Barrick Mining Corp (B) 2018 Q1 法說會逐字稿

Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes Group Inc. First Quarter 2018 Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to William Pitts, Director, Investor Relations. Please go ahead.

Good morning, and thank you for joining us for our first quarter 2018 earnings call. With me are Barnes Group's President and Chief Executive Officer, 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, 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. In addition, with our adoption of the FASB's amended guidance for the presentation of pension costs, you'll find a summary of the reclassification adjustments made to our previously recorded financial results on our Investor Relations website and in this morning's separate Form 8-K submitted to the SEC.

Be advised 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 periodic filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at bginc.com.

We'll now open today's call in our usual fashion, with remarks from Patrick, followed by a review of our first quarter results and our updated 2018 outlook from Chris. After that, we'll open up the call for questions.

Patrick?

Thanks, Bill, and good morning, everyone. Barnes Group opened the year with solid first quarter performance, exceeding the expectation we had shared with you on our February call. In doing so, we now have heightened expectations for 2018, and our end markets remain generally favorable in support of this enhanced outlook. We ended the quarter with record backlog in each of our segments, and total backlog now exceeds $1.1 billion.

In the first quarter, net sales increased 7%, with each segment seeing an increase. Organic sales were up 1%, primarily driven by Aerospace strength, while Industrial organic sales were down slightly as foreign exchange provided the revenue lift there.

Operating income was essentially flat to last year's first quarter, and earnings per share improved to $0.72, up from an adjusted $0.71 a year ago.

At our Industrial segment, sales grew 8% over the prior year period, though organic sales declined slightly. With healthy end markets and favorable FX, we saw a record quarter for orders, which were up 12% (sic) [13%] in total. Organic orders were up mid-single digits. This result was achieved even with the nonrecurrence of a sizable heavy-duty suspension order in our Nitrogen Gas Products business that we booked in Q1 last year. As such, we're feeling positive about our prospects for the remainder of 2018.

At Molding Solutions, total sales increased 15%, while organic sales were essentially flat. Sales in the quarter were impacted in part by more validation timing issues, and while the molds have been manufactured, revenue recognition doesn't occur until final validation and customer acceptance. While we see some deliveries shifting to the right, we still expect Molding Solutions to deliver high -- higher quarterly sales in the 3 remaining quarters.

Within the SBU, and with respect to hot runners, we anticipate automotive program launch strength in both Europe and Asia to offset softening demand in North America, given the exceptional year there in 2017.

With our molds business, we see very strong medical and personal care end markets, with a corresponding benefit for hot runners. In particular, Männer generated record quarterly orders and saw backlog increase to an all-time high in the first quarter. For the year, we continue to forecast Molding Solutions' sales growth in the mid-single digits.

Moving to Nitrogen Gas Products. The global tool and die market has maintained its strength entering the year. And while we don't envision significant growth over the record 2017 sales level, we remain positive in our outlook.

In the quarter, organic sales declined 7% relative to last year's strong first quarter, though keep in mind that this quarter's sales are sustained at a high level.

Similar to Synventive, we're seeing some relative softness in North American automotives. However, for NGP, higher activity in industrial tool and die markets is partially offsetting that dynamic. With sustained high sales volume, though reflective of a difficult comparison through the remainder of the year, we continue to expect full year total and organic growth to be in the low-single digits.

At Engineered Components, first quarter total sales increased 4%, with essentially flat organic sales. Sales growth primarily came from transportation end markets, both automotive and nonauto.

Here, too, our end markets are favorable. Global automotive production forecasts are modestly positive over the next several years, and manufacturing PMIs for our key regions remain strong.

Progress on operational challenges within Associated Spring has been made, and our forecast reflects sequential margin improvement in Engineered Components in the second half.

All in, our revenue expectation is unchanged, with 2018 sales in line with 2017 levels.

Likewise, at the Industrial segment level, our prior outlook holds, with 2018 full year total sales in the low- to mid-single digits, with organic growth in the low-single digits. Forecasted operating margin is projected to return to the mid-teens.

