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Barnes Group Inc (B) Q3 2020 Earnings Call Transcript

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Barnes Group Inc (NYSE: B)
Q3 2020 Earnings Call
Oct 23, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Barnes Group Inc. Third Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to hand the conference over to Mr. Bill Pitts, Director of Investor Relations. Please go ahead.

William Pitts -- Director, Investor Relations

Thank you, Sharon. Good morning, and thank you for joining us for our third quarter 2020 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 Securities and Exchange Commission.

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 SEC. These filings are available through the Investor Relations section of our corporate website at bginc.com.

Let me now turn the call over to Patrick for his opening remarks, then Chris will provide a review of our financial results. After that, we will open up the call for questions. Patrick?

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you, Bill, and good morning, everyone. For the third quarter, Barnes Group delivered respectable financial performance as we continue to manage through the challenging environment presented by the ongoing global COVID-19 pandemic. We generated earnings per share toward the high end of our July outlook, and our cash generation continues to be good. We also saw incremental sales growth in both of our operating segments over the quarter, with promising signs of recovery in our industrial business, and the moving on from what we believe was the second quarter revenue trough in our Aerospace business. Clearly, there remains a lot of uncertainty, but we can see signs of a path to recovery with more clarity. Given our strong management team and thoughtful actions, we expect to drive profitable performance throughout this challenging period, while maintaining a sharp focus on accelerating our key strategic initiatives to position the business for future growth.

For the third quarter, total sales decreased 28% over the prior year period with organic sales down 26%, driven by lower volumes given the pandemic's impact on our end markets. On a positive note, total sales did improve 14% sequentially from the second quarter, primarily driven by the performance of our Industrial segment. Adjusted operating income decreased 53% compared to a year ago, while adjusted operating margin declined 640 basis points to 11.7%. Earnings per share were $0.30, down 66% from last year, obviously, significant declines from a year ago, but somewhat better than expectations we laid out in July. More importantly, total sales improved sequentially through the quarter. At the same time, cash performance was once again solid, and our leverage continues to remain manageable. Ongoing cost management and further working capital improvements in the quarter also helped to mitigate some of the impact of lower demand.

Moving now to a discussion of our business segments and end markets. At Industrial, we're seeing some of our end markets exhibiting positive signs of recovery, coinciding with what has been a rapid increase of manufacturing PMIs. U.S. and Europe PMIs have risen substantially from the second quarter lows, and China has strengthened to its already favorable reading. Exiting the third quarter, all had solid PMI readings of 53 or better. Overall, segment book-to-bill was slightly better than one times and orders grew 24% sequentially from the second quarter.

In our Molding Solutions business, sales of medical molds and hot runners remained solid. And for the second consecutive quarter, we saw a nice year-over-year pickup in both packaging and personal care orders, reflecting the release of previously deferred projects. Correspondingly, we generated a sequential sales increase in both of these end markets in the quarter. In our automotive hot runner business, while sales were relatively flat to the second quarter, order saw a sequential bump as a few postponed projects were released. We're seeing this market slowly ramping, in part driven by the influence of new electric vehicles.

In our Force & Motion Control business, sheet metal forming market saw a modest sequential improvement in orders and sales, while general industrial orders and sales likewise trended positively. At Engineered Components, general industrial end markets experienced the meaningful sequential bump in orders and sales, another positive signal and fully aligned with the trend in manufacturing PMIs. Our global automotive production markets saw the most sequential improvement, which was foreshadowed by the positive auto production forecast trend we highlighted last quarter. While global automotive production is still anticipated to be meaningfully down in 2020, next year's growth is projected to be up in the mid-teens.

In our Automation business, we saw a solid quarter of performance with both year-over-year and sequential improvement in orders and sales. Demand for our end-of-arm tooling solutions and various automotive applications saw a nice bounce, while precision grippers for medical and pharma applications also remained a bright spot. For the segment, we continued to forecast sequential orders and sales improvement into the fourth quarter as the recovery progresses, albeit at a measured pace.

