LDL - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to Lydall's Third Quarter Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brendan Moynihan, Vice President of Financial Planning and Analysis and Investor Relations. Please go ahead.

Brendan Moynihan

Thank you, Allison. welcome Third and Conference XXXX everyone, Call. afternoon, to Quarter Lydall's Earnings Good

today's Barnhart, the in and are Executive me progress call call Joining on the about Dale long-term Dale start Randy continued Executive with comments Officer. are Officer; Gonzales, President our Vice Financial segment. of President of will follow making Randy the as strategy Chief our we will performance the executing our open business and financial current Chief and remarks, well by as questions. the provide conditions. key and of end line discuss a At an review drivers overview we'll with for

was filed quarterly press release Form and today. released Our was XX-Q earnings yesterday

conference can So be follow in Investor at can along the that lydall.com XXXX found reference section. you earnings presentation, call Relations call, which today's please with the QX

As made Slide to the forward-looking to note comments forward-looking defined provision within this on may statements the concerning presentation, are as for this the made noted any constitute X XX-Q also refer that pursuant laws. Please Form information. available harbor statements call on further cautionary of safe securities Lydall's conference in

can appendix call. referenced. will In during found conference non-GAAP GAAP I'll referring turn A that, With of to the be financials reconciliation over financial be this in Dale. the presentation, to just measures to addition, we I've call the

Dale Barnhart

sales everyone, the X.X% by million consolidated performance for grew materials, us. joining the organically. contributed On thanks I'm the of afternoon, which interface report up year Lydall's and XX% at almost sales $XX.X revenue Brendan. third compared to acquisition basis, in a Good quarter Thank to were you, pleased prior quarter. of led

quarter. the basis recovered margins second issue margin down thermal were fully expansion the acoustical operating in OEM sequentially. not lost third related as in lower-than-expected in from the second were Gross While points adjusted volumes to volume was quarter, the recovery quarter supplier by we segment anticipated the margin impacted XXX

We continued mix, cryogenics, saw tariffs. by launch Solutions sequential anticipated year, unfavorable impacted commodity product China sales product also costs. materials insulation to Compared of related in margin higher performance specialty be to Thermal to double-digit driven a activity in Every including products headwinds the cost, in down decline prior higher increased continued for particularly was labor and aluminum. Acoustical gross by causing overhead and negatively to

headwind While compared improvements we a to to year, these continue costs incremental see quarter-to-quarter. prior presented from sequential

Continued provides XXXX. the in for $X.XX the focus share on Incremental spending Adjusted of this our our for was gross I he outlines earnings variance. will the for from results summary will when the take third quarter reduction X quarter amortization key acquisitions quarter you results in Slide published $X.XX SG&A third to partially financial and per of accounted in XXXX. of detail third the performance. highlights, quarter mitigated Randy margins. cover the briefly compared financial through of $X.XX recently a

China FX of where impacted filtration in business legacy sales offset tariffs and were domestically precision and primarily in contributing in Thermal Acoustical grew by including organically all with record from sales by Nonwovens impacted dramatically Materials acquisitions XX.X% which Third growth, activity higher lower XXXX organically of $XX.X XXXX. suppliers. headwinds of cryogenic interface top industrial net Solutions were on million X.X% XX.X% increasing filtration insulation $XXX.X organic lower segment, period million to Technical line or Organic sales The X.X% was in higher growth and have Performance reported in for million a growth the in geographies, by quarter Lydall, China. segment cryogenic sales up sales Europe. by same of X.X% $XX.X led equipment grew the

inflation year. the Commodity prior continues only by Midwest primarily XXX adjusted up based modestly, to margin Solutions while was Third to the were pricing And gross basis points driven segment. significantly a XX.X%, headwind to index domestic aluminum XXXX Thermal from on and year. prior premium be compared declined up costs quarter Acoustical conversion

improved manufacturing impacted by the Materials by points XX by negatively margins. compared to quarter basis a margin Thermal incremental mitigated SG&A basis incremental Nonwovens was gross Solutions on points as reductions than X.X% margins, points and XXXX for in of The expenses, by resulting third the continued amortization Performance which partially adjusted in basis, Technical costs basis percentage operating addition, was price. the overall quarter partially inflation, prior was which The net an marginal discipline of sales gross margin in expense. XXXX. and mix of XXX adjusted Acoustical segment In product lower unfavorable decline The third on driven adjusted XX saw including offset of material higher year,

step-up Technical expense acquisition. Third interface earnings share initiatives inventory the quarter higher results with Adjusted included and after expenses the restructuring interest strategic Nonwovens ongoing $X.XX debt for in expenses, associated higher corporate excluding was segment. per

