Good day and welcome to the TriMas Fourth Quarter and Full year 2019 Earnings Conference Call. [Operator Instructions] At this time I would like to turn the conference over to Ms. Sherry Lauderback. Please go ahead ma'am.

Thank you and welcome to the TriMas Corporation's Fourth Quarter and Full year 2019 Earnings Call. Participating on the call today are Tom Amato, TriMas' President and CEO; and Bob Zalupski, our Chief Financial Officer. After our prepared remarks on our 2019 results and our 2020 outlook we will open the call up for your questions. In order to assist with the review of our results we've included the 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 1287708. 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 for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements. Also we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website where considerably more information may be found. I would also like to refer you to the appendix in our press release issued this morning or included as a part of this presentation which is available on our website for the reconciliations between GAAP and non-GAAP financial measures used during the conference call. Today the discussion on the call regarding our financial results will be on an adjusted basis excluding the impact of special items. At this point I would like to turn the call over to Tom Amato TriMas' President and CEO. Tom?

Thank you, Sherry. Good morning and thank you for joining our fourth quarter and full year earnings call. During the quarter and for much of the second half we made excellent progress on executing against our strategy to better position TriMas for long-term value creation. At the end of the year we completed the sale of our Lamons business a significant strategic step which reduces our exposure to the oil & gas markets to less than 5% markets that have historically been more cyclical than our core Packaging and Aerospace markets. This proved to be a challenging sale process that the TriMas and Lamons teams worked diligently on and for which personally thank all involved in bringing it to successful completion. While working to deemphasize our position in the oil & gas market we have also been executing against our strategy to build out the TriMas Packaging and TriMas Aerospace platforms through programmatic M&A leaning into markets that we believe in the long term will drive the highest value for TriMas and its shareholders. In our Packaging segment in addition to the two acquisitions we completed earlier in the year we recently announced that we signed an agreement to acquire Rapak which brings us bag-in-box product line adjacency and I'll cover this unique transaction in a few slides. In our Aerospace segment we renewed our acquisition target list earlier in 2019 to focus on building out this platform as well. As a result we recently announced that we signed an agreement to acquire RSA Engineered Products which adds a new product adjacency to our Aerospace group. Consistent with our Aerospace fastener business RSA supplies highly engineered products under longer-term customer contracts. I'll discuss this exciting acquisition in a few slides as well. And turning to Slide 3. TriMas' end market…

Thank you, Tom. I will begin my remarks today on Slide 10 and briefly comment on free cash flow and the strength of our balance sheet. We generated $28.3 million of free cash flow in the fourth quarter slightly higher than the prior year's quarterly amount of $26.9 million. We finished the year with $71 million of free cash flow which was lower than the prior year due to higher cash taxes increased capital investment in support of customer growth initiatives and higher inventory levels to help manage the impacts of tariffs and planned factory floor improvements. For the full year free cash flow conversion approximated 100% of income 107% of income from continuing operations which exceeded our guidance of greater than 100% of net income. We ended the year with $172.5 million of cash on book inclusive of the net cash proceeds from the sale of Lamons of approximately $111 million. In addition as Tom noted a bit earlier, we invested $67 million in two bolt-on acquisitions in the first half of 2019 as well as used $36.7 million of cash during the year to repurchase more than 1.2 million shares of our stock in return of capital to shareholders. As a result we finished the year with net debt of $122.2 million and a bank leverage ratio of 1.3x significantly below our stated overarching goal of less than 2x. TriMas' strong balance sheet which includes more than $450 million of cash in aggregate availability under our revolving credit facility low leverage and a solid track record of free cash flow generation positions us with ample capacity and flexibility to continue to fund our balanced capital allocation priorities. Now let's review our segment results beginning with Packaging on Slide 11. For fourth quarter we reported net sales of $94…