Moving now to our Aerospace business. In the third quarter, total Barnes Aerospace sales were down nearly 50% with OEM down 44% and aftermarket down 58%. Commercial aviation remained significantly disrupted by the global pandemic, yet passenger traffic has improved from the lows of April. In the short-term, we expect our OEM business to see soft demand for its manufactured components as aircraft production rates of both Boeing and Airbus have been lower. Although we expect our OEM sales to improve sequentially in the fourth quarter, getting back to pre-pandemic levels is forecasted to take several years.

In the aftermarket, lower aircraft utilization and weakened airline profitability will no doubt result in a slow recovery as less maintenance is required and/or gets deferred. However, as commercial flights return with domestic traveling -- travel happening sooner than international demand, we anticipate volumes in our aftermarket business to gradually pick-up.

For the fourth quarter, we forecast flattish sequential aftermarket sales. Despite a second consecutive quarter of 50% down sales, Aerospace delivered adjusted operating margin of close to 10%, a tribute to the quality of the team. Also, while addressing the substantial day-to-day challenges of the current environment, Barnes Aerospace improved its position by securing a long-term agreement with GE Aviation for the manufacturer of existing and additional components on the LEAP engine program.

With this agreement, we'll employ our expertise and technology in the machining and assembly of complex hot section engine components. The agreement provides for an increase of production share for select parts on LEAP engine programs, extends the term of previous agreements by 10 years for select parts and expands our portfolio of components on LEAP engines. Inclusive of the contract extension benefit, the estimated sales is over $700 million through 2032.

Just before I close today, I'd like to take a few minutes to talk about another very important aspect of our business, which is Environmental, Social and Governance or ESG matters and to highlight the progress we are making. At Barnes Group, we are committed to being an exemplary corporate citizen, and we take that responsibility very seriously. In doing so, over the last several years we've worked to further our ESG progress and have recently published our sixth annual ESG corporate social responsibility report. You can find our report and a summary of our ESG efforts on our company website under About BGI.

At Barnes, we began our ESG journey several years ago by educating ourselves on the global standards for measuring and reporting sustainability progress. Barnes Group's ESG efforts are currently focused on aligning our sustainability actions around the Global Reporting Initiative or GRI. The GRI is a common language used by organizations to report on their sustainability impacts in a consistent and credible way. Our teams are engaged in several projects that will illustrate to our varied stakeholders how we are striving to meet those sustainability standards.

I'm also proud to report that we have recently established environmental targets for 2025. As a company, we will work to reduce the energy we use in our factories as measured in carbon dioxide equivalents by 15%, reduce the amount of water we use by 20% and reduce the amount of industrial process waste we generate from our manufacturing operations by 15%. These efforts are a testament to our Barnes Enterprise System. Reducing all types of waste and inefficiencies to achieve operational excellence is the hallmark of our operating system and demonstrates our commitment to running sustainable businesses that conserve natural resources, while minimizing the impact of our footprint on the environment.

So to conclude, we continue to effectively manage our business as we deal with the disruptive effects of the pandemic on our end markets. Across the company, we've been focused on the safety of our employees, protecting profitability and driving cash performance. At the same time, we are pursuing various opportunities for growth, like the recent GE deal, to better position Barnes Group to leverage the speed at which we exit the current downturn.

As difficult as the last couple of quarters have been, I am very proud of the Barnes team and encouraged by the direction of our progress. And while the level of uncertainty remains elevated, I am very optimistic that our end markets have begun the recovery and that the future looks promising.

Now let me turn the call over to Chris for a discussion on the financial details.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thank you, Patrick, and good morning, everyone. Let me begin with highlights of our 2020 third quarter results. Third quarter sales were $269 million, down 28% from the prior year period, with organic sales declining 26%. As you'd expect, the severe demand disruption brought on by the global pandemic continues to impact many of our end markets. As we previously mentioned, we view the second quarter as the sales low point, with modest recovery commencing in Q3 led by Industrial, which is indeed, what we're seeing.

We saw a 14% sequential improvement in sales relative to the second quarter. However, on a year-over-year basis, the pandemic impact remained significant. Also, influencing our sales results, the divestiture of Seeger had a negative impact on sales of 4%, while FX had a positive impact of 2%. Operating income was $31.2 million as compared to $67.6 million in last year's third quarter. Operating margin was 11.6%, down 650 basis points. Interest expense of $3.7 million decreased $1.6 million from the prior year period due to lower average borrowings and a lower average interest rate. Other expense decreased by $2.5 million from a year ago as a result of favorable FX.

