Q1 2020 Earnings Call
Good morning, I want to the chart industries in 2021st quarter Conference call.
All lines have been placed for me to prevent background noise Atlas speakers remarks, there will be a question answer session.
Supplemental presentation with issued earlier this morning.
Have you ever that must be totally she may access it by visiting charts website at Www Dot chart industries that.
A telephone replay they've broadcast will be available following the conclusion of the call until Thursday April Thirtyth 2020.
A replay information is contained in the company's press release.
Before we begin to company would like to remind you that statements made during this call, but I'm not historical effect that forward looking statements. Please refer to the information regarding forward looking statements I wish that doesn't include any of the company's anomalies in the latest filings with the FCC.
The company undertakes no obligation to update publicly on revise any forward looking statements.
I would now I turn the conference call to Joey Veeco sure industry CEO.
Thank you Shannon good morning, everyone and thank you for joining us today to go through our first quarter 2020 result, and business update.
Joining me today, it's gotten are both our chief accounting officer, you'll hear about her recent actions related to the coded pandemic. The continued breadth of our order book and an update on our views a 2020, given the uncertainty surrounding coated 19 as you walk through our supplemental presentation released this morning.
You can see on slide three or long term strategies unchanged even in these uncertain times.
But right now we're responding to the here in L. impact as well as preparing for continued uncertainty in our markets from the current alert.
Starting on slide five first and foremost is the safety of her team members in particular, given the fact that her businesses are deemed essential.
We have as many team members as possible working remotely yeah. We continue to have approximately 70% over workforce that must be in our factories to manufacture critical care products.
Therefore, we have taken the falling measures, which are just a few examples to ensure that team members.
Daggers, starting in times of should schedule to reduce interaction.
You can lunches into rotating groups during the shift.
Designated time clock by department to reduce community touch point.
Enhance personal protective equipment for all employees.
It has cleaning and all facilities and had to deep cleaning companies on coal nearby each of our manufacturing locations around the world.
Designed and installed kicked fleets on doors for opening including without using your hands.
And finally, we're providing assistance for our team members to Stacy not just at work beginning March six we suspended the employee portion of our teladoc fees to support those in need of health care assistance, while also reducing non critical hospital in doctors' visits.
Given our central status by all governments in locations, where we operate keeping or if we see this critical in particular as we ramped production beginning in March for medical oxygen products to meet increasing demand.
We were able to increase production by 50% in our Czech Republic facility, 63% in our Georgia location and doubled in our Minnesota factory for these products.
We did have a total 40 nonworking days across her locations in the first quarter for which I will share the operational impact on upcoming side.
Additionally, our team did an exceptional job quickly achieving the ability to use dual certifications for U.S. product in Europe, when the urgent European demand exceeded localized manufacturing lead times.
To receive this is already from the governing certifying bodies piece is quite an accomplishment as it typically would tick up to six months.
As with all companies. These days non essential travel in the company's arnhold last year, we averaged $1.1 million of travel when expenses per month and in March we save just under 1 million from those expenses.
Well these are temporary savings they contribute to our bottom line until the world reopened.
We're constantly assessing our manpower needs in relation to changing demand and are able to quickly adapt our variable cost structure.
Since the beginning of the year, we've reduced our workforce by 13% over 600 fulltime had.
These reductions have been a combination of direct labor in response to declining order rates, primarily in thin fans as well flattening the organization across all segments in corporate.
These reductions have resulted in $49 million of annualized cost savings, which $12.4 million or the savings were from actions taken this week.
We saw $2.2 million of savings in Q1 based on the timing of the early reductions and expect 34 million in the remainder of 2020.
The largest reduction was in or NCCN sand segment for which annualized savings from year to date reductions is $23.6 million.
To give you a sense of the magnitude of the go forward run rate in December 2019 revenue per person per year and since then was $280000.
Out of the March that same metric is 450000 per person per year.
These reductions are in its current wide savings generated by actions taken in 2019 and in addition to integration cost synergies.
We will continue to be agile based on market demand and act as Lee and responsibly manage through this crisis.
The 2019 savings are reflected in the first quarter 2020 gross margin and asking a result first quarter gross margin as a percent of sale increased 350 basis points sequentially over the fourth quarter of 2019, and 530 basis point over Q1 2019.
Each segment's gross margin as a percent of sales increased both sequentially and year over year with the exception of means Ethan fan.
Yes, you know when normalized for onetime costs, primarily severance was $49.3 million for the first quarter of 2020 and included 2.9 million of share based compensation expense, which only a significant each year in the first quarter.
We expect S. You need to continue to decrease further and 2020 as a result and cost reduction activities, we've taken year to date.
As we publicly stated on March Twentyth, we quickly worked with our lender group to amend our net leverage ratio bank covenant for what we referred to as just in case scenarios well, we did not nor do not anticipate hitting even the prior covenant cap. We felt it was prudent to get ahead of any extreme downside case, given the uncertainty of the current affairs impacts.
Flipping to slide six you can see that we successfully completed the amendment process on April Twentyth.
Previously the net leverage ratio covenant step down to 3.5 times.
Number Thirtyth 2020.
Our new Covenant hold at 4.25 times through 2020, and does not stepped down to 3.5 until the end of 2021.
It's also worth pointing out that are pricing grid is unchanged up to our prior covenant level, which we do not expect to exceed.
Once about 3.5 times, there's a new pryce interior as shown in the left hand corner of the slide.
Finally, very little of our existing debt matures until 2024 inclusive of our convertible notes revolver and term loan.
Our current net leverage ratio is 3.1 in our cash on hand is $89 million as of March 30 Onest.
Given our balance sheet. The recent Covenant amendment and our cost reduction actions, we do not currently foresee using the carriers Act.
As I indicated first isn't it has been considered central manufacturing in every one of our production site not just at the seven locations, where we manufacture critical care equipment in the United States, the transportation of medical supplies and equipment related to the testing diagnosis and treatment of Cobot 19 is considered essential as our all manufacturers.
Warehouse operators or distributors of medical gases and manufacturers of energy infrastructure for the department of Homeland Security. The same exceptions and approvals have been granted in our Indian and European locations, including in one of the hardest hit Koby country, Italy.
Yeah, we did have days, where we were unable to produce in the first quarter as either waited for the approval of our central status or there was a mandatory government shutdown as was the keys in China.
Yes, it's a little of 40 production days in the first quarter across our locations with 26 of those being in our Chinese facilities in late January in early February.
We were 100% operational in China as of mid February.
We do not estimate lost revenue from these 40 days, but rather revenue that pushed out of Q1 to later in 2020.
The total revenue pushed out of the first quarter because of Corona layer shutdown was $7.5 million was 3 million of that in China.
