Q2 2024 Barnes Group Inc Earnings Call

Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes Second Quarter 2024 Earnings Conference Call-In Webcast. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by.

Thank you for standing by my name is Christa you know I'll be your conference operator today at this time I would like to welcome everyone to the.

Krista: My name is Krista, and I will be your conference operator today.

Krista: At this time, I would like to welcome everyone to the Barnes Second Quarter, 2024 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise.

Speaker Change: Barns second quarter, 'twenty 'twenty four earnings conference call and webcast.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question I got and press Star one. Thank you I will now like to introduce.

Krista: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you.

William Pitts: I will now like to introduce Bill Pitts, Vice President of Investor Relations.

Speaker Change: Bill Pitts, Vice President of Investor Relations Bill you May begin your conference.

Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I will now like to introduce Bill Pitts, Vice President of Investor Relations. Bill, you may begin your conference.

William Pitts: Bill, you may begin your conference. Good morning, and thank you for joining us for our second quarter 2024 earnings call. With me, our Barnes President and Chief Executive Officer, Thomas Hook, and Senior Vice President, Finance and Chief Financial Officer, Julie Streich.

Good morning, and thank you for joining us for our second quarter 2024 earnings call.

William Pitts: Good morning, and thank you for joining us for our second quarter 2024 earnings call. With me are Barnes President and Chief Executive Officer Thomas Hook, and Senior Vice President of Finance and Chief Financial Officer Julie Streich. You can access all earnings-related materials on the Investor Relations section of our corporate website at onebarnes.com. That's O-N-E-B-A-R-N-E-S dot com.

Speaker Change: With me are Barnes, President and Chief Executive Officer, Thomas Hook and.

<unk> Senior Vice President Finance, and Chief Financial Officer, Julie strike.

William Pitts: You can access all earnings-related materials on the investor relations section of our corporate website at one barns.com. That's ONE, B-A-R-N-E-S.com. During our call, we will be referring to the earnings release presentation. Our discussion today includes certain non-GAAP financial measures, which provide additional information. We believe it's helpful to investors. These measures have been reconciled to the related guests. We will find out measures in accordance with SEC regulations.

Speaker Change: You can access all earnings related materials on the Investor Relations section of our corporate website at one Barnes Dot com.

Speaker Change: That's O N E.

Speaker Change: Are any dot com.

Speaker Change: During our call, we will be referring to the earnings release presentation.

Speaker Change: Our discussion today includes certain non-GAAP financial measures, which provide additional information. We believe is helpful to investors.

Speaker Change: Measures have been reconciled to the related GAAP measures in accordance with SEC regulations.

William Pitts: You will find a reconciliation table on our website as part of the press release and in the form eight case submitted to the Securities and Exchange Commission.

Speaker Change: You will find a reconciliation table on our website as part of the press release and in the form 8-K submitted to the Securities and Exchange Commission.

William Pitts: Be advised that certain statements we make on today's call, both during the opening remarks and 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 one barns.com.

Speaker Change: Be advised that certain statements we make on today's call. Both during the opening remarks, and a question and answer session maybe forward looking statements.

William Pitts: During our call, we will be referring to the earnings release 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 gap measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of the press release and in the form 8K submitted to the Securities and Exchange Commission. Please be advised that certain statements we make on today's call, both during the opening remarks and the question and answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Speaker Change: Defined in the private Securities Litigation Reform Act of $19 95.

Speaker Change: These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

Speaker Change: 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 one Barnes <unk> Dot com.

William Pitts: I will now turn the call over to Tom for his opening remarks. And after that, Julie will provide a review of our second quarter financial performance and details of our updated 2024 outlook.

William Pitts: 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 in the Investor Relations section on onebarns.com. I will now turn the call over to Tom for his opening remarks, and after that, Julie will provide a review of our second quarter financial performance and details of our updated 2024 outlook. Then we will open up the call to questions. Tom?

Speaker Change: I will now turn the call over to Tom for his opening remarks, and after that Julia will provide a review of our second quarter financial performance and details of our updated 2020 for outlook.

William Pitts: Then we will open up the call for questions.

Speaker Change: And then we will open up the call for questions Tom.

Thomas Hook: Tom. Thank you, Bill, and good morning, everyone. Today, I will provide an update on our transformation progress and strategy execution, in addition to second quarter highlights. I will also provide some color on the current macro and industry environments.

Thomas J. Hook: Thank you, Bill, and good morning, everyone. Today I will provide an update on our transformation progress and strategy execution in addition to second quarter highlights. I will also provide some color on the current macro and industry environment. Julie will then cover quarterly performance in more detail, including updates to our annual outlook.

Tom: Thank you Bill and good morning, everyone.

Tom: Today, I will provide an update on our transformation progress and strategy execution. In addition to second quarter highlights.

Tom: I will also provide some color on the current macro and industry environments.

Thomas Hook: Julie will then cover quarterly performance and more detail, including updates to our annual outlook. As we approach the halfway point of Barnes' multi-year transformation journey, we have executed on several significant milestones following my appointment as chief executive officer two years ago. And after visiting our global operation shortly thereafter, we developed a more comprehensive understanding of our strengths to leverage and the business challenges to address. In early 2023, we articulated a clear and concise three-pillar strategy to move Barnes forward. First, core business execution; second, scale aerospace; and third, integrate, consolidate, and rationalize industrial. The work to improve our underlying performance and value creation is not yet complete.

Tom: Julie will then cover quarterly performance in more detail.

Updates to our annual outlook.

Tom: As we approach the halfway point of Barnes multiyear transformation journey.

Thomas J. Hook: As we approach the halfway point of Barnes' multi-year transformation journey, we have executed on several significant milestones. Following my appointment as Chief Executive Officer two years ago, and after visiting our global operation shortly thereafter, we developed a more comprehensive understanding of our strengths to leverage and the business challenges to address. In early 2023, we articulated a clear and concise three-pillar strategy to move Barnes forward.

Tom: Executed on several significant milestones.

Speaker Change: Following my appointment as Chief Executive Officer, two years ago, and after visiting our global operation. Shortly thereafter, we developed a more comprehensive understanding of our strengths to leverage.

Speaker Change: The business challenges to address.

Speaker Change: In early 2023, we articulated a clear and concise three pillar strategy to move Barnes forward.

Thomas J. Hook: First, core business execution. Second, scale aerospace, and third, integrate, consolidate, and rationalize industrial. The work to improve our underlying performance and value creation is not yet complete. However, we have made noteworthy progress, and I'm pleased with the positive momentum, with last fall's acquisition of M.B. Aerosmith.

Speaker Change: First core business execution.

Speaker Change: Second scale aerospace and third to integrate consolidate and rationalize industrial.

Speaker Change: The work to improve our underlying performance and value creation is not yet complete. However, we have made noteworthy progress and pleased with the positive momentum.

Thomas Hook: However, we have made no-read progress and am pleased with the positive momentum. With last ball's acquisition of NB Aerospace, the largest deal in the company's lengthy history, we have significantly scaled aerospace. More recently, in the second quarter of this year, we completed the sale of our associated spring and hangy businesses, a meaningful step in rationalizing our industrial segment. Given that associated spring can be traced back over 165 years to the founding of Barnes, this transaction clarifies we are considering all alternatives to unlock enterprise value. With the second quarter, we generated a revenue of $382 million, an increase of 13% reported and 5% organic.

Speaker Change: With last Fall's acquisition of MB Aerospace the largest deal in the company's lengthy history, we have significantly scaled aerospace more recently in the second quarter of this year, we completed the sale of our associated spring and hanging businesses, a meaningful step in rationalizing our industrial segment.

Thomas J. Hook: The largest deal in the company's lengthy history, we have significantly scaled aerospace. More recently, in the second quarter of this year, we completed the sale of our Associated Spring and Hangee businesses, a meaningful step in rationalizing our industrial segment. Given that Associated Spring can be traced back over 165 years to the founding of Barnes, this transaction clarifies that we are considering all alternatives to unlock enterprise value. For the second quarter, we generated revenue of $382 million, an increase of 13% reported and 5% organic.

Speaker Change: Given that associated spring can be traced back over 165 years to the founding of Barnes. This transaction clarifies youre, considering all alternatives to unlock enterprise value.

Speaker Change: For the second quarter, we generated revenue of $382 million, an increase of 13% reported and 5% organic.

Thomas Hook: Adjusted EBITDA grew 14% to $76 million, and adjusted EBITDA margin was up 20 basis points. As a result of the portfolio transformation progress just discussed, Aerospace now contributes two-thirds of our adjusted EBITDA. Our focus on core business execution through our top line, bottom line, pipeline growth philosophy continues to guide the actions we take across the company. Through the Barnes Transformation Office, or DTO, we are implementing cost mitigation actions to improve our competitiveness, drive operational efficiencies, enhance margins, and increase cash flow. The majority of our DTO products are focused on the industrial segment. We're savings today to have largely served offset inflationary cost pressures and unfavorable mix.

Thomas J. Hook: Adjusted EBITDA grew 14% to $76 million, and the adjusted EBITDA margin was up 20 basis points. As a result of the portfolio transformation progress just discussed, aerospace now contributes two-thirds of our adjusted EBITDA. Our focus on core business execution through our top line, bottom line, pipeline growth philosophy continues to guide the actions we take across the company. Through the Barnes Transformation Office, or BTO, we are implementing cost mitigation actions to improve our competitiveness, drive operational efficiencies, enhance margins, and increase cash flow.

Speaker Change: Adjusted EBITDA grew 14% to $76 million and adjusted EBITDA margin was up 20 basis points.

Speaker Change: As a result of the portfolio transformation progress just discussed.

Speaker Change: Aerospace now contribute two thirds of our adjusted EBITDA.

Speaker Change: Our focus on core business execution through our topline Bottomline pipeline growth philosophy continues to guide the actions we take across the company.

Speaker Change: Through the borrowers transformation office or D. T O we are in.

Speaker Change: And I think cost mitigation actions to improve our competitiveness drive operational efficiencies enhance margins and increase cash flow.

Thomas J. Hook: The majority of our BTO products are focused on the industrial segment, where savings to date have largely served to offset inflationary cost pressures and unfavorable mix. We have rationalized closed or divested facilities across the globe, resulting in a reduction over 500,000 square feet of commercial office and manufacturing.

Speaker Change: Majority of our <unk> products are focused on the industrial segment, where savings to date have largely served to offset inflationary cost pressures and unfavorable mix.

Thomas Hook: We have rationalized, closed, or devastated facilities across the globe, resulting in a reduction of over 500,000 square feet of commercial office and manufacturing space, reducing cost and complexity across the organization. While this is a strong start, we're continues to identify additional optimization opportunities. As we have shared previously, we continue to target run rate annualized savings of $38 million by the end of 2024 and $42 million by the end of 2025. Across Barnes, we have also streamlined each of our business unit leadership teams and are now well positioned to further build on our momentum. We have complete confidence in our strategy and are committed to further actions to unlock Barnes' full growth potential.

Speaker Change: We have rationalized closed or divested facilities across the globe.

Speaker Change: <unk> get a reduction over 500000 square feet of commercial office and manufacturing space, reducing cost and complexity across the organization.

Thomas J. Hook: Reducing cost and complexity across the organization. While this is a strong start, work continues to identify additional optimization opportunities. As we have shared previously, we continue to target run rate annualized savings of $38 million by the end of 2024 and $42 million by the end of 2025 across Barnes. We have also streamlined each of our business unit leadership teams and are now well positioned to further build on our momentum. We have complete confidence in our strategy and are committed to further actions to unlock Barnes' full growth potential.

Speaker Change: While this was a strong start work continues to identify additional optimization opportunities as we have shared previously we continue to target run rate annualized savings of $38 million by the end of 2024.

