Q3 2019 Earnings Call
Good day, ladies and gentlemen, welcome to CIRCOR International's third quarter fiscal year 2019 financial results Conference call.
Today's call will be recorded at this time, all participants have been place and they listen only mode.
There will be an opportunity for questions and comments after the prepared remarks, if anyone should require operator systems. During the conference. Please press star there on your telephone keypad.
I'll now turn the call over to Mr., David Lewis from CIRCOR for opening remarks, an introduction. Please go ahead.
Thank you and good morning, everyone.
On the call today.
Scott book out sort of course, president and CEO and shoddy Shaheen, the company's Chief Financial Officer.
The results presented today are considered preliminary as the company has not completed its review procedures related to reporting discontinued operations.
Related impairments and associated tax effects.
Company completes its review material adjustments may arise between today and the day if the company files with the Securities Exchange Commission. Its quarterly report on Form 10-Q for the quarter ended September 29 2019.
The slides will be referring to today are available on CIRCOR is website at www CIRCOR dot com on the Webcasts and presentations section of the investors like.
Please turn to slide two.
Today's discussion contains forward looking statements that identify future expectations.
These expectations are subject to known and unknown risks uncertainties and other factors.
For full discussion of these factors the company advises you to review CIRCOR Form 10-K , 10-Q's, and other FCC filings.
The company's filings are available on its website at CIRCOR Dot com.
Actual results could differ materially from those anticipated or implied by today's remarks.
Any forward looking statements only represent the company's view as of today November six 2019.
While CIRCOR may choose to update these forward looking statements at a later date the company to specifically disclaims any duty to do so.
On today's call management will refer to adjusted operating income adjusted operating margins adjusted net income.
Adjusted EPS free cash flow and organic measures.
These non-GAAP metrics exclude certain special charges and recoveries. The reconciliation of sort of course non-GAAP measures to the comparable GAAP measures are available in the financial tables of the earnings press release on sort of course website.
I'll now turn the call over to Scott, Please turn to slide three.
Thank you, Dave and good morning, everyone.
In June we communicated our detailed 18 month plan for delivering significant shareholder value.
I'm pleased to report that our Q3 results and our outlook for Q4 are right on track to that plan.
Well talk more about the progress we've made delivering our strategic plan, but first let me recap our results.
As you May recall following the divestiture of our engineered valves business in July and the announcement of our intent to divest our distributed valves business in October we started reporting both businesses as discontinued operations.
Including the impact of distributed valves in the quarter consistent with our guidance, we delivered a solid Q3 with $252 million a revenue and 48 cents of adjusted EPS.
From continuing operations excluding divestitures.
Sales in the quarter were $234 million up 7% organically.
Adjusted EPS was 63 cents.
Adjusted operating margin was 11%.
160 basis points versus last year.
We delivered $218 million of orders in the quarter down about 13% organically.
And our aerospace and defense segment, we had a solid quarter borders $64 million orders were down 20% organically due to the timing of large orders last year.
Year to date orders are up 22% versus prior year.
Year to date book to Bill ratio for this segment is over 1.25.
Industrial segment orders were down 3% organically, primarily due to softness in large projects consistent with industrial trends, we saw OEM weakness in Europe , partially offset by modest growth in North America, and Asia and strong global growth in aftermarket.
Energy continuing operations orders were solid with a book to bill ratio of approximately one.
Orders were down 21% organically, mainly driven by a difficult compare and refinery valves, where a number of large project orders drove an exceptionally strong quarter last year.
The order pipeline a refinery bells remains strong.
So far in 2019, we've made significant progress on circuits transformation, and we continue to diversify away from commodity businesses and upstream oil and gas.
In February we completed the sale of reliability services for approximately $85 million.
In July we completed the sale of our lossmaking upstream oil and gas engineered valve business.
In August we completed the sale of our spends and Nicholson product lines for approximately $85 million.
In addition in October , we announced or intend to sell our upstream oil and gas distributed valves business further simplifying the company and allowing management to focus on businesses with better growth and earnings potential.
