Albany International Corp (AIN) 2013 Q4 法說會逐字稿

Ladies and gentlemen, take you for standing by, and welcome to the fourth-quarter earnings call for Albany International.

(Operator Instructions)

At the request of Albany International, this conference call, on Tuesday, February 11, 2014, will be a webcast and recorded.

I would now like to turn the conference over to Chief Financial Officer and Treasurer John Cozzolino for introductory comments. Please go ahead, sir.

Thank you, operator, and good morning, everyone. As a reminder for those listening on the call, please refer to our detailed press release issued last night regarding our quarterly financial results, with particular reference to the Safe Harbor notice contained in the text of the release about our forward-looking statements, and the use of certain non-GAAP financial measures and associated reconciliation of GAAP. And for purposes of this conference call, those same statements also apply to our verbal remarks this morning. For a full discussion, please refer to that earnings release, as well as our SEC filings, including our 10-K.

Now I'll turn the call over to Joe Morone, our Chief Executive Officer, who will provide some opening remarks before we go to Q&A. Joe?

Thanks, John. Good morning, everyone. As is our custom, I will open with a few comments that summarize what we see as the key themes for the quarter, and then we will quickly turn to your questions.

Q4 results were heavily influenced by the containerboard or packaging market in North America. And as we discuss in the release, this is by far our most important market in machine clothing, both in revenue and profitability. It softened significantly in the first two months of Q4. The result was a substantial drop in our North American machine clothing sales, a 7.5% decline sequentially and a 10% decline year over year. This hurt our margins for the quarter, which held back EBITDA.

Everything else in machine clothing came in as expected. South America, Europe and Asia were all stable, both year over year and sequentially.

We continue to expect a strong first half of 2014 for machine clothing. Orders in Q4 were well ahead of the previous year, and that all-important North American containerboard market bounced back in December, which, in turn, triggered a rebound in our North American machine clothing shipments in January.

As we pointed out in the release, our positive outlook assumes an improving macroeconomic environment. And more generally, we view the macroeconomic environment, rather than structural or competitive factors, as the primary source of risk, both upside and down, for machine clothing in 2014.

Turning to composites, AEC performed very well in Q4 on all fronts: financially, on the LEAP ramp-up, and in R&D. We attempted in the release to provide a bit more detail about the expansion of our R&D portfolio. To reiterate, our most promising areas of potential for the first wave of growth beyond the LEAP fan module are enhancements to the LEAP engine and initial airframe applications.

At the same time, we are also exploring applications that hold potential for subsequent waves of growth. The most promising application areas that we are currently working on are our future versions of LEAP, next-generation engines, broader airframe applications, and possible applications in the automotive industry.

In sum, while the softness in the North American containerboard market in Q4 dampened our performance in machine clothing, in other respects, the Company performed well and to expectation. And our positive outlook for the first half of 2014 for both businesses remains unchanged. We expect a rebound in machine clothing, driven by a return to normal in North America, and steady or incrementally improved performance in Europe and Asia, coupled with continued good performance on all fronts in Albany-engineered composites.

So, it is a pretty straightforward quarter and outlook. And with that, let's go to your questions. Steven?

(Operator Instructions)

Our first question will come from the line of Jason Ursaner, CJS Securities. Please go ahead.

Good morning.

Good morning, Jay. First, a couple questions on the machine clothing segment. The restructuring credit on the pension curtailment, the offset to that, was it embedded in SG&A or gross margin?

Jason, this is John. Basically, that is lowering a pension liability that we would have had for our employees in France. So we reduced the liability and recorded the pension curtailment gain. In the future, that would probably result in lower pension expense for those French employees, and that would be -- and that's a much smaller number, and that would be in our SG&A expenses.

Okay. And then, Joe, you mentioned stability in Europe and Asia. I guess that sounds good for Europe, maybe not so much for Asia that had been the region expected to grow and offset some of the structural decline.

Is there any change you are seeing in the long-term fundamental outlook for flat to moderate growth? Or is that still pretty much intact at this point?