Moving to Aerospace. We delivered another excellent performance quarter. First quarter sales were up 5% as compared to a year ago. While OEM sales increased modestly, which was not unexpected, orders remained very solid, and OEM backlog grew to a record level.

In the aftermarket business, sales growth was robust, up 19%, with MRO sales up 16%, and spare parts sales up 23%.

Certainly, our business is benefiting from a vigorous commercial aerospace environment, where aircraft build rates are expected to remain strong over the next several years and current fleet utilization remains high.

On the OEM side, we envision stronger quarterly revenues for the remainder of the year, driven by the LEAP and Trend 7000 programs, among others. Accordingly, we continue to expect full year OEM sales up in the high-single digits.

In the aftermarket, our full year outlook has improved, with MRO revenues expected to be up in the high-single digits, and spare parts now up mid- to high-single digits. Our operating margin outlook is for the high-teens.

As a side note, I had the opportunity to attend the MRO Americas conference in Orlando a couple of weeks ago and, to no surprise, found the sentiment there was overwhelmingly positive on the current aftermarket environment. With sustained strong industry demand trends, which are reflected in our quarter's results and increased full year outlook, we expect a great year for our aero aftermarket business.

To close out my comments, we have started the year with solid performance that positions us well for 2018. Operationally, we're making good progress in executing on our plans. In addition, our end markets are supportive of our positive outlook.

So with continued momentum and a focus on driving our long-term growth strategy, we remain confident in the prospects for another good year. We look forward to delivering on our outlook and driving further value for our key stakeholders.

With that, let me now turn the call over to Chris for a discussion of the financial details of the quarter and a broader update on our current year guidance.

Great. Thank you, Patrick, and good morning, everyone. Let me begin with highlights of our first quarter results.

For the quarter, sales were at $367 million, up 7% from the prior year period, with an FX benefit of approximately 5%; organic sales growth of 1%; and acquisition revenues of 1%.

Net income was $38.8 million or $0.72 per diluted share, up from an adjusted $0.71 per share last year. Adjusted net income per share in the first quarter of last year excludes $0.01 of FOBOHA short-term purchase accounting adjustments within our Industrial segment.

Moving now to segment performance, beginning with Industrial. First quarter sales were $246 million, up 8% from the prior year period, driven mostly by the impact of FX.

Operating profit was $32.4 million, down 6% from an adjusted $34.5 million in the prior year period, as a lower contribution from organic sales, inclusive of unfavorable product mix and lower productivity, weighed on the quarter's performance.

Operating margin was 13.2%, down 200 basis points from an adjusted 15.2% last year, though up 170 basis points sequentially from an adjusted 11.5% in the fourth quarter of 2017.

For Aerospace, first quarter sales were $121 million, up 5% from the same period last year.

Operating profit was $24.3 million for the quarter, up 8%, reflecting the profit impact from higher sales volumes, partially offset by scheduled price deflation as certain programs transition from development to production.

Operating margin was solid, up 60 basis points to 20.1%, clearly benefiting from the mix of aftermarket demand in the quarter.

Aerospace total backlog ended March at a record $745 million, up 9% compared to a year ago and up 3% sequentially from year-end 2017.

For OEM only, backlog was $733 million, and we expect to ship just under 50% of that backlog over the next 12 months.

Other items to note for the quarter. Interest expense increased $0.5 million to $3.9 million, primarily as a result of a higher average effective interest rate as compared to a year ago; and other expense for the year increased $1.2 million versus last year.

With respect to taxes. The company's effective tax rate was 23.9% in the first quarter of 2018, compared to 26.9% in the first quarter of 2017. For the full year 2017, excluding the impact of discrete tax expense related to Tax Cuts and Jobs Act, the effective tax rate would have been 20.2%.

With respect to share count, our fourth quarter average -- quarter average shares outstanding were 54.1 million shares. During the first quarter, we were inactive -- we were active in repurchasing approximately 533,000 shares at an average cost of $62.93 per share. We now have 3.2 million shares available for repurchase under existing board authorizations.

Through March, cash provided by operating activities was $30.5 million versus $51.8 million last year. 2 main drivers are working capital needs to support growth and the absence of a legal settlement payment of $10.6 million in the first quarter of 2017.