In conjunction with this strategic shift away from upstream oil and gas the energy groups overhead will be rationalize by the end of the year, which is expected to generate annual run rate savings of approximately $4 million.
The food handling integration remains on track with $7 million incremental savings expected in 2019 and $23 million a run rate savings expected by the end of 2020.
We continue to invest in innovation and new products to drive growth.
Year to date for Q3, we've watched 31 new products.
We remain on track to watch at least 35, new products. This year, and we reiterate our forecast of $70 million of new product revenue.
We reduced our debt by nearly $89 million in the third quarter and $148 million so far in 2019.
We continue to evaluate the sale of additional noncore assets to simplify the company strengthen the portfolio and further deleverage the balance sheet.
Overall, we're optimistic about the remainder of the year and 2020.
We have initiatives in process to continue to advance our 18 month plan to optimize the company new product launches are gaining traction the fluid handling integration is on track. Our 2019 price increases are dropping through simplification initiatives are in process and our low cost manufacturing facilities continue to wrap up.
Looking ahead, we remain confident in our ability to enhance growth and margin potential what deleveraging the company.
Now, let me turn the call over to shoddy to discuss the third quarter results in more detail before I review the outlook for our end markets.
Thank you, it's called and good morning, everyone.
Let's begin by reviewing our segment results all figures out from continuing operations and excluding divestiture.
Starting with industry I'm on slide five.
The industrial segment had seized upon their at $11 million organically up 2%.
Due to a strong backlog and order execution.
It's worth noting that putting currency headwind reduced industrial revenue by 3% and of course.
The industrial segment delivered margin of 12.6% up 60 basis points from Q3 2018.
The margin expansion was driven by price increases integration initiatives and productivity improvements, partially offset by the unfavorable mix and foreign currency headwinds.
Well the fourth quarter, we expect revenue and margin in line with a third quarter.
Turning to slide six aerospace and defense had feeds off $68 million up 19% organically on strength across both our defense and commercial business segments.
I always be some defense operating margin was 20% up 490 basis points versus the third quarter of 2080.
Reflecting the benefit of higher revenue low cost manufacturing and pricing initiatives.
For Q4, we expect to delivered double digit revenue growth and further margin expansion year on year.
Turning to slide seven we continue to execute on our plan to reposition the energy segment.
Energy sales of $56 million went up 4% versus prior year driven by growth in downstream refinery evolves.
Adjusted operating margin in the quarter what 9.4%.
The company's operating loss attributable to the distributed valve business was approximately $3 million into quarter.
And $7 million for the nine months ended September 20, 920 lighting.
In Q4, we expect energy seals in line with skews, the and margin in the low teens, largely driven by strength in the final evolves business and the reduction of energy group overhead costs during the quarter.
Starting in Q1 2020 the remain weak energy businesses will be integrated into the rest of so called.
Turning to slide eight for youth feet PNNT selected items.
Our adjusted tax rate for the quarter was 13.5% due to a two up a few today tax expense from continuing operations.
Looking at special items and restructuring charges, we recorded a total pretax charge of $28 million.
The largest component of discharge continue to be the noncash acquisition related amortization expense totaling $12 million.
The remainder was made up off.
7 million dollar charge related to other restructuring activities.
Hi, Manley at us utilization of the energy group and industrial business in Europe .
If I had million dollar loss on the sale for business and $40 million all professional fees related to the unsolicited offer to acquire the company.
Net interest expense for the quarter was $11.8 million down over $2 million compared with prior to year as the impact of lower debt balance it out to partially offset by higher interest rate.
Other income, which was $1 million into quarter, primarily reflects pension income and both realized and unrealized foreign exchange gains in Q3 2018. Other income was also about $1 million.
Turning to our would that position on slide 10, our free cash flow with it all $9 million in Q3 at similar levels to Q2 20 like team.
We invested that all important million dollars in capex into quarter and expect to invest a similar amount in Q4.
We have reduced net debt by $89 million in Q3, and Neely hundred $48 million year to date.