So what does critical care products for medical applications really mean with respect to charge production.
By way of background on slide eight medical oxygen supply to hospital, let's meet regulatory standards to be 99.99% pure and medically certified by the FDA in the United States or to European pharma copious standards in Europe.
Oxygen is either truck in liquid form to the hospital that has specialized storage tanks that feed it into the hospital or is compressed into metal cylinders of varying capacities.
Our products for these applications ranged from micro bulk storage systems to liquid cylinders to mobile delivery systems. The ball tanks used as a primary source of oxygen and hospitals.
Our micro bulk storage systems provide liquid oxygen storage for respiratory applications and can be used for the mandatory 24 hour backup supply of liquid oxygen to hospitals primary bulk take.
Or permits you'll units are pellet based and can be installed very quickly on any surface, which are perfect for field hospital.
Ideal for pop up medical.
Our medical skids as well as our mobile options.
Liquid cylinders can be used to remotely fill liquid oxygen systems in home health care and nursing homes as well as being manifold. It together display oxygen in the field hospital.
Our trial biological shippers can be used for the storage and transport of biological samples, including viruses and recently, we sold multiple units for the research of the treatment for Cobot 19.
The CDC assured that up to 64% of critically ill patients treated for coated have received high school oxygen therapy in both Europe and the U.S. there over 45 million cylinders and use however, only 15% to 20% of these cylinders are currently certified for medical oxygen service and as mentioned already not only our hours.
Cylinder certified we received permission to produce dual coated products, which can be used in both regions.
Products that we met manufacturer that can be used in medical applications run about 20% of total chart revenue.
This was 21% for the full year 2019, with just under 10% of that in United States Southern half percent in Europe, and slightly above 4% in Asia.
Our customers the industrial and medical gas suppliers have reported a rise in recent weeks and demand for medical oxygen of three to five fold in both cylinder and liquid form in places like Italy, and Spain hospitals, all oxygen consumption reach as much a 10 times normal levels.
Turning to slide nine our known medical oxygen specific orders increased 34% compared to the first quarter team and 29% compared to Q4 2019, you can see injuries in regions order increases in the middle of slide nine.
As we have entered the second quarter demand in this area has increased further in particular in both North and South America, where order levels month to date I are higher than the entire first quarter for medical oxygen kids specifically.
For example in the past week, we've received $2.6 million of orders for medical ready shifts from one customer that is responding to the code that situation in Mexico.
Through yesterday April month to date orders for these applications are at 39% of the entire first quarter related orders.
We expect these types of orders to return to pre Covance levels leader in 2020.
We thank our employees, who have ramped up production on our critical care products, there's not enough time on this call to share all the stories of life saving efforts to expedite products to hospitals public medical facilities and other health care locations, but you can see some of them highlighted on this slide let me share one additional story.
On a recent Friday afternoon at 12 15 P.M. The chart commercial team received a call that three main tanks at hospitals in New York City area failed. While the reason is unknown, there's industry assumption that the overdrew the oxygen system in a shutdown supply.
By three P.M. that same afternoon, we were able to have 20 derisk deals on a dedicated truck, which I'm sure you know isn't easy to find given the supply chain challenges of late that arrived on site. The very next afternoon, our operations team state all Friday evening to load the truck.
We wouldn't be a headline news story, we hope that these 20 units helped save 50 to 70 People's lives.
For a crowd biological products. The first quarter started slowly in particular with the shutdown in China as impacts from coded 19 began happening in late February in early March orders dramatically increased with total first quarter orders of just under $21 million, a 14% increase over the first quarter 2019.
The demand increase is driven both directly and indirectly by coded as mentioned with China reopened there has been increased activity from biobanks in the region.
We have sold our cryo products to many institutions for coded research and as elective surgeries are delayed we've sold freezers to companies that need to store biological inventory for longer periods of time, so those valuable assets you not parish.
Flipping to slide 10, it makes me proud to share that while we continue to serve our customer needs our employees a banded together to identify hospitals and health care providers in our local communities to donate personal protective gear from our safety stock today, we have donated thousands of and 95 industrial masks. The hospital in each community that we live and work in we think those working to keep.
I will say through this crisis.
Let's move from the Kobin discussion to our medium and long term fundamentals market dynamics in recent demand trends starting on slide 12, we continue to see long term strengthen the fundamentals of our markets in particular, the transition to clean energy and the needed infrastructure associated with that many of asked about whether carbon emissions reductions targets there were still import.
And before the school will exist going forward from what we hear this will be even more top of mind coming out of this crisis ranging from global leaders see more need for energy independence, given the recent oil price impacts and that there will be a focus on actions that can be achieved by 2030 versus the longer 2050 timeline.
Even during the recent shut down the Indian Parliament approved an increase in the excise duty on gasoline and diesel which will help protect their transition to natural gas.
Backlog of $733 million is flat to the first quarter 2019, which included 135 million eventual goal cats, you pass to dig LNG orders as we ended the first quarter 2020, there was $93 million Calcs, who passed backlog remaining which is expected to be recognized as revenue fairly evenly over the next.
Four quarters.
When removing that backlog increased 7% year over year as shown on slide 13.
And DNS West first quarter backlog of $151 million is the highest in history of the business up 19% over the first quarter of 2019.
[noise] east backlog of $221 million is the highest backlog for March 30, Onest for the segment since the first quarter of 2015, which included a significant portion of Petro China LNG related backlog.
Also worth noting is that we have not had any material cancellations in our backlog to date.
We sold two 120, new customers in the first quarter 2020 of which 84 were outside of North America. This included 23, new customers in India 26 in Europe.
China 12 in Southeast Asia, One in Africa, and one in Mexico.
36 of these new customers were obtained in March to date in April we have orders from 29, new customers as well the 4.7 million dollar order for an industrial plant application and easy cryo, a $3.1 million air cooled heat exchanger retrofit order for refinery any and teeth in fans and a 1.5 million dollar order for space launch application.
Indian as west.
Sales of $321 million is an increase of 11% over the first quarter 2019, and flat organically and see cryo sales were up nearly 77% with the inclusion of $22.9 million venture global Kelcy pest revenue.
The first quarter 2019 did not include any galxc pest revenue.
On slide 14, and 15 will walk through each segment right to left from weakening to consistent to strengthening demand. These categories, we're sharing or based on the last six weeks of information since the pandemic took full hold of the global environment.
In distribution stored west the product line with weakening short term demand is our each LNG fuel systems known to you as each LNG vehicle tanks. This product line has two main sole source customers, whose operations are located in Europe. These customers production lines have been closed for the prior month and are expected to reopen in the coming weeks order activity with these customers.
Dropped by 75% over the past four weeks with our current expectation that orders returned to normal levels in June.