Year-to-date free cash flow, which we define as operating cash flow less capital expenditures, was $19.3 million compared to $40.1 million last year. First quarter capital expenditures were $11.2 million, down slightly from 2017.

With respect to the balance sheet, our debt-to-EBITDA ratio remained at 1.7x at quarter-end. Under our existing debt covenants, additional borrowings of approximately $500 million of senior debt would be allowed, while approximately $450 million remained available on our credit facility at quarter-end.

Turning now to our updated 2018 outlook on Slide 5 of our supplement. We now expect 2018 total revenue growth of 5% to 6%, with organic sales growth of 3% to 4%. FX is expected to benefit revenue by approximately 2%.

Our operating margin forecast remains in the range of 15.5% to 16.5%.

Earnings per share are now expected to be in the range of $3.03 to $3.15, up 5% to 9% from 2017's adjusted diluted earnings per share of $2.88.

We continue to see our EPS weighted in the second half of the year, with a roughly 47%, 53% first half second half split. Please keep in mind that in the second quarter of 2017, we realized a substantial discrete tax benefit, via consolidation of several Swiss legal entities, which provided approximately $0.12 of EPS benefit in the quarter.

A few other items to update in our outlook. Interest expense is anticipated to be $15.5 million to $16 million. Our effective tax rate for 2018 is expected to be in the range of 25% to 25.5%. Average diluted shares are forecasted to be 53.5 million. Our CapEx expectation remains at $60 million to $65 million. And cash conversion is expected to be greater than 100%, unchanged from our prior view.

So in summary, a very good start to begin 2018. Our earnings expectations have improved, lifted by the continuing strength in our Aerospace segment.

Our full year cash generation and conversion expectations remain strong, which, coupled with a supportive balance sheet, allows us to sustain a higher level of CapEx, much of which is directed towards growth programs.

And as always, strategic acquisitions that promote our long-term growth objectives remain a key part of our overall strategy.

Operator, we will now open the call for questions.

(Operator Instructions) Our first question comes from Christopher Glynn from Oppenheimer.

Just want to dive into the comment for having Industrial margins in the -- at the mid-teens level for the full year. So the first quarter came in at entry-level teens, I think, as expected. You're looking at the second half kind of fully normalized relative to the recent plant consolidation-related inefficiencies. And then what was the continuing drag from those activities in the first quarter?

So Chris, as you highlighted, the margin in first quarter, we saw some nice sequential improvement from Q4. And that, again, primarily coming from improvements that have continued within Associated Spring. The team there has continued to make solid progress and is on track to achieve the milestones that we previously outlined. To that end, the closure and consolidation of the smaller plants we announced has progressed as planned, and our target is to exit that facility by the end of the second quarter.

So with that, what we're seeing -- what we expect is sequential improvement in margins, particularly in the second half of the year, from Associated Spring, which is -- gives us confidence in the mid-teens guidance for total Industrial.

Okay. And then aftermarkets had a continuing very strong quarter. Just wondering if there's -- a couple questions. Any initial provisioning involved with your portfolio? And otherwise, comment on RSP, CRP and base MRO, really, to the point of what spurns aftermarket profile versus the market for the next couple years? The kind of structural dynamic with some of those various components?

Yes. So with respect to our aftermarket, as you know, a big component of it is the CRPs and the RSPs. The CRPs, being on the repair side of the equation, sometimes -- we also refer to it as MRO. There -- both programs are being driven by the CFM56 and so the demographics of that particular engine continue to be extremely favorable, with a large install base that is projected to have to come into the shops for overhaul over the next few years -- over the next 10 to 15 years. But peaking, we expect peak overhaul shop visit rates in the mid-20s.

So as we look out for our aftermarket side of the business, the CFM is a primary driver of our confidence in continued growth. The other engine model that's a part of both of those programs is the CF6, which is a wide-body aircraft. And that particular engine is at the sunset years of its life cycle. But we've seen a resurgence in demand for that particular engine and spare parts for that engine over the last year and even strong demand in for the first quarter.

