Q3 2019 Earnings Call
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will conduct a question and answer session.
We'd like to turn the call over to Mr., Jim Giannakouros, Vice President of Investor Relations and FP Me Jim. Please go ahead.
Thank you David Good afternoon, everyone and welcome to Carlyle's third quarter 2019 earnings Conference call.
At least our third quarter financial results after the market close today and you can find both our press release and earnings call Slide presentation on our website at Www Dot Carlyle Dot com in the Investor Relations section.
Discussing the results and our updated outlook today, our Chris Koch, President and Chief Executive Officer, and Bob Roach, Our Chief Financial Officer, today's call will begin with Chris discussing our progress towards vision 2025, and business trends experienced during the third quarter, Bob will discuss carlyle's third quarter financial performance following christened Bob's your.
Marks we will open up the lines for questions.
Before we begin please refer to slide two of our presentation, where we note that certain statements made during this call maybe forward looking and actual results may differ materially from our expectations due to a number of risk factors a discussion of some of the risks and uncertainties that may affect our results are provided in our press release and in our FCC filings on forms.
10-K and 10-Q.
Those considering an investment in Carlyle should read these statements carefully along with reviewing the reports we file with the FCC before making an investment decision with that I.
I will turn over the called Chris.
Thanks, Jim.
Good afternoon, everyone. Please turn to slide three of the presentation.
Okay and to build on the momentum of this year's first and second quarters I'm pleased to report Carlyle had record third quarter sales and operating income we made significant headway towards our vision 2025 goals of $8 billion in revenues, 20% operating income and 15% oral I see all driving to $15.
Earnings per share in 2025.
As a reminder, we remain committed to and focused on driving 5% organic growth was operational leverage utilizing the Carlisle operating system and driving a continuous improvement culture.
Building scale with synergistic acquisitions.
Continuing to invest an exceptional talent and deploying over $3 billion into capital expenditures share repurchases and dividends.
We launched vision 2025 in the first quarter of 2017, and we are excited about the progress we've achieved to date I'd like to make a special note of the record performance by CCM in the third quarter, a sales and operating income were both at record setting levels in the quarter.
Also very pleased with the significant margin improvement that see I T delivered in the quarter in no small way made possible by previous years restructuring efforts.
As achievements at CCM and C.I.T. are all the more meaningful given that these two segments accounted for approximately 85% of revenue and 90% of our total segment operating income for Carlo.
CCM status as a best in class provider of building envelope solutions continues to be evidenced by its above market sales gross and operating margins that are nearing 20%.
This performance is driven through price leadership.
Sustainable mid single digit organic growth and supported by strong and growing commercial reroofing cycle.
Carl construction materials remains steadfast in its resolve to deliver on its commitment to the Carlyle experience that our contractors and distributors truly value and trust in every day.
We're pleased with the traction we are achieving on the integration efforts of our new platforms that expand our reach into the building them envelope, namely our polyurethane and architectural metal businesses.
Let's see I T. Our focus remains on driving profitable growth across all our served end markets and driving efficiency improvements as we consolidate factories and better aligned systems and processes throughout the organization.
As reflected on previous calls beginning in the fall of 2017. The team embarked on three key initiatives first increase their focus on elevating the role of Cmos in the organization second implementing a new approach to pricing and lastly, executing on a footprint rationalization and on productivity improvement efforts.
We're very pleased with Crts third quarter operating income of 14.9%, a 270 basis point improvement over the third quarter 2018, and a significant milestone on the path to returning to previous operating earnings levels.
As a leading global supplier of aerospace solution CIA T. focuses on increasing content per plane at every opportunity. Our recently announced commitment to acquire dropped a full acre highlighted on slide four demonstrates this and increases our business with commercial aerospace and space and defense customers, especially in Europe .
Rockets silica has a reputation as a leader in highly engineered interconnect solutions for harsh environments, having provided high end cable solutions to European aerospace customers for many years.
It's like a generates approximately $50 million of annual sales and we expect to close this acquisition in the first quarter of 2020.
