Barrick Mining Corp (B) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your second-quarter Barnes Group earnings conference call. My name is Cathy and I am your operator for your call today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

The host of your call today is Mr. William Pitts, Director of Investment Relations. Please go ahead, Mr. Pitts, and have a good call. Thank you.

Good morning and thank you for joining us today. With me are Barnes Group President and CEO, Patrick Dempsey, and Senior Vice President of Finance and Chief Financial Officer, Chris Stephens. If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at BGINC.com.

During our call, we will be referring to the earnings release supplement slides which are also posted on our website.

Our discussion today includes certain non-GAAP financial measures which provide additional information that we believe is helpful to investors. These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website, as part of our press release and in the Form 8-K submitted to the SEC.

I want to remind everyone that certain statements we make on today's call, both during the opening remarks and during the 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 period filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at BGINC.com.

Before we begin our prepared remarks, I want to remind everyone that our financial results discussion is based on continuing operations.

So let's now open today's call with remarks from Patrick, followed by a more detailed review of the quarter and our 2013 outlook discussion from Chris. After that, we will open up the call for questions. Patrick?

Thanks, Bill, and good morning, everyone. This morning, Barnes Group reported second-quarter results that continue to demonstrate our progress in driving profitable growth. I am pleased with the solid performance achieved in the quarter and would like to highlight some of the key factors that led to increased sales and improved operating margins.

Sales increased 24% in the second quarter, propelled by the contribution of our acquired Synventive business and our organic growth from both our Aerospace and Industrial segments. In fact, organic sales growth for the Company exceeded 4% in the quarter, the highest quarterly increase since the first quarter of 2012.

More notable is the sustained progress in margin expansion, as both segments improved operating margins in the quarter by 180 basis points over last year's second quarter.

Total backlog remained strong, standing at $664 million at quarter-end, up 4% from last year and slightly down from the first quarter.

In Aerospace, we continue to experience growth in OEM and aftermarket is showing signs of improvement. OEM sales were up 5% in the quarter. While aftermarket sales were down 3%, we did see sequential improvement over the first quarter of 2013 of 5%.

Our view of the current commercial aerospace environment mirrors many of the themes to come out of the Paris Air Show in June. With Boeing and Airbus continuing to book new orders into already record levels of backlog, the OEM side of aerospace remains very upbeat. Market demand it is coming from both fleet growth and replacement needs. Additionally, widebody commercial aircraft platforms are well-positioned within the current OEM cycle, a good sign for us as our OEM business is more heavily weighted towards widebodies.

With respect to the aftermarket, industry expectations for a second-half recovery remain. Aftermarket commentary originating from the Paris Air Show suggests that market participants were seeing a sequentially better second quarter, which was consistent with our experience.

Overall, we continue to have a positive outlook with respect to commercial aerospace. However, with aftermarket softness persisting in Q2 and our updated expectation for a slightly down year in aftermarket business, we now see Aerospace sales growth in the high single digits for 2013.

If the aftermarket were to strengthen above our expectations in the second half, we could see some upside here.

Our Industrial performance is a very positive story in the second quarter. We achieved organic sales growth of 5%. Our margins further expanded as a result of volume leverage, being more selective on new business and a disciplined approach to managing costs. Our Industrial end markets generally remain favorable. Global automotive production, with the exception of Europe, remains solid, and the tool and die market demand continues at a high level.

Interestingly, our European manufacturing businesses experienced strong order intake during the second quarter. Collectively, order intake for these businesses was up double digit, both year-over-year and sequentially, a positive sign given the challenging headwinds that some of these businesses have endured.

Certain markets, such as heavy duty truck and construction equipment still remain difficult, but overall, a very good story for our Industrial segment.

