LDL - Earnings call transcript Q3 2019

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Operator

Good morning and welcome. Lydall announces the Third-Quarter 2019 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 Investor Relations.

Please go ahead.

Brendan Moynihan

Debbie. you thank Hi, and Lydall's everyone, earnings quarter conference call. welcome morning, third to XXXX Good

today's Dale in an and business call Chief on progress as call me Joining are provide the about long-term and Dale start continued Gonzales, conditions. strategy, with Officer. well comments Executive are Barnhart, current Randy Executive our Financial overview Vice-President making of Chief we will the executing Officer; and President as

the our will open by key Form with Yesterday, discuss review release performance Randy our of the we'll issued, was earnings was questions. drivers of At remarks, financial end follow for the our segment. quarterly filed. XX-Q and and a our line

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

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

In addition, measures reconciliation this found financial GAAP to we referring A I be of call. in be financials can appendix the non-GAAP to the conference presentation during referenced. will just

Dale. I'll With the to that, call turn

Dale Barnhart

published Good Thank recently the Slide results financial us. our you, morning, outlines for Brendan. quarter. everyone, and joining thanks three for third

or increased Third million quarter XXXX X.X% the $X.X same net million $XXX in of from period XXXX. sales

were points. on consolidated The Technical particularly sales a And in X.X%. on-going tooling in softer Motors continued impacted down sales, in million markets the and General key X.X% were percentage million in or Performance revenue end reducing strike sealing foreign decreased dollar uncertainty $X.X Nonwovens, or as be strong X.X $X.X Sales volumes. segment sales impacted Materials. to by and headwind sales trade global China, markets drove tensions Organically, in automotive the lower

$X.X million $XX.X the a growth of business. a quarter sales Nonwovens net adding the Acquisitions partial interface divestitures or of in of of the the with by of as X.X and Geosol Technical contributed million offset reduced points of million, divestiture result $XX.X

for strong Thermal contribution EBITDA down benefits points third a EBITDA Acoustic in from mix in Improvements headwind restructuring of in basis partially of the associated was margin quarter the $XX.X quarter, Adjusted third and Higher was costs flow million, drove XX Materials. third margin operating Performance Solutions of the Nonwovens. were expansion the XX.X% by in and XXXX. offset quarter Technical pricing, incremental from through

share, $X.XX per third-quarter down amortization from $X.XX including with $X.XX were Interface XXXX, earnings approximately associated the Adjusted the of acquisition. incremental

the Finally, to in $XX in million of and supported debt working $XX.X down capital, by enabling $XX million pay fund improvements million and quarter of generation the investments. capital organic in strong to was year-to-date us continue cash quarter

to and Turning includes four. product growth an new Slide expansion our geographic M&A. is development, which strategy, four Six This Sigma, overview Lean long-term of drivers:

to and Interface our skill these positive is be sustaining continuous process business and resources in deploying profitable tools for Materials across our sets Six continue we a point have key Sigma Leveraging the are actively focal Sigma business these and results. Lydall. Lean seen to Six a growth. business, existing to Performance Implementing

Kaizen on line. a in of example, a reducing events specific facility focused one product conducted series rates Pennsylvania disciplined In cross a functional on team Lancaster, scrap

rework of The reducing across Lean the of analyzing on and variation in in almost of scrap time control data efforts focused production implementing $XXX,XXX the data production rates, analysis savings, that of annual can this impact causes work, standard line. and tool in methods high-value, documentation of these in and the reduce identify process. improve on gathering and resulted results. this data team product root and included employed is low-cost actions initially development prioritizing The scrap to to

like also in illustrates to Lydall's segment, Acoustic our our address Thermal ability initiative which development to engineered provide their Solutions new a customer requirements. highlight I'd solutions and product complete to partner with

Motors design a solution to building thermal application This to provide shield, updated that the address shield interaction unwanted Motors. fabric and mid-engine with cabin. long-term one metal new collaborative noise addressed a thermal for provided heat to key our high-temperature complete, providing identified is while a acoustical with requirement generated Working product also lower-cost the both a acoustical for their timely cost-effective requirements platform, block a engineered Corvette team solution in single which adding design in the By solution on to General package a material customer issue, General and growth. base the an the heat thermal