Sigma, Lydall is Turning Slide This purchase interface performance of third development, which and growth the New quarter. recently to includes an completed Lean of our expansion product M&A. overview geographic the Six drivers: respect With long-term X strategy, X. materials to in acquisitions,

business product materials capabilities. acquisition, but are that has requirements markets working across capabilities our portfolio new deep additional expectations. is business details legacy advances in offering serve financial the manufacturing and and meeting solutions the earthmoving, As materials aftermarket month on such both am a segment. OEMs happy leveraging one is Interface the ceiling to reported and equipment in leader us, original our of design Tier report is technologies Performance with interface industrial technical in-house with performance business. that and X legacy Lydall's segments reminder, behind agricultural, interface performance compressive complementary applications. Randy's materials under while construction, and cover engineering Materials manufacturer - will as to the a with similar I portfolio other used in and further performance a manufacturers processes The The engineering

The expansion our line activities, product highlight new are a molecular into launch GP to filtration core new This to Lydall consistent single highly where product development Lydall's specialty which and concern. environment new molecular Applications strategy to pollutants, a technology September entree to like United is organic compounds. customer and growth involves absorption complements I'd to in provide can for providing odors has particulate of any been labor outside Materials' innovative of Performance environmental over efficient solid foundation is requirements. of higher both our laminated announcement volatile value-add The product of very a airports, meet cabin solutions or onto to a develop the States. layers technology. value-add variety Lydall received with line marketplace. filtration. contaminants remove phase XX% our can generated office is filters including any gaseous, The buildings, other for filtration, or gas particular be Moving contaminants. Geographic particulates, pleadable continue filtration base positively in automotive include the media particles uniform restaurants, with and exceed - and acid, hospitals, media conventional - highly sales that solution and molecular continues product It

growth Solutions operation of generating double-digit of margins. healthy, in China I ramp-up, operating mentioned Acoustical continues XXXX quarter earlier, As sales third to nearly with the Thermal XX% compared to

China positioning reducing of the milestone closure million in gaining restructuring in further the locations $X.X - these growth move in to been run expenses. Europe better foothold approximately strength addition, continue our India in in approximately Nonwovens will incurred of first in anticipation to well early efficiency, and XXXX. approximately reached remainder leveraged million manufacturing and initiatives The by gained third the of spend previously performance our sites focused further announced activities on to XXXX. The program that acquisition In half X focus date, of overhead are X. restructuring for anticipated $X.X efficient These consolidation $X To synergy markets. can and benefits with the the expansion. footprint estimate also fixed expense Activity initiatives on in the quarter underway from our with related further XXXX. reduction facilities more interface XXXX to we with scale million a of consolidation Technical be in the has be China materials, the remaining site total reducing one a with to of facility, has million of with to invested this leverage rate business We be $X completion in the will and X

- to Turning Overall, business the X business we conditions. favorable. underlying Slide generally of with believe fundamentals general remain respect our to

subsided we an in approximately first the the of market. aluminum average significant pound. continued XXXX, pricing for $X.XX degree see of to volatility to After per aluminum the side, some supply in LME volatility half with price has On

represents a it quarter the While X% this down the XXXX. of sequentially is from of third second quarter, from headwind approximately

sheet on see Thermal to continue premiums, used tariffs conversion local duties for pressure we and addition, aluminum business. in and Acoustical products Solutions In the upward year-over-year costs

a have arrangements business recovery. volumes. X/X Lydall approximately There of As the for a reminder, lag affected in on does to is place X X-month typically pass-through

certain and fiber business see are specialty aramid applications to units, for Nonwoven input certain Lydall polyester we simply fibers and monitoring materials. addition, Technical input all In closely key performance applications a pricing, in and gasket continue supply across on constraints

implemented higher tariffs on for impacted to raw continuing on as most XX% recent arrangements by are inputs work key to the we January X, other that countermeasure XX% XXXX. could material of tariffs supply Finally, the be alternate our round a

flat. On rates at volumes while are seasonally September, continue are likely million the will to essentially be projections XXXX that current third adjusted demand With side, of mid-single-digits. marginally indicate automotive units domestic forecast U.S. European markets the quarter XXXX. to to light production show above grow XX light in forecasted Western results domestic China field the levels favorable to see in annual up flat

basis. we this mix our slightly on market of and in portfolio, product platforms Given outpace a to expect applications volume in outlook the global

XXXX, quarter, specialty Sales Strong cryogenic to due sales materials materials primarily Europe for domestically, by expect Chinese to Looking to third softness by show the demand stability the the business, first the and engineering filtration continue U.S. trend installation of and of and that in and China. continue filtration we positively remainder to in impacted markets half continue in in offset to customers third quarter products our in tariffs. year. to softened the of for performance

so industrial China, our and filtration advanced ramp America filtration demand with demand Advanced down. Technical a In fourth and we and strong. our this quarter, strong seasonal, demand weather remain for Materials products. markets by driven for power remains North market. is overall in Nonwovens The geosynthetics the enter remain healthy, liquid and and Finally, as both stable in will generation The industrial the construction also materials business geosynthetic demand we cooler the applications markets experiencing are healthy for air segment,