To wrap up my prepared remarks, our second-quarter performance continues to demonstrate that our strategy to deliver profitable growth is driving results both on the top and bottom line. With expanded revenue, enhanced profitability and increased cash flow, we are able to increase the investment in our existing businesses and target strategic value-enhancing acquisitions, the combination of which enables us to extend our reach into global markets, grow into a more intellectual property-based business and enhance shareholder return.

Now let me pass the call over to Chris to go through the financial details. Chris?

Good, thank you, Patrick. Good morning, everyone. I will start by highlighting key points of our second-quarter results and then finish with an update of our full-year 2013 guidance.

Turning to slide 2 of our supplement, sales were $267 million in the quarter, up 24%, primarily driven by the contribution of the Synventive acquisition and organic sales growth from both our segments, as noted by Patrick. Income from continuing operations was $9 million or $0.17 per diluted share. However, 2013 second-quarter income from continuing operations included a tax charge of $16.6 million or $0.30 per diluted share associated with the April 16, 2013 US Tax Court's unfavorable decision arising from an IRS audit for the tax years 2000 through 2002. Excluding this charge, adjusted income from continuing operations per diluted share was $0.47, up 34% over last year's second quarter.

We have provided a reconciliation of these adjusted results to the appropriate GAAP measures as part of our press release.

Operating margins of 13.5% achieved in the second quarter were up 150 basis points over a year ago, with both Aerospace and Industrial delivering improved performance.

Let me now turn to segment performance, beginning with Aerospace. In the second quarter, Aerospace sales were $97 million, up 3% from $94 million in the same period last year. As Patrick mentioned, OEM growth was offset in part by aftermarket, where MRO was down 5%, and our spare parts program, the RSPs, were essentially flat. RSPs benefited in the quarter from unit volume growth, although net sales were impacted by mix and scheduled management fees.

Operating profit of $15 million was up 17%, from $13 million in the prior period. Aerospace operating profit benefited from higher OEM sales and improved productivity, partially offset by the impact of lower sales in aftermarket. Operating margins in the quarter was 15.7%, up 180 basis points.

Aerospace segment backlog remains strong. At the end of the second quarter, Aerospace backlog was $536 million, up slightly from last year's second quarter. And it's anticipated that about 60% of this backlog will ship within the next 12 months.

At Industrial, sales were $171 million, up 40% from $122 million in last year's second quarter. Synventive contributed $43 million in sales during the quarter, while organic sales, which benefitted from favorable pricing, exceeded 5%. Operating profit of $21 million was up $8 million, or 64%, from last year, reflecting the profit contribution from Synventive and the profit benefit from higher organic sales.

Operating margin in the quarter was 12.3%, up 180 basis points.

The Company's effective tax rate from continuing operations for the second quarter of 2013 was adversely impacted by a tax charge of $16.6 million, as I noted earlier. Absent that item, the Company's effective tax rate from continuing operations for the second quarter of 2013 was 20.5% compared to 16.3% in the second quarter of 2012 and 13.5% for the full year of 2012.

The remaining increase in the second-quarter 2013 effective tax rate versus the full-year 2012 rate was mainly due to certain discrete foreign tax-related items in 2012, an increase in the Company's effective tax rate in Sweden, and the projected mix of earnings attributable to higher taxing jurisdictions. Related to the Tax Court case, we expect to make a cash payment of approximately $13 million by the end of the year.

Regarding share count, our second-quarter average diluted shares outstanding was $54.8 million, and during the second quarter, we repurchased approximately 1.7 million shares for $48.6 million. Year to date, we have repurchased 2.1 million shares for $61.4 million. We have 2.9 million shares available for repurchase under the existing Board authorization at the end of June. The Board authorization permits us to repurchase shares in the open market, including through the utilization of a 10b5-1 plan and in privately negotiated transactions.

2013 full-year guidance assumes we buy back up to 3 million shares in total by year end, which would provide a weighted average diluted share count of approximately 54 million shares and a year-end share count of approximately 52 million shares. This also assumes we do not realize another strategically important cash need such as an acquisition.