We -- the latest production statistics for paper consumption and production statistics for China actually show that in 2013, it was down a bit. Maybe domestic consumption of paper looks like it was down about 2%, domestic production down a little less than that. And we are not seeing anything in the short-term to change that. It is feeling flat.

And that's -- as you are suggesting, a significant change over what we have all been accustomed to. We don't think -- we don't see any evidence to suggest a change in the long-term structural picture of China as a growth market. We, and everybody else, think the growth will be somewhat slower, but there are still new machines coming in.

There is still that growing middle-class that is going to consume packaging and tissue and food containers. And even some printing and writing. So we think our -- in the short-term, what we have been seeing is what we continue to expect to see: more or less flat.

And structurally, for the long term, we are still in the same place, and we do not see any reason to deviate from that place. That as that economy grows over the long haul, there will be more and more paper production, more and more paper consumption, and it should be at least enough growth too offset long-term sectoral decline in Europe. We are still in the same place.

Okay. And longer term in North America, excluding the current quarter, you still think the brown paper markets and the tissue markets are growth there are offsetting printing and writing?

Yes, we are still in the same place there. The combination of overall growth in South America, coupled with GNP-like growth in the packaging and tissue grades, should more or less offset the steady larger declines in the digitally-displaced grades in North America, the newsprint and printing and writing.

Yes, so that's how we get to our long-term stability. Essentially long term growth in Asia offsetting long-term erosion in Europe, long term strength in South America, packaging and tissue North America offsetting decline in newsprint and printing and writing in North America.

Okay. And then quickly on composites, can you just remind us what big milestones are in 2014? And are any of them in Q1?

The story for 2014 in LEAP is engine tests. I think there will be something like 15 engine tests -- full engine tests in 2014, and we are supplying the parts for those engine tests. So those are the milestones, and they will be -- you will be hearing about them on a pretty regular basis from CFM. They will be in the media.

Less visible will be another set of milestones that will be more directly related to our ability to ramp. We are going to be running a couple of, essentially, tests of our production capabilities, some full runs of the parts of the plant that are already in place. We will do some all-out, full-rate production runs to really test where we are in terms of yield and cycle time and overall performance.

So those are the main milestones for 2014. At the same time, on the pipeline side, we will be continuing to work with customers to explore and expand the portfolio of applications. And the key milestones there, sometime in the next two years, we should start, if we're going to see some contracts popping in that would have an effect on revenue in the back end of this decade, some of those contracts should start to pop in some time in the next 24 months.

Those are the primary milestones on the AEC side. Engine test, production runs, and whether or not we see some of these projects turn into near-term contracts.

Okay. Great. I will give some others a chance to ask questions. Thanks, Joe.

Thanks, Jay.

Our next question will be from John Franzreb, Sidoti & Co.

Good morning, Joe and John.

Hello, John.

Joe, could you talk a little bit about the rebound you're seeing in orders in PMC? Can you give us a sense of magnitude that gives you that confidence that the first half is going to be relatively good?

There are multiple variables here, and the most important is simply the seasonal variability in our key markets. So the first half of the year, in North America in particular, has historically been quite a bit stronger than the second half of the year.

And all of the order patterns that we are seeing, and all of the interactions we are having with our customers, reinforce the expectation that we are going to see a normal first half of the year in our customer base, which will mean a normal first half of the year for us. And normal means a nice rebound. The only counter-piece of evidence, and whether that's orders, direct contact with our mills, shipment dates, what we are seeing in the way of trends in the containerboard market. The only counter-indication that is potentially out there would be macroeconomic.

If we get the kind -- if the kind of nervousness that equity markets were showing the last few weeks translated into general nervousness in the economy, then you could see shipments, containerboard shipments starting to slow down and move back into that dampened cycle. But normally, first half of the year in our key markets are a good -- are strong.

At the same time, there are no -- none of those seasonal factors that tend to dampen our margins in the first half of the year. So there are no -- there is no summer shutdown, or equivalent of the summer shutdown, or the year end shutdowns that tend to pull back gross margins.

