive aerospace market and in an effort to continually provide transparency into our business, it's important to hear directly from our operational leaders will provide an update on the integration of MB Aerospace, expected synergies and the operational and commercial benefits we are already experiencing. First, let me provide an overview of 2023 to highlight our considerable achievements as a team. Please turn to slide 5. Speaker 200:03:47I am pleased with the noteworthy progress made in the execution of Barnes' business transformation strategy encompassing our 3 pillars core business execution, scale aerospace and integrate, consolidate and rationalize industrial. Across the company, we are committed to unlocking Barnes' full potential and increasing value. For the full year, we turned in a solid performance. Revenue of $1,450,000,000 grew 15% reported and 5% organic. Adjusted EBITDA margin improved to nearly 19%, reflecting benefits from our cost savings efforts. Speaker 200:04:26We also improved cash flow significantly due to disciplined cost management and a focus on working capital, while still investing in our business for long term growth. Our restructuring program continues to progress. We delivered $25,000,000 in savings in 23, above our previously communicated $22,000,000 target. These savings are partially mitigating higher material and labor costs and isolated productivity challenges. Importantly, we are seeing cost abate somewhat and supply chain health improve. Speaker 200:05:03Despite more work ahead, I'm proud of our team accomplishments in the short period of time we've been at it. We delivered meaningfully on our key strategic priorities during the year and are gaining momentum. Please turn to slide 6 and our first strategic pillar, core business execution. As I have said before, we are focused on top line, bottom line and pipeline growth across the company. We continue to identify opportunities to strengthen our direct connection with customers for top line growth and leverage these opportunities through commercial excellence combined with operational productivity to improve bottom line profitability. Speaker 200:05:40These actions in turn fund future pipeline investments and increase our sales funnel. During 2023, we extended 2 long term aerospace agreements with Safran. In Molding Solutions, we deployed an integrated channel management approach and a global go to market alignment to drive commercial excellence. Operationally, we are applying heightened cost management and working capital discipline across the organization. Please turn to slide 7 and our second strategic pillar, Scale Aerospace. Speaker 200:06:13In 2023, we made a massive leap with the strategic acquisition of MB Aerospace, which closed in August. Barnes Aerospace is now a truly global business with an expanded geographic reach, diverse capabilities and offerings to serve markets and customers around the world. The addition of MB Aerospace to our portfolio positions us as a more attractive partner that enables deeper customer relationships and the ability to win additional contracts. To that end, we have already closed on 2 large contract renewals and expect to close on several other large contract wins and extensions with customers. Ian will discuss this in more detail in a moment. Speaker 200:06:56We continue to further scale this business through integration and synergies which will drive growth, operational excellence and margin expansion. Please turn to slide 8 and our final strategic pillar, integrate, consolidate and rationalize our industrial segment. During the year, we formed the Barnes Transformation Office or BTO to enable a more agile responsive organization using standard tools, processes and systems. We are experiencing solid momentum as we execute numerous transformation initiatives in support of accelerating our growth and profitability. We advanced our manufacturing facility optimization through footprint rationalization with plant closures and molding solutions, Motion Control Solutions and several smaller underperforming technology and service centers in the automation business. Speaker 200:07:46At Molding Solutions after several months of planning, we recently announced a new organization structure to fully integrate and streamline the business to drive efficiency and expand manufacturing capacity globally. Last month, we took another important step forward with the announced sale of our associated Spring and Hanging businesses. With this divestiture, we will exit Automotive Components Manufacturing and simplify the Industrial segment. Post close, the expected net cash proceeds of approximately $150,000,000 will be used to reduce debt supporting our leverage target goals. On slide 9, you can see how these strategic actions are dramatically shifting our portfolio, moving us towards higher growth and margin opportunities while increasing our exposure to more stable business. Speaker 200:08:37As we move forward, our Aerospace segment will account for the majority of our consolidated revenues and even larger percentage of our earnings positioning us for long term profitable growth. In closing, our teams drove an incredible amount of progress in 2023 where we have faced challenges, we have taken actions to improve performance. We had a clear vision for Barnes, a solid strategy that we are in the process of executing to make that vision a reality and a passionate team that has proven they know how to deliver results. While we still have a lot more to do, we are committed to reshaping and positioning Barnes for success by executing our strategic priorities to maximize value for our shareholders. As such, you should expect more progress in 2024. Speaker 200:09:26We will continue to drive multiple working capital, cash management and cost reduction activities with a focus on business fundamentals and deleveraging our balance sheet. Now before passing the call to Ian, I want to take a moment to thank the global Barnes team of 6,500 employees for their hard work, contributions and dedication to the success of Barnes and its transformation. Their collaborative attitude and willingness to embrace change in a fast paced environment is what will allow us to achieve our desired outcomes. And for that, I am truly grateful. Ian, I'll now pass the call to you for an update on Barnes Aerospace. Speaker 300:10:07Thank you, Tom, and good morning, everyone. I'm happy to participate in today's call to provide an update on Barnes Aerospace, including the MB Aerospace acquisition and share my excitement about the opportunities to capitalize on the strength of the combined business. Please turn to Slide 10. In the 5 months since the acquisition closed, we have made significant progress with our key integration objectives. We approached the integration with the guiding principle of stronger together to inform our decisions and actions and we now operate as 1 Barnes Aerospace. Speaker 300:10:47A new organization structure is in place, including the senior management team that combines leaders from both Barnes Aerospace and MB Aerospace and we are going to market as a single, unified Barnes Aerospace brand. With core integration activities complete, we are now focused on optimizing and improving the combined business. There has been solid advancement in identifying and executing synergies. As we exit 2023, we have secured $8,500,000 of run rate synergies and have line of sight to increase the run rate to $12,000,000 by the end of 2024. We fully expect to realize the $18,000,000 run rate target shared upon closing of the transaction by the end of 2025. Speaker 300:11:41In addition, we are enabling greater flexibility and best practice sharing to optimize our existing facilities. For example, in January in Connecticut, we created a new OEM Operations Center of Excellence or COE primarily focused on military related components, resulting in management and operational efficiencies. This COE approach creates opportunities to optimize global facility capacity, which enables us to position work in the right COE location from our extensive global footprint to best meet program and customer needs. As Tom noted, our now larger aerospace business is seeing new commercial and defense opportunities given our expanded capabilities and solution set. Our increased scale also provides greater diversification of customers, markets and platforms. Speaker 300:12:40Customer feedback regarding our combined value added offering has been very positive. We've been working diligently on renewing multiple long term agreements with all of our major engine OEM customers and have largely concluded negotiations on all the agreements. We have already signed 2 major LTAs and are now working towards finalizing the remainder of the agreements over the coming few weeks. These deals, a combination of program extensions and incremental new work, will generate significant order strength for the business over time. An example of an LTA we have recently signed, which illustrates our competitive position is a long term agreement with General Electric to extend the term for LEAP engine programs by 10 years, extend legacy engine programs by 4 years and expand our portfolio of products on military engines. Speaker 300:13:37This agreement has an estimated sales value of over $1,000,000,000 to 2,035 with most of the value from program extensions. In addition, we have signed an LTA extension with a legacy MB Aerospace engine OEM customer, and we are close to finalizing several others. Building on the previously announced Safran long term agreement for the repair and overhaul components for the LEAP and CFM engine programs and the increasing demand for aftermarket repairs from other customers, we are expanding our existing MRO footprint in Singapore with the opening of a new facility in the Seletar Aerospace Park in 2024. Furthermore, to ensure we can offer a truly global repair solution to our customers, we have initiated planning for a new European MRO component repair facility, utilizing our existing footprint in Poland. In closing, we have made significant advancements on many fronts in becoming a near $1,000,000,000 Aerospace Business as we position ourselves for further organic and inorganic growth. Speaker 300:14:53Our team is excited about the progress and I look forward to sharing more highlights with you in the future. With that, I'll now pass the call to Julie to cover our financial performance and outlook. Speaker 400:15:06Thank you, Ian, and good morning, everyone. Before I walk through our results, I want to first share that we are introducing adjusted EBITDA metrics to our reporting and outlook. We believe this addition better reflects our core operating and cash generating capability and provides increased transparency into our performance. Also, as Tom discussed, we recently announced the divestiture of Associated Spring and Hange. Combined, these businesses generated approximately $200,000,000 in revenue in 2023. Speaker 400:15:42The combination of our MB Aerospace acquisition coupled with this divestiture shifts our portfolio to a more focused and higher value business. It is truly an exciting time as we position Barnes for sustainable, profitable growth and further value creation. My comments today will focus on our 4th quarter results and 2024 outlook. We have provided full year results for the total company and by segment within our earnings presentation, which is posted on our Investor Relations website for your reference. Also, comparisons are year over year unless otherwise noted. Speaker 400:16:25Please turn to slide 12. For the Q4, sales were $416,000,000 up 33% reported and up 2% organic. Foreign exchange was a benefit of 2%. Adjusted operating income was 48,000,000 36% and adjusted operating margin of 11.5% was up 30 basis points, largely attributable to our restructuring program. Adjusted EBITDA was $78,000,000 up 36% and adjusted EBITDA margin was 18.8%, up 50 basis points. Speaker 400:17:06Interest expense was $24,000,000 versus $4,000,000 due to higher borrowings given the acquisition of MB Aerospace and a higher average interest rate associated with our debt recapitalization. The 4th quarter adjusted tax rate was 12%. During the quarter, we