Cash generation continues to be strong, as year-to-date cash provided by operating activities was $66 million versus $34 million in last year's first half. Free cash flow which we define as operating cash flow less capital expenditures was a positive $46 million year-to-date versus $18 million last year. Given the strong cash flow performance, this week our Board authorized a 10% increase in our quarterly dividend, which now stands at $0.11 per share.

With respect to debt, our total debt to EBITDA was 1.4 times at the end of the second quarter. However, please note that cash taxes of approximately $145 million for the gain on the BDNA sale and the US Tax Court decision will be paid by year end and result in an increase in debt.

Discontinued operations in the second quarter of 2013 were $200 million net of tax or $3.65 per share, which includes both the gain on the BDNA sale and the net operating results for BDNA. While 2012's second-quarter discontinued operations reflect the after-tax operating results of BDNA.

Now let's turn our attention to the updated 2013 outlook on slide 3 of our supplemental slides. Our 2013 guidance is based upon continuing operations. Therefore, it excludes the results of BDNA which are now reported as discontinued operations. In addition, our adjusted full-year guidance excludes the Company's CEO transition costs accounted for in the first quarter and the tax charge recorded this quarter.

For 2013, we now expect sales from continuing operations to grow 17% to 19%, with adjusted operating margins in the range of 13.5% to 14%. Adjusted EPS from continuing operations is expected to be in the range of $1.85 to $1.95 per diluted share, up 22% to 28% from 2012 adjusted earnings per share of $1.52.

For our continuing operations, depreciation and amortization is expected to be roughly $64 million, and $35 million of that reflects our outlook for depreciation, given higher CapEx spending of about $45 million this year.

And we expect the 2013 effective tax rate from continuing operations to be in the low 20%, which excludes the impact of the tax charge.

As has been our belief over the last several quarters, key factors that could impact our 2013 adjusted guidance include the following. To reach the higher end of the range, we would expect to see aerospace aftermarket strengthen in the second half, better volume leverage and stronger productivity. At the lower end of our range, we would assume the impact of weaker demand in certain industrial end markets, softer European automotive production, and a slowdown in the global economy.

In closing, sustained focus on increasing profitability across our businesses has provided for a good first-half start, and our second-half outlook remains positive. Additionally, our balance sheet has strengthened following the divestiture of BDNA, positioning us to benefit from organic and acquisitive opportunities to deliver long-term growth and shareholder value.

Operator, we will now open the call for questions.

(Operator Instructions) Edward Marshall, Sidoti & Company.

So the first question I had was on Aerospace, which I think I would have expected to see slightly higher, not just this quarter, but just so far this cycle, revenue gains. And looking at your largest customer, we saw equipment orders up 12%, spares are up 21% -- and I understand there's some management fees going into your revenue line there. But kind of piece together what seems to be the disconnect between maybe just using your largest customer versus kind of your performance over the last quarter or two.

Thanks, Ed. What I would highlight is that overall, we continue to be very confident on the outlook for Aerospace. Our backlog continues at all-time high levels. And of course, as you know, commercial aerospace production schedules continue also to be robust.

We are very confident in the full year and not surprised necessarily by schedule fluctuations from one quarter to another. As we laid out the year, we had a stronger back half of the year planned versus the first half, and that's truly a reflection of just various programs that we've been working and new product introductions coming online. And there has been on behalf of just some of the approvals a slight slippage from second quarter to third quarter on one of those initiatives. But overall, very confident with our backlog at record highs.

Yes, it sounds consistent with what I think you said that you expect to see high single digits for the full year in that business, so that assumes a ramp-up in the back half of the year.

Yes, what we had was the high single digits is still based on double digits in our Aero OEM. But based on the performance of aftermarket been a little bit lower than we had anticipated. Ultimately, that's what's putting a damper on the full year, but still high single digits for total Aerospace being projected.