The company's effective tax rate for the third quarter of 2020 was approximately 44% as compared to 23.4% for the full year 2019. The increase in the third quarter's tax rate over last year's is primarily due to a change in the forecasted geography sources or the geographic sources of income with reductions incurring in several low tax jurisdictions, and the impact of global intangible low tax income, commonly referred to as GILTI.

Our current expectation for the full year 2020 tax rate is approximately 39%, which includes the recognition of tax expense related to the Seeger sale that occurred in the first quarter. As we look out to next year, given where things stand today, we expect our 2021 tax rate to be in the range of approximately 27% to 29%. Net income for the third quarter was $0.30 per diluted share compared to $0.89 a year ago.

Let me now move to our segment performance, beginning with Industrial. Third quarter sales were $197 million, down 15% from a year ago. Organic sales decreased 12%, Seeger divested revenues had a negative impact of 6%, while favorable FX increased sales by 3%. On the positive side of the ledger, total Industrial sales increased 19% sequentially from the second quarter. Industrial's operating profit for the third quarter was $24.4 million versus $34.8 million last year. Like last quarter, the primary driver is lower sales volume, offset in part by our cost mitigation efforts, which included the previously announced workforce-related actions and the curtailing of discretionary spending. Operating margin was 12.4%, down 260 basis points.

I'll close my Industrial discussion with quarterly organic orders and sales relative to last year. Molding Solutions organic orders and sales were down approximately 10%. Force & Motion Control organic orders were down mid-teens and sales down approximately 20%. Engineered Components organic orders were up 8% with sales down approximately 10%. And Automation organic orders were up high-teens with sales up low-single-digits.

Moving to Aerospace. Clearly the business remains under considerable pressure. Sales were $72 million, down 49% from last year. Operating profit was $6.8 million, down approximately 80%, reflecting the lower sales volume and partially offset by cost actions. Operating margin was 9.4% as compared to 23.2% a year ago. On an adjusted basis, excluding $300,000 in restructuring charges, operating margin was 9.9%.

Between the volume impact on factory absorption and the unfavorable aftermarket mix, the Aerospace team did a nice job to protect profitability. Aerospace OEM backlog ended the quarter at $534 million, down 4% from June 2020, and we expect to ship approximately 45% of this backlog over the next 12 months. Year-to-date cash provided by operating activities was $163 million, an increase of approximately $2 million over last year-to-date, driven by ongoing working capital improvements. We continue to have good receivable collections, and we began to see reductions in inventory levels. Year-to-date free cash flow was $133 million versus $124 million last year. And year-to-date capex was $30 million, down approximately $8 million from a year ago.

With respect to our balance sheet, our debt-to-EBITDA ratio, as defined by our credit agreement, was 2.8 times at quarter end, up from 2.4 times at the end of June. The company is in full compliance with all covenants of our credit agreements and maintained sufficient liquidity to fund operations. As we announced last week, the company has amended on a temporary basis the debt limits allowed under our credit agreements. For the next four quarters, our senior debt covenant maximum, our most restrictive covenant, has increased from 3.25 times EBITDA as defined to 3.75 times. Given the level of uncertainty in several of our end markets, we believe that is a prudent risk mitigation action. Our third quarter average diluted shares outstanding was 50.9 million shares. Our share repurchase activity remains suspended.

For the fourth quarter, we expect organic sales will be lower than last year by approximately 20%, though up approximately 5% sequentially from the third quarter. Operating margin is forecasted to be approximately 11%, while adjusted earnings per share are anticipated to be in the range of $0.27 to $0.35. Forecasted 2020 capex is approximately $40 million, a bit lower than our prior view.

So to close, while significant challenges remain in the current business environment, we're focused on managing those items that we can control, whether they be growth opportunities, cost actions or cash management. All things considered, our financial performance demonstrates that focus. As Patrick mentioned, the sentiment is that we're starting to turn the corner on a recovery. And while much work is still to be done, our efforts on positioning the company to best leverage and improving environment continues.