Globally, products. Nonwovens robust backlog With acoustic We have now I that, has Randy. architectural Technical seen growth turn also third healthy to quarter. the in our will exiting the a over call

Randall Gonzales

you, Thank Dale.

overview Slide to consolidated X. then an segment I'd Turning and our briefly of results. operating our results, cover provide

XXXX Thermal of sales up Canadian tooling contributing X.X% an growth. points points of Tooling includes primarily line. million this on X.X of and of XX.X% of growth future or organically quarter of revenue were accounting a and with top from euro. weaker of growth sales sales primarily of that XXXX, quarter the was contributed segment Third $XXX.X dollar standard, of tooling the impacts Solutions. third to was sales, up foreign sales was for Acoustical sales quarter Solutions, adding related the $XXX lesser new points, adding million of of our recognition, $X.X and consolidated XX.X% a Acoustical X.X points compared or $X.X $XX.X recognition to million, to headwind FX part extent, Performance indicator timing while million Materials and $XX.X or the the each exchange of acquisitions up year-to-date Thermal third sales million sales, to XXXX. in X.X X.X% Year-to-date Note points X.X Acquisitions in X.X which million

delivery The contrast incurred costs million. of prior a prior net to points XX.X% third revenues profit reminder, and the time year. under gross quarter upon was tooling to to in from practice $X.X As are the of was sales as tooling predominantly customer. over new recognizing the gross recognizes down XXX margin Lydall Reported standard, impact acceptance basis

adjusted step-up both charges XXX basis inventory 'XX points. XXX third basis Interface drivers this labor higher were severance XX.X% periods, erosion. The the down gross Acoustical Solutions points, of of drove primary additional in drove costs where XXX points costs to acquisition reduction an margin and and basis Thermal Excluding in of related and higher and in was restructuring gross quarter consolidated commodity overhead margin

performance The and third initiatives, including of include for to related Nonwovens the was inventory expenses unfavorable operating expenses quarter costs, to transaction $X.X million on the $X.X restructuring third foreign The was corporate activities. to expenses materials tax Act Additional Adjusted Consolidated an Tax related adjustment in by quarter for of offset XXXX by rate material reported was rate the mix from by acquisition. sales. of partially for of X.X%, drivers negatively onetime Technical non-Deductible triggered XX.X%. earnings step-up $XXX,XXX effective Interface and repatriation and margin higher the tax million pricing. the and strategic impacted Reform

tax continue full XX%. of the rate we to ordinary For to be range year XX% the the XXXX, to expect consolidated

$X.XX provided earnings $X.XX $X.XX earnings down the higher share of difference. working of was amortization to strategic cash of to third of Cash driven million $X.XX quarter. was income adjusting driven XXXX initiatives higher Year-to-date contributing cash in Third by receivables share flow flow with compared reduction compared third net of $XX.X was in in by in and inventory expenses, per higher in prior restructuring from adjusted quarter with flows capital for the lower quarter the XXXX expense, compared million. delivered earnings $X.XX step-up, this quarter EPS of $X.X of the When $XX.X XXXX by third per with accounts acquisition-related was year. $X.XX operations and the operations adjusted diluted severance million quarter

$XXX.X facility for remains a Our million. X.Xx of quarter-end debt was quarter debt third of credit EBITDA. end the the cash outstanding strong. XXXX, was approximately ratio million at net of $XX.X liquidity from At adjusted Total the

capital spending of of the third from quarter flat year. to down million million Lydall relates of quarter to million XXXX. spent $XX it spent As expenditures, the $X.X in prior XXXX, is $X.X third Year-to-date in

Technical expenditures each in products invest to productivity Consistent capital of direction, to the with and with in Thermal to million to Nonwovens. capacity range and Solutions X capital in support spend performance we and automation anticipate be growth new million $XX and in the continue in We XXXX segments. strategic prior Acoustical materials $XX spending the

