Patrick Winterlich: Yes. So the $20 million sequential pullback was specifically on raw materials. Overall inventory was down about $4 million. So we saw a little bit of growth in other areas, but there was a reduction, and obviously, the starting point is raw materials. We will continue to be aggressive and disciplined around inventory. I think we’ve spoken to it a few times. The real metric we’re looking at is the relative days of inventory that we hold. And so the first objective is to allow our sales to grow certainly into next year and beyond that and hold this level of sort of dollar inventory. Now we will look to squeeze it in the fourth quarter. I think there’s some opportunity to do that. But most importantly, it’s really holding this level of inventory as our sales grow and essentially improving the days holding fairly significantly over the coming sort of periods.
John McNulty: Got it. Thanks very much for the color.
Operator: We’ll go next now to Scott Deuschle at Deutsche Bank.
Scott Deuschle: Hey, good morning.
Patrick Winterlich: Good morning, Scott.
Scott Deuschle: Nick, is there any opportunity to open the door with OEMs to discuss the prospect of getting some better price given the inflation that’s out there, kind of like some of the other OE suppliers have been able to achieve? Or is that conversation ultimately a nonstarter given that you’re still generating some nice profitability here? Thank you.
Nick Stanage: No. So I think our team does a great job on getting price and value pricing our products for what it does for our customers. Remember, in a lot of the commercial aerospace programs, we have long-term agreements where we have indices and formula that help protect both us in inflationary, increased cost scenarios or raw material inputs, and it protects our customers where it’s declining. So there tend to be a lag, but overall, we constantly look to help our customers with their productivity initiatives. We do that through driving productivity through our systems and identifying new opportunities to leverage our growth. So I’d say we certainly have other areas that aren’t on long-term contract, and our team worked those very hard, especially in the Industrial segment and some other smaller niche areas where we are able to get price based on the environment we’re in today.
Scott Deuschle: Okay, great. Thank you.
Operator: We go next now to Gautam Khanna at TD Cowen.
Gautam Khanna: Hey, good morning, guys.
Patrick Winterlich: Good morning, Gautam.
Gautam Khanna: I was wondering if you could just talk a little bit about the components of the implied Q4 free cash flow. And is there any efforts underway to maybe make it a little more linear because last couple of years would have been pretty back-end loaded?
Patrick Winterlich: I would say, historically, for better or worse, Gautam, our cash flow tends to be back-end loaded. It’s sort of the flavor of our business. In terms of Q4 this year, it’s obviously going to be driven by an income number, which we’re going to push to drive to the guided EPS. We’re going to manage working capital tightly, as I was just saying. I think there’s some opportunity around inventory. We will drive receivables collections very strongly as we always do in the fourth quarter, and we will manage payables. So it’s really just about sensible cash discipline. We’re managing capital. As we’ve called out several times, we don’t have sort of huge capacity requirements. We continue to bring up lines and to reutilize existing assets on the whole. And we’ll see that again in the fourth quarter and into next year. So we believe — I mean we did virtually $100 million Q4 last year. We believe we can — we will deliver that again this year.
Gautam Khanna: Thank you. And just I was curious also if this year — this quarter had a little bit of dampening on the margins on the hiring a head and the like. Maybe if you could just describe some of the onetime things this year that — like tooling, for example, I think that was called out in prior quarters. Is there anything else that you view as nonrecurring that kind of make the comparisons a little easier for next year, besides what we discussed in Q3?
Nick Stanage: There really were not material one-timers. The hiring and the efficiency improvements that we’re driving in the plants and bringing people in, again, I think we’ve shared that some of the positions in our fiber business take 9 months to a year to get to a minimum efficiency level for an operator to be able to work alone on the line. I would say there’s some added effort going on with the CH-53K ramp and the first articles. And that program is really just starting to ramp up. So we’re clearly not as efficient in the engineered structures area there as we will be as those first articles are complete, the qualification is complete, and we streamline the deliveries to our customer. Other than that, we continue to work hard on recruiting and finding top talent.
And the team has been very successful, but it’s hard work, and it takes a little bit longer. And the attrition is a little bit higher than it had been pre-pandemic, and you have to build all that in. And again, when you’re full source for key programs, you can’t be sure. And that’s really what drove us to make sure we’re not short and we have that capacity in place. So we’ve talked about that. Other than that, there really are no other one-timers that we’re going at and attacking other than operational excellence and efficiency.
Gautam Khanna: Great. Thank you, guys.
Operator: We’ll go back to now to Sheila Kahyaoglu at Jeffries.
Sheila Kahyaoglu: Thanks so much. Good morning, Nick and Patrick. So maybe first question on Defense & Space, really good performance there on the top line. Can you maybe talk about the profitability within Defense & Space business as you ramp on some of these programs and their delta in space there?
Patrick Winterlich: Yes. Sheila. I mean, Space & Defense is very similar to Commercial Aero in terms of its profile profitability. It contains a fair amount of Hexcel carbon fiber. And as we’ve called out before pulling through Hexcel carbon fiber in a mix of sales is good. So we generate good earnings, good margins. We have quite a lot of engineered core and honeycomb in some of our military applications, all the way through to the technology work, there’s a business we acquired in early 2019. So overall, the profitability profile with those strong sales is good, Sheila.