completed an intercompany transaction between related entities in several tax jurisdictions, which based on the tax law in those jurisdictions provided a favorable tax benefit. On an adjusted basis, net income per share was $0.41 compared to $0.52 reflecting revenue growth and margin improvement offset by higher interest and tax expense. I will now turn to our 4th quarter segment performance starting with Aerospace on Slide 13. Speaker 400:18:01We have made significant strides in integrating our Aerospace business and are better positioned to participate in the strong industry growth opportunity. For the Q4, total sales were $213,000,000 up 96% reported and up 15% organic. Excluding the impact of MB Aerospace, organic OEM sales increased 17%, MRO sales grew 15% and RSP sales were up 7%. These results demonstrate the strength of our underlying Aerospace business. Adjusted operating profit of $27,000,000 was up 53 percent, while adjusted operating margin declined 360 basis points to 12.8%, reflecting the impacts of MB's portfolio mix and the amortization of long term acquired intangibles. Speaker 400:19:00Aerospace adjusted EBITDA was $46,000,000 up 69 percent benefiting from higher organic sales and the contribution of MB Aerospace. Adjusted EBITDA margin was 21.5% versus 24.9% a year ago, impacted by portfolio mix and productivity. As Ian mentioned, we are working diligently on several new long term agreements with customers. Our backlog remains healthy. With the combined Barnes and MB Aerospace Business, our OEM backlog now stands at $1,230,000,000 and we expect to convert approximately 50% to revenue over the next 12 months. Speaker 400:19:46Moving to Industrial results on Slide 14, we have made significant progress to integrate, consolidate and rationalize our Industrial segment. This includes our restructuring program aimed at reducing our cost structure, the closing of numerous locations over the last year and a half and more recently the announced agreement to sell Associated Spring and Hange. 4th quarter sales were $203,000,000 down 1% reported and down 4% organic. Molding Solutions organic sales increased 1%, while Motion Control Solutions organic sales were down 10% and automation was down 7%. Adjusted operating profit was $20,000,000 up 19% and adjusted operating margin was 10.1 percent, up 170 basis points. Speaker 400:20:43Adjusted EBITDA was $33,000,000 up 4 percent and adjusted EBITDA margin was 16%, up 80 basis points, benefiting from positive pricing and favorable productivity due in part to transformation related activities, partially offset by lower sales volumes and mix. Turning to the balance sheet and cash flow on Slide 15. Cash provided by operating activities for the full year was $112,000,000 versus $76,000,000 a year ago. The significant improvement was driven by a lower investment in working capital. Free cash flow was $57,000,000 versus $40,000,000 and capital expenditures were $56,000,000 up $21,000,000 from the prior year as we continue to reinvest in our businesses. Speaker 400:21:37About 60% of the CapEx is related to growth and transformation. Our net debt to EBITDA ratio was 3.6 times at year end, which improved from 3.8 times at the end of the third quarter due to both higher EBITDA and lower debt. Liquidity as of December 31 was $447,000,000 comprising approximately $90,000,000 in cash on hand and $357,000,000 availability under our revolving credit facility. With Turning to Slide 16. We continue to maintain a disciplined approach to capital allocation. Speaker 400:22:27Our priorities are the health of our balance sheet, organic investments that will drive sustainable profitable growth and remaining committed to shareholder returns. Net cash proceeds from the divestiture of approximately $150,000,000 will be used to reduce debt. We continue to target net leverage to be 3 times or lower by the end of 2024 and 2.5 times by the end of 2025. We also continue to invest in the business for long term growth with most of the increase in CapEx directed towards business transformation activities and MB Aerospace. In addition, we will continue to return capital to our shareholders through a dividend, which we have been paying for 90 consecutive years. Speaker 400:23:17Turning to our outlook on Slide 17. Our 2024 guidance reflects the strategic actions we have taken to shift our portfolio towards Aerospace, which offers higher growth and higher margin opportunities. This guidance assumes 1 quarter contribution from Associated Spring and Hanging as we expect the transaction to close in early 2024. We expect the impact to 2024 to be a negative 11% to revenue and negative 10% to adjusted EBITDA. For the year, we expect total sales to be up 12% to 16% with organic sales up 4% to 8%. Speaker 400:24:01Given the shift in our portfolio and streamlining of our businesses, starting this quarter and going forward, we are providing our outlook at a segment level only. Looking at our segments, we expect our Aerospace sales growth to be over 55%, inclusive of a full year contribution of MB Aerospace. We expect organic sales growth in the low double digits. For Industrial, we expect sales down in the mid teen range with organic sales growth up low single digits when taking the announced divestiture into account. Regarding our restructuring program, as Tom mentioned, we achieved $25,000,000 of savings, dollars 3,000,000 ahead of our previously communicated commitment. Speaker 400:24:48For 2024, we expect to achieve $38,000,000 in run rate savings and the program remains on track to deliver against our 2025 run rate target. Expected run rates are impacted by the pending divestiture and a reconciliation table is included on Slide 18 of our investor presentation. Adjusted operating margin is expected to be in the range of 12% to 14%. This reflects Aerospace adjusted operating margin in the range of 14.5% to 16% and Industrial in the range of 8.5% to 10%. Depreciation and amortization expense in 2024 are expected to be between $130,000,000 140,000,000 dollars Adjusted EBITDA margin is expected to be in the range of 20% to 22%. Speaker 400:25:42This reflects Aerospace adjusted EBITDA margin of 23.5 percent to 25% and Industrial of 15% to 16.5%. We expect adjusted EPS to be between $1.55 on the low end and $1.80 on the high end. This guidance reflects the impact of MB Aerospace and our announced divestiture, which combined are dilutive to adjusted EPS by approximately $0.47 per share. Top line growth and margin expansion from ongoing cost savings offset this dilution. On slide 18 of our investor presentation, we have included additional 2024 guidance information for modeling purposes. Speaker 400:26:32Please turn to slide 19. Given the moving pieces and to assist with modeling our business in the near term, we wanted to provide some additional transparency into our Q1 performance expectations. We expect revenue growth of 25% to 27%, adjusted operating margin of 11% to 12%, adjusted EBITDA margin between 19% 20% and adjusted EPS between $0.32 $0.37 Operator, we will now open the call for questions. Operator00:27:09Thank Your first question comes from the line of Matt Summerville from D. A. Davidson. Please go ahead. Speaker 500:27:27Thanks. Good morning. Speaker 600:27:29Good morning, Matt. Speaker 500:27:30Maybe just starting with the Molding Solutions SBU, can you talk a little bit about the organic performance across the mold and hot runner businesses in 2023 and what your expectation is in 2024? And specifically, delve into, to the extent you can, a little more detail on some of the headwinds you may be facing in the Chinese hot water market? And then I have a follow-up. Speaker 200:27:57Yes. Certainly, Matt. So in 2023, obviously, we had a lot of activities and success on the multi cavity molds in particular. Our lead times, due to the amount of work that we've won and have in operations that we're actively trying to keep pace with has increased our lead time. It's really almost doubled our lead times from about 26 weeks up to more complex molds for 50 to 52 weeks. Speaker 200:28:24That has met a very intensive period for the operations team to output. And we've been obviously struggling with long lead times to continue to book business with customers until we can clear that backlog. So on we still are leading from a mold standpoint globally very effectively on the multi cavity mold hot runners, asymmetric story. We do see market weakness in markets like China. We have seen a little bit of wavering in the European markets, but that has kind of stabilized. Speaker 200:29:02We sell across the hot runner product lines from the mid range all the way to the high end. We feel that we have struggled competitively in certain markets against other competition in the hot runner markets that have hurt our market share. But the organization we put in that streamline molding solutions and has also allowed us to invest more in the go to market focus and commercial market excellence will stabilize and has stabilized the hot runner sales funnel that we're feeding. We still are concerned about China market weakness. We have seen a still good market in the Americas. Speaker 200:29:43It's not a for us, it's more of the hot runners on the automotive side than it is broadly across Molding Solutions. We're making more investments in North America to have a more significant presence across the Molding Solutions product lines. So we feel that while the market in North America is not as favorable as it was last year, but we feel the investments we're making both in molds and hot runners will continue to allow us to capitalize on market growth in North America. But primarily right now, I would say in China, we're expecting kind of weaker conditions. I think all competitors are seeing that. Speaker 200:30:17We're expecting stable conditions in Europe. And I think for the overall year we expect a level of growth that's kind of mid single digits across those product lines. If we get more output of multi cavity molds, we could have an upside opportunity to that. But I think hot runners for the most part in the hot haves part of the product lines globally will be kind of a recovery year from some of the market share loss in 2023. Hopefully, Matt, that answers that question. Speaker 500:30:48Yes. I appreciate the detail. Flip it over to Aerospace. I think you guided high teens organic for the full year. You came in mid teens. Speaker 500:30:57Maybe talk about what sort of shortfall you may have experienced there? And I think last quarter you commented that the business was having some productivity challenges. If you could maybe elaborate on the state of the union, if you will, in that regard? Speaker 300:31:15Yes. Thanks, Matt. It's Ian. I'll take that. We certainly had some productivity challenges, primarily at 2 of our OEM locations in Q4. Speaker 300:31:25But we saw good progress all our other 15 locations, including one underperforming business that's turned around their performance in Q4 back to expectations. Where we did have the challenges, we understand the issues and are working to fix them with robust plans in place. As an example, we've taken actions to drive high attrition levels down at one site to ensure we have a more stable workforce and we're now investing heavily in the right training and employee engagement. Should we both retain our employees, but also accelerate their development and to enable higher productivity and efficiency levels. We've also made some key leadership changes at those 2 impacted sites. Speaker 300:32:07On top of that, we do have some persistent supply chain issues that haven't helped, but we're working with our customers and suppliers to mitigate these and we're making solid progress. And we've seen a good start to Q1. Although it's going to take time to fully mitigate productivity challenges at a small number of our sites, I'm confident we're seeing the improvements and we have the right action plans in place. Speaker 500:32:31Got it. Thanks guys. I'll get back in queue. Operator00:32:35Your next question comes from the line of Christopher Glynn from Oppenheimer. Please go ahead. Speaker 600:32:42Thanks. Good morning, guys, and congrats on the spectrum of scale, bold moves in the