So as we look at our aftermarket, in general, we remain very optimistic. The fundamentals of the industry continue to support a strong aftermarket with respect to aircraft utilization. And specifically, for Barnes, the great programs that we're on, I think, put us in a great position.

Okay. So would you expect to generally sit a little bit above aftermarket industry trend line?

I think aftermarket's projected to grow in the mid-single digits. And you've seen us far outpace that over the last couple of years, particularly driven by the dynamics I just mentioned. So I think mid-single digits is a very solid outlook for aftermarket in general. And I think our CFM56 engine content puts us in a nice position to be there or higher.

Your next question comes from Michael Ciarmoli from SunTrust.

Just to stick on the aftermarket side. You obviously talked CFM56. Any incremental opportunities for you there, given what will likely be a lot of Airworthiness Directives and accelerated inspections on those older engines in service? I mean, is that repair work you guys can do? Or is that going to go more towards maybe [Saffron], GKN or -- just maybe if you could provide some color on there, if you see that as an incremental driver in the -- on the repair side?

Yes. So with respect to the Airworthiness Directive that you're referencing, we do not see any necessary benefit to Barnes Group from that activity because the particular parts affected, we do not overhaul and repair or have any content on. That said, I also believe that for the engine in its entirety, the particular Airworthiness Directives can be actually performed in line or online. So the shop -- the engines themselves may not go into the shop for a complete overhaul. It will be a in-line inspection conducted potentially at airports.

So -- but as it pertains to the CFM in its entirety, as you know, it's a great -- it's one of the most successful engines in aviation history and it continues to be produced even as we speak. Whilst the LEAP is ramping up, the CFM, of course, is ramping down to CFM56. But again, continues to be produced at high levels and up to record levels just a couple of years ago.

Got it. That's very helpful. And then just at the company level, on guidance. Organic growth narrowed down for the full year. What are the puts and takes weighing on that organic growth?

So the 2 main drivers, as we think about organic growth out of the Industrial side, come from Molding Solutions and Nitrogen Gas Products. What we've seen in the first quarter is a little softer start to organic sales in Molding Solutions. And as I mentioned in my prepared remarks, it was really as a result of slippage of some molds out of the quarter due to timing issues with validations. And so we still remain extremely positive on our Molding Solutions business, with a full year outlook of up mid-single digits.

On Nitrogen Gas Products, by contrast, we saw some softening in North America in the first quarter. We recognize that, that's coming off a very strong 2017. So demand that we're seeing in Europe and Asia for both Molding Solutions and Nitrogen Gas Products, gives us confidence that there'll be -- that they'll offset any softening that we're seeing in North America.

Got it. And then just housekeeping. On the EPS change tax and share count, anything else driving the EPS change for the full year?

Yes. I would say, Mike, it's on the Aerospace aftermarket side. We continue to be very bullish on the comments prior about CFM56 and, specifically, the benefits of spare parts and aftermarkets. So very strong.

Your next question comes from Edward Marshall from Sidoti.

So I wanted to stay on Aero. So strength in MRO, I think, might be messy. Any potential recovery in the OE side as you're coming down the cost curve on LEAP? I'm wondering if you could kind of give us any details. I know you won't break out the margin per product line but can you try -- kind of talk to that theme and let us know what's going on in the OE side?

Yes. So on the OE side, Ed, we continue to make great -- the team there continues to make great progress in terms of ramping up to the increased volumes, primarily on the LEAP program and on the A350. And as I mentioned, even coming into the back-half of this year, we see increased volumes in terms of the Trent 7000.

As it pertains to the overall performance of Barnes Aerospace, clearly, this quarter was driven significantly by aftermarket with 20% operating margins. But on the OEM side, we're pleased with the progress we continue to make. We are moving product through the shop at higher rates than we have been for the last 2 years. And we are continually focused on margin improvement and have seen margin improvement on our OE side.

That said, I also would highlight that we have to keep ahead of a curve because you also are aware that there are price bounce as volumes increase. And so whilst we see nice improvements in terms of efficiencies in the shop, there's a portion of that which is shared with the customer in terms of already contracted deflation.

