TRS - Earnings call transcript Q3 2017

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Operator

Good day everyone, and welcome to the TriMas Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sherry Lauderback. Please go ahead, ma'am.

Sherry Lauderback

Thank you, and welcome to the TriMas Corporation Third Quarter 2017 Earnings Call. today Zalupski, Amato, our call CEO; President the Bob and Chief on are TriMas' Tom and Participating Financial Officer. will an XXXX Bob well and review quarter third Tom results as provide update outlook. our on our as After your for call questions. remarks, our we'll prepared the up open a company to included website, the section. with www.trimascorp.com, we assist PowerPoint and order review of under release In results, presentation our the have press on our Investors

a replay of by this call code available be today with a will calling later XXX-XXX-XXXX, addition, replay XXXXXXX. of In

XXXX Amato, point, started, could and results we like no President our except on everyone Tom? special filed those be reconciliations number TriMas, where from turn would excluding which a Also, are would is website, revise We press forward-looking available on non-GAAP you presentation, Before publicly I our call GAAP and and information of a XX-K on Form during to your website, for intended like also that that used financial found. our this this to I more results CEO. between direct call X-K morning any conference to over to the basis. our to the I financial issued release attention of your get the measures on to would will appendix would be At to we part Tom the items as also this of may of the Today, list and TriMas' Form September to risks comments refer this may to our to like understanding considerably to statements. regarding cause our law. call. are forward-looking discussion in or statements subject differ an for required included factors remind by our XX, contain and forward-looking or undertake today, any such uncertainties. which anticipated update inherently obligation as refer supplement that statements, Please

Tom Amato

the call. Sherry, in Thank you, we and to like also our good our deeply investors offering appreciated would welcome We credit as recent those on to your support. morning new

slide Let's in we our pleased through and third progress continued performance with the year. quarter our the to turn very X; are

key TriMas Business improve decisions cases earnings driving Model our the another With performance, as solid performance, and our quarter. up actions were we tenet in to Sales and per had protect some X.X%, up share XX.X%. and

better, was over have flow and strong cash still year our net past in room Our to with particularly the get improving we managing satisfied in our momentum working capital, inventories. while

was the included QX overcame Coast in performance unexpected natural which some Our notable, Gulf disaster a navigating in we given area. that carefully challenges,

Hurricane some Let me the effect Harvey. additional color on provide of

Lamons facility the several idled and through floods business as branch region. rolled the six locations resulting production days main Our for Houston and Gulf our Coast hurricane

Fortunately, we of incurred flooding damage only meaningful physical loss or production limited with interior no equipment.

work through went to of a repairs. number production locations plants as had bring prolonged remained they customers' Also equipment protocols. their to However, they customers some for longer their through as safe much yet idled start full our

As related operations. inefficiencies to led the impact September, increased to and largely of costs disruption our the Lamons, the hurricane in overall given to off-standard production

X.XXX%. action the studied rate -- within opportunity received rates. summer, credit of million credit that would quarter, some historically significant TriMas tightened the the debt into otherwise where of completed our which and a of of $XXX we issuing refinancing new we from time, took due a due not eight will our spreads debt years new low the years out third support the and few to transaction, deal. rate fixed also When the up Leading credit new the for helps the investors. During Again, swap assessing moved advantage we out at next a capital secure took Bob appreciate further. later to moderate enhance we in discuss we to at trading this structure be we market for quickly where refi, coming

we we Turning A as XXXX. customers to spring to fall move Lamons' planning into have us slide the X; to fourth external some of their have previously they are scheduled notified maintenance quarter, that of number delay the factors overcome. to

be As a proactive robust facilities in turnaround resin secondary resulted our pricing and region sharply related effect otherwise prepared support more the what in such, and will to continue currently spring in season. delayed of the to Gulf be A we customers increasing in petrochemical but to summer. idling may late

to for closely resin our longer-term about to that operations increase disaster a having at production one Rieke natural of facilities. be this our effect. fires our another in idle resulted Separately, temporary a Rohnert will monitoring are week. facility out or tragic in impacted the The costs team in We Northern has assess turn Park California to at