We continue to expect to reduce our leverage body, one turn by the end of 20 like gene excluding the divestiture of noncore assets.
I'll now hand, the call just cost to discuss our market outlook.
Thank you shoddy.
Now I'll provide an overview of our end markets and business group outlook. Please turn to slide 10.
Let's start with industrial.
The industrial group backlog continues to be strong orders in Q3 were down 3% organically, primarily due to projects delayed out of the quarter.
We saw OEM weakness in Europe , partially offset by modest growth in North American Asia, and strong growth in our aftermarket business globally.
In addition, we continue to see strength in commercial marine and several niche businesses such as cryogenic valves.
For aftermarket business, we have an extensive installed base that continues to fuel our short cycle orders.
We've increased our dedicated aftermarket sales capacity to improve the capture rate and our installed base in the third quarter, our global aftermarket business grew 10% versus prior year.
In commercial marine with IMO 2020 on the Horizon, we continue to see strong demand for a scrubber pumps. This positive momentum is offsetting the ongoing weakness in new vessel orders.
For industrial overall, we're entering Q4 with a strong backlog.
We expect to see continued pressure in our OEM and project businesses in Europe and to a smaller degree in North America.
However, we expect to largely offset these headwinds with new product revenue strong growth in the aftermarket and in commercial marine and ongoing strength in Asia in India.
Overall, we expect orders in Q4 to be in line with Q3.
Our aerospace and defense segment generated another strong quarter of orders at $64 million down from the previous quarter and last year, mainly due to timing of large defense orders.
Commercial aerospace orders continued their upward trend in the quarter driven by the increase in build rates for major platforms like the Athree 50, and two significant new program wins.
We continue to raise prices in aerospace and defense, primarily focusing on OEM spot orders and aftermarket demand.
The backlog for aerospace and defense segment continues to be strong driven by ongoing strength in commercial aerospace and large defense orders in prior quarters related to multiple programs, including the joint strike fighter. The U.S., maybe Virginia class submarine the DDG 51 class destroyer and the CVN 80 aircraft carrier.
Overall, we expect Q4 orders to be in line with Q3 due to a limited number of large defense or commercial orders anticipated in the quarter.
We expect large program offers to pick up again in the first half of 2020.
Now, let's shift or energy segment.
For continuing operations the order intake for energy group was up 21% versus prior quarter, mainly driven by strength in refinery valves.
Refinery valve orders were up 64% sequentially, but down year over year in Q3, mainly due to a difficult compare last year.
As we mentioned in the past project orders in this business can be lumpy with order timing difficult to predict the pipeline of project activity remains healthy and the outlook for this business remains strong for Q4 as well as 2020.
In Q4, well timing of large orders is uncertain, we expect to be up sequentially and versus prior year, driven by strong order pipeline the refinery valves.
Now I'll turn the call back over to shoddy to discuss guidance.
Thank you Scott turning to slide 12, the guidance is for continuing operations.
Overall, we expect fourth quarter 2090, and revenue in the range of 235 million to $248 million and adjusted EPS in the range of 76 cents to 88 cents.
We expect an unfavorable FX impact or 40 million to $5 million on revenue as compared to 40 team.
In the quarter, we expect sequential and year over year margin expansion, driven by volume pricing productivity initiatives and restructuring actions.
We also expect sequentially improved free cash flow into fourth quarter.
Which aligns with our expectation of continued free cash flow improvement in the second half off 2019 compared to the first half.
Regarding special and restructuring charges for the fourth quarter of 20 lighting, we anticipate charges for the following items.
Acquisition related amortization expense of 49 cents, but Chad and restructuring and special charges totaling 20 cents to 24 cents per share.
We expect the fourth quarter and full year adjusted tax rate to be approximately 18%.
With that let me turn it back over to Scott.
Thank you shoddy to summarize we're building positive momentum as we look to next year, we expect to realize continued benefits from our business simplification initiatives, new product launches pricing actions manufacturing and low cost facilities and integration synergies.