past year. I had a question about the $0.38 of the divestiture impact. How much of that pertains to core earnings in 2Q to 4Q versus ancillary impacts around stranded cost or kind of transaction related adjacent that maybe you don't adjust out? Speaker 400:33:17So the $0.47 we referred to on the call was related to all of the adjusted impacts that we will see throughout the course of the year. And it's a combined number. As Tom mentioned in his remarks, both the acquisition of MB Aerospace and these divestitures are clearly aligned with our 2 strategic pillars to scale Barnes Aerospace and integrate, consolidate and rationalize industrial. And combined, there's no doubt they create a step change towards achieving our objectives next year. So giving you a little more color around what's driving the $0.47 picture? Speaker 400:34:04Sure. Speaker 600:34:04Truly, I think I saw $0.38 dilution from divestiture impacts in the bridge from adjusted earnings to GAAP earnings guidance. I'm not identifying with the $0.47 but the question predicated the $0.38 from the press release. Speaker 400:34:24All right. I can pivot to a $0.38 those are the oh, you're talking about the Reg G items. You're talking about the Reg G items, not what's staying in. So the Reg G items, you're nailed. I apologize for that, Chris. Speaker 400:34:43I was answering a different question. Those include, yes, transaction costs, loss on gain of the impact of the gain on sale and some pension related Speaker 600:35:00items. Okay. So the core earnings loss isn't I'm wondering what the kind of operational foregone operational earnings? Speaker 400:35:11Correct. So that is what I was the core operational impact coming out of Alpha, that's where I was going. The core operational impact coming out of Alpha is approximately $0.28 But remember, the proceeds of the divestiture will be used to pay down debt, which is generating interest expense and tax benefit. And in the end, now going back to the total $0.47 of EPS dilution we talked about in year, MB will be approximately $0.19 And it's really important to point out that that is all non cash. There's about $24,000,000 of intangible amortization that flows through the P and L. Speaker 400:36:00And so the $0.19 dilution is all non cash and we expect to exit the year approximately neutral to accretive on the deal. Speaker 300:36:16Okay. Speaker 600:36:20And then the automation, how do you guys view that? It's got some nice niche technology, but it's small scale and the technology is kind of isolated in the context of automation markets generally. So curious if you could update the strategic fit for automation? Speaker 200:36:44Certainly. Well, as the automation business for us. We've done a refresh in the management team. We laid out in the second half of last year in parallel with Molding Solutions kind of a streamlined automation strategy as well. We've added a very important product line. Speaker 200:36:58We've been traditionally mechatronics gripping. We've added a vacuum product line and we're launching that globally. So we're quite excited about the growth potential for automation. Emmanuel Orlando is the new President of Automation. He's off to a very good start. Speaker 200:37:14And remind you, Emmanuel Orlando was the architect and the executor of a very successful multi cavity molding strategy and molding solutions, which earned him the opportunity to move to that business. So we're strategically it is a small business. We see it as a nice strategic fit into the tooling side. And we're toolmakers a lot on the industrial portfolio between molding, automation, tool and die industry. So that's the fit from the automation business strategically, sells through a combination of dealers and direct selling through automation centers that have been highly successful. Speaker 200:37:50So we see that as a very nice business with good growth trajectories. As we know due to labor demand, labor productivity, automation and robotics in the Gimatic business we run there as an end of arm tooling specialist application solutions for customers has been very successful. So we very carefully have been investing in that to grow it and expand that new product line globally and opening up some new market opportunities primarily through the automation center channels that we've been developing. A tooling and die, molding solutions which is tool and die and then automation which is obviously tooling. So we think that the connections of those product lines are quite nice. Speaker 200:38:43We think we've made the required adjustments and leadership and focus of the business for go to market. It will be successful as we get into 2024. Of course, we're always looking at the overall strategy of the company in combination and we think that's a nice fit with where we've made that maybe as pending dispositions exiting Associated Spring and Hanging to bring those into focus and alignment. Speaker 600:39:05Okay. So you don't see it as being handicapped in the channel not being part of a broader automation portfolio? Speaker 200:39:16Right now, I think we're focused, Chris, on getting the businesses to perform top line, bottom line, pipeline. So in industrial, we've been focused on rather than trying to scale the portfolio like we are in aerospace. We're focused on getting the business performing on the basics fundamental of generating organic growth and profitability by pricing correctly, productivity. Once we have and of course 2024 is a pivotal year for the industrial businesses to do this. Once we have that level of integration which we're aligning on right now, once we have that level of performance, top line, bottom line pipeline, then we'll talk about investing into the business for future growth. Speaker 200:39:56But until we get to that point, we'll continue to hold on industrial M and A activities because we're not prepared to add to the portfolio in that manner. Speaker 600:40:08Okay, great. And last one from me, you have the 30% to 32% tax rate guide. I would like a clarification on how that should translate to the adjusted tax rate. And that level of taxation is certainly an outlier. So curious how that what your expectations are for general tax rate paradigm understanding that there are a lot of influences on deductibility and non deductibility in the current year? Speaker 400:40:55So going forward, the 30% tax rate would be our standard tax rate in terms of I want to make sure I'm answering your question correctly, but that would be our standard tax rate going forward in light of where we sit with our interest expense and the geographic composition of our business. Speaker 600:41:30Okay. We'll tell that back more online. Thanks offline. Thank you. Speaker 400:41:33Okay. Thanks. Operator00:41:37Your next question comes from the line of Myles Walton from Wolfe Research. Please go ahead. Speaker 700:41:44Great. Thanks so much. I just had a couple of quick questions if I could. The first one is around orders within the aerospace business. And Ian, you went through sort of LTAs on the horizon, but just wanted to make sure that I'm thinking about this right to see order declines both in the quarter that were pretty big and order declines for the year that were still there. Speaker 700:42:05I'm trying to reconcile that with sort of the market expansion. And if you're just saying that it's timing related and we'll see a lot of these LTAs actually pop into backlog in the near term. Speaker 300:42:18Thanks, Miles. And you're absolutely right. Our orders are lumpy just with the nature of the business, but absolutely solid. The LTAs we have in play at the moment, including the one we've announced, has just over $2,500,000,000 of order value across about 7 LTAs. So we're seeing very strong orders. Speaker 300:42:40It's just a timing issue. We'll be announcing a number of new LTA signatures as we go forward, but absolutely no issues with orders, a very strong backlog. And as we all know, we're very growing demand on both the OEM new build and the aftermarket. So we're seeing strength on both sides of the business. Speaker 700:43:04Okay. And I think that the margins were expected to be a bit stronger in Aero. They ended up a bit lighter. Is that simply RST mix not coming through or something else? And then by within Arrow, the low double digit organic growth you have for 2020 4, is aftermarket expected to grow at a faster pace than that average? Speaker 700:43:29Any color there? Speaker 300:43:32So on the certainly on the mix, RSP is a big part of the driver there. And of course, we're bringing MB in, which doesn't have an RSP program. That's going to drive our overall margin down. But of course, it's a good story. It's just that the RSP is a bit of a heavy, heavy weight there in terms of its profit contribution. Speaker 300:43:57But looking forward, we expect to see margin accretion, some of the productivity challenges that I talked about earlier on the OEM side of the business as we work through those and we get the work through the factories, that those sales fall to the bottom line in a very predictable way. So we expect to see incremental margin expansion. And on the aftermarket side, yes, we expect to see higher growth levels than the average level. It's very difficult to predict. The aftermarket business is something that is very cyclical, but we are seeing a very big up cycle and demand certainly in Q1 across RSP and our repair shops has been phenomenally high. Speaker 300:44:43So we're seeing that come strong. Does that continue strong throughout the year? Do we see cycles? We don't know, but we're expecting to see solid growth year on year in the aftermarket side and then growth on the OEM side as production rates start to ramp particularly on the narrow bodies. Speaker 700:45:03Okay. And last one, Julie, on cash flow, the conversion I see on the slide is 140 percent of GAAP, but obviously you've got a very large adjusted number in there that had sounded to the answer to Chris' question was largely non cash. And so I'm curious from a working $40,000,000 consumption. Is that correct? Speaker 400:45:29$40,000,000 consumption from what area? Speaker 700:45:33In 2024 to get to $75,000,000 to $90,000,000 of free cash flow, what is the working capital outlook that you have for 2024? Speaker 400:45:45The working capital outlook, let me get to that one. It is let me get back to you on that one on the follow-up call. I do have it. It's just not right in front of me. Speaker 700:46:00Okay. No worries. Thanks again. Operator00:46:04Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead. Speaker 800:46:12Hey, morning guys. Thanks for taking the questions. Just a couple of follow ups for clarity first. Julie, did you say MB is now expected to be neutral to accretive, I guess by the end of this year? And then I think I heard the operational impact from the divestitures is 0.28 dollars And I think you called out maybe 50 bps of margin impact from the divestiture. Speaker 800:46:38So I guess you're losing $200,000,000 at maybe a 4% margin. That $0.28 sounded high. So did I have that right? Speaker 400:46:49Yes. You have that approximately right from what's falling out of the portfolio. And you did hear correctly that we anticipate MB will be exiting the year neutral to accretive. Speaker 800:47:09Okay. What's the $0.28 operational impact? It doesn't seem to reconcile with the 50 bps margin. Speaker 400:47:19So from a dollar perspective, it's about a $20,000,000 outflow of operating income. 