Barnes (US:B)2020-07-29 03:15Financial Data and Key Metrics Changes - Second quarter sales decreased by 37% to $236 million, with organic sales down 32% [19][8] - Adjusted operating income decreased by 52% to $27.8 million, with adjusted operating margin declining by 390 basis points to 11.8% [19][8] - Adjusted earnings per share were $0.27, down 64% from $0.75 a year ago [19][21] Business Line Data and Key Metrics Changes - Industrial segment sales were $165 million, down 29% year-over-year, with organic sales decreasing by 22% [22] - Aerospace segment sales were $71 million, down 49%, with OEM sales decreasing by 52% and aftermarket sales down 42% [23][19] - Molding Solutions in the medical end markets saw strong growth, with a significant pickup in packaging and personal care orders [10][11] Market Data and Key Metrics Changes - Manufacturing PMIs for North America and Europe showed some improvement but remained below neutral [9] - Global automotive production is expected to decline by approximately 20% in 2020 compared to 2019, although there are signs of stabilization [10][11] - Aerospace OEM backlog ended the quarter at $555 million, down 21% from March [14] Company Strategy and Development Direction - The company is focused on cost reduction and cash preservation, leading to a workforce reduction of approximately 8% [7] - The company aims to maintain a conservative balance sheet while investing in capital expenditures and innovation for future growth [17][26] - The transformational strategy is emphasized as crucial during times of uncertainty, aiming to create long-term partnerships through differentiated solutions [18] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the crisis is behind, with signs of recovery beginning to appear, although challenges remain [6][7] - The outlook for the aerospace industry remains challenging, with expectations of a slow recovery in the aftermarket [15][16] - The company anticipates a gradual recovery in industrial markets, with expectations for sequential improvement from Q2 to Q3 and Q3 to Q4 [12][13] Other Important Information - The company has suspended share repurchase activity and does not anticipate a liquidity concern, maintaining open communication with lenders [25][24] - Year-to-date cash provided by operating activities was $123 million, an increase from the previous year, driven by working capital improvements [24] Q&A Session Summary Question: OEM sales down 52%, what were the contributing factors? - Management indicated that various factors contributed, including customer inventory decisions and communication inconsistencies [30] Question: How did aftermarket sales trend from April to July? - Aftermarket sales were down approximately 40% in April, with continued pressure into May and June, and expectations for further pressure in July [33] Question: What was the order cadence in the Industrial business? - April was the most severe, with gradual improvement seen in June as customers began to reopen [36] Question: What are the expected cost savings from the workforce reduction? - The company expects $30 million in savings over time, with $4 million to $6 million anticipated in the second half of 2020 [41] Question: What is the outlook for the Aerospace OEM and aftermarket? - Management expects some sequential improvement in OEM but acknowledges that the supply chain needs to clear before meaningful growth can occur [62]