Operator, we'll now open the call to questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Christopher Glynn with Oppenheimer.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Thanks. Good morning, guys.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Good morning, Chris.

Patrick J. Dempsey -- President & Chief Executive Officer

Good morning.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Yeah. Just curious, I think you mentioned automation orders up high-teens, if I heard you correctly. I take that to kind of reflect dramatic first and foremost. So curious if that's a concentrated kind of bulk order dynamic or if you're seeing kind of a ground swell in the robotics automation secular themes kind of reasserting?

Patrick J. Dempsey -- President & Chief Executive Officer

Chris, you are correct. It is dramatic, and it is a overall growth across a range of different customers and product lines. So it's been a nice positive uptick in terms of the quarter and also on a year-over-year basis up in low -- their sales were up low-single-digits, orders were up in the high-teens.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Great. And I had a question about the tax. I think the fourth quarter implies a similar kind of GILTI impact maybe in the 40s for the tax rate than you mentioned high-20s for next year. Is the bridge just aero aftermarket moving off the bottom such that if aftermarket stays, like the second half of '20, does that actually push your tax rate much higher? Just want to understand this kind of thousands of basis point swings a little bit better.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Yeah, no. To your point, Chris, it's a pretty significant change. So yes, it is driven by lower income on those lower tax jurisdictions. But I would also want to identify as I made in my prepared remarks, just the application of GILTI given our dynamic globally, it is negatively impacting us. We went into the year thinking GILTI was going to be about $2 million headwind in our tax rate. We're now looking at roughly $5 million. So how that plays itself out into 2021, we're going through the planning period now. But as I mentioned, we would expect our effective tax rate for 2021 to be in this 27% to 29%.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Okay. And last one from me. Last quarter, FOBOHA had really strong orders, I believe. Just wondering if that backlog conversion is -- how that's going to that hit some 3Q or is it a little more fourth quarter and beyond where FOBOHA backlog and orders take hold in sales?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. FOBOHA is a little bit longer lead time because of the mold side of the equation. So a typical mold order when it's received could take from three to six months to ship. So a minimal impact in an immediate quarter. It's more the follow on quarters, Chris, where the impact without order will convert to an actual sale.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Great. Thank you.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thanks, Chris.

Operator

Next question comes from Pete Skibitski with Alembic Global.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Hey, good morning, guys. That was a nice quarter, all things considered.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thank you, Pete.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Hey, Patrick, Europe, people are talking about a COVID spike again over there, and you guys obviously have a big presence. So I'm just wondering to what degree does that make you nervous about your expectation of sequential improvement in the Industrial segment in particular?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, let's say, Pete, the COVID-19 situation makes us all nervous at the high level. But what our teams have done is an outstanding job in terms of anticipating different scenarios. And so what we are doing at the moment is ensuring that the businesses are taking every precaution necessary that is within our control to ensure continued operations without any disruptions. Of course, there could be a wildcard to that in terms of a governmental mandates of one form of another. But in general, we saw nice recovery across our industrial markets. We saw a nice recovery within our positive uptick in terms of our personal care and packaging in the quarter, all of which are European-centric.

And so in general, I think there is always going to be a concern with the unknown and the uncertainty of the current pandemic. But I want to highlight the great job our team has been doing with regards to managing and controlling everything within their control. We're also doing scenario planning just in the event that if a particular business was to be impacted for any reason, how we leverage our overall global footprint. So we're doing scenario planning in that respect to try and minimize any potential impact in the event of an outbreak of significant proportion.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Okay. But in general, you just see industrial strength manufacturing-wise despite the fact that we could have that uptick in cases over there. It's not holding back to markets, in other words.

Patrick J. Dempsey -- President & Chief Executive Officer

I don't see -- if you look at the PMIs even for Europe up at 53 for the quarter. I think sentiment in general continues to be positive, and we're seeing that flow through in our results in the third quarter.

Pete Skibitski -- Alembic Global Advisors -- Analyst

That's great. Is it too -- I mean, you guys are two quarters deep into this downturn, you're talking about already having hit the trough in the second quarter. Is there a reason to be excited about '21? I mean, you probably had a tough quarter in the first quarter with aerospace, but it seems like you're setting up for some pretty easy comps for most of the year, next year and already seeing some green shoots. So is that -- is it fair to say it could be a pretty nice year next year given all that?