Thank you, Bob. Let's turn to Slide 16. For 2020 our objective is to continue the momentum in each of our businesses under the TriMas business model while strategically positioning to drive further growth through innovation and capitalize on available market opportunities. We expect annual sales growth of 9% to 11% primarily driven by our acquisitions. Due to certain end market challenges Bob discussed organic growth is expected to be approximately 2%. We are forecasting full year 2020 diluted EPS in the range of $1.50 to $1.60 per share with the midpoint representing an increase of approximately 7% compared to 2019. Our forecast does not include any impact from FX related to coronavirus as it is simply too early to predict secondary effects. For example while we are working through supply based challenges, we are also seeing an increase in quoting activity related to our hand soap and sanitizer dispensing product lines and in one case actually in two cases selling out available capacity at both our Vietnam and our India locations. We are planning to shift and add more equipment and floor space capacity in both our Packaging and Aerospace segments in 2020 and beyond. Therefore we are planning to invest at a slightly higher rate of CapEx. However we again anticipate 2020 free cash flow conversion of greater than 100% of net income. Turning to Slide 17. We remain excited about the important strategic actions we completed in 2019 and look forward to delivering long-term value creation for our shareholders. We will continue to leverage the TriMas business model and operate under a culture of Kaizen to drive continuous improvement. We also continue to invest in new product and process innovation. For example we have now brought online our first high volume 1-piece flow large-cap manufacturing line in a plant that experienced capacity constraints last year. We were excited to invest in this innovative processing technology and are already making plans to implement further operational excellence improvements based on what we have learned from this installation. We also have a robust pipeline of potential transactions as we use M&A to grow TriMas in the Packaging and Aerospace segments. We believe that M&A and ongoing investment in our businesses combined with share buybacks provides a balanced approach to capital allocation. We will continue to shape TriMas by investing in our highest return product lines and businesses to drive long-term value for our shareholders. Given the progress we have made strategically and our sound financial position we remain excited about the long-term prospects for TriMas in each of our businesses. With that I'll turn the call back over to Sherry.

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

[Operator Instructions] We'll take our first question from Andy Casey with Wells Fargo Securities.

Few questions on the guidance. First in Aerospace what could you give us a little bit more color on the production schedule forecast you're using for the 737 MAX? Is that beginning in August you start to see the ramp-up? And then also on the top line can you provide some further color around the timing of when you expect acquisition benefit from RSA and Rapak? Meaning does your guidance include RSA from the beginning of Q2 and Rapak from the beginning of Q3? Or is it more defined than that?

Let me take those questions in reverse order. On the acquisitions we expect the RSA acquisition to close relatively soon probably in the coming weeks. The Rapak transaction is a little bit more challenging because there are some operational changes and equipment relocations that have to take place. That's probably best case late Q2 sort of in that time frame. So hopefully that gives you some ability to range bound how those transactions will come in. And the Boeing ramp-up it's pretty slow. Obviously slow progress throughout the year. I don't want to give the external I don't know what Boeing has published externally. So I don't want to give exactly what we're building to but it's fairly modest build rate over the next couple months and then slowly ramping up toward the end of the year.

And then on the industrial cylinder weakness can you help us understand if the decline rate related to that specific business deepened relative to past quarters? And then within that have you seen any change in channel inventory destock?

Yes great question. That probably was the biggest surprise for us in Q4. And as you probably know from following that market, we've had a number of our largest customers consolidate over the past few years. And what we saw when there was one consolidation a couple of years ago was not going to, I guess I'll call it inventory rebalancing. I'm not a fan of the word destocking. But inventory rebalancing occurred and then things got more to a normal cadence. Well two of our larger customers combined and their order rate was down significantly in Q4 levels we haven't seen in many quarters. That's the bad news. On the more positive side now that we've seen them combine and are working through that we're seeing an order intake that is starting to approximate more expected levels not quite the levels we would like but certainly not the rate we saw in Q4.

And then just kind of a detailed point given that your you continue the share repurchase as indicated on Slide 4. I'm just wondering if you can help us with the share count that's included in the $1.50 $1.60 EPS forecast. I'm just wondering if it anticipates incremental beyond the repo that's listed on that slide.

Bob you want to?

Yes it does include some anticipated additional share repurchases. We're circa 45.5 or 45.6 million shares outstanding as of the end of 2019. And we'd expect that to trend down closer to 45 million plus/minus depending on timing of repurchases for the remainder of 2020.

We'll take our next question from Steve Barger with KeyBanc Capital Markets.

I know coronavirus is hard to predict but obviously it's topical. Has there been any impact on your Asia manufacturing footprint so far in terms of extended shutdowns or lower utilization rates?