We're excited to make another significant moving our efforts to build out our medical technology platform. We continue to be focused on the rapidly growing minimally invasive device space, which exhibit strong growth and profitability characteristics. We intend to accomplish this build out through both organic growth in acquisitions, our recently announced plans to acquire Providian, which we.
Highlighted on slide five is an important step in establishing a meaningful medical technologies platform as planned and vision 2025.
Providian with approximately $100 million of annual sales and based in San Diego, California is a leading provider of comprehensive solutions for global medical technology Oems, including contract manufacturing.
Precision machining and metals Thermoforming and injection molding.
The addition of for video into Crts Medical technologies platform of Red Group Microeconomics and technology is a significant milestone to Carlyle, becoming a one stop shop to key medical device customers.
Earlier in the third quarter, we also announced the acquisition of Swedish based Echo, finishing which adds key low and high pressure painting equipment is ceiling applicators within CFTC adhesive platform.
The acquisition is complimentary to our 2019 acquisitions of Pasco fittings integrated dispense solutions it should hang.
Despite current demand headwinds, we continue to believe that CST has plenty of long term growth potential margin opportunity in excess of 20% and will be a significant contributor in carlyle's future.
Turning to capital deployment, our free cash flow and strong balance sheet afford us both strategic and financial flexibility. When we introduce vision 2025, we envisioned a balanced approach of organic growth investments acquisitions and returning capital to shareholders. Since then we have been opportunistic buyers of our shares having deployed approximately 1 billion.
In dollars over the last three years, notably this $1 billion investment to share repurchases was the total level contemplated in our vision 2025 plant.
We also increased the dividend, 25% in the third quarter or 40 threerd consecutive year of increases.
Going forward, we will continue our strategy of a balanced get opportunistic approach to capital deployment.
Now please turn to slide six does I get into some specifics of our third quarter results.
In the third quarter, we drove 8.4% revenue growth totaling a record $1.3 billion of sales are 26 consecutive quarter of year over year growth.
We generated $191 million of operating income a 36% increase over prior year, which led to record third quarter diluted EPS of $2 at 42 cents up 52% year over year, confirming that we're making the right investments in our factories in our people and into Carl operating system.
Third quarter results were driven by continued solid demand at CCM excellent margin expansion in both CCM and CIA T partly attributable to our price discipline and efficiencies gained from CLS throughout the company.
CCM revenues grew 15% year over year close to 9% of that organic reflecting continued strong underlying demand dynamic new product sales and the addition of Peterson earlier this year.
We continue to see a solid backlog of work in North America, and anticipate continued support from Reroofing demand.
The non discretionary nature of roof replacement bolsters, our belief in the sustainability of the CCM business model.
Cesium solid performance this year demonstrates its market leadership, especially in its pricing resolve selling our strong value proposition to roofers and distributors.
With roofing market labor markets remaining very tight our ability to deliver the right product at the right place at the right time, coupled with innovation and training enhances the value we bring to the market. The Carlo experience continues to be recognized and appreciated by our customers. Accordingly, we announced a price increase on all CCM products commencing early January .
The 2020, and it's important to note sinatra tied to raw material fluctuations, but rather to address the cost of providing industry, leading value to our customers and the general inflation and operating costs.
Taken together with a solid backlog of contractors. We believe current positive market dynamics will continue for the foreseeable future.
On profitability CCM once again delivered excellent operating income growth approximately 43% in the quarter, achieving 19.4% operating margins. This performance was driven by maintaining solid pricing resolve better than expected raw material cost benefits and notably maintaining share in the marketplace.
Let's see I T revenue grew seven tenths of 1% in the third quarter supporting robust content growth at aerospace customers and continued progress in building out our medical platforms medical technology platforms offset by product rationalization efforts.
Next in the global industrial slowdown and pressure from the continued Boeing 77, Max eight issues as well as the impact. These issues are having on or other inflight entertainment sales as fewer planes are being taken out of service to be retrofit. We view these pressures as significant yet resolvable.
And are not affecting our views of mid single digit plus growth potential for the CIO segment going forward.
Within the medical technologies platform the outlook for growth remains robust due to increased demand for breakthrough procedures to address the desire for increase wellness and enhanced quality of life of the aging global population.