our some produce steel has been is impacting loss quarter damage increasing business, Steel high-pressure Norris cylinders, members which discuss deal later. pricing, While which all levels. uncertainty planning our a finally, will to and number to in year, inefficiencies modest the input plant, physical is expect team above we main our do And production personal our therefore, material as has had We had of have a disruption. result. with of moved and no fourth the Bob to this

staying we to mitigate is any best matters time proactively our time, further seek to with also faced optimize do while our While operations. business course to unforeseen them, to the from

earlier Rieke City facility, example, on our our operation we closed For yesterday, of the sale exited this year. Mexico which

new we eliminate of facility streamline nice old in resulting previously manufacturing to seek in disposition location. promptly to to San million Following a oversight a secure of used the Miguel, importantly, And for couple marketing a the also facility began the need relocation dollars. a and

exiting a strategic business. Engine reduce costs locations location of our one process Lamons' in in of further to infrastructure are in Asia. BRAC Tulsa in we assessing are to Additionally, we Arrow options the branches And related XXXX manufacturing

remain taking and committed actions we all long-term manufacturing our difficult footprint to strategies improve and to exploring success. to drive So

quarter. a sales period million, to mentioned four organic of EPS prior previously up solid three Turning by our million, some the net million, profit profit X.X% we $XX.X reportable of to despite up and with year driven $XXX.X slide in $X.XX, earlier, income compared Net year. X; operating prior Operating segments. X.X% was X.X% sales as rate. the higher and growth as had were challenges from noted, was XX.X% favorable $XX.X tax up the up was

X; from million total from debt down slide of down million XXXX, $XX.X Net third was $XX.X quarter a of the reduction $XXX.X period, million, XXXX. from million to year versus Turning ago debt and last of $XXX.X was the $XX.X $XX.X million end year. year-end million, and the down

down have diversified cash leverage of was further solid $XX.X debt net even than considering the with period deleveraging $XX $XX prior has to This an paying X.Xx million of industrial million. up performance ample flow. we from our attribute here, exciting cash after comparable shown flow the the million, be proved year. liquidity costs all improved was model, Free year, and and to quarter refinancing. on not $XXX Although to million the our a related was last to coupled from focus Net we more which

driven year. $XX.X $XXX.X year-to-date efforts. basis, million, up up as was on Operating EPS up to was X.X%, our diluted X.X% XX%, slide Net up by $XX.X were XX.X%. net the X; income compared income and was sales Turning realignment a prior $X.XX, million, million, to

it Now I'm Bob? performance. to will who our turn going Bob, through go over to segment TriMas

Bob Zalupski

and Thank morning. good you, Tom,

entered a moment to our take of a review wanted which results, debt cross-currency into mentioned, to Tom portion transaction to debt. finalized. agreement dollar I We segment synthetically our I recently U.S. denominated swap euro Before swap the discuss into convert we

over years in Eurozone, with which capitalize interest million of on our of The will to from expense and the on annum. a we year were agreements, a our region's these million net By debt interest notional million amounts have $X.X providing to the X.X%, at also favorable the reduce contract to rate the interest beginning to into the cash year approximately five addition declining lowered portion over agreements five tenor rate investment In $XX the hedge fixed X.XX% more term. $XXX swap environment. able per next two the we by entering

pleased of historic near low structure, by in able to mitigate significantly yet are interest were entering U.S. compared and our structure advantage that the market yield to add higher we our swap into as agreements. capital high costs take rates We to debt these prior flexibility

to results. our Now moving segments

on comments As segment's the earlier, an excluding I'll of comment all slide Sherry basis. our be Packaging items special begin with XX. of performance will review today on my noted my

slightly Third quarter compared to the sales million, $XX prior down approximated year period. net

in our for continued higher experienced sales food variable SG&A in labor sales and our in $XX.X certain growth margins profit achieved operating despite multinational well to as track market. once with sales certain result reporting achieved segments Overall, customers in overhead we A again the and both due year sales and a stronger and higher Asia of softness strong to with quarter, operating as North been care end customers the the with generate offset home has an operating to in in During full continued North QX, million costs softness effectively several spending. better Packaging performance margin with health, this XX.X%. customers of of American Packaging plan and U.S. beauty its managing of This of our productivity continued market. continued as products. America, profit beverage on Asia sales operating levels remains partially helped

and focus Continuing business. growth this XX We in long-term continue Aerospace sales in driving our new invest initiatives on sustainable, on to products slide our segment. with

million, sales production to deliveries solid $XX as demand. increased and net order approximately as increased well quarter by X.X% Third throughput driven