20. And remember, the reason it might not be reconciling for you is that we have a quarter of the business we have 1 quarter performance in the outlook for the year. So that reflects 3 quarters of a year. Hopefully that helps triangulate your math. Speaker 800:47:50So you're losing $20,000,000 of operating income on that, that seems to be fairly high margin then. What's actually in all of that operating income? I mean that's just I thought this was more of a margin dilutive business that you were selling. Speaker 400:48:08Yes. So in 2020, it in the range of our margins, it was absolutely on the low end of our margin portfolio. In 2023, we experienced some benefits in the business, which temporarily inflated that margin as we were closing the Bristol facility. We had the Ford final buys and we had some other final type sales, which supported the profitability of the business in 2023 that would not be recurring if the business remained in our portfolio. And that's probably what's skewing what you're thinking about. Speaker 200:48:51Basically, Mike, they're just the end of life they're the end of life programs for the transfers that what the Bristol Associates bring Bristol shut down. Speaker 800:48:59Okay. Speaker 200:49:00Ran out and ended their one time benefit, one time revenues for 'twenty three and they weren't going to repeat under any circumstances prospectively? No. Speaker 800:49:10Okay, got it. And then I guess just shifting to industrial, the outlook for the year on low single digit organic, what gives you the I know you gave a lot of color originally to Matt's question, but I think the organic order flow was down 11%. I mean, what gives you the confidence in that industrial organic outlook? Speaker 200:49:35Mike, a lot going on in industrial, as you know, and I'll focus my comments away from even those are a quarter of associates bringing HANGM here. I'm going to focus on molding solutions, motion control solutions and automation. Each of those pieces we've kind of done some streamlining in the group what we call the integrated, consolidated, rationalized, industrial. So we've made a lot of investments there to streamline our approach to the businesses, focus management teams on commercialization initiatives. And with the reduction in G and A, we've been able to put more feet on the street and focus on sales funnels. Speaker 200:50:11We have seen multiple places where that's been very successful. Certainly in multi cavity molds, we've been highly successful last year seeing that initiative and we've been rolling that out more broadly into the industrial go to market teams. More resources and the additional one for Molding Solutions is selling the entire portfolio globally. We don't typically sell comprehensively in North America for Molding. That's a big pickup opportunity for us. Speaker 200:50:38We've appropriately looked at upsides and downsides to be balanced in providing our guidance. We know we also have more full year effects of some of the commercial investments in 2023 coming through in 2024 which would be pricing for a full year effect. So we're starting to see more full year benefits and also see some of the returns in those prospective views from the investments we've made in the second half of last year when I was running the Molding Solutions business. We've got good stable leadership in place and we're kind of beyond those integrate consolidate initiatives that have already been completed. So So we're going to end up seeing the benefits of those come through. Speaker 200:51:18We understand and have kind of recognizing the markets may not be as favorable in 2024 as they were in 2023 in some of these markets. So we've tempered our expectations accordingly based on the information we have from competitive and market information. I think we've ended up with a very balanced view, but also a growth perspective that kind of supports the investments we've already made to improve those businesses and sure we get the performance and returns out we are expecting. Speaker 800:51:47Okay. Got it. And then just last one on the Aerospace LTAs, I know historically you guys made some upfront investments in the RSPs and CSPs. Is there any nuance to these new LTAs or extensions where you have to make any upfront investments? Or are these should we think of these as more traditional kind of industry orders that without any upfront investment? Speaker 300:52:20Thanks for the question, Michael. There's no significant investments required for any of the LTAs. Most of them are follow on with some new work in there and some volume expansions. But now these are just normal orders and not requiring any significant investments at all. Speaker 800:52:38Okay, perfect. I'll jump back in the queue. Thanks. Speaker 400:52:42Hey, and this is Julie. I just wanted to hop in and follow-up on Myles' question on working capital. We actually have working capital expectations to be approximately flat year over year as we continue to work through backlog reserves we excuse me, inventory reserves we have that we're still working down and as we continue to drive additional productivity. So we despite sales growth and growth in some of our AR areas are looking and working with the business very closely on driving down working capital overall. So it's a net neutral in the year. Operator00:53:23Your next question comes from the line of Matt Summerville from D. A. Davidson. Please go ahead. Speaker 500:53:31Thanks. I just want to clarify one item, kind of getting back to Mike's question and maybe a question prior. How much in operating income dollars are you foregoing in 2024 for the 9 month period you will not own Spring and Hengdi? And if you need to normalize that, if it was over earning in 2023, can you please make that normalization? I just wanted to be crystal clear how much OP dollars you're foregoing? Speaker 500:54:01Thank you. Speaker 400:54:03So in the back three quarters of 2024, we'll forego approximately 100 and $55,000,000 in sales and approximately $20,000,000 in operating margin. Normalizing that, I don't want to throw out a number that is directionally incorrect for you. So when we have our follow-up call, I'll be we can dissect that a bit because I know you're trying to use this for modeling purposes and I just don't want to give you incorrect information, but there was a meaningful increase in our sales this year as those end of life programs came in and happy to get you the figures when we have our follow-up. Speaker 500:54:55Perfect. And then, just final one on pricing. Tom, can you maybe talk about how much price you were able to realize in industrial in 2023 and how much incremental price capture we should be thinking about for 2024? Thank you. Speaker 200:55:12Yes. I'll give a qualitative answer and then I'll let Julie give the analytical answer. The short answer is not enough to my satisfaction. We've been hit with a lot of inflation, energy, freight, labor, materials, supply chain disruption, longer lead times. So offsetting all that has required a comprehensive across all of industrial, even the associates bringing hanging businesses to this. Speaker 200:55:38Go to reach out to customers to pass on those inflationary pressures and to either reprice the book of business we have or to price business prospectively for future orders. That has been a battle as you can imagine across the portfolio. That's been our primary over the last since my 18 months in this company, it's been one of the primary customer interface negotiation points. I'll let Julie give the analytics behind it. We were late in getting started. Speaker 200:56:10We only partially mitigated this in 2022 and 2023. I would say today we passed the even keel point and now we're really in a position of recovering price and making up for inflation that we've already experienced, but we were late in responding and only partially in mitigating it. So I would say that we've done an incomplete job there, but prospectively better balance and certainly the curing supply chains in the lower inflationary environment make that normalization and equilibrium better. But I'll let Julie give the analytics behind those qualitative statements to help out. Speaker 400:56:48Yes. Thanks, Matt. For pricing, we realized approximately and this is a gross number, approximately $30,000,000 of price in year. That was used, as Tom said, to largely offset what we saw in terms of inflation and mix impacts and other productivity challenges that we faced. And that's across the whole portfolio, not just industrial, that's across the whole portfolio of which about $19,000,000 was industrial. Speaker 500:57:26Okay. And then how much incremental price capture should we be thinking about in 2024 across total Barnes and then Industrial as a subset? Thank you. Speaker 400:57:35Yes. So for total Barnes, we're looking at a number that's around the $20,000,000 range at this point. And that would be skewed towards Aerospace with Industrial, call it, 7 to 10. Speaker 500:57:54Perfect. Thank you for that color. Speaker 400:57:56Yes, no worries. Operator00:58:02Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead. Speaker 800:58:10Hey, sorry guys. Just to right back to Matt's question to make this clear, Julie, dollars 155,000,000 of revenue goes away from the divestiture. And Matt was asking the op income dollar loss for the 9 months, forgetting about the year on year, is it fair to say the $155,000,000 was generating 4% to 5% margin, so maybe it's a $6,000,000 op income loss for the remaining 9 months this year? Speaker 400:58:46No, I don't think that's the right way to be looking at it. We would be it's the $20,000,000 which would be closer to about like a 12% or 13% margin is what we would expect to see going out the door as a result of the divestiture. Operator00:59:24And that's all the time we have for questions today. I will now turn the conference over to Tom Hook, Chief Executive Officer for closing remarks. Speaker 200:59:34Thank you for joining our call today. It is an exciting time as we reshape the company and position Barnes for sustainable profitable growth. We remain laser focused on executing our strategic business transformation and delivering solid results in 2023. Momentum is building and we have a clear path to drive growth, margin expansion and cash flow in 2024, which will support our commitment to reduce debt. There are multiple work streams underway across the company for improved predictable financial performance and to maximize value. Speaker 201:00:06Thank you for your continued interest in Barnes. Operator01:00:10This concludes today's conference call. Thank you for your participation and you may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallBarnes Group Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Barnes Group Earnings HeadlinesElicit Brewing Co. prepares for upcoming opening in Danbury Square’s former Barnes & Noble spaceApril 3, 2025 | msn.comRick Barnes, Kelvin Sampson have a 50-year friendship leading into Elite Eight clashMarch 30, 2025 | usatoday.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.April 26, 2025 | Paradigm Press (Ad)David Moore Victor BarnesMarch 13, 2025 | latimes.comBarnes makes most of every possession as Lenape tops Cherokee in South Jersey Group 4March 4, 2025 | msn.comTherapeutic Goods Administration decides not to register lecanemab in AustraliaMarch 3, 2025 | gurufocus.comSee More Barnes Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Barnes Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Barnes Group and other key companies, straight to your email. Email Address About Barnes GroupBarnes Group (NYSE:B) provides engineered products, industrial technologies, and solutions in the United States and internationally. The company operates through two segments: Industrial and Aerospace. The Industrial segment offers precision components, products, and systems used by various customers in end-markets, such as mobility, industrial equipment, automation, personal care, packaging, electronics, and medical devices. This segment also designs and manufactures hot runner systems, mold cavity sensors and process control systems, and precision high cavitation mold assemblies for injection molding applications; provides force and motion control solutions for various metal forming and other industrial markets; and designs and develops robotic grippers, end-of-arm tooling systems, sensors, and other automation components for intelligent robotic handling solutions and industrial automation applications. In addition, it manufactures and supplies precision mechanical products, including mechanical springs, and high-precision punched and fine-blanked components used in mobility and industrial applications. This segment sells its products primarily through its direct sales force and distribution channels. The Aerospace segment produces fabricated and precision machined components and assemblies for turbine engines; and nacelles and structures for commercial and defense-related aircraft. It also provides aircraft engine component maintenance, repair, and overhaul services for turbine engine manufacturers, commercial airlines, and defense market; and manufactures and delivers aerospace aftermarket spare parts. This segment serves original equipment manufacturing industry. Barnes Group Inc. was founded in 1857 and is headquartered in Bristol, Connecticut.View Barnes Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Good morning. My name is Christa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Barnes Fourth Quarter and Full Year Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:28Thank you. I would now like to turn the conference over to Bill Pitts, Vice President of Investor Relations. Bill, you may begin your conference. Speaker 100:00:37Thank you, Christa. Good morning and thank you for joining us for our Q4 full year 2023 earnings call. With me are Barnes' President and Chief Executive Officer, Thomas Hook Senior Vice President, Finance and Chief Financial Officer, Julie Strike and Ian Reason, President of Barnes Aerospace. You can access all earnings related materials on the Investor Relations section of our corporate website atonebarnes.com. That's onebarnes.com. Speaker 100:01:13During our call, we will be referring to the earnings supplement presentation. 