Solutions I'll providing our in applications. Moving with innovative-engineered global our This business, segment results. automotive for X. specializes Thermal Solutions to which power under and Slide our segment. exhaust start Thermal is hood, vehicle discuss Acoustical train I'll underbody, Acoustical and

year conversion quarter Unfavorable XX.X% million in foreign China Aluminum compared sequentially higher inclusive down basis operating organically were points. impacting X.X%. index by reduced from of additional pricing, margin third up Net up prior premiums, Third exchange, grew million, $X.X part by where sales margins growth from primarily in declined by Adjusted quarter almost the cost or unfavorably XXX with second sales X.X this weaker support tariffs. sales $X.X sales and XXXX. Tooling growth while $XX.X from customer of points points, X% basis all including year, quarter, costs XXX XX% euro, of logistics of grew $XX.X million business product was up X.X% launches. were million sales regions, to in million or last organically. of $XX.X

to operational dynamic of pricing trade was parts, discussions. change commodity global the context as monitor customer we actively caused margin continue disruptions launch outsourcing, by labor freight in higher resulting given remaining in and current The costs. continued new We

year. We of through expect in to look to expect persist mitigate the and for will the the continue this activity but they short-term exposure rest continue ways to

solution insulation engineered addition performance I'll cover of business broadens to interface X. segment. with filtration Slide across and industries. variety ceiling to Materials markets Moving provides solutions materials the our This specialty globally, of in Performance portfolio end a the

The The new Sales under to filtration segment. new Advanced encompasses segment, and headwind. as were announced was high reported including Insulation in Solutions and and going applications, related growth Ceiling ceiling XX% Note which Thermal applications. the and down million $XX.X sales Interface been insulation compared XX% $XX.X performance Lydall result, air Life particularly this previously higher primarily X includes up or the reported that sales FX million of filtration Sciences U.S. cryogenic Filtration to cryogenic and products. previously forward. sales prior legacy on organic from Precision Resulting well of $XX.X consisted segments applications reported acquisitions, segment as temperature million interface specialty temperature consists growth the under or liquid materials, previously gasketing for year. of data China segment lower impacted for filtration ultra-low and a their the a by was insulation, and applications of end quarter will X.X%, report have where key slide As sales demand customers lower under tariffs for or sales

X.X% expenses. the Third or adjusted from quarter step-up for included prior to points margin expense. points XXX of $XXX,XXX XXX by amortization year basis higher basis operating also eroded This inventory

Excluding down basis unfavorable cryogenic partially lower expenses. mix was margin higher-margin offset infiltration, by points, these items, impacted lower XXX sales, of operating SG&A insulation volumes by

As step-up Dale $XXX,XXX inventory and start, off of margin for $XX.X our contributing mentioned, points, adjustments the of XXX When of in million than communicated performance August, September $XX.X accretive accounting amortization XXXX. the expect in and This expectation XXXX million million finalized, total higher all August. has the $XXX,XXX inventory Intangible and to full $X XXXX also $X.X or we now in We year about line basis step-up by and XXX portfolio. the QX. or occurring with estimate intangibles to anticipate our is with was the Interface in $X.X in and of million. be expectations EBITDA preliminary in for respectively. million we approximately of of substantially announced per been operating million amortization amortization to performance month Purchased acquisition is sales incremental Performance our in adjusted Materials in with materials business a solid reduced $X $XXX,XXX initial this

expect in EPS XXXX, reported be among Technical minimally our others. deal well continue in the for air Nonwovens expect medical cash such use as industrial to it segment covers we be other as products engineered So XXXX. accretive produces will This to filtration and geosynthetics, accretive to Slide commercial automotive, applications liquid media and as segment. we X while various in

sales the automotive quarter of declined the felts largely by reported by third X.X% basis basis to by compared were X.X% by Industrial For Europe totally XXXX net not of but sales million. driven organically period lower points were X.X% driven higher America, primarily amortization, of third and in costs, material needle lower operating profitability XX led of exchange of Materials, in margin the $X.X perspective, XXXX, which up growth XXX segment. million sales offset of sales points $X.X North foreign offset sales $XX.X higher price. filtration for of XXXX, Advanced was adjusted or quarter by strong unfavorable the million From a in to $XXX,XXX higher same which of unfavorable mix product by and or selling of

basis XX reminder, ongoing related a same in income, the As or or activities excludes quarter to compared year. operating of expenses in points last the adjusted $XXX,XXX to $XXX,XXX points restructuring period XX

line be market that quarter favorable, in of review by That now serve. our third generally earlier, and Texel continues Year-to-date side driven gained enjoy. to to healthy businesses the Dale be we demand leverage by to Gutsche of track, integration end noted top the position both in we concludes the and with and industry-leading on acquisitions, supply respect the strategic has As demand markets we performance remain and been growth confident results.

deliver to performance operator turn positions that, into performance strength back finish our end completing integration in on With Nonwovens portfolio the the remain session. continued performance. and integrating the solid in Interface call improvement improvements question-and-answer the these begin materials Technical operational Leveraging XXXX. focused I'll markets As in the our continued restructuring to us year, our we acquisition and we in on to

Operator

question Our Marshall from today Sidoti. Please Instructions] Edward [Operator ahead. will go of first come

Edward Marshall

good Hi guys, afternoon.

Dale Barnhart

afternoon, Good Ed.

