Circor International (CIR) 11 Nov 182018 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to CIRCOR International's Third Quarter Fiscal Year 2018 Financial Results Conference Call. Today's call will be recorded. [Operator Instructions]. I'd like to turn the conference over to David Mullen, Senior Vice President of Finance for CIRCOR for opening remarks and introductions. Thank you, you may begin.

morning, good and you everyone. Thank

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

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

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

at forma basis million million, debt at to EPS us flow Operating to Operating million, XXXX. XX%, and the million, third cash grew a points quarter. in $XXX and revenue $XX in quarter. XX% morning, reduce XX%. by good and came organic came Thank up $XX you, Dave, in X.X%, than $X.XX, higher had allowing QX We adjusted up improved to strong On orders pro basis, margin grew XX to $XXX a everyone.

segment cover strategic performance flow market last our we priority. to call. financial and operating I'd and into top a like outlook, Before remains get highlights since Cash our some

is In expansion, global CIRCOR improved addition from better the CIRCOR working the management across system team performance cash office across to company. track. I'm to Handling receivables and us. on results payable drive with by to We're to the flow Fluid the remains The methodically encouraged starting working the cash and improve operating margin sustainable through change growth capital culture integration and inventory, and we're recent see. the leveraging

is X, expect cost $XX plan year synergy ahead we end of Our schedule, to a of the rate by original our year timeline. than the million earlier deliver synergies run

and engineering synergy exceed to deliver plan million XXXX. our of of Distributed commitment facility to savings We body Mexico to support this to Valves our City. manufacturing basis million the points we Monterrey, to October, expect in in rate a for office the line. In product as XXX synergy welded Overall, of expect Houston $X for Energy by we in the to Producing action XXX We'll well improvement sales, margin volumes, continue is to as year our segment. announced run Oklahoma Oklahoma expect City. to maintain current operating moving facility At X. customer we deliver the action $X closure plant the

half exit first Oklahoma and City to production of expect the We XXXX.

We market primarily in and business low-margin for nominal of of money. is approximately Handling screw our pump This and end we portfolio, that two sales. will channel. the to for gas intellectual loses the interest to businesses. as business our fourth a these property manage skids retained of We rights. take accounting and transaction sales business, The Rosscor, supplies not product strategically this us will annual as fit quarter. does better a XX% This $XX and Netherlands our oil based continue place in low allow the minority non-core SES for divested rationalize a the In Fluid well October, business has million amount. The portfolio a growth for systems

loss expect charge. minimal We any as or gain and to be treated be a special

in momentum I Finally, on We the in to launched X development. comment want QX. building we're new products new product

half across to X X Product new segments. products all in of expect the launch additional span an QX. second We launches in XXXX

pace expect see product new We year. output to similar next of a through

results I Rajeev quarter Now let to our me in before turn outlook. the to the detail end-market to discuss review over third more over call

Thanks, Scott.

a valve the and businesses down Industrial Let's margin compared to a organically operating in up with pump sequentially. North on X% segment $XXX Industrial XXXX. North and review segment and up projects. The is saw X. the starting points XXX basis American were pro up The of pro of QX slightly with forma a basis business segment The year-over-year XXXX European Slide American increase compared basis. cost million, large XX.X% XX to forma points deliveries, sales QX business on Industrial flat significant pump including results had

Handling We the points We in partially for a and This impacted margins recorded industrial oil gas a we acquired few margins on of by synergy restructuring that a are by Fluid large the seeing project XX benefits projects, business. our large contract with the quarter. offset and lower projects projects. loss basis

we restructuring see expect our For the margin sequentially of benefit partially levels an continuing margin quarter, offset as of similar lower synergy we'll actions, by expected and business. fourth the mix

in to operate expect we term, the mid-teens. longer the business margins with Over this

organic $XXX to valves, pro XX%. over Energy a Growth up XX% on increased basis. was led of X. forma sales refinery by million Turning Slide

high XX single-digit growth and year-over-year. margin Services organic of Energy Sampling X.X%, slightly. We segment Valves, Distributed Valves. mid points down down saw to and were sales also Instrumentation in basis Reliability Engineered operating

in the delivery facility of costed expected are Oklahoma into we of to ramp and We our Mexico continued to in begin Valves, complete plan lower Oklahoma improve to as costs up QX, Distributed the City manufacturing experience and continue higher margins XXXX as our our transition to higher from and in execute inventory. close production we headwind