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 8 ks submitted to the Securities and Exchange Commission. Of note, as we announced in today's earnings press release, following the acquisition of MB Aerospace, the company is introducing adjusted EBITDA metrics to its reporting and outlook, which Julie will discuss in greater detail. Speaker 100:02:02Be 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, which are available on the Investor Relations section on 1barnes.com. I'll now turn the call over to Tom for his opening remarks, then Ian will comment on our Aerospace business and progress on the MB Aerospace acquisition. After that, Julie will provide a review of our financial performance and details of our initial 2024 outlook. Speaker 100:02:57Then we'll open up the call for questions. Tom? Speaker 200:03:01Thank you, Bill. Of the Barnes Aerospace Business. As we transform our portfolio toward a majority contribution from the attractive aerospace market and in an effort to continually provide transparency into our business, it's important to hear directly from our operational leaders will provide an update on the integration of MB Aerospace, expected synergies and the operational and commercial benefits we are already experiencing. First, let me provide an overview of 2023 to highlight our considerable achievements as a team. Please turn to slide 5. Speaker 200:03:47I am pleased with the noteworthy progress made in the execution of Barnes' business transformation strategy encompassing our 3 pillars core business execution, scale aerospace and integrate, consolidate and rationalize industrial. Across the company, we are committed to unlocking Barnes' full potential and increasing value. For the full year, we turned in a solid performance. Revenue of $1,450,000,000 grew 15% reported and 5% organic. Adjusted EBITDA margin improved to nearly 19%, reflecting benefits from our cost savings efforts. Speaker 200:04:26We also improved cash flow significantly due to disciplined cost management and a focus on working capital, while still investing in our business for long term growth. Our restructuring program continues to progress. We delivered $25,000,000 in savings in 23, above our previously communicated $22,000,000 target. These savings are partially mitigating higher material and labor costs and isolated productivity challenges. Importantly, we are seeing cost abate somewhat and supply chain health improve. Speaker 200:05:03Despite more work ahead, I'm proud of our team accomplishments in the short period of time we've been at it. We delivered meaningfully on our key strategic priorities during the year and are gaining momentum. Please turn to slide 6 and our first strategic pillar, core business execution. As I have said before, we are focused on top line, bottom line and pipeline growth across the company. We continue to identify opportunities to strengthen our direct connection with customers for top line growth and leverage these opportunities through commercial excellence combined with operational productivity to improve bottom line profitability. Speaker 200:05:40These actions in turn fund future pipeline investments and increase our sales funnel. During 2023, we extended 2 long term aerospace agreements with Safran. In Molding Solutions, we deployed an integrated channel management approach and a global go to market alignment to drive commercial excellence. Operationally, we are applying heightened cost management and working capital discipline across the organization. Please turn to slide 7 and our second strategic pillar, Scale Aerospace. Speaker 200:06:13In 2023, we made a massive leap with the strategic acquisition of MB Aerospace, which closed in August. Barnes Aerospace is now a truly global business with an expanded geographic reach, diverse capabilities and offerings to serve markets and customers around the world. The addition of MB Aerospace to our portfolio positions us as a more attractive partner that enables deeper customer relationships and the ability to win additional contracts. To that end, we have already closed on 2 large contract renewals and expect to close on several other large contract wins and extensions with customers. Ian will discuss this in more detail in a moment. Speaker 200:06:56We continue to further scale this business through integration and synergies which will drive growth, operational excellence and margin expansion. Please turn to slide 8 and our final strategic pillar, integrate, consolidate and rationalize our industrial segment. During the year, we formed the Barnes Transformation Office or BTO to enable a more agile responsive organization using standard tools, processes and systems. We are experiencing solid momentum as we execute numerous transformation initiatives in support of accelerating our growth and profitability. We advanced our manufacturing facility optimization through footprint rationalization with plant closures and molding solutions, Motion Control Solutions and several smaller underperforming technology and service centers in the automation business. Speaker 200:07:46At Molding Solutions after several months of planning, we recently announced a new organization structure to fully integrate and streamline the business to drive efficiency and expand manufacturing capacity globally. Last month, we took another important step forward with the announced sale of our associated Spring and Hanging businesses. With this divestiture, we will exit Automotive Components Manufacturing and simplify the Industrial segment. Post close, the expected net cash proceeds of approximately $150,000,000 will be used to reduce debt supporting our leverage target goals. On slide 9, you can see how these strategic actions are dramatically shifting our portfolio, moving us towards higher growth and margin opportunities while increasing our exposure to more stable business. Speaker 200:08:37As we move forward, our Aerospace segment will account for the majority of our consolidated revenues and even larger percentage of our earnings positioning us for long term profitable growth. In closing, our teams drove an incredible amount of progress in 2023 where we have faced challenges, we have taken actions to improve performance. We had a clear vision for Barnes, a solid strategy that we are in the process of executing to make that vision a reality and a passionate team that has proven they know how to deliver results. While we still have a lot more to do, we are committed to reshaping and positioning Barnes for success by executing our strategic priorities to maximize value for our shareholders. As such, you should expect more progress in 2024. Speaker 200:09:26We will continue to drive multiple working capital, cash management and cost reduction activities with a focus on business fundamentals and deleveraging our balance sheet. Now before passing the call to Ian, I want to take a moment to thank the global Barnes team of 6,500 employees for their hard work, contributions and dedication to the success of Barnes and its transformation. Their collaborative attitude and willingness to embrace change in a fast paced environment is what will allow us to achieve our desired outcomes. And for that, I am truly grateful. Ian, I'll now pass the call to you for an update on Barnes Aerospace. Speaker 300:10:07Thank you, Tom, and good morning, everyone. I'm happy to participate in today's call to provide an update on Barnes Aerospace, including the MB Aerospace acquisition and share my excitement about the opportunities to capitalize on the strength of the combined business. Please turn to Slide 10. In the 5 months since the acquisition closed, we have made significant progress with our key integration objectives. We approached the integration with the guiding principle of stronger together to inform our decisions and actions and we now operate as 1 Barnes Aerospace. Speaker 300:10:47A new organization structure is in place, including the senior management team that combines leaders from both Barnes Aerospace and MB Aerospace and we are going to market as a single, unified Barnes Aerospace brand. With core integration activities complete, we are now focused on optimizing and improving the combined business. There has been solid advancement in identifying and executing synergies. As we exit 2023, we have secured $8,500,000 of run rate synergies and have line of sight to increase the run rate to $12,000,000 by the end of 2024. We fully expect to realize the $18,000,000 run rate target shared upon closing of the transaction by the end of 2025. Speaker 300:11:41In addition, we are enabling greater flexibility and best practice sharing to optimize our existing facilities. For example, in January in Connecticut, we created a new OEM Operations Center of Excellence or COE primarily focused on military related components, resulting in management and operational efficiencies. This COE approach creates opportunities to optimize global facility capacity, which enables us to position work in the right COE location from our extensive global footprint to best meet program and customer needs. As Tom noted, our now larger aerospace business is seeing new commercial and defense opportunities given our expanded capabilities and solution set. Our increased scale also provides greater diversification of customers, markets and platforms. Speaker 300:12:40Customer feedback regarding our combined value added offering has been very positive. We've been working diligently on renewing multiple long term agreements with all of our major engine OEM customers and have largely concluded negotiations on all the agreements. We have already signed 2 major LTAs and are now working towards finalizing the remainder of the agreements over the coming few weeks. These deals, a combination of program extensions and incremental new work, will generate significant order strength for the business over time. An example of an LTA we have recently signed, which illustrates our competitive position is a long term agreement with General Electric to extend the term for LEAP engine programs by 10 years, extend legacy engine programs by 4 years and expand our portfolio of products on military engines. Speaker 300:13:37This agreement has an estimated sales value of over $1,000,000,000 to 2,035 with most of the value from program extensions. In addition, we have signed an LTA extension with a legacy MB Aerospace engine OEM customer, and we are close to finalizing several others. Building on the previously announced Safran long term agreement for the repair and overhaul components for the LEAP and CFM engine programs and the increasing demand for aftermarket repairs from other customers, we are expanding our existing MRO footprint in Singapore with the opening of a new facility in the Seletar Aerospace Park in 2024. Furthermore, to ensure we can offer a truly global repair solution to our customers, we have