Speaker Change: And $42 million by the end of 2025.

Speaker Change: Across borrowings we have also streamlined each of our business unit leadership teams and are now well positioned to further build on our momentum.

Speaker Change: We have complete confidence in our strategy and are committed to further actions to unlock barns full growth potential.

Speaker Change: Aerospace remains a good growth market with durable demand.

Thomas Hook: Aerospace remains a good growth market with durable demand. Barnes Aerospace is recently scaled business operation, and greater customer, geographic and platform diversification makes us a more meaningful player in the industry. Between the deal announcement and closing, we developed a comprehensive integration plan. This enabled us to quickly optimize the leadership team, pulling from both legacy Barnes Aerospace and MB Aerospace, and begin capturing synergies from day one. We identified $18 million of cost energies to attack. Interintegration progress is firmly on track, with $15 million of annual one-rate savings now identified and action. We expect to realize the full extent of those cost energies by the end of 2025 as planned.

Thomas J. Hook: Aerospace remains a good growth market with durable demand. Barnes Aerospace's recently scaled business operation and greater customer, geographic, and platform diversification make us a more meaningful player in the industry. Between the deal announcement and closing, we developed a comprehensive integration plan. This enabled us to quickly optimize the leadership team, pulling from both Legacy Barnes Aerospace and MB Aerospace, and begin capturing synergies from day one. We identified $18 million of cost synergies for ATT&CK, and our integration progress is firmly on track, with $15 million of annual run rate savings now identified and actioned. We expect to realize the full extent of those cost synergies by the end of 2025, as planned.

Speaker Change: Aerospace has recently scaled business operation and greater customer geographic and platform diversification makes us a more meaningful player in the industry.

Speaker Change: Between the deal announcement and closing we developed a comprehensive integration plan.

Speaker Change: This enabled us to quickly optimize the leadership team.

Speaker Change: Pulling from both legacy Barnes aerospace and N b aerospace and begin capturing synergies from day one.

Speaker Change: We identified $18 million of cost synergies to attack and our integration progress is firmly on track with $15 million of annual run rate savings now identified.

Speaker Change: And action.

Speaker Change: We expect to realize the full extent of those cost synergies by the end of 2025 as planned.

Thomas Hook: More recently, we have seen cross-selling green shoots that should benefit the business in the future. Overall, there are several positive trends for aerospace, and we continue to forecast good performance. However, we do anticipate OEM to ramp more slowly than our prior expectations, and this will impact our outlook for the year.

Thomas J. Hook: More recently, we have seen cross-selling green shoots that should benefit the business in the future. Overall, there are several positive trends for aerospace, and we continue to forecast good performance. However, we do anticipate OEM growth to ramp more slowly than our prior expectations, and this will impact our outlook for the year. Julie will touch on that momentarily.

Speaker Change: More recently, we have seen cross selling green shoots that should benefit the business in the future.

Speaker Change: Overall, there are several positive trends for aerospace and we continue to forecast good performance.

Speaker Change: However, we do anticipate OEM to ramp more slowly than our prior expectations and this will impact our outlook for the year, Judy will touch on that momentarily.

Thomas Hook: Julie will touch on that momentarily. In the aftermarket, we expect excellent growth to continue, as the dynamic of lower OEM aircraft production output will lead to a favorable step up for the aftermarket, as existing fleets stay in service longer to compensate. Across the OEM landscape, both Boeing and Airbus has spoken to production ramp delays due to existing supply chain bottlenecks and labor productivity. Likewise, we have experienced supply chain and labor efficiency challenges. We continue to actively address what is within our control, but market supply chain challenges are likely to persist. While we are well-positioned to support the re-ramp, we have dialed back our OEM outlook for 2024.

Thomas J. Hook: In the aftermarket, we expect excellent growth to continue as the dynamic of lower OEM aircraft production output will lead to a favorable step-up for the aftermarket as existing fleets stay in service longer to compensate. Across the OEM landscape, both Boeing and Airbus have spoken to production ramp delays due to existing supply chain bottlenecks in labor productivity. Likewise, we have experienced supply chain and labor efficiency challenges.

Judy: In the aftermarket we expect excellent growth to continue as the <unk>.

Judy: Dynamic of lower OEM aircraft production output will lead to a favorable step up for the aftermarket is existing fleet stay in service longer to compensate.

Speaker Change: Across the OEM landscape, both Boeing and Airbus has spoken to production ramp delays due to existing supply chain bottlenecks and labor productivity.

Speaker Change: Likewise, we have experienced supply chain and labor efficiency challenges. We continue to actively address what is within our control, but the lead markets supply chain challenges are likely to persist.

Thomas J. Hook: We continue to actively address what is within our control but believe market supply chain challenges are likely to persist. While we are well positioned to support the re-ramp, we have dialed back our OEM outlook for 2024. It is prudent to take a more conservative view of the near and medium term for new aircraft production as the environment is dynamic and exhibits less specificity.

Speaker Change: While we are well positioned to support the re ramp we have dialed back our OEM outlook for 2024.

Thomas Hook: It is prudent to take a more conservative view of the near and medium term for new aircraft production, as the environment is dynamic and exhibits less specificity. We see the industry OEM challenges as a timing issue; the stronger, longer-term demand is still intact. We are using this transition phase to make capital investments and our Singapore OEM capabilities for new equipment and anticipation of leap engine growth when production ramps. For the aftermarket, very strong growth persists as air travel demand and aircraft utilization remain high. Pressures on the OEM side of the market will continue to support extended flying of legacy aircraft platforms, especially for important narrow-body engines, like the CFM56 and V2500.

Speaker Change: It is prudent to take a more conservative view of the near and medium term for new aircraft production as the environment is dynamic and exhibits less specificity.

Thomas J. Hook: We see the industry's OEM challenges as a timing issue with stronger, longer-term demand still intact. We are using this transition phase to make capital investments in our Singapore OEM capabilities for new equipment in anticipation of LEAP engine growth when production ramps up. For the aftermarket, very strong growth persists as air travel demand and aircraft utilization remain high. Pressures on the OEM side of the market will continue to support extended flying of legacy aircraft platforms, especially for important narrow-body engines like the CFM56 and V2500.

Speaker Change: We see the industry OEM challenges is a timing issue with stronger.

Speaker Change: Longer term demand still intact, yes.

Speaker Change: We're using this transition phase to make capital investments in our Singapore OEM capabilities for new equipment in anticipation of leap engine growth when production ramps.

Speaker Change: Or the aftermarket very strong growth persists as air travel demand and aircraft utilization remain high.

Speaker Change: Pressures on the OEM side of the market will continue to support extended flying of legacy aircraft platforms, especially for important narrow body engines like the CFM 56, and the 2500.

Thomas Hook: Given engine component repair capacity constraints within the industry, we have significantly expanded capacity in both Singapore and East Granby, Connecticut, supporting our enduring growth expectations for the aftermarket. In addition, we are investing in European aftermarket capacity of our facility in Poland. During the quarter, at the Emerald America Show in Chicago, Barn Zero Space and RTX's Pratt and Whitney Canada announced a long-term extension of a repair services agreement for the maintenance, repair, and overhaul of highly complex parts used in air-w engine cases, rotating components, shrouds, and seals. Despite a more challenging OEM environment, the commercial aftermarket remains robust.

Thomas J. Hook: Given engine component repair capacity constraints within the industry, we have significantly expanded capacity in both Singapore and East Granby, Connecticut, supporting our enduring growth expectations for the aftermarket. In addition, we are investing in European aftermarket capacity at our facility in Poland during the quarter. At the Emerald America Show in Chicago, Barnes Aerospace and RTX's Pratt & Whitney Canada announced a long-term extension of a repair services agreement for the maintenance, repair, and overhaul of highly complex parts used in aero engine cases, rotating components, shrouds, and seals.

Speaker Change: Do you have an engine component repair capacity constraints within the industry, we have significantly expanded capacity in both Singapore and East Granby, Connecticut, supporting our enduring growth expectations for the aftermarket.

Speaker Change: In addition, we are investing in European aftermarket capacity at our facility in Poland.

Speaker Change: During the quarter.

Speaker Change: At the MRO America show in Chicago, Barnes Aerospace and our T X as Pratt <unk> Whitney, Canada announced a long term extension of a repair services agreement for the maintenance repair and overhaul of highly complex parts.

Speaker Change: Used in Aero engine cases, rotating components shrouds and seals.

Thomas J. Hook: Despite a more challenging OEM environment, the commercial aftermarket remains robust. This MRO agreement comes on top of multiple new long-term agreements reached with our large customers this year, including General Electric and Rolls-Royce, in addition to Pratt & Whitney. In total, the full term value of these agreements is approximately $2 billion.

Speaker Change: More challenging OEM environment, the commercial aftermarket remains robust.

Thomas Hook: The Emerald Agreement comes on top of multiple new long-term agreements reached with our large customers this year, including General Electric and Rolls Royce, in addition to Pratt and Whitney. In total, the full-term value of these agreements is approximately $2 billion. We have positioned Barnes as an integral global partner to customers in the aerospace supply chain with expanded geographic reach and capabilities. The strategic balance of our OEM and aftermarket capabilities is unique in the market and will service well as the industry works to normalize supply chain and production flow.

Speaker Change: This MRO agreement comes on top of multiple new long term agreements reached with our large customers this year, including general electric and Rolls Royce in addition to Pratt and Whitney in total the full term value of these agreements is approximately $2 billion.

Thomas J. Hook: We have positioned Barnes as an integral global partner to customers in the aerospace supply chain with expanded geographic reach and capabilities. The strategic balance of our OEM and aftermarket capabilities is unique in the market and will serve us well as the industry works to normalize supply chain and production flow. Moving to industrial, second quarter performance was solid, albeit asymmetric, with improvements in certain areas and lingering softness in others. Our Molding Solutions business generated solid year-over-year organic sales growth as new commercial leadership and product offerings gained traction.

Speaker Change: We have position Barnes is an integral global partner to customers in the aerospace supply chain with expanded geographic reach and capabilities.

Speaker Change: The strategic balance of our OEM and aftermarket capabilities is unique in the market and will serve us well as the industry works to normalize supply chain and production flow.

Thomas Hook: Moving to industrial, second quarter performance was solid, albeit asymmetrical. Our molding solutions business generated solid year-over-year organic sales growth as new commercial leadership and product offerings gain traction. Importantly, we returned to sales growth in China for our automotive hot runner systems. SInvented posted its best quarterly orders and sales levers in China since the end of 2021, a positive sign. In molds, our lead times are holding at 40 weeks, a significant improvement from several quarters ago as we drive operating rigor throughout our business. At Forest and Motion Control, the remaining business within Motion Control Solutions after the divestiture of Associated Spring and Hanging, we generated low single-digit growth in organic orders year-over-year, while organic sales were relatively flat.

Speaker Change: Moving to industrial second quarter performance was solid, albeit a symmetrical.

Speaker Change: We saw improvements in certain areas and lingering softness in others.

Speaker Change: Our molding solutions business generated solid year over year organic sales growth as new commercial leadership and product offerings gained traction.

Thomas J. Hook: Importantly, we return to sales growth in China for our automotive hot runners. Sinvented posted its best quarterly orders and sales levers in China since the end of 2021, a positive sign. In molds, our lead times are holding at 40 weeks, a significant improvement from several quarters ago as we drive operating rigor throughout our business.

Speaker Change: Importantly, we returned to sales growth in China for our automotive Hot runner systems.

<unk> posted its best quarterly orders and sales levers in China since the end of 2021, a positive sign.

And molds are lead times are holding at 40 weeks, a significant improvement from several quarters ago as we drive operating rigor throughout our business.