Turning to sentiment respect continue With to Slide discussions, business to create business monitor we on-going trade affect uncertainty. which the five. conditions, and negatively

lower prior year. for supply approximately provided side, aluminum use Acoustic million $X from cost On Thermal the a tailwind Solutions in our business

quarter of to pricing in down approximately will range. pound year, remain third conversion per which by low Average aluminum partially anticipate We $X.XX of the pound prior LME was per base from LME in index $X.XX the domestically. was higher pricing offset XX% cost mid

anticipate fiber Midwest, and levels engineering materials have to through first costs year-end. segments generally in through the of three premium at will steady quarters the through we XXXX. and conversion hold In the this cost business our year, seen remain the been Polyester filtration

higher in constraints have Supply prices and meta stabilized. Technical aramid generally the and Nonwovens Materials on used Performance fibers

demand vehicle the seasonally million the in adjusted light domestic September, offset in XX light with gains rate production declines units side, averaged by truck through On cars.

the of vehicles, labor in volumes for production impacted GM of production U.S. vehicle for and the The strike the weeks is full-year X last full third the The quarter million forecast reduction U.S. XXXX. XX of October. X.X% from a month light

of European be full-year don't X% year. is down this in or the be be and anticipate for we in following X%, XXXX. China larger is to in expected -- quarter earlier to market At will The XXXX approximately the time, these recovered the outlook auto fourth down volumes down declines

the our a due our to on slightly in basis volume expect of outpace market We and application mix platforms portfolio. to

China Looking and business, engineering mixed to demand in and North weaker and results in America. saw our Europe filtration materials we

Filtration In Europe Technical customers to as end in delaying expenses. as continue, sales replacement Nonwovens, tensions help trade are reduce China unexpectedly were projects in softer filter and Industrial lower

seeing result, lower for we term. in a As Industrial Filtration are backlogs the near

end The restricts but Advanced performance Materials weather demand driven the third conditions Europe. showed segments quarter in projects. geosynthetics will in in by which as filtration Performance fourth saw segment quarter in seasonally lackluster see continued volumes, higher the colder higher to favorable Materials domestically market construction decline

the quarter to be the and contraction expect continued to the we anticipation fourth the third In actions Demand a all we markets the down expected business. across quarter initiated in to the market and across softer saw than regions for profitability quarter, have targeted reduction third these flat lower in of conditions, levels. sealing from cost geographic in response

for savings million $X $X.X million, primarily of completed charges, to the run $X million approximately million and of be investment in to XXXX. in $X The quarter severance-related fourth generate will rate will

With call Randy. over that, turn the now will I to

Randy Gonzales

Thank you, Dale.

results. Turning our our to cover operating slide segment provide overview six. then I'll consolidated an and briefly of results

including discussing As a will be segment. by reminder, adjusted adjusted financial metrics, EBITDA we

and to reconciliations numbers the the GAAP are Details release comparable earnings press in presentation. and provided

up million were in $XXX As down quarter million, X.X% Dale or mentioned, already third $X.X consolidated organically. sales

segment. in Materials Solutions points. year Adjusted adjusted period, from for costs Performance Incremental in down and the the acquisition-related margin Thermal by step-up productivity the basis sales gross gross restructuring in and production XX combined margin Acoustical business, higher were Nonwovens, the Interface lower inventory in offset prior with segment was gains pricing costs Technical higher

provisions Third with adjusted in July to associated from in quarter consolidated EBITDA the sales gain related was products of including XX.X%, XXXX. acquisition, Precision was Filtration earn-out a margin $XXX,XXX which other income completed

gains points Technical offset XX Nonwovens Performance margin by were Compared Acoustical more erosion Solutions. was Materials margin and to adjusted third in as XXXX, quarter margin EBITDA Thermal in down basis than

$XXX,XXX from for the Adjusted XXXX third the period. million, quarter $XX.X quarter was EBITDA down

rate XX.X% quarter by third not benefit up jurisdictions losses prior in was tax recognized. tax from year, is impacted The where of effective

