Greetings, and welcome to the TriMas Second Quarter 2023 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sherry Lauderback, Investor Relations and Communications. Thank you, Sherry. You may begin.

Thank you, and welcome to TriMas Corporation's Second Quarter 2023 Earnings Call. Participating on the call today are Thomas Amato, TriMas' President and CEO, and Scott Mell, our Chief Financial Officer. We will provide our prepared remarks on our second quarter results and outlook, and then we will open up the call for your questions. In order to assist with the review of our results, we have included today's press release and PowerPoint presentation on our company's website at trimascorp.com under the Investors section. In addition, a replay of this call will be available later today by calling (877) 660-6853 with a meeting ID of 13739841. Before we get started, I would like to remind everyone that our comments today may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-Q that will be filed later today for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements. Also, we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We would also direct your attention to our website where considerably more information may be found. In addition, we would like to refer you to the appendix in our press release or our presentation for the reconciliations between GAAP and non-GAAP financial measures used during the call. Today, this discussion on the call regarding our financial results will be on an adjusted basis, which excludes the impact of special items. With that, I will turn the call over to Tom Amato, TriMas' President and CEO. Tom?

Thank you, Sherry. Good morning, and welcome to our second quarter earnings call. As we reflect on the quarter, I want to first thank our TriMas team for their increased efforts this year as we continue to navigate a very dynamic and changing global market environment. In certain product lines, we are adding capacity, ramping up production volumes, enhancing skilled labor, and alleviating supply bottlenecks, all to support robust customer demand. At the same time, in other product lines, we are rebalancing our manufacturing footprint and securing procurement savings to prepare certain businesses for improved conversion as end markets recover. Overall, irrespective of markets being strong or soft, each TriMas local team is working diligently to satisfy market demand or offset market disruptions while remaining focused on gaining momentum against our longer-term strategies. In relation to this quarter, I would like to personally thank our Specialty Products team for delivering strong results. Our Specialty Products performance is the result of making investment decisions in our businesses when market demand was challenged on the premise that demand would rebound. Market improvement did occur as we are witnessing today, and we were prepared to satisfy higher customer demand, all while also converting well. So in summary, we decided to invest in and take advantage of prior disruption in our Specialty Products end markets, which has benefited investors today. We are also leveraging our current momentum to position our Specialty Products Group to capture future growth through new innovations such as ultra-high purity cylinders for packaged gas applications and EPA-certified remote power generation units. So again, I would like to thank our Specialty Products team for their strong performance this year. I would also like to highlight that while our performance within TriMas Aerospace is well below our internal standards and potential, we are starting to make some significant progress in bringing the supply of super alloy raw materials, skilled labor, and production capacity into better balance. As we make strides to achieve improved synchronization with our production planning and customer requirements, we anticipate achieving financial results much improved from current levels. In fact, our second quarter results were sequentially better than our first quarter results. And I would like to note that in Q2, we had a settlement charge unique to the quarter that otherwise would have had our operating margin percent ahead of the prior year quarter as well. So while we are still below our overall potential, we are starting to achieve momentum in this group. Finally, our TriMas Packaging and TriMas Life Sciences teams are working diligently to prepare for improved market conditions as we move forward. Within TriMas Packaging, while we have seen some sequential monthly increases in our order backlog, they are at a more moderated rate than we had hoped to achieve at this point in the year. As we move into the second half, we now believe a market recovery in certain consumer products and packaging industrial submarkets will be more gradual than we assumed to start the year. As such, we made the decision to take advantage of this lower demand period to reposition productive assets and streamline our manufacturing footprint, and we are taking other procurement savings actions which we anticipate will generate more than $10 million or 200 basis points of annual run rate savings once implemented. Additionally, our TriMas Packaging commercial team is gaining momentum, leveraging our global supply model to expand our business into new geographic markets with new customers, particularly in South America. And of course, we continue to make progress marketing the characteristics and benefits to our CPG customers of our patented and commercial-ready single polymer dispenser for personal care, beauty, and other applications. We anticipate highlighting these advancements as we move into 2024. Within TriMas Life Sciences, we are ramping up and launching new programs for polymerase chain reaction from oral test kits and electrosurgery component applications. While some of our life science applications are currently lower in volume, we remain excited about the new channels and newer customers for growth in areas that, once qualified, have a strong moat. Again, I think our TriMas Packaging and TriMas Life Sciences teams were taking actions today to position us for improved performance in the future. With that background, we delivered adjusted earnings per share for the quarter of $0.50, which compared to the first quarter of 2023 of $0.30 represents sequential improvement and was in line with our internal planning models. With that said, while we continue to assume a recovery in certain of our packaging end markets in the back half of 2023, we anticipate that these will be at a more gradual rate than originally modeled and I'll discuss this further in a few slides. At this point, I would like to turn the call over to Scott, who will take us through our consolidated and segment results. Scott?