We made great progress in our continued portfolio transformation during the quarter and we'll continue to explore the divestiture or other noncore businesses that would accelerate the deleveraging process.
Our third quarter performance and outlook for the remainder of 2019 are right in line with the targets we laid out in our 18 month plan.
We remain committed to driving long term growth expanding margins generating strong free cash flow and de leveraging the company now shoddy and I'll be happy to take your questions.
Thank you will now be conducting a question answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone wouldn't King. Your line is into question Q you May press Star too if you would like to remove a question from the Q4 participants using speaker equipment. It maybe that's sort of pick up your hands that before person start Keith one moment. Please levine.
Question.
Our first question is from Nathan Jones Stifel. Please proceed with your question.
[noise].
Nathan Jones your line is now life.
[noise] [noise] can you hear me now.
Yes, what you're hearing on either.
Okay. Thanks, good money every one.
Good morning, more not just a clarification first on the Oh the preliminary results here I think that based on on the things that you're looking at that they might affect yep results, but probably not affect your adjusted results is that reasonable or if not well you know what could be under consideration here our evaluation.
It could change the are you adjusted results.
Hello, Nathan this is shoddy, yes, youre right. Its it primarily it's going to affect the GAAP results as we mentioned due to our procedure review of our discontinued operation. So we don't expect.
Our adjusted result to be affected.
Okay. Thanks, a and then on the aerospace margins I think that's probably a quarterly records to the company yet at 20%. They can you talk about the things that have driven those margins up whether or not that sustainable here in in the short to medium term I think that above what your topic could be.
Got it anymore color you can give us around a restaurant performance there.
Sure sure needs and so.
You're absolutely right, where it would having great momentum in aerospace and defense and primarily driven by.
Our volume as well pricing aftermarket growth and.
This is driving our to our margin sequentially and year over year I would add.
We continue to ramp up the low cost manufacturing in aerospace and defense as well which has contributed.
So I mean, all of that commentary that does it sound like as anything onetime in nature. It now as you can you sustain 20% I change that kind of area going forward here.
That's a that's that's what we expect Nathan so regarding similar margins in Q4, and we don't expect too.
A material change in margins as we go into next year.
Okay and last one on leverage a I think you're down to about I had my margin sure I was just over four at the end of 2000 at nighttime essentially on that rate by the end of 2020 can you talk about any other actions that you could take aside from a more divested you see that they could positively impact that leverage ratio.
Over the next.
You know they stayed mark.
Then I'll pass it on thanks.
Sure He said so.
Finally, our growth in EBITDA as we look at.
The run rate of 29, TNS 2020 will contribute to.
To an acceleration de leveraging as well as as we mentioned we are looking at.
Non core assets divestiture that would reduce how would that.
You had on year and of course, as we announced our intention to sell I would it.
Noncore asset in upstream oil and gas that.
Lossmaking that also will contribute to increasing EBITDA and de levering fastest EBITDA increasing cash flows.
Emanate, a negative cash flow I'd say, there's a little there's there's still some opportunity in working capital Nathan as well, particularly on the inventory side, but but I think as shy to capture the bulk of it.
Our next question as from Jeff Hammond Keybanc capital markets. Please proceed with your question.
Good morning, guys good morning, Jeff.
So it sounds like 19 is very much on track I'm just.
No just given all the moving pieces the sales spend some nicholson getting out of some of these money losing business is just kinda talk about how we should maybe be thinking about the 2020 165 target what's changed within that.
You know if anything.
Sure I'll start shut in and then why don't you Archie jump that so we.
You're right.
2019, we're very confident of delivering the commitments for 19.
As was the run rate as we exit 19, we feel very good about being where we expected to be as we ended the year will report out on that in the and our February earnings cause we close out the year.
Going into a into next year with the with the 165.
Say.
With with one exception virtually all of what we expected to do certainly everything we control is on track going into 2020, I'd say the one change in the bridges that we communicated in June is that we're seeing I'd say, a weaker market industrial industrial than what we had assumed in June .
He said that we're we're we're ahead of that already and responding to compensate another area. So the business. So if you look at very high level weaker markets in industrial going into 2020.