Edward Marshall

if So was The that Or how all? to segment was any - start production? recovery due I I'm wanted of recover there did it with I much curious, to at disruptions TAS the uptick in could. you fire, -

Brendan Moynihan

was half Brendan. about Yes. expected. This it Basically, what of is we

recovered $X about had about of absorption, it in QX, of sales of and $X we about margin, million million that. So including indicated $X.XX and was we

Edward Marshall

the Or fourth rest orders come that that Okay. of the purchase anticipation into And will have those been quarter? placed?

Brendan Moynihan

recover in No. seeing We're activity and XQ would remainder. any an indicate uptick the not

Edward Marshall

Is have expenses introductions I on. kind when vehicles? the you me comments the this those And would that there Ranger, can taking the product I make any that might that it. be about They the would kind Got of - maybe midsized you're the think you new in year to next of that introductions Ford about be Explorer, to the the vehicles with sense vehicle of those Escape, year. related talk all types - are

Dale Barnhart

product Ford year as that faced product Those majority - is of platforms line, new platforms Ed, with launches, are and are GM, the metal us of a we've we those relatively small seen. Chrysler. are in this portion impacted have those the far all that OEMs. as the what Honda, have The been various new product for

Edward Marshall

cost Got there the XQ and expenses. overhead from trend talked in about overhead continuing it. improving you the that the to is XQ And an trend

about talked they quarter. see through of did fact this off of say wouldn't roll a the remainder we the sequential would quarters first fourth the year? X on trend in, basis entirely quarter-to-quarter But of improvement that that similar the the we You

Brendan Moynihan

of the particularly talking you're Ed, clarify, TAS. to Just

Edward Marshall

that To overtime, expenses freight, et cetera? overhead the segment. The Correct. incurring. the you're TAS The expedited

Dale Barnhart

quarter improvement gotten see of did was as launches, had we that a But up September. X Yes. principally, should in through number dramatically. quarter, X second They in back the we as result, as versus We year. quarters And outsourcing a the launching were We that quarter some in one brought through, came of the fourth of end high-volume product the to of freed we the to outsourced the third towards the the as that. in third components capacity in and drops continue larger we've volume quarter. see far expense, new

fourth the we So to continued should expect expense see quarter. outsourcing in in reduction

Edward Marshall

Say, kind to to tariffs? can't think the that do related any can there that domestically way then you seeing you that mean, to even or use or I'm I that aside exotic - could aluminum, aluminum through materials Got relates from market the curious, any is either of of a it. source? - And trying you I'm there in have scenario you you kind as anything activity? from might be that inflation you it mitigate

Dale Barnhart

one specifically, I we don't other what gray know We originally it but only Ed, was and China. the find sourced Europe. could was had was source in it And in

the So on a increase, we it in - second that's lower one rate that from being I year-over-year the resourced that seen was quarter with than in - believe we at this Still would've the China to from a what Italy. imposed China but there. duties

So aluminum North because in the their their umbrella do using one price the but the European conversion much of are in raise major are for too creating they to their also have. as impact of done they've - premium suppliers some - actually is them, but was of sort are that's what mean X also this, have to grade a haven't raising unique tariffs prices they've tariffs suppliers seen and tariffs what we call the they them. to We America, any there Midwest of we a offset

still of our products United the type States, So capacity have - limited have provide can need. that in standpoint, we the from we

Edward Marshall

a basis? year-over-year in performance wanted Does or the ask majority of slide materials. Or margin finally, then I on to on The the that the And insulation. represent just it. the detrimental cryogenic your... Got bulk

Brendan Moynihan

or the talking the sales? you're Ed, margin

Edward Marshall

acquisition, obviously. guess, considerably, the I up with Sales but... The were margin,

Brendan Moynihan

a year-over-year specifically The margin unfavorable in applications. we product segment high also mentioned. and double in digits filtration But the on because And of and we that's liquid as for insulation, filtration right. were Right, some cryogenic air sales between result impacted down the margin relatively us. was addition, mix a saw as sequentially that

Edward Marshall

environment Right. trying Because into tough to the while. I the get as is sense imagine the guess, for majority line? - rate? might run I - right therefore, that insulation, is it'll get at. - business this this what to away a and a responsible trying Is the cryogenic a that the China within sell the responsible guess be with in cryogenic I to from I'm now of and shift tough run persist that rate I that's for decline margin mix a that the I'm

Brendan Moynihan

I continued particular classify I will the drag majority, it as unless you're going line. on forward product guess some the resolve, there that and think that trade issues but the China that that on wouldn't U.S. be between spot

Operator

next come CJS Securities. Our ahead. of will Chris Moore go question from Please

Christopher Moore

Maybe, 'XX. Randy, amortization. talking just And about don't going be just I the intangibles make were that back accretion go right? Is correctly. for got real to quickly want the I you that numbers to that $X.XX know. sure That's those to I zero 'XX. in

Randall Gonzales

I'm you Can ask your question sorry, Chris. again?