Thanks, Tom. Let's now turn to Slide 4 where I'll summarize our financial results for the quarter. Sales for the quarter were $233.2 million, compared to $237.7 million for the prior year quarter, as organic growth in the TriMas Specialty Products and TriMas Aerospace groups and acquisition-related sales were more than offset by lower market demand for TriMas Packaging dispenser and closure products used in personal care, food, and industrial applications. We continue to believe the packaging market softness primarily relates to continuing overstock positions at certain large CPG customers, more conservative purchasing patterns, and lingering inflationary concerns. Operating profit for the quarter was $27.3 million compared to $15.5 million for the first quarter of this year, and $32.1 million for the prior year quarter. EBITDA for the quarter was $45.5 million or 19.5% of sales, compared to $31.7 million or 14.7% of sales for the first quarter of this year and 20.3% of sales for the prior year quarter. As Tom mentioned in his opening remarks, the performance for the quarter was in line with our planning models and we continue to expect our performance to sequentially improve over the second half of the year, albeit at a more gradual rate than originally expected. Finally, adjusted earnings per share for the quarter were $0.50, which was a 67% increase when compared to the first quarter of this year. Now let's turn to Slide 5, and I will briefly review our balance sheet and credit statistics. Net debt, after funding the acquisition of Weldmac, paying a dividend, and completing share repurchases, was $375 million, with a net leverage ratio of 2.3x. As previously discussed, we grew approximately $40 million on our revolving line of credit to fund the April acquisition of Weldmac, of which $22 million remains outstanding at the end of the quarter. We expect to repay the remaining outstanding balance by the end of the year with cash flows generated from operating activities. Free cash flow of $11 million for the quarter was in line with expectations, and we continue to have ample liquidity to continue to invest in our businesses, take streamlining actions where appropriate, buy back shares, pay dividends, and complete future strategic bolt-on acquisitions as opportunities present themselves. Now let's turn to Slide 6, and I will begin my review of our segment results, starting with TriMas Packaging. First quarter net sales were $117 million compared to $148 million for the prior year quarter and up slightly when compared to the first quarter of this year. Acquisitions contributed $7.5 million of sales during the quarter, while the impact of foreign currency was immaterial. As expected, organic sales were lower during the quarter, down 26% when compared to the previous year period. This decline is primarily attributable to lower demand, most notably for consumer goods with applications in the personal care, food, and certain industrial submarkets. We continue to closely monitor the commercial environment and will take as necessary additional streamlining actions as a hedge against any potential further market demand softness. Operating profit in the quarter increased by $6.7 million to $21.9 million compared to the first quarter of this year, but was lower on a year-over-year basis, primarily on account of the impact of lower sales. Operating margin was 18.7% of net sales, while adjusted EBITDA was $30.3 million or 25.8% of net sales, a 90 basis point improvement year-over-year and a more than 600 basis point improvement when compared to the first quarter of this year. Turning to Slide 7, I will now provide an update on our TriMas Aerospace segment. Net sales for the quarter increased by $12.4 million or 26% when compared to the same period a year ago, as we continue to see strong order intake for many of our aerospace products, as general aerospace volumes continue to recover ahead of market expectations. Acquisitions contributed $7.3 million of sales during the quarter, while organic sales increased by more than $5 million or 11% when compared to the previous year period. Operating profit for the quarter was $3.7 million or 6.2% of net sales compared to $3.3 million or 6.9% in the prior year. As Tom mentioned earlier, absent a one-time settlement charge unique to the quarter, operating margin for the quarter would have been higher on a year-over-year basis. More importantly, sequential quarterly operating margin improved by more than 300 basis points as we are starting to see improved conversion rates on higher sales. Adjusted EBITDA for the quarter was $8.6 million or 14.4% of net sales. Now on Slide 8, let's review our Specialty Products segment. Net sales in the second quarter increased by more than $14 million to $56 million, a 34% increase when compared to the same period a year ago. This is now 9 consecutive quarters of double-digit percentage growth for our Specialty Products segment. Demand for steel cylinders for packaged gas applications and remote power generation units and related spare parts, each for the North America region remains robust with moderately high levels of backlog for both businesses. Operating profit in the quarter was $12.1 million or 21.6% of net sales compared to $6.8 million in the previous year period. This record-setting margin level for Specialty Products is the result of continuing robust demand and the impact of previous factory floor improvement actions. Adjusted EBITDA for the quarter was $13.2 million or 23.5% of net sales. While our Specialty Products businesses' order books remain strong, which we believe is indicative of continuing resilience in certain end markets for which they sell into, we will continue to closely monitor order changes and input costs and take appropriate actions if necessary. At this point, I would like to turn the call back over to Tom to review our 2023 outlook and for some closing remarks. Tom?