We term, the deliver business. to Valves for Engineered a mid-teen the margins expect the longer assuming over segment cyclical Energy rebound

a Turning XX% million, in forma in favorable deliveries. including XXX prior as actions pricing sales, X. impact basis increase quarter. Defense our on by up the a Defense driven Aerospace were Slide as of strong basis and XXX This and mix sequentially. to restructuring $XX actions in to the points operating commercial growth our up of basis Defense year is & up XXXX. pro XX.X%, sales saw & from as Aerospace compared margins sales organic well well the had as an QX We points the pricing

fourth quarter on restructuring to expect operating ongoing We price increases, in improve continue margins efficiencies. actions based the and to

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

for the was tax a year-to-date rate now catch XX% adjusted for the Our this quarter reflecting year. up to we XX%, expect rate

by resulted lower the The recorded compensation-related from settlement an costs related adjusted onetime which benefit than tax EPS quarter. from settlement we to the tax accrued, international lower QX amount item benefit addition, audit discrete of the a offset the tax higher previously a in In a rate. The was to in largely amount rate the benefit matter. was

billion, acquisition total acquisition compared charge the million. charge million this Looking due to largest operating Slide XX. $XX amortization noncash flow The Fluid pretax of interest in Handling for component continues quarter was to quarter, nearly up in rates. because restructuring with programs. the improved $XX balances $XX.X at year of be higher million. million interest special prior cash the higher well for expense remainder We Net due $XX our severance Turn relates position to items as recorded We debt the totaling and as performance. to of primarily costs The working a related generated restructuring charges. debt capital expense $XX.X part to the due of on our

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

to For expect CapEx year, million. approximately the $XX be full we

cash down top we end priorities ratio net approximately million. we down our remain quarter, the by as and the expansion target our of calculated XXXX. During generation, be $XX to agreement debt debt Xxb pay margin paid credit Clearly under flow leverage the

cash call, discussed million we of $XX in the earnings million to second expect in generate the the $XX to half flow of QX range free As in XXXX. we

We are reaffirming that guidance today.

Moving to recorded a guidance revenue we top XXXX per given last expect be comparison million a businesses, reflects of onetime of SES fourth the in year. XX. to $XXX price we slightly Scott growth difficult expect quarter $X.XX retroactive mentioned the guidance from in the million perspective, to range on From adjusted share. from and the year-over-year, that momentum XXXX. divestiture and Industrial QX. impact QX with our We continuing the range of a in EPS range earlier. line Aerospace should This $XXX slide Overall, Rosscor million, $XXXX Energy lower increase significant $X of

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

per we and and to $X.XX an to the special following charges of including loss Regarding charges fourth XXXX, amortization Rosscor $X.XX charges estimated anticipate quarter of share; acquisition-related $X.XX divestiture. the the expense share, per restructuring for items: special totaling for restructuring $X.XX on SES and

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

direct-material been of Before we able a the tariffs. generate like inflation quick impact productivity up, you commodity for wrap I'd on sourcing with purchases by date, inflation savings. offsetting commodity give update to I and and to have To

We The the product impact expect main of through material commodity Distributed line. the on year. Valve inflation productivity remainder trends to of our continue is

program in turn our of on cost China. over this Regarding Scott. impact point, let has the to a that, the back tariffs, not imports it significant had at current from effect me With

Rajeev. you, Thank

will of balance as that me momentum give Slide XXXX. through give the you Please of turn an we believe Let and the markets to end drivers us the XX. we move overview

the Let's was in start Industrial low quarter with segment. a Industrial. QX seasonally

last driven solid saw equipment regulations low. orders pump Energy new XXXX third North remain The order capital pumps Industrial and control in the base broad-based power growth valve aftermarket with both scrubber nuclear This pump in is growth Industrial by the markets In increase has expectations stronger-than-expected bright IMO plants. in been in Marine, remains X% vessels. is activity in spending. Industrial the both and our soft remains organic of the by $XX spot by year. million sector. our offset providing Marine quarter, of U.S. in Commercial implementation see quarter, healthy. The orders the American driving in used Europe in driven overall. within Navy project valve pro quarter spending for orders vessel remain Offshore businesses. However, U.S. incremental in third markets continue improving Marine. in valve In General mainly forma orders continued in we Commercial to and received the demand the we of orders, the and strength aftermarket defense One supply installed large activity Power commercial Merchant very

we overall growth solid across markets by in quarter, and and sequentially stronger driven Industrial For year-over-year most fourth expect regions. order end the intake

as on U.S. the decisions business. from orders a the projects of Navy expect remains our applications on We were third the well Pricing for as valve significant deferred business. focus carriers that out for quarter aircraft

price help increase, the should revenue, half impacted year. QX which Our about of of in lift segment Industrial second the half margins our