Despite maybe just call it the okay revenue performance in that business, on a sequential look, it looks like Aerospace margin actually performed pretty well on down sales sequentially. It was actually an up -- and sequentially meaning from first quarter 2013 -- the margin was actually up nicely. Was there something specifically that went through there? I mean aftermarket was down, so it wasn't that, or at least the spare parts were down. What happened there?

On our Aerospace side, the teams there continue to drive a high focus across the businesses in terms of improved productivity. In particular, our Barnes Enterprise System is really starting to take hold across the Aerospace side of our business. And as you know, even recent in the last couple of years, we were recognized by the Shingle Award for manufacturing excellence.

So overall, the business continues to make great strides, and of course, we are leveraging volume as well in terms of the OE side.

Now, I will give you a chance to kind of maybe gloat a little bit, but the Industrial business itself is actually performing quite well, especially with its exposure to Europe. And I know you talked about the order book, but that's future revenue.

What happened -- what end markets -- and I think you touched on a few different products -- but what end markets in particular are performing better than expected right now for you on your Industrial side?

Well, we had a very solid quarter in terms of our Nitrogen Gas Products business, with them achieving a very nice sales improvement in the quarter. We also continue to be extremely pleased with the solid fundamentals in the hot runner end markets in particular. Obviously, the automotive hot runners, because we think that the CAFE standards are driving continued focus on lighter-weight vehicles, and in turn, driving demand for our hot runners.

And then finally I would say that we have seen pickup across our European businesses in terms of the fact that whilst Europe itself seems to be stabilizing, those businesses serve at global market base through their customers.

Did you give an organic revenue expectation for that business, similar to what you did in Aerospace?

We had indicated I think mid-single digits for the year.

Okay, thanks, guys.

Peter Lisnic, Baird.

Good morning, gentlemen. First question, just to continue on Industrial, you mentioned the strong hot runner demand. I'm just wondering now that you've got your arms around Synventive and it's pretty well-integrated, can you maybe speak to the longer-term organic growth opportunities and how you think about that business? I know it's a relatively stronger growth business, but I'm wondering if we could narrow it down a little bit more or maybe talk about any sort of difference you see in the business post your acquisition of it from a growth perspective.

Yes, happy to do so. In terms of Synventive, as we continue to integrate the business into Barnes Group, we continue to be very pleased with the progress being made, as well as the continuing work endeavors of the management team running the Synventive business. So overall, as I mentioned, the outlook for the business continues strong, with the overall hot runner business being driven by lighter-weight vehicles, increased global competition, more new models and refreshes, as well as continuing identification new applications for plastic.

So in general, the high-quality, high-premium service that Synventive provides to its customers, we believe continues to be something that keeps them as a market leader in this end market, and in turn is continuing to drive demand for their services.

Okay, all right, that helps there. And then I just want to clarify -- the double digit order growth that you saw in Europe, you gave a little bit of color there, both up year-over-year double digits and sequentially. But I'm wondering was there a particular vertical, or is it just broadly export-based business? It seems just a little bit surprising, given what we've heard so far through earnings that we would see that kind of comparison. So I am wondering if there is perhaps a share gain initiative there that you are benefiting from or if there's a particular vertical where you are really well-positioned that's driving that growth.

In terms of the European business, what I would highlight is that Nitrogen Gas Products continues to do very well in terms of penetrating its end markets in terms of the tool and die industry.

We also saw strength from automotive end markets, in particular for our Seeger business, which again. is serving not only a customer base that is located in Europe, but also global in nature. So continued expansion in China in terms of their end markets.

And then in terms of our Heinz Hanggi business, the main contributor was a program that we've continued to have in new product introduction for the last couple of years, is now starting to ramp into production, in particular gas-direct injection program that we've been developing for some time.

