Altra Industrial Motion Corp (AIMC) 2009 Q3 法說會逐字稿

Welcome to the Altra Holdings Q3 2009 Quarterly Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. At this time, I would like to turn the call over to your host for today's call, Carl Christenson. Mr. Christenson, you may begin.

Thank you, Erica. Good morning and welcome to our conference call to discuss Altra's third quarter 2009 financial results. Joining me today will be Christian Storch, our CFO. To help you follow our discussion on this call, we have posted slides on our website that we will be referencing during the call. Hopefully, you have already had a chance to access them, but in case you haven't, I'll walk you through the steps to access this presentation.

Please go our website, www.altramotion.com, click on "Investor Relations" in the upper right-hand corner; click on "Events and Presentations" on the left-hand side of the screen; click on "Third Quarter 2009 Results," and you'll see our slides.

Now please go to page 1. I'll pause for a moment to give you time to read the Safe Harbor statement, which covers any forward-looking statements that may occur during this call. If you are not looking at the presentation, you may refer to our forward-looking statement in our press release or the documents we file with the SEC.

I will make some opening comments and give you our view of Altra's current business environment. Christian will then review our third quarter 2009 financial results in detail. We will also update you regarding the actions we have been taking in response to the global economic downturn that started to impact our business in the fourth quarter of 2008, and then we will go to Q&A.

Now please go to page 2. We are very pleased with our third quarter results despite our sales being down 34.3%. The lower sales were the result of continued end market weakness due to the global economic downturn and inventory reductions by our distributors and OEM customers.

In the third quarter, we did see a marked improvement in incoming orders and experienced a positive book to bill ratio for the first time this year. We are extremely pleased with the impact our cost reduction efforts have had on operating margins and the amount of cash that we were able to generate. Our operating margins, excluding restructuring and leasehold improvement write-offs in China of 7.4% on a recurring basis for the quarter compared with 7.1% for the second quarter.

Our operating cash flow for the quarter was $24.3 million, compared with $25 million for the same quarter last year. As has been the case all year, strong cash flow was due to solid execution by our operating units relative to cost and working capital reduction as well as reduced capital spending.

We have been able to reduce our manufacturing lead times and therefore have been able to reduce inventories without sacrificing product availability or customer service. During the third quarter, we generated $12.1 million of cash from working capital reductions primarily from inventory reduction. Our total inventory reduction from the end of 2008 has been $26.1 million.

As a result of the strong cash generation and our desire to delever the balance sheet, we reduced our debt by $16 million during the quarter. In addition, we repurchased $15 million worth of our 9% notes in early October. Since the beginning of the year, we have reduced our debt by more than $45 million, and the outstanding balance on the 9% notes is down to approximately $205 million.

These notes are due at the end of 2011. Our goal has been and remains to continue to delever. We have also stated that we want to refinance these notes when the market conditions are attractive. Based on the work we've done to date, our current performance and current capital market conditions, our preference would be to refinance with another high-yield bond offering. Of course, market conditions change rapidly, therefore, the most appropriate recapitalization method may change accordingly. Christian will discuss this further.

Now please go to page 3. As I stated earlier, we are very pleased with our operating results. The impact of our cost-reduction efforts are beginning to show up in the P&L. During the call to review the 2009 second quarter, we increased our cost reduction objectives to $60 million for the year with an annualized rate of $70 million, not including the site consolidation savings. We fully expect to achieve the revised plan objectives.

Regarding payroll costs, I would again like to emphasize that while we have been forced to reduce headcount, we are making every effort to protect our developmental activities by minimizing engineering and sales headcount reductions. By the end of the year, not including the facility consolidations, we will have reduced the number of positions by approximately 22% for 740 associates. After the facility consolidations are completed, the total number of positions eliminated will be approximately 25%, or 850 positions.

Our facility consolidation efforts remain essentially on track. We anticipate having the bulk of the equipment moves completed by the end of the year. We have delayed a portion of one of the moves by approximately one month, as demand has picked up for a couple of product lines associated with that move. We continue to expect the annual savings from these six projects to be in the range of $6 million to $7 million and the cost to be approximately $10 million.

We also expect our procurement and other cost reductions to meet or exceed the revised plan. In addition to the procurement cost savings, material costs have had a favorable impact on our results with both steel and copper prices lower than their peak. However, both are now up from their lows and trending higher as the economy recovers. Where possible, we manage material costs through surcharges and by tying prices for custom products either to a firm material quote or an index.

