Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Joe Nadol - JP Morgan.
Joe Nadol - JP Morgan
Mark, first of all, thanks for that math on the decremental margins plus the structural cost take out. Just a couple questions around that, first if you look at the forged segment and you look at it sequentially rather than year-over-year it’s 100% reduction in drop through of sales to earnings and interestingly the same thing or close to it happened last year as well from Q1 to Q2. Can you talk about that segment specifically?
Mark Donegan
Yes, the biggest delta we face there is that the outages, so big, there’s a lot, there’s a misconception that the sales line is actually the biggest impact from the outage. A lot of times we will build up an inventory position and ship that out, because we have to make sure that we satisfy our customer needs.
The biggest impact and we have some of our large probably four out of our five largest factories were seeing outages or downtime of roughly four weeks. So, you just have the lack of volume going over those assets that you can’t overcome. You still have the people in play we still have the cost, but we just don’t have the volume going across it, so the reason why you see that more of a drop through and then it bounces its way back up in Q3 is because we just don’t have the absorption across that asset based.
Joe Nadol - JP Morgan
So, would you characterize as we look forward and think about your seasonality you would characterize Q1 as a very high margin quarter going forward in forged and then that big sort of multi-100 point drop sequentially is probably something we should expect on an ongoing basis.
Mark Donegan
Yes, and again there’s certain if you look kind of where we were last year with the volume coming at us at a rate we couldn’t handle I think so we kind of limit our way along in terms of the press outages whereas certainly this year we are able take them down. So, but as a general rule, yes, I think you see Q1 tends to be a full quarter, full operational, full days.
You get a real good utilization of your assets. We come into Q2 that the forging world, you take scrawl on the chin shutting those forging presses down, and the other thing I would add, too, we continue to add to that where in the past there was just Wyman-Gordon’s now you have Carlton, it is the Jiffy Lube that do the repairs or you have a significant kind of traffic failure.
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