Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of James Lucas – Janney Montgomery Scott.
James Lucas – Janney Montgomery Scott
In your cash flow what are your CapEx assumptions for the full year?
Andy Lampereur
We are looking at about $30 million for the year. It will be a little bit higher than the $5 million we had this quarter for each of the next two quarters.
James Lucas – Janney Montgomery Scott
What is that in maintenance versus growth?
Andy Lampereur
Probably maybe half of that, $15-20 million is maintenance.
Bob Arzbaecher
It depends on where you put computer systems. A pretty good chunk in that number is computer upgrades whether that is maintenance or growth is a little bit debatable.
James Lucas – Janney Montgomery Scott
Speaking of the energy segment now that you are breaking that out in your prepared remarks you referred to a majority of the volume in energy is maintenance related. By majority, what is that on a percentage? Is that 2/3? 3/4? I’m trying to just understand now that you are breaking that out separate of what is specifically maintenance related?
Andy Lampereur
For the Hydratight business it is 75-80% maintenance. Cortland, which is about 1/3 of the size of Hydratight, probably half of it is maintenance. It is somewhere about 2/3 in total.
Bob Arzbaecher
Some of that Cortland that is not maintenance is in the non-energy field. We do some stuff for defense and some other holes there.
James Lucas – Janney Montgomery Scott
Specifically with the margins in the energy segment could you speak to the mix issue of just trying to understand the margin profile of how much Cortland is below Hydratight and what the opportunities are there?
Andy Lampereur
If you look at what Hydratight did last year from a margin standpoint Cortland is probably running about 500 basis points behind that in a normal environment. It is very difficult to look at the second quarter as normal because it is definitely the low point for Hydratight. Seasonally there are very low rentals going on. In the second quarter we tend to have some of the fixed costs of the service techs out there. We have to hold onto them for the entire year, a certain base layer of them, hold onto them for the base year so our margins tend to get beat up in the second quarter relative to other quarters. If you had those dynamics going on this quarter.
- To read the full transcript on Seeking Alpha, click here »