Christopher Moore

intangible respect Okay. to... The amortization larger amount of with

Randall Gonzales

Yes.

million of So expecting, think, in it's we're 'XX. $XX.X amortization I

Brendan Moynihan

'XX, million. In it'll $XX be

Randall Gonzales

I'm sorry, $XX million in XXXX.

So we that's higher right? timeframe, August than what talked about in the

Christopher Moore

you. Got

of from gross standpoint. a more question margin a guess picture I Okay. big

gross of of driven have feel Nonwoven Technical trying normal the restructures kind level What of margin to since get and XX view XX that a what a from an new the factors to gross many margins months the factor QX acquisition, as to at end. 'XX, now? down in then look guys you Interface kind you - I'm If coming for

Brendan Moynihan

not number Chris, out specific normal will to I price. I there. Yes, on guess, a moving anticipate to would I'm the put forward term want a sure the come longer mean, more we in we macro back generally, aluminum trends,

gross help XX I tightness of on within should to X next, that supply in and it operating fibers itself on materials. we're in think the hopefully Interface there. in some a margin, is margin performance recovering on And think past, accretive viewpoint the materials, margin as you I then hit to performance aramid the on some say, resolve Technical will in Nonwovens us we've months, particularly said seeing

then in So away the issues this mix saw that that moving as anticipate forward and well. quarter. we We will we'll go certainly help, particularly

closer particular long that answer, but restated we're there, XX% to I margin, goal a EBITDA as think past, to in be be the we've pegging aren't on we not operating out - but margin I So an will and guess, forward. aspirational to alluded XX% going margin, XX% necessarily probably or continues overall, of

Christopher Moore

you. Got

from how gross moving kind and if near-term, Let what ability QX, of there terms from, pieces now of at me QX's today, say, visibility much here - ask end in between looking is margin will be? how there standpoint, margins more gross target a variability sitting the I'm of kind much is And to December? still of

Randall Gonzales

cost give If expect seeing in today, the to of margins holds demand we're we are today the we we would improve as But type material have fourth expect guidance. margins. and Well, we we quarter. do with that here they gross where raw think don't we everything in what sit

Christopher Moore

Got for you. specific wasn't Yes. My question number. a

variability, understand trying causing Just December. could pieces of still which cause to in rise you to which were kind potentially

So the in last down. question, terms of slowed And materials, you of advanced okay. just kind the

about of, You autos. just the to about kind a bit talk you view it related to further point? felt of how that Or little in you Can a is terms needle it talked sales at this that trend?

Randall Gonzales

- automotive I it lower going Yes, a so TNW mean, is terms to from Chris, in the sales the trend segment. of the

the have. fibers we consistent the of I that in volume line product TAS, what applications the have said with past terms in think we in that's of the

Christopher Moore

guys. Thanks okay. Understood, in line. jump I'll Alright, back

Randall Gonzales

you, Thank Chris.

Operator

Capital from Our Koranda Instructions] next Matt Roth go ahead. [Operator will question with Partners. come Please

Matthew Koranda

for thanks the Hey taking questions. guys,

Just TAS. start out to want with

mid-teens in marketplace growth choppy China, I despite pretty quarter think, guys you alluded the to, So in a there.

forward enable that how of sort understand here? that? could just So going we or what about trend help us And program should customer your you anticipate mix

Dale Barnhart

Well, the by had primarily Western-related new over product China. months, in with ventures joint it's driven XX last we've winds

and and primary or applications some directly Shanghai. now. now we through right either it's that we that - also have all thermal, we're business And are Mercedes So GM, product Tier there. to metal producing we I supplying believe X in those the are have X China, a GM

Matthew Koranda

know viewpoint of it. in your rates sort terms of operating in just going in Got And you there? a terms forward, market's little been that environment sustain these I but growth the the choppy you're can of production,

Dale Barnhart

on the applications regardless know, share, our X we'll relatively be before, small winning because low very we what that quarter-on-quarter, have know so to a but we sustain now. which we I or X base, still we of has right impact Well, said growing should new relatively is XX% marketplace, as significant happens

Matthew Koranda

of contributed fiber what the I fibers your the is terms remarks, on and Okay. other and anticipating mean, the business called most the numbers for that the you segment, in what terms given TAS shared seems just rose in in going out operating of of but are QX? we of of headwind aramid comments side have And in terms with just forward? And metals in the the guys then segment, drag fiber trend prepared given in of like it everything margin and sort you outsourcing the still in sticking same

Dale Barnhart

negatively in I by the don't line, We fibers I supplier issue from was talked you business fiber have it in we impacted recovering That the supply but quarter. rich-margin you. - get impact which a the quantify Ford can't was product product on for second QX, our when quantification, can the about to back line. the did F not pretty series

recover that quarter, we're third that in not and was seeing in down So sales fourth the quarter. the

was line. that pressure from on is other that product that higher-than-normal year. that's in then seeing forward, segment we that pressure and product continued we're that just And coming category that are price competitors price go as in what volume in, the putting So are lost

Matthew Koranda

Got it.