Speaker Change: At force <unk> motion control the remaining business within motion control solutions. After the divestiture of associated spring and hanging we generated low single digit growth in organic orders year over year, while organic sales were relatively flat sequentially.

Thomas J. Hook: At Forest and Motion Control, the remaining business within Motion Control Solutions after the divestiture of Associated Spring and Hanging, we generated low single-digit growth in organic orders year over year, while organic sales were relatively flat. Subsequently, orders and sales improved, supported by Europe and China. Lastly, automation organic orders grew year over year while organic sales declined.

Thomas Hook: Sequentially, orders and sales improved, supported by Europe and China. Lastly, automation organic orders grew year-over-year, while organic sales declined.

Sequentially orders and sales improved supported by Europe and China.

Speaker Change: Lastly, automation organic orders grew year over year, while organic sales declined.

Thomas Hook: To close my remarks this morning, much has changed at Barnes in the last two years, and we remain steadfast in executing our three-pillar strategy to drive improved growth, profitability, and returns. Additional actions to lower cost and boost cash generation are an active deployment. We continue to elevate opportunities to optimize your business to unlock the full value of the company.

Speaker Change: To close my remarks. This morning, much has changed it burns in the last two years and we remain steadfast in executing our three pillar strategy to drive improved growth profitability and returns.

Thomas J. Hook: To close my remarks this morning, much has changed at Barnes in the last two years, and we remain steadfast in executing our three-pillar strategy to drive improved growth, profitability, and return, while additional actions to lower costs. Boost Cash Generation is in active deployment. We continue to enhance opportunities to optimize your business, to unlock the full value of the company. With that, I will pass the call to Julie to cover a financial performance, and I'll

Speaker Change: Additional actions to lower costs and boost cash generation are an active deployment, we continue to elevate opportunities to optimize their business to unlock the full value of the company.

Julie Streich: With that, I will pass the call to Julie to cover our financial performance and outlook.

Jewelry: With that I'll pass the call to jewelry to cover our financial performance and outlook.

Julie K. Streich: Thank you, Tom, and good morning, everyone. As a reminder, comparisons are year-over-year unless otherwise noted. Please turn to slide 8. For the second quarter, bills were $382 million, up 13% reported and up 5% organic; foreign exchange was not meaningful in the quarter. Adjusted operating income was $48 million, up 9%, and adjusted operating margin of 12.4% was down 40 basis points. Adjusted EBITDA was $76 million, up 14%, and the adjusted EBITDA margin was 20%, up 20 basis points.

Julie Streich: Thank you, Tom, and good morning, everyone. As a reminder, comparisons are year-over-year, and let's otherwise note it. Please turn to Slide 8. For the second quarter, sales were 382 million, up 13% reported, and up 5% organic. Foreign exchange was not meaningful in the quarter. Adjusted operating income was 48 million, up 9%, and adjusted operating margin of 12.4% was down 40 basis points. Adjusted EBITDA was 76 million, up 14%, and adjusted EBITDA margin was 20%, up 20 basis points. Interest expense was 21 million, versus 7 million a year ago due to higher borrowing given the acquisition of MV Aerospace and higher average interest rates.

Jewelry: Thank you Tom and good morning, everyone.

Jewelry: As a reminder, comparisons are year over year, unless otherwise noted.

Jewelry: Please turn to slide eight.

Jewelry: For the second quarter sales were $382 million up 13% reported and up 5% organic.

Speaker Change: Foreign exchange was not meaningful in the quarter.

Speaker Change: Adjusted operating income was $48 million up 9% and adjusted operating margin of 12, 4% was down 40 basis points.

Speaker Change: Adjusted EBITDA was $76 million up 14% and adjusted EBITDA margin was 20% up 20 basis points.

Speaker Change: Interest expense was $21 million versus $7 million, a year ago due to higher borrowing given the acquisition of and the aerospace and higher average interest rate.

Julie K. Streich: Interest expense was $21 million versus $7 million a year ago due to higher borrowing given the acquisition of MV Aerospace and higher average interest rate. On an adjusted basis, the company's second quarter tax rate was 31 percent.

Julie Streich: On an adjusted basis, the company's second quarter tax rate was 31%. Adjusted net income for share was 37 cents compared to 58 cents a year ago.

Speaker Change: On an adjusted basis, the company's second quarter tax rate was 31%.

Speaker Change: Adjusted net income per share was 37% compared to 58 a year ago.

Julie K. Streich: Adjusted net income per share was $0.37 compared to $0.58 a year ago. Turning to our segment performance, beginning with aerospace on slide nine, for the second quarter, sales were $218 million, up 79% reported and up 8% organic. OEM organic sales increased 1 percent, and aftermarket organic sales increased 19 percent.

Julie Streich: Turning to our segment performance, beginning with Aerospace on slide 9. For the second quarter, sales were 218 million, up 79% reported, and up 8% organic. OEM organic sales increased 1% and aftermarket organic sales increased 19%. As Tom mentioned, lower than expected growth in OEM was due to a combination of external supply chain challenges and select labor efficiency issues. Adjusted operating profit of 32 million was up 56%, benefiting from the contribution of higher organic sales volumes, inclusive of pricing, and the contribution of M.B. Aerospace. These benefits were partially offset by the non-cash amortization of long-term acquired intangibles for the M.B.

Julie K. Streich: As Tom mentioned, lower than expected growth in OEM was due to a combination of external supply chain challenges and select labor efficiency issues. However, adjusted operating profit of $32 million was up 56%, benefiting from the contribution of higher organic sales volumes, inclusive of pricing, and the contribution of MD Aerospace. These benefits were partially offset by the non-cash amortization of long-term acquired intangibles for the MV Aerospace acquisition and lower productivity at certain OEM facilities.

Speaker Change: Turning to our segment performance beginning with aerospace on slide nine.

Speaker Change: For the second quarter sales were $218 million up 79% reported and up 8% organic.

Speaker Change: OEM organic sales increased 1% and aftermarket organic sales increased 19% as Tom mentioned lower than expected growth in OEM with due to a combination of external supply chain challenges and select labor efficiency issues.

Speaker Change: Adjusted operating profit of 32 million was up 56% benefiting from the contribution of higher organic sales volumes inclusive of pricing and the contribution of MB aerospace.

Speaker Change: These benefits were partially offset by the noncash amortization of long term acquired intangibles for the NV aerospace acquisition and lower productivity.

Julie Streich: Aerospace acquisition and lower productivity at certain OEM facilities. Adjusted operating margin declined 220 basis points to 14.8%. Adjusted EBITDA was 50 million, up 64%, benefiting from higher organic sales and the contribution of M.B. Aerospace. Adjusted EBITDA margin was 23.1% versus 25.2% a year ago. As a reminder, the year-over-year change in aerospace EBITDA margin reflects the new mix between OEM, M.R.O. and RSP sales following our acquisition of M.B. Aerospace. In the second quarter, this mixed impact was approximately 230 basis points. Notably, OEM booked to bill was 1.3 times, and OEM backlog increased to 1.5 billion dollars, up 3% from March 2024.

Speaker Change: I am facility.

Speaker Change: Adjusted operating margin declined 220 basis points to 14, 8%.

Julie K. Streich: Adjusted operating margin declined 220 basis points to 14.8 percent; adjusted EBITDA was $50 million, up 64%, benefiting from higher organic sales and the contribution of MB Aerospace. As a reminder, the year-over-year change in aerospace EBITDA margin reflects the new mix between OEM, MRO, and RSP sales following our acquisition of MB Aerospace. In the second quarter, this mixed impact was approximately 230 basis points.

Speaker Change: Adjusted EBITDA was $50 million up 64% benefiting from higher organic sales and the contribution of MB aerospace.

Speaker Change: Adjusted EBITDA margin was 23, 1% versus 25, 2% a year ago.

Speaker Change: As a reminder, the year over year change in aerospace EBITDA margin reflects the new mix between OEM MRO and RSP sales following our acquisition of MD aerospace in.

Speaker Change: In the second quarter. This mix impact was approximately 230 basis points.

Julie K. Streich: Notably, OEM book-to-bill was 1.3 times, and OEM backlog increased to $1.5 billion, up 3% from March 2024. We expect to convert approximately 40% of it into revenue over the next 12 months. As Tom mentioned, we are monitoring lower aircraft production levels to determine the potential impact on our OEM backlog and revenue estimate. That said, we are well positioned to capture increased aftermarket activity.

Speaker Change: Notably OEM book to Bill was one three times and OEM backlog increased to $1 $5 billion up 3% from March 2024.

Julie Streich: We expect to convert approximately 40% to revenue over the next 12 months. As Tom mentioned, we are monitoring lower aircraft production levels to determine the potential impact on our OEM backlog and revenue estimates. That said, we are well positioned to capture increased aftermarket activity. Our well-balanced OEM, M.R.O. portfolio, allowed us to mitigate much of the OEM volume impact on margin performance in the quarter, and we remain well positioned to benefit from ongoing aftermarket growth. Nonetheless, with a heightened expectation for continued OEM softness in the second half, we have proactively taken additional cost production actions and remain focused on managing the things within our control.

Speaker Change: We expect to convert approximately 40% to revenue over the next 12 months.

Speaker Change: Tom mentioned, we are monitoring lower aircraft production levels to determine the potential impact on our OEM backlog and revenue estimate.

Speaker Change: That said, we are well positioned to capture increased aftermarket activity.

Julie K. Streich: Our well-balanced OEM MRO portfolio allowed us to mitigate much of the OEM volume impact on margin performance in the quarter, and we remain well-positioned to benefit from ongoing aftermarket growth. Nonetheless, with a heightened expectation for continued OEM softness in the second half, we have proactively taken additional cost reduction actions and remain focused on managing the things within our control. Moving to industrial results on slide 10, in early April, we closed on the divestiture of the Associated Spring and Hangee businesses, materially reducing our exposure to automotive component manufacturing.

Speaker Change: Our well balanced OEM MRO portfolio allowed us to mitigate much of the OEM volume impact on margin performance in the quarter, and we remain well positioned to benefit from ongoing aftermarket growth.

Speaker Change: Nonetheless, with a heightened expectation for continued OEM softness in the second half we have proactively taken additional cost reduction actions and remain focused on managing the things within our control.

Julie Streich: Moving to industrial results on slide 10.

Speaker Change: Moving to industrial results on slide 10.

Julie Streich: In early April, we closed on the vestiture of the associated spring and hangy businesses, materially reducing our exposure to automotive component manufacturing. The headline price of the transaction was $175 million, and net cash proceeds of approximately $150 million were used to reduce debt. Second quarter sales were $164 million, down 24% on a reported basis due to the sale of associated spring and hangy. Adjusting for this, organic sales were up 3% from a year ago. Molding solution sales increased 8% while force and motion control was approximately flat, and automation was down 6%. Adjusted operating profit was $15 million, down 33%, reflecting the divested businesses, partially offset by positive pricing and Barnes transformation off its cost initiative.

Speaker Change: In early April we closed on the divestiture of the associated spring and hanging businesses materially reducing our exposure to automotive component manufacturing.

Julie K. Streich: The headline price of the transaction was $175 million, and net cash proceeds of approximately $150 million were used to reduce debt. Second quarter sales were $164 million, down 24% on a reported basis due to the sale of Associated Spring and Hange. Adjusting for this, organic sales were up 3% from a year ago. Molding solution sales increased 8% while force and motion control was approximately flat, and automation was down 6%.

Speaker Change: The headline price of the transaction was $175 million and net cash proceeds of approximately $150 million were used to reduce debt.

Speaker Change: Second quarter sales were 164 million down 24% on a reported basis due to the sale of associated spring and hanging.