We continue to work towards building on a more comprehensive offering of manufacturing solutions to medical Oems.
It had strong operating leverage in the quarter, increasing margins 270 basis points year over year to 14.9%, which includes $2.5 million of investment in restructuring costs.
CBS again had a difficult comparison in subdued demand across our key markets of construction mining and agriculture as such Destocking activity has increased relative to our expectations.
Coming into 2019 and ended the third quarter and we expect reduced production schedules will continue near term is always better align their production to demand.
In the third quarter CBF revenue declined 16.6% year over year.
That said CBF is seeing the benefits from it significant restructuring efforts around the closure of our Tulsa, Oklahoma manufacturing facility and integration into Medina, Ohio.
Despite pressured volumes were pleased that lower restructuring activity and cus, driven efficiencies delivered 860 basis points of improvement in operating margins to 7.4% a significant improvement given the market pressures CBF is facing.
CFTC sales declined to 5.4% year over year reflected difficult global automotive conditions challenging market dynamics in China continued capital project delays with both automotive and industrial customers in North America.
Safety is operating margin was dramatically impacted by lower volumes, primarily from China in global automotive and tier one accounts, we remain hopeful that the U.S. trade negotiations will make progress towards resolution in the near term and there will be some decrease to the current level of uncertainty that has delayed capital investment in spending.
Despite these headwinds see if he continues to progress on actions that aligned with vision 2025 plans, including maintaining price discipline, increasing R&D efforts and spend and enhancing our breadth of product portfolio of our product portfolio through new product launches in acquisitions.
Free cash flow in the third quarter $277 million, leaving us with an ending cash position of $658 million, which in addition to our strong balance sheet and available $1 billion, an untapped credit on a revolving facility continues to afford us both financial and strategic flexibility.
We will continue to approach capital deployment into balance and disciplined manner opportunistically buying back shares and actively seeking strategic acquisitions.
I will now provide further detail about our third quarter financial performance and review our balance sheet and cash flow up. Thank you Chris. Please refer to the revenue bridge on slide seven of the presentation. We're pleased with our overall third quarter revenue performance organic growth is 3.4% quarter driven by strong results are non residential roofing commercial aero.
And medical platforms acquisitions contributed 5.4% of sales growth for the quarter and FX was a 40 basis point headwind.
Turning to our margin bridge on slide eight Q3 operating margin expanded 300 basis points.
Relative pricing and volume leverage combined for 90 basis points of the year over year improvement Cmos added 140 basis points freight labor and raw material costs netted to a 100 basis point improvement and restructuring and rationalization costs were an additional 30 basis point tailwind.
Partially offsetting these positives acquisitions were 60 basis point headwind.
On slide nine we have provided EPS bridge as Chris mentioned earlier, we reported third quarter diluted EPS from continuing operations of $2 and 42 sets, which compares to $1.59 last year.
Positive volume price and mix contributed 19 cents for the year over year increase raw material freight and labor costs netted to a 23 set benefit CLS, which includes sourcing initiatives contributed 21 cents and a lower share count added an additional 12 cents.
Now, let's turn to slide 10 are you the third quarter performance by segment in more detail.
At CCM revenues increased 15% with acquisitions contributing 6.5% of the growth and organic growth rate of 8.8%, partially offset by 30 basis point headwind in foreign currency.
CCM executed extremely well in delivering approximately $20 million of net price cost realization in the quarter.
Operating margin at CCM was 19.4% at 380 basis point improvement over last year.
While the macro environment for commodities helped us in the first nine months of 2019, we're extremely pleased with CCM sourcing initiatives, which add to our confidence in sustaining year over year margin improvement.
Now please turn to slide 11 to use the ITC results.
It grew 0.7% in third quarter.
Aerospace remains a source strength and the main driver of CIO. These positive results with medical and space defense supportive as well we remain on plan with our product line rationalization efforts within medical which while it lays out our topline benefit segment profitability.