Okay, perfect on that one. And then the last question just on the profitability of that segment. In that case, it actually went down a little bit sequentially, so I was just wondering if there was a little bit of adverse mix there that caused that. If you look at the operating margin first quarter versus second, it's down around 50 bps, but your revenue is up a bit. So any sort of color there would help.

Yes, I think one of the primary contributors is our NGP business sales into the Japanese market. And FX was a contributor in terms of the strengthening of the US dollar.

Okay, perfect. That is very helpful. Thank you for your time, nice quarter.

Pete Skibitski, Drexel Hamilton.

Good morning, guys.

Pete, welcome to Barnes Group.

Yes, welcome.

Thank you, thank you. I just want to clarify something on the cash flow, in terms of the proceeds from the distribution sale. It looked like you got all $540 million in this quarter. But the net proceeds are expected to be $400 million, and I'm just wondering where the $140 million tax bill -- I guess that came out of cash from ops this quarter. Is that correct?

Yes, actually, the cash payment is not going to happen until -- by the end of the year, we will make that cash payment. But that's the way to think about it, Pete, is we've got roughly after-tax cash proceeds of $400 million.

Okay. Will that all be in one quarter, the tax bill will be paid, or you pay that ratably (multiple speakers)?

We expect it. Yes, we would expect that -- right now, probably I would say targeting towards third quarter.

Okay, okay, got it, got it. Chris, the work in capital management H1 over H1 is definitely greatly improved. And I'm just wondering are there further opportunities for working capital takeout as you look forward, and could we expect a similar performance going forward?

That's a good question. We do constantly stay focused on working capital management and trying to drive better improvement across the board. I would not say that there's any one big item that would change it significantly. We continue to manage it over time. Obviously, we look at total free cash flow generation from the business, would include working capital. Very pleased with overall cash performance for the Company, and guiding around the free cash flow conversion of 100%.

Got it, got it. I guess just one last one for Patrick maybe. Patrick, your prior peak margins in Aerospace, if you look back to 2007, were close to 19%. And you are essentially I think the same business in Aerospace. So I'm just wondering as you look out what you see as the potential peak margins Aero as you get to the top of the cycle in Aerospace, maybe three or four years out.

What I would highlight, back in 2007 timeframe as the prior peaks, what we were looking at -- or what you saw there was the impact of the revenue-sharing programs, which at that time were not being impacted by the management fees. As they have come into play, that has been a factor.

However, with that said, as we look out for our Aerospace business, we are looking at mid to high teens as the targeted margins.

Got it, great, thank you very much.

Christopher Glynn, Oppenheimer.

Thanks, good morning. Just a couple of questions on your acquisition outlook here, just as Synventive has been with you for a couple quarters. What are the bright spots and the challenges you are seeing there? How is that all playing out?

And then on the forward pipeline, how is that looking and what's your current appetite with Synventive still pretty young with you?

Christopher, yes, I would highlight there that we continue to place a large focus on filling a pipeline of acquisition targets that we feel meet our overall strategy and the key criteria that we have laid out. In other words, the focus is on businesses that have a high level of intellectual property, such as design engineering, applications engineering, as well as the manufacturing aspect.

And then in terms of favorable end markets, we are extremely pleased with the injection plastic molding industry that we embarked upon with our acquisition of Synventive. So that remains a key area of focus. We are pleased with the pipeline and continue to drive our focus in that area.

Okay. And with Synventive being young, still that doesn't kind of play into your thinking on potential timing?

I think we are continuously looking, and if the right opportunity comes along, that -- a premium business meeting our criteria, we would look seriously at it.

Great. Just tax years other than 2000 to 2002, any possibility of any other issues, or are you looking at any components of your current tax structure?

No, Chris. Good question. Just for clarity, no. This is a -- kind of, I would say, a unique issue for us in the 2000-2002 timeframe, but it doesn't repeat through the remaining part of the years.

Great, thanks, guys.

Matt Summerville, KeyBank Capital.