$XX.X for XX% with to anticipate of consolidated tax pension tax settlement, consistent we to tax be effective quarter, to the associated fourth range be with are We quarter rate full in rate tax rate XX%. outlook benefit a the third result, as our year of plan more the revising is the million and XX.X%. Year-to-date, ordinary adjusted

of $X.XX $X XXXX per to Third quarter Adjusting restructuring and completion the for the compares adjusted costs approximately in $X.XX. results settlement, pension of earnings share. This $X.XX quarter share the were that earnings share incremental of per third-quarter amortization or per million $X.XX. was Note third share per XXXX. include

were operations by third provided million and flows in quarter million year-to-date. at strong $XX the Cash $XX.X

last through capital improvement the Continued management year million the the focus of year. primary $XX.X driver on from is working

ratio with priorities, reduction Debt XXXX, one the capital and facility debt the was be adjusted outstanding Total end third approximately $XXX allocation the for top ended quarter net in quarter credit year-to-date. in at million million leverage defined million. At of X.X of quarter million EBITDA cash of of continues to facility. as the paid credit $XX down our times third the $XX.X from a $XX

reprioritization were quarter million, second down projects. third $X.X Capital in timing quarter project from XXXX of expenditures on and

continue full-year to uncertainty capital the markets, and to $XX we for lowering Given outlook end as of reprioritize our to result, a million. of spend the range are a million $XX capital projects,

underbody, and specializes powertrain segment Slide engineered our is to in acoustical This with segment. that our results our global business discuss and exhaust for Solutions innovative applications. Moving vehicle Acoustical solutions seven. starting thermal underhood, Thermal I'll automotive providing

Third with from million, in quarter of prior sales up in million were all $X.X $XX.X sales $XX.X were up X.X% organic growth million part Net business this organically. regions. year,

due exchange, GM more last volume strike, sales sales sales grew foreign million in America European up XX% with of were net than ended approximately by North modestly, and the were slightly which to continued week. on unfavorable platforms. gains adversely While $X started impacted selected late mid-September

were $X.X to China of customer on driven of our market were continues prior to compared mix by sales year, platforms. points. basis part sales sales be $X.X million foreign and million the the of net up reducing year-over-year, XXX down down exchange, While Tooling

primarily million was exchange, the Profitability favorable XXX growth agreements. customer offset commodity favorably reduced segment of anticipated sales pricing by of the points by XX Acoustical basis or basis XXX $X points. our impacted supply euro, aluminum, Solutions was Foreign consistent points long-term Thermal the basis with which transfer in segment actions, by

In delivery see Higher North in labor year. and to costs North in operations incur resulting or resulted the basis volumes. OEM increased market, Europe and higher prior to incremental production labor America continue million while points wages, overtime, higher additional of a because America, and in European operating to costs expedite our XXX tight of we compared continue $X.X temporary volumes outsourcing

In French lower we but costs, German continue several part our will we completed quarter, the which see facility of transition to including SG&A labor and both from of to sales, to operations, these last a some our help in compared numbers and the points. of were operations mitigate Favorability mix, lower in costs basis higher benefit volume XXX product tooling year. overhead absorption, spending

segment, Slide prior globally. cover solutions XX.X% to variety markets sealing our compared filtration Moving $XX.X and will $XX of to I million up engineered Materials or which and specialty of were provides Performance industries end to eight. million a Sales year.

completed and XX.X August periods, third the Interface that XXXX, sales Recall reported of million results in to $XX.X inorganic was which on quarter contributed so points August July from include percentage Interface sales XX, growth. acquisition the

by $X.X the headwind sales reduction was was and September. quarter, the X.X% solutions sealing in in sales or driven contraction million points a month This of in organic million. of contracted so XXX FX basis advanced by organically, $X.X

costs, basis margin of and were pressures, points and by improved partially our costs. These EBITDA increases segment is driven volumes XX.X% overhead and The XXX by mitigated from in the lower productivity absorption, adjusted by impacted pricing higher prior segment down sealing labor third lower improvements material year, efficiencies. SG&A lower quarter

million at quarter, continue the which fourth In third to the Note the level This Interface, of of Interface year. same $X added million results incremental million amortization quarter intangible in same include $X.X XXXX. compared prior quarter third XXXX. for in $X.X that from EBITDA an is will period

be lower EBITDA continue to accretive cash Lydall expect XXXX. and sales, we to Despite softer gross Interface markets end margin, in to margins and

