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

Thank you, and welcome to the TriMas Corporation Third Quarter 2017 Earnings Call. Participating on the call today are Tom Amato, TriMas' President and CEO; and Bob Zalupski, our Chief Financial Officer. Tom and Bob will review our third quarter results as well as provide an update on our 2017 outlook. After our prepared remarks, we'll open the call up for your questions. In order to assist with the review of our results, we have included a press release and PowerPoint presentation on our company website, www.trimascorp.com, under the Investors section. In addition, a replay of this call will be available later today by calling 888-203-1112, with a replay code of 4178159. Before we get started, I would like to remind everyone that our comments today, which are intended to supplement your understanding of TriMas, may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K and Form 8-K filed on September 11, 2017 for a list of factors that could cause our results to differ from those anticipated and any such forward-looking statements. Also, we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We would also direct your attention to our website, where considerably more information may be found. I would also like to refer you to the appendix in our press release issued this morning or included as part of this presentation, which is available on our website, for the reconciliations between GAAP and non-GAAP financial measures used during this conference call. Today, the discussion on the call regarding our financial results will be on an excluding special items basis. At this point, I would like to turn the call over to Tom Amato, TriMas' President and CEO. Tom?

Thank you, Sherry, and good morning to those on the call. We would also like to welcome our new investors in our recent credit offering as we deeply appreciated your support. Let's turn to slide 5; we are very pleased with our performance in the third quarter and our continued progress through the year. With the TriMas Business Model as our key tenet driving our decisions and actions to improve performance, and in some cases protect performance, we had another solid quarter. Sales were up 3.5%, and earnings per share up 11.4%. Our cash flow was strong and while satisfied with our momentum over the past year in improving net working capital, we still have room to get better, particularly in managing our inventories. Our performance in Q3 was notable, given that we overcame some unexpected challenges, which included carefully navigating a natural disaster in the Gulf Coast area. Let me provide some additional color on the effect of Hurricane Harvey. Our Lamons business idled six Gulf Coast branch locations and our Houston main production facility for several days as the hurricane and resulting floods rolled through the region. Fortunately, we incurred only limited physical damage with no meaningful interior flooding or loss of production equipment. However, a number of our customers' locations remained idled for much longer as they went through their safe start protocols. Also some customers had yet to bring their plants to full production as they work through prolonged equipment repairs. As related to Lamons, in September, the impact of the hurricane largely led to production inefficiencies and increased off-standard costs given the overall disruption to our operations. During the third quarter, we also completed a significant refinancing where we took out -- where we took advantage of trading out of debt that would be otherwise…

Thank you, Tom, and good morning. Before I review our segment results, I wanted to take a moment to discuss the swap transaction Tom mentioned, which we recently finalized. We entered into cross-currency swap agreement to synthetically convert a portion of our U.S. dollar debt into euro denominated debt. In addition to providing a hedge of our net investment in the Eurozone, we were also able to capitalize on the region's more favorable interest rate environment. The agreements have a five year tenor with notional amounts beginning at $150 million and declining to $75 million over the five year contract term. By entering into these agreements, we lowered the fixed interest rate on the portion of the debt swap from 4.78% to approximately 2.8%, which over the next two years will reduce our cash interest expense by $3.1 million per annum. We are pleased that we were able to take advantage of near historic low rates in the U.S. high yield market and add flexibility to our capital structure, yet significantly mitigate higher interest costs as compared to our prior debt structure by entering into these swap agreements. Now moving to our segments results. As Sherry noted earlier, all of my comments today will be on an excluding special items basis. I'll begin my comment with the review of our Packaging segment's performance on slide 11. Third quarter net sales approximated $90 million, down slightly compared to the prior year period. During the quarter, we achieved higher sales levels with our food and beverage customers in North America, and once again experienced higher sales in Asia due to continued growth with several multinational customers for our health, beauty and home care products. A stronger sales in Asia helped to partially offset the continued sales softness with certain of our North…