Patrick J. Dempsey -- President & Chief Executive Officer

I think as you said, first quarter will be under pressure because we will have the comps compared to the prior year. And we had a -- within Aerospace, we had our strongest first quarter through the cycle in the first quarter of 2020. So that fairly sets up a tough set of comps in the first quarter. As we move on through the year, what we've remained encouraged by is that passenger traffic, while it's not anywhere close to what we would all want, it is showing consistent signs of improvement, albeit a pause there in September. At the same time, for those that have done a little travel, you'll see that the airports are picking back up in terms of traffic. With that said, as we move into 2021, we remain optimistic that general -- our industrial businesses will continue to improve as the year progresses.

As far as our medical end markets, it has just been consistently strong throughout the pandemic. And in fact, I would say, somewhat benefiting with the fact that our capabilities have solicited more inbound inquiries from our customers as to how we might help them in ramp into the needs of the medical community as this pandemic continues to unfold. So all in, Industrial, we are looking positively to 2021. Aerospace is going to be a slower recovery, all dependent on the OEM side. The rate of which production settles on the aftermarket, totally dependent on the amount of passenger traffic and people feeling comfortable getting back on planes.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Understood. Thanks for the color, guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thanks, Pete.

Operator

Next question comes from Michael Ciarmoli with Truist Securities.

Michael Ciarmoli -- Truist Securities -- Analyst

Hey, good morning, guys. Thanks for taking the questions, and nice results here given the conditions.

Patrick J. Dempsey -- President & Chief Executive Officer

Good morning. Thank you.

Michael Ciarmoli -- Truist Securities -- Analyst

Chris, just fourth quarter, margins forecasted to be down versus this quarter. And anything specific there as to why we wouldn't get any or shouldn't expect any margin lift if we're going to get the sequential increase in sales?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. Mainly driven by just our view of aftermarket. We're looking at sequential -- yeah, it's mainly aftermarket, so the higher margin piece of the aftermarket. But sequentially we're seeing growth. We expect growth in each of our businesses. The wildcard for us is how does aftermarket reflect in Q4 relative to Q3. So that's why we're a little bit on the lower side. But also, I would put -- so it's a bit more flattish in terms of the aftermarket. Also it's playing out in sequential improvement for us in Aerospace as the OEM business is expected to have a nice small increase, which is lower margin. So ending this quarter at roughly 10% for Aero and then looking at roughly 9% for Q4, is what we're thinking at this stage.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. It's a good segue. I guess, just looking at your slide deck, you talk about the variables for 4Q and you kind of call out deepening aerospace aftermarket declines. Can you give us any color as to what you're seeing from engine shop visits, inductions, orders. I mean, is there just -- I know you said you expect flat revenues in aftermarket for next quarter. But maybe just other color you're seeing from your big engine customers and relationship there that gives you sort of more reason for concern that you could see that aftermarket decline?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, I think Michael, what we saw was decline in terms of the aftermarket from Q2 to Q3. So once we referenced that we saw the revenue trough for Aerospace in Q2, it's actually comprised of an increase in terms of OEMs from Q2 to Q3 for the decline of the aftermarket. And so if you look at sequentially, our OEM business from Q2 to Q3 was up 17%, the aftermarket was down 22%. And so the trough as we referred to in total revenue was Q2, but we did hit a lower point in aftermarket in Q3. So with that, we're looking at Q3 as being the bottom with respect to aftermarket.

And then the question is how long we move forward at this level. We don't necessarily expect it to deteriorate. The question is, how fast might it improve? So from the businesses and from the team what we're hearing relative to shop visit rates is that the narrow-body engines are really the driver at the moment. In that, we've seen a significant fall off in wide-body engine inductions. The volume that we are seeing has been generated from narrow-body, and particularly narrow-body in Asia, particularly China. So the overhauled shops in China continue to be the engine at the moment that's pushing volume true back into our shops.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. That's helpful and then just one more on the OEM. What's sort of driving that sequential uptick? We're seeing other suppliers talk about still ongoing levels of destocking, production rate cuts still seemingly making their way through the system, certainly on some of the wide-bodies, and I don't know where the MAX rate is for you guys. But what's driving? What did you see drove that sequential pickup in OEM? Any specific platforms or anything you could point to?