So there is a combination of seasonal factors in our markets -- strong seasonal factors in our markets, coupled with the absence of that -- those drags on margin that we get in the second half of the year due to the seasonal factors, coupled with all of the evidence pointing towards normality. All of the evidence from order patterns and shipment patterns, that leaves us pretty confident.

Okay. One of your competitors recently closed a facility in Europe. You mentioned that you don't view competitive factors as one of the potential headwinds in the first half outlook.

Could you talk a little bit about what is going on as far as capacity equilibrium out there? Pricing, anything to elaborate on some of those factors going forward?

There are no -- the punch line is, there are no major contract re-negotiations in the -- for the first three quarters of the year. So we -- usually, we get pricing instability during the period when we have contract re-negotiations.

Right.

That's why for us, from everything we see, and if you just go back to my answer to your previous question. The only variable we are seeing out there that we can't quite nail with confidence is what is going to happen to the economy.

We have not seen any fundamental change, structurally or competitively. The -- we have not seen any major takeout -- enough of a takeout of capacity in our markets to change any of the structural dynamics that we have always described to investors before.

In the Americas, there is pretty good alignment of capacity and demand. In Europe, there is still too much capacity.

The small shutdown that you are referring to was really in -- was not in paper machine clothing, and it was a pretty small shutdown. No, we haven't seen anything yet that would lead us long term to say the exposure to price erosion in Europe has alleviated.

Okay. Could you just review some of the cost-savings --

John, just before (multiple speakers) that said, nor have we seen anything that leads us away from the conclusion that this is a flat business over time. Because while we think there will be continuing erosion in Europe, we do think long-term, that gets offset by continuing growth in Asia. That's back to the previous conversation.

(laughter) Right. Thank you for that. Could you maybe review for us the cost saving actions you have taken in the past year? And when you expect to realize the benefits from those actions in the coming year?

There are two kinds of cost-savings actions. One is just normal incremental productivity improvements, and they are going on all the time. Pursuit of lean manufacturing, and we are always working to improve productivity in the plants to basically offset inflation.

The other type of cost savings, of course, actual substantial restructuring and capacity takeout. And the last big one, which took place in 2013, were the downsizing of our two plants in France.

We expect -- I think we said at the time the total impact of EBITDA would be about annual $10 million, so about one-quarter of that per quarter. (laughter) And we think that some of it started -- some of that started flowing in in Q4, but we would expect the full impact to show up by Q2.

Okay. And one last question. You identified a number of programs in PMC, ex LEAP, that could roll in with the various type of revenue potentials.

The earliest you said was in two years' time. Which of those programs would be the ones that hit first?

I think the best way to think about this is -- I used this term before and it confused some people, S-curve. So think waves of growth. And the next wave of growth that will start slow, then will accelerate, and then will eventually will flatten, should be toward the very end of the decade.

And the two most likely areas of application are number one, enhancements to the LEAP engine. Once an engine is introduced, there tend to be performance improvement packages every two years or so, or every 30 months, thereabouts. We are actively working with our customer on possible improvements to the LEAP engine. And then -- so that's number one.

Number two, we are actively working, as we laid out in the release, on a number of airframe applications, on wings, for example. If you ask, what are the platforms on which those would come on? There aren't any major new aircraft that are now scheduled to be introduced that would allow us to get some big hits.

The next big wave of airframe applications are out in the middle of the next decade, with the next-generation single aisle, and now increasing speculation about a next-generation 757. And that's -- we are positioning ourselves for, we think, for the next wave of growth on those platforms.

Nearer term, this decade, there's no secret about what the possible platforms will be, and our applications on this would be relatively small. But some -- if we are on there, some could be interesting. There is the 777 X-wing, is certainly a potential application. And then there are new derivatives of the 787 and the A350 that are potential opportunities for us.

Whether or not we get on those, how much we get on those, that remains to be seen. But that is where you would expect, logically, to see an initial wave of airframe applications. Just look to see where the new extensions to existing platforms are, and when they are entering into service, and you get an idea of what the applications are.