Assuming a three month period of this level of orders our annual forecasted revenue and his product line would be reduced by $15 million to $20 million in 2020.
We reduced our workforce for this line by 50% early in March to adjust to the current demand situation.
We've made significant progress on other potential customers use of our age LNG fuel systems products, specifically, we expect customers in both India in Russia to move ahead. This year with LNG mine haul trucks and two large logistics companies in the U.S. to add to their LNG fleet, one having recently completed a successful pilot program.
Also late breaking news yesterday, we received formal notice that a second significant patent for LNG fuel systems will be granted to us in Europe. This further enhances our leadership position for LNG vehicles in the region.
Dosing equipment space applications and water treatment orders are consistent originally I would've thought water treatment being primarily with municipalities would have slowed given cobot well, we booked for different municipalities orders in the first quarter in already won in the second quarter. The reason for this is that municipalities are also considered a central business and they have a budget with a timeline that is law.
If not used.
Dosing order activity is consistent with the prior quarter, although we have seen a wide swath of new applications being used for our Dozers in recent weeks in particular, we're working with a fuel additive company, which is a new industry using dozers help change the way they are packaging their product just this past week, we sold our first dose or for eyelash enhancement product.
In addition to the critical care products for which I've already discussed the increasing demand specialty markets orders continue at and above our previously forecast level.
Orders in the first quarter quarter of 2020 were up 9% over the fourth quarter 2019, and up nearly 11% over the first quarter of 2019.
Hydrogen cannabis food and beverage and space all show strengthening demand our customers associated with fast food and convenient stores are increasing demand for our products somewhat offset by independent and casual restaurants that are hit by having to shut down.
Customers, including Mcdonald's Young and Chick Fil a have all confirmed that they will continue with their newbuilds.
Q1, food and beverage sales included strong beverage tank sales driven by speedway convenience stores that had 3000 stores with new tanks, each with a new tone metrics feature on the content gauges.
Many states that have issue shelter in place orders to combat coated 19 continue to include alcohol wine beer and cannabis and the essential category in today's ever changing lifestyle. The demand for can premium wine has also risen one of our key customers. The family Copel winery was one of the first offer premium wine and it can we supported the family.
Copel winery in packaging of their wining cans with our liquid nitrogen dosing systems.
Overall, food and beverage orders were up 17% as compared to the fourth quarter, 2019, and 36% compared to the first quarter between 19.
The reason that food and beverage shows on this slide into categories is that while we've seen a demand described above in the past week beverage has been weaker than typical as we believe we are now seem as hilde impacts from the casual restaurant shutdowns.
Finally, southwest aftermarket service and repair demand is increasing this is a theme that you'll hear throughout all segments. As there is a trend to utilization of existing infrastructure versus new purchases.
For DNS west parts repair and service revenues increased 11% with operating income up more than 200% over the first quarter 2019, driven by increased demand from the industrial gas majors and cost reductions taken in second half the 2019.
Yes, West aftermarket service and repair as a percent of total sales was 9.8% in the first quarter up from 8.2% in the fourth quarter of 2019.
In both units West and East, we're seeing an increasing number of bid request for re gasification terminals in the first quarter. We booked the first re gas station for the Malaysian region. We're also expecting reorders for military locations in the United States in the third quarter as well, including on 20 rigs stations for South America.
Yes East is shown on the second row on slide 14 in the first quarter, we booked 14, LNG fueling stations, which is the same level of Q1 2019 in on par with the average per quarter throughout 2019, which was a record year. Additionally in April we received verbal commitment from shell for the supply of southern LNG fueling station.
And our teams are currently working toward a multi year long term contract, which will allow for expansion, although the first seven stations.
In the Middle East in Asia Pacific outside of China Region March 2020 was the second best order intake month in the last year second only to December which was a record. This region had above average taken NC products with the sale of a cold box for Korea in a brazed aluminum heat exchanger for iOS Yell India.
India had its second highest order month in the history of the business in March.
We have seen softening and trailer demand in recent weeks. This is not surprising is both 2018 and 2019 were record trailer order years for us, but it is happening sooner than we expected in 2020.
Any softening and trailer orders would not be expected impact 2020 revenue as lead times on trailers are 10 plus months.
Moving to our energy and chemicals segment, and starting with Cryo, which is shown on the top row of slide 15.
Starting on the far right column, we saw significant demand for natural gas processing plant related equipment in 2017 in 2018. After a few years of none whatsoever. In 2019 is dramatically Phil was three plants for which we received a total of $1.6 million of orders.
Our original expectation in 2020 was five to seven plants being ordered with none in the first half given the current oil and gas situation. We would expect very few to none of these types of orders in 2020, which would impact our 2020 revenue by approximately $5 million.
Additionally, we do not expect to receive any big LNG new orders in 2020.
If there are some positives in the CEO of LNG morose These days.
Our work on venture Global Calcs, who passed project continues on schedule and there are no anticipated delays for that project.
Project is $100 million of 2020 equipment revenue.
Venture Global continue their offtake Street remained for 1 million ton per annum capacity on their next project Clackamas as a reminder, vg already has final for clearance for placements.
And on project that have not yet as I do need but continue to progress even in these difficult times.
To worrying extended their 2019 term loan to November 2021.
On March 19th FERC approved the Jordan Cove LNG project, if Jordan Cove moves ahead, as I'd and construction, we would have $60 million of equipment content on that project.
Qatar Petroleum stated that they had zero projects being canceled for the development of the Northfield, including the second phase. We're currently bidding on Brazed aluminum and other equipment content for this project.
Moving to the middle column labeled consistent demand for PMT Cryo, you can see that global petroleum or the petrochemical applications industrial gas applications and small scale LNG demand continues as we have expected even into recent weeks.
Well some petrochem projects may have slower schedules. They have all confirmed that they plan to move ahead.
Specifically there are three that we expect to still be awarded in 2020, and these range in chart content from $15 million to $30 million on average each.
In late February we received an order of 29 in half million dollars to deliver process design and equipment for us Gulf Coast PDH plant.
We expect $13 million of this project to be revenue recognized in 2020, which was included in our original revenue forecast for the year.
The air cooled heat exchangers for this project have not yet then awarded and we are in the bid.
For those coolers, which would be in the $5 million to $10 million range.
We received a lie for process technology and equipment on Eagles, Jacksonville small scale LNG facility in January we expect limited notice to proceed on the project to begin engineering work in conjunction with matrix in the second quarter. Additionally, we continue to see small scale projects in particular for power generation and utilities progress on that.
Original bid timelines.
We have 17 terminals in our 2020 bid pipeline that the operators have indicated continue to have a realistic chance to move ahead order point. This year. These 17 projects tool over $355 million of potential were content.