Patrick J. Dempsey -- President & Chief Executive Officer

I think, I wouldn't necessarily point to any particular platform per se, as much as I would highlight that a tremendous amount of uncertainty in Q2, a tremendous amount at e-bookings and a significant amount of disruption in terms of what was accepted and what was declined relative to shipments from our dock to the customer. So as we move from Q3 to Q4, we have a nicer -- we have -- feel we have a nicer line of sight to what the customer is willing to accept.

Your commentary around destocking, we are not immune to it. So there is an aspect of uncertainty even as we move into 2021 as to how much of what we have within our schedules will actually flow and be allowed to flow direct to the customer versus the fact that there may be some lumpiness from quarter-to-quarter if they have a particular amount of inventory that they are looking to bleed down. And so they're managing that entire supply chain right now, and I do think it's going to create some lumpiness into '21. But nonetheless, on a gradual improvement as it pertains to the OEM side of the business.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. That's good color. Thanks a lot, guys. I'll jump back in the queue.

Patrick J. Dempsey -- President & Chief Executive Officer

You're welcome.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thank you. Thanks, Michael.

Operator

Next question comes from Myles Walton with UBS.

Myles Walton -- UBS -- Analyst

Hey, good morning. Thanks so much for taking the question. Maybe I'll just put it another one in following Mike's questions there. The sequential decline in aftermarket, I think it was about $5 million sequential decline and EBIT from Aerospace was also $5 million. So I'm just curious, it's a pretty steep decline. Was there a shift in mix of your aftermarket as well away from RSP sequentially, and maybe that explains some of that?

Patrick J. Dempsey -- President & Chief Executive Officer

That's fair. What it was is that in the quarter what we saw was the OEM side of the business was down 44%, aftermarket was down 58%. Inside of that 58%, MRO was down 50% and RSPs were down 69%.

Myles Walton -- UBS -- Analyst

Got it. Okay.

Patrick J. Dempsey -- President & Chief Executive Officer

So the mix is the driver with the more profitable spares being down -- affected more than MRO.

Myles Walton -- UBS -- Analyst

Yeah. Okay, that makes sense. And then you talked about OEM sequentially growing, do you also expect the OEM backlog from here to start to tick higher? And I guess the Airbus news this morning about potentially moving to freight 47 in the second half of next year, is that something that's already started to show higher signals to you from what the current pull rate is on that platform?

Patrick J. Dempsey -- President & Chief Executive Officer

It has -- I don't know that we are sitting here and seeing any impact to our backlog in terms of that positive news. I think it definitely is good news from our standpoint. At the same time, as we move forward, I think the earlier comment around destocking and the supply chain clearing what has been built up is going to have a direct influence on backlog. And so whether we've hit the bottom in terms of backlog, I think is unclear. But at the same time, as things consistently start to improve, I think we'll start to see a build as we move into 2021.

Myles Walton -- UBS -- Analyst

Okay. And in terms of that $700 million GE contract that you announced, part of it's obviously extension of existing work, part of it's incremental. Is there a way, Patrick, for you to size how much of that is incremental share gain on work effort as opposed to just an extension of time on what you're currently doing?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. I think the easy way to think about it is it's -- the $700 million was approximately half and half of what was extension and incremental share on existing work and that which was new incremental work, new products that we secured. So within the extent -- within the existing work, the extension of that -- the 50% was extended with approximately three quarters extended existing contracts. And the other 25% was incremental share that we secured on existing work.

Myles Walton -- UBS -- Analyst

Okay, great. And one last one. You mentioned EV driving some of the automotive molding solutions revenue or order rates. I actually don't know what's the mix of that business in terms of platforms it delivers to from an EV or hybrid versus ICE? And sort of how has that been trending over the last year or two?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, what we look at relative to electric vehicle conversions is that overall is a beneficial aspect of the industry for our automotive molding side of the business, because again, what the electric vehicles are bringing is new model changes, new configurations, new launches, all of which drives demand for our hot runner business. That said, I would say electric vehicle is early in its impact on our business. It's something that we continue to look positively on because we think it will continue to drive more demand for our automotive hot runner systems. Yes, I would say, we're in the early stages. So it's a small percentage at this juncture.