So you had these operating margin grew 270 basis points year over year to 14.9% given favorable mix price realization Cmos and sourcing savings. These were partially offset by investment and restructuring projects to rightsize, our manufacturing footprint along with wage inflation.
Turning to slide 12, CFTC organic revenue declined 17.1% year over year, and FX was a 1.1% headwind in the third quarter. Despite significant market pressures pricing was up 1.7% year over year, evidenced thing appreciation for the value proposition of cfcs products. Additionally, acquisitions.
Added 12.8% in the quarter.
Operating margin at Cfd declined 990 basis points year over year to 6.1% as significant volume declines and related de leverage along with acquisition related costs were partially offset by past restructuring of facility rationalization efforts vertical integration savings and efficiencies from CLS.
Turning now to slide 13, CBF third quarter organic revenue decline of 15% was due to a slowdown in off highway vehicle markets certain customers adjusting their inventory levels and significant growth in 2018 and OE production cuts.
Our gains during the quarter, partially offset the decline FX also had a negative 1.6% income impact.
Operating income grew to $5.7 million or 7.4% operating margin. We're very pleased with CBF was able to drive margin results in line with our expectations. Despite topline headwinds faced during the quarter.
On slide 14, we show select balance sheet metrics, our balance sheet remains very strong as we ended the quarter with $658 million of cash on hand at $1 billion of availability under our revolving credit line year to date, we have deployed $232 million on share repurchases and paid $75 million in dividends.
Okay.
Turning to slide 15, our free cash flow was a positive $276.8 million compared to a $76.2 million last year. The increase in free cash flow is primarily attributable to higher earnings lower cash tax payments and more efficient use of working working capital.
With that I will turn the call back over to Chris.
Thanks, Bob Please turn to slide 16, as we discussed our updated 2019 outlook.
Total Carlyle our revenue outlook for 2019 remains unchanged as it has since our original guidance was issued in February .
By segment.
At CCM driven by what we view as a positive north American non residential new construction market growing demand for Reroofing, a solid backlog of work at contractors continued tight labor markets. In the addition of Peterson to our architectural matters metals platform. We continue to expect revenues to grow low double digits in 2019.
Let's see ICTI, we now expect to return to our original 2019 forecast of mid single digit revenue growth. While we expect to see continued strength in our core Cie markets of aerospace and medical and benefit from pricing actions taken in 2018 to offset inflation and other cost increases were risk realistic about our ability to offset the negative impact.
The Boeing 707, Max issues and the impact from the slowdown in the global economy on our industrial customers are restructuring plans and related charges of approximately $15 remain on track, which as a reminder are related to the consolidation of north American facilities to drive operational improvements in efficiency gains.
At CST, despite our progress on expanding our platform with meaningful acquisitions, the significant decline in the China, Chinese automotive and industrial markets, coupled with a very real decline in capital spending in North America, we're now reducing our expectations to a decline of low to mid single digits.
And at CBF, given lower than expected volumes year to date, we now expect revenues to decline low double digits.
Turning to our corporate items corporate expense is now expected to be approximately $95 million to $100 million for the year depreciation and amortization expense is still expected to be approximately $200 million.
For the full year, we expect capital expenditures of $75 million to $80 million and free cash flow conversion above 115%.
Net interest expense is currently expected to be approximately $58 million for the year and we now expect our tax rate to be approximately 22%.
As we begin to close out 2019, we are well positioned to build on our record third quarter performance and continue our progress towards the vision 2025 goals of $8 billion in revenue, 20% operating income and 15% or I see we remain steadfast in our commitment to achieving our goals and driving to $15 of earnings per share by 2025.
We expect to deliver record performance in 2019, and we'll continue to demonstrate excellent price discipline focus on integration and restructuring efforts and drive continuous improvement and all our operations the third quarter reflected the impact that the prolonged us in China trade negotiations and Brexit stalemate has had on our global industrial and transportation.
And customers and ultimately our CBF and Cfd businesses.
Im extremely pleased that Carlyle employees around the globe are making exceptional efforts to manage and to offset the impact of this global economic slowdown our team continues to embody a positive an entrepreneurial spirit a commitment to excellence and all we do and are focused on delivering results for the Carlyle shareholder.
