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I think after we've taken these actions, we're looking more 13% plus margin in the Test business.
I mean, this was a ---+ between taking costs out with the two international operations some of the initiatives we have under way to reduce cost at our domestic locations and some of the things we're doing at our plant in Austin, I think we have a very clear path of sustainable 13% or 14% margin in that business.
I think if we're able to get some growth this next year, we should be able to hit those types of margins in 2017.
I'd have to go back and look and see exactly how much growth we got here, but we certainly will see growth over what we have this year.
I mean just based on the things that we have ---+ the fact that we'll have Plastique for a full year.
So I would say that we will see some growth going into 2017.
I really don't talk about how much yet because we spent all our time recently talking about the fourth quarter and so we get everybody back together in late August early September to talk about 2017.
Yeah, obviously we talked about that, we're given up an early sense of that but at that time we will kind of firm up what our outlook's going to be for 2017 and we'll talk about that on our next call.
The thing I will say.
<UNK>.
I mean I feel really good about some of the actions that we've taken to get our cost in line.
If you look at the fact ---+ I mean it is obvious to everybody that sales aren't as strong as maybe anticipated this quarter even, but the facts are we've really done a good job.
The Company's done a good job of controlling costs, making sure that's in line.
So the great thing about that is we go into next year the growth that we get we should be able to leverage pretty significantly, so that's one of the things that's very encouraging to me, the hard work that they've done this year we should get additional benefits going into next year.
Yes, well we have to address it across each of the businesses.
I think that within the filtration business it is very quick.
And we don't have a big capital appetite, filtration, all the stuff we need is done so the conversion rate there is in the high 80s to low 90s relative to its EBIT contribution again because we carried the tax burden at corporate.
So I put them in the high [A-plus] bucket on how they quick turn that plus the customers.
We have the air buses and Boeing's believe it or not paid on an efficient basis so the conversion is really quick.
In Test it is kind of an anomaly because on some projects you get advanced payments, and then on other ones you get retention on the back end until everything is certified.
So you might get 20% of the cash up front and then you might run eight months with no cash in and you get 60% at completion and then the other 20% upon sign off the contract.
So that's a real hard one to predict because it is really a function of what projects you have running through the pipeline.
And then go to the Plastique ---+ the packaging business that's kind of somewhere between because we have these long runs of programs; things like [KAZ] we get paid quickly on.
And some of the medical ones where you are running that program for 90 days and you really don't bill the customer until the 91st day and then you collect a little after that.
So I put the filtration in the 90% bucket.
I put Test in the 40% or 50% bucket on a conversion; again it is time phased.
And then Plastique ---+ or the packaging group I'd put probably in a 75% conversion because there is a capital appetite there relative to the efficiency (inaudible) off the machines, so there's a little higher capital appetite than the other places.
And I'd say Doble's conversion rate can range from 50% to 90% because even though we're a critical customer to them, utilities don't always pay as quickly as you think they would.
And again we have some leverage over them and we choose not to use it.
And so, you bring all that stuff ---+ (interruption) ---+ particularly international.
And then when you bring that all together I would say if you were just picking out one number and said 75% would be the conversion across the platform, that would be out the right way to think about it.
And so ---+ well that's again a lot of data you really need to understand the four components of that before you say well 75% is not very good.
What these really are are ruggedized computers that have very specific application.
So the specific product itself is not that expensive but typically utilities you're going to buy enough of these to outfit a large number of their (inaudible) engineers.
This is something I think is in kind of the initial forecast that $7 million or $8 million a year after we get it up and running which we should be up and running late next year.
We're getting really good at the option rate on that and so we think it's got a good future.
And the biggest reason, I mean it's a great product first of all but there's a lot of regulatory pressure for utilities in a certain area which you satisfy so and then that kicks in, in April so I think a lot people are going to be charged last half of next year (inaudible).
Okay, so again I'll let <UNK> talk about each of the businesses.
With the fluid flow business I don't think it is really big issue there at all, so I think we are both comfortable with that.
The packaging business probably the same way.
I mean there has been good longer term contracts there, good backlog, good insight into what the customer wants.
With Doble, solid business.
We have seen some pressure on the hardware side of the business.
The utility budgets are just little tighter than they have been historically for a lot of reasons.
What we tried to do to address that are couple things and we've been working at the last couple of years; one is developing new products as we just talked about so this may be a very temporary thing as something new products kick in.
Our M7000 which we introduced last year we're way ahead on sales on that product versus where we thought we were going to be going at this point in the year, so it's not like all hardware's sales are soft.
So anyway new products on the hardware side.
We've really expanded our offerings on the software side and that's been partially through internal development and partially through acquisition.
(Inaudible) acquisition we did a couple years ago has been a real success.
It's fully integrated both within our hardware and some other people's hardware, so that's been a great thing for us as well as the arms product.
And the other thing is the service side of it.
And the service side is something else we've emphasized.
And a lot of times what you'll see with utilities is they don't have hardware budgets, they may have service budget.
And while they may not be able to buy the equipment, they still need the test done and so they'll reach out and work with us on that.
So while our hardware (inaudible), the other pieces (inaudible) stronger.
So net-net, I think we'll be fine.
And then the other thing as I mentioned in my prepared remarks is really a renewed focus on international business and that's something we're working on as well.
And so that leaves the Test business.
And always the Test business is the one that's probably the toughest to predict.
Having said that if you look at the orders that we had this year we have really not had big orders.
And so the biggest orders we've had are $3 million or $4 million ---+ as we said here today, we're bidding a number of larger projects going to next year so you can anticipate that we will continue to get the type of orders that we've gotten this year in addition some of these larger projects may come in.
But those are the most susceptible obviously to some of the budget constraints that are out there, so short answer is a little bit concerned at Doble, a little bit concerned at Test.
But we think we understand those and we think there are other opportunities to offset what we are seeing.
The other two businesses I think we are pretty solid in.
Sure.
So they're just in way of background we're coming up toward the end of year two of the Saudi contract, which is the largest contract we have there.
They are exceptionally happy.
In fact we have two people there today working on the extension of the third year of that contract.
We completed a job at Marafiq which is another Saudi utility, and we had [Paul Griffin], one of the guys that is responsible for that area over there, well he spent two months ago and he had probably eight meetings with eight different utilities; a lot of interest in what we're doing.
I think as we get through this process with Saudi and people see the results we are able to get that we will continue to get good traction.
It will be such a big opportunity for us and obviously Saudi very well respected in the region as far as what we are seeing on the utility side.
And then kind of the kicker with that as well, everything we're doing today it is primarily services.
We have sold them maybe $2 million of hardware as well.
If they go into the next phase more and more equipment will be sold to support their ongoing operations.
What they're really trying to do is kind of get a baseline and then bring a lot of that in house and for them to be able to do that they will need to have the equipment that were using to complete our piece of the process.
Yes, obviously we have to be a little careful on what we say but we're pretty far along on one opportunity and there's probably three others that we know are coming to market that we are very interested in over the next four or five months.
Correct.
Okay.
Well, I do want to make one clarification.
I guess we talked about DUCe, an [essential ruggedized] computer; obviously enthused about that from a hardware perspective but what really drives it is our software that we put on that.
So it's not like we're just reselling somebody else's computer, we are really putting a lot of intelligence into that product.
So with that I'll just thank everybody for their participation.
I look forward to talking to you in the next call.