This segment. in use commercial for filtration Nonwovens well automotive, engineered produces and Slide products media and others. among nine liquid as industrial medical, other covers such as Technical air segment our as geosynthetics, applications various

were $XX.X for Sales from in points basis and sales year. XXX to compared the prior XXX translation points basis were of headwinds Adjusting for Geosol quarter of prior XXXX XX.X% divestiture, organic the year. X.X% down million, down FX third

$X.X impacted million as Geosol Filtration for by XX.X% Industrial China, were up But the were down heavily softness sales lesser and a million, adjusted in degree, $X or X.X% divestiture, sales or in reported Advanced down or Europe. sales Materials X.X%. lower are million. $X.X to sales

restructuring In XXXX productivity sequentially. from XXX XX terms basis up and was pricing actions, margin improvements, of profitability, adjusted by of and XX.X% quarter continued segment mix This driven points points was lower spending. EBITDA third favorable basis SG&A benefits,

we aramid continued meta these XXXX. cost discussed, but an to stabilized be previously quarter fibers see have year-over-year, As generally compared to we area material pressures seen where second

adjusted XXXX. EBITDA reminder, for and expenses That third-quarter concludes of accounts XX basis a segment review quarter of third points in basis results. in XX XXXX third-quarter As of restructuring points our

fourth lower with could We quarter business the increasing uncertainty Materials third anticipate our quarter. Technical global the expectations advanced than sealing these markets in of in in While uncertainty opened stable deteriorate sales further segment and drove expected for sales, areas and the China in in weaker business. relatively and the Nonwovens demand solutions market, volumes Performance in in

line GM to approximately anticipate we segments, sales top million. business our $X by dampen strike will million further $X Across the

We well as Materials operations portfolio. in integration the on the focus acquisition costs mitigating Acoustical as of into to continue higher the Interface Solutions Thermal Performance

flow continued to will the Finally, reduce we expect strong that generation allow outstanding cash company debt. its

With before we will our that, call Dale to turn question-and-answer begin back I session. the

Dale Barnhart

like China, comment segment. recent previously Solutions we prior performance and leadership briefly led tools of will on has the Joe Joe President continued and brought Junker, take for to Joe that July, Solutions Hannifin the Abbruzzi questions, and automotive Acoustic Replacing portion segment. team. as we in expertise background announced of this drive experience will the our early in In growth business over Thermal this Acoustical to the president at Before experience Nonwovens lead given profitable in of open segment. who is manufacturing call I'd Robb the Parker to improve with Technical as changes in

this entire take me. communicated to earlier from succeed Sara extend my full for to their Sara company this transition Lydall the mutual Finally, to like I appointment my retirement of have announced as over the announced contributions Lydall, months. we our family thank several to support the month, my success Greenstein to I'd opportunity we over and coming the tender and XX-year as

line With that, questions. the up let's open for

Operator

go from answer We [Operator and Company. begin not Your will question question first Please ahead. Sidoti Marshall & Instructions] Edward with session. the comes

Edward Marshall

Good morning, guys.

Dale Barnhart

Good morning.