Speaker Change: Adjusting for this organic sales were up 3% from a year ago.

Speaker Change: Molding solutions sales increased 8%, while force and motion control was approximately flat and automation was down 6%.

Julie K. Streich: Adjusted operating profit was $15 million, down 33%, reflecting the divested businesses, partially offset by positive pricing, and Barnes' transformation office cost initiative. Adjusted operating margin was 9.3%, down 120 basis points. Adjusted EBITDA was $25 million, down 28%, and adjusted EBITDA margin was 15.3%, down 70 basis points. Excluding the divestiture from the prior year comparison, adjusted EBITDA growth was 12%, and adjusted EBITDA margin was up 120 basis points. Of note, while automation orders grew in the quarter, growth was slower than expected.

Speaker Change: Adjusted operating profit was $15 million down, 33%, reflecting the divested businesses, partially offset by positive pricing and barron's transformation office cost initiatives.

Julie Streich: Adjusted Operating Margin was 9.3%, down 120 basis points. Adjusted EBITDA was 25 million, down 28%, and Adjusted EBITDA Margin was 15.3%, down 70 basis points. Excluding the vestiture from the prior year comparison, Adjusted EBITDA growth was 12% and Adjusted EBITDA margin was up 120 basis points.

Adjusted operating margin was nine 3% down 120 basis points.

Speaker Change: Adjusted EBITDA was $25 million down, 28% and adjusted EBITDA margin was 15, 3% down 70 basis points.

Speaker Change: Excluding the divestiture from the prior year comparison, adjusted EBITDA growth was 12% and adjusted EBITA margin was up 120 basis points.

Julie Streich: Of note, while automation orders grew in the quarter, growth was slower than expected. Accordingly, we have trimmed our sales and cash flow forecasts for this business, which, among other factors, resulted in a non-cash impairment charge of approximately $54 million in the second quarter. This charge has been excluded from our adjusted earnings.

Speaker Change: Of note, while automation orders grew in the quarter growth was slower than expected.

Julie K. Streich: Accordingly, we have trimmed our sales and cash flow forecast for this business, which, among other factors, resulted in a non-cash impairment charge of approximately $54 million in the second quarter. This charge has been excluded from our adjusted earnings.

Speaker Change: Accordingly, we have trimmed our sales and cash flow forecast for this business, which among other factors resulted in a non cash impairment charge of approximately $54 million in the second quarter.

Speaker Change: This charge has been excluded from our adjusted earnings.

Julie Streich: Turning to the balance sheet and cash flow on slide 11. Year-to-date cash provided by operating activity was 3.1 million versus 42.5 million a year ago. The decrease was largely due to an increase in working capital, namely inventory, and divestiture-related income tax payments. Capital expenditures of 29.9 million were up 8.2 million versus the first half of 2023 in support of the company's restructuring program and growth investments.

Julie K. Streich: Turning to the balance sheet and cash flow on slide 11, year-to-date cash provided by operating activity was $3.1 million versus $42.5 million a year ago. The decrease was largely due to an increase in working capital, namely inventory, and divestiture-related income tax payments. Capital expenditures of $29.9 million were up $8.2 million versus the first half of 2023 in support of the company's restructuring program and growth investments. After adjusting for the income tax payments related to the sale of Associated Spring and Hanging, free cash flow was negative $14.5 million.

Speaker Change: Turning to the balance sheet and cash flow on slide 11.

Speaker Change: Year to date cash provided by operating activities was $3 1 million versus $42 5 million a year ago.

Speaker Change: Decrease was largely due to an increase in working capital, namely inventory and divestiture related income tax payments.

Speaker Change: Capital expenditures of $29 9 million were up $8 2 million versus the first half of 2023 in support of the company's restructuring program and growth investments.

Julie Streich: After adjusting for the income tax payments related to the sale of associated spring and hanging, free cash flow was negative 14.5 million. Our net debt to EBITDA ratio was 3.48 times at quarter end, exhibiting further deleveraging from 3.62 times at the end of March. We remain focused on achieving a leverage ratio of three times our lower by the end of 2024, and 2.5 times by the end of 2025. Liquidity as of June 30th was 485 million, including 66 million in cash on hand and 419 million of borrowing capacity under our revolving credit facility. There are no major debt maturities until 2028.

Speaker Change: After adjusting for the income tax payments related to the sale of associated spring and hanging free cash flow was negative $14 5 million.

Julie K. Streich: Our net debt to EBITDA ratio was 3.48 times at quarter end, exhibiting further deleveraging from 3.62 times at the end of March. We remain focused on achieving a leverage ratio of three times or lower by the end of 2024 and 2.5 times by the end of 2025. Liquidity as of June 30th was $485 million, including $66 million in cash on hand and $419 million of borrowing capacity under our revolving credit facility. There are no major debt maturities until 2028.

Speaker Change: Our net debt to EBITDA ratio was 3.48 times at quarter end exhibiting further deleveraging from 362 times at the end of March.

Speaker Change: We remain focused on achieving a leverage ratio of three times or lower by the end of 2024 and two five times by the end of 2025.

Speaker Change: Liquidity as of June 30 was $485 million, including $66 million in cash on hand, and $419 million of borrowing capacity under our revolving credit facility.

There are no major debt maturities until 2028.

Julie Streich: Turning to slide 12 and our updated full-year outlook.

Julie K. Streich: Turning to slide 12 and our updated full-year outlook, amid an increasingly challenging backdrop, including recent developments with OEM customers, we believe it is prudent to reduce our annual guidance. We now expect total sales growth of 10% to 12%, down from 13% to 16%, and organic sales growth of 4% to 6% versus 5% to 8%. We expect aerospace sales to grow approximately 50%, inclusive of a full year contribution from MD Aerospace, with organic sales growth in the low double digits. For industrial, we continue to expect total sales to be down in the mid-teens given the divestiture. However, excluding this impact, we expect sales to grow in the low single digits.

Speaker Change: Turning to slide 12, and our updated full year outlook.

Speaker Change: Amid an increasingly challenging backdrop, including recent developments with OEM customers. We believe it is prudent to reduce our annual guidance.

Julie Streich: Amid an increasingly challenging backdrop, including recent developments with OEM customers, we believe it is prudent to reduce our annual guidance. We now expect total sales growth of 10% to 12%, down from 13% to 16%, and organic sales growth of 4% to 6% versus 5% to 8%. We expect aerospace sales to grow approximately 50%, inclusive of a full-year contribution from early aerospace, with organic sales growth in the low-double digits. For industrial, we continue to expect total sales to be down mid-teens, given the divestiture. Excluding this impact, we expect sales to grow in the low single digits.

Speaker Change: We now expect total sales growth of 10% to 12% down from 13% to 16% and organic sales growth of 4% to 6% versus 5% to 8%.

Speaker Change: We expect aerospace sales to grow approximately 50% inclusive of a full year contribution from MB aerospace with organic sales growth in the low double digits.

Speaker Change: For industrial we continue to expect total sales to be down mid teens, given the divestiture. Excluding this impact we expect sales to grow in the low single digits.

Julie Streich: Adjusted operating margin expectations for total bonds of between 12 and 14%, an industrial of between 8.5 to 10% are unchanged. For aerospace, we now expect adjusted operating margin of 15 and a half to 15 and a half percent, of 50 basis points on each end, due to a higher mix of aftermarket sales. Full-year depreciation and amortization expense is now expected to be approximately 120 million versus 130 million previously, primarily driven by the timing of capital expenditures and sales-related amortization. Adjusted EBITDA margin guidance is unchanged in the range of 20% to 22%. This reflects aerospace adjusted EBITDA margin of 24% to 25% and industrial of 15% to 16%.

Julie K. Streich: Adjusted operating margin expectations for total barns of between 12 and 14 percent and industrial of between eight and a half to ten percent are unchanged. For aerospace, we now expect adjusted operating margins of 15.5 to 16.5%, with 50 basis points on each end due to a higher mix of aftermarket sales. Full-year depreciation and amortization expense is now expected to be approximately $120 million versus $130 million previously, primarily driven by the timing of capital expenditures and sales-related amortization.

Speaker Change: Adjusted operating margin expectations for total Barnes of between 12, and 14% in industrial of between eight and a half the 10% or unchanged.

Speaker Change: For aerospace, we now expect adjusted operating margin of 15, 5% to 16.5% a 50 basis point on each end due to a higher mix of aftermarket sales.

Speaker Change: Full year depreciation and amortization expense is now expected to be approximately $120 million versus $130 million previously primarily driven by the timing of capital expenditures and sales related amortization.

Julie K. Streich: Adjusted EBITDA margin guidance is unchanged in the range of 20% to 22%. This reflects aerospace adjusted EBITDA margin of 24 to 25 percent and industrial of 15 to 16 percent. We expect adjusted EPS of between $1.55 and $1.75, down 7 cents at the midpoint versus our April outlook. On slide 13 of our earnings presentation, we have included additional 2024 guidance assumptions for modeling purposes.

Speaker Change: And EBITDA margin guidance is unchanged in the range of 20% to 22%.

Speaker Change: This reflects aerospace adjusted EBITDA margin of 24%, 25% and industrial of 15% to 16%.

Julie Streich: We expect adjusted EPS of between $1.55 and $1.75, down 7 cents at the midpoint versus our April outlook. On slide 13 of our earnings presentation, we have included additional 2024 guidance assumptions for modeling purposes.

Speaker Change: We expect adjusted EPS of between $1 55, and $1 75 down seven cents at the midpoint versus our April outlook.

Speaker Change: On slide 13 of our earnings presentation. We have included additional 2024, our guidance assumptions for modeling purposes.

Julie Streich: In closing, while our outlook for the aerospace OEM performance is tempered in the second half of the year, the longer-term outlook for the sector remains robust. We are energized by the strategic transformation of the business. Through the acquisition of MBE Aerospace and divestiture of associated spring and hanging, Barnes has pivoted to a more strategic and focused player in the aerospace industry. Discipline developed through our emphasis on core business execution has created enduring business efficiency and revitalized a continuous improvement mindset. We are only at the midpoint of our journey and already see the positive impact of our three-pillar strategy driving shareholder value.

Speaker Change: In closing, while our outlook for aerospace OEM performance has tempered in the second half of the year the longer term outlook for this sector remains robust.

Operator: In closing, while our outlook for aerospace OEM performance is tempered for the second half of the year, the longer-term outlook for the sector remains robust, and we are energized by the strategic transformation of the business. Through the acquisition of Embry Aerospace and divestiture of Associated Spring and Hangey, Barnes has pivoted to become a more strategic and focused player in the aerospace industry. Discipline developed through our emphasis on core business execution has created enduring business efficiency and revitalized a continuous improvement mindset. We are only at the midpoint of our journey and already see the positive impact of our three-pillar strategy driving shareholder value. Operator, we will now open the call to questions.

Speaker Change: We are energized by the strategic transformation of the business.

Speaker Change: Through the acquisition of <unk> aerospace and divestiture of associated spring and hanging fire has pivoted to a more strategic and focused player in the aerospace industry.

Speaker Change: Disciplined developed through our emphasis on core business execution has created enduring business efficiency and revitalized our continuous improvement mindset.

We are only at the midpoint of our journey and already see the positive impact of our three pillar strategy driving shareholder value.

Operator: Operator, we will now open the call for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw that question, again, press star one.

Speaker Change: Operator, we will now open the call for questions.

Speaker Change: Thank you we will now begin the question and answer session. He would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue and if you would like to withdraw that question again Press Star one on your first question comes from Gregory Dahlberg with Wolfe Research. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw that question, again, press star 1. The first question comes from Gregory Dahlberg with Wolf Research. Please go ahead.