For of agreements opportunities segment evaluate and for Industrial as long-term renewal. continue up revenue, contracts come the we to remainder the frame

be Energy X% to upstream strong. pro basis. our are segment. The Now still for Energy upstream a American strong but markets forma orders markets to and downstream remain our improving. North Overall, on shift International products. were markets midstream up organic continue Global slow let's

impact Valve more orders IMO year. With last XXXX capital we compared since Refinery committed regulatory than doubled refiners prices the acquired stable Orders the business. of remain record oil and to quarterly business Our to spending. had change, the

market the to expect Permian remaining given rig drive well in In levels. new sequentially, are robust. to remains Order has moderated at be counts, completions Orders this however, product difficult and and be can Distributed where our the underway, Valves, to product production development for favorable constrained. for to DeltaValve outlook conditions especially take-away though We business become continue growth capacity strong timing predict, with line. QX efforts this that high continues growth the in mark-to-market the

quarter. most be continues fourth market. the We orders expect in weak were Middle our quarter. Engineered The in to similar see East Valves, the order levels active to sequentially third In

pricing pressure. improved Although due quoting the and excess to relatively current into to we and capacity expect not order translated is remain has market low. QX improve intake, resulting on activity orders sequentially quoting activity, it in but primarily the to up, Based expected

Distributed Valves deliver line prior to orders a orders QX. and forma pro compared For & Instrumentation to Energy to are and overall, moderate we expected year sequentially with expect in basis. on Sampling

segment, valves given record low growth bookings pro be XX% and base Joint of The million, Strike engineered on valves expect up large Defense In our program had sequentially XX% Block by Defense in expect our Virginia-class sequentially. refinery another a off orders lower to forma year-over-year $XX QX. organic and and orders we of spares. quarter Aerospace we in driven We defense sequential a the & growth for Commercial program, primarily Fighter basis and submarines the was solid V

We continue our strength across see Commercial products. to Defense broad-based and

across debt net dip prices to the orders We're QX higher new the & well benefits large markets and win an pricing realizing end well robust. margins. technologies missile high and continue market In expected XXXX. the brushless sequentially optimistic motor pricing. service we growth delevering the We're as in raise of business DC our increase recent as momentum the and we're strong transitions the new our year, We're and We're the in we Aerospace severe in strong core Overall, synergies, reducing and generating assembly the to programs remain to positive half expect addition, and driving outlook new commercial about Defense XXXX. in to started of continues. program, group programs. program. A of manufacturing facilities the and To leveraging actions rates a in most a committed to manufacturing couple programs, missile due a we integration the first finally, flow market. aftermarket low-cost remain look We switch ahead long-term our strong actions. remains product for and the a cash defense reasonable price for QX as growth, to orders, electromechanical launches, wins restructuring realize most seeing but low-cost to free from X.X% And footprint existing opportunistically for higher volume timing company across summarize, expanding and by for of to positioned includes existing build

will his of future today, them the I'd As commitment CFO thank role He his Rajeev we X and the an we the like moment important role transitioning us years. to best take we announced of to in over August, out played CIRCOR. Rajeev a all in to last the be wish are getting to where company in endeavors.

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

Instructions]. [Operator

from Our first Citi. Kaplowitz question is from Andrew

in Scott, up they over to you, quarter. talked So guys about and aerospace you defense orders, ramped significantly, the sequentially here

replace JSF. and mentioned saw were You on to with MRO such And newer about your as you last traction. quarter talked quarter you technology the that major opportunities this strength that initiatives platforms competitors gaining

just orders it it So visibility more your does or is chunky how And in these increasing platforms? revenue XXXX? sort for is market toward translate growth higher of share

getting There Andy. actually are joint here is the anticipated the the me the order quarter, XX Scott lumpiness let And we third relative had portion in here. of of is an increase element but so here, Yes, start a book and fighter significant chime -- to early it We can that then quarter. there to were in fourth in intake. order pleased the year-over-year strike