Myles Walton -- UBS -- Analyst

Okay. And sorry, one last one, which is for Chris. On working capital, it looks like more of a neutral this quarter. Should we think about it as neutral from here on out into next year?

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Yeah. It will depend on -- we're doing a good job in terms of receivables. So most of the reduction that we've seen in working capital is just basically really collecting what we've previously sold in terms of those higher sales at the beginning of the year, specifically in the first quarter. So we feel good about keeping pass-throughs down our receivables. Our opportunity and where we're spending all of the focus is on the inventory side. What can we achieve both in Aerospace and Industrial on inventory reduction?

We still feel there is an opportunity, primarily in Aerospace given now that we've got stability in the order pattern in terms of the actions that the Airbus' and Boeing's have made relative to their production rates. And then we also are very conscious that if Industrial continues its sequential improvements, we don't want to be caught not having enough. So I want to say our opportunity is in inventory, that's where the focus is. But it's not without being able to deliver if and when and we're seeing it in the Industrial side improve. And in payables, we continue to do a good job trying to just work the terms with our supply base given this downturn. So we want them to participate in the pain, if you will, a little bit on helping us from a cash flow point of view. But overall, very strong cash flow performance, and we continue to drive it.

Myles Walton -- UBS -- Analyst

Okay. Thanks, guys.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Thank you.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Operator

Next question comes from Matt Summerville with D.A. Davidson.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Hi. Thank you. A couple of questions. First, on the Molding Solutions business, I think in your prepared remarks you mentioned orders and sales down 10%. I was hoping maybe to get a little bit more end market granularity around those numbers. A little more specificity in terms of what you actually saw in medical? How much that business was up? What you saw on personal care, packaging, auto, etc., please?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. So within Molding Solutions, as we mentioned, orders and sales were down approximately 10% on a year-over-year basis. Within Molding Solutions, as you know, it's the multi-cavity and the automotive hot runners business are the two larger pieces.

Within the mold side of things, what we've seen is continued strength within the medical end market. And then improvement, as I said, year-over-year and for the second quarter as it pertains to personal care and packaging. With respect to the mold business though, I will highlight that it is, and I think we've mentioned this previously, it is a little lumpy. So what happens is, if we're expecting a larger order and it slips by a few days from one quarter to the other, it can have a significant percentage-wise impact in terms of the comps.

That said, we continue to see -- remain very bullish on it. There was a bit of lumpiness in orders in Q3 pertaining to the medical side. In other words, timing-wise, we saw a lot of activity in coating, didn't get the same conversion that we would have expected in the quarter on the mold, on the medical side, but again, remained very bullish on that. In terms of the business overall, just to put it in context, the book-to-bill on the automotive hot runners was just under 1.2 times, while on the multi-cavity side we saw us down at slightly point -- just approximately 0.8 times.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

And then, Patrick, could you also maybe provide just on the automotive hot runner piece of that business [Technical Issue]. Can you provide a little geographic color in terms of what you're seeing sequentially and year-over-year in China versus Europe versus North America, please?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. Strength that we're seeing at the moment is in North America, predominantly with the -- again, I think it's a number of programs that we've been working for a while that had got caught in a deferral type situation that are now releasing. Within Europe, it has been pretty consistent and potentially flat. And then in China, in particular, the automotive industry in general continues to show strength in China with some fluctuations. But for our business, it's held its own. In totality, as I said, we were flat sequentially, but orders saw a nice uptick in terms of orders, which was -- came from all three regions in the quarter.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

When you look globally at '21 in terms of new model launches or major model redesigns, what sort of step function, if any, change in activity do you anticipate?