Edward Marshall

mind I'm for July, in I what part, okay. the about We've third the guess the markets. in So we're sitting July, end through. quarter's at outlook of of kind stability here looked gone talking the relatively Not -- individual held and looking on an most is okay. the you, looks but sales wondering great, kind And this outsider happened segments. of in. And

I can So of, where maybe kind TAS, guess, and the you were. specific of issues PM through real walk examples

and And just took the from it businesses, talked in the been a it because turn about July. specific with in examples seems those of that comments fundamentals maybe happening specifically turn stability took just Thanks. you a what's

Dale Barnhart

in world, lower in that we continued particular, midway $X of occur Yes. the all of business. of the when in It did orders Materials, softness it quarter. we Across In September significant and decline regions in about started we areas what the backlog anticipating the were segment -- sealing million than a of through third was Performance all in quarter. saw

demand driven equipment, softness continued Caterpillar-type ag in the inventory. have i.e., destocking dealer it's fact several construction product, that industries by equipment. they're And OEMs of seeing So mentioned those for

dealers So pull to as OEMs seeing that from less declines, through the from our the products. we're demand

we that most saw the in in was the significant surprise that Materials third quarter. So Performance

expense, demand had we in quarter. new and said, Europe, specifically platforms far some won. had in where forecasted we specifically what challenge the we part in -- from on the was revenue our relation that sales and to of facility expense With there we France, of saw excess as OEMs TAS, in erosion in in the growth The organic and third increasing

to taken facility, significant the resulted expedited expense and to as time, That and facility mentioned we've of our the we've outsourcing the French to is corrective freight in capacity over expedited available mitigate now freight. several some in quarter. reduce Randy that go German forward we had outsourcing parts the third moved which from action

that So see as in market. did growth; the the sealing the cost the Performance increases to drove, underperformance we of fact and it TAS were organic one, principal given relates that those two Materials areas unexpected then

such out And stable quarter, demand were didn't be would were our again, case. the backlogs Performance as that comfortable we third in that to the Materials. Unfortunately, the be started that we turn

Randy Gonzales

Yes.

The TAS OEMs. automotive America, sees a other business $XX thing QX QX I'll typically mention, X%. in to about Ed, the to The business, sequentially from is have reduction dropped TNW segments from these that so In plant QX where over shutdowns July all North at because you million, of seasonality. typically QX,

of So we there. decline a bit little expected

China, Of course, over of big QX that a $X head on in and QX and by strike, top half in the reduction surprise referenced reduction, And that million. was big reared $X to of the TNW that we impacted drop terms ugly unexpected, kind GM million But quarter-to-quarter was the there quarter. of the the was in that was the which second line. its surprise

Edward Marshall

Right, right.

going you about to the in for transitions and this the transition TAS Europe So has facility to for while. other, one a the from a talked second, going been and on

it kind mean of does is to take to it How how So speak? under long can that get to to take ask, the Germany does so from France so I going of costs of maybe to kind those water take? move bridge, long long I to these resource Germany? it how kind parts

Dale Barnhart

completed of parts by There and be transferred. believe been that already of fourth we're they'll three them the have the were of five end a moving all I total quarter.

Edward Marshall

Okay.

of get sort now take this quarters. five of but it what, has in just going to been mean I for, kind that four, respect? Now time on does

Dale Barnhart

the in and the expedited and second France. was freight third No. It quarter were in outsourcing --

Edward Marshall

balance into most and TAS 'XX underlying that So there the are other XXXX? of issues of the for were

Dale Barnhart

It the product were Yes. outsourcing the that all American in experiencing due expedited launches was in North freight we new XXXX. to

Edward Marshall

Got it.

aftermarkets in Interface? So, it PM what's to relates OEM to mix the as from

Dale Barnhart

About XX% Interface the of volume aftermarket. is

Performance So that XX% would about Materials. of be

Edward Marshall

it. Got

So has been up I'm OEM assuming that you've held been Interface aftermarket where okay and declines? the of seeing the component

Dale Barnhart

using the product. I they're sell need also think in they're mean both. projects end it, declines down are the seen to the we've think we're down, the replacement are users. No, vehicles much, wholesalers mining of gaskets slowing again seeing aftermarket not projects I plus, for that slowing the and if not as going about construction to have And if destocking those the

Edward Marshall

question and provide to dilutive Interface how So then if is was to you'd year EPS the number? in QX date maybe that

Randy Gonzales

Yes. I I I -- think from disclosing a is don't think, what mean don't I -- perspective, think we're it's on it's accretive. EPS, impact we're the dilutive cash that... But