into ramp as And then you discussion, go organic especially fire. of we of to we're the that kick will the these as in have this to large and we irons at yes, traction do So With good point, the we into with a revenue some it as are in. respect received seeing there. contract up translate respect XXXX. lumpiness progress number making but opportunity No to growth replace, programs

a I little bit. to guess add that me -- let I'd just

with of MRO general big played side. we're side are other the that on increases the existing larger received the so where orders the in the -- certainly aftermarket. platform, the shares quarter with the market the just lumpiness But in are and that the we a defense X we factors the a picking on; already couple factor So on platforms rate up

a So in effort times defense put we've and capacity, increased where dramatically a concerted turnaround and force MRO direct we aerospace have place. reduced sales on and

rapidly, business is the that quite And of growing more the much market. than so piece

So we that share taking know the piece of we're in business.

wanted guys. Permian. about the Valves. And focused Obviously helpful, ask very I to you on Distributed That are people

forward. You what that QX? seeing being sequential QX you flat if talked seen -- sort versus Is here so guys about you orders Have your can business, maintain going QX. in that it's relatively guess far talk about that in you're in maybe good because I visibility relatively of flat

yes, Valves order So Distributed QX. did In off drop business intake our see we we starting a in

and far or QX so with more So QX. less QX in line lower is what in QX we're seeing was than

So the that the here realized demand same it in seems change was in on around lowered all have demand and their time us. and a customers there capacity in that expectations our Permian takeaway

be seems we it QX X QX to were last rate as seeing at as same So we about holding the here. go the months into of

that see in what we're going So as we orders QX line comfortable with we're more less QX. saw in to

me. you for your the especially capital, in can to to Just sales. management We picked as about in of your it XX% making goal up cash talk obviously ultimate new generation capital XX% the one inventory. office working terms is working of Maybe Cash QX, more to in get progress nicely on it's know would. said

goal. So us if the toward on you could update progress that

up? level next you get say Xx pick started expect still did cash as here You year. by levered Has the has to to your confidence end improved of to

Sure. you. Thank

a leaders team. corporate cash we management named office of the team with core the here So we've on at have that director-level

have capital units. accountable in an this and driving X And have of each director of extended the of office and receivables, business working capital, component team each component we we the working have for we people X of for running then So inventory. payables

driving business. operating that, on and using need how playbook CIRCOR run of practices, the the system, minimize capital working best As that CIRCOR driving to the the optimize to part

cash business week. So that They're changing methodically receipts CIRCOR. tracking disbursement receivables cash business. culture at around and week. And every tracking has forecast The and every fundamentally we're driving we the now flow through the they're

-- expect into So you we're seeing significantly capital go we I'm into saw I see results what the feel that in of done QX. We going performance better out we've we pleased working can with about think as And here here good CIRCOR XXXX. to QX.

to gets XX% The has the CIRCOR second who the note management directly it's important everybody at everybody related incentive CIRCOR of to mention short-term at flow. piece who's that program to around -- in cash bonus is cash bonus,

translates that the So or initiatives which it's into good feel that still is more the going analysts with X.Xx literally deliver XXXX, daily way it, in calculate banks XXXX. receipt that and Xx how of to the continue expecting end calculate good note is we're leverage, a in calculation. hitting at target we like the about of X.X focus end to X.Xx hitting and to combination we're the EBITDA, that to at or generous our increased the results. The With many respect would running is the target of parallel our and on disbursements, important X.X

in and positive. important the all of $X just fact to to it's about the just that. in million that. we the in you'd throughput so business is, of are tune from as cash there of mind let context and capital, of inventory receivables are respect the But working a X Andy, with better the that's to in tune puzzle shop asked the and couple million, are the we Keep quarter about done on of respect the the to comments so the add the is With there to performance that velocity reduction capital growing $XX a me here. generating One inventory. pieces quick working about

constraining making so And that the we business not grow are to as try we as well. we're sure