This concludes our formal comments, David we're now ready for questions.
As a reminder to ask the question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compile the Q and a roster.
Thanks.
Your first question comes from the line of Brian Blair with Oppenheimer. Your line is open.
Good afternoon, guys great quarter.
Right. Thanks revenue.
I was hoping we could start kind of high level with CCM.
Updated perspective on where the industry isn't replacement cycle and specifically weather.
Thank you maybe approaching peak at this point.
Well on the replacement cycle, you know I think we showed you and others the.
The Reroofing demand that was created with Russo were put on in the past 20 years, plus intercompany deal we see that accelerating.
At least for the foreseeable future and so I think for the Reroofing cycle, we are.
No where near peak I think we're accelerating into the strong part of that cycle.
Okay, great to hear.
On.
And obviously good.
Price cost realization again in three Q.
That remains a hot topic, what does the updated estimate for 2019 benefit.
Yes, Brian we're thinking 80 to 85, no as raw materials stayed stayed lower than we thought holding throughout the year. So.
Got it.
And given current trends would it be fair at least on a preliminary basis to think is.
20 price cost is flattish or should we anticipate given.
And some continued benefit given the January pricing and still pretty cooperative commodity cost.
Yes, I mean, Brian we're not going to comment on 2020 deeply now but based on where we are with the pricing. We did put out a pricing increase of 2% going into January so that should help next year and it's too early for us to call, what's going to happen to commodities arena.
That's fair.
Thanks.
Yes.
Okay.
Your next question comes from the line of Neil Frohnapple with Buckingham Research. Your line is open.
Hey, guys congrats on a quarter.
Bill.
Let's just talk more about the two acquisitions without announced last night, so permit in a drop.
Just curious would you expect margins to be.
Accretive to see segment profitability in 2020, I got nice improvement on the quarter on CHP. So just trying to.
Figure out how those acquisitions will impact.
Business.
Yes, Brian Brian Neal, where we are now.
I think it's a little bit too early for us to talk about obviously will unfold as we as we sign in close on these deals when it can't tell you is that debt Providian you know there an excellent company they fit right into the the necessary areas that we had to continue to build out this space and and they're well run I would think that we would not have acquired this if.
We didnt think to the margins are similar to what we project for our medical business going forward.
Forward and then really drag of Lake is.
We stated one word is really like the legacy business very similar in Europe , and we don't see anything in that business that would prevent us from executing the same way, we haven't or legacy businesses.
In aerospace.
Okay and then just specific question on permit in I think some of the revenue is tied to aerospace in auto with its diner all business. So could you just talked about how much of previous total revenues medical related because it sounds like it's more of a medical fire, but just.
Curious on some of the doctoral business there.
Yes, again, I'm really hesitant to get into too much detail prior to the close but I would say that.
The vast majority in the impactful part of the Providian acquisition, both from a revenue in up and operating income perspective would be in the medical technology space.
Okay. Thanks, and then just one final one crescent as we're on capital allocation.
Specialty.
As it relates to the M&A pipeline. Following these two deals what will you sort of pump rates so to speak on other deals until you get these integrated.
Then I guess just as a follow up with regard to your appetite for our share repo in light of these deals.
Yes, I think we continue to take the same position we have going into this I think these will these integrations of goes smoothly.
We will continue to look for any acquisitions within the building envelope within the medtech within aerospace and within fluid technologies to expand that platform. So.
Right now the pipeline has been good and you know we remain disciplined and it's it's nice to see that these set our models and we think there will be great additions, but that also will prevent us from continued to be opportunistic on or buybacks and I think we take the same approach we have.
For the past three years.
Okay. So if the right you'll gamer along you want to be afraid to pull the trigger so to speak no sir.
Okay. Thanks, so much I'll pass it off.
Your next question comes from the line of Tim Wojs with Baird. Your line is open.
Hey, guys.
Good afternoon.
Afternoon, Tim.
So nice job.
So maybe going back to the pricing question just.
More of the cadence question. So are you kind of thinking about pricing kind of structurally different than what you have in the past where.