Dale Barnhart

Ed, -- is got Yes, disclosed we've income the the XX-Q. in op

that not get adjust too in prior his you versus in If for $X.X quarter mentioned EBITDA, amortization, to to was Randy comment year. which hard million the it's

Edward Marshall

Got it.

for revision there If mentioned forward outlays a into CapEx in assumption You've XXXX. what be would were XXXX? XXXX, I step was and the to capital look for

Randy Gonzales

to the to carryover continue But for the maintenance Think plus -- We're because in XXXX. programs CapEx in year. flight. that, next our it's very for we organic already be of we'll cycle fund growth assumption where the are outlook the beyond similar should are that CapEx,

$XX range guiding be for would terms comfortable XXXX. So with I what of would million around be in the

Edward Marshall

then Okay. subsequent question the much of is savings, And severance million and associated million cost for with CEO this How to transition? the that, then $X.X the year. me, $X.X final the

Dale Barnhart

None.

Randy Gonzales

in on the consistent next into we'll announced -- will onetime though per $X we and agreement been that we compensation. so so her transition as -- Ed, the adjust for be be which where the our across out not details, this his is but employment Clearly, looking that cost, it well with year, prior strictly Sara, the basis discussion, agreement, won't Yes, benefits million terms severance see actions today, is have CEO year. the $X.X operating completed, of bonus will as be Dale that primarily sign-on million the as a he go to for exits that's the to as segments, we flowing final we'll

in the out to look that's external adjust quarter. to reporting. $X But numbers, round will will going that about we million be So impacted for

Edward Marshall

Europe, $X any anything have that And in million does been or of movement already from in the completed that the to has transition do and Andrew's? million $X.X on preplanned Andrew's to with

Randy Gonzales

restructuring separate. QX. it's, amount small But We Andrew's largely question, to a very The completely is address Yes. yet go completed. in your got to here

Edward Marshall

Got guys. much, it. it. Appreciate Thanks very

Dale Barnhart

you, Ed. Thank

Operator

[Operator from Levenson Instructions] Ryan go The comes question with ahead. next Please Privet.

Ryan Levenson

just that my guys. for some a year's data I'm last just lot Hey, a having out Thanks time the the of questions really questions. here. of taking tough follow-ups And think numbers have today. I came of I the both footing to

from miss is expectation? So a delta did the that you your million $X say was that a Was sudden decline that was in revenue you on PM that quarter? the saw

Dale Barnhart

That we the off product drop in a was sealing in the…. significant saw where category,

Randy Gonzales

That in segment, organic sealing sales was decline was about which Yes. the million. $X.X

Ryan Levenson

Okay.

-- not was -- in expectations that that Performance does is there so miss Materials? and there whole And another prior those the miss? from the -- of Or chunk is

Randy Gonzales

to organic QX performance in QX XXXX from September business. So sales the XXXX sealing the all attributable to the is decline

Ryan Levenson

Okay. right. All

then, just so like margin talk there's you about basis, down I the that sales. was a operating looks accounted, on offset it in line? to correctly? I that straight there an Am decline -- million flowed to from -- nothing standpoint it was profit like $X It absorption just -- interpreting it looks mean And can that no

Dale Barnhart

three have mind Interface, September with I of what from thing last month months year of you one in one businesses. September this the, the So reported the of call, have here, August keep you do legacy year. month a a have we July, business from This Performance both so for viewpoint, and that to full would Materials year, and periods mixed

through we mix, address the some of that business. saw that terms of healthy Interface the line in what a to it vast while on margin and sealing volume Year-over-year, contribution is terms is solutions, drop volume and in of and which issues profitability, in relatively margin. flowed question, But the we certainly, filtration the to was down, the majority impacts your of the on the saw on absorption advanced bottom the was

Ryan Levenson

Okay.

And from next absorption will so is that that thing that have get to right-size able we back -- -- that the so is offset able and be to you you been to can prior then, and can extrapolate your reposition levels?