Hammond next KeyBanc question Capital Our from is from Markets. Jeff

you this improvement. I because be added just to XXX to a said kind this want lot et that's cetera, underlying and think of hit if of wanted year. basis costs, to So or, on clear been facility I improvement points the know structural I closure, just there's XXX of

it's it's expect what of get we kind of and out -- a business, the that of view actually of first it's a the source with direct recognizing labor get holistic the biggest the same Yes, is -- the benefit combination respect we to the and how the in cost to continues and transition to material arbitrage lower be foremost there. labor. The we

the there structural smaller cost So also it the of that of that just move. is to reduction a closure and is transition the the piece. benefit really is aggregate And facility, with the some but portion relative

So than we higher we costs part guiding question answer jump just think the think run now -- think your relative and the is situation run are to And we I to current relative expected have are cost to to are rate. of we in, I higher or relative with to the a that I relative to the rate. guiding

now the do labor City we cost keeping mentioned qualified So have issues inefficiencies associated with Oklahoma getting that we transition. labor with labor the the and and higher transition. some in associated the of terms of We've have in

over would that's above run normal So rate. our expect with and in you

So when a prepared feeling. today because the we the there to about rate the in relative run be you're upside and what we're of seeing extraordinary that's costs versus savings would remarks, talked

it to back and about point like a 'XX? XQ little I kind XQ for jumping bit into does think rate Okay. stepped the how into looks mean run what margin energy? of it that And off the as a like XQ, then look in

about going engineered what -- QX, headwinds significant as as We've to we Yes, some on we continue that fact we're improve. of the valves. by talked are Energy & to line should business we well. about forecasting But to the going in some At Refinery do of respect aggregate expect with we to in experience to that. large the the Valves Sampling to headwinds the What businesses driven then loss, to than we going respect the profitability with margins, transition expansion improvement part top sequentially smaller a albeit of see have talked the relative margins to a well in are still here. that to saw the sequential Instrumentation Valves deliver stage, still Distributed to is expect this Scott what experience and the as

breakeven to have Just in in smaller were a an QX. We in to have EV loss expect a and slightly get loss, we even QX. or current the profitable based we we to a in on QX, smaller QX But in margins in backlog, small so backlog QX had clarify, EV a the hoping loss had loss we'll to and on EV. and loss in

Okay, great. And might then look you've identified cash? else just non-core you mentioned use the source talk potential divestiture candidates -- of portfolio, and as about Rosscor. what is or the divestiture Can be of you you just across that of a

obviously we specific are any assets, any we potential the divesting talk for or here can't for we So be selling looking at looking further tool -- at nonstrategic options process but at about in continually especially divestiture, might as CIRCOR. we're a -- that accelerate to delevering

to forward there we're at that that and specific ready But ready anything not CIRCOR move about opportunities are announce but today, are we're talk the to not evaluating with. likely yet. details So we to just we're

as Rosscor relative of and the it growth, to strategy money the fact the Yes, important well. business a was losing was piece Jeff, that low divestiture the here

was more portfolio. adjusting the and it So pruning

sense you're point? what of savings Okay. of said year 'XX $X by I Handling, incremental to be the one. $X get think and at the savings million to Then Fluid just us $XX to a million last this X. would million you Can going give you

less experienced here, I we specific XXXX. do what we 'XX. would or don't of ramp up think Yes, the number bit we least but that was coming coming have out of significantly at than little And double expect double, maybe actually what I run out -- rate in

of $XX in savings It XXXX. incremental under should be just million

say $X around So to million. $X million

question next from from John Company. Franzreb is Our & Sidoti

that What's be despite positive, versus on bit it I can with slightly you segment? in basis revenue talk going heard If wouldn't you you and absence mix I QX Industrial of margin there? correctly, like sounded points Yes, but the was flat have of the going profile to think the the you margin, better project. Why XX one-time everything the about said op a QX? little profile sequentially was

here versus well. John, expectation piece are is the respect mix QX American in to handful pumps of equation business with The of to valves for Rajeev. additional as is both pumps going projects. the some an North of There to those the there's Yes, the North third But here the -- mix businesses quarter, Europe do there the businesses But that a we product this America. we see the pieces in be dilutive of European in out to had impact growth and here.