Got it. And with the LEAP seeing some, I guess, supply chain shortage or turbine disc issues, do you think that's a potential opportunity for you as we -- have you had conversations with your customers as a potential opportunity for you to pick up additional share?

If there's issues in the supply chain, we always see it as an opportunity, Ed, for the reason that one thing we're focused on is performance, performance, performance. And we believe that by being a solid performer and meeting the volumes that are coming to us, the minute there's a glitch in the system with any of our competitors we see it as an opportunity to pick up market share. It has, more often than not -- for it to be in the short term, it has to be similar-type products that we're already producing. So in the product line that you referenced as being an issue, that's not something that we participate in. So that particular product may not represent an opportunity, while others, if they get into delivery issues, may represent opportunity for us.

Got it. With Industrial, it's just a quick question on inflation. Are you seeing -- obviously, you're seeing the raw material inflation. How's that conversation with the passthrough?

It's -- well, it's one that we continue to have dialogues on and, of course, recent announcements around tariffs and that it -- the associated costs that may come with that on aluminum and steel, aluminum is not so much a factor for us. The steel clearly is. But we have a number of contracts in place that allow for escalators and openers for discussions on a periodic basis. We have others, which we're going to continue to dialogue with the customer. But the team, collectively, has rallied around a clear focus on mitigating any costs that come to us, in terms of alternative sources or mitigating them with our customers.

Got it. And last one from me. I couldn't help but notice in the balance sheet, the receivables have taken a big tick up. I don't want to ask about any particular customers, but are certain customers taking longer to pay than normal, and -- or was this just an anomaly to the first quarter?

Yes, Ed, I would view it more as an anomaly to the first quarter. We haven't seen changes in payment terms, just given the volume we've had in the -- kind of in the March time frame, and just looking at receivables. We're still -- just from an operating cash flow, good performance for the quarter. Typically, Q1 is lighter than us for the full year. But from a cash flow point of view and our focus on working capital, we still expect to have cash conversion greater than 100%.

Your next question comes from the line of Pete Skibitski from Drexel.

Patrick, just on the MRO expansion at FOBOHA and kind of the global expansion as well, could you just let us know kind of where we're at on the time line there? And when do you think that strategy will be kind of fully implemented?

So on FOBOHA, the team there continues to make great progress in executing the plans that we put in place from the initial time of acquisition. Be it, as you know, we announced the closure and consolidation of a FOBOHA plant in Muri, Switzerland made last year, which the team completed without a glitch by the end of the fourth quarter. I'm also, to that end, pleased to say that we've -- we are realizing the projected savings as a result of that activity.

The teams are also making nice progress, as you highlight, on the other areas that we targeted to grow the business and improve profitability. And one of the key focus areas there is putting a lot of emphasis on demonstrating to our customers the exceptional value that FOBOHA's unique cube technology brings to the production process because it allows tremendous throughput on the same actual injection molding press. So that value is something that we have just put a tremendous amount of effort on, in terms of demonstrating it to our customer base.

On the aftermarket side, we continue to expand our capabilities. As you know, we had a Männer facility in the U.S. And in the acquisition, we acquired a FOBOHA facility in Asia, in China. And in both instances, the teams are looking to spool up capabilities with a view to expanding aftermarket globally, both in Europe, North America and Asia and, to that end, they've also put a lot of emphasis on increasing our presence, in terms of field services, and engaging the customer more and more with a view to providing overhaul services to our installed base of products.

So nice progress all around. And as it pertains to FOBOHA, from an overall level, we think it's well positioned for the year with a healthy backlog, and we're excited about that business more and more as we continue to integrate it into the Barnes family.

So it sounds like still early days on that whole aftermarket expansion.

Early days. I would say early days in the sense that it's a -- when we entered into it, we thought of it as a multiyear process, and I'd say we're in the early innings.

Okay. Okay. And then just on the whole -- the mold validations issue. I don't know, is that FOBOHA also? And then should we expect that to be kind of complete in the second quarter or more so later this year?