Right, Joe. What I was really looking for here is adjacent opportunities. You say, even if it's small, limited, something outside of fan blades, you say that initial production revenue ranging from two years. I'm looking for those other opportunities outside the fan blade market that is two years from now, even if it is only nominal and on top-line impact.

I will just say it again. If we get on some airframe applications, and they are going to turn into revenue this decade, then they would need to be -- would need to have contracts announced over the next two years. And start seeing some initial revenue in 2017, 2018 timeframe, 2019 time frame. There might be smaller stuff than that before then on platforms that are less visible, maybe defense platforms.

On the engine, the most likely near-term applications would be enhancements to LEAP. When you get farther out, into next decade, there is some very significant potential applications that we are working on that our customers are talking about on-- Safran has talked about a ceramic matrix composite low-pressure turbine blades, or a future version of LEAP and then beyond LEAP.

They have talked about the open rotor, and our participation on the open rotor, which is a next-generation engine for smaller aircraft like single aisle aircraft. Boeing has talked about the ceramic matrix composite nozzle, which has very interesting promises of technology.

So there is big families of applications out in the 2020s. This decade, the most likely applications, enhancements to LEAP, and then if we can make it, getting onto derivatives of the 787 and the 777X and the A350.

Okay. I will get back into queue.

Our next question will come from the line of Steve Levenson of Stifel.

Good morning, Joe and John.

Hello, Steve.

Just in terms of those new parts that you are talking about. I know they are out in the future, but are those 3D woven parts that would be within the joint venture? Or are those more traditional parts that would not be?

The low-pressure turbine and the open rotor would certainly be part of the agreement.

Okay.

Anything on the airframe would not. Anything on LEAP would.

Got it. Thank you. Right around the time of your last conference call, Boeing announced that they were going to go to 47 single aisle planes per month. Now they are talking about going to 52. And while Airbus hasn't said anything, you would expect them to want to try to keep up. And there certainly seems to be plenty of demand for single aisle planes out there.

So my question is, in terms of the capacity expansion that you are doing right now for LEAP blades, how many can you service before you have to start adding more capacity? And can you do that within the existing brick and mortar?

Yes. The short answer is, yes, we can do it within the existing -- we think we can do it within the existing brick and mortar. And we are planning for 1,800 engines a year by the end of the decade, which is pretty consistent with about 52 a month. 52 a month single aisles by Boeing and Airbus, if you do the math.

Okay. Thank you. And the last item goes back to paper machine clothing. Can you quantify the margin impact of the North American containerboard situation? Is that base points impact or percentage points impact?

We still think our normal gross margin for that business should be in the 43% range. And when it comes down to where it was, 41.5%-ish, there are two variables going on.

One is the end of the year shutdowns that create negative variances. And then on top of that, the larger than expected containerboard slowdown. And those two variables together push us below the 43%.

Got it. Thank you very much.

Our next question will come from the line of J.B. Groh, D.A. Davidson. Please go ahead.

Hello, guys. Thanks for taking my call. A couple of quick ones. On the product that you're working on, the airframe stuff and the enhancements, can you sort of characterize what is stuff you are pushing and prototyping on your own? And what is being driven by customers asking for it?

I would say it is somewhere in between. We try the -- 10 or so, dozen or so projects that we are actively exploring with customers, we are actively exploring. So we are in conversations with them, and they are showing some interest. And so we start developing the prototype, and that leads to a conversation.

And so it is not a contract, but it is an active exploration, where we are visiting with them and they are visiting with us, and we're attempting to qualify and demonstrate the capability of our parts, our sample tech -- our, in some cases, sample parts, in some case, overall technological capability.

So it is a mix, and that, I guess, spawns other parts that you may be interested in doing (multiple speakers).

We try to -- we basically, if you think of this like a funnel, when we start saying we are exploring a variety of applications, we are only including applications in which there is an active conversation going on with a customer. But that is not yet a contract, but it is an active conversation. It is not -- it is a two-way conversation. It is not hey, would you guys be interested?

Okay. And so that activity is multiples of what it was last year?

Yes.