our as I think you difference in sequential -- we've QX line is to regions There Industrial on today, of that more mix should expect the margins be a to in fairly given group. or QX a seen. less changes significant margins across the

business, little bit the kind program business? talk seems, with Defense that can talk about also about that how With actuary and bit little missile and talk in you're the new And more Aerospace to how the X can in the coming about plays Okay, on Can new Scott, the of a win Defense & what's you missile going looks the Aerospace positive out? X, profile. that wins, quarters? you a And in helps. profile you Scott, about revenue

start jump Fighter booking obviously, Strike Recognize being in orders then there XX, the historically lots of, have number that we're here. Joint a I'll like and awarded that LRIP here. Scott that the Yes, can were

expect initial -- increase aircraft low digit are have. should product built type therefore kind that as number those and up we in seeing increase at going significant rate And So so you the production, you're that of growth the programs year-over-year, absent we a the But to being not of see amount grow. of John. an of mid-single ramp we're still

has couple sourcing of And can the Has how Okay. commodity quick it net you if total? company, And costs a Commodity been much, quantify? about offset. questions. costs by the you helping firm a or negative you kind across talked for other is in been neutral

but want, be answer and than So directly generated I'll let we net overall, question may it for that, a first. me -- a productivity. It's answer you longer answer CIRCOR your

you the always the businesses that's So for When have CIRCOR exceeded not inflation savings case. individual the overall. look into

a Distributed So where was we've we Valves inflation. bit quite of absorbed mentioned

in So than XXXX Distributed go if CIRCOR to for up Distributed the fairly overall, generated is But observed you down, we've we've in savings our Valves we're inflation Valves. productivity so CIRCOR. significant upside that in sourcing net higher

high usually anywhere try to And from XXX to basis low versus probably this at close and the we points. end stage the end get XXX historically. It's

in of whatnot Okay. costs I in those And looks expense other of any like about in included quarter. corporate ops. Because just absorbed? being up this kind a the still you quarters, million couple went some by part and it quick Are sequentially $X of know other costs consulting continuing points.

I that. was of by kind So surprised

So should anything we cognizant there of there? be is

you're absolutely costs integration-related for factors in X John, talked out. here. that right. that Yes, pointing of we've about prior There's is quarters. kind Thanks One the

we The seeing second some higher is piece that compensating-related to are and it recruiting cost.

I remarks. mentioned in think my I that prepared

consolidated to of margins with headwind basis there's these respect XXX year-over-year our corporate of expenses. So CIRCOR about types on points

quarter. do expect here So down. But a continue it more in will the integration related little cost, to we tail the fourth

new with and the consulting CIRCOR. business the are costs of majority the vast in the recruiting Fluid and and associated Handling -- of related compensation Much integration

in not essence, we integration, but call So might is. it officially it

it. make to sure want I just XXX based clarify the revenue on guess And properly. basis current XXX Oklahoma profile? is that understand the move, I the point to that improvement, on Got just I to City

correct. Yes,

normal current of of margin Based based revenue to the it's lower be... savings based clarify, a good savings on the But cost profile, the profile. on with It's are than profile. on is not the would revenue labor. it's just cost current excluding margin because our Current variable profile the question because current

SunTrust. Our from Charles next Brady with question is

This is Charley. Patrick standing for in actually Wu

August? a you step thus call, the impact implemented the On tariffs have really from the And in impact imports mentioned significant not back absorption that the have done maybe you pricing in that the up far a the you guys Have just about with XXXX? the in can you bit are early for talk little that guys China. more calculation potential on

list. at list high million some a it why not $X been having fortunate to we impact done the what's from happen We've in we the if million we today and I'll to the talk that And significantly get list have in tune sensitivity lower. with buying, of we're respect were of at But tariffs. the end up of what if import pricing simulation the analysis respect that end. I'll China. the the that would and on higher But is with to could Yes, much, that end, Scott products number much what import products talk we've to be be of which place, we we're incremental costs $X high on that is on terms would

August I answer Industrial to we group you're did in believe of to price your referring pricing So that we discussed revenue. the on in half our was, on increase the question the

We are burned book the cut in now order seeing and start inventory that through backlog. we've to existing around as and

in our through the So in we're fourth to seeing that quarter should expect Industrial business. price see flow and increase

a more, we'll the are prices in the of We on rest way say still revenue. methodical raising

the agreements those are agreements go long-term and As agreements as we we well. expire, frame renegotiated in and

other of covers the revenue. So the that half

So probably we're to we'll do of continue that working middle around that, XXXX. the and through

of in us fact quarter quarter XXX some points Industrial. And Patrick. all lift The the XX points, pricing impact basis in that across the basis gave in the in about enterprise about