It's not necessarily -- I don't want to project that as being an issue in the sense that -- what happens is when we produce these complex molds, we actually bring the customer on-site to validate them at the end and highlight their performance and demonstrate their performance before the actual product ships. However, in that process it requires the timing of the customer to be on-site for that validation process. And what we saw in the first quarter was a timing issue to where some of those validations shifted to the right, or the validation and the customer acceptance of that validation.

As you know, with the mold business, it tends to be a little bit more lumpy in terms of quarter-to-quarter. But in the full year, we still think it all levels out. But we'll continue to look at that business very positively, both in short term and for the full year.

Got it. Okay. And then, just on the LEAP, there's more and more talk of Airbus and Boeing going up through 60 a month rate-wise over the next, I don't know, couple of years, let's say. Are you guys facilitized in machine to go kind of up to those type of rates? And would it be a lot of incremental capital for you if they did make those decisions?

I think we have the ability to expand, but we're not at that capacity today. But what has been planned out within our Aerospace business is the next 2 to 3 years worth of capacity. And so we're expanding as we speak, even within our Singapore locations and continuing to develop capabilities in our U.S. locations. So it absolutely represents upside opportunity first. And we also, to some of the earlier comments, we think that as the supply chain potentially strains under some of those volumes, it may represent additional opportunity for Barnes.

And my last one, if I could. I wanted to ask you kind of a high-level technology question. I keep reading more and more about this area of thermoplastics as maybe kind of a replacement for metals. And we've got the whole additive manufacturing issue out there as well, which I know you guys kind of monitor, but thermoplastics and additives, are we getting to the -- a, do you guys have any expertise in thermoplastics? And are these things that can threaten your core business? How are you thinking about these technologies?

So materials, in general, when I think about the plastic injection molding industry and our Molding Solutions business, the team there work with a range of different plastics, Pete, every single day. And in fact, it's one of the aspects of their expertise that, I think, not only draws the customer to them but also allows them to differentiate themselves in terms of the competition.

So overall, as we think about 3D printing, it's something that we look -- we're looking to embrace, we have embraced it, both within our Molding Solutions business as well as our Aerospace business. We see it as having definitive applications that we think can add incremental value to the products and services that we provide. And so we're embracing it, at the same time we're also keeping very cognizant of its disruptive nature to where it has great potential. And so we keep a watchful eye on that as well.

Your next question comes from the line of Tim Wojs from Baird.

So I guess just on Molding Solutions, I was wondering if -- just I had a question on content and kind of what you're seeing there. I mean, relative to maybe 12 to 18 months ago, I mean, how do you feel about the content opportunity within the automotive part of Molding Solutions, in particular. And has that really changed at all, is it getting better, is it maybe kind of staying the same? Some color there would be good -- be helpful.

Right. Well in particular, as it pertains to the automotive side of our hot runners business, what we're seeing is continued strength in Europe and Asia. This particular quarter we saw a little bit of softening in North America. And again, based on a comparison to last year, which was a record year in North America for our automotive hot runner businesses because of the sheer number of program launches that occurred over 2017, we still feel North America represents opportunity, but not at the peak levels that were achieved in 2017.

The offset to that, of course, is we continue to see nice order strength in both Europe and Asia in the first quarter, and that bodes well for a continuing solid year.

Okay. And then, how do you think about the -- so from an M&A perspective, I mean, you guys spent a fair amount of time at the Analyst Day, kind of talking about kind of structures of businesses that you're looking at or considering maybe adding to the portfolio. So I'm curious just how that process is going for you guys. And how you feel about the M&A pipeline, just in general?

Yes. So it's an area we spend an inordinate amount of time on. Whilst it may not translate into announcements as frequent as we would like or maybe you would like, I don't want it to diminish the amount of activity that's taking place in the background. And so we continue to be very excited about potential M&A opportunity. And not only within our existing portfolio of capabilities, whether it be Molding Solutions, as an example, or even some of the other product lines that we're currently producing today. But as we look at other areas, in addition to that, we're excited about potential areas that the -- Barnes can expand, specifically on Industrial technologies that are highly differentiated and that allow us to replicate similar activity to what we accomplished with Molding Solutions. And so we're being very deliberate and we're being very disciplined in our approach. And it's an ongoing active discussion with our board every meeting that we have with them, so...