Gregory Dahlberg: Your first question comes from Gregory Dahlberg with Wolf Research.

Gregory Dahlberg: Please go ahead.

Gregory Dahlberg: Hi, good morning everyone. This is Greg Dahlberg on behalf of Myles Walton.

Speaker Change: Hi, Good morning, everyone. This is Greg dahlberg on for Myles Walton.

Gregory Dahlberg: Hi, good morning, everyone. This is Greg Dahlberg on from Myles Walden. Good morning.

Gregory Dahlberg: Morning. Hey, Greg. Morning. Good morning.

Speaker Change: Good morning, Greg.

Julie K. Streich: Good morning, maybe this one's for Julie. I think you mentioned in your prepared remarks that I was just hoping to dig a little bit more into the aero margins in 2Q. I know you mentioned the mix dynamics. Just given the higher aftermarket lower OEA, I would have expected better margins. So can you just dig a little bit deeper?

Greg Dahlberg: Maybe this one is for Julie I think you mentioned in your prepared remarks, I was just hoping to dig a little bit more into the Aero margins in <unk> I know you mentioned the mixed dynamics just given the higher aftermarket Laura you would've expected better margins. So can you just dig into that deeper.

Julie Streich: Maybe this one's for Julie. I think you mentioned your prepare remarks. I was just hoping to dig a little bit more into the aerial margins into you. I know you mentioned the mixed dynamics. Just given the higher aftermarket lower, we would have expected better margins, so can you just dig into all the deeper? So happy to do that. Yes, we definitely had the benefit of a more robust sales profile in the aftermarket segment. However, on the OEM side, as I think I may have mentioned in the remarks, we did see productivity challenges as a result of fluctuations in demand.

Okay.

Julie K. Streich: I am so happy to do that. Yes, we definitely had the benefit of a more robust sales profile in the aftermarket segment. However, on the OEM side, as I think I may have mentioned in the remarks, we did see productivity challenges as a result of fluctuations in demand. As you can expect, there are inefficiencies that come from starting and stopping lines, from keeping people employed so that we can meet customer needs. And we're seeing the impact of that flow through on OEMs, impacting the overall margin position.

Speaker Change: Happy to do that yes, we definitely had the benefit of a more robust.

Speaker Change: Sales profile in the aftermarket segment. However on the OEM side is I think.

Speaker Change: May have mentioned in the remarks, we did see productivity challenges as a result of fluctuations in demand as you as you can expect there's inefficiencies that come from starting and stopping line from keeping people employed so that we can meet customer needs and we're seeing the impacts of that flow through on <unk>.

Julie Streich: As you can expect, there's inefficiencies that come from starting and stopping lines, from keeping people employed so that we can meet customer needs. And we're seeing the impact of that flow through on OEM, impacting the overall margin position.

Speaker Change: Impacting the overall margin position.

Gregory Dahlberg: Got it. That makes sense.

Speaker Change: Got it that makes sense.

Julie K. Streich: Got it, that makes sense. And then I guess just a quick cleanup on cash. So just given cash conversion for this year looks to be a little bit below 100. I guess, how do you think about that for 2025? Is there a path to return to 100% or exceed it?

Julie Streich: And then I guess it's a quick cleanup on cash. So just given cash conversion for this year looks a little bit below 100. I guess, how do you think about that for 2025? Is there a path to return to 100% or exceed? While we tend not to provide forward-looking guidance, I would offer that the blip we're seeing this year in our free cash flow is directly correlated with an increase in working capital, namely inventory. That's coming from the disruptions we're seeing in the OEM space, where there's a leg between when we can cut off supplies and inventory coming in and when the customers are changing orders.

Speaker Change: And then I guess, just a quick cleanup on cash.

Speaker Change: Just given cash conversion for this year looks to be a little bit below 100, I guess, how do you think about that for 2025 is there a path to return to 100% or exceed.

Speaker Change: Well, we tend not to provide forward looking guidance I would offer that the blip. We're seeing this year in our free cash flow is directly correlated with an increase in working capital, namely inventory that's coming from the disruptions we're seeing in the OEM space, where there is a lag.

Julie K. Streich: While we tend not to provide forward-looking guidance, I would offer that the blip we're seeing this year in our free cash flow is directly correlated with an increase in working capital, namely inventory, that's coming from the disruptions we're seeing in the OEM space, where there's a lag between when we can cut off supplies and inventory coming in and when customers are changing orders. So, all that said, there's no reason we should not be back to our normal cash conversion going forward.

Speaker Change: Clean when we can cut off supply and inventory coming in and when the customers are changing orders. So all that said there is no reason, we should not be back to our normal freak are cash generative cash conversion, sorry cash conversion going forward.

Julie Streich: So all that said, there's no reason. We should not be back to our normal free cash conversion, sorry, cash conversion going forward.

Julie K. Streich: Got it. Thank you so much.

Gregory Dahlberg: Got it. Thank you so much.

Speaker Change: Got it thank you so much.

Matt Summerville: Your next question comes from Matt Summerville with D.A. Davidson. Please go ahead. Thanks a couple questions. Just getting back to the aerospace OEM side of things. You had been having your own internal productivity challenges prior to, I think, what you're describing this quarter. So I'm trying to understand how much of the OEM outlook change is more Barnes' internal sort of issues versus the market itself and on the market. Are you having issues procuring material, procuring things like titanium and forging and things like that. If you could expand on all of that, that'd be helpful, and then I have a follow-up.

Speaker Change: Your next question comes from Matt Summerville with D. A Davidson. Please go ahead.

Operator: Your next question comes from Matt Summerville with D.A. Davidson. Please go ahead.

Matt J. Summerville: Thanks. A couple questions. Just getting back to the aerospace OEM side of things, you had been having your own internal productivity challenges prior to, I think, what you're describing this quarter. So I'm trying to understand how much of the OEM outlook change is more Barnes internal sort of issues versus the market itself. And in the market, are you having issues procuring materials, procuring things like titanium and forgings and things like that? If you could expand on all of that, that'd be helpful. And then I have a follow-up question.

Matt J. Summerville: Thanks couple.

Matt J. Summerville: Couple of questions just getting back to the aerospace OEM side of things you had been having your own internal productivity challenges prior to I think what youre, describing this quarter. So I'm trying to understand how much of the OEM outlook change is more barnes internal sort of issue.

Speaker Change: <unk> versus the market itself and on the market are you having issues procuring material procuring things like titanium forgings and things like that if you could expand on all of that that'd be helpful. And then I have a follow up.

Thomas Hook: Yeah, certain that is. Let me first, on the OEM side, on productivity, draw distinction that I think is very important. We have had a few facilities that have been productivity issues of getting people rehired, retrained, and be able to get up to the output levels we want to support our OEM customers. We've done a great job of investing to fix those productivity issues. What we have right now is what I would call the labor efficiency issue. After bringing all these teams in and all our facilities to maintain the rate output to support our customers, those short term rates have come down; take rates have come down.

Speaker Change: Yeah sort of met is let me first on the OEM side on productivity draw a distinction that I think is very important we have had a few facilities that have been productivity issues of getting people rehired retrained and be able to get up to the output levels, we want to support <unk>.

Thomas J. Hook: Yeah, certain that is. First, on the OEM side of productivity, I want to draw a distinction that I think is very important. We have had a few facilities that have been productivity issues of getting people rehired, retrained, and able to get up to the output levels we want to support our OEM customers. We've done a great job of investing to fix those productivity issues. What we have right now is what I would call a labor efficiency issue.

Speaker Change: Customers, we've done a great job of investing to fix those productivity issues. What we have right now is what I would call the labor efficiency issue after bringing all these teams and at all our facilities to maintain the right output to support our customers.

Thomas J. Hook: After bringing all these teams in at all our facilities to maintain the right output to support our customers, those short-term rates have come down, the take rates have come down, but the long-term rates have held up. And that is an input problem.

Speaker Change: Those short term rates have come down the take rates have come down, but the long term rates have held up and it is an input problem, we have plenty of capacity and capability in our plants. We don't see really the productivity of that workforce, but we made a conscious decision to maintain that workforce.

Thomas Hook: But the long-term rates have held up, and it is an input problem. We have plenty capacity and capability in our plants. We don't see really the productivity that workforce, but we made a conscious decision to maintain that workforce engaged, not fitting out our labor or capacity waiting for the return for those ramp that will come after this temporary repositioning of output. That's an important because if you look at the inputs right now, which is really the rate limiting stuff from castings for jigs and raw materials, but not really titanium because we've got plenty of buffer stock on titanium.

Thomas J. Hook: We have plenty of capacity and capability in our plants; we don't really see the productivity of that workforce, but we've made a conscious decision to keep that workforce engaged, not thinning out our labor or our capacity, waiting for the return for those ramps that will come after this temporary repositioning of output. That's important because if you look at the inputs right now, which is really the rate-limiting step from castings, forgings, and raw materials, but not really titanium because we've got plenty of buffer stock on titanium; it's more other components that would be more rate-limiting there. You can see a shift because of the end market shift, particularly between the mix of Airbus and Boeing. What's happening is that what our input castings and foragings are coming from are shifting as well towards Airbus, higher rate, lower Boeing. That shift takes some time for that input to adjust.

Speaker Change: Gauged not fitting out our labor or capacity waiting for the return for those ramp that will come after this temporary repositioning of output.

Speaker Change: That's an important because.

Speaker Change: If you look at the inputs right now, which is really the rate limiting step for castings, forgings and raw materials, but not really titanium because we've got plenty of buffer stock on titanium it's more other.

Thomas Hook: It's more other components that would be more rate limiting there. You can see a shift because of the end market shift, particularly between the mix of Airbus and Boeing. What's happening is that with our input castings in for jigs are coming, our shifting as well towards Air Bus higher rate lower Boeing. That should take some time for that input to adjust. We're consciously not reducing labor and capability within the plan. So that's where the labor efficiency issue comes in. We want to be on the ability to re-ramp with our customers when they up over the next 24 to 25 time frame as they come back up to the rates for the end market.

Speaker Change: Other components that would be more rate limiting there is you can see a shift because of the end market shifts.

Speaker Change: Between the mix of Airbus and Boeing.

Speaker Change: Sampling is is that.

Our input castings and forgings are coming are shifting as well towards Airbus higher rate lower Boeing that should take some time for that and then put to adjust we're consciously not reducing labor and capability within the plant. So that's where the labor efficiency issue comes because we want to be on the ability to read.

Thomas J. Hook: We're consciously not reducing labor and capability within the plan. So that's where the labor efficiency issue comes in, because we want to have the ability to re-ramp with our customers when they, over the next 24 to 25 timeframe, come back up to the rates for the end market. We know that we have the offset to the aftermarket to buffer that, and we're positioned to handle it that way. So the supply chain is the rate-limiting step right now for us.

Speaker Change: Ramp with our customers.

Speaker Change: Over the next 24 to 25 timeframe as they come back up to the rates for the end market.

Thomas Hook: We know that we have the offset to the aftermarket to buffer that, and we're positioned to handle it that way. So mark the supply chain is the rate limiting stuff right now for us. And that because that makes a shifting, it's going to take a quarter for that to absorb. And we're not the constraint over the course of this period of time, are going forward. And we plan on making sure we can maintain pace with whatever the output rates and whatever the mixes for our customers, but it is a short-term pain because we do have to take in castings and for jigs where we're tempering output demand.

Speaker Change: We have the offset to the aftermarket to buffer that.

Speaker Change: <unk> to handle it that way.

Speaker Change: So.

Speaker Change: Mark the supply chain is the rate limiting step right now for us.