Even the major international oil companies that has begun the small scale journey as evidenced by the letter of cooperation that we signed with Exxon Mobil and Indian Oil Corporation in February our continuing on their global infrastructure Buildout using small scale LNG in many cases.
Finally, our lifecycle business is seeing increased demand in particular in the past few weeks around repair and service opportunities. There was one potential repair and service project that would be $4 million for which we expected decision to be made in the next month.
Additionally, as many of you know we have four competitors globally for Brazed aluminum heat exchangers.
One of those competitors had a regional certification permanently revoked late in the first quarter as a result of this we've seen an uptick in request for bids from their customers that are looking for alternative supply of raised.
Moving to NCCN fans shown on the bottom on slide 15.
And our hardest hit segment to date, not just from coded but also from the oil and gas situation while orders in the first quarter were the highest out of the past three quarters, including $23 million in the month of March we anticipate that this will quickly falloff in particular on the air cooled heat exchanger side of the business related to our mid and upstream and use in htwo.
The 19, approximately $110 million of our total chart revenue related to midstream and upstream applications.
Today, some of our mid an upstream customers have publicly announced capex spending cuts of over 30%.
As I commented during the cold that update we've taken over 40% of total head count out of the segment in the first quarter and with the possibility of 35% year over year order and revenue declines in the air cooler side of the segment. We expect that we can maintain profitability at the softening levels.
[noise] the fans business continues to breeze, along with Arco Finco fan order levels the highest in the year. Unlike DNS West NCCN Sands has seen an increase in aftermarket service and repair service and repair as a percent of sales for this segment was 26.4% in the first quarter.
From 22 and half percent in Q4 2019.
A portion of this increase is attributable to the strength in demand for fans and a portion is from our customers looking for creative ways to differentiate themselves in the medium and long term.
For example, the first of the kind orders for Finfet ends are shown on slide 16 as part of the total 15 first we had in Q1.
For example, we completed the first high specification verticals for for one of the U.S. Department of energy strategic petroleum reserves for emergency crude oil storage facilities as well as putting our first vertical fan into field trials with key customer.
Other first of kind orders are related to our medium and long term market fundamental that I described earlier. These types of orders in combination with 35 customers ordering over $1 million in the first quarter demonstrates the varied applications, we plan as well as the global view that the clean energy transition will be as important as ever coming out of the current situation.
A few examples we received an order for a study for liquid hydrogen propelled marine vessels, including passenger ships. This order came to us in the last week of March and while you might think that the passenger cruise industry is completely at a standstill. This further reiterate the clean energy transition will continue as we come through the coded 19 situation.
We booked in order for our first bio methane LNG project in Italy. These plans to use biogas from farm fields to generate power the Italian government recently renewed their subsidies for these applications. We expect this trend to continue.
And finally, we are working with the large retail food company that is in the process of transitioning their larger chicken farms from propane to guess for higher efficiencies.
Many of these first of the kind orders support our customers and their SG initiatives and carbon footprint reductions slide 17 shows or 2019 figures and in 2020, our customers are looking to future applications that reduce their carbon footprint, while becoming more efficient.
I'll now hand, it over to Scott to walk through our earnings and free cash flow.
Thanks Joel.
First quarter 2020 reported diluted earnings per share is 24 cents, an increase of 21 cents compared to the first quarter 2019, when adjusted for one time cash shown on slide 19 adjusted earnings per diluted share is 57 cents, a 46% increase over the adjusted first quarter of 2019 adjustments include.
Average for the headcount reductions that Joe described hard cost to expedite materials related cobot 19 medical essential production the mark to market impacts from our equity investments, which we explained we would be calling out each quarter, regardless, regardless of the positive or negative impact to that quarter and finally integration costs.
The only integration cost included are related to air exchangers, which is substantially complete and expected to be fully complete by the ended the second quarter.
There are no PRB integration costs included going forward.
Adjusted EPS does not reflect the impact of the 40 days of lost production in the first quarter as steel described.
To reiterate the total revenue forced out of the first quarter because of Cobot 19 impacts was seven and a half million dollars with 3 million of that in China.
Free cash flow from operating activities and capital expenditures is $15 million for the quarter. This is inclusive about securing additional safety stock in our inventory for critical raw materials and components that we consciously chose to increase to offset potential supply chain disruptions.
Yes, Joe mentioned earlier, we ramped production for our critical care products in various locations.
We estimate $13.4 million of additional inventory for these purposes was on hand at the end of the first quarter.
$15 million of free cash flow is before the $19 million or share repurchases completed in early March our first quarter.
So a 55 is a 10 day improvement compared to the first quarter of 2019, and this example of our continued working capital management is one element as to why we continue expect strong cash generation in 2020.
Many of you have asked what's different about the chart business during this down cycle than in the 2014 to 2016 timeframe.
On Slide 21, you can see the changes to the composition of the portfolio products, we offer as well as the acquisition and divestiture activities that have resulted in a much more diverse geographically broad company.
A few specifics when comparing today to the former years.
We had virtually no aftermarket service and repair revenue. We are now at 13% of total chart revenue with a roadmap to over 20%.
In the prior cycle, we were heavily reliant on one big LNG project.
As you heard us discussed over the past 18 months, we think of the big LNG as icing on the Kate and have a line of sight to growth in many of our based businesses across the cycle.
We have a much more diversified global footprint, which axis is applications and projects. The previously were not.
Dissipated.
Our year and a half ago, we sold into 21 countries. We now work on projects and sell into over 70 countries.
Even with these changes the remains a high amount of uncertainty surrounding the potential business impacts from coal with 19 as of today, we've not seen a meaningful impact on total bookings, although a shift from been fans to DNS is expected and certainly the fundamentals of the business remains very much intact.
Because of the high level of uncertainty that cobot 19 has created we are withdrawing our prior 2020 full year guidance until we have more clarity on the duration and severity of situation.
While we think it's prudent to hold off on issuing new guidance into the situation stabilizes. We can bridge. We can provide the following data points for 2020 as shown on slide 22.
Venture Globals caucus, who passed project remains on schedule with 100 million of expected revenue in our AMC cryogenic segments in 2020.
We're seeing a short term increase in demand in our medical related products. As described earlier, we continue to expect strong free cash flow generation in the year have suspended our share buyback program and continue to prioritize debt paydown.
Year to date, we've taken cost reductions totaling 40 midnight over $49 million of annualized savings. This is in addition to the $38 million savings from cost reductions taken in 2019.
Our expected effective tax rate remains unchanged at 20% for the full year 2020.
Our capital expenditures are flexible and we will continue to assess the spend as the year progresses. At this time, we anticipate capex spend will be in the $25 million to $30 million range.