As a result of our SG&A cost reduction activities, our SG&A expenses are down approximately 25% for the third quarter when compared with the same quarter last year. Both lower demand and our focus on inventory reduction have had a significant negative impact on the P&L, as our factories have been under-utilized. We do expect to realize considerable operating leverage as a result of better fixed-cost absorption as we conclude our inventory reduction and our distributor inventory reduction tapers off.

Now please go to page 4. Sales for the quarter were $104.8 million compared with $159.4 million for the same quarter last year. As we have said in the past, from a top-line perspective, the third quarter is typically our weakest, due to seasonality. This was a 34.3% decline of which approximately 280 basis points can be attributed to exchange rate changes.

Our gross profit was 27.3% compared to 28.7% for the same period last year, 26.3% for the second quarter this year.

Excluding restructuring and the write-off of leasehold improvements in China, our recurring operating margin was 7.4% compared with 11.6% for the same quarter last year and 7.1% for the prior quarter this year. This translates to a delevering on the operating income line of about $0.20 per sales dollar for the quarter compared with $0.24 for the year-to-date.

In general, we have been successful in maintaining our selling prices, and pricing had a favorable impact of approximately 120 basis points for the quarter when compared with the same quarter last year.

While nearly every market we serve has experienced significant retraction, we are now seeing a significant improvement in the incoming order rate. We believe this is primarily due to our distributors beginning to reach their desired inventory levels of our products. Our expectation is that the destocking of our products by our distributors will be complete by the end of the year and, at that point, we should be receiving orders based on true end market demand and not at a level that reflects the destocking.

Furthermore, we expect that while the early cycle markets that we serve are beginning to show some signs of improving, the late cycle markets that we serve, such as energy, mining, and metals will continue to be weak. As a result of our focus on new business development activities, we have received some very nice orders for new projects.

For example, we received an order for nearly $1 million for marine drives for a foreign military vessel. We also received an order for over $2 million for a component that is used in a new dual-clutch transmission that is expected to become very popular due to the improvement in fuel efficiency.

One particularly encouraging data point is that our book to bill ratio was positive for this quarter for the first time since the third quarter of last year.

Finally, economic indicators that track well with our business are improving. The ISM PMI is probably one of the best leading indicators for Altra. The October number of 55.7 is the highest reported number since June 2007. This makes the third consecutive month where the PMI has been above 50, signaling expansion.

Now I'll turn the call over to Christian.

Thank you, Carl, and good morning, everyone. Moving on to page 5 of our slides and our unaudited third quarter 2009 results.

Diluted EPS for the quarter was $0.02 excluding restructuring charges and deferred financing expenses related to the repurchase of senior secured notes during the quarter. Non-GAAP recurring EPS per diluted share was $0.06 for the quarter.

Net sales declined by 34.3% when compared with a very strong third quarter a year ago, and as Carl stated, favorable price added 120 basis points and currency had a negative effect of approximately 280 basis points on the top line.

Our gross profit margin for the third quarter was 27.3%, which is 100 basis points higher than the second quarter of 2009. This margin improvement occurred despite the lower sales volume in third quarter when compared to the second quarter and was driven by the cost savings we have achieved as well as lower commodity prices.

Restructuring charges for the quarter totaled $1 million, flat for $4 million for the first nine months. Our restructuring efforts are progressing as planned, but we continue to project the completion of the plant consolidation in the second quarter of 2010. We are already realizing some of the savings related to these actions, as two of the projects have been completed.

During the third quarter, we completed the relocation of our manufacturing operation in China into a larger facility that will allow us to further grow that business. Related to that move, we recorded a loss to dispose of leasehold equipment associated with the old location totaling $0.5 million for approximately $0.01 per diluted share.

Operating income for the third quarter of 2009 was $6.3 million, or 6% of sales. Excluding the restructuring charges, non-GAAP operating income would have been $7.3 million, or 7% of sales.

Interest expense totaled $6.3 million for the quarter, and $18.9 million for the first nine months of 2009. This compares to $7.3 million and $22.5 million in the respective prior-year periods. The decrease was driven by lower volume levels.

The tax rate for the quarter was positively impacted by the reinstatement of interest expense reductions for one of our foreign jurisdictions we operate in. After successful negotiations with the authorities, we were able to claim the full deduction retroactively from the beginning of 2009.