Thanks, good morning. A couple questions. First, Patrick you mentioned some slippage in your Aerospace business on the OE side. Can you get more specific about that in terms of the program and magnitude, and whether we should feel good about that getting recaptured in the back half?

Yes, good question. One of the things as we continue to do new product introductions across our Aerospace business is that as much as we are aggressive in the schedules that we've put in place and then forecasting those particular initiatives coming online, there is, just as a natural part of the industry, some slippage.

That slippage for us just was a second quarter to a third quarter item, but nothing out of the ordinary in terms of what we would expect in terms of new product introductions. So we are optimistic in terms of recovering that in the second half. And of course, as I mentioned, we have as a result a stronger second half outlined for the full year.

What are your assumptions in the second half in terms of OE revenue growth versus aftermarket?

We believe overall for the full year a high single digit for all of Aerospace. And on the OE side, that translates to low double digits.

Okay. And then sticking with Aerospace, there's been another company or two talking about some of the engine OEMs, specifically Rolls and UTX destocking. Are you seeing any of that? Is that a concern? Are you hearing any of that?

No, in general I don't think we had seen any impact from destocking. We are clearly continuing to focus on the major programs that make up our strategic backlog, and they are the 777, the 787, and we are not seeing any destocking effects from that.

So as I think about trying to get comfortable with this back-half scenario, you are sub-$100 million. The numbers you are talking about imply $110 million, $115 million, something like that per quarter in the back half of the year. What programs are contributing to that incremental ramp on the OE side of the business? You are really talking about a big jump in the second half versus the first half.

Yes, we have a number of programs. Obviously, the 777, which makes up a large part of our Aerospace backlog, is key in that. But also we have a number of programs that have been introduced today where we do not own the product lines through our new product development initiatives. They will come online. So not necessarily new programs. It may be increased volume on 777, 787, GE-90 in particular, as an example. But we also have then a large B2 military contract which also is scheduled for shipment in the second half.

Okay. And then just trying to close the loop here on the spares business. I think GE mentioned on their call that their daily spares rate was up about 20%. Historically, what has been the magnitude of disconnect between the experience in your business versus the experience in their business? And should we view that number from your big customer as looking more upbeat for the back half of the year as it pertains to you guys?

What I would highlight is that it is directionally, as our large customer business goes, then our RSP programs; as an example, are on the CFM56 and the CF6. So there is a mix factor, but directionally we are in the same trend.

For our RSV program in the second quarter, we saw a nice pickup as well in terms of unit volume. However, that was offset by management fees and mix.

Okay, thank you.

Scott Graham, Jeffries.

Yes, good morning, Patrick, Chris. So the questions, I had a couple of sort of housekeeping items. Could you give us the backlog dollars by segment?

Sure. So we had total Company was $664 million. For Aerospace, it was $536 million, and Industrial, $128 million for the end of the second quarter.

Okay. Now, a couple of questions on the Aerospace aftermarket industry expectations. Can you kind of size them for us for the second half? I know that we've kind of maybe danced around this question a little bit. And I'm just wondering if -- is the view kind of pinched from double-digit down to 5% to 10% in the second half? Am I in the ballpark there?

In terms of aftermarket, Scott, what I would highlight is that we remain cautiously optimistic relative to the timing being the second half of 2013. That said, the overall leading indicators in the market continue to support a recovery, in that passenger traffic continues to grow, load factors remain at all-time highs, capacity continues to grow, and the overall outlook for airline profitability continues to improve. So all of the leading indicators support the recovery.

We saw nice -- I think across the industry, I would suggest that Q2 saw nice uptick in terms of aftermarket in general, and so that bears well for continued positive outlook.

Got it, okay. So when it comes to margins, you had still a negative mix in Aerospace, yet that margin rose pretty strongly in the quarter. And I was just kind of wondering maybe you can give us a little bit about what's behind that -- productivity, I know. But maybe specifically within productivity what you guys are doing to boost the margin that much with mix a bit of a headwind for you.