Thomas J. Hook: And because that mix is shifting, it's going to take a quarter or two for that to absorb, and we're not the constraint over the course of this period of time or going forward. And we plan on making sure we can maintain pace with whatever the output rates or whatever the mix is for our customers. But it is a short-term pain because we do have to take in castings and forgings where we're tempering output demand. And we will end up having to be patient to wait for the correct castings, forgings, and raw materials to come in for the higher rates that go to the end market.

Speaker Change: Because that makes the shifting that's going to take a quarter or two for them to absorb and we're not the constraint over the course of this period of time or going forward.

Speaker Change: We plan on making sure we can maintain pace with whatever the output rates or whatever the mixes for our customers, but it is a.

Speaker Change: The short term pain, because we do have to take in castings, and forgings, where we're tempering output demand.

Thomas Hook: And we will end up having to be patient to wait for the correct casting for jigs and raw materials to come in for the higher rates to go to the end market.

Speaker Change: We will end up having to be patient to wait for the correct castings forgings and raw materials to come in for the higher rates that go to the end market.

Speaker Change: Okay.

Speaker Change: Got it and then as a follow up.

Thomas J. Hook: Got it. And then, as a follow-up, I just want to understand a little more Tom about where Barnes is at in terms of the strategic thinking for the business and how Additional portfolio shaping may evolve from here and, you know, putting that in context of some of the reports out that you've indeed hired a financial advisor to evaluate strategic options for the company. Can you touch on that?

Matt Summerville: I just want to understand a little more, Tom, about where Barnes is at in terms of the strategic thinking on the business and how additional portfolio shaping may evolve from here, and putting that in context of some of the reports out that you've indeed hired a financial advisor to evaluate strategic options for the company.

Speaker Change: I wanted to understand a little more Tom about where Barnes.

Tom: In terms of the strategic thinking on the business and how.

Tom: Additional portfolio shaping may evolve from here.

Putting that in context of some of the reports out that you are indeed hired.

<unk> financial adviser to evaluate strategic options for the company can you touch on that please.

Thomas Hook: Can you touch on that, please? Absolutely, Matt. As you know, last year, after we launched the operational, you know, vector, you know, we call growth vectors, the three pillar strategy that we spoke to in my prepared remarks. We've been rolling that out an offer year and a half, or about half a week through that journey, and we've accomplished a great deal. We also have obviously, over the past year, deeply looked at underlying strategic optionality within the portfolio, and you've already seen some of these things being implemented. The acquisition of NBRO space, which we enabled off the recapitalization of the company.

Thomas J. Hook: Absolutely, Matt. As you know, last year, after we launched the operational, you know, vector, you know, what we call growth vectors, the three-pillar strategy that we spoke about in my prepared remarks. We've been rolling that out now for a year and a half, and we're about halfway through that journey, and we've accomplished a great deal. We have also, obviously, deeply looked at underlying strategic optionality within the portfolio.

Tom: Absolutely Matt is as you know last year.

Tom: After we launched the operational vector that's what we call growth vectors. The three pillar strategy that we spoke to in my prepared remarks.

Tom: We've been rolling that out now for a year and a half or about halfway through that journey and we've accomplished a great deal.

Tom: We also have obviously over the past year deeply look the underlying strategic optionality within the portfolio and you've already seen some of these things being implemented the acquisition all of them be aerospace would show we enabled off the recapitalization of the company. We've divested of the hanging business. We've divested of the associated spring business, we are very actively.

Thomas J. Hook: And you've already seen some of these things being implemented, the acquisition of MP Aerospace, which we enabled through the recapitalization of the company, we've divested of the hanging business, we've divested of the associated spring business. We are very actively looking at what the portfolio should look like prospectively, and how it best drives enterprise value. And we're looking at the operational and strategic options. We have nothing to communicate at this time, but we're considering everything.

Thomas Hook: We've divested the hangy business; we've divested the associated spring business. We are very actively looking at what the portfolio should look like prospectively, how it best drives enterprise value, and we're looking at the operational and strategic optionality we have. Nothing communicated this time, but we're considering everything, and as you know, we've done quite a bit to operationally and strategically already transform the company.

Tom: Looking at.

Tom: What the portfolio should look like prospectively, how it best drives enterprise value and we're looking at the operational and strategic Optionality as we have nothing to communicate at this time, but we're considering everything.

Thomas J. Hook: And as you know, we've already done quite a bit to operationally and strategically transform the company. We're only halfway through this journey. So you can expect that there'll be more to communicate, but just nothing at this time, really, to update you.

Tom: And as you know we've done a quite a bit to operationally at strategic already transformed the company and we're only halfway through this journey. So you can expect that there'll be more to communicate but nothing at this time really to update you on.

Matt Summerville: We're only halfway through this journey, so you can expect that there'll be more to communicate, but just nothing at this time really to update you on. Got it. Thanks. I'll get back in here.

Tom: Okay.

Thomas J. Hook: Got it. Thanks, everybody.

Speaker Change: Got it thanks, I'll get back in queue.

Samuel Struhsaker: Welcome. Here, next question comes from the line of Sam Astruz-Saker with Truvist Securities. Please go ahead.

Tom: Hello.

Speaker Change: Your next question comes from the line of Sam is truth seeker with <unk> Securities. Please go ahead.

Operator: Your next question comes from the line of Sam Strusaker with Truist Securities. Please go ahead.

Samuel Struhsaker: Hi, good morning guys, on from my Tremole.

Speaker Change: Hi, Good morning, guys on for Mike.

Sam Strusaker: Hi, good morning, guys. I'm Mike Ciarmoli. So I guess to begin, I was just hoping you could maybe give a little bit more color on what is giving you the confidence to maintain the industrial guide for the year, just kind of given some of the downward revisions we're seeing across that sector.

Thomas Hook: So I guess to begin, I was just hoping you guys maybe get a little bit more color on what is giving you the confidence to maintain the industrial guide for the year, just kind of giving some of the downward provisions we're seeing across that sector. Yeah, Sam, fundamentally, as you know, we've taken a look at the entire industrial portfolio last year, and it's been making some major investments in transforming, you know, through the Integrate Consolidate and Rationalized. We each of the management teams within industrial has now been reconfigured, streamlined, and delayed, and they're in place.

Speaker Change: So just to begin I was just hoping you guys to maybe get a little bit more color on what is giving you the confidence to maintain the industrial guide for the year, just kind of given some of the downward revisions were seeing.

Speaker Change: Across that sector.

Speaker Change: Yeah, Sam fundamentally as you know we've taken a look at the entire industrial portfolio last year and have been making some major investments in transforming.

Thomas J. Hook: Yeah, Sam, fundamentally, as you know, we took a look at the entire industrial portfolio last year and have been making some major investments in transforming you know, through the integrate, consolidate, rationalize. We, each of the management teams within Industrial have now been reconfigured, streamlined, and de-layered, and they're in place. They have their, what I would call, simplified and direct strategies that are under a set of, you know, business-specific themes that they're implementing, and while we started that in the molding solution business at the end of last year, we really only got into the first quarter and second quarter of this year with the automation and the, what we call force and motion control businesses now. So those teams are in place.

Through the integrate consolidated rationalized.

Speaker Change: Each of the management teams within industrial has now been reconfigured streamlined and de layered and they're in place. They have there, but I would call simplified indirect strategies that are under a set of.

Thomas Hook: They have their, what I would call simplified and direct strategies that are under a set of, you know, business specific themes that they're implementing. And while we started that in the molding solution business at the end of last year, you've really only got into the first quarter and second quarter of this year, the automation and the, what we call force and motion control businesses now. So those teams are in place. We have a lot of momentum behind the BTO initiatives. We now have better visibility to our sales funnels across those businesses.

Speaker Change: Business specific themes that they're implementing.

Speaker Change: And while we started that in the molding solutions business at the end of last year, we've really only got into the first quarter and second quarter of this year, the automation and the what we call force and motion control businesses now so those teams are in place.

Thomas J. Hook: We have a lot of momentum behind the BTO initiatives. We now have better visibility into our sales funnels across those businesses. And while we're not expecting really great market conditions, we've digested a lot of the realities of the markets. We've launched some new products in businesses like Molding Solutions, and it's picking up some momentum where we've lost some market share, particularly in the hot runner side of the business, which is the short cycle side of the business.

Speaker Change: We have a lot of momentum behind the bto initiatives.

Speaker Change: We now have better visibility to our sales funnels across those businesses and while we're not expecting really great market conditions, we've digested a lot of the realities of the markets.

Thomas Hook: And while we're not expecting really great market conditions, we digested a lot of the realities of the markets. We've launched some new products in businesses like molding solutions. It's picking up some momentum where we've lost some market share, particularly in the hot runner side of the business, which is the short cycle side of the business. And we've got confidence that those strategies are working, despite the tough market conditions. And we have confidence that they're going to continue to be deployed effectively by those new teams. And we're going to be able to meet what expectations we've laid out.

Speaker Change: We've launched some new products and businesses like molding solutions, it's picking up some momentum where we've lost some market share, particularly in the hot runner side of the business, which is the short cycle side of the business and we've got confidence that those strategies are working despite the tough market conditions, and we have confidence that they're going to continue to be deployed effectively by the.

Thomas J. Hook: And we've got confidence that those strategies are working, despite the tough market conditions, and we have confidence that they're going to continue to be deployed effectively by those new teams. And we're going to be able to meet the expectations we've laid out.

Speaker Change: New teams and we're going to be able to meet what expectations we've laid out.

Samuel Struhsaker: Great. Thank you.

Speaker Change: Great. Thank you and then turning to more of the Aero OEM side could you guys give any details or kind of specifically what rates you are producing two now for Boeing and Airbus renew the platforms.

Sam Strusaker: Great, thank you. And then turning to more the Aero OEM side, could you guys give any detail on kind of specifically what rates you are producing now for Boeing and Airbus? We're going to do the platforms.

Samuel Struhsaker: And then turning to more the Aero OEM side, could you guys give me a detail to kind of specifically what rates you are producing to now for Boeing and Airbus? Any other platforms? Sam, that's an excellent question.

Speaker Change: Sam that's an excellent question and one that I wish I could actually understand myself is that just coming back from Farnborough visit.

Thomas J. Hook: Sam, that's an excellent question and one that I wish I could actually understand myself. After coming back from Farnborough, there's a great deal of what I would call uncertainty and dynamics in what the rate is going to be in 24 into 25 and when they would get up to the what I would call stated rate of, you know, the kind of, you know, 75 on the Boeing side and 55 on the Airbus side. So I think those output rates can't be achieved right now.

Thomas Hook: And one that I wish I could actually understand myself is after coming back from to Barnboro, there's a great deal of what I would call uncertainty and dynamics in what the rate is going to be in 24 and 25. And when they would get up to the what I would call stated rate of, you know, the, you know, kind of 75, you know, to 55 on the Boeing side. So I think those output rates can't be achieved right now. So we're consciously making some, albeit painful, choices on to, you know, have pain and working capital and labor inefficiency to make sure we can maintain synchrony with our, you know, OEM customers.

Speaker Change: This is a great deal of what I would call uncertainty and dynamics in what the rate is going to be in 'twenty four 'twenty five and when they would get up to the what I would call stated rate of.

Speaker Change: The kind of.

Speaker Change: 75.

Speaker Change: <unk> 55 on the Boeing side, So I think those output rates, we can't be achieved right now so we're consciously making some albeit painful choices too.

Thomas J. Hook: So we're consciously making some, albeit painful, choices to have pain in working capital and labor inefficiency to make sure we can maintain synchrony with our, you know, OEM customers. It's clear it's going to take over a year in order to get up to the rates that the end of the market really is looking for. We know we're going to get mitigation on the aftermarket side, and we've already seen that.