Your next question comes from Matt Summerville from D.A. Davidson.

A couple questions. Just within Molding Solutions, organically, can you tell us what the mold side of the business did versus the hot runner side? And then if maybe you can give a little more granularity on how much North America was down. Being only 25% of Molding Solutions' sales, I guess, I'm a little surprised that the strength you saw in Asia and Europe was maybe not able to more offset the (technical difficulty)].

Yes. So on the mold side, as I mentioned, in Männer, we had record orders and so our orders were a step function up over prior year and producing record backlog within our mold business in Männer. On the FOBOHA side, we also saw strong orders in the quarter, but not anything outside of the ordinary in terms of continuing strength. The hot runner side of the business continues to also exhibit some really nice strength. And so, as we look at both businesses, molds and hot runners, the backlogs in the mold side of the business have us in a great position for the full year. And hot runners, we also have a healthy backlog, which it's a shorter-cycle business but that, again, bodes well for strength.

Within the hot runner side of the business, is there a way for you to quantify? I think you mentioned in North America, you've seen a bit of a rollover in new model launches. So maybe what the view is regionally in terms of new model launches in 2018 versus 2017, to help us sort of see how the year might build in that business?

Yes. So the model launches side of the equation is something that we watch closely. And what you saw in North America was unprecedented levels of launches in '17. Recognizing too that they -- launches, in terms of how the business comes to us, precedes the actual model going into production. What we're seeing into the first quarter of the year is continued strength in Europe and Asia. And so over the course of the year, we continued to believe that, both on the hot runners side and on the mold side, not only do we have backlog to support our outlook for a couple of quarters, but the continued favorable environment and the amount of quota activity taking place with our customers, continues to instill confidence in terms of the full year.

The softness you saw in NGP, I saw you said, Patrick, in your remarks, that NGP was down 7% in Q1. Relative to your own internal forecast, how did NGP perform? And were you surprised by the magnitude of decline you saw there? Is there a destocking issue going on in North America? Can you give a little bit more granularity on that? I would just think, seemingly, with the general Industrial environment we're in right now globally, that, that business would still be doing pretty well.

Yes. I do think that it's doing extremely well. So albeit it's down 7%, I'm not necessarily overly concerned with respect to that because it's all relative to the high levels of performance in 2017. So NGP, more than any one of our businesses, has high comps coming into 2018. And so what we did see was, clearly, a little bit of a softening or pull back in North America in the first quarter for that business. But as you said, general Industrial is a nice offset for that particular tool and die business, with its -- majority of its revenues generated off of Automotive, as you know.

So I'm not necessarily overly concerned about it. I think it's indicative of operating at high levels. And quarter-to-quarter on a year-over-year basis, I think there's going to be some ups and downs.

Understood. And just one final one. The inefficiencies you saw in Associated Spring in Q4 were what number? And what was that number in Q1? I guess what I'm trying to do is sort of bridge how much sequential improvement you've seen in that operational drag, if you will. Chris, are you able to help out with that at all?

Yes. Matt, what I would say on that is it's the sequential improvement that we're seeing out of our Industrial business. And it's definitely -- we're at the other end of trying to get through the Associated Spring challenges in terms of, as we mentioned in the opening comments, in terms of the closure of the facility and just getting through that. So we're through it. The team's made some good progress. It's reflected in a quarter that met our expectations for the first quarter. And that sequential improvement, being up 170 basis points in operating margin and having that outlook for 2018 as continuous improvement, is how the team is profiling it. So we're pretty optimistic about getting to the mid-teens relatively shortly.

And there are no further questions at this time. I will now turn the call back over to Mr. Pitts for closing remarks.

Thank you, Kelly. We'd like to thank everyone today for joining us for our earnings call, and we look forward to speaking with you next on July 27, with our second quarter 2018 earnings call. Operator, we will now conclude today's call.

This concludes today's conference call. You may now disconnect.