Look I mean as you can imagine for several weeks we've been working on this matter. We do have an extended supply network that is in China as well as our own manufacturing locations. What's interesting about it if there's any bit of a bright spot given the nature of the crisis it occurred before in and around the Chinese New Year. So we had already stocked up many products both stateside and on the water and some cases in China. So as it started to hit there really was sort of a delay in individuals coming back to work at many of our sub-suppliers and our own locations. And we're now starting to see capacity come online. In some cases it's actually surprising me that it's a little bit better than I thought it would be at this point. I mean hopefully there's not some type of rebound or secondary effect that occurs but we are getting products manufactured now in the region. One of our sub-suppliers is reported to be at call it 70-plus percent which is pretty good. Our plants are sort of north of 70% which is pretty good. And as I mentioned the inbound quote activity for us has been, I mean we have a lot of products that go into hand cleaning washing or sanitizing applications. You could start to extend that to a company we just bought in called Taplast which makes a whole product line of soap lotion dispensers. And then additionally the other company we just bought makes a product line that is largely used in the detergent area and cleaning area. So you could see that if people become a little bit more conscious of washing hands and cleaning and keeping countertops clean there could be some longer-term benefit here. I mean we're certainly living in the current period of managing our supply base and our current manufacturing operations but we're also looking at our available capacity to see where we can ramp up and scale up in other locations to take advantage of the period.

Yes, understood. That's good detail. And how much capacity do you expect to add back in North America for Packaging? And will most of that spend be this year? Or is this a multiyear rethinking in the footprint?

Yes. It's really a great question. And it will be a multiyear process. I mean tariff was sort of the onset. I mean the company has been thinking about this with some freight strikes from or port strike from a few years back. And then with the onset of tariffs clearly, we started to put some wheels in motion. We've already added some capacity into the states. But with coronavirus and some of the geopolitical issues that have crept into our business model here we're going to probably take more significant steps and probably will involve what I call bumping out a plant as opposed to adding new manufacturing facilities so we'll take existing manufacturers we'll spend to add more square footage at those locations and then we're buying injection molding machines we're buying presses sorry we're buying mold and we're buying assembly lines. That will take more than a year just given the nature of how long equipment mold and assembly lines need to be made.

Moving to the model a little bit. Do you expect all three segments will have positive organic growth in 1Q? Or is this a year of lower growth first half versus back half?

Well I mean first half could be a little bit challenged given some of the dynamics that we've been talking about. But I think overall as we're reporting we see a positive upside.

Yes. I was going to add that the first half of last year was much stronger than second half obviously. So coming off the run rates we are in fourth quarter we'll make that comp challenging in the first quarter no question. But I do think we see it trending positively as we move through the year.

Yes. And Bob what do you expect to run for SG&A on a quarterly basis given all the portfolio actions?

I don't really see the SG&A changing a lot. I mean I think we're ultimately going to see leverage once we get the new acquisitions folded in on that SG&A. But clearly with the tough year we were coming off of and going into 2020 where the prospects of coronavirus and what that might do to this business generally and markets we're being very, very cautious about increasing spend and/or adding headcount.

Yes, right. You have that typical footnote on your free cash flow guide. What special items are contemplated in that guidance? Or what will conversion be ex special items?

Well ex special items it's greater than 100%. Typically the majority of the special items are deal costs associated with diligence and the like.

Yes. Sorry I misspoke. Do you have a percentage estimate including special items is what I meant?

No.

All right. And then last one for me. Tom it's good to see you turning the portfolio over some with divestitures and acquisitions. But this is going to be another year of low single-digit organic growth and plus or minus this year is going to look pretty much like the last five years in terms of absolute revenue level and operating income. Are you looking at more sizable M&A and higher growth areas to kind of break out of this range? Or just where do you see the best opportunities to really kind of kick-start TriMas?

Well good question. And clearly over the past few weeks given some of the dislocation and valuation maybe we'll rethink some of that a bit. I mean to date we've spent we've been spending our corp dev resources on looking at acquisitions that what I would call are a little bit more manageable in the range of bolt-on or where there's an adjacency there they could tuck in well we can manage and track them well and not disrupt our balance sheet and that is currently our current path forward. That being said we're looking at some valuations now that could make some companies. We have to see if what's happening in publicly traded companies is affecting the private transaction world. And there it's one reason why I like the fact that we put our balance sheet in the position that we're in. So we could make if we needed to and wanted to or we're willing to more sizable steps. But I would also say before I close out that point is we're also looking at the valuation of TriMas and we're going to make some sizable steps there.

[Operator Instructions] At this point we do not have any questions in the queue.

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

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may now disconnect.