Thank you, Scott. Let's now turn to Slide 9. We continue to model potential scenarios for 2023, especially given some of the uncertainty in a few of our end markets. As noted in our earnings release, we are modifying our full year outlook. There are a few important considerations I'd like to note. The most significant driver is our view of the recovery in certain packaging end markets. Specifically, while we have estimated continued sequential demand recovery as customers work through inventories, we now believe that that recovery rate will be more moderated than originally forecasted. Therefore, we are modifying our consolidated sales growth range to a new rate of 5% to 10%, compared to 2022, and an adjusted EPS range of $1.80 to $1.95. It is worth noting that on a comparison basis, when normalizing 2022 and for two discrete special projects that we completed last year, our base adjusted EPS for 2022 would have been $1.73. Therefore, even at the revised adjusted EPS midpoint, we are forecasting sequential momentum in our performance. Our revised outlook also assumes continued strong demand within our Specialty Products group, continued progress against bringing supply and production into better balance within our TriMas Aerospace Group, and continued moderated sequential demand increases within TriMas Packaging. We also continue to forecast our full year free cash flow to be greater than 100% of net income. So let's turn to Slide 10. I would like to thank again our investors for their continued support as we navigate through what we believe is a prolonged but temporary softer demand period. With that said, I will conclude our prepared remarks by providing just a few examples of why we remain excited about the long-term prospects for TriMas. First, we continue to believe there are attractive long-term characteristics within our TriMas Packaging and TriMas Life Sciences Group through our multiple end markets, diverse geographic presence, and improving demand. We also have many sustainable product solutions such as mono polymer, tethered caps, and child-resistant closures in the pipeline and coming to market in the future, and we are gaining traction with some new medical applications. We also have growing confidence in the sustained recovery within the commercial aerospace and defense end markets and anticipate future increased spending in defense will benefit TriMas Aerospace. We are working through supply and remaining skilled labor constraints and expect to take advantage of long-term operating leverage gains as we bring our supply and production planning into better synchronization with customer demand. Within our TriMas Specialty Products group, we expect demand to remain robust given our strong order backlog. We will also continue to assess new market and product adjacencies to drive future growth within our Specialty Products businesses. Given our relentless commitment to cash flow generation, we will continue to reinvest in our businesses for long-term growth while also returning capital to our shareholders, both through dividends and share buybacks. In addition, our leadership team remains committed to operating TriMas in a responsible way to positively contribute to society, particularly in the communities where we live and work. Again, we continue to believe TriMas is an exciting company to invest in. And with that, I'll turn the call back to Sherry. Sherry?

Thanks, Tom. At this point, we would like to open the call up to your questions.

Our first question comes from the line of Ken Newman with KeyBanc Capital Markets.