purely some your guess companies, then EMEA weakness out? call as weakness this helpful. -- quarter you Industrial Okay, on have sequential the -- out that's seeing some is slides seasonal, Are very you Or called seasonal that you this point? moderation the think weakness or called Europe. you region in I -- I side, in and at on are And

a with Europe, compare is seeing QX. you're I in think difficult Well, what

we look project at growth low of repeat didn't relatively raw order organic this but offset for the numbers -- EMEA, when So you we QX $XX million it's in it's a offset, year. a number, that

very as we're we we in orders look QX, into when growth as and we QX order orders nice overall. QX we sequential going look the into having It look at feel growth So sequentially about intake. and overall, the with at good was year-over-year happy for it in Industrial going seasonal

a fact improvement and pretty of QX good Part to just in you we those the we've month decisions the in around number color were going orders give where for third booking is of some that there of and deferred that fact quarter been of already. out that. Yes, the that here orders decent to sized be substantial. to were due of just sequential is expect The in some October

So you'll that factor have as well. some lift sequentially from

[Operator Instructions].

Our Nathan from next question Stifel. Jones from is

upstream some if was offshore. type Adam some of on improvement guys anecdotal on that? you this color have is around There's any have commentary This Farley I wondering in been quarter Nathan. for

quoting -- is We our Engineered upstream that increase normally have that business in in from offshore seen a involved would not business meaningful be the Valves Milan. in our

in those have North in So we that's seeing not but have as gone yet. orders we got our looking we're business and into Sea. as the existing and back meaningful QX, QX do QX, and QX trend present in affecting a QX orders that are We into

is been around companies, think national I some investment FID, of number projects the CapEx has of of a of number off kind to increase the that fact here, going figure, obviously on to oil final the But decision. majors you're low what that Adam, referring the press to, turn there significantly discussion are a base and starting

here bears improving all well, but Scott's to it there's translates of And an point, a into our runway for so still outlook bit business. before that

kicked if now. we're cycle. being necessarily in typically And We projects see going are be off yet wouldn't to the the later orders

was shifting the the guess that's That's I helpful. from of like in up And like light change you out of refinery oil IMO of sweet then oil, the coming impacts Permian, into the I guys just type nicely, CapEx wondering amount in going the crude called that? the out Gulf? seeing Coast, any the Orders Gulf XXXX. and valves. just are oil Just to

We're not seeing that. our significant business a impact around to

I think take the through coking the what blend and you oils that not is delayed supply heavier that you're linked. process referring is to

out else you anything if don't yet, there had I sweeter know, Scott, right, business Adam. you're our hasn't crude as impacted higher well. there but is So some to add. it But

Kearney from from Our is question Company. next & Brett Gabelli

more the further then on improvement short-cycle looking of of you QX. runway Just the out sequential at to visibility, a wanted guess, I extent talk have segment, the to Industrial like even expect sounds can you in some products from tracking, this what kind customers of you're seeing hearing, maybe the about point? project all in And business, you're funnel? at terms ask,

I is a Sure. of inside oil main and part business projects is -- of we answer where I would guess simple sell can gas that the actually the way Industrial I for uptick bigger North And we for pump growth the seeing in business. American projects that one Industrial. that has business been North are an And America. for in drivers of our

seeing Commercial The Merchant is rest in side. -- really uptick Marine. slight about We're the not But the the We're Commercial we seeing Marine. yet. moving other on of place not in Marine talked projects where trends a Commercial is the Marine we see

So the I by driven this smaller think when we say remain projects, is by, or trends that not And at you necessarily good. business, what driven short-cycle look it's mostly majority orders orders.

around globally to China anything, And Rajeev? want looking Industrial PMI outside the if results in the the expansion relatively in with order of add it's at tracked the of of that manufacturing this intake business. we've the it's that you're world. our One PMI. where flat, is is seeing our China, globally We place world certainly and to pointing metrics around the only business we're

our above a around the of a healthy little think little what so bit it vessels, still of the was reduced than on business. But much or to of than looks And again was oil the I so. point, I a XX recent PMI there lower gas. more the to well which It positive your Marine in we've past, PMI, No, Scott, is Yes. Eurozone seen it, growth. most Merchant XX, rate the agree, would Commercial is is and for offshore number tied Marine piece

the for concludes This participation. teleconference. today's as well session question-and-answer as you Thank

You your at may this lines disconnect time.