Thank you, Bob. Turning to slide 15; as we consider our full year outlook, we are maintaining our previously -- our previous sales growth guidance range of up 2% to 4% despite some uncertainty as noted in the Energy segment and lost production within one of our Rieke locations. As we near the end of the year, we are tightening our full year EPS guidance range to $1.37 to $1.43, which now includes slightly higher interest expense and a lower tax rate estimate to 30%. As a reminder, our fourth quarter is typically our lowest sales and profit quarter, given lower levels of production activity due to holidays and year end customer shutdowns. While we anticipate external factors to provide some pressure on our fourth quarter results, we are striving to mitigate these impacts with operational performance and management actions. Finally, we are increasing our free cash flow guidance to now be more than 125% of net income from 100% as we expect the momentum we have been driving to-date to carry through to fourth quarter. Turning to slide 16; before opening the call to questions, I want to again highlight that through our commitment to operational excellence and operating under the TriMas Business Model, we expect to drive performance improvement and generate exceptional cash flow. Our capital allocation priority remains to first invest in our businesses, then continue to offset debt with a guiding target net leverage ratio of below 2X. Ultimately, we will consider bolt-on acquisitions to augment TriMas' highest value proposition businesses as well as consider share repurchases or dividends. Thank you, and I will now turn it back to operator for questions. Operator?

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

Hi Andy.

First of all, thank you for the impact estimate from the hurricane, that's helpful. I'm wondering does the $2 million to $3 million negative impact in Q4 also include the impact from the California fires? Or is that on top of that?

No, that would be on top of it. The California fires affected our Packaging operation facility in Northern California, so that's unrelated to the $2 million to $3 million for the Energy segment.

Is that material Bob, or --?

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

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

Well, I think in general, on pricing, we've seen some stabilizing in the steel costs as we move through the year. Clearly, on a year-over-year basis, they were up in Q3 as I mentioned, but year-to-date, it's starting to moderate and -- so we're optimistic that trend continues in fourth quarter. In terms of pricing, well, certain of our contracts with the major gas companies have passed through escalators. Ultimately, those aren't volume requirement contracts, so the pricing impact is something that you always have to balance between recovering net steel costs, but then also being mindful of the impact that might have in terms of your sales demand. So that's the delicate balance that, that management team needs to walk, and they've done pretty well historically, and we would expect that we'll take opportunities to selectively raise prices where we're able.

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

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

Yeah, good morning everyone.

Good morning Sam.

Hi Sam.

Just on Packaging, the margin performance this quarter was nice on a year-over-year basis. I think you commented that SG&A was the driver, but just given the raw material environment I think resin pricing is up. You commented a little bit about it, but I think it's up 20%, 25% in the last three months. Maybe you can you talk a little bit about your ability to drive pricing there to offset that inflation? How we should think about that into the beginning part of 2018?

Yes. We haven't seen quite that level of increase, Sam. As we exited the quarter, it looked to us that on average we were about up 10% in terms of resin for the month of October, and it looked like beyond that October on bond it was going to be another 2% to 3%. In Packaging, where we do have pass-through clauses, there was a bit of a delay. But generally speaking, those contracts also had volume requirements, therefore, the recovery there is, generally speaking, okay, perhaps with a little bit of lag. We have announced some increases in early October for noncontractual pass-throughs given the increase that we've seen and time will tell how that recovery fares vis-à-vis what we see in the market. But currently, in terms of supply, we have plenty of contracted supply for our needs through remainder of the year. So there hasn't been a scarcity, if you will, in terms of our ability to get resin.

And as far as the percentage of the Packaging segment that would be contractual in terms of pass-throughs versus trying to go out to the market and get price, how would you kind of -- is that 50-50, is it 70-30? What's the right way to think about it?

60-40 is probably a good way to think about it, Sam.

60% contractual?

Right. Correct

Got it. And looking at the Aerospace segment, nice -- I think you're on pace this year to see almost about 400 basis points of year-over-year margin expansion. What's the next leg from here? How do we think about -- you know, you've kind of flat margins this quarter recognizing that there is some mix issues. But looking ahead, what's the right way to think about kind of margin expansion from here?