Hey, good morning, guys. Maybe first to start off. Can you just talk a little bit about the confidence that you have in the packaging guide and just where your visibility with customers in the end market is today?

Yes, that's a great question. The best way to explain the current market situation is that many of our customers have been managing overstock positions throughout the year, and while not all, a number of them have made progress in reducing their inventory. As a result, starting the year with these positions and given the available market capacity, we are seeing significantly reduced lead times across several product lines. This means that suppliers, including our packaging group and others, are now quoting delivery times that are considerably shorter than the usual 6 to 8 weeks. Consequently, customers are benefiting from this increased capacity and faster lead times, leading to a shift towards a shorter supply cycle. Our visibility is somewhat limited, but we are encouraged by the month-over-month improvement in our order book from the second quarter. However, we’re also in a shorter cycle period. While we are achieving significant progress with larger orders for our Packaging group, many of these won’t take effect until next year due to being new innovations or specific programs, so they won't contribute to 2023. Thus, we are focusing on our current order flow to revise our top-line outlook for packaging. On a consolidated basis, we have a solid order book in TriMas Aerospace and strong orders in TriMas Specialty Products, which helps us manage our production effectively.

I guess we are trying to understand how much conservatism is included in the lower end of the packaging revenue guidance. Should we anticipate year-over-year sales growth in the third quarter, or is it more accurate to view significant revenue growth as something that will occur primarily in the fourth quarter to reach that midpoint?

Yes, good question. We are anticipating a moderate increase in Q3 sales compared to last quarter. Sales were quite low last quarter, as well as in the fourth quarter. We expect some improvement in the fourth quarter. Additionally, we do foresee a seasonal selling period this year, which we did not have last year. As you may recall, some orders in our system were canceled, and they never materialized. Therefore, we expect a return to a somewhat seasonal selling period, although not yet at normalized levels, but definitely an improvement from what we experienced last year.

Ken, I'd also point you to Slide 13 of our earnings presentation, where we highlight the revised sales growth for packaging for the year, which is on the low end, minus 8% year-over-year, and on the high end, minus 2%.

Right. No, I get that. I think it still implies up double digits in the back half year-over-year, right, for just that segment. And so I guess that kind of leads me to the next question because that leads the margin profile also implies a pretty sizable ramp in operating leverage for the back half. That probably makes sense just given the commentary you made, Tom, on the easier comps from last year and the selling period, any way that we can kind of think about the cadence of incremental margin 3Q to 4Q?

Yes. I think the current value proposition for TriMas in aerospace is showing progress every day, and this will be reflected in our numbers as we advance in aerospace and see revenue return in packaging. As that happens, we should experience improved conversion rates. At the moment, our run rate for packaging is unusually low, but we are maintaining some infrastructure and rationalizing our footprint while reducing costs. However, we are not treating this as the new normal for sales; instead, we are preparing for recovery. I am confident that as we achieve additional sales in packaging, our conversion will be strong.

Right. Maybe just one more on Packaging. Sorry if I missed this, but did you say how much these consolidations are expected to cost within packaging? And a sense of the timing of realizing those benefits. I think you mentioned $10 million in benefits are expected. Any color there?

Yes. I don't know, Scott. We do have some restructuring charges in the quarter that largely relate to anticipated costs to make those moves. So the payback on that, I think, is pretty swift, but also will help us with our conversion rates.

Okay. And then the existing facilities, do they need to be retooled in any way to kind of move that capacity over? Or what's involved from an operational or logistics perspective in consolidating that capacity? And is there a risk that even since the visibility is so low right now, is there a risk that you can kind of get caught flat-footed as you try to consolidate the manufacturing space?

I understand your point, but I want to emphasize that I have extensive experience in relocating manufacturing operations. The change we're making in the U.S. involves exiting a facility in California and transferring our production resources to existing plants. This approach allows us to avoid the need for new infrastructure since we can move our equipment to current presses. If the market remains weak for an extended period, we will still achieve savings by reducing the costs associated with the California plant.

Right.