Stork, we it's been very reactive to commodity increases I mean is this.
Situation now or you think every year youre going to have a January price increase that is going to go through here to your customers and is that what you're trying to kind of the kind of course through the market in terms of cadence.
Yes, Tim I would say that in the past it was almost prices seem like you said very reactive an almost the with the very broad brush just reactive and in some.
Big bucket in reaction to raw materials.
We have worked over the past few years to really focus on.
Changing that and really pricing to the value, we're providing the marketplace in and around the market dynamics in specifically around each product line and where they sit for a value proposition and then also separating out the the cost that occur every year to us to provide that valued or a customer in the carlyle experience. So you're absolutely right I think theres been a structural.
Change in the way we approach pricing hopefully it's more refined.
Hopefully better understood and accepted.
Okay and is there any as you kind of gone through.
Our view is there any.
Areas in the portfolio that you think are very underpriced relative to the market value or do you just think that the whole portfolio can kind of migrate over time.
I think that through a disciplined approach in more systematic look at that through more sophisticated tools that we have now we've been investing in I think there's while the entire organization has seen pricing this year and we've been really pleased with that even CST.
And CBS it had pricing despite the headwinds.
We still have room, we still have room to do a better job on pricing.
Okay. Okay, and then just just the last one on on just labor of contractors.
There is tight I mean is there anything that scares you that at some point labor Jeff.
Not enough labor for.
Market to grow much beyond a couple of points.
I guess I'm, just kind of kind of curious.
We've kind of a structural.
Yes, when how how much the industry growth there not adding offers.
No I don't think so and I think one of the things that it is tight we seem to be we have a nice backlog of jobs one of the things that it does for us. It I'm encouraged buys it brings us back to the the value proposition of CCM and some of the labor saving products that are coming out and we're seeing traction on those so I think.
Through greater efficiency better delivery better utilization of the Carla experience, we think that creates capacity with the labor. That's there. So that's really our goal is how can we get that roof put down to the high quality standards, we have as quickly as possible and make us the most efficient.
You know choice for people that are utilizing our products in the industry and I think that will create some of that necessary flex and labor we need.
Great. Good luck on the rest of year.
Thanks, so much.
Your next question comes from the line of Joel Tiss with BMO. Your line is open.
Hey, guys has gone.
Thank you all johari.
Right. So so I just wondered if you could give us a sense of how far out you're kind of visibility on the on the CCM business goes we kind of into the middle of 2020 and also other competitors going along with the pricing or is it too early to tell.
So maybe.
The first one Joel we have we took the price leadership there under 2% increase and then we have seen competitors follow.
Not all of them, but but a vast majority of them, which is a good sign.
As far as looking out we hate to get too far in project out into 2020, but I would say probably the same thing. We said at the ended 2019, which is where things are today, where we were lead we will likely leave 2019 with a nice backlog tight labor markets relatively good and positive new construction demand.
And then the growing reroofing, so I think that sets up for.
Good start to 2020 at least.
Okay. That's very helpful. And then and then on the medical platform is is it fair to kind of gas that year, you're around the 250 million in revenue level and as that is that platform much higher margin or noticeably higher margin than the overall CRT.
Yes, it's 250, just dropped to 50, Joel and we believe.
Short term with purchase accounting and things going on that it will be.
In line, but over the long term, it's inherently higher margin.
Okay.
Okay. That's great. Thank you so much.
Thanks Joel.
Again, if you would like to ask a question press star one on your telephone.
Your next question comes from a line of Garik Shmois with Longbow Research. Your line is open.
Hi, Thank you question on CCM, the organic growth of 9% just wondered if you could maybe breakout volume and price.
Yes, Eric as we talked about last year, you know PREIT, we lap the price in the third quarter. So price was relatively small.
Part of that there was some as we we did announce some small price increases and as Chris said, we're getting very strategic but it was a very small part.
Makes sense.
Actually about CFTC outlook is calling for sequential increase in sales I think that was kind of expected for Q1 is going to see.
Increase.
Due to some new product introduction. So just wanted to confirm that that's the main driver to sequential increases CST.