Page 6 is a reconciliation that shows how we get from reported first quarter net income to the non-GAAP recurring net income number. In this reconciliation, we have removed raw material one-time costs to give you a feel for what our ongoing business looks like.

Turning to page 7 -- we continue to generate strong cash flow. Operating cash flow for the quarter was $24.3 million and now totals $52.1 million for the year. Free cash flow, operating cash flow less capital expenditures, was $23 million for the quarter, and a record $47 million for the first nine months of 2009.

The strong cash flow performance was driven by a further reduction in working capital. For example, during the third quarter we decreased our inventory levels by another $7.1 million, or 9%. We are now projecting to significantly exceed our free cash flow goals as we now expect to generate free cash flows of between $50 million and $55 million for the full year.

Please move on to page 8. Our priority for free cash flow continued to be the reduction of debt. As Carl mentioned, we reduced our debt by almost $60 million during the third quarter and by more than $30 million during the first nine months. In early October, we repurchased another $15 million of the senior secured notes, which brings the total debt reduction for the year to more than $45 million.

From a working capital perspective, at the end of the quarter, working capital, which we define as trade receivables inventory less trade payables totaled $105.1 million, a decline of $12.1 million since the end of the second quarter. We have not seen any significant collection issues in our accounts receivable, and DSO was essentially flat when compared to the sequential second quarter.

Although we have already exceeded our full-year working capital goal, we continue to see working capital as an opportunity to generate cash in the fourth quarter.

Please turn to page 9. Our net debt was down to $162 million at the end of the quarter, nearly $50 million below the level of December 31st. Our revolver remains undrawn.

We continue to limit our CapEx spend. CapEx during the third quarter was $1.3 million, and was $5.1 million for the first nine months of the year. Depreciation and amortization was $5.8 million for the quarter and $16.7 million for the first nine months. This indicates an annual run rate of approximately $22.5 million.

I would like to note that in mid-October we filed an S3 shelf registration statement. Once effective, the shelf registration will allow Altra to raise capital. The Company has filed this shelf registration statement at this time to provide the flexibility to readily access the capital markets. However, Altra has no immediate plans to sell equity securities under the shelf registration statement.

Given the fact that our current ABL facility matures in November of 2010, and that the par premium in our senior secured notes that fall in December, we have started to more closely monitor conditions in the credit markets.

Before I turn the call back to Carl, I would like to add a final comment on our outlook for the fourth quarter. We are optimistic about the near-term outlook. First, for Q3, we experienced a book to bill ratio greater than 1 for the first time this year, and we saw that trend continue into October. And, second, destocking activity in our distribution channel seems to be tapering off.

Therefore, we believe we may have hit the bottom in the third quarter from a demand standpoint, and the bottom in the second quarter in terms of non-GAAP recurring EPS.

With that, I'll turn the discussion back to Carl.

Thank you, Christian. Please go to page 10.

We are narrowing our guidance for 2009. Based on the current incoming order rate, we believe that revenues for the full year 2009 will be in the range of $440 million to $450 million. Recurring EPS will be $0.20 to $0.25; depreciation and amortization, $21.5 million to $22.5 million; capital expenditures will be in the range of $8 million to $9 million.

We'll now turn it over to the moderator and open up the call for Q&A.

At this time, we will conduct the question-and-answer session. (Operator Instructions) Yvonne Varano, Jefferies & Company.

Thanks. Carl, I was wondering if you could talk a little more specifically about some of the end markets and what the trends are that you're seeing?

Yes, sure, Yvonne. I think it's pretty early in the economic recovery, but certainly the ISM, as a general indicator, is very encouraging. What we're seeing, you know, some of our early cycle markets like general industrial, machinery, food processing, transportation, and turf and garden picked up a little bit and really show some positive signs.

We saw orders in August that were slightly better than they were in July and September. They were slightly better than they were in August and, in October, they've maintained that trend. So we've become pretty optimistic that things are starting to get better. And then the biggest piece is the distribution inventory, and we monitor that very closely, and we believe that that has started to turn, and that that's going to taper off through the end of the year before, I'm sure, the rest of that inventory. We've seen that orders improved significantly through that channel.

I guess I know that from a manufacturing standpoint, 4Q, for certain industries it really is a strong quarter, and I'm wondering if you have any indications in regard to November/December, whether your customers are becoming a little more cautious.