Speaker Change: Pain in working capital and labor inefficiency and make sure we can maintain synchrony with our OEM customers.

Thomas Hook: It's clear it's going to take over a year in order to get up to the rates that the end of market really is looking for. We know we're going to get mitigation to the aftermarket side, and we've already seen that that's already reflected in our guidance. And there's somewhat of a short-term decision here to kind of maintain overcapacity and over capability and some level of labor inefficiency.

Speaker Change: It's going to take.

Speaker Change: Over a year in order to get up to the rates for the end market really is looking for we know we're going to get mitigation to the aftermarket side, we've already seen that that's already reflected in our guidance, but there is somewhat of a short term decision here to kind of maintain.

Thomas J. Hook: That's already reflected in our guidance, and there's somewhat of a short-term decision here to kind of maintain overcapacity and overcapability and some level of labor inefficiency when we are over the second half of this year. We think it's the right thing to do.

Speaker Change: Maintain overcapacity in over capability and some level of labor inefficiency.

Thomas Hook: When we are over the second half of this year, we think it's the right thing to do is an investment in our customer relationship and our capability. And we think it really, at the end of the day, that investments going to pay off is the rebrand occurs. We also know that we can take some of those employees on the OEM side and we can move over to aftermarket facilities in the short term for labor support given the heavy demand on that side. So there's offsets we can do, but it's kind of a conscious investment decision.

Speaker Change: When we are over the second half of this year, we think it's the right thing to do as an investment in our customer relationship and our capability and we think it really at the end of the day that investment is going to pay off as the re ramp occurs.

Thomas J. Hook: It's an investment in our customer relationship and our capability, and we think, really, at the end of the day, that investment is going to pay off as the re-ramp occurs. We also know that we can take some of those employees on the OE side, and we can move them over to aftermarket facilities in the short term for labor support, given the heavy demand on that side. So there are offsets we can do, but it's kind of a conscious investment decision.

Thomas J. Hook: It's going to be painful as the industry kind of re-normalizes. It's paced absolutely by casters, forgers, and raw materials inputs due to the shifting end market mix. And that shift; we feel we have to make that investment to stay within balance. So I feel that right now we're in synchronization with our customers, literally in daily and weekly communication with them on this, almost order by order, but I think it's going to be a tough period of time for the entire supply chain across the industry to get back on the rate, and we will not, and we currently are not, a rate-limiting step in that.

Speaker Change: I know that we can take some of those employees on the OE side can we can move them over to aftermarket facilities in the short term for labor support given the heavy demand on that side. So there's offsets we can do.

Speaker Change: But it's kind of a conscious investment decision.

Thomas Hook: It's going to be painful as the industry kind of normalizes. It's paced absolutely by casters, forgers, and raw materials, and puts due to the shifting and market next. And that shift we feel we have to make that investment to stay within balance. So I feel that right now that we're synchronization with our customers, literally and daily and weekly communication with them on this almost ordered by order.

Speaker Change: Gonna be painful as the industry kind of read normalizes, it's paced absolutely by casters forgers in raw materials inputs due to the shifting end market mix.

Speaker Change: That shift we feel we have to make that investment to stay within balance.

Speaker Change: I feel that the right now that we're in.

Speaker Change: Securitization with our customers literally in daily and weekly communications with them on this almost quarter by order but.

Thomas Hook: I think it's going to be a tough period of time for the entire supply chain across the industry to get back up the rate, and we will not, and we currently are not a rate limiting step in that. So we're going to maintain ourselves one step ahead. We invested too much, and it worked too hard to make sure that we're in this position. And while it's painful to be in this place right now, we're going to make sure that we're not a laggard and we could be a leader because we think it helps us in the aftermarket side.

Speaker Change: But I think it's going to be a tough period of time for the entire supply chain across the industry to get back up the rate and we will not and we currently are not a.

Speaker Change: Great limiting step in that so we're going to maintain ourselves one step ahead.

Thomas J. Hook: So we're going to keep ourselves one step ahead. We've invested too much and have worked too hard to make sure that we're in this position, and while it's painful to be in this place right now, we're going to make sure that we're not a laggard and we can be a leader because we think it helps us on the aftermarket side, and when there is a recovery on the OE side, it's going to help us there too.

Speaker Change: Invested too much into work too hard to make sure that we're in this position and while it's painful to be in this place right now.

Speaker Change: We're going to make sure that we're not a laggard and we can be a leader because we think it helps us in the aftermarket side and when the recovery on the OE side. If you can help us there too.

Samuel Struhsaker: And when the recovery and the OEM side, it's going to help us there too. Make sense. I appreciate that.

Thomas J. Hook: It makes sense. I appreciate that. Thanks, guys.

Speaker Change: I appreciate that thanks, guys.

Samuel Struhsaker: Thanks, guys.

Speaker Change: Okay.

Christopher Glynn: Your next question comes from the line of Christopher Glenn with Oppenheimer. Please go ahead. Thanks.

Operator: Your next question comes from the line by Christopher Glynn with Oppenheimer. Please go ahead.

Speaker Change: Your next question comes from the line of Christopher Glynn with Oppenheimer. Please go ahead.

Christopher D. Glynn: Thanks. We wanted to start with just a clarification on you not being a rate limiter, limiting input in the Aero OEM industry, Tom. That suggests that the orders that the customers want from you right now are a reflection of the broad backdrop for forgers or casters, or are there some specific forgers and casters you source from that are gating you, but you're kind of putting the issue on that rather than what you're able to do in your factories if and when you get these forgings and castings?

Christopher D. Glynn: Thanks wanted to start with just a clarification on you are not being there.

Christopher Glynn: We want to start with just a clarification on you not being a rate limiter. We're limiting input in the OEM industry, Tom.

Speaker Change: Limiter limiting and put it in the Aero OEM industry Tom.

Christopher Glynn: That suggests that the orders that the customers want from you right now is the reflection of the broad backdrop for forders or casters or are there some specific forders and casters you source from that are gating you but you're kind of putting the issue on that rather than what you're able to do in your factories if and when you get these forging the casters. Yeah, let me try to explain it this way, Chris. It's an excellent question. It's really the heart of the matter here is, you know, we have an in-market signal that comes, you know, six to 12 months in advance of what our demand patterns are.

Speaker Change: That suggests that the orders that the customers want from you right now is the reflection of the broad backdrop for forgers or casters.

Speaker Change: Or are there some specific forgers and casters you source from.

Speaker Change: That are gating, you, but youre kind of putting the issue on that rather than.

What you are able to do in your factories, if and when you get these forgings and castings.

Thomas J. Hook: Yeah, let me try to explain it this way, Chris. It's an excellent question. It's really the heart of the matter here.

Speaker Change: Yes, let me try to explain it this way Chris that's an excellent question and that's really the heart of the matter here as you know.

Thomas J. Hook: You know, we have an end market signal that comes, you know, six to 12 months in advance of what our demand patterns are. We plan our production around that. We have the ability to flex with the customer in the short term to send them what completed assemblies and components that we've made. And if their shift changes because of their end demand, we will end up having capacity and having produced and working capital raw materials, products that they don't have the demand for yet, and they'll have over demand from the supply chain that they don't, and we don't have castings and forgings for. So there's an asymmetry, an equilibrium imbalance there.

Speaker Change: We have an end market signal that it comes.

Speaker Change: Six months to 12 months in advance of what our demand patterns are re plan our production around that we have.

Thomas Hook: We plan our production around that. We have the ability to flexible customer in the short term to send them what completed assemblies and components that we've made. And if their shift changes because of their demand, we will end up having capacity and having produced and working capital on materials products that they don't have the demand for yet. And they'll have over demand from the supply chain that they don't we don't have to have things for. So there's an asymmetry and equilibrium in balance there. We have plenty of machining capacity and plenty of, you know, special process capacity to meet whatever the mixes. We also have the employees to do that as well.

Speaker Change: The ability to flex with the customer in the short term to send them what completed assemblies and components that we've made.

Speaker Change: And if their shift changes because of their end demand.

Speaker Change: We'll end up having capacity and having produced in working capital and raw materials.

Speaker Change: The products that they don't have the demand for yet and they will have over demand.

Speaker Change: From the supply chain. They don't we don't have castings and forgings for so there is asymmetry in equilibrium.

Speaker Change: In balance there.

Speaker Change: We have plenty of machining capacity and plenty of.

Thomas J. Hook: We have plenty of machining capacity and plenty of, you know, special process capacity to meet whatever the mix is. We also have the employees to do that as well, so we're very, the rate of our output is controlled by what the aero engine OEMs would like from a mix standpoint. They can change that very quickly within a month to a quarter, but the supply chain can't respond for multiple quarters, and that, right now, is why the second half is out of equilibrium.

Speaker Change: Special process capacity to meet whatever the mixes. We also have the employees to do that as well so we're very.

Thomas Hook: So we're very the rate of our output is controlled by what the Aeroengine OEMs would like from a mixed standpoint; they can change that very quickly within a month to a quarter, but the supply chain can't respond for multiple quarters. And that right now is why the second half is out of equilibrium. We have plenty of castings and forgings and intermediate and working process for products that we, you know, frankly, just have too many of and that mixes it shifting over to the opposite side of the market. There's a, you know, there's an inadequate amount of supply chain inputs for those products that is being rapidly cured as the shift is changing castings and forgins and materials are shifting into that direction and we'll be able to pick up those materials and output them very rapidly.

Speaker Change: The rate of our output is controlled by what the Aero engine Oems would like from a mix standpoint that can change that very quickly within a month two.

Speaker Change: Two a quarter, but the supply chain can't respond for multiple quarters and that right. Now is why the second half is out of equilibrium we have.

Thomas J. Hook: We have plenty of castings and forgings and intermediate and work-in-process for products that we, you know, frankly just have too many of, and that mixes it with shifting over to the opposite side of the market. There's an, you know, an inadequate amount of supply chain inputs for those products that is being rapidly curbed as the shift is changing. Castings and forgings and materials are shifting into that direction, and we'll be able to pick up those materials and output them very rapidly, but it doesn't mean, in the short term, higher working capital levels, which is a painful investment, but it's how we have to serve and win with our customers.

Speaker Change: Plenty of castings, and forgings and intermediate and work in process for our products.

Speaker Change: We frankly, just exit many of and that makes us at shifting over to the opposite side of the market. There is a there.

Speaker Change: There is an adequate amount of supply chain and puts for those products that is being rapidly cured.

Speaker Change: The shift is changing castings, and forgings and materials are shifting into that direction, and we'll be able to pick up those materials and I'll put them very rapidly, but it doesn't mean in the short term higher working capital levels, which is a painful investment, but it's how we have to service and win with our customers we have the offset to the aftermarket.

Thomas Hook: But it does remain in the short term higher working capital levels, which is a painful investment, but it's how we have to service and win with our customers. We have the offset to the aftermarket, which is very visible to us from our customers. We're being rewarded because we're taking OEM side pain in the supply chain right now. And we feel that we'll be able to take that working capital and purge it out in the 25 timeframe to be able to re-normalize and get back the equilibrium again. And in that way, we're never the rate limiting step in that investment philosophy, and that positions us to win across the entire arrow engine cycle with every single OEM.

Thomas J. Hook: We have the offset to the aftermarket, which is very visible to us from our customers. We're being rewarded because we're taking OEM side pain in the supply chain right now, and we feel that we'll be able to, you know, take that working capital and purge it out in the, you know, 25, you know, time frame to be able to renormalize and get back to equilibrium again, and in that way we're never the rate limiting step in that investment philosophy, and that positions us to win across the entire aero engine cycle with every single OEM, but it does mean in the short term it's a change in our guidance and it's a change in our working capital, which is painful.