I think, Scott, it really centers around the same dialogue as before. And whilst we are looking at all of our programs across the board, there has been an increased focus and attention not only in terms of driving productivity, but also in a disciplined cost management. That has all emanated from the discipline that we are putting into the businesses from the Barnes Enterprise System, and so we continue to be pleased and continue to remain laser-focused in driving those initiatives.

Okay, great. The other question I had for you was on the Industrial margin. Now I don't know how much Synventive boosted the margin, but I guess maybe this is a question for you, Chris. Was the Industrial margin in the second quarter up even without Synventive?

Yes, the businesses are contributing across the board within Industrial, trying -- the whole focus has been on margin expansion within each of our businesses. And Synventive clearly contributed to that. But when you look overall at Industrial, the only I would say negative that I would highlight is what we commented before in terms of the Japanese yen and what our Nitrogen Gas Products contributes into Japan in terms of sales into Japan.

But when we look at it, we feel -- we actually felt very good about the margin performance in the quarter. It is reflective of what we would expect out of the Industrial segment. And in that low double digit margin is what we -- our outlook in terms of margin expectation for the full year.

I would also just add to that that the associated spring business has done a tremendous job also in terms of refining its product lines and ensuring that they're focused on those products which create the greatest value for the customer, and in turn, higher margins for Barnes.

Okay, last question, and this is more for you, Patrick. Someone alluded to it earlier. As you look at the M&A environment, I know that there is a continuing desire to move the portfolio up margin-wise. Would you say that the pipeline of opportunities that you are looking at is more skewed toward Industrial or more skewed toward Aerospace?

And the second question would be can we expect something to occur? Because I think you guys mentioned it a couple of times, about like, for example, share repurchases with the -- with the caveat being a deal. Are you optimistic that you can close something before the end of the year? So the two questions, please.

Yes, in terms of where we are focused, I would say that we continue to look at both Aerospace and Industrial for potential opportunities, with more of a leaning at this point towards the Industrial side of the business. And that's truly driven by valuations in the marketplace at the moment, because of the Aerospace side being extremely heated in terms of how people are looking at valuations there.

In terms of our overall outlook on M&A activity, we don't comment, obviously, on any deals that are in the works. But clearly, we are focused on driving and filling the pipeline to meet the criteria that we've outlined in terms of our overall strategy. And we continue to be very pleased with the work that we are doing on our business development side and that supports those efforts.

Very good, thanks for your time.

Matt Summerville, KeyBank Capital.

Just two quick follow-ups. First, Patrick, I think in your prepared remarks, you mentioned that a portion of the 5% organic growth you saw in Industrial was pricing. First, how much price are you getting and which businesses do you feel now that you have pricing power?

Well, what I would highlight, Matt, is that it was approximately 1% of the 5% was pricing. What we are looking at is those businesses where we own the design, we own the applications engineering and we own the manufacturing lend themselves to pricing discussions much more than perhaps our traditional businesses.

Patrick, have you historically been able to get price in Industrial? Is this sort of a new focus?

I would suggest that it's a key area of focus and it's in a very selective and specific way, in that it's not new overall, but it is something that we continue to challenge our businesses to look at in terms of where we create significant value-added services for the customer to ensure that we are also looking at the pricing aspect of those services.

And then related to a question I asked a few minutes ago, I want to make sure I am clear. Did you say that you've gained incremental content on the GE90 and on the 787?

What we continue to indicate is the approximately $1 million content on the 777 and $300,000 on the 787. What I highlight is that as we continue to work with our customers on both of those programs, we are looking at always where new product introduction may allow Barnes to bring a new set of manufacturing expertise or technologies to allow us to continue to expand that product offering.

Thank you.

Thank you for your question. That does conclude your conference call for today, ladies and gentlemen. Thank you for your participation in today's conference call. Please enjoy the rest of your day. Thank you.