We stable in more profit manufacturing that an the XX% consistent third efficiencies customers opportunity We and order will demand quarter. operating $X.X to further margin are from optimistic operating more over level in reported result continue patterns time. million of our for of see and improved

achieved increased a margin of level the XXX was operating QX QX, points than lower this relative in XXXX. XX.X% While basis slightly to

margin Aerospace's and favorable fastener as our products a the operational were of improvements percentage tempered quarter were of less related said, further operating standard to manufacturing largely of off-standard costs continue offset improving make in progress benefits products. margins the machine by plants. our We That sales to standard product lower performance components our a larger sales. these by fastener the comprised mix

on throughput, We reducing focus manufacturing continue while due orders and costs. past reducing off-standard to improving

standard still work to we primarily our there achieved significant have year-to-date, Although and more in machine progress is components fastener operations. do,

cylinders levels $XX.X Turning demand to Engineered compared third primarily and to approximately oil better $X.X Sales increased or to of million, Components. XX% also of $X.X by due when Sales year industrial higher consistent our approximately acetylene million the cylinders. as engines period. million, prior and Overall, small increased slide XX, increased sales field high-pressure products to we $X million sales of compression experienced higher with well relatively oil increased margin QX operating products U.S. comprised gas as cylinder levels and flat small of profit in resulting a approximately were and in million, by a the offset at was increase the Canada. greater sales profitable an largely completion high-pressure sales lower year-over-year. margin, XX.X%. $X.X sales benefits acetylene of The of in mix Operating and less activity quarter percentage

steel small compressing year-to-date earlier, manufacture cylinders planned high-pressure in levels. noted for increased further of coiled significantly higher experienced prices Tom we in In third beyond acetylene steel the have particular, used costs and quarter, margins. As the

steel fourth quarter. sales mix trends to continue into We the costs expect and these

gain seeking on market Our share to managing the to in focus business, while cost capitalize in end on demands. remains structures each opportunities variable response

compared to from our the North increased to higher segment. primarily improved in a more improvement and on by million. the than than Operating year-ago geographic margin period due X.X% sales to to result. declined less Sales for operating quarter offset resulting decreased Sales to America, to as $XX.X sales deemphasizing the million to $X.X This delivery. $X profit on-time customer profitable demand slightly increased lower Moving related Energy regions. more million X.X%

million. to productivity estimate negative production and sales and tempered a we cost production mix, the actions from year-over-year fixed favorable by continue due costs impact to in hurricane to results these QX on interruptions, $X realignment higher the Harvey. Overall, absorption to all our initiatives profit Hurricane less resulting performance, lower were much approximate While operating due positively affect

As spring season. the turnarounds of many customers Tom defer noted XXXX fall a we of number planned our will earlier, previously turnaround with believe significant

customer our sales significantly staffing we $X to While the difficult operating QX and effects additional is levels to In could mix predict, a and prior levels less responsiveness managing an profit to QX fixed profit impacted demand favorable operating absorption. balance a million estimate we although the on to production lower and levels due to be cost and compared sales remain actively meantime, $X are uncertain, million profitability. expectations for

Turning a increasing light of quarter XXXX. our mix. decreased the compared at four operating operating to and unexpected of our up. remain favorable segments. In overall of to are we now million, and first $XX.X to we slightly Tom? in nine wrap will to quarter and due solid I the faced in improved summary, segment growth with Segment less months in slide plan performance sales million we quarter to the back call in through a the $X.X challenges Tom outlook three QX, while of essentially on experienced XXXX, turn X.X% sales discuss XX; to third full profit sales margin year product pleased to