We expect the full year diluted weighted average shares outstanding to be 35.45 million based on our March 2020 share buyback of approximately 750000 shares.
One more item before we open it up for questions. Many of you dealt with John Bishop and his Investor relations capacity as you've heard today, we've taken layers out of the organization and eliminated certain rules, the chief operating officer role, which John occupied was one of them, we valued John contributions to our business and offered in the role of Vice President of Investor Relations.
A role, which we need going forward. Unfortunately, John declined our offer for this opportunity and therefore, we will begin a search for this role immediately in the meantime, you all know Tom today and he will be your point of contact John leaving will be treated as a without caused departure. We thank John for all of the contributions to chart as a value team member with that.
I'll now turn it over to Shannon to open it up for questions.
Ladies and gentlemen to ask a question you will need to press star one of your telephone to withdraw your question press the pound Keith please symbolic composite Tony roster.
Our first question comes from James West with Evercore ISI. Your line is open.
Hey, good morning Bill.
Hey, Dan.
Phil.
And it's got sort order too big LNG nice to have not necessary.
You're not expecting anything for the rest of this year to hit the backlog, but I'd love to hear.
How the conversations or going with customers.
That we're planning to apply the no realm, this time period or maybe before mid year.
What they're telling you about their intentions it there.
Canceled the ideas and totally are pushing things back what's critical flavor those conversations.
The majority of the conversations are around pushing things to the right. So we haven't heard anybody that's talking about completely negating the project in its entirety.
And in pushing to the right being 2021.
At the earliest in 2022, even in some cases, we have one one particular customer that remained favorable on F. I'd in late 2020, which were unable to share that view that is.
The other team that we're hearing as well is you know were while we're not canceling projects. We might go about the structure differently in particular in modular mid scale. So were originally a project might have had picked picking a hypothetical example, 10 trains and starting with all pen.
Color customer might say well, we're going to start with five incrementally add to that on so those are really the two things that we're hearing again I think I think you'll have the big guys. One that we continue to talk about other customers on have the intent things forward and have taken the right steps in the short term to be able to to get through.
This next 12 months.
Okay. That's very helpful. Thank you and then with respect to the critical care medical.
Devices that you guys or supplying the obviously, we're getting a big bump right now because with the Europe demo, but there's also a big rethinking though.
Global supply chain here from for Us government European governments as well.
Thoughts developed stockpile.
Source for allocation and so what's your.
Early thoughts or what's your thoughts on that part of your business being your wells.
I'll be the same size a drink leases awards.
Right now, but what's your thought on terms that business being much more sustainable going forward.
Yes, definitely echo your comments around in the current level that we're seeing won't be what we see going forward. This is a temporary significant increase in these particular products, but to your point, we've had multiple discuss discussions with government agencies around what is the supply chain look like going forward in that timeframe is not just three.
Months away, it's kind of in the next 12 months in permanent supply chain.
Commissions and how we participate in that so our expectation would be that on ongoing there will continue to be higher than previous levels, but not as a level that we see right now.
It really goes into what the industrial gas customers choose to do around how they utilize assets that can be used in industrial applications as well as oxygen applications and how they plan to keep a safety stock in particular on hand on what we're also starting to see in the last week or so is that.
On some of those industrial gas customers in North America in particular that utilize existing assets in particular micro bulk involved tanks for medical oxygen related capacity, there now, saying, we need to backfill on the industrial gas side for customers that are coming back online on so I think.
Overall, you'd see a little bit of a boost to on the total bulk and micro bulk side of the business in DNS for us.
Okay, great. Thanks, Phil it's very helpful.
Thanks, Jamie Thank you see.
Our next question comes from John Walsh with Credit Suisse. Your line is open.
Hello, Good morning.
John.
Course rone.
Repair, we'll obviously realized you're not updating the prior guidance framework, but no I guess given your comments on covenant.
And leaseback, Andrew from the Blink of an EBITDA number.
We grew about going through the year.
Liquidating inventory.
You know you pulled the lever on Capex I mean.
What are the other moving parts that you're able to do the kind of really protect free cash flow because right would go through these periods.
What you see in the decline in free cash flows easily much less than what you would see obviously on the EBIT as long as you kind of liquidate some of the balance.
You're absolutely correct in like you said, while we Havent updated a guide on free cash flow our commentary around our continued expectation of strong free cash flow generation in 2020 on should kind of give the.
Qualitative indicator on our feeling toward the continue to levels that we think we can do even with potential downturns on the horizon with that said, we do have multiple levers to pull you referenced some that we already had around on skinning down capex as well as some of the a our activities that we had in place.
We also are working very diligently with our supply chain over the last four weeks Weve, primarily give an update around the fact that we have very few I'm single digit higher risk suppliers, but also part of the sourcing discussions are uncertain, what you're hearing from multiple other companies around taking advantage of the opportunity.
For extended terms, where applicable as well as cost reductions on the supply base side of things.
We also have a multiple different ways that we can manage our accounts receivable and we were very pleased with that that we've made to our charter business services in particular on accounts receivable side, where our cash conversion cycle continues to improve a month over month with those activities.
On the inventory side of things, we did a very quick early an agile update to what we needed on the safety stock side of things and we're really well positioned from that standpoint in terms of not needing to go out and continuing to ramp our raw materials, given where we sit today, so where you saw the 13.4 mill.
In additional inventory related to on the raw material and supply chain that Scott mentioned.
That's a temporary bump on the inventory side and you'll see that normalized throughout the year.
Got you are great return.
And your brown the cost actions, you're obviously getting ahead of that.
You know, but I can demand for care for kind of quarterly.
No you were just the thank you.
We saw another leg down or worse are there more things you can do or are there other actions around integration you can.
Gallery.
Protect the profit dollars.
There are many many more actions that we can take we feel like we got at this very early in this situation. So we were.
Even earlier than what other companies have done in terms of cost reductions, but there's a laundry list of other actions that we can we can take and we've not yet had a situation where we've had to go through a furlough. We've obviously I'm not adjusted executive compensation at this level of demand. We also have not on further.
To any facility consolidations that we had a roadmap for the future on what that could look like if needed.
I think that was one of your references there on facility consolidations are a little harder to do one on.
All non essential travel is locked down, but certainly others. There's a lot of quick actions that we have in our various different scenario planning that have not yet and taken on but again, we do think that we've gotten to a level, where we can sustain even further downturn in demand across all four segments.
Based on the.
Level of cuts that we've taken to date.
Great appreciate the color or profit along.
Thanks, John.
Thank you. Our next question comes from Rob Brown with Lake Street Capital Your line.
Hi, Good morning, Joe.
[music].
On the aftermarket business.