Patrick J. Dempsey -- President & Chief Executive Officer

We'd expect to see continued improvement as we march into 2021. The model change side of the equation has gotten caught over the last couple of years in term -- caught in this whole mix of what was initially the tariff war that was going on. And yeah, that's all faded into the background with the onset of the pandemic. That said, what had both factors contributed to was a deferral of the launch of projects due to the uncertainty that existed. We remain positive that that is going to continue to break free as we go into 2021. So I don't see a significant step up, but more a gradual improvement as we see those projects continuing to release, and we feel we're well positioned relative to them.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Thanks, Patrick.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Operator

Next question comes from Tim Wojs with Baird.

Timothy Wojs -- Robert W. Baird -- Analyst

Hey, guys. Good morning.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Good morning, Tim.

Timothy Wojs -- Robert W. Baird -- Analyst

On the force side of the business, I've got two questions. So yeah, just the first on the force side of the business. Is there anything constraining that business at all? I guess, I would have thought maybe you would have seen a little stronger orders kind of exiting the quarter, just given the PMI uptick. So I'm just wondering if there is any sort of kind of inventory that's still being destocked within that business?

Patrick J. Dempsey -- President & Chief Executive Officer

Can you -- which business?

Timothy Wojs -- Robert W. Baird -- Analyst

On the force business. Force & Motion.

Patrick J. Dempsey -- President & Chief Executive Officer

Force & Motion. Okay. Force & Motion Control business. Sorry, Tim. We were looking at each other trying to interpret what you just said. Force & Motion Control, got it. Thank you.

Timothy Wojs -- Robert W. Baird -- Analyst

No issue. Yes.

Patrick J. Dempsey -- President & Chief Executive Officer

So on the Force & Motion Control side of the business, as you know, that business is approximately 60% sheet metal forming, which is the tool and die and then 40% general industrial. What we saw was a nice sequential improvement in terms of the general industrial and a little bit more subdued in terms of the sheet metal forming.

So in terms of what we highlighted was that, orders on a year-over-year basis were still impacted, being down mid-teens, while sales on a year-over-year basis were down approximately 20%. What we're more focused on now is obviously the sequential improvement of what we're seeing in the business. And there, while we saw a modest uptick in terms of sheet metal forming, we saw a more positive uptick in terms of general industrial, again, in alignment with what we're seeing flowing through in the PMIs.

Timothy Wojs -- Robert W. Baird -- Analyst

Okay. Okay, that's helpful. And then the other question I had was just on the restructuring benefits. As we think of kind of '21, how would you kind of frame the net restructuring benefits kind of thinking that some of the temporary cost measures might also come back?

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Sure. So Tim, as we mentioned last quarter, of the restructuring charge, the $18 million that we actually took in the second quarter, we expected $30 million in cost savings on an annualized basis. And we've talked about the timing of that being roughly $4 million to $6 million in the second half of the year, and we are absolutely on track to achieve that. We were actually close to almost $5 million for the quarter both in terms of the combination of BI, Industrial as well as Aerospace contributing. So that benefit is going to continue into the fourth quarter. So we're on track for those restructuring savings.

Relative to actions we've taken, furloughs, salary reductions, etc., that will slowly change over time as our business recovers. We'll continue to take those short-term necessary actions. Although I'll call it painful in terms of having to go through them, we're doing what we can to preserve margin in both of our segments. But we are on -- the message to you is really we are on track to continue to experience the savings as a result of that restructuring and we're on track to achieve what we said last quarter.

Timothy Wojs -- Robert W. Baird -- Analyst

Great. Thanks for the time. Good luck on the rest of the year, guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Great. Thank you, Tim.

William Pitts -- Director, Investor Relations

Thanks, Tim.

Operator

And at this time, I will turn the call over to Mr. Pitts.

William Pitts -- Director, Investor Relations

Thank you, Sharon. We would like to thank all of you for joining us this morning. And we look forward to speaking with you next in February with our fourth quarter and full year 2020 earnings call. Operator, we will now conclude today's call.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

William Pitts -- Director, Investor Relations

Patrick J. Dempsey -- President & Chief Executive Officer

Christopher J. Stephens -- Senior Vice President, Finance and Chief Financial Officer

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Pete Skibitski -- Alembic Global Advisors -- Analyst

Michael Ciarmoli -- Truist Securities -- Analyst

Myles Walton -- UBS -- Analyst

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Timothy Wojs -- Robert W. Baird -- Analyst

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