Randy Gonzales

the just Well, in force announced. reduction we that that'll of part be

Ryan Levenson

it. Got

Okay.

was, attaches demand force margins, best nonlabor on necessarily and that and more your if I'm seems and guess was to We to that to issue instead. on incremental good have positioned set that. -- current not that That correctly? And labor order that the in really, quarter? with allocate ultimate said I that I like and -- it was the TAS, labor there. spend was my correctly, quantify looks So mean was what had question it customer there then you I sort the weighed you first understanding surprised non-labor TAS spend question, overtime am like to what service absorb the can that if I'm correctly. margins of understanding that in out understanding

about mean, is, item question is the all think, if second hold to non-labor $X to overtime about, that quarter. spent? the -- million the and same, But attributable Is talking I I the margins cost we in a that you're were

Dale Barnhart

Yes.

mentioned Randy $X.X -- mention in did his million. we approximately remarks, So

although support that facility pickup tighter discussion in cost that in meet outsourcing QX facilities, to that and U.S., we So not include of demand we the area, in terms Carolina European That spot-on. the the in some well charges, demand here costs pretty and particularly incremental domestically with about is it, impacted also the as here that only North in our total your much started math there and persisted the market temporary of is Those had are the into but as QX. in certainly labor over stack. saw also labor labor the time expedites associated French inclusive

Ryan Levenson

Okay.

margin in remarks. for transient? service condition permanent so is get we think of anything a the of that having sorry, recapture as demand, absorption? reposition long I that to of this this we prepared as so that better I'm we're is us is it really that level Or to even done And that But that -- elevated Randy's kind haven't as that missed business fair can to or

Dale Barnhart

No.

and by as by some charges TAS through resourcing France eliminate from premium facility -- focus focus starting having those in five Germany. improving Mr. we're the Our is productivity that the to And see operation parts we're over our those sites. all Abbruzzi's taking to improvement to the of French already

should on their having excessive So won't happen forward. part take improve time. into to but of business cost. It clearly no, those efficiency all costs we they the XXXX not those some labor focus plan It go our in as that's to is going as will their immediately, operations eliminate excessive

Ryan Levenson

takeout Okay. of guess months going implement. digested a to between a something be little that to difference cost XX demand take through a there's I kind mean shock that's I can in and of versus initiative cycled of that bit one quarter a kind new

I Is mean $X.X million? $X.X you the the latter? characterize it how would or mean, that more I So former million, the

Dale Barnhart

not between equipment the that in a and the I'm which we up that addressing getting million the right we're I I X. we've if automated those last in little TAS it's other a seeing of exact business those, this productivity some business not to you've heavily, the already mean invested quantify XXX% Well, over the -- percentage us But part following of are. is think and it, out, several I not as either. to years, taking in can't out the matter of That's divide metal these have now. position shields. that'll take we $X.X And one we're should it's longer. a produce of And been

Ryan Levenson

up been if just -- permanent in what it's structure of to trying out of get bogged the of a then not I'm increase And more through that permeated things there the whole but to and of dividing TAS -- $X.X maintain the some question, no, it's out the to are down going was that have so there business. million, or to to don't impairment in not kind figure margin have are what -- yet. mostly the and either we're certain really, the It's system Yes. just margin loaded to trying mean transition profile And much that that more I to necessarily that, that, think hearing I if that. figure is higher-level initiatives

Dale Barnhart

That's correct.

Ryan Levenson

Okay.

so CapEx thing that your million. How $XX guidance programs And maintenance? last of a the just versus carryover new on is is -- then of CapEx of much the investments.

Randy Gonzales

$XX of is probably $XX Carryover the in million. range to million

Ryan Levenson

Okay.

be And free so to a kind CapEx? recurring million bit able I $XX little like say, are are freight it flow, million we mean, to not eventually squeezing cash having to always more initiative forward, CapEx, this of of we going Or have? by, going is new $XX to start

Dale Barnhart

think going a balance around across for the forward, planning all $XX business businesses. size we for have, and maintenance capital the have of that the both good growth I million we on would is

Ryan Levenson

it split can businesses? And Or is capital, contemplation? on growth the -- there is Okay. I a the so mean, evenly among three

Dale Barnhart

No. some where than There's disproportion growth in it. an teams have higher a XXXX, because been we've in that's to gone had of has normal growth Nonwovens. in Materials year and a the good TAS, that's pursue. And Performance in and thing opportunities have capital feel to and they amount there this lot Technical But been encouraging