Okay.

So you should next could business resolving I statement supply forward. themselves on aramid that be some may XX the issues elaborate on I headwinds guess, Brendan we referenced little side of to you that the a bit further going months, referenced, within anticipate X when more? think,

Dale Barnhart

by and generation right year, of the of supply, shortage and itself of to now, some everybody seems that supply, Nonwovens power we'll prices Technical or - the of now be power-generation restricted up have to increased end availability hopefully, seems our we we've we area that. a of increase been the supply, going been in the Matt, and the so and in of gone see prices make had That's for product. product. price materials recapture all there's relieving predominantly in be able Earlier because was lack for 'XX, to of scrambling leveling actually our off driven That so market. the into though, stabilizing It not significantly, that

Matthew Koranda

it seeing softness guys I And auto-related then did was say Nonwovens, Advanced in that maybe I out, why QX? call guess, some know kind should and Materials year-over-year And did the strong. Technical declines Okay. of you in you it be geosynthetic

the then driver that mean, side declines? terms kind how year-over-year And factoring Materials outlook I in we that only sort going of the the of be of at segment? just Advanced that of forward, was outlook growth of So the should into for least the

Brendan Moynihan

lot the much comp. I continue that else business up I Yes, to wasn't to them think required. forward, the them, a volumes Randy the specific we're and see automotive, And driver going to used as that, probably as on business the There was to, alluded big down within to in clear Matt, to and they just and driving has unfavorable sources be going other whole pretty there. auto lower available those and supply flex slightly fibers mean, automotive quarter,

to here XX% the if be on from X, we then for domestically business. and seeing TNW some fibers - costs TNW to use escalate are We be some will automotive for continue to us tariffs higher China in Jan the bringing over

another we're closely. monitoring that's So very thing

Matthew Koranda

that What guess, that terms of I intercompany to TAS, Jan just would to through sales X? goes if sales, do in from TNW the in the

Dale Barnhart

that then at are of is things looking mean, the so One - mitigate China at me, do facility it in product to to downside Canada, transfer that we that to Canadian we're product of that, the would looking we the just Texel qualifying the excuse we I in if China on volume to produce we're China have in run Canada. and assets from our we

Matthew Koranda

to Can something that that the is we now going longer? a little take that's year-end, do between and or

Dale Barnhart

right We're running now. process that through

from a confident qualified upon be need depend will have qualification but approvals get in - it of product we'll pretty standpoint, OEM, the able a product from we'll Lydall to a and the Canada. I'm to Some running

Matthew Koranda

Okay, it. got

maybe Just couple a for Randy.

do sort end inventory sight flow. capital and a I or the of there's in been guess, could we reversing little cash you and think Just of also sense but drags. a that the AR that one for dragged bigger the been traverses? when has sort big timing? given I drag may Any of this Is I billed, that and think talk down mean, of an prospects bit, on be working to on year cash there about But when

Randall Gonzales

Yes.

balance sheet is where now It's a big expect up sheet. the in balance revenue hung We called recognition the Matt, QX, that contract on especially our assets.

in So in we're these at record level significant launch. to of tooling tooling. expect We QX continue products as payments do

So QX reversal.

Matthew Koranda

And $X what And clarify Okay. plan you number benefit that there? that in Could liabilities. the was? million

Randall Gonzales

acquisition, I in right? Interface. from million coming liabilities, that's From think, $X benefit the The

Matthew Koranda

can color follow-up of I And that like needed. a if on we quarter-over-quarter the implies your CapEx, Where think little spent seeing size most Okay, more segments? in I sort on offline being that's a just then I among the guidance decent uptick pretty are where so uptick?

Randall Gonzales

the on quarter-over-quarter CapEx? So

Matthew Koranda

Yes.

Randall Gonzales

So in invest the TNW I restructuring. to we've mean, continued

So there on continued have the these the was high-speed clients automated TAS in come a quarter, business. lot in spending of that expense there on

So primarily what's that's driving been this.

Brendan Moynihan

the well. range of will months one we've also things mind we the but million requirements Matt, last keep Interface so in X, from is capital Yes. constant for X $XX we've million, probably some added to $XX kept have as the here to at Interface,

guidance. if it's prior into, that actually So our net than slightly you lower

Matthew Koranda

okay. Alright, thanks. guys, I'll in jump queue Okay.