Speaker Change: Which is very visible to us from our customers, we're being rewarded because we're taking OEM side pain in the supply chain right now and we feel that we'll be able to.

Speaker Change: Take that working capital and put it out in the 25.

Frame to be able to re normalize and get back to equilibrium again.

Speaker Change: And at that way were narrowed the rate limiting step in that investment philosophy and that positions us to win across the entire arrow engine cycle with every single OEM.

Thomas Hook: But it does mean in the short term, it says change our guidance, and it's a change in our working capital, which is painful.

Speaker Change: But it does mean in the short term, it's us change our guidance and it's a change in our working capital which is painful.

Christopher Glynn: Okay, thanks. And then, you know, you took up the arrow margin guidance a bit, noting the mix shift. But the inefficiencies were sort of the explanation of not seeing that, you know, mix kind of kiss in the second quarter.

Speaker Change: Okay. Thanks, and then.

Thomas J. Hook: Okay, thanks. And then, you know, you took up the aero margin guidance a bit, noting the mix shift, but the inefficiencies were sort of the explanation for not seeing that, you know, mix kind of kiss in the second quarter. Does that just reflect an adjustment period in timing where, you know, the mix kind of has more weight over the productivity issues on the OEM side in the second half versus the second quarter?

Speaker Change: You took up the Aero margin.

Speaker Change: And a bit noting the mix shift.

Speaker Change: But but the inefficiencies were sort of the explanation of not seeing that.

Speaker Change: Mix kind of course in the second quarter.

Thomas Hook: Is that just reflect an adjustment period and timing where, you know, the mix kind of hit has more, more weight over the productivity issues on the OEM side in the second half, versus the second quarter. Yeah, Chris, Chris, that's a fair question. I think you can imagine when the output from us to our customers shifts quickly, we really lost the opportunity to mitigate that OE labor efficiency argument. Now, in the second, you know, you come exiting the second quarter into the second half of the year knowing that the shift is occurring. We can make some choices to make that labor inefficiency smaller.

Speaker Change: Just reflects an adjustment period and timing, where the mix trying to pit has more more weight over the productivity issues on the OEM side in the second half versus the second quarter.

Thomas J. Hook: Yeah, Chris, that's a fair question. I think you can imagine when the output from us to our customers shifts quickly. We've really lost the opportunity to mitigate that OE labor efficiency argument. Now, in the second, you know, exiting the second quarter and the second half of the year, knowing that the shift is occurring, we can make some choices to make that labor inefficiency smaller. We can rationalize some of the workforce that is, you know, kind of low skilled that we haven't invested in to do high amounts of training.

Speaker Change: Yes, Chris I, Chris That's a fair question I think you can imagine with ish when the output from us to our customer shifts quickly.

Speaker Change: Really lost the opportunity to mitigate that OE labor efficiency argument.

Speaker Change: Now in the second half.

Speaker Change: It kind of exiting the second quarter into the second half of the year knowing that the shift is occurring we can.

Speaker Change: Make some choices to make that labor inefficiency smaller.

Thomas Hook: We can rationalize some of the workforce that is, you know, kind of low skilled, but we haven't invested in to do high amounts of training. We can shuffle some of the workforce, the high skills over into the aftermarket side. You know, we have close facilities in the Connecticut area, and they will hire area and also in, you know, Singapore that have both combined OE and MRO capabilities. We can shuffle some of that talent. So they're in the second half of the year; we can mitigate this kind of conscious decision we've made to retain workforce. And, you know, but at the end of the day, it'll be incomplete mitigation.

Speaker Change: <unk> rationalized some of the workforce that is kind of low skilled because we haven't invested in to do high amounts of training. We can shuffle some of the workforce the high skills over into the aftermarket side, we have close facilities in the Connecticut area.

Thomas J. Hook: We can shuffle some of the workforce, the high skills, over to the aftermarket side. You know, we have close facilities in the Connecticut area, in the Ohio area, and also in, you know, Singapore that have both combined OE and MRO capabilities, so we can shuffle some of that talent. So there, in the second half of the year, we can mitigate this kind of conscious decision we've made to retain the workforce and, you know, but at the end of the day, it'll be incomplete mitigation.

Speaker Change: Io area and also in <unk>.

Singapore that have both combined OE and MRO capabilities, we can shuffle some of that talent. So there in the second half of the year, we can mitigate.

Thomas J. Hook: But since we're expecting and it's seen, I don't want to call it insatiable demand on the aftermarket side, but an extremely high level of demand on the aftermarket side, we know we have that mitigator, and we can more fully leverage that by shifting some of the workforce without losing them. And, you know, at the end of the day, we all know last year we had a labor productivity issue that really was vexing us because of this training loop and being able to attract talent.

There's kind of a conscious decision we've made to them.

Speaker Change: Retain workforce.

Speaker Change: But at the end of the day is it'll be incomplete mitigation, but since we're expecting and have seen I don't want to call. It insatiable demand in the aftermarket side, but an extremely high level of demand in the aftermarket side. We know we have that mitigate or and we can more fully.

Thomas Hook: But since we're expecting and it's seen, I don't want to call it insatiable demand in the aftermarket side, but an extremely high level of demand in the aftermarket side. We know we have that mitigator, and we can more fully leverage that by shifting some of the workforce without losing them. And, you know, at the end of the day, we all know last year we had a labor productivity issue that really was fixing us because of this training loop and being able to attract talent. So we don't want to lose the talent and have to go back through labor productivity pains in 2025.

Speaker Change: Leverage that by shifting some of the workforce without losing them in.

Speaker Change: At the end of the day, we all know last year, we had a labor productivity issue.

Speaker Change: That really was vaccine us because of this training loopnet and being able to attract talent. So we don't want to lose the talent and have to go back through labor productivity pains in 2025, but that's why we're taking this approach, albeit like we.

Thomas J. Hook: So we don't want to lose the talent and have to go back through labor productivity pains in 2025. That's why we're taking this approach, albeit, you know, like we don't get the level of upside in the aftermarket, you know, push through that we'd like to see, but it'll be gradually improving as we just temper that OE effect on labor efficiency.

Christopher Glynn: That's why we're taking this approach. I'll be it, you know, like we don't get the level of upside in the aftermarket, and you know push through that we like to see, but it'll be gradually improving as we just temper that OE effect on labor efficiency. Yeah, it makes perfect sense.

Speaker Change: We don't get the level of upside in the aftermarket.

Speaker Change: Pushed through that we'd like to see but it will be gradually improving as we just temper that OE effect on labor efficiency.

Speaker Change: Yes makes perfect sense, I understand the strategic kind of investment and retention and everything and your overall aftermarket capacity and throughput you talked about three locations with expansions.

Thomas J. Hook: Yeah, makes perfect sense. Understand the strategic kind of investment and retention and everything and your overall aftermarket capacity and throughput. You talked about three locations with expansions. That should all be pretty, pretty clean and straightforward to capture the demand that in the aftermarket that you otherwise could.

Thomas Hook: I understand the strategy of kind of investment and retention and everything. And you're overall aftermarket capacity and throughput. You talked about three locations with expansions. That should all be pretty, pretty clean and straightforward to capture the demand that in the aftermarket that you otherwise could. First, that's fair, and thank you for the question because it lets me give you the highlights that we've been supporting. As a team, we're going to bring on aftermarket capability out of our policy facilities. We've been making those investments. We have been already making investments well ahead of you know the aftermarket push in our East Grand B facility and also in our Singapore facility, and we and you already know that we've made a lot of investments in our Westchester, Ohio facility in the aftermarket.

Speaker Change: That should all be pretty pretty clean and straightforward to capture the demand in the aftermarket.

Speaker Change: Otherwise could.

Speaker Change: Chris That's fair and thank you for the question because it lets me give you the highlights that we've been supporting is it as a team we're going to bring on aftermarket capability out of our Polish facilities.

Thomas J. Hook: Chris, that's fair and thank you for the question because it lets me give you the highlights that we've been supporting as a team. We're going to bring on aftermarket capability out of our Polish facilities. We've been making those investments. We have already made investments well ahead of, you know, the aftermarket push in our East Granby facility and also in our Singapore facility. And you already know that we've made a lot of investments in our Westchester, Ohio facility for the aftermarket.

Speaker Change: We've been making those investments we have been already making investments well ahead of the.

Speaker Change: Aftermarket push in our east Granby facility and also in our Singapore facility and we already know that we've made a lot of investments in our Westchester, Ohio facility and the aftermarket we're going to maintain capacity head. So we had a lot of very productive discussions at Farnborough with our aftermarket partners and I see.

Thomas Hook: We're going to maintain capacity head. We had a lot of very productive discussions at Farmboro with our aftermarket partners, and I see very, very strong market, and a lot of it will be continuing about our ability to maintain turnaround time with customers. But we don't see a market limit to our ability to ramp aftermarket. It's going to be purely how fast we can keep our capacity capability of ramp going, which has been going exceptionally well so far. But we don't want to get ahead of ourselves in the second half of the year, but we see quite a healthy aftermarket four years to come, and that would extend from all the you know MRO work.

Thomas J. Hook: We're going to maintain capacity. We had a lot of very productive discussions at Farnborough with our aftermarket partners, and I see a very, very strong market, and a lot of it will be contingent upon our ability to maintain turnaround time with customers, but we don't see a market limit to our ability to ramp up the aftermarket. It's going to be purely how fast we can keep our capacity capability ramp going, which has been going exceptionally well so far, but we don't want to get ahead of ourselves in the second half of the year, but we see quite a healthy aftermarket four years to come, and that would extend from all the, you know, MRO work that we do all the way through the RCA. Great, thanks. Thanks for all the color.

Speaker Change: Very very strong market and a lot of it will be contingent upon our ability to main turnaround time with customers, but we don't see a market limit to our ability to ramp aftermarket.

Speaker Change: Going to be purely how fast we can keep our capacity capability ramp going which has been going exceptionally well so far but we don't want to get ahead of ourselves in the second half of the year, but we see quite a healthy aftermarket for years to come.

Speaker Change: What extent from all the MRO work do we do all the way through the Rfps.

Thomas Hook: Do we do all the way through the RSP's?

Thomas Hook: Great. Thanks. Thanks for all the color welcome.

Speaker Change: Great. Thanks, Thanks for all the color.

Speaker Change: Welcome.

Operator: And that concludes our question-and-answer session.

Speaker Change: And that concludes our question and answer session I will now turn the conference back over to Thomas Hook, Chief Executive Officer for closing comments.

Thomas J. Hook: And that concludes our question and answer session. I will now turn the conference back over to Thomas Hook, Chief Executive Officer, for closing comments.

Thomas Hook: I will now turn the conference back over to Thomas Hook, Chief Executive Officer, for closing comments. Thank you for joining our call today. We continue to execute on our transformation to maximize barns value, and we are focused on customer synchronization and discipline operations as we navigate an increasingly dynamic market. While there is more work to deliver against our proper girls and ambitions, we are making strides every quarter and executing our strategy. Thank you for your continued interest in barns.

Thomas J. Hook: Thank you for joining our call today, we can execute on our transformation to maximize <unk> value and we are focused on customer synchronization and disciplined operations as we navigate an increasingly dynamic market.

Thomas J. Hook: Thank you for joining our call today. We continue to execute on our transformation to maximize Barnes value, and we are focused on customer synchronization and disciplined operations as we navigate an increasingly dynamic market. While there is more work to deliver against our profitable growth trend ambitions, we are making strides every quarter in executing our strategy. Thank you for your continued interest in Barnes.

Speaker Change: While there is more work to deliver against our profitable growth ambitions, we are making strides every quarter in executing our strategy.

Speaker Change: And for your continued interest in bonds.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect. Thank you very much.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: [music].