Okay. And then maybe one for John. How should we think about R&D spending in this fiscal year -- in this year? Obviously, the more of these prototypes you are working on in different projects, that that's going to be elevated. What -- how should we look at that this year?

Yes, J.B., I think, as the pipeline continues to expand for the business, that the R&D spending that we're going to have in the business is going to go up. It is not going to be very high percentage point increases, but we -- I would see it going up. It is probably going to start going up in line with the sales growth that we are going to see over the next few years, but we should start seeing increases in that as the activity goes up.

So a better way to do it is percentage to sales as the sales ramp to --

The ramp is so dramatic that it wouldn't -- once it starts to kick in, the percent of sales will go down. I think if you --

Right. Okay.

First approximation, if you're adding $1 million of R&D per year, that is probably not an outrageous way to do it.

Okay. All right. Thanks for your help.

Thanks, J.B.

(Operator Instructions)

Our next question will come from the line of Mr. Rick D'Auteuil of Columbia Management. Please go ahead, sir.

I think you mostly touched on this, but let me just probe a little bit. In the release, it talks about the opportunity pipeline as it relates to airframe applications.

And then you size it, some as small as $5 million a year, and some tens of millions. And then you also throw a time frame out there of 2 to 10 years. Are any of the tens of millions (laughter) in that earlier side of the -- I mean, are they in the two to three year? Or are those mostly the smaller, the $5 million and under?

I'm wondering if there's -- we're still looking at a decade for any of the sizable opportunities. In that two-year time frame, is there anything of size?

If you -- I think the best way to map all of this out -- this is what I was trying to get to before, and let me take another whack at it. The best way to map out the potential size of opportunities is to look where there are platforms that our parts could go on. And the biggest near-term platform is still LEAP.

If we can get another major part or a couple of major parts on LEAP, that will be the single biggest near-term opportunity. You just can't -- I know we have talked about this before, but it bears repeating. There has never been, and may never be, an application with the size, the sheer volume of LEAP.

And so any time you can get a little more content on a program of that volume, it's just -- that's what leads to revenue. Every new -- through history, every major engine program will -- after the introduction, there will be periodic performance improvement programs and then next generations. And they come every two to three years, every 30 to 36 months.

So that is the very promising platform on the engine side. If history is any guide, there will be more opportunities for additional content 30 months after the thing is introduced into service. So we will see if we have -- if we get on that content or not.

Now on the airframe side, the big opportunities for major revenue occur when there's a whole new aircraft. So the 787, which was a whole new aircraft, was the last major platform for all kinds of new applications, and the A350 as well. As you know, we were -- we got started too late to really be a major player on either of those platforms.

The next big platforms, so the ones that offers significant new revenue potential, are the ones that Boeing and Airbus are now starting to talk to. That's the next-generation single aisle, and possibly a new 757. Those are going to create significant waves of opportunity for us and everybody else in the industry.

In the near-term, for somebody trying to break into the airframe, if there are opportunities, they will be smaller opportunities and they will be compared to those whole new aircraft. And they will be on the derivatives of aircrafts that are now being introduced. So the 787 is going to have a new version, the A350 is going to have new version, and if you can -- and they will be incrementally different from the current versions that are being introduced. And so they offer potentially, to us and everybody else, incremental opportunities for new revenue.

And then the other chance of somebody trying to break into the airframe, as for new business in the short term, is if any of those airframes have a weight problem. And so they need to go back and do a performance improvement package sooner than might otherwise be anticipated. And then that tends to open an incremental opportunity.

So you go between now and 2020 on the engine, there should be enhancement to LEAP, and there should be incremental opportunities on these new platforms that the airframe manufacturers are making. When you get out next decade, it is whole new engines and whole new aircraft. And so if we do our jobs right this decade, we will position ourselves very well for those next waves.

We keep saying we think the revenue potential for this business by 2020 is $300 million to $500 million. LEAP plus the current projects we are on get us in the $220 million range. So we still think that $300 million to $500 million is the right range, and it will only take one or two incremental parts on LEAP to get us to the bottom of that range.