Tom Amato

Thank Bob. you,

our full of growth our to and Energy despite X% previous -- lost we Turning to in maintaining X% previously year of as up our one the Rieke we outlook, noted segment slide consider our some locations. range production within sales are guidance XX; as uncertainty

lower As end rate the our year, and slightly interest now we XX%. we includes are near a to expense estimate tax higher of tightening full which EPS to range $X.XX the to $X.XX, guidance year

due quarter reminder, customer a and of end levels our given activity quarter, profit year As fourth sales lower is holidays typically shutdowns. and lowest production our to

quarter factors performance mitigate anticipate our and results, some on fourth with external actions. are we to to striving While these management pressure provide impacts operational we

been the to-date are to Finally, net flow we XXX% have now through to be expect cash we free than from increasing more XXX% quarter. to driving momentum carry fourth of we as our income guidance

we questions, slide XX; call commitment to to our performance drive to to Model, the expect that and Turning through excellence and operational want opening operating under again I before TriMas exceptional highlight improvement cash to the generate flow. Business

below debt invest target businesses, Ultimately, value for or offset consider to we allocation as and capital to will questions. XX. with back proposition then you, net as our businesses now TriMas' turn Our highest of a repurchases bolt-on acquisitions share consider leverage remains guiding Operator? in continue priority augment will well operator first Thank ratio dividends. it to to I

Operator

Fargo our Andy of question [Operator come Casey from Instructions] will first Securities. And Wells

Tom Amato

Hi Andy.

Andy Casey

on the the fires? impact include the from of hurricane, that? impact of does Or for is all, you thank million helpful. the to million QX First the also negative in estimate California that's $X I'm $X from wondering that top impact

Bob Zalupski

unrelated Packaging California Energy on operation The be Northern California, would million the that $X it. No, top to of $X facility in fires for affected to that's so our million the segment.

Andy Casey

Is that material Bob, or --?

Bob Zalupski

to some for have relative I my we're as but full plan It will profit effect, noted in overall on comments the year. our largely Packaging, for

Andy Casey

the comment can And initiatives then you to typical And what recovery any the inflation lag? be discussed the you cost business, pursuing? you we price should be in on on Norris consider may

Tom Amato

but I that Clearly, it's costs year-to-date, general, fourth QX in I up continues on year. move -- think Well, optimistic in as the seen a some trend moderate mentioned, and in we're in basis, pricing, so as the were through quarter. to they on we've steel stabilizing year-over-year we starting

sales well, requirement have demand. pricing, escalators. in those to you then passed being that net of certain of have the major costs, contracts is aren't so the balance impact but steel recovering also the Ultimately, terms through impact companies contracts, of always between might of your that pricing terms something with In volume have mindful our gas

pretty So would to raise well take expect that's team where the they've needs we'll selectively delicate historically, balance opportunities we're walk, that that, we to that able. and management prices done and

Andy Casey

back Okay. in will queue. get Thanks a I lot.

Operator

question next will Sachs. from Goldman of [Operator Eisner Sam Instructions] come Our

Sam Eisner

Yeah, good morning everyone.

Tom Amato

Sam. morning Good

Bob Zalupski

Hi Sam.

Sam Eisner

on basis. performance margin quarter the was Packaging, year-over-year on a nice this Just

environment you just given was I but think resin up. raw think the material is the driver, that pricing SG&A commented I

but about part it's to a of there months. little about you little should ability How bit XX% commented bit XX%, inflation? a the in XXXX? talk I you last You three the beginning think up drive into it, Maybe offset think that to can pricing we that your about

Tom Amato

Yes.

quite increase, seen haven't We Sam. level that of

like exited for October, October on that we it on X% beyond in up it we of In little the going that to terms average we the speaking, resin us was there were clauses, be the generally looked with another XX% about it was month to and looked okay, bond speaking, As therefore, of Packaging, delay. a generally X%. volume recovery have a bit where of those requirements, do a pass-through But there contracts also to of perhaps is, had lag. bit quarter,

our that We in we've seen have remainder recovery we announced how of of time some for October increases what the year. the will in supply, of contracted market. that But vis-à-vis fares currently, noncontractual we for supply see tell given the pass-throughs terms needs have in increase plenty early through and

been our resin. if you hasn't ability scarcity, to of there a terms will, So in get

Sam Eisner

the how as of terms versus that go is -- trying and far think that kind as of it in about to the out is to would to contractual be What's it? percentage the right Packaging pass-throughs And the market way XX-XX? of segment would XX-XX, price, you get

Tom Amato

to think XX-XX about is good probably way it, Sam. a

Sam Eisner

XX% contractual?