I think that November/December are real wildcards with the holidays and potential shutdowns by manufacturers at the holiday season. So I think in our guidance we've reflected that Q4 would be essentially flat if you go to the midpoint of our guidance in Q3. And we feel that the order rate is definitely getting better and that '10 is going to go up from there.

Is anybody indicating at this point that there is going to be extended shutdowns or just a normal, typical type of shutdown?

We have not heard of anybody talking about extended shutdowns at this point. In fact, that's still out there. They can pull that card right at the holiday season, too.

Sure. And then just on the cost side, commodity helped a little bit in the quarter. How much of a headwind do you think that ends up being, going forward?

Not a significant headwind. We buy some steel bars and some raw copper that's directly related to the commodity pricing, but an awful lot of what we buy is already converted where we negotiate prices with our sub-suppliers. And we think we can hang onto the price reductions that we've negotiated this year for some period of time as those commodities turn back up.

And then we also have surcharges that we pass on to our customers if commodity prices go up. So it should not be a significant (inaudible) loss.

Is there a lag on that passthrough?

There is a lag, but in the range of 30 days for some and a quarter for some others.

Okay, so pretty short?

Yes.

Mike Schneider, Robert Baird.

Maybe, again, on the discussion of Q4, and with orders getting better, it does look like revenue you've assumed is flat sequentially. Are you seeing anything seasonally unusual that would prompt that assumption as a starting point?

No. I think in the first two quarters, particularly in Q1, we needed a backlog, so that backlog is gone, and we're really working off the orders that come in today. So our best estimate, based on the current order trend and the content of those orders on what that's going to look like -- with a little bit of assumption that the holidays is going to have an impact on it.

Okay, so the holidays offset the modestly improving orders on a monthly basis?

Yes.

In effect? Okay, then, sliding down the income statement -- I presume under-absorption was another headwind this quarter. Can you, maybe, Christian, just quantify what you believe under-absorption -- what the amount of under-absorption was this quarter? Then looking into Q4, just some discussion on what your production days look like sequentially and then, again, that under-absorption delta in Q4?

When you look at Q4 and Q3, we essentially have the same number of - we have two more shipping days in Q4 than in Q3. And compared to -- the same is true if you compare Q4 -- this upcoming Q4 compared to last year's Q4. There is also two more shipping days in this year's fourth quarter.

The under-absorption was an issue for us. We reduced inventory by another 9%. We estimated that somewhere between 50 and 75 basis points, in fact, on gross profit margins.

Okay, so sequentially, then, I'm trying to reconcile -- the guidance assumes, basically, earnings are flat to down sequentially, yet revenue is going to be flat, under-absorption is going to be lesser, and you have more shipping days. Where is the plug in that that would explain again why earnings might be actually down sequentially? It seems awfully conservative.

The plug is December. For us, December is a wildcard. We don't know, from a volume perspective or shipping perspective, how December is going to play out. And that has a lot to do with, as Carl mentioned, what will the shutdowns be, the holiday shutdowns. But the other thing is what kind of balance sheet management will go on in December at the division level as well as the OEM level? And a lot of companies have a December year-end and try to clean up their balance sheets, which may affect order rates in December.

Fair enough. And then --

The EPS standpoint is our tax rate. As you know, we discontinued the items on the tax rate, and we have really little visibility into (inaudible) what the fourth quarter tax rate will look like.

As you stand today, are there any unusual puts and takes on the tax rate sequentially?

We are working hard on the tax rate to some tax planning ideas, and the question for us is the timing as to when we can realize those. The benefit in third quarter is a good example. We couldn't reflect a favorable outcome of our negotiations with the foreign tax authorities in our plans because we didn't know whether there is going to be a favorable outcome. But, fortunately, it was very favorable, and we were able to realize a pretty significant benefit, and we hope that we have some benefits to report in the fourth quarter. But we can't promise that because, again, it depends on (inaudible).

Okay, and then, final question just on facility savings. So you've completed two of the closures, delayed one. Can you quantify in the $7 million in facility savings what you think you realized in Q3, and then do you hit a full run rate in Q4 already?

The two facilities that we completed were actually the smallest ones of the six. So I don't know, if I had to guess, we don't have an exact number for you, but if we had to guess, maybe $0.5 million of benefit related to those two smaller relocations.

The other part of your question -- ?