Ryan Levenson

Okay.

not actual going into growth? just that at materialize year-over-year, a is so looking to businesses And declined, both two that to have I'm on start quarterly…

Dale Barnhart

growth the the market as the doing. second start We XXXX incremental of should half by investments the as whatever seeing is far Sure. over impacts of

Ryan Levenson

have is of million. kind you the fairly down of finish and cash $XX we to well? [Inaudible], And TAS more maintenance programs theory, do could get XXXX, of of the CapEx sizable growth we where course of could do as level curtail growth really CapEx, not million initiate not $XX some -- this in generation the if And new to we free over the and kind

Dale Barnhart

TAS news good and support over all the to now that's XXXX capital business won. is with Well, already the is required we've new

the in So space, don't years for awards that into pick after to the we award. production auto up will actual go three two

won. So already the business support making investments in we're we've XXXX

Ryan Levenson

That's the of carryover Yes. CapEx, right?

Dale Barnhart

products little and won XXXX won't of there's going Well, that's that's production until carryover XXXX. the go of on based into platforms bit a into we've new that

Technical that fully in But stagger capital high-volume ask, start performance seeing as that TAS. over improvement real growth that bit assets in again, all in But the we've get in time there. And we're operating be little a seen should right in new will there's running in XXXX. we in efficiently, are and Nonwovens, So bit because Performance put our place place in from the Materials a put utilizing XXXX little investments incremental the are of then these XXXX. you in

Brendan Moynihan

Ryan, this is Hey, Brendan.

the of at you're If end yours…

Ryan Levenson

taking am. taking thank for the for and time. you Thanks I

Brendan Moynihan

others like and, up I'd to we off-line. chance can certainly, give a follow

Ryan Levenson

so much I the Thank you No. with me spending appreciate call. time for on that.

Brendan Moynihan

Ryan. you, Thank

Operator

Next, we Edward from Company. have question, follow-up from call with -- Edward Please rather, ahead. Marshall a & Sidoti go

Edward Marshall

more me. for Two

I but investments, -- TAS presume, quantify you of maybe that you both domestically a labor it's have I So I'm kind and or maybe inflation automation. maybe curious, wage if what shouldn't toward internationally? the force. smaller you're going could seeing

Randy Gonzales

as market a keep is I here the seeing up the generally, Ed, positions, been to direct positions onetime as tight. the domestically adjustments not the And but the to have only there labor we're market. factory, local what indirect result, with in labor labor of for Yes. mean, is, some previously, alluded I

will So compares those year-over-year QX. continue into

I'm and that there. big labor the the Europe, to they're the quantify In it's amount outsourcing are freight is but significant. escalation drivers going they some not issues, year-over-year, primarily the of what are, expedited there while necessarily and freight

Edward Marshall

I'm is sorry, force ahead. And labor your -- go

Randy Gonzales

higher that was takes of to thing typically I on the degree mind skilled to going automated say, keep lines high-speed the other in labor. is a

that that's in skills requires is structure. operators, increase the the it overall and we so for wage more reason an do one wage technical because thus, escalation And have

Edward Marshall

decision Yes. correct? the that in valued kind But was spend assume to capital, those I that present of --

Dale Barnhart

was. it Yes

Randy Gonzales

is. It

Edward Marshall

like that for to million saving $X said that you million you're assuming there's next on carryover savings? So would sounds it midway an of year, XXXX. $X I'm comes Can annualized additional number that some you give an The basis. that cost annual through

Dale Barnhart

be QX. Ed, completed Yes. severance in based. actions will based, the nature almost it's of the activity exclusively Those is headcount

we to million in so expect $X XXXX. full the And million through flow $X to

Edward Marshall

Okay. the Appreciate follow-up.

Dale Barnhart

Sure.

Operator

and and presentation. our conference. our question -- you attending concludes thank section This for answer Please today's

now may You disconnect.

Lydall (LDL) 2 Nov 192019 Q3 Earnings call transcript