Brendan Moynihan

Thank you, Matt.

Operator

Sidoti. is question a Marshall Our Edward follow-up Please go ahead. from next of

Edward Marshall

if to clarification wanted point just could. a of I I Hi get

a it to on the QX, for Jan you? basis? curious, do were, but margin - go what the done X. about quantify it on reported talked can You what did that might impact tariffs would've say the I'm you you the impact of versus If margin XX% in effect do from

Randall Gonzales

we've up the to sizing what did able currency. we're that because Ed, go it into is mitigate some been degree effect, of Yes, devaluation the the to understand trying we're XX% with that to Chinese of

what what plan qualify an to hit on to we get don't as not whether mitigation alternate January referred been X impact, Dale alternate big is our lines. same that suppliers, along like it's so locations extent So but the we part those of

hope hold anything that not us because of the this guess at bunch all of we've point least I it. probably I from but So got in back at we mitigation part, on part plans it, spare works of quantifying a will

Edward Marshall

risk? line? the business is question the you're in full guess, impact if what What I to that be would unsuccessful Right. the mitigating

Dale Barnhart

back quantified, that but have don't can get to we We you.

Edward Marshall

be some into you the as of wanted may overhead On - we've the bifurcate but second us And there stay, other and see, and business know to that I done aluminum, talk TAS. then kind in then to is, as of obvious in issues be of what you wanted to ultimately, go a here about of away, business we talked walk and how through see can cost. specific We've about you Okay. I this the kind self-help what is offset talked and to when, between about kind in the you maybe are follow-up We've these throw can just, think to to tooling then the I margin the kind goes might talked TAS structural difference to and well. guess about the pricing segment recovery the what if forward? pressures about near-term I I in of could margin? the could

Randall Gonzales

to of a some structural to that the into like put what described going you a about I improve mean, the as near-term. quarter-over-quarter, is complete when sequentially to number was reduction QX. stuff did Don't and So launches, mean, efficiencies, again, we it of that and that I well. here you But product is terms other as should of Ed, in see over we self-inflicted, operational time if mentioned on in outsourcing it, bifurcate, we you necessarily what mentioned and and continue but costs talk reduction want commodity self-help see we again stay as want to the we'll lot a

QX see sequential should also seek pressure mean, the the from I cost going but again, on we'll So commodity forward. operational issues, improvements in some side continued

Edward Marshall

okay. But, but,

do product complete? So when a way. they launches, different The maybe asking

Dale Barnhart

we as the quarter so third yes, away, were September, we're that the of that number but some back in as the fourth lower new substantially the bring parts pretty was, for. launches, The outsourcing. quarter goes be But able that's never what quarter actually is business launching. all the and quarter of far parts than substantially quarter that's we're from end fourth in third the the parts high-volume why will we're down they're to third It at

run being So those are in-house now. back

Edward Marshall

I kind you're worse, step around think if and getting are of this, I it lot edge. about mean, So like the back, things and sound I doesn't a

looking are have. You that mitigate the of some specifics to at, looking ways to issues you say, improving at

Some off rolling of going it's to continue. naturally as operations be

and I think off about, a the So it there's $X.XX, we tell me as to about right that like mean, build about but annualize the models think we to start that too and $X.XX. beyond. was just I as I just I'm negative impact. you're trying of can when up to our sense them. to not how quarter looks to pieces If looking to be kind at few think think combined think Is through, scenario coming and the it would base XXXX mitigate this. that if about there's as here of about about overhead of I third $X.XX a cost I'm if future? of much kind the about Knowing get there, frame that there a right number a

Brendan Moynihan

we've TAS I Again, operation you know mean, level in points, to and similar and in get directionally are you're reported we to them those EPS. put we're Then doing, basis I an is to directionally correct. the you've correct. math year-over-year 'XX. math given think into your able variances, Ed, the is I so efficient those dollarized think back I

Edward Marshall

of would It the coming that required layer, guess, help in I probably then in? QX interface And top that much revenue all is as that on really you well? Is didn't EPS imagine? that

Brendan Moynihan

had only month we it. of And one

certainly. So

Edward Marshall

wanted just very of next out. how much. frame I appreciate help, and year might that think Thanks your great. Okay, kind guys. I about to

Operator

back This time, I'm conference questions. question-and-answer the any Mr. session. turn I'd like closing Barnhart showing for At this conclude to to will our Dale remarks. over no further

Dale Barnhart

speaking I'm you. Thank we I joining on sure be thank to for soon. will want everybody call, and the us

Operator

attending now has Thank conference The you concluded. presentation. for today's

You may your disconnect now lines.

Lydall (LDL) 11 Nov 182018 Q3 Earnings call transcript