Just a sense of what the capacity is there and maybe the of the amount of business mix I could become over.
The next 12 months or so.
And we're definitely seeing that tick up as as we referenced in the prepared remarks.
We do have the we do have additional capacity in our existing facilities and part of those steps that we've taken to ensure that we have that capacity on has been the result of us hearing from our industrial customers some of which are on long term agreements.
Providing demand forecast on the repair and service side that are greater than what they've been in the last few years.
Additionally to that we've launched various different aftermarket programs for refurbishment of different products on the t. side in particular as well as.
A little bit on the DNS west side of things.
So we have the ability to take on just over 20% of charts revenue for prior revenue forecast, which obviously as has been suspended.
In our current capacity, we are evaluating the need for a south east us repair and service project, which we've held off on obviously given the current situation, but also as we get through on discussions with our industrial gas customers, where we've been working to understand the.
Amount of.
Product that will be coming our way on their parents service side and understanding if we can I get minimum commitments from those customers. So I think you'll continue to see this uptick throughout 2020, and even into 2021, and we're well on our way toward on that 20% Mark by the end 2021.
Great. Thank you.
And then and then you talked about finfet or the fans business in particular seeing some strength.
Well marks are you seeing strength, there and what's your visibility if that's correct.
Yes, so we continue to see strength.
This in its entirety, which touches over on 10 different end markets. So there hasn't been one that's really been a standout market. It's just kind of than broad based growth for fans and just by way of giving you size on the fans business last year on fans is.
Just under $100 million in revenue I'm in the NCCN in the NCCN fan segment.
Also in the total fans business Theres about 35% of that that is aftermarket service repair on and that's been ticking up as well. So I think those two on dynamics, we expect to continue throughout the year.
Great. Thank you I'll turn it off.
Thank you. Our next question comes from Eric Stine with Craig Hallum. Your line is open.
Hi, Scott.
Eric There Hey, you touched on industrial gas in terms of oxygen and you just did on the aftermarket, but just wondering you talk about that more broadly.
Certainly different than it has been in the past since you've got long term contracts.
But also noted that.
Typically a GDP plus business in the outlook.
Going forward, given all going on and how much it last is somewhat uncertain.
We're seeing continued.
The strength it at a minimal and I would characterize it as consistent to the last couple of years from the industrial gas side of things and on the more positive side better than the last couple of years to date I'm in the total industrial gas arena from an order standpoint, eight orders increased on kind of year.
Over year over 4% in that particular area and that was and we had guided originally yet just under 3% anywhere like 2.8. So slightly ahead of what we had originally thought from on a broader and more macro commentary with our industrial gas customers. There has been this industry can.
Validation over the last three years, and we're seeing that sort itself out were assets have landed and there's more industrial gas players and what there had been in 2018 in 2019. So you have kind of investors and matheson's of the world are now entering into that larger tier industrial gas customer on which gives us a little bit of broader based.
Growth opportunity across more customers, but also on I think everybody from what we were hearing commercially is looking at the repair and service side and how can they utilize existing assets.
So we'd expect to kind of the three 4%, it's not a little bit better to continue all but also have a margin mix, which were unable to share with you guys, but around the repair and service side that should be improving.
Got it and I would assume that that's a business just given oil and some other things across the rest of your business that that's going to be.
A bigger percentage of your business going forward I think what today now it's 40% to 45%.
That's correct, but both of your statements are correct.
Okay.
Maybe just trying to China, you mentioned the largest order there.
You've gotten in some time.
Just curious do you think that now that things have restarted there, but some of those trends, but that is sustainable and also should we take it from your.
At least the guide that you could provide on the tax rate should we take that.
As an indication that you expect to be profitable in China in 2020 still.
We do expect to be profitable in China in 2020, we are.
I think for the last few years the term I view this cautiously optimistic.
We'll probably drop the cautiously at this point I think we're seeing continued demand in the shift in demand has really been to more of the industrial gas side of things our backlog at the end of the first quarter in China, the $68 million. The last time it would that high was the second quarter of 2015 in that included a lot of that LNG.
Related Petro China backlog that subsequent to that got canceled on so the backlog is a nicer mix of product in the current shade and the profitability is continued to be expected in 2020 in that in that region.
Got it okay.
Maybe last one for me just on the Capex, you're pulling that number back a little bit in is part of that.
The tank facility or the expansion there I mean is that something you still plan, but we should think about more than 2021.
Actually almost done with that LNG vehicle tank line in our Italian facility. So that Capex is already baked on almost almost in fall. We expect that facilities online to go to go online in June of this year and that's a critical part of a serving our European customers and also margin.
I mentioned to reduce the cost of shifting from the states to Europe.
Got it I mean any any areas you can then point out that would be part of that Capex I mean, I think you've reduced it by.
And the $20 million versus last go around I don't know if you can provide that clarity.
Without going to project specific detail on I would say that we have because we constantly have very low level maintenance capital I'm, almost every year and below $30 million, we've always taken productivity and capacity expansion projects that are on top of that maintenance and included them in our outlook for the year.
Yes, so we havent ever said well, we don't want to do a productivity project and now we really kind of batten down the hatches instead, all right, let's take each one of these as we go and based on product line demand and see what we need to do so it's really kind of a bucket of productivity capacity expansion that.
Being much more disciplined on than what we would have been if we had a really high demand across the business going forward.
Okay got it thanks, yeah. Thanks.
Thank you. Our next question comes from Ben Nolan of Stifel. Your line is open.
Hey, Joe Scott.
Good morning.
Hi.
So my first question relates to sort of.
I guess the guidance or the renewal God's completely understand that.
Although I'd say the at least in my opinion and Joe It. It sounds like you guys have a lot better visibility.
[music].
Into a lot of projects in the backlog into the back half a year.
Do you envision a point later in the year, where you can reinstatement guidance.
And.
Are you feeling.
Well I'd like now things, maybe are settling you're getting closer to a point where each do that.
I certainly hope so in terms of being able to own.
Provided guide sooner rather than later I'm not yet there yet I think is the best way to characterize it there certainly still a lot of things that having settled down theres still lot of flux around timing of reopening with respect to coded as well as how did the projects that are from a longer term nature and the finfet inside of the did.
And how does that sort itself out you know there's varying different views on how the oil and gas situation and rebounds, and what that timing looks like so a lot of that's going to be dependent on those types of factors, but the goal would be the next time, we talk next quarter hopefully be able to share on an updated guide.
Okay helpful.
Helpful.
And then you mentioned something that.
Uh huh.
Curious I guess with respect to I think the.
Brazed aluminum or Qatar sounds like the cars moving forward.
Any sense of maybe what the potential project size for that would be.
Just just trying to think through magnitude a little bit.