And I guess I've a follow up question.
Yes, I would say Garrick that certainly new products I think some.
Some better alignment around the new acquisitions, obviously integration as we get through some of that than they pick up speed and we're certainly excited about what echo brings in that combination the ceiling todays platform. So in essence, those are new products to us too. So, yes, I think Thats fair assessment.
I just wanted to ask.
Saw a deceleration.
In the macro environment for CFP and for CBF matter.
Third quarter, just wondering if you're looking at the 2020.
Well you need to take any additional cost actions in those businesses.
Right size given.
Weaker market opportunities.
No I don't think so I think the play for CF T is still you know and CBF has been longer term I think the investments we made and see BF. It certainly paid off moving back to Madonna. We've we think we're back on track there from leased for profitability perspective volume does return than we're right back to where we were saying that.
2011 2012 timeframe.
And then on CFC look I mean, this is going to be a big part of carlyle's future going forward. We continue we'll continue to invest in acquisitions as we're able to build out the platform in those areas. We're going to continue to invest in new products to help us expand into new markets in new geographies and continue to make that so no I don't see any any cuts in the structural cuts for us going.
Forward.
Thank you.
Your next question comes from the line of Kevin how far with Northcoast Research. Your line is open.
Hey, everybody headquarter.
Thank you Kevin.
Wondering.
So on.
Yes.
While since you've done any acquisitions of kind of this magnitude like the two that you announced today so I think.
One of the hurdle has been.
Extensive asking prices multiples on on on any acquisition so wondering.
What's changed there.
Some of the multiples come back down to Earth or have you had to step up a bit or.
Changed there.
In that environment, we're able to announce two deals or the size.
Okay.
After another here.
Yes, I think what has changed certainly multiples I have not come down at this point I mean, I think you're right. We would look at what's happening in economy and think they might but.
Both these are very very.
Given the maybe the last two acquisitions, we've done the medical space. The drag of Lake is it really really is very close to our and I'm talking about legacy business going back to the translate days, it's right in our wheel house right in our core and so the pathway to synergies the pathway to more efficiencies things like that.
It is a very good one for us and that makes it very desirable and then on the medical technologies. This play if you think about for video and versus some of the I would say more single play or single line acquisitions that have come up I mean, this gives us a lot of what we need to build out the whole platform thermoforming.
The assembly the precision meeting machining and metals injection molding is that it was all in and one basket that makes it very attractive and gives us much further down the process than some of them or some of the other recent acquisitions that we've seen in the market would have done.
Okay got you and then we heard.
Tornado damage the one year.
Facilities down in Florida couple of days ago. So wondering.
And so foam facility. So wondering if you could give any comments there do you expect that to have any disruption or can you service.
You know from other locations are just wanted to give any comment on that.
Yes, I mean first of all we're thrilled that everyone was safe there was no injuries at all in and terrible thing that happened that facility.
But overall impact on the quarter should not be anything we don't see much going forward we can.
We will have an up running pretty quickly and we believe we can chip in from other places to to make upward.
Okay got it and then.
You mentioned that pricing.
In the quarter, and obviously volumes were down.
Quite a bit so wondering if you're having to trade off.
Volume for pricing.
During how the competitions doing the competition also have positive pricing and kind of think you're performing at market are wondering if you just comment on the.
How that the balance of price and volume is looking in that business.
Yes, I don't think we're trading any any volume offer price I mean, I think this is a market that if you look back at the competitors Nordson, Greg or these others I mean pretty much end users, it's an ROI C.
Sale and people are paying for value that is very tangible and returning to their bottom line and thats why we see significant investment in R&D and that investment can pay off because that's that's that type of a sale at when we look at the competition I think in some cases, we've seen them being even more aggressive with price increases that had been announced throughout the year. So I think.
We are we're right in there with where we should be vis-a-vis the competition.
Okay, great. Thank you very much.
There are no further questions at this time I will turn the call back over to the presenters.
Thanks, David This concludes our third quarter 2019 earnings call like to thank everybody for your participation. We look forward to speaking with you at our next earnings call have a great evening. Thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.