initiated planning for a new European MRO component repair facility, utilizing our existing footprint in Poland. In closing, we have made significant advancements on many fronts in becoming a near $1,000,000,000 Aerospace Business as we position ourselves for further organic and inorganic growth. Speaker 300:14:53Our team is excited about the progress and I look forward to sharing more highlights with you in the future. With that, I'll now pass the call to Julie to cover our financial performance and outlook. Speaker 400:15:06Thank you, Ian, and good morning, everyone. Before I walk through our results, I want to first share that we are introducing adjusted EBITDA metrics to our reporting and outlook. We believe this addition better reflects our core operating and cash generating capability and provides increased transparency into our performance. Also, as Tom discussed, we recently announced the divestiture of Associated Spring and Hange. Combined, these businesses generated approximately $200,000,000 in revenue in 2023. Speaker 400:15:42The combination of our MB Aerospace acquisition coupled with this divestiture shifts our portfolio to a more focused and higher value business. It is truly an exciting time as we position Barnes for sustainable, profitable growth and further value creation. My comments today will focus on our 4th quarter results and 2024 outlook. We have provided full year results for the total company and by segment within our earnings presentation, which is posted on our Investor Relations website for your reference. Also, comparisons are year over year unless otherwise noted. Speaker 400:16:25Please turn to slide 12. For the Q4, sales were $416,000,000 up 33% reported and up 2% organic. Foreign exchange was a benefit of 2%. Adjusted operating income was 48,000,000 36% and adjusted operating margin of 11.5% was up 30 basis points, largely attributable to our restructuring program. Adjusted EBITDA was $78,000,000 up 36% and adjusted EBITDA margin was 18.8%, up 50 basis points. Speaker 400:17:06Interest expense was $24,000,000 versus $4,000,000 due to higher borrowings given the acquisition of MB Aerospace and a higher average interest rate associated with our debt recapitalization. The 4th quarter adjusted tax rate was 12%. During the quarter, we completed an intercompany transaction between related entities in several tax jurisdictions, which based on the tax law in those jurisdictions provided a favorable tax benefit. On an adjusted basis, net income per share was $0.41 compared to $0.52 reflecting revenue growth and margin improvement offset by higher interest and tax expense. I will now turn to our 4th quarter segment performance starting with Aerospace on Slide 13. Speaker 400:18:01We have made significant strides in integrating our Aerospace business and are better positioned to participate in the strong industry growth opportunity. For the Q4, total sales were $213,000,000 up 96% reported and up 15% organic. Excluding the impact of MB Aerospace, organic OEM sales increased 17%, MRO sales grew 15% and RSP sales were up 7%. These results demonstrate the strength of our underlying Aerospace business. Adjusted operating profit of $27,000,000 was up 53 percent, while adjusted operating margin declined 360 basis points to 12.8%, reflecting the impacts of MB's portfolio mix and the amortization of long term acquired intangibles. Speaker 400:19:00Aerospace adjusted EBITDA was $46,000,000 up 69 percent benefiting from higher organic sales and the contribution of MB Aerospace. Adjusted EBITDA margin was 21.5% versus 24.9% a year ago, impacted by portfolio mix and productivity. As Ian mentioned, we are working diligently on several new long term agreements with customers. Our backlog remains healthy. With the combined Barnes and MB Aerospace Business, our OEM backlog now stands at $1,230,000,000 and we expect to convert approximately 50% to revenue over the next 12 months. Speaker 400:19:46Moving to Industrial results on Slide 14, we have made significant progress to integrate, consolidate and rationalize our Industrial segment. This includes our restructuring program aimed at reducing our cost structure, the closing of numerous locations over the last year and a half and more recently the announced agreement to sell Associated Spring and Hange. 4th quarter sales were $203,000,000 down 1% reported and down 4% organic. Molding Solutions organic sales increased 1%, while Motion Control Solutions organic sales were down 10% and automation was down 7%. Adjusted operating profit was $20,000,000 up 19% and adjusted operating margin was 10.1 percent, up 170 basis points. Speaker 400:20:43Adjusted EBITDA was $33,000,000 up 4 percent and adjusted EBITDA margin was 16%, up 80 basis points, benefiting from positive pricing and favorable productivity due in part to transformation related activities, partially offset by lower sales volumes and mix. Turning to the balance sheet and cash flow on Slide 15. Cash provided by operating activities for the full year was $112,000,000 versus $76,000,000 a year ago. The significant improvement was driven by a lower investment in working capital. Free cash flow was $57,000,000 versus $40,000,000 and capital expenditures were $56,000,000 up $21,000,000 from the prior year as we continue to reinvest in our businesses. Speaker 400:21:37About 60% of the CapEx is related to growth and transformation. Our net debt to EBITDA ratio was 3.6 times at year end, which improved from 3.8 times at the end of the third quarter due to both higher EBITDA and lower debt. Liquidity as of December 31 was $447,000,000 comprising approximately $90,000,000 in cash on hand and $357,000,000 availability under our revolving credit facility. With Turning to Slide 16. We continue to maintain a disciplined approach to capital allocation. Speaker 400:22:27Our priorities are the health of our balance sheet, organic investments that will drive sustainable profitable growth and remaining committed to shareholder returns. Net cash proceeds from the divestiture of approximately $150,000,000 will be used to reduce debt. We continue to target net leverage to be 3 times or lower by the end of 2024 and 2.5 times by the end of 2025. We also continue to invest in the business for long term growth with most of the increase in CapEx directed towards business transformation activities and MB Aerospace. In addition, we will continue to return capital to our shareholders through a dividend, which we have been paying for 90 consecutive years. Speaker 400:23:17Turning to our outlook on Slide 17. Our 2024 guidance reflects the strategic actions we have taken to shift our portfolio towards Aerospace, which offers higher growth and higher margin opportunities. This guidance assumes 1 quarter contribution from Associated Spring and Hanging as we expect the transaction to close in early 2024. We expect the impact to 2024 to be a negative 11% to revenue and negative 10% to adjusted EBITDA. For the year, we expect total sales to be up 12% to 16% with organic sales up 4% to 8%. Speaker 400:24:01Given the shift in our portfolio and streamlining of our businesses, starting this quarter and going forward, we are providing our outlook at a segment level only. Looking at our segments, we expect our Aerospace sales growth to be over 55%, inclusive of a full year contribution of MB Aerospace. We expect organic sales growth in the low double digits. For Industrial, we expect sales down in the mid teen range with organic sales growth up low single digits when taking the announced divestiture into account. Regarding our restructuring program, as Tom mentioned, we achieved $25,000,000 of savings, dollars 3,000,000 ahead of our previously communicated commitment. Speaker 400:24:48For 2024, we expect to achieve $38,000,000 in run rate savings and the program remains on track to deliver against our 2025 run rate target. Expected run rates are impacted by the pending divestiture and a reconciliation table is included on Slide 18 of our investor presentation. Adjusted operating margin is expected to be in the range of 12% to 14%. This reflects Aerospace adjusted operating margin in the range of 14.5% to 16% and Industrial in the range of 8.5% to 10%. Depreciation and amortization expense in 2024 are expected to be between $130,000,000 140,000,000 dollars Adjusted EBITDA margin is expected to be in the range of 20% to 22%. Speaker 400:25:42This reflects Aerospace adjusted EBITDA margin of 23.5 percent to 25% and Industrial of 15% to 16.5%. We expect adjusted EPS to be between $1.55 on the low end and $1.80 on the high end. This guidance reflects the impact of MB Aerospace and our announced divestiture, which combined are dilutive to adjusted EPS by approximately $0.47 per share. Top line growth and margin expansion from ongoing cost savings offset this dilution. On slide 18 of our investor presentation, we have included additional 2024 guidance information for modeling purposes. Speaker 400:26:32Please turn to slide 19. Given the moving pieces and to assist with modeling our business in the near term, we wanted to provide some additional transparency into our Q1 performance expectations. We expect revenue growth of 25% to 27%, adjusted operating margin of 11% to 12%, adjusted EBITDA margin between 19% 20% and adjusted EPS between $0.32 $0.37 Operator, we will now open the call for questions. Operator00:27:09Thank Your first question comes from the line of Matt Summerville from D. A. Davidson. Please go ahead. Speaker 500:27:27Thanks. Good morning. Speaker 600:27:29Good morning, Matt. Speaker 500:27:30Maybe just starting with the Molding Solutions SBU, can you talk a little bit about the organic performance across the mold and hot runner businesses in 2023 and what your expectation is in 2024? And specifically, delve into, to the extent you can, a little more detail on some of the headwinds you may be facing in the Chinese hot water market? And then I have a follow-up. Speaker 200:27:57Yes. Certainly, Matt. So in 2023, obviously, we had a lot of activities and success on the multi cavity molds in particular. Our lead times, due to the amount of work that we've won and have in operations that we're actively trying to keep pace with has increased our lead time. It's really almost doubled our lead times from about 26 weeks up to more complex molds for 50 to 52 weeks. Speaker 200:28:24That has met a very intensive period for the operations team to output. And we've been obviously struggling with long lead times to continue to book business with customers until we can clear that backlog. So on we still are leading from a mold standpoint globally very effectively on the multi cavity mold hot runners, asymmetric story. We do see market weakness in markets like China. We have seen a little bit of wavering in the European markets, but that has kind of stabilized. Speaker 200:29:02We sell across the hot runner product lines from the mid range all the way to the high end. We feel that we have struggled competitively in certain markets against other competition in the hot runner markets that have hurt our market share. But the organization we put in that streamline molding solutions and has also allowed us to invest more in the go to market focus and commercial market excellence will stabilize and has stabilized the hot runner sales funnel that we're feeding. We still are concerned about China market weakness. We have seen a still good market in the Americas. Speaker 200:29:43It's not a for us, it's more of the hot runners on the automotive side than it is broadly across Molding Solutions. We're making more investments in North America to have a more significant presence across the Molding Solutions product lines. So we feel that while the market in North America is not as favorable as it was last year, but we feel the investments we're making both in molds and hot runners will continue to allow us to capitalize on market growth in North America. But primarily right now, I would say in China, we're expecting kind of weaker conditions. I think all competitors are seeing that. Speaker 200:30:17We're expecting stable conditions in Europe. And I think for the overall year we expect a level of growth that's kind of mid single digits across those