Sure without giving specifics on that project, our international content on tends to be for 'em frequently as well as for the upfront activities on these projects and all those can be anywhere from $20 million to $50 million on it wouldn't be bigger than that then okay. All right I appreciate it thanks Joe.
I think that's boxing.
Thank you. Our next question comes from Martin Malloy with Johnson Rice. Your line is open.
Good morning.
Marty Marty.
Oh My first questions on the.
LNG fueling stations and sounds like you had a pretty good quarter in terms of order flow there and.
The potential arrangement with shell could you maybe talk about geographies that youre seeing strengthened demand for these LNG fueling stations.
Yes, it's been both Europe, as well as India, a and we've started to see much more activity on the quoting side in the rest of southeast Asia beyond India, but the actual order activity has been Europe and India.
Okay.
And then on the beverage side, you mentioned, a few restaurant chains that you're selling into.
I know that offers you a lot of you've had a few customers.
Out their testing this are those restaurant chains were those ones that are test, we're testing it and your dosing and now moving to actual purchases and maybe could you give us kind of brought update on on that beverage area.
Sure on those customers use both our tanks as well as our doses in some cases. So on these are either customers that have been around for a while some of them biotrue distribution in some by directly on with US on in terms of some of the pilot program that we've referenced over the last couple of quarters with some of the beverage customers in particular there.
There are much more on.
The larger named beverage companies that provide beverages to the restaurants that we reference as our customers and those pilots continue to progress on we haven't seen any breakthrough in terms of purchases from any of those pilots, but we've received favorable feedback from 100% of them all and we've also just begun.
New pilot, which were under a confidentiality agreement on to not be able to discuss but it's a very interesting one that goes into a new way of packaging of water in particular with one of these major beverage customers.
We see this onto your to the second half of your question. We see this particular business, we kind of lumpy it as food and beverage, but even just every specifically this is where you're going to continue innovation and because it's so global in nature, even with a minor hick up where you have the casual restaurant chains.
Having the impact from having to shut down we think that from a media short even short medium long term perspective beverage continues to be a key part of our growth story and specialty markets.
Great. Thank you.
Marty.
Thank you. Our next question comes O'connell along with Morgan Stanley. Your line is open.
Yes. Thanks. Good morning, Thanks for squeezing me in here take our.
Hey, I'll just leave it with just one although.
But.
A long answer I'd imagine, but just if if we look at these slides 14 and 15.
Helpful Framework I'm wondering if you could just frame.
Sort of a percentage of revenue as opposed to a percentage of products how significant the like what percentage of your portfolio is strengthening versus weakening.
Yes.
Couple weeks or.
Let me answer it in reverse so on the weakening side of things. If you were to kind of stay in the worst case scenario I quantified h. LNG vehicle tanks as $15 million to $20 million Nat gas processing is five and then gave you the up in midstream revenue from 2019 being 110 million.
So if you kind of frame did that way I think thats, the best way to try to assess what and what.
Worst case impact would be on total revenue.
Pick a number of decline on the the air cooled off in midstream probably pick a pretty big number on that one and then add to 25 on the others that I referenced in this it's probably the best way to go about it but on the other way I could answer it for you is there's a much more significant portion of the business that's consistent in strengthening than isn't the weak.
In category.
In the.
The not just sorry.
Yeah got it alright, thanks very much.
Thanks Tyler.
Thank you on next question comes from Walter Liptak Seaports. Your line is open.
Hi, Thanks, good morning, well out.
Hi.
We're just about the covenant redo and is there going to be a change to interest expense will exclude help us understand that or amortization of sees throughout the year.
No there is not going to be a change unless you go above on the rich the original covenant of three and a half, which we do not expect to have that situation. So your original interest and amortization forecast still hold.
Okay, and then kind of along those lines.
Good corporate expenses were little bit higher and I guess it was because of the 2019 bonus comp what's for rest of the year on rate per quarter for corporate expense.
Yeah, there is probably about.
4 million Bucks or so of unusual in the corporate expense in the first quarter. So if you reduce that that'd be a good run rate for core.
Okay got it.
And then maybe last one for me.
You know thinking about China, a little bit more and just the.
Characteristic of this.
In your opinion as is China went back to work.
Good.
You know rebounding.
You know back to previous levels, which sounds like it's there and with a better mix or is it or slow recovery as they go back to work I'm, just kind of thinking about churn has sort of a guide or how.
You House Europe.
Rest of world recoveries in the future.
What we what we saw in our particular products in China was a very quick rebound I'm back to pre shutdown level, if not in some cases, a little bit better I'm not certain that can be used as a proxy for the other regions.
For ours in some of that vary region specific and customer behaviors differ I'm in the United States in Europe in India, but certainly China was a very quick rebound for our products.
Okay, great. Thank you.
Thanks.
Thank you. Our next question comes from JB Lowe with Citi. Your line is open.
Hey, Joe Hi, Scott bidding.
Lower the overtime here, so I'll be quick with just one.
I guess, you will get kind of a better idea.
Pullback.
And your different segments and product lines much quarter I'm just wondering.
Are there any particular product lines that you think could have a sharp rebound after after seeing the downtick in twoq, <unk>, which segments would that be.
I think in Ah DS west in the H. LNG vehicle tanks, there's continued demand for that and that's really a matter of those particular key customers getting back to work. So it's less about the demand side than it is about having people in their production facility. So that's one that could very quickly come back for us.
I don't think that'll be the case in Nat gas processing and I do expect the air cooler side to deal a little bit further out in terms of recovery. So not just a quick bounce back, but you know it at a minimum a couple quarters of what were what we are starting to see or if not a little bit longer I'm, so really on.
That weakening column, the one that could surprise us as each LNG vehicle tanks.
But we think the rest of the business. We again, we haven't seen any any sharp declines at this point.
All right great. Thanks, guys.
Thanks, Jamie.
Thank you. Our next question comes from Greg will also be TRG. Your line is open.
Yes, Thank you and good morning, just one for me.
In the prepared remarks, you talked a little bit about some of the impacts as you're seeing.
As business continues in the environment.
Facing.
Moving employees around.
Is there anyway, we can kind of think about the margin impact of that across the businesses like you could sort could some of the areas be.
Less exposed or more exposed to maybe having some margins having some margin compression.
Related to that just kind of curious any comments around that will be helpful. Thanks very much.
Sure on it it's hard to quantify that Weve had weve.
I would say in the areas that probably had that impact on without being able to specifically give you a number in India in Italy, you'd have impacts from having fewer production employees being able to be in the factories at the same time, but I I would.
So so far as to say that I think it's de Minimis margin impact at this point to the business.
Okay perfect. Thank you.
Thanks.
Thank you. Our next question comes from Tom Hayes Most research your line is open.