Then just what amount do you expect to be at in Q4? And then, maybe early 2010 in terms of the run rate of that $7 million in savings?

We think our run rate might be around $1 million a quarter as we enter 2010.

Torin Eastburn, CJS Securities.

It's actually Larry Solow calling in for Torin. You guys have done a nice job of bringing down your working capital levels, and it sounds like you still have more to go in Q4. Could you maybe give us a little more color on where you'd like those levels to go -- your design levels? And do you see yourselves bringing it down in calendar 2010 as well?

I think we've got one more quarter to go -- inventory reductions and receivables. Inventory reduction -- currently, we carry about -- our working capital equals about 23% of sales. Ideally, we'd like that to be more closer to the 20% range, and that's what we're working towards.

Okay. And then in terms of just looking a little bit -- on following up on some of your end market discussions, I know you mentioned that the mining area is late recovery and still remains weak, but I do believe one of your competitors has reported a pickup in mining. Have you seen any pickup there?

I think that depends on -- there are a couple of variables there. One is, what types of mines are you active in? So are you mining iron ore or are you mining coal? And then also what's the mix of business -- OEM versus replacement parts? We're seeing a pickup on the replacement parts for our mining and our mining applications. We think that the OEM business, that the equipment builders will lag some, and they did in the last upturn by a significant amount, and I think their projections are that they'll lag. So we expect the replacement business to be pretty good, but the OE piece to lag.

Could you just give us a little color on your Chinese Shenzhen facility and how utilization is trending there?

Yes, it's -- you know, we signed a lease in April for the new facility. We had three small facilities that we wanted to consolidate into one. We started that consolidation; we did some renovation between April and July; started the consolidation in July and completed it in September. It went flawlessly. It was a very, very good consolidation. The utilization of that facility is around 50% right now, and we've got some projects that we'd like to move into that that we're working on winning some business over there to fill that facility up.

Stephen Sanders, Stephens, Inc.

Good morning, guys, nice quarter. First, maybe just a little bit more color on the inventory side. Is the clearing from here primarily some of the late-cycle stuff that's taking a bit longer? And could you provide any metrics around your comment on shortening lead times?

Yes, I think there are two things -- one is back in 2007/2008 when demand was ramping up, everybody struggled with keeping up with that demand. So we built backlog and, consequently, orders got placed further down the stream. So as we cleaned up the backlog, we naturally get shorter lead times.

But the other thing is the implementation of the Altra business system and our efforts -- we've ramped up our efforts this year. We saw it as an opportunity to really accelerate some of the lean initiatives we've been working on, and those have had some tremendous benefits. So we believe that as we go back up into the next upturn, we will be able to maintain shorter lead times than we had in the last strong economy.

Okay, and then just to -- another question on the gross margin. You had 100 [bev] q-to-q increase on a decline in sales, and I think the commentary was that the low-cost country sourcing, the stabilizing production, the cost reductions, were really the lion's share of that versus mix or commodities. Is that a fair way to look at it?

Yes, I think all the cost-reduction activity that we put in place -- we call it material savings -- some of that is commodity cost reductions, but a lot of it is negotiating with our sub-suppliers that are pricing. Those would have an impact on it and a significant impact on the (inaudible). So all of the savings plans we are now seeing are those showing up in the P&L.

Okay, okay, and then two more -- maybe, first, for you, Christian. You guys have talked about $10 million to $12 million of the cost reductions being permanent. If we saw a scenario in 2010 where sales were relatively flat year-over-year -- I know you've got a tough comp probably in the first quarter, but if sales were relatively flat in 2010, year-over-year, and you made some reasonable assumptions about mix, what do you think would be incremental in terms of savings in 2010 versus 2009?

About $8 million to $9 million, and the reason for that is that the -- half of the $10 million to $12 million is related to the plant consolidations. The full run rate on that will be in place halfway through the year. The other savings -- procurement, headcount, and so forth -- will be in the run rate as we enter 2010. So that works out to, roughly, $8 million to $9 million.

Okay, okay, that's helpful. And then just, Carl, on one of your new product comments, I think you said a $2 million order. It sounded like it was auto. That's a fairly significant order, it sounds like in an area that's pretty promising. Can you just provide a little bit more color on that?