Tom Amato

Correct Right.

Sam Eisner

margin segment, -- pace we issues. almost it. think leg ahead, Got this you've the But next from do -- right What's see basis what's there points the think way flat this And at nice XXX the think some know, mix you're looking margins to quarter of recognizing year-over-year looking here? expansion Aerospace margin on year you of kind is from about about I about that kind How here? of expansion. to

Bob Zalupski

momentum improvement. want are Look, to our we as extensively to working plan, continue XXXX, we drive performance and we look on and towards drive

that pleased drive performance we're this and about we number certainly for times the We're challenging use performance and more forward to momentum put we've of -- a Now on with that was this moderate want also mix standard XXXX we previously have felt very we there's plan to we've that that plan. talked a products, weighting, products more the weighting ultimate little margin natural given a of print-type XXXX. some cognitive into to. can of get and will realistic a machine some we But to the that we're track bit

to So all now. I'd that's like say

you'll a drive for our and put better we're we early think in get As business. of XXXX forward to XXXX, I this forecast sense where going

Sam Eisner

Got it.

I We Thanks. queue. hop back that in look plan. hearing to will will

Tom Amato

Thank you.

Operator

Instructions]. [Operator

will Koranda Roth of come Capital. Our next question from Matt

Matt Koranda

good guys, Hey, morning.

Tom Amato

morning, Good Matt.

Bob Zalupski

Matt. Hi

Matt Koranda

in on on double-digit the the looks the And then, your low of guidance, guidance. I to almost of be guess, revenue get going top the we're I end upside thinking It a end the where line just sources the high-end to should if of you'd we growth X% more high-level like range? on revenue about guide, meet X% So guess to need higher the of would QX. to be segment basis? the

Tom Amato

I probably Matt. in the to full midpoint see is terms way of good coming a year how think the about guidance out, we range, think

Matt Koranda

driven Got offsetting by Okay. those separates kind on that was quarters? think the I growth sales two next on near-term One points American Packaging of how How basis mentioned for And Like Asia. Could shake does in of weakness that regions? several rate of North them? it. the you talk your segment? many of growth mainly for the growth the will gap rate continue I just you the about me. curious, for in decline, and some between terms kind out

Tom Amato

how out longer know it to shakes term. hard Well,

been again, a I part of softness the both and I been a the speaking, basis up segment business. obviously, percentage decent in or relative Asia, gap, QX. down the in on care one of business, growth in mixed. softness North that's larger, more had is in more year America and industrial some smaller we North beauty some we've think the and And health our but growth -- consistent terms turned has quarter but in seeing industrial's basis. where America and our And obviously, we're full what first of becoming seen then important. year has in And think there. home, year-over-year again, that We food been year-to-date slightly beverage, of is the year-over-year in the generally

of not probably relative the of good gap business at comparison because the it's So dollar in look value each the to only geography. respective a there

Matt Koranda

has softness for So the of off consumed Asia North smaller base you're extent running to in some the now. American

Tom Amato

Yes.