Hi, Good morning, Giovanna, Scott Thanks for squeezing man I'm, just as it goes as far as they are looking at the uses a Josh is real quickly would you expect to kind of continue to do some of the share repurchases and any comments on potential a debt payments in 2020.
Debt pay down is absolutely our priority right now in terms of the use of our cash we feel great.
The share repurchases that we were able to do in the open window in March that have been completed but at this point. The given the program has been suspended or we don't anticipate that will mean, we'll be doing anymore at this point.
Alright, thank you.
Thank you. Our next question comes from patches Baumann with JP Morgan Your line is open.
Hi, Joe Thanks for taking my questions.
Hi, good morning for stuff just wanted to say started here John Scott I'm not sure if you're listening, but I want to wish him the best.
Had a few questions.
First of it sounds like you're seeing stable demand for small shown G. At this stage, which I guess I was kind of surprised to hear any color on the on the pluses and minuses to the outlook. There just thought that with oil coming down so hard and also just the general economic uncertainty. We can you help with that area.
And maybe on that Jacksonville, or you have to January does that evercore.
Sure. So so first of all we all will Miss John as well he was a great number of our teams who love to it'll be big shoes to fill on for the new IR person coming in.
On the LNG side of things. So overall, you know I want to make sure that I characterize that we do expect a sharp downturn in or in the air cooler side of the thing fans business I'm. So that you know, making sure that your carving that particular piece out so all the the negatives that we called out on the agency side, you know, we do expect us to be.
Turning in the coming weeks and months, but in with respect to the small scale LNG side of things on a lot of these projects have customers already and are pretty far down the road I'm. So you're talking about you know weeks and months of possible delays not full project delays or a quarter's types of delay.
Yes on the Eagle Jacksonville, L. ally, we have not booked the particular quarter, which is in the mid 30 million, we wait on that for F. I'd to formally occur on the project. So we we do expect that to be booked in the coming months here in terms of whether it's close are moving.
Forward, we do expect limited notice to proceed on the work with their EGPC that they chose which is matrix.
Here very quickly in the second quarter.
Okay, and you mentioned finanza I was surprised to see the order strength today ICSI in the quarter, but it sounds.
The first so just curious any sense on how this cycle could look relative to the last one I think back then revenue went from you know 200 million or so down to you a little bit under 100 at the trough is there any reason it could hold up better this time [noise].
So that was particular for the air exchanger side of the business on and you're correct in terms of the last downturn and what it would have dropped on we do have more aftermarket service and repair which would be a minor help to that but I don't see I don't see any particular fundamental in the air cooler side. That's different. This time then last time.
Got it and then.
Quickly on the specialty markets it looks like some pluses and minuses on slide 14, you think the aggregate can still grow this year or is the weakening in like the trailer anew challenges stuff to do to overcome I just don't know the size of those buckets within specialty.
Specialty markets, absolutely will grow this year on that's something that we have a lot of confidence in in a in a high single digits.
Okay, Alright, I didn't know you'd mentioned that okay.
And then if I get a squeeze one last one of the restructuring can you just walk through how we should think about related expense for the balance through the year. It just seems like the magnitude of the savings that you're talking about outweighs the actual spend but I think like asking if I look at an earlier side. It seems like 25% of the savings came this week. So maybe there is just that.
And restructuring the second quarter, just kind of curious if you give some color on on on that kind of what you're targeting Stein.
Yes, so if I if I understand your question correctly de the savings you can take $34 million of this of 2020 savings across the next three quarters and you can do that evenly across the quarters. If your splitting the.
Total 40, or 48.8 million between SDMA and gross margin of 45% of it is SG, ne and 55 percentage gross margin.
Is there more restructuring spend that needs to happen to generate that.
The rest of the year or Youve, that's just based on what you've already spend that's based on what we've already spent on at this point, we don't have a further restructuring spend in our thinking but it will obviously, we constantly assess needs against the demand by product category.
How did you get the 12 million. This just this week than what what did that come from.
Are there was there were specific head count reduction actions taken primarily in the easy businesses. Both in Cryo Infiniband and then we had a couple changes in the corporate structure, which were de layering I'm of the organization.
And that and that restructuring spend now I'm sorry to belabor. This will will occur in the second quarter. Because you just generated the savings this week or that are already occurred in the first quarter a that'll be in the second quarter. So the total restructuring for April for Q2 on is just under $3 million.
Okay. Thanks, so much.
Hi, Thanks, so much appreciate all the detail good luck. Thank you.
Thank you. Our next question comes from so small novelists Raymond James Your line is open.
[laughter] for taking my question.
You've been pretty active and M&A in the previous.
Commodity down cycle 2014 to 2016.
Obviously had left that they need to today by different business mix as well you. If there are some opportunities to do bolt on M&A, particularly some small maybe middle market distressed M&A situations would you even a consider doing those.
We would opportunistically consider a very small bolt on if they were ones that are part of our long term strategy and right now those really would look like I'm on the cryogenic pump side of the business and potentially on the hydrogen side of the business, but beyond that there's really nothing strategically.
The that on is in the hopper that we need to continue down the path that we've laid out.
Okay.
In terms of your manufacturing capacity, obviously your operating below capacity today as everybody is what level of revenue would you theoretically generate on a calendar year basis.
If demand were limitless and you had your existing.
Production capacity.
Oh, we could get to about 2.2 billion I'm, a little bit of that would depend on where the demand is so for example, we've really have a lot of the capacity and plan for that capacity in our lacrosse, Wisconsin facility and our new Iberia, Louisiana facility in anticipation of some of the bigger LNG projects on so.
A little bit of it would be a mix driven but 2.2 is a pretty good number to use.
Very helpful. Thanks, very much Isabel.
Thank you. Our next question comes from Crunch here was to be brothers. Your line is open.
Good morning, Joel Thanks for taking the question.
Oh, you mentioned diminimus ongoing impact on margins from adjusted staffing shifts, but I wonder in the first quarter. If the margins could have been even better barring one time margin impacts on less efficient logistics and maybe product deliveries from 40 days of manufacturing shut ins and.
This regional locations.
Yes, I think it I think it could have been.
Very hard to quantify what that would have looked like.
But but whatever hit that was would would would be gone ongoing we should be slightly better than even what you just supposed to correct that is correct.
Okay. Thank you.
Thank you and I'm currently showing no further questions at this time I turn the call back over to Joe's includes Kumar.
Thanks, Shannon during this unprecedented times my closing remarks are for our team members on slide 23.
Thank you for all you've done and are continuing to do as a central workers help save lives. Your efforts are notice depreciated and impactful and we'll talk more tomorrow on our global feel update thanks, everybody for joining us today and goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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