We're seeing but better growth in aerospace and defense going into 2020 than what we expected back in June so that's partially offsetting the expectation and then we're being more aggressive.
Then than previously thought on both the cost out with respect to both group and corporate cost in DNA.
But also pricing should be better as well as we go into next year. So we're still the bridge looks similar a few changes, but we're still confident and delivering the the 165 net of acquisitions next year.
And Jeff just to add to what Scott said as we highlighted the 165 have been.
But he said to exclude spends.
Divestiture of $8 million, so with targeting 157, excluding future divestitures.
Okay. That's very helpful. And then can you give us I guess the pro <unk>.
Just I know Nathan asked a question on leverage, but what's pro forma leverage.
Look like you know given your fourq guidance and kind of excluding.
These money, losing business is kinda it so where does pro forma leverage and 29 P. Nat.
So we're still we're still looking at that armed for 4.3 at this point from a leverage point of view our pro forma.
And that would take out the engineered and distributed valves correct.
Okay, but again as as important as of Q3 Som I'm not look it will be it will be fast states will be lower if we take out completely from continued operation afforded Q1, and Q2, then it will be it will be less than four.
Okay helpful and then just want to.
The order commentary always helpful, but I'm just given all the moving pieces I want to make sure I understand it. So industrial I think you said would be in line with Q3, what does that contemplate for an organic decline.
Cause I just don't have the prior year.
Yes, apples to apples number.
And then maybe what you're looking at that <unk> the energy.
Don't have I don't know what the apples to apples prior your order number. So maybe you can just talk about what you think the magnitude of increase in orders would be versus Threeq, you, which I think you had at 53 million.
Sure John I'll take your question on the under industrial so when we look at.
Q4, we're looking at.
Year on year flat order.
Flats order to year on year and.
For the energy, we're looking at an increase in order to primarily driven.
By the ought to be or does that we expect in Q4.
But but what's the what's the.
<unk> for Q1 8, adjusted order number.
Excluding whatever you've gotten rid of yes, it's 50 is 57 million.
Okay.
For the energy.
Okay, Great and then just just last one refinery valves. It sounds like you still feel very good about that business just.
Despite some of the Lumpiness in the order rates just talk maybe more qualitatively about what your customers are saying in terms of spend in 2020, and what that meant business might look like.
So we are.
We have.
We have a pretty strong pipeline of projects that were working on right now as you know and when they turn into orders, it's hard to predict in any given quarter, even even within a six month window, but there's a number reason that we feel good one is that today we have.
We would need to increase number of engineers in this business to keep up with.
The project the project work that we're doing ahead of receiving orders.
That's they're working with process Licensors, who.
Our it will say leading indicator of order activity in this business of the process Licensors are very busy right now and a in so we have as strong a pipeline of new orders.
Kind of teed up to fall into a into place here over the next nine months, that's that's pretty big So we're feeling good going into end into next year.
I think that when you look at year over year when when we go back to the 18 month plan that we communicated we we expected flat earnings year over year in this business. So we're delivering a decent year here in 2019, and we're expecting the same in 2020, I don't I don't I wouldn't say.
At this point that we are we're going to forecast a different number for next year is still feels more or less in line 2020 versus 2019 from and AOL y and our EBITDA standpoint.
Okay. Thanks, guys.
Our next question question is from John Franzreb.
Sidoti and company. Please proceed with your question.
Hey, Scott Shoddy.
Just kind of summing up if I remember in June when you put out the original 18 month plan. The total organic revenue profile will be just north of 3%.
Given the better than expected aerospace and defense and lower than expected.
Industrial.
Are you still netting out above that kind of organic growth profile in order to hit those targets or we're not.
That's correct, yes, that's how we're looking at it right now.
That's that's exactly right we are weaker industrial in a stronger aerospace.
And basically energy is playing out as expected.
Got it okay and on the aerospace and defense side on the commercial side of that business.
Can you talk a little bit about what the booking profile it looks like and 2020 seem to seems to sound like it is.