And then if you can layer in some airframe applications, and some applications we're not yet working on, then you start getting toward the middle of that range. And then if there is a surprise on the automotive side, you get to the upper end of that range. We are not seeing anything yet that would lead us to back away from seeing $300 million to $500 million as the revenue potential for this business. We don't have the contracts in hand.

That is very helpful, laying it out. Thanks.

Our next question will be a follow-up from the line of Jason Ursaner. Please go ahead.

Hi, Joe. I just wanted to follow up on -- you mentioned before that 43% gross margin normal range. Just getting back to the restructuring in this quarter, normally it is an add back for non-operating expenses that are in the numbers. This quarter, obviously, it's a negative to offset a non-operating gain from the curtailment.

I'm trying to figure out if that gain was in SG&A or COGS? And whether that 42% gross margin for this quarter is a good figure, or if that was artificially bumped up by the gain from the curtailment?

Yes, Jason, it's John. The restructuring curtailment gain is booked on its own line in the financials. And when we report the gross profit numbers, it is not in there. So it's not in cost of goods sold, it's not SG&A. It is on its own line. The only place that you really would see it affecting it, it is in machine clothing operating income line in that table.

Okay.

That's the only place. But if you look at the face of the financial statements, it's on the restructuring line, so it is not affecting the margin numbers.

But it is in that -- but the GAAP operating income is being impacted by it. So it's either -- it's got to either come out of SG&A or gross margin, because it is a negative in the restructure.

It is -- right, but we pull it out. If you want to call it SG&A, you can, but we pull it out and put it on its own line, restructuring. And correct, it does impact the GAAP operating income numbers that we report for machine clothing.

Okay but it is not in that 41.7% growth margin?

No.

No.

And then on AEC --

And just staying on the gross margin, if you look at full year, it was like 42.8%, just a tad under 43%. And that's with a lot of softness in the second half of the year. So we're -- 43% is still a good number.

Okay. And on AEC, the 10% growth, that's related almost exclusively to commercial programs? Or some of the joint R&D would show up as revenue in the short term.

Some of the R&D would show up as revenue in the short term, but it is not big enough to move the needle very much. Most of the growth is in commercial programs, and it is mostly LEAP.

Okay. And if some of the pipeline moves towards contracts, is it going to be a different type of inflection, because LEAP was customer-funded early on, in terms from a GAAP profit loss perspective? Or it would have a similar type of trajectory? I'm just wondering if it would hit all of the (multiple speakers)?

It's -- we will have to go case by case, and we will discuss it as they come along. But our goal is to get to normal aircraft engine industry margins, which is -- we discussed before, if an EBIT margin around 15% should be our normal objective and expectation.

There may -- you could imagine that an opportunity comes along that is so strategic for us that it is enabling us to break in with a customer that we have not been able to break in with, that would be willing to go for a lower margin on the expectation that it is going to lead to more business later. But that should -- that is basically our guiding expectation, internally. We don't see any reason to deviate from that.

Right. No, I guess I'm just wondering if the revenue -- if it's going to show up as reimbursement revenue? Or if it won't show up on the revenue line, if it is joint funded as opposed to customer funded?

Right. If you've been -- if the customer does not pay for the nonrecurring costs, and we bear them, then those costs, typically, in the industry, get amortized over the life of the program. But if the customer bears it, and is paying for the nonrecurring tooling and engineering and development, then it gets treated as revenue.

Okay.

And that remains -- you have got to go contract by contract. And as we get more established in the industry and as our reputation grows, as our capability gets recognized, there's going to be, I think, a greater expectation on the part of customers to -- for us to bear -- start bearing those costs. Which means they wouldn't get -- the development wouldn't get booked as revenue; it would be amortized.

Got it. And then on the balance sheet, there was pretty significant interest savings from paying back the first tranche on the Prudential term loan. Given what you have on your revolver, and the balance sheet, and in the position it is in, what is the prepay penalty on the 2015 tranche? And -- or if you had to go into the market for permanent debt, where do you think you would see rates at this point? Does it make sense to do anything early there?

Yes, you know, Jason, it certainly is something that we think about. Best -- without getting into the specifics of the agreