CIR - Earnings call transcript Q2 2018 | Circor International Inc

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Operator

Good day, ladies and gentlemen and welcome to CIRCOR International's Second Quarter Fiscal Year 2018 Financial Results Conference Call. Today's call will be recorded. At this time, all participants have been placed in a listen-only mode. There'll be an opportunity for questions and comments after the prepared remarks. [Operator Instructions] I’ll now turn the conference over to Mr. Merrill remarks Sharon introductions. from Solomon for and opening Scott Please go ahead.

Scott Solomon

good and morning, you everyone. Thank

call unknown Buckhout, Officer. On CEO; is www.circor.com are today the Scott website CIRCOR's Bhalla, be to at company's available contains and are we'll on and the the identify future that factors. of section turn subject CIRCOR's Presentations statements the Chief slides known link. Please Financial uncertainties Webcasts The to These forward-looking expectations risks Slide & Investors on X. other referring to today Rajeev and Today's and President and discussion expectations.

full Actual these XX-Qs only July you and XXXX. a as could those from results its filings implied the XX-K, to filings. views of SEC today, company on The company's differ today's statements materially For advises forward-looking discussion or remarks. of Any other are represent anticipated Form circor.com. review by XX, company's at CIRCOR's the available factors, website

statements specifically organic the While earnings a These the of press amounts. today's recoveries. financial CIRCOR release are over may measures adjusted Slide exclude CIRCOR's at flow, adjusted so. to Mr. will call charges the X. GAAP any to to turn call, of The to pro EPS the disclaims special operating on CIRCOR's I'll date, management and metrics non-GAAP any reconciliation comparable metrics Buckhout. the On forma operating adjusted turn free now refer non-GAAP available tables Please and later website. in do choose net adjusted and margins, to to cash duty update these measures income, forward-looking income, company

Scott Buckhout

by morning, $XXX million, basis $X.XX, pro organic second points at X.X%; XX%. grew million, good EPS basis, Operating sequentially and orders adjusted to XXX $XXX We everyone. Scott, last strong a year. to in had forma X%. improved to higher quarter. came up XX% Revenue margin grew than up On you, a Thank

CIRCOR P&Ls on to like complexity, P&L and brings outlook, June, and production products, well adapting track. highlights as of operational series and growth ran financial an our channel the within At to Group. downstream cover into call. he President the CIRCOR. strategic remains on systems performance our global Schlumberger, including of CIRCOR joined of I'd and and we excited record with and since increasing testing segment get familiar Energy our board. valve partners size Walker of Handling Fluid business, management, downhole and some our Before In He's market a track are surface We're last integration operating The experience excellent their Lane have end division him very environment. teams OneSubsea to customers. business. Cameron’s The markets, Lane

schedule. synergy is Our plan ahead of

deliver three, earlier to the our timeline. expect year the rate synergies original $XX a of cost by million We year end run than

that, the Reliability the part is facilities the the As rationalization of and executed Services reduction-in-force. of network exited complete. We

We savings year our is expect for million reduction-in-force approximately $X.X $X of track. on annualized. The business this and EMEA million

a the mostly million synergy savings million $X.X Overall, to $X action half and annualized. $X.X expect We expect savings to approximately million million year, we XXXX. in of $X plan deliver this in back of

up the due facility and the year of the manufacturing second we're scope Indian exceed volume of to manufactured by four. addition, our expanding opportunities, first In from In we commitment we product. and gates additional synergy quarter, to the DeltaValve shift now expect ramping set

start of the shipping of TapcoEnpro to year. half India this expect We out in product second

up. proximity gives markets facility our refinery market ramp downstream important significant our Mexico for Our line. Indian cost to important will manufacturing the position valve Asia. also us Monterrey, continues in savings production in our transition product This Distributed to growth strengthens expand margins to valve in capabilities better due but

QX. We expect to to QX compared more than double output in

Mexico for in North an of completed our America. facility market increasing role June, In the by customers offering margins improved manufacturing we continue in the better all low-cost were in and to play CIRCOR drive serving Our that Colfax. held shares

of existed Handling Colfax transaction eliminating since As the position, liquidated the its of Fluid that closed overhang XXX% we thereby in year. last a result, December

me to to results detail Let discuss quarter end I in the over second turn more the call before outlook. our review Rajeev market

Rajeev Bhalla

Scott. Thanks,

X. business significant to valves Industrial by was number review of Let's in up starting had declines large with pro margin is quarter deliveries, increase organically The year. from compared sequential including up XX We forma segment in the Europe, QX sales from market. North pump in growth XX in of segment points American results, pump business QX the and XX% saw Slide on year-over-year a the The million, $XXX XXXX. America. in a projects. experienced up of Industrial XX.X% points with basis prior basis slightly North and Industrial operating The offset European growth partially segment

few it a While on projects. actions restructuring muted lower was strong margins somewhat revenue by productivity lift, and provided large a from

For margin the moderate expansion the benefit from synergy our we continuing of quarter, actions. and sequentially third expect restructuring

with of Instrumentation basis XX% term, of were the were to continued of services pro forma a year-over-year; on both to down margin sampling million should be a Slide on mid-teens. basis, year-over-year slightly. organic X.X%, and $XXX and valves engineered refinery margins. valves, Turn increase up margins short QX longer about from growth segment distributed sales reliability X. increased operate the business Over cycle operating reflecting and down this in XX%. in valves flat while valves drag XXX points Energy losses an engineered still in Energy and sales

the and valves to sequential overall contributed distributed However, in the increased profitability quarter. services in expansion margin refinery valves reliability an improvement and in

ramped As Monterey. for up in Scott distributed product production mentioned, valves has

and deliver higher As we margins and on lines, quarter additional beyond. the in to in third Mexico, gain product the traction in we other volumes expand expect

with We expect over rebound mid-teen valves operate term, longer a cyclical engineered this for the margins assuming business to the business.

down forma compared QX to on $XX Turning of pro a million, to X. basis. & Aerospace sales Defense Slide XXXX have organic

approximately the mix French with of annual Aerospace the year a QX of a Defense in sales. that on based strong You from $X in last moderating margins business sales & operating quarter. and XX.X%, levels, inventory-related we charge were million may recall divested

expect the to margins sales on the increases operating price and third in mix, recent improve to quarter continue We efficiencies. based

Over term, high should reach X to items. teens. margins Turn Aerospace for Defense & the Slide longer selected P&L

Our adjusted tax was our in line rate with full-year XX%, quarter for the expectations. quarter and

lift million to restructuring Interest million. and expense totaling than amortization largest of Looking restructuring relates items more at $XX.X acquisition-related for chart The up expense, our cost $XX.X special $X.XX million. per share, quarter the noncash charge primarily The we total programs. of pretax a charges, recorded component relates for this remainder $XX or to to was the currency of $XX FX with the higher Turn with the year to Handling had rates $X.XX as of prior XX. acquisition. balances million due revaluation the debt certain per associated the quarter. compared sheet position in share a about Slide Fluid on balance appropriate our accounts, on gains from result debt based We

approximately capital the $X million on During spent quarter, expenditures. we

and $X our continued For Consistent CapEx operating of fees totaling to we cash to full advisor with number million. disbursements million. year, the expect the $XX approximately large This be costs, for we quarter, reduced approximately incurred severance flow. first a

improve by reduced top generation, debt and cash expansion extraordinary end generate significantly to continues of target XXXX. level range expect we approximately we free operating our be and in to remains as million leverage capital. the of cash Leverage priorities the the of the above year. Overall, $XX Xx million this Xx. working half $XX disbursements paydown margin based improved flow in ratio of expect to cash We second flow in half, flow to on to Clearly, second

sales Slide on share. million, businesses. adjusted From $X.XX XXXX growth million the by expect we our we a XX. guidance part for Overall, of seasonally the range European in of $X.XX range and third quarter of top an line per revenue moderated businesses, Energy our in in to Moving Aerospace to expect $XXX to $XXX perspective, EPS lower

pro forma expect to year-over-year expansion synergies. QX, due across We the price, and all groups of in realized volume benefits margin

the per special special $X.XX charges share; charges quarter items. for to third $X.XX restructuring Acquisition-related and charges we amortization and of the per and anticipate XXXX, of share. restructuring $X.XX to $X.XX Regarding expense for totaling following

rate expect to third be adjusted approximately quarter We tax the XX%.

Before give been productivity potential by to I want we've offsetting To able material impact of sourcing commodity inflation tariffs. I quick date, and a inflation commodity on net you the generate update savings. to wrap up, with

remainder through that the The impact commodity the of to inflation is of products. continue expect year. valve We main our distributed on

proposed from China. administration's tariffs, on have initial Trump the expected Regarding a imports is of financial tariffs minimal to our the impact round

valve if the on year this cost approximately the round tariffs would of material for $X million proposed product an importing have of line. enacted in However, additional impact the distributed August,

to to production Mexico, As import be mitigated. we impact and transition this location expect

on impact are profitability. exploring as pricing addition, to we path another the offset In

Now it over let me Scott. turn to back

Scott Buckhout

Thank you, Rajeev.

saw second X%. across QX an drivers order In increase in Let manufacturing higher industrial with that markets was and marine for an orders to goods sectors and pro momentum Book-to-bill strength of is second XXXX. end Europe. bookings the us demand largely pump markets. are above of with the America orders strong business, as General markets segment, the significant navy our Both forma markets overview grew the driven the lines move new robust in and organic Please of PMI, aftermarket orders and industrial the and German regions industrial consecutive durable and gas remained business. in most end and particular the orders European we in give in was turn increase XX. certain healthy. believe healthy output. me for in end equipment In strength, we through general balance and momentum Higher pumps industrial a oil quarter, one of timing Slide you by the the North broad-based give in quarter, and we

we by markets effects order Pricing regions. moderate end Sequentially, the remains For double-digit to most quarter, due seasonal expect a expect business. and to year-over-year, pro lower commercial growth activity. the forma intake marine order a third for orders and driven across we focus low solid

of which lift Our half margins. our second impacted will XX% price increase, QX revenue, help industrial about

the come long-term the evaluate frame On renewal. continue opportunities of and agreements for to rest up as business, we contracts

to announce pump lubricants. the applications. recently our Finally, application service I'm in of is machine to fluids coolant a designed that of to new launched abrasive coolant handle three-screw excited MTEC we The C version tool

in line The reducing increases this easy prior in margins. improving lighter the maintain Our top costs It's new our to group XX% on than while patented the to continues grow versions. focus life. significantly Industrial expand engineering products, improves order to and team technology service and reliability

improving. me Now our orders midstream pro still let In slow, markets Overall, upstream were are continue shift a Energy segment. markets in Energy, downstream Energy robust. and but forma International segments. up markets on to basis. up the remain North organic American Global to our be strong XX%

nearly XX% stable oil impact the on of of growth valves fuel. the content sulfur orders refinery in quarter. IMO Our are focused for business XXXX saw the and prices, refiners With change regulatory bunker

growth for our We XX expect of booked past action line. order orders product business. valve the from DeltaValve our In $XXX regulatory continued in months, million this we've refinery

weak and and stable orders lumpy completions rate can project continues from expect Distributed environment while the win but valves, activity, rate quarters. orders valves, order pricing double-digit high. forma the with Based and business with predict, the this current to saw but QX this at the positive and strong, in in Our other difficult rig Distributed with seen well for roughly areas remainder be up remain of we especially timing first remain of was resulting to East as quarter year. QX we've run line continue business. Reliability remains Europe, Orders can market QX. organic Middle slightly The to and and the on overall the an and of significantly capacity for were orders. expect this from on The quoting we to bullish is in orders and were and is American be XXXX, quoting in QX most soft the gradually North in expected be excess North still outside strong with America production North growth of pro previous as rate LNG. American remain be improvement such In market. market we valves continues well, market, improving active this engineered which Services Nigeria up QX half them activity, pressure. higher count, awards line

in orders seasonal fall approach we season. turnaround a increase expect the sequentially We as

line year. in QX For prior overall, or up versus pro expect Energy slightly we orders less more sequentially forma and

to & Turning Defense. Aerospace

the organic of at selection an Pro quarter, program Our driven XX% solid forma ejector new for of power programs, by across Defense aircraft supply had This Aerospace order with to & aftermarket products. segment broad-based aircraft applications. million another demonstrates OEM engine core quarter is and leverage and us our our vent around fluid Rolls-Royce plant. was for orders submarines. valve by growth in defense strength and $XX We especially a mission-critical TPXXX into technology ability our announced the recently excellent to control commercial

to line both sides with business. increasing half, most competitors second second robust. defense the initiatives the to of in year. outlook We we opportunities or end of facilities rates the to market are To build the Orders actions businesses higher summarize, the half remains on to Restructuring remains the are programs, quote the be year. line as of MRO start existing our ramp to benefits pricing and our QX In the across seeing the seeing expect replace continues. traction, strong low-cost started with technology from of gaining with our bookings With first expected half the newer that synergies, and for source and in momentum our our bottom commercial up programs integration manufacturing newer the sequentially programs, markets of transitions actions. the first and

delevering year. as look committed reducing flow ahead expanding long-term Overall, generating the half and cash QX debt driving and optimistic free second the strong are to we and by the company We growth, we margins. of to remain

happy I your and to questions. Rajeev Now, will take be

Operator

you. Thank

question. be from with [Operator proceed session. We Please will your Capital first question conducting Hammond with now Markets. question-and-answer Instructions] is Our Jeff KeyBanc a

Jeff Hammond

guys. morning, good Hey,

Scott Buckhout

Good morning, Jeff.

Rajeev Bhalla

Jeff. Good morning,

Jeff Hammond

– terms timeframe that around flow is couple Just things capital of flow, talk And the it on like just then, working capital the think that? about of non-core said statement. balance ultimate debt cash free working Can Thanks. think reduction what But the opportunity what be a the cash is accelerate just portfolio sheet, kind small in I businesses for you you the to talk you a going business? looks better. a opportunities of you hit had about divestiture see in you

Rajeev Bhalla

Jeff. Thanks

divestiture in the have We first, we'll Let question where on a then working take did the the headed. and me quarter. not and chime capital that’s in divestiture

section the referring on cash you what adjustment in about is $X was be working think million I a statement may to that actually investing the flow amount to the capital.

that back of consideration Colfax. with from In that's such did We paid got estimated an million So amount down the we working what with Colfax we capital. deal that associated seeing amount what and December, in was adjusted $X you're the statements.

part So purchase divestiture. consideration, of it's just the really not a

do opportunity. continue On the we significant working to have capital, a

over to capital if As to to capital. close a XX% we're down that it better to today. of before, of let specifically doing you know, XX% turn give working outcome XX% get of heard between above and – what to But from us of and me Scott sales working drive well you it a to we've sense we're is targeted you

Scott Buckhout

opportunity. we said, have as Rajeev So

of majority in capital have CIRCOR. Legacy the the is working we I think opportunity that

each we and we at transaction probably we component to accountable initiatives a as continue several drive basically That on then CIRCOR. five quite got sales, cash capital. kicked have bit with you this parallel in the inventory off are of a office teams year, have if unit of corporate got for closed percentage know the business the management of to that team, lower Colfax Shortly going. every we've a team. we after earlier We working and people are We

of its as In cash driving someone experts management, ins each working got initiatives component well. we've receivables parallel, and on payables. team capital daily is This we’ve inventory and driving outs. So on so got

driving inventory have the someone and down for process all sci-op we effective most more areas in So and inventory taking the responsible opportunity. got we've

we through capital. I important really think working around the also to it's organization cash an say that have incentive and program flow

So that at business – flow team financially related is directly cash everyone's cash now as in everyone program, each incentivized bonus It's our the on cash everybody's that flow their is changed in free the targets. are well of also teams at cash office is to not budget management, above XX% short-term unit incentive CIRCOR as we deliver flow. to known which bonuses or all probably such annual

the whole side So particularly this. hard improving see CIRCOR the cash initiatives we've got these working organization the focused flow on working business. capital as We're better in opportunity, out these get on you'll the driving extraordinary very and of we traction capital. got And way capital we've and on that get of working on Legacy back half very we this the the of some on year of disbursements

Jeff Hammond

we we and And in segment distributed about good think some Mexico color And and maybe into in ramp, the you valves expectations? Thanks. your should there, – trajectory kind Oklahoma talk of just ramping good exit XQ gave Okay, margin the where on how talk in run there. color just then Energy but just about versus then, rate the generally about as XXXX? – that’s

Scott Buckhout

it. is that's ramping right expected way the probably hiccups to but We expected. say some there, as as up Monterey ramping and here it's had up So

to at reasons. two course, than is improved City. in now, we're we a the margins number say lower time the Monterey, here. ramping we're historic in volume continue I'd the The there’s factories. same for of increase running margins are reasons: We're first DV primary running three time, As margins of over Monterey Oklahoma up Right

difficult inefficient Oklahoma than in The we attrition. to higher in labor. very normal for situation be us with second labor managing in, qualified Oklahoma the would City and rather City, are we're – with find It's still

the getting in training has into Oklahoma City up production efficient a labor and qualified getting challenge. them So been factory,

better Monterey, Material inflation. half the the – has third harder margins, any in into better the we production move on are the that least material in been other hit we impact situation. valves inflation the then businesses first has CIRCOR. So at our distributed in we of than the faster off And can are

price in starting say, newer higher cut shipping the and certainly we're now around prices, now older as we – and orders the older through benefit the You'll that with inventory see should to I orders of increase the will help. work so

are main you’re DV. of the So will increase The the in Monterey back the well as better, into factors. be price that those seeing transition as half three because

Rajeev Bhalla

we in Just certification received that. to about in Recall Jeff, first to the fact little add talked a quarter API call, we the that color the April.

that So prior ramp to gaining a was obviously the here. up factor

we ahead. it's have speed that full that, Now

that going we at margins as accelerate is And to expectation ramp the the digits. so high-single as And year, out we to end look our close full year. is for at

Scott Buckhout

than materially than we'll second the come first today, on of QX have the in to better improve the So will to of And what been I in we QX, margins orders half start expect margins, of but will QX than Energy year-to-date. the think you'll half them better we back improve in half even it's engineered with with better we based year, be the now, XXXX. the respect expect valves, about the And seeing engineered continue through of worth backlog respect business valves have through good QX. read better I to the But balance have back to year, backlog. a our that in we've year. think feel a QX we what expecting we're as margin out noting we Right certainly, see this pretty to QX better of on that here

Jeff Hammond

guys. Thanks. color great Okay,

Scott Buckhout

Thanks Jeff.

Operator

Jones Nathan Please from proceed. is Stifel. question with next Our

Nathan Jones

morning Good everyone.

Scott Buckhout

morning, Good Nathan.

Rajeev Bhalla

morning, Good Nathan.

Nathan Jones

the is the Just XQ. midpoint to close it XQ get you earnings $X.XX results, Relative in a your for mix? to please? sounds was Can But what results. FX QX XQ lower. was inventory what the well about fairly color about It then to guide. bit differences I’d are had that charging And in on as like the XQ quantify little of of there is like the revenue gain in reported included in you in you in terms an talk could XQ euro

Rajeev Bhalla

Sure.

we as to year-over-year Nathan, euro at a associated denominated to from gain. an have gone settling $XX here, mentioned up you that's because I is really this and bridge European with down know so business EPS and looking that supply And you're is amount has FX euro you you inside if to as lower U.S. payable $X.XX the left that on for about at end example end call, reflects. when up as $XX, – our that we a That's So recording had a $X.XX. an what FX of from of

you see So that. some do of

about you I this need versus on So Defense that margins look for QX. segment then to with $X.XX to in Aerospace as have at other & relatively the revenues QX And It of well. we particular sequentially, adjust charge, this down it damps respect constant a points. as margins, nonrecurring charges in inventory are margin by drag embedded in couple that basis down there XXX

Nathan Jones

sounds engineered it of valves signs then markets the show there. to And starting life out is in Okay. like some finally

constructively What your there that You loss in for year? back instead about talked the next today end in I business profitability to actual profitability give you us profitability on of seeing market? gets there. any for what through details the the anything Can the And assume XQ. orders can outlook you're about the us you give year? more in expected fairly trajectory quarter, of the wrapping the profitability out of

Scott Buckhout

on one. that So start start I'll with - I'll

of So because look mostly we on good what's remainder that's like have the we year, going the read – backlog. are for in a it's to pretty

in as loss So incurred it expecting look a significantly what loss But in we're QX. than into we we QX. QX, lower should be

are had in QX, to at that we've schedule look year-to-date. expect engineered QX swing to the we As in we profit from of valves unless to there changes projects, a losses

XXXX, As Nathan, really look into hard stage. it's know at to we this

is the margins have What about difficult. don't we in we on of capacity competitive excess backlog. is are still being now. The We that say, a the of really all I’ll quoting firm it's a still our still right in We're first XXXX. read very pricing lot But projects put market. disciplined there the

its now. right QX out in of XXXX but So really happen as first what's say good read to going we right now on a I hard half just the QX to laid and have

Nathan Jones

valves, Okay. On that and distributed out how out completions might Permian being well the of take-away there concerned investors there. about capacity influence

your keep you that distributors a or so And in of out that kind of destocking seen basin or slowdown in valve in any from that business, any distributed any anticipation concern? to demand of have basin change from slowdown

Scott Buckhout

about we're as well. that reading Nathan,

we've been been point so slowdown asking I indication We’ve we're as from that same an we And they capacity doesn’t in happen in wouldn’t some sales field to of not of and could levels a issue be There But the a It in not questions to of are And team hearing on see guess there not any the Permian. activity high. the this ground. yet, thing appear the around valves take-away that's our distributed us reading what capacity are we can hit certainly, customers our supposed be the giving slowdown. issue. be you, now. could realize haven’t that still

Rajeev Bhalla

see to Nathan, this here. there are closely at actually opportunities think we're fact, in looking if I

can see an a into valves? midstream we we've do we at a as infrastructure, As going piece it well you more that of sell not of get And the dialogue had with our looking distributors build destocking and lot as on. opportunity. But to good field that are we so

Nathan Jones

seeing us broadly give additional can material more there? And – occurred? that you in tariff on Can more XQ the where impacts about. any and one you entire price that kind portfolio? color was targeted Was then on just where it the you're increases you last price the of areas Just talked distributed like across valves increases

Rajeev Bhalla

Sure, Nathan. absolutely,

Distributed there. think So we pretty if specifically, valves the relative to that. according line you is about the would broad-based, catalog product react to

Scott Buckhout

across business. whole Pretty much the

Rajeev Bhalla

look a because animal. business, I'm unique we price other industrial of to businesses in up – took lines half the close obviously, about some of on aside project if our parts And you increase. right. product That's X% a the putting that's But of other segment, at

Defense, we're a you Aerospace talk managing with XXX with The to continue customers half, as points you businesses. long-term then agreements And negotiation. a agreements, XXX as frame know, out do, other price heard through to we year historically, working about, those of and increase good have net that may get we & that basis Scott as and of

the targeted, project more excluding pretty little a businesses, So broad-based.

Nathan Jones

Great, thanks very much.

Rajeev Bhalla

Thanks, Nathan.

Operator

Our proceed. question SunTrust from Charley Please is with next Robinson Humphrey. Brady

Charley Brady

Hey, morning, Good thanks. guys.

Scott Buckhout

morning, Good Charley.

Charley Brady

I inventory, the, guess, valve or inventory. on distributed the field back Just on

You're not slowdown seeing kind levels mean, I – just saying what is there have concern channel don't inventory you where I'm I but are a wondering the I'm right do of a destocking, but that think during inventory? now? goes these sense on a being of guys a stuck last tick? there's of their – a pain you're tightly channel it kind halt with a of managed surplus the given is comes quick pretty Or and the through down a felt

Scott Buckhout

a So inventory on channel now. quarters that, for is it's view our been of stable couple

the or stable So of destocking, last distributors quarters. increasing run a over we're not orders at seeing it's our stable pretty level, stocking have couple relatively been

getting as we're have talk a be we've of actually less or in the – slowing quite said not opposite. to expecting none seeing. down. And been We're anticipating slowdown. virtually line our with guided, we're orders to destocking We at that customers, more anticipating we a them what we So looking or – they're when

Charley Brady

terms, the I'm gauging how getting still consider the – has margin trying kind much of on what EV wondering pretty that then project the of And still on project. you market? will business normalized normal optimized valves, optimal, point broad spread at But Or spread But better, as I'm kind is side to just an it's it in a to if I in a in about the the competitive. of engineered XXX margin, on realize shrinking projects? be in all? how talked is and just spread varies margin Thanks. – that normal at large basis XXX all, what by is price you or

Scott Buckhout

in it last seeing would changed, hasn't necessarily worse I the six hasn't it gotten gotten been but what better. it we've months say hasn't than

competitive So given we project what happens the how price. is dynamic that, can really on a will change

competing them. general, not so in most very necessarily all on competitive, are projects And of we're

less are But that situations and not put over projects so pricing get where has competitive And or have with price can I better into the try you relationship a to the we tell a customer. the we speaking, improved of where a bit would ourselves that we're months. quoting six better we last broadly

Rajeev Bhalla

Just much this to out. Charley, downturn, to surprisingly, capacity the capacity, right came – of not that, the add during

projects, sense still spread significant I suggesting, is now. a the as see to uptick that once pretty offshore really shrink, right so is you're you And you in because high see the start capacity think to start my the where

Charley Brady

Yes, I that’s want sure helpful. heard make Thanks. for me, Just And just you one to I correctly. more

Aerospace & that Defense, EBIT charge XXX includes is XX.X% QX, inventory the points? the basis margin in On of that

Rajeev Bhalla

Correct.

Charley Brady

– there that back a of we again is offer the back mean, or the of that half are And the year in one see year? half – Okay. I don't

Rajeev Bhalla

That's a right. one That offer. is

expectation the range. kind is double-digit of high to a of low So teens out type close here

Charley Brady

high Okay. just Energy, And On you want year more. then to I guess I'll to stick rate? a single-digit clarify, exit at one the

Rajeev Bhalla

full The year at a should rate, be high Charley. single-digit

Charley Brady

Okay, fantastic. Thanks.

Rajeev Bhalla

welcome. You’re

Operator

with Company. next proceed. from John Our is Franzreb Sidoti & question Please

John Franzreb

guys. morning, Good

Rajeev Bhalla

John. morning, Good

John Franzreb

a doing some little talk acquired on bookings the there. are relative them about year to color expectations, you business order than expected worse? and I better the and versus more guess ago, some a Can your

Scott Buckhout

particularly EMEA. it's stronger better America, acquired business significantly fairly than expected the we're seeing I stronger mean, in say, orders So orders we I'd we And overall in seeing North acquisition. when made on the what broad-based, we're are, orders

what than seeing, significantly our So that we're intake we better it's built with into model. acquisition order the pleased we're

Rajeev Bhalla

provided the expectations, to is on relative commercial to marine that fluctuation here John, some side. piece has other The it

but up saw uptick a we QX, maybe You moderated, lower it a it's nice now again. back it'll little of kind in tick recall,

of So industrial mentioned, once actually you as there's better. that. it's at the some it, doing side But look fluctuation on Scott

John Franzreb

Okay. sequential guide margins magnitude here? seems me three you're than missing that saying I'm a be else Well, question, be the be I to the improvement in bit business guess seems I what great, there stronger. talking FX, of would wondering should better. because isn't was could all wondering What be unless the that But then it that I'm guide other I am we're little about the thinking segments. will the the improved referencing like earlier

Rajeev Bhalla

important an and one adjust piece Obviously, we're opportunities, better, ensuring guide it at any risks going what do always to think improvement margin I looking Operationally, recognizing of we here. out there's to, you the we think into is and there. John, better? that risk part but sequentially, the that's is And in I for we takes try to always opps QX. FX we're and account. see the do have balance Could

John Franzreb

conservatism. about just QX output Monterrey supposed I QX. going this Scott, facility And the want to you said Are last QX measure be of what the Xx quarter, the make of sure year-over-year? was being right, it to in is QX? QX. was got understand – recall, to Xx just you double talking I Or From I Xx

Scott Buckhout

QX. in double be did we what It'll

versus QX, be to than actually more we So of expecting were less little slightly a in But than Xx we're QX Xx. QX, in QX.

So now here the Monterrey. the that got API in will up certification, ramp open and it we've really volume floodgates the

Rajeev Bhalla

Recognize, we started with low the right? base,

John Franzreb

That’s true.

Scott Buckhout

John. Yes,

to need we're So but it faster. accelerating do it's good this that we

John Franzreb

up? ramped fully be Monterrey would when And

Scott Buckhout

year, next early expecting we're we'll be up. fully Well, ramped

John Franzreb

you've one-time in the that second what Rajeev, had away? quarter. in And to in you used And any integration-related occurring Was does short-term of of so, if here quarter? EPS the first the embedded when go cost kind call that Okay.

Rajeev Bhalla

It quarter or the same by dissipate moderate, second did quarter. the here. so have XX% some We John, the QX. quarter here level fourth come in in about about the QX, It as was Yes. probably in and down will third in

John Franzreb

the seller. And the I one cash question. is it. million a returned to Got guess statement flow $XX there outflow last In

you that Just was? tell me what – can

Rajeev Bhalla

Yes, And so in we behind back about was we to businesses left these deal deal. was acquired, $XX asset excluded closed there deal, if two closed, the cash-free, was cash, the that the an you to million that that of when here. close returned over debt-free there was recall, when a last quarters we we Colfax

that reflects Colfax. asset that excluded return And So done. of amount the we're to

been So of that QX, end at the has resolved. matter

John Franzreb

taking Okay, Thanks all my guys. Thanks right. for questions.

Rajeev Bhalla

John. Thanks

Operator

question Brett Please proceed. [Operator Instructions] Our next & from is Co. with Kearney Gabelli

Brett Kearney

Hi, Good guys. morning.

Scott Buckhout

Good morning, Brett.

Brett Kearney

finished a you the little of mostly acquired. know to wanted on backlog, QX ask. bit I that past business guys you with Just due

update any down that Just progress, in quarter expectations year rest want for to there. on this this of working ask the and

Scott Buckhout

Yes.

cut XX% started from entities. it So for good we We've cut in where acquired the We've very made progress. about the actually aggregate year. we it have

be in – cut so, gone largely it'll feel about it expect And year. we the end third we the We'll quarter. to good half this. And again in probably be by very the here of

Brett Kearney

much Thanks Okay, great. so that’s guys.

Scott Buckhout

Thanks Brett.

Rajeev Bhalla

Thank you.

Operator

joining conference Ladies you concludes for Thank call. our and gentlemen, that us today.

Circor International (CIR) 27 Jul 182018 Q2 Earnings call transcript