product lines. If we get more output of multi cavity molds, we could have an upside opportunity to that. But I think hot runners for the most part in the hot haves part of the product lines globally will be kind of a recovery year from some of the market share loss in 2023. Hopefully, Matt, that answers that question. Speaker 500:30:48Yes. I appreciate the detail. Flip it over to Aerospace. I think you guided high teens organic for the full year. You came in mid teens. Speaker 500:30:57Maybe talk about what sort of shortfall you may have experienced there? And I think last quarter you commented that the business was having some productivity challenges. If you could maybe elaborate on the state of the union, if you will, in that regard? Speaker 300:31:15Yes. Thanks, Matt. It's Ian. I'll take that. We certainly had some productivity challenges, primarily at 2 of our OEM locations in Q4. Speaker 300:31:25But we saw good progress all our other 15 locations, including one underperforming business that's turned around their performance in Q4 back to expectations. Where we did have the challenges, we understand the issues and are working to fix them with robust plans in place. As an example, we've taken actions to drive high attrition levels down at one site to ensure we have a more stable workforce and we're now investing heavily in the right training and employee engagement. Should we both retain our employees, but also accelerate their development and to enable higher productivity and efficiency levels. We've also made some key leadership changes at those 2 impacted sites. Speaker 300:32:07On top of that, we do have some persistent supply chain issues that haven't helped, but we're working with our customers and suppliers to mitigate these and we're making solid progress. And we've seen a good start to Q1. Although it's going to take time to fully mitigate productivity challenges at a small number of our sites, I'm confident we're seeing the improvements and we have the right action plans in place. Speaker 500:32:31Got it. Thanks guys. I'll get back in queue. Operator00:32:35Your next question comes from the line of Christopher Glynn from Oppenheimer. Please go ahead. Speaker 600:32:42Thanks. Good morning, guys, and congrats on the spectrum of scale, bold moves in the past year. I had a question about the $0.38 of the divestiture impact. How much of that pertains to core earnings in 2Q to 4Q versus ancillary impacts around stranded cost or kind of transaction related adjacent that maybe you don't adjust out? Speaker 400:33:17So the $0.47 we referred to on the call was related to all of the adjusted impacts that we will see throughout the course of the year. And it's a combined number. As Tom mentioned in his remarks, both the acquisition of MB Aerospace and these divestitures are clearly aligned with our 2 strategic pillars to scale Barnes Aerospace and integrate, consolidate and rationalize industrial. And combined, there's no doubt they create a step change towards achieving our objectives next year. So giving you a little more color around what's driving the $0.47 picture? Speaker 400:34:04Sure. Speaker 600:34:04Truly, I think I saw $0.38 dilution from divestiture impacts in the bridge from adjusted earnings to GAAP earnings guidance. I'm not identifying with the $0.47 but the question predicated the $0.38 from the press release. Speaker 400:34:24All right. I can pivot to a $0.38 those are the oh, you're talking about the Reg G items. You're talking about the Reg G items, not what's staying in. So the Reg G items, you're nailed. I apologize for that, Chris. Speaker 400:34:43I was answering a different question. Those include, yes, transaction costs, loss on gain of the impact of the gain on sale and some pension related Speaker 600:35:00items. Okay. So the core earnings loss isn't I'm wondering what the kind of operational foregone operational earnings? Speaker 400:35:11Correct. So that is what I was the core operational impact coming out of Alpha, that's where I was going. The core operational impact coming out of Alpha is approximately $0.28 But remember, the proceeds of the divestiture will be used to pay down debt, which is generating interest expense and tax benefit. And in the end, now going back to the total $0.47 of EPS dilution we talked about in year, MB will be approximately $0.19 And it's really important to point out that that is all non cash. There's about $24,000,000 of intangible amortization that flows through the P and L. Speaker 400:36:00And so the $0.19 dilution is all non cash and we expect to exit the year approximately neutral to accretive on the deal. Speaker 300:36:16Okay. Speaker 600:36:20And then the automation, how do you guys view that? It's got some nice niche technology, but it's small scale and the technology is kind of isolated in the context of automation markets generally. So curious if you could update the strategic fit for automation? Speaker 200:36:44Certainly. Well, as the automation business for us. We've done a refresh in the management team. We laid out in the second half of last year in parallel with Molding Solutions kind of a streamlined automation strategy as well. We've added a very important product line. Speaker 200:36:58We've been traditionally mechatronics gripping. We've added a vacuum product line and we're launching that globally. So we're quite excited about the growth potential for automation. Emmanuel Orlando is the new President of Automation. He's off to a very good start. Speaker 200:37:14And remind you, Emmanuel Orlando was the architect and the executor of a very successful multi cavity molding strategy and molding solutions, which earned him the opportunity to move to that business. So we're strategically it is a small business. We see it as a nice strategic fit into the tooling side. And we're toolmakers a lot on the industrial portfolio between molding, automation, tool and die industry. So that's the fit from the automation business strategically, sells through a combination of dealers and direct selling through automation centers that have been highly successful. Speaker 200:37:50So we see that as a very nice business with good growth trajectories. As we know due to labor demand, labor productivity, automation and robotics in the Gimatic business we run there as an end of arm tooling specialist application solutions for customers has been very successful. So we very carefully have been investing in that to grow it and expand that new product line globally and opening up some new market opportunities primarily through the automation center channels that we've been developing. A tooling and die, molding solutions which is tool and die and then automation which is obviously tooling. So we think that the connections of those product lines are quite nice. Speaker 200:38:43We think we've made the required adjustments and leadership and focus of the business for go to market. It will be successful as we get into 2024. Of course, we're always looking at the overall strategy of the company in combination and we think that's a nice fit with where we've made that maybe as pending dispositions exiting Associated Spring and Hanging to bring those into focus and alignment. Speaker 600:39:05Okay. So you don't see it as being handicapped in the channel not being part of a broader automation portfolio? Speaker 200:39:16Right now, I think we're focused, Chris, on getting the businesses to perform top line, bottom line, pipeline. So in industrial, we've been focused on rather than trying to scale the portfolio like we are in aerospace. We're focused on getting the business performing on the basics fundamental of generating organic growth and profitability by pricing correctly, productivity. Once we have and of course 2024 is a pivotal year for the industrial businesses to do this. Once we have that level of integration which we're aligning on right now, once we have that level of performance, top line, bottom line pipeline, then we'll talk about investing into the business for future growth. Speaker 200:39:56But until we get to that point, we'll continue to hold on industrial M and A activities because we're not prepared to add to the portfolio in that manner. Speaker 600:40:08Okay, great. And last one from me, you have the 30% to 32% tax rate guide. I would like a clarification on how that should translate to the adjusted tax rate. And that level of taxation is certainly an outlier. So curious how that what your expectations are for general tax rate paradigm understanding that there are a lot of influences on deductibility and non deductibility in the current year? Speaker 400:40:55So going forward, the 30% tax rate would be our standard tax rate in terms of I want to make sure I'm answering your question correctly, but that would be our standard tax rate going forward in light of where we sit with our interest expense and the geographic composition of our business. Speaker 600:41:30Okay. We'll tell that back more online. Thanks offline. Thank you. Speaker 400:41:33Okay. Thanks. Operator00:41:37Your next question comes from the line of Myles Walton from Wolfe Research. Please go ahead. Speaker 700:41:44Great. Thanks so much. I just had a couple of quick questions if I could. The first one is around orders within the aerospace business. And Ian, you went through sort of LTAs on the horizon, but just wanted to make sure that I'm thinking about this right to see order declines both in the quarter that were pretty big and order declines for the year that were still there. Speaker 700:42:05I'm trying to reconcile that with sort of the market expansion. And if you're just saying that it's timing related and we'll see a lot of these LTAs actually pop into backlog in the near term. Speaker 300:42:18Thanks, Miles. And you're absolutely right. Our orders are lumpy just with the nature of the business, but absolutely solid. The LTAs we have in play at the moment, including the one we've announced, has just over $2,500,000,000 of order value across about 7 LTAs. So we're seeing very strong orders. Speaker 300:42:40It's just a timing issue. We'll be announcing a number of new LTA signatures as we go forward, but absolutely no issues with orders, a very strong backlog. And as we all know, we're very growing demand on both the OEM new build and the aftermarket. So we're seeing strength on both sides of the business. Speaker 700:43:04Okay. And I think that the margins were expected to be a bit stronger in Aero. They ended up a bit lighter. Is that simply RST mix not coming through or something else? And then by within Arrow, the low double digit organic growth you have for 2020 4, is aftermarket expected to grow at a faster pace than that average? Speaker 700:43:29Any color there? Speaker 300:43:32So on the certainly on the mix, RSP is a big part of the driver there. And of course, we're bringing MB in, which doesn't have an RSP program. That's going to drive our overall margin down. But of course, it's a good story. It's just that the RSP is a bit of a heavy, heavy weight there in terms of its profit contribution. Speaker 300:43:57But looking forward, we expect to see margin accretion, some of the productivity challenges that I talked about earlier on the OEM side of the business as we work through those and we get the work through the factories, that those sales fall to the bottom line in a very predictable way. So we expect to see incremental margin expansion. And on the aftermarket side, yes, we expect to see higher growth levels than the average level. It's very difficult to predict. The aftermarket business is something that is very cyclical, but we are seeing a very big up cycle and demand certainly in Q1 across RSP and our repair shops has been phenomenally high. Speaker 300:44:43So we're seeing that come strong. Does that continue strong throughout the year? Do we see cycles? We don't know, but we're expecting to see solid growth year on year in the aftermarket side and then growth on the OEM side as production rates start to ramp particularly on the narrow bodies. Speaker 700:45:03Okay. And last one, Julie, on cash flow, the conversion I see on the slide is 140 percent of GAAP, but obviously you've got a very large adjusted number in there that had sounded to the answer to Chris' question was largely non cash. And so I'm curious from a working $40,000,000 consumption. Is that correct? Speaker 400:45:29$40,000,000 consumption from what area? Speaker 700:45:33In 2024 to get to $75,000,000 to $90,000,000 of free cash flow, what is the working capital outlook that you have for 2024? Speaker 400:45:45The working capital outlook, let me get to that one. It is let me get back to you on that one on the follow-up call. I do have it. It's just not right in front of me. Speaker 700:46:00Okay. No worries. Thanks again. Operator00:46:04Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead. Speaker 800:46:12Hey, morning guys. Thanks for taking the questions. Just a couple of follow ups for clarity first. Julie, did you say MB is now expected to be neutral to accretive, I guess by the end of this year? And then I think I heard the operational impact from the divestitures is 0.28 dollars And I think you called out maybe 50 bps of margin impact from the divestiture. Speaker 800:46:38So I guess you're losing $200,000,000 at maybe a 4% margin. That $0.28 sounded high. So did I have that right? Speaker 400:46:49Yes. You have that approximately right from what's falling out of the portfolio. And you did hear correctly that we anticipate MB will be exiting the year neutral to accretive. Speaker 800:47:09Okay. What's the $0.28 operational impact? It doesn't seem to reconcile with the 50 bps margin. Speaker 400:47:19So from a dollar perspective, it's about a $20,000,000 outflow of operating income. 