Accelerating maybe a little bit more than I would've expected.
What programs are driving that.
So.
You know this is primarily driven by the 50 it I'm pop.
That we are seeing.
That said the 320 as well and a 20-F as well we may have some upside as we go into next year, depending on what Boeing does so as you know they pulled the three seven down to 42, a year, we don't have a lot of content on them, but as they ramp that step back up we may have a little bit of upside on that but.
Theres not a lot of change and expectations on on aerospace as you as you know these production rates don't don't change that quickly. So we still are more or less inline with what we expected on the commercial side, where we're seeing stronger growth and expect is more on defense.
Okay. Thanks that helps.
Alright, and lastly, I think shot he said something about better than expected results in the coming quarter.
In Asia can you just talk a little bit about those comments on it and where are you seeing that.
So this is this is primarily.
In India and in China, where we are focusing some of that do the activities like what is still small so the growth aided on a like for like base. This days.
Hey, good from a percentage point of view than a dollar point of view, but our investments.
In China for China, as well as ramping up in the benefiting us primarily in the industrial.
Segment lot of our commercial marine business goes into Asia, as well and we're seeing strong growth in commercial marine right now as well.
So its commercial Marine Asia is we've seen the strike or is that some other business Austin's Bethany.
Both but it is side, it's a Asia, both China and non commercial Marine India, which is not commercial marine and then commercial Marine and Asia. All three we're seeing good growth in Q3 and expecting that continued to continue through Q4.
Okay, Great all right great. My other questions were answered thanks, guys.
Thank you.
Our next question is from Andrew Kaplowitz Citi. Please proceed with your question.
Hey, good morning, guys.
Yes.
Scottish I get to your 2020 plan he mentioned narrows better it's going to offset industrial but you also mentioned cost out in pricing that you could sort of hit more I know it initiatives how much more flexibility do you have sort of try some originations considering an already being relatively aggressive with those initiatives.
The next 18 months.
Right. So I'll start I'll start shot and then you can jump in I think on the when as we go into next year. The majority of the compensation that we're making here it for the industrial expected weakness is going to be on the cost side. So we're being more aggressive on on the DNA, we're getting a lot of cost.
Out of energy as we consolidate that into the rest of of CIRCOR and so the numbers are bigger than what we expected back in June and that's a that's giving us some room here for for additional weakness on the industrial side with respect to pricing, we're going to be careful with pricing in industrial given the weak market. So.
So that's probably going to play out as expected in a in the plan that we put out in June we won't be more aggressive industrial but on the aerospace and defense side, we are being more aggressive and we're really focusing on OEM spot orders and aftermarket where we have significant leverage with price. So we're getting more now and expect to continue to get more.
Price into next year that will contribute to offsetting the weakness in industrial.
And then Hart Scott just maybe update us on how to sell process are distributed valves will go.
Timing potential interest [laughter] anything more you could give us in terms of color there.
So.
It's a real as you know, it's really difficult to to predict the timing Andy So we are.
It's in process we are.
Working through that were out contacting.
Potential buyers.
And we're working through through the process here I don't know I'm afraid to give you an exact time of when work when we're going to sell it I'm not sure how long it's going to take we're doing we're looking across the board of both strategics and private equity.
Buyers and we expended just expected just run the process here. So it's not going to be imminent, we don't intend to sell this in the next.
345 months, but but it's we're actively working it.
Okay, and then related to that Scott I shot a lake.
He obviously draining cash from the business itself I think shopping you had given guidance earlier this year of about 30 million to free cash.
Your next after three quarters, it's not so unusual or the fourth quarter is usually quite good.
I would you update that guidance.
Point for the year.
So you're absolutely right Andy So we're looking we're looking as I mentioned in my prepared notes were looking at this similar.
Q4, then then it Q3 and overall will be closer to 20 million then 30 million.
Okay, and how much of that Shati is the weaker energy markets versus just working capital build and anymore color you could give us there.
Sure. This is it's absolutely all of it and more is coming from upstream.