Look, as we look towards 2018, we are working extensively on our plan, and we want to continue to drive momentum and drive performance improvement. Now we've talked about this previously a number of times and we felt that the plan we've put forward for 2017 was a challenging plan. We're very pleased that we're on track and we certainly want to use this momentum to drive performance -- more performance into 2018. But we're also cognitive realistic that given some of the mix we have with some more standard products and machine to print-type products, that there's a little bit of weighting, a natural weighting that will moderate the ultimate margin we can get to. So that's all I'd like to say now. As we put forward our forecast for 2018 and in early 2018, I think you'll get a better sense of where we're going to drive this business.

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

Thank you.

[Operator Instructions]. Our next question will come from Matt Koranda of Roth Capital.

Hey, guys, good morning.

Good morning, Matt.

Hi Matt.

So just on the high-level revenue guidance. It looks like to get to the high-end of your revenue guide, I guess you'd almost need double-digit growth on the top line in Q4. I guess, should we be thinking more about the low end of the 2% to 4% range? And then, if we're going to meet the higher end of the guidance, where would the sources of upside be on a segment basis?

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

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

Well, hard to know how it shakes out longer term. I think what we're seeing in North America is food and beverage, generally speaking, has been up year-over-year both in the quarter and on a full year basis or year-to-date basis. And then industrial's been mixed. We had some decent industrial growth year-over-year in the first part of the year and that turned slightly down in Q3. And I think where we've seen the more consistent softness has been in the home, beauty and health care segment of our business. And again, in terms of gap, we -- the growth in Asia, obviously, is a smaller percentage of our business, but one that's becoming more important. North America obviously, larger, but again, some relative softness there. So it's probably not a good comparison to look at the relative gap there only because of the dollar value of the respective business in each geography.

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

Yes.

Just on margins in that segment, wanted to kind of attack may be a different way, you guys mentioned obviously, and have covered resin increases a bit and -- I think, correct me if I'm wrong, but I think maybe the soft revenue in North America maybe continues in the near term. So could just talk about how that kind of filters through to your longer term margin expectations in the Packaging segment? I mean, are we still comfortable with the sustainability of that 23% to 24% guidance for 2017 continuing into 2018 and beyond?

Well, I think we've consistently performed in a range of 22% to 24%, Matt. Tom has talked previously about the balance between return on sales as well as just the growth in operating profit dollars. And it is a balance, and it's something that we'll continue to evaluate as we move through time.

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

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

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

Good morning Steve.

Good morning. Just wanted to touch on the actions that you're taking for streamline TriMas within Packaging, Energy and Engineered. You may have said this, but I may have missed it, but any idea as to what the cash impact could be from those restructuring actions, and maybe a timeline as to when you think you can get all this done.

Ken, sorry. Is this Steve or Ken?

This is Ken.

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

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

Yes. Good question. I spoke to this previously, I felt like much of the heavier lifting cash movements that we felt were near-term opportunities within TriMas we've already taken, and I still feel that's the case. So a lot of the actions we're taking now I would put into the category of very wide streamlining activities, but not what I would call more significant in terms of cash impact. There would certainly be some noncash impact, but I can't speak to that at this point. But as I look at the type of -- the physical type of actions we're looking at, they strike me as less significant move from a cash point of view.

That's helpful. Thanks.

Thank you.

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

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

Well, there's perhaps a difference of what I would describe as focus on M&A internally at TriMas, on which we are focused versus what we're prepared to talk about externally or bring to the market. It's a very -- as you know from other companies you talk to, it's a very hot competitive M&A market, and the areas that would be most natural for TriMas to explore would also fall into that category. So nothing to report this quarter. As soon there is, we'll let everyone know. But rest assured, management is not -- rest assured, management is doing all that we can in this area to explore opportunities that can create long-term shareholder value. And we're also cognizant of the market and pricing and we're going to be very diligent.

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

The indication that we're getting from our customers is that it is a pushout. It is likely to be perhaps first and into the second quarter, perhaps could be a longer, more robust turnaround season. Now we don't know that for sure, but as noted in at least my commentary, we are going to be ready because we want to make sure that customers choose Lamons over competitors as they have their need for speed in terms of performance in gasket and bolt supply. So we're going to be ready. We're going to support them, and hopefully, it's a robust and prolonged turnaround season. We'll be ready.

Okay. Thank you very much.

Thank you.

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

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

Thank you all.

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