I want to emphasize that the situation in China is a bit more complicated as we work on consolidating two plants into one, which requires a new facility. Our estimates are based on the current demand levels there, without expecting any increase in demand. We are also reallocating some assets to different regions. Thus, I view these restructuring actions as safer options compared to starting a completely new plant.

Right. Maybe just switching over to the Specialty segment. Obviously, very strong margins here. Just longer term, I mean, how sustainable are margins at this level? I mean, is this the new baseline for that business through the cycle, do you think?

It really depends on overall market demand and the types of cylinders we sell, as there's a significant mix involved. I've mentioned in previous quarters that ultrahigh purity cylinders are a strong product line for us, especially as they relate to the localization of microchips in the U.S. These cylinders are used in specialized applications and typically allow us to command better pricing, leading to improved margins. We acknowledge that we are reaching historically high margin levels, which is both positive and prompts us to carefully monitor our situation to protect those margins. Much of our success has come from enhancing our cost structure. We've made considerable investments during tough times, which was a risk, but we believed the market would rebound, and it has, to our benefit. I wouldn’t want to suggest there’s no risk involved, but we are aware of your concerns.

Okay. Maybe just switching over to Arrow really quick. Boeing's ramping monthly production with the 737. Just curious how you think about that impact and the visibility for faster production.

Yes. All of that helps. Our order book is strong. The aerospace industry has a unique annual gathering where you can meet everyone you want to connect with, and the recent air show was very positive. The production challenges we're experiencing are not unique to us; many in the aerospace sector are facing similar issues, particularly with technical supplies. The main focus for us and our customers and suppliers is aligning the supply base, sub-supply production, and skilled labor as the aerospace industry begins to pick up again. This is why I'm optimistic about our performance going into 2024. Additionally, regarding the long-term outlook, while you mentioned the 777, we expect little to no impact from it on our current figures, but we do have a solid position in that area.

Yes. Maybe the last one for me. Just on the free cash flow guide, greater than 100%. I know that's excluding some restructuring costs, so maybe not completely apples-to-apples, but even, I think, through the first half, even on an adjusted basis, we're around 60% conversion. So any big one-time thing? How much of that is seasonality? Or is there anything that we need to be paying attention to in terms of how that free cash starts to flow through here in the back half, just given all the issues with packaging?

Yes. I mean that's our traditional cycle of cash generation as we invest typically in the first half of the year with to working capital and then we unwind it as we get into the third quarter and really into the fourth quarter. So there's nothing really unique there, Ken, other than just our traditional expectations on unwinding of working capital. Plus, obviously, the incremental earnings in the second half of the year versus the first half.

Our next question comes from the line of Hamed Khorsand with BWS Financial.

Good morning. So the first question I have was on the Packaging side. Do you think you might be in a situation where you don't have capacity if orders come back quicker than you're assuming on the consolidation side?

No, we have actually been studying this. It's a great question and one that we have examined closely, particularly in light of what has happened in aerospace. It definitely served as a wake-up call for us. However, we have the ability to add shifts at several of our plants where we anticipate bottlenecks. Currently, we are not operating all of our packaging plants on a three-shift schedule, and in many cases, not even on a two-shift schedule. This allows us to increase our output from our productive assets and achieve significant operational efficiency.

Okay. And then as far as the customers are concerned, are they adjusting as far as making new products to attract the customer again? Or are they just stuck with inventory and they're just waiting for it to clear out through the channel?

I understand your question. The exciting aspect of our packaging segment is the continuous innovation that drives both our customers and us, particularly in the consumer product space where we see what attracts consumers at the point of purchase. A lot of research goes into this, and we are committed to supporting our customers in their efforts. You're correct that if inventory was high or overstocked at the start of the year with items like simple pumps or 2 cc dispensers, that inventory will need to be depleted. However, it's unlikely to be disposed of since there is consistent demand for these 2 cc simple dispensers, which have been around for some time and will continue to exist in the future. They are cost-effective, straightforward pumps that successfully deliver liquid to the consumer.

There are no further questions at this time. I'd like to turn the floor back over to Tom for closing comments.

Okay. Thank you again for joining us on our earnings call. And we look forward to updating you again next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.