Oil and gas and in fact, I Wonder Weve, our working capital at 26% 12 months turn is right, where we wanted to be even if that is more to do on on the inventory but definitely.
Morning, guys have been a drain on cash.
For the first nine months.
Again negative contribution on cash this year and and continued through the third quarter as a negative could contribution.
That's helpful guys and then get back industrial Scott you mentioned the strong aftermarket does nothing to new products from an aftermarket growing I think he said 10%.
How much could that offset weaker OE. If we can or are we continues into 2020 [noise].
It's it's it's significant that's why I highlighted it roughly 30% of our industrial business is aftermarket. So that's still leaves 70% that that's not in that is seeing a and as you know we have a pretty significant business and in Europe , where we're seeing the biggest headwinds so order of magnitude.
We're seeing about 30% of the business in global aftermarket that's growing.
And we're seeing modest growth in the Americas and Asia, and then commercial marine is growing quite nicely. So you netted all together and we ended up with around a 3% decline in organic orders in the third quarter, and we're expecting more or less flat orders in the for fourth quarter, We may do a little bit better than that but has probably be around flat orders or Ghana.
Fourth quarter [laughter], Scott one more bigger picture question I think you mentioned last quarter. They need you were evaluating a broad range of operational financial strategic option, Eric could deliver value in excess of your strategic plan any update on the thought process around this evaluation just kind of deal once you've been dealing which is you know these days.
Passengers.
And he already are there any bigger changes that we might anticipate.
We're still we're still evaluating and I believe the way that.
The right way for this to play out is as we if and when we choose to to take a different path will we'll announce that when we can as you can imagine we can't announce a certain things were well ahead of time, but I will tell you. The processes is still in process well. If we reached the end of the process and.
And everything we've evaluated comes back to executing the 18 months plan. The way we communicated back in June then we will close out of processing communicate that.
We havent reached the point, where we're closing it out we still are evaluating certain alternatives, but we don't have anything that we can really report on publicly right now.
Thanks, guys.
Our next question is from Brett Carney Gabelli and company. Please proceed with your question.
Hi, guys. Good morning, good morning, Brett Brad.
Yeah, I just wanted to ask I guess across a few of the businesses, how you're thinking about you know personnel resources. It sounds like on refinery valves, we feel pretty good about the engineering a function where it's at to support you know continued.
Positive momentum in that business, but then on the industrial side could you talk a little bit more about the incremental restructuring actions you're taking in Europe .
Sure we.
Good question, So we have.
Still have opportunity that could be categorized as synergy.
But we're not really looking at it that way, we're we're focused on and what we have done in third quarter and going forward, you'll see more this is the tactical gionee back office kinds of resources and getting driving more efficiency into the business. There. So the restructuring that we did in industrial was largely in Europe .
Largely focused on on back office, there were some leadership roles that we changed with some organization change, but largely focused on on back office.
DNA types of resources. So we continue to invest in engineering, we continue to invest in product management as well as in sales Soviet broadly across the company. The head count in those categories is going is going up slightly.
Whereas the the back office the Gionee the overhead types of roles you should expect to see those those had the head count continue to come down and as you know the group structure in energy, there's there's a significant amount of overhead that we're going to be removing here as we as we consolidate the energy group.
Great and I guess, one quick follow up on that and you mentioned in your prepared remarks, integrating I guess the remaining energy assets into the rest of CIRCOR I know, it's early days, but any thoughts on timeline, there and kind of how.
Your thinking.
Through the way that will play out.
Sure. We we will work in that continue to run CIRCOR with a separate energy groups through the remainder of this year and when we close out the year in report our earnings will talk about energy in Q4.
Once we get into next year, the remaining businesses in energy will be consolidated into the rest of CIRCOR, there will be some savings associated with that.
But going forward, we will not be talking about nor will we be running the company with a separate IDT energy group. So we'll have an industrial.
Business, a broad based industrial business and in aerospace and defense business.
Okay. Thanks, guys.
Yes.
Thank you we have reached the end of the question answer session and with that the Cogen of today's call. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.