CIR
#Yes.
So if you think about it ---+ let me put it in the context of what's upstream.
So overall all of CIRCOR, about one third is upstream.
Of that two-thirds is engineered valves.
Welcome.
Morning, <UNK>.
Sure.
It is.
You know, clearly when we talked about ---+ at the end of the year, if you'll recall, we talked about the fact that top line is going to matter here.
But we are clearly focused on that objective, <UNK>, that to drive flat margins for the full year-over-year year.
We came in a little over 12% in the first quarter, which implies, you know, higher than 14% later in the year.
So there's several things going on here.
Essentially you're going to see a lot of the cost actions that we took middle to late last year and earlier this year going to start cutting in and you'll see an expansion in margin as a result of that.
There's still some unknowns in the top line.
We see further deterioration than we expect from here, it's going to be hard for us to get to the 14%.
But we still have 14% as a target for the year.
Yeah.
We watch that as well.
So we saw a little bit of deterioration sequentially coming into Q1.
We're expecting a little bit more deterioration as we go into Q2.
But these numbers are much lower in terms of deterioration from where we were last year.
So we think we're very close to the bottom, if not at the bottom.
So if you were to look at our forecast for our distributed valve business for the remainder of the year, you'd see it bouncing around the numbers we're at right now.
So, in the 5% down from where we were this year is about what we're expecting for the rest of the year.
Sure.
<UNK> let me take that.
Yeah, so it is shut down.
It's closed.
There are no manufacturing operations, no manufacturing personnel there.
We're left with a couple of folks to, wind up the rest of the business there.
With respect to the quarter, we did have an incremental charge of about $1.9 million associated with the the inventory, that when we walked into the year, I thought we could sell.
We had to write that down to salvage value.
But that's really the big delta between what we talked about earlier on and today.
And with respect to the rest of the year, that assumption is still current.
That's the big piece of it.
We did have a little bit with respect to some industrial-related type of orders out of our business in Europe.
That was a little softer, you know, we do sell some valves on some skids that go into the industrial applications.
That was a little softer.
But really the defense programs was the bigger driver.
Sure.
Happy to do so.
The three big ones, the first one is the SM3 Missile, with Honeywell.
The second one is the Joint Strike Fighter and I'll give some color on that.
We had anticipated signing up the low rate initial production lot number nine at the end of 2015.
That actually shifted into 2016.
And the long-range initial production, the LRIP 10 that we expected to sign up here in 2016 has shifted into 2017.
So overall it's falling into this quarter here.
So the joint strike fighter is a nice big one.
We love that program.
And the third one is the multi-mission Maritime aircraft.
We have quite a bit of content on that as well.
And both the JSF and the MMA, our customer is Harris.
So those are the three big ones that we expect to sign up here in the quarter.
No problem.
Good morning, <UNK>.
So why are we winning.
So we are ---+ so it is competitive.
We are exercising a lot of discipline on price, when we lose, it is almost always because we run out of room on the margin that we're willing to give up.
We've been pretty good about offsetting and planning for offsets with lower commodity prices and other productivity initiatives associated with these projects.
So the margin deterioration that you see now, we don't expect to be incremental going forward for the rest of the year.
We're expecting ---+ we look at the margins in our backlog right now, with the orders that we have won they're more or less in line with the margins we delivered in Q1.
So there was some deterioration in Q1 that we aren't able to fully offset the pressure on price that we're seeing.
But it's not ---+ there's not a lot of drama here.
The margins are still pretty good.
So that's mostly where we're benefiting from our competitors issues right now is in North America, as you're well aware, one of our big competitors is in the process of being acquired and integrated.
And so we're benefiting from that.
There's some operational issues that they're dealing with right now.
I would guess a lot of the team there is distracted with the integration as well.
We're not exactly sure.
We do know that they're having delivery issues and lead-time issues.
We've been able to take some customers and some projects that we might not have otherwise won if we weren't able to deliver quickly.
Just to add to that, I think once you sign up a distributor, it does get a bit stickier.
So, I think clearly obviously distributors can change who they buy from as often as they want.
But it is ---+ there is an element of switching costs and effort there.
So there is an element of stickiness to that as well.
Yeah.
We're eagerly awaiting for the day that this is going to stop, like everyone else.
What I can tell you is that you really have to break our distributors into two buckets.
The large distributors that we sold to that have many different sites around the country, those distributors continue to destock.
the smaller, single site or a few sites, the regional distributors, they are for the most part at the bottom.
We think we're getting demand from them that is more or less in line with the demand that they see.
So it's really driven by our larger distributors right now.
I hope we're near the bottom.
We've been asking about that.
But we hope we aren't seeing that at all with the large distributors.
They're still certainly destocking.
They're expecting to us hold inventory on their behalf and have a very short lead time.
By the way, <UNK>, welcome aboard.
Appreciate having you.
Hi, <UNK>.
Welcome back.
So, yeah.
I'm glad you asked.
Things overall are going very well with the integration.
So we're one year in.
We've done a lot on the operational side to improve their operations, to improve their working capital performance, their delivery.
So we feel pretty good about that.
We also spent a lot of time on the growth angle as well as, as you know with the business with this kind of margins, the real way to turn this into a home run acquisition is to drive the growth.
We have spent a lot of time on both sides.
So with the Schroedahl commercial team, as well as the CIRCOR commercial team in cross training, making sure we're representing the full breadth of the product line that we have in control valves including Schroedahl on both sides.
Schroedahl has been helping us sell Leslie product in China.
They had a better presence there than we did.
We're having a good success, but early success in North America.
So one of the opportunities we had with the acquisition was to bring Schroedahl into North America, where essentially they had no presence.
We have a very large pipeline of quoted projects for Schroedahl in North America.
In fact, North America has more open quotes than any other region for Schroedahl right now.
So we're not at a point where we're seeing that turn into revenue yet.
But we feel like we're seeing early signs of momentum here and we'll hope to see the revenue piece of that in the back half.
It's coming on very close to zero.
It was small.
There was a little bit.
But it was very close to zero.
That's true.
So right now the manufacturing piece of our China business is shut down.
We still have a procurement team that is managing the supply base there.
So they still receive material there, they still check it for quality and then ship it on from there.
So we still have some logistics support in China.
We could spin China back up.
We're evaluating China and its role in the CIRCOR footprint right now is probably the best way to say it.
Thank you, <UNK>.
Good morning, <UNK>.
Sure, <UNK>.
If you recall when we talk about the overall revenue pie for CIRCOR, the midstream, downstream and power is probably between 20% and 25% of the total revenue.
And then within that, power is still small at this stage.
But it's really more bias toward the downstream.
So you could probably break that in half between mid and down.
I would ---+ we're seeing pricing pressure now as we mention in distributed valve, which really wasn't so intense last year.
So that's relatively recent development here while we're floating around what we believe is the bottom of the market.
I would speculate that when the stocking orders start to come and the market starts to come back, that we will see ongoing pricing pressure, I don't know that it will be more intense than what we're seeing right now.
The ask is very big right now for the orders that we do get now.
But I think when those large stocking orders start to come out, we are going to see a lot of pressure.
Just to add to that, <UNK>, because that's the way we look at it, it's imperative for us to take the structural cost out of the business.
That's why you see us spending a lot of time and effort doing just that.
So we're not going to sit here and anticipate that an increase in stocking orders giving us price leverage.
We want to take the structural cost out and be ready for that and drive good margins as well.
Thanks, <UNK>.