Matt Koranda

mentioned to me in resin margins on a revenue different near and Just America that I have kind maybe correct increases but term. -- in North way, the wanted continues you in segment, if I'm attack of I may think, and the soft a think covered wrong, bit obviously, guys maybe be

I the beyond? that could with and kind still in So filters longer of into mean, we margin XXXX how segment? about that just through your term of talk XX% continuing expectations guidance to the for XXXX XX% to sustainability are Packaging comfortable

Bob Zalupski

the a to that think XX% time. balance we've the of performed And balance, a consistently as sales we between I operating about as it's profit on to XX%, talked dollars. Well, Tom well just move we'll as has range it in Matt. in evaluate continue return and previously through is growth something

Matt Koranda

All queue. guys. Okay. I right you. in Thank will back jump

Operator

[Operator Our question of next Instructions] Markets. will Steve come KeyBanc Barger from Capital

Ken Newman

Newman Hey for Steve. morning. Ken Good on guys. It's

Tom Amato

Good Steve. morning

Ken Newman

Good morning.

on Packaging, touch for you're and to Energy TriMas actions wanted streamline Engineered. Just the that taking within

I but it, could those cash when this, this to you said actions, the a have may to what all but any restructuring idea as may as timeline done. can think maybe from you and have get impact You be missed

Tom Amato

Is this sorry. or Ken? Ken, Steve

Ken Newman

Ken. is This

Tom Amato

to you hear We didn't hear a little Ken, for the it's hard speak bit, your line. on us can you up question.

Ken Newman

go-forward that Engineered, as to may cash those So savings that to well missed have out on Energy look actions could the impact to this, of color actions in for the what you're as take, planning just timing on those? Packaging, and any and take get the are as kind I but expected restructuring we the those of

Tom Amato

near-term were spoke feel still Yes. already to within previously, cash I question. I lifting taken, that I heavier the and we that's the this movements like we've opportunities case. TriMas much felt Good felt of

impact, But physical impact. as significant put I very -- at be the less the call lot I what activities, would I actions strike look at, now wide of looking me of but this into of category of as point. of cash type not we're would taking but move cash I a There terms streamlining type a noncash to So we're more of some the significant the would they point certainly actions from can't speak view. that at in

Ken Newman

That's helpful. Thanks.

Tom Amato

you. Thank

Operator

[Operator we question from Andy have a do Casey. Instructions] And follow-up

Andy Casey

you bit numbers higher flow I question. quarter, the had Hello progress noise to the do forward? stability just terms by in was again. behind expect strong I'm the cash a that, you closer focus you you some during little segment? that, when wondering behind of level how on are just Thanks. in of to as think external more going that achieving I'm returns some close But A should impacts mean, we start that. wondering to caused M&A

Tom Amato

there's are you difference to, into category. it's very It's would we also to for M&A market. versus explore that bring M&A on focus prepared natural we're market, the at about to from talk Well, very -- would you fall hot describe I internally know would a and a perhaps a that to talk as TriMas, competitive what companies which on externally of as focused what other TriMas most be areas the or

nothing report quarter. So this to

very -- can all to there diligent. can be value. assured, is pricing market to soon we're everyone explore And this long-term not let we're is, rest know. is the management create cognizant As rest also opportunities going management that assured, of shareholder doing But in area that we'll and and we

Andy Casey

just Is and bits I'm would online first have turnaround. the you kind of just Okay, then Tom. turnaround projects that about segment We've and it next coming heard at industrial the pieces wondering and large is be the point? to the indeterminate discussion of this half year? pushout going the into that And Energy this pushout, turnaround activity. of back

Tom Amato

first we're is indication is perhaps getting from customers pushout. into to is robust It be second quarter, the turnaround more likely be could a perhaps a our it longer, The that that and season.

of that Now going in and competitors sure don't because as bolt commentary, know least terms they gasket want my noted supply. that be are to at in choose speed in customers we we need as over for to their for ready we have Lamons but performance sure, make

prolonged We'll going So and be robust going We're to it's hopefully, we're support to season. and ready. be a ready. them, turnaround

Andy Casey

you Thank much. Okay. very

Tom Amato

Thank you.

Operator

we the for Instructions] [Operator I'll appears, questions. over any no further closing our additional it remarks. to speakers as turn And back have conference or

Tom Amato

again. everybody quarter. with our to speaking very with look We're in a on we Thank performance basis. year-to-date you. Thanks And you the forward pleased next

Bob Zalupski

you all. Thank

Operator

And conclude all that participation. for your does you Thank today's teleconference.

TriMas (TRS) 28 Oct 172017 Q3 Earnings call transcript