20. And remember, the reason it might not be reconciling for you is that we have a quarter of the business we have 1 quarter performance in the outlook for the year. So that reflects 3 quarters of a year. Hopefully that helps triangulate your math. Speaker 800:47:50So you're losing $20,000,000 of operating income on that, that seems to be fairly high margin then. What's actually in all of that operating income? I mean that's just I thought this was more of a margin dilutive business that you were selling. Speaker 400:48:08Yes. So in 2020, it in the range of our margins, it was absolutely on the low end of our margin portfolio. In 2023, we experienced some benefits in the business, which temporarily inflated that margin as we were closing the Bristol facility. We had the Ford final buys and we had some other final type sales, which supported the profitability of the business in 2023 that would not be recurring if the business remained in our portfolio. And that's probably what's skewing what you're thinking about. Speaker 200:48:51Basically, Mike, they're just the end of life they're the end of life programs for the transfers that what the Bristol Associates bring Bristol shut down. Speaker 800:48:59Okay. Speaker 200:49:00Ran out and ended their one time benefit, one time revenues for 'twenty three and they weren't going to repeat under any circumstances prospectively? No. Speaker 800:49:10Okay, got it. And then I guess just shifting to industrial, the outlook for the year on low single digit organic, what gives you the I know you gave a lot of color originally to Matt's question, but I think the organic order flow was down 11%. I mean, what gives you the confidence in that industrial organic outlook? Speaker 200:49:35Mike, a lot going on in industrial, as you know, and I'll focus my comments away from even those are a quarter of associates bringing HANGM here. I'm going to focus on molding solutions, motion control solutions and automation. Each of those pieces we've kind of done some streamlining in the group what we call the integrated, consolidated, rationalized, industrial. So we've made a lot of investments there to streamline our approach to the businesses, focus management teams on commercialization initiatives. And with the reduction in G and A, we've been able to put more feet on the street and focus on sales funnels. Speaker 200:50:11We have seen multiple places where that's been very successful. Certainly in multi cavity molds, we've been highly successful last year seeing that initiative and we've been rolling that out more broadly into the industrial go to market teams. More resources and the additional one for Molding Solutions is selling the entire portfolio globally. We don't typically sell comprehensively in North America for Molding. That's a big pickup opportunity for us. Speaker 200:50:38We've appropriately looked at upsides and downsides to be balanced in providing our guidance. We know we also have more full year effects of some of the commercial investments in 2023 coming through in 2024 which would be pricing for a full year effect. So we're starting to see more full year benefits and also see some of the returns in those prospective views from the investments we've made in the second half of last year when I was running the Molding Solutions business. We've got good stable leadership in place and we're kind of beyond those integrate consolidate initiatives that have already been completed. So So we're going to end up seeing the benefits of those come through. Speaker 200:51:18We understand and have kind of recognizing the markets may not be as favorable in 2024 as they were in 2023 in some of these markets. So we've tempered our expectations accordingly based on the information we have from competitive and market information. I think we've ended up with a very balanced view, but also a growth perspective that kind of supports the investments we've already made to improve those businesses and sure we get the performance and returns out we are expecting. Speaker 800:51:47Okay. Got it. And then just last one on the Aerospace LTAs, I know historically you guys made some upfront investments in the RSPs and CSPs. Is there any nuance to these new LTAs or extensions where you have to make any upfront investments? Or are these should we think of these as more traditional kind of industry orders that without any upfront investment? Speaker 300:52:20Thanks for the question, Michael. There's no significant investments required for any of the LTAs. Most of them are follow on with some new work in there and some volume expansions. But now these are just normal orders and not requiring any significant investments at all. Speaker 800:52:38Okay, perfect. I'll jump back in the queue. Thanks. Speaker 400:52:42Hey, and this is Julie. I just wanted to hop in and follow-up on Myles' question on working capital. We actually have working capital expectations to be approximately flat year over year as we continue to work through backlog reserves we excuse me, inventory reserves we have that we're still working down and as we continue to drive additional productivity. So we despite sales growth and growth in some of our AR areas are looking and working with the business very closely on driving down working capital overall. So it's a net neutral in the year. Operator00:53:23Your next question comes from the line of Matt Summerville from D. A. Davidson. Please go ahead. Speaker 500:53:31Thanks. I just want to clarify one item, kind of getting back to Mike's question and maybe a question prior. How much in operating income dollars are you foregoing in 2024 for the 9 month period you will not own Spring and Hengdi? And if you need to normalize that, if it was over earning in 2023, can you please make that normalization? I just wanted to be crystal clear how much OP dollars you're foregoing? Speaker 500:54:01Thank you. Speaker 400:54:03So in the back three quarters of 2024, we'll forego approximately 100 and $55,000,000 in sales and approximately $20,000,000 in operating margin. Normalizing that, I don't want to throw out a number that is directionally incorrect for you. So when we have our follow-up call, I'll be we can dissect that a bit because I know you're trying to use this for modeling purposes and I just don't want to give you incorrect information, but there was a meaningful increase in our sales this year as those end of life programs came in and happy to get you the figures when we have our follow-up. Speaker 500:54:55Perfect. And then, just final one on pricing. Tom, can you maybe talk about how much price you were able to realize in industrial in 2023 and how much incremental price capture we should be thinking about for 2024? Thank you. Speaker 200:55:12Yes. I'll give a qualitative answer and then I'll let Julie give the analytical answer. The short answer is not enough to my satisfaction. We've been hit with a lot of inflation, energy, freight, labor, materials, supply chain disruption, longer lead times. So offsetting all that has required a comprehensive across all of industrial, even the associates bringing hanging businesses to this. Speaker 200:55:38Go to reach out to customers to pass on those inflationary pressures and to either reprice the book of business we have or to price business prospectively for future orders. That has been a battle as you can imagine across the portfolio. That's been our primary over the last since my 18 months in this company, it's been one of the primary customer interface negotiation points. I'll let Julie give the analytics behind it. We were late in getting started. Speaker 200:56:10We only partially mitigated this in 2022 and 2023. I would say today we passed the even keel point and now we're really in a position of recovering price and making up for inflation that we've already experienced, but we were late in responding and only partially in mitigating it. So I would say that we've done an incomplete job there, but prospectively better balance and certainly the curing supply chains in the lower inflationary environment make that normalization and equilibrium better. But I'll let Julie give the analytics behind those qualitative statements to help out. Speaker 400:56:48Yes. Thanks, Matt. For pricing, we realized approximately and this is a gross number, approximately $30,000,000 of price in year. That was used, as Tom said, to largely offset what we saw in terms of inflation and mix impacts and other productivity challenges that we faced. And that's across the whole portfolio, not just industrial, that's across the whole portfolio of which about $19,000,000 was industrial. Speaker 500:57:26Okay. And then how much incremental price capture should we be thinking about in 2024 across total Barnes and then Industrial as a subset? Thank you. Speaker 400:57:35Yes. So for total Barnes, we're looking at a number that's around the $20,000,000 range at this point. And that would be skewed towards Aerospace with Industrial, call it, 7 to 10. Speaker 500:57:54Perfect. Thank you for that color. Speaker 400:57:56Yes, no worries. Operator00:58:02Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead. Speaker 800:58:10Hey, sorry guys. Just to right back to Matt's question to make this clear, Julie, dollars 155,000,000 of revenue goes away from the divestiture. And Matt was asking the op income dollar loss for the 9 months, forgetting about the year on year, is it fair to say the $155,000,000 was generating 4% to 5% margin, so maybe it's a $6,000,000 op income loss for the remaining 9 months this year? Speaker 400:58:46No, I don't think that's the right way to be looking at it. We would be it's the $20,000,000 which would be closer to about like a 12% or 13% margin is what we would expect to see going out the door as a result of the divestiture. Operator00:59:24And that's all the time we have for questions today. I will now turn the conference over to Tom Hook, Chief Executive Officer for closing remarks. Speaker 200:59:34Thank you for joining our call today. It is an exciting time as we reshape the company and position Barnes for sustainable profitable growth. We remain laser focused on executing our strategic business transformation and delivering solid results in 2023. Momentum is building and we have a clear path to drive growth, margin expansion and cash flow in 2024, which will support our commitment to reduce debt. There are multiple work streams underway across the company for improved predictable financial performance and to maximize value. Speaker 201:00:06Thank you for your continued interest in Barnes. Operator01:00:10This concludes today's conference call. Thank you for your participation and you may now disconnect.Read morePowered by