Yes, sure, it's for a dual-clutch transmission, and it is automotive-related. And the dual-clutch transmission, it's a pretty innovative product. It's just hitting the market, and we're doing it in Europe. It's in Europe first, and it will probably be brought to the States in '12, I would imagine, based on the schedules we've seen. But it shifts like an automatic transmission but has the efficiency of a manual transmission, and they use two clutches in order to enable that. And we make a relatively small component in that transmission, but it's a very nice piece of business for us. (inaudible) leading-edge technology that's -- that we think is going to be successful.

Okay, so a relatively small component of a system, but a $2 million order. So it was a fairly significant number of units that this is what's going into in the first round?

Yes, and the estimate is that in '11 it will be probably in the $3 million range.

Jordan Hollander, Jefferies & Company.

Just a follow-up from the working capital question. When you guys said one more quarter of being able to reduce inventories, is that this fourth quarter or is it really 2010?

It's the fourth quarter.

Okay, and just on the geographic basis -- any changes in the trends we saw last quarter -- is Asia still holding up? Or less declines in some of the other markets?

Yes, and Asia probably is seeing an improvement a little bit quicker than we're seeing in North America and Europe -- very similar trends where North America and Europe are similar -- Europe is a little bit worse than North America, and probably lagging on the improvements. And then Asia is leading and down about half as much as Europe and other foreign countries.

Any difference in ordering patterns from the OEM base as opposed to distributor base -- are distributors coming back a little quicker?

Yes, the distributors are coming back a little bit quicker, but we have seen some select OEMs starting to place some orders, too.

Jeff Hammond, KeyBanc.

Is there a way to quantify the impact you think you've had on earnings this year from inventory destocking?

I think -- we've used the inventory levels. By the end of the year, we'll have reduced inventory levels more than $30 million. So if you looked at -- if you were to assume flat sales in 2010 compared to '09, we would actually -- our production volume would be $30 million higher than in '09. We don't want to quantify what that is, but if you look at how we have levered up for, how we've levered down, you'd probably come to an estimate there.

Okay, that's helpful. And then just as you think -- I mean, you made some straightforward comments on the S3 and how you're thinking about capital structure, but I guess as you look out, I mean, what, in your mind, is the ideal capital structure? When do you think you get to a point where you can start to think about external growth again?

I think from an external growth standpoint, I think that the acquisition market has not been very robust through this downturn, and our expectation is that it's not going to be until the earnings -- until people get a realistic view of what their earnings are and what the value of their companies are. We've seen a few more books in recent weeks than we have, certainly, at the beginning of the downturn, but I certainly would say that it's a robust market out there.

So we think that the best thing for our company is to continue to delever and, from an acquisition standpoint, we don't have any aspirations to get to be a certain size and that we have to make acquisitions. We want to make acquisitions of the right businesses, the right products that fit with ours and that are typically the engineered, niche-y business. So we're going to wait for those to come available, and we'll work on the balance sheet until we do that. And when they do, one of the reasons we put the S3 in place, it's out there for three years -- you know, when they do, we want to be able to quickly access the capital markets and be able to participate in a process when it comes available.

Okay. And then can you give us a sense -- just looking at the high-yield market related to your company -- what would a bond offering in this market look like, vis-à-vis, your current structure?

I think that would be -- you look at pricing, we're probably looking at -- today, tomorrow may be different, but today probably a [coupon] of about 8.5% and a [year of] 8.75%. We also would be looking at less restricted equipment that would allow us to better go about international tax planning, for instance -- larger [baskets] and those types of things.

That's helpful.

We're a very different company than we were when those first [accounts] were sold.

(Operator Instructions) Doug Newman, Madison.

Just following up on the financing and refinancing question -- I may not have heard correctly or fully -- have you ruled out equity as a potential financing vehicle for yourselves? I noticed your stock is up over 25% today. Is that contemplated at all as a potential source of financing?

As I made the statement in my comments, prepared comments, at this point we have no immediate plans to raise equity under that filing.

Yes, I don't think we could say that we would never rule it out, though. You never know what's going to happen three, six months down the road -- what acquisitions might come available, what the economic environment is going to be like. So we can't say we would never, but we certainly perceive it as the most expensive form of capital; something that we would reserve for the right situation.

(Operator Instructions) Gentlemen, at this time, we have no further questions.

Just to close up, I want to thank everybody for their interest in Altra and, again, I'd like to thank our associates for their hard work during this very challenging time. So thank you for participate, we look forward to talking to you on the next call.

This concludes today's conference call. Thank you for attending and have a great day.