CRS
#And that should leave us about ---+ that will leave us flat effectively, when you think about year end versus year end.
Well, if you look at it from a sequential standpoint, <UNK>, our backlog, whether it is in tons or dollars, is pretty flat.
It's about the same.
Certainly, if you look year over year ---+ so, March last year ---+ you will see a decrease, and that's primarily driven by the energy market, as well as industrial.
And that's the oil and gas business that we supply through the industrial market.
Good morning, <UNK>.
<UNK>, I'll answer the first part, and then maybe come back on the second part.
For us, we haven't given any specific guidance for longer-term inventory.
We have said that we will come down to be flat for the end of this fiscal year.
As we tried to talk about ---+ as we continue to implement the Carpenter operating model, our goal is to improve the efficiency of our mills here, and that is leaning out our inventory.
As we talked about in our last quarter call, we expect our work-in-process levels to come down year over year, although inventory levels will stay flat year over year.
It's because we will see an increase in our raw materials, and we'll see a slight increase in our finished goods.
But what we are doing with our operating model is improving that flow through the factory and through the mills here, where we are taking waste out of the system, reducing the surplus inventory sitting at different steps.
So as we continue to execute that model, we continue to believe that the inventory levels will come down.
We don't have a specific number as to what that will be.
But our expectations are that, as that continues to decline and as volumes in our end markets continue to increase, we should be able to improve the turns of our finished goods, which should allow inventory to continue to reduce over the next period ---+ year or two.
And, <UNK>, this is <UNK>, if I could just add ---+ certainly, our goal is to take inventory down.
We think we have a means to do that.
Over the next year ---+ over the next two years.
From a development ---+ you asked a question around developmental inventory ---+ we do have developmental inventory on hand, primarily at Athens.
But it's not a significant amount of our total inventory.
And we hold that relatively flat quarter [over quarter].
I think last quarter I said 20%, and it is very close to that number as we speak now.
Well, I will tell you that we have a lot of discovery ahead of us, which means we have a tremendous amount of opportunity.
Some of the ---+ over the last three quarters, the results you have seen has been a direct impact from the work that we are doing, and the items that we're solving to root cause.
So I am very confident and very pleased with the work that we have done over the last two or three quarters.
And quite frankly, without this, the results would not be what they are today.
But we are ---+ as I said in my remarks, we're just getting started, and the potential, quite frankly, is significant moving forward.
Right.
I'll answer it this way, and that is: In our journey to get to a shop floor that is efficient and operating under the principles of the Carpenter operating system, if you ---+ we're in the first inning.
So there is a lot of opportunity that's out there.
No specific comments, obviously, but as we have articulated being a solutions provider and connecting with the customers, there are opportunities that could present itself.
In many ways, we can do that organically with the titanium powder project.
But going forward, possibly there are some opportunities.
Quite frankly, our focus right now is dealing with the operational challenges that we have and the opportunities in front of us, and working our commercial and marketing team to branch out into new applications where Carpenter products can solve critical problems for our customers in areas that we have not participated in, in the past.
I look at it a little bit differently, <UNK>, as I speak with all of our customers, and our customers' customers in some cases.
They understand the value and the unique position that Carpenter has in the market.
And what we want to do is, we think we can build going forward by understanding their needs and then filling out our portfolio to best support that.
And that will take us wherever it takes us.
Yes.
Yes, $8 million to $10 million a quarter.
Just to clarify, <UNK>, that includes basically depreciation, the fixed costs and the variable costs that we have.
We have a full workforce in Athens right now that we have trained, and we are running at 20% utilization.
The point to make there is, as the volume starts coming in, it is basically going to drop right to the bottom line, ex the raw materials.
There are no other costs that need to be added as we increase the volume of that facility that aren't already in our numbers today.
So thanks for bringing that up.
75% is fixed of that number, and 25% then is the variable piece.
When I say variable, it is certainly not variable now because we're not running much volume through there.
But once you have a plant up and running, those are the operators on the shop floor.
So, 75% fixed of that $8 million to $10 million, 25% variable.
Yes.
It's very different.
And what Carpenter had done in the past is very product specific.
So we sold a product.
And what we're doing now going forward is we're going to sell a solution.
And what that does is that opens up a lot more applications for us as we talk to customers now.
We have a much more robust and rich conversation of what their challenges are, and how the Carpenter products and alloys can help solve that.
So it opens us up significantly outside our traditional applications and markets.
It's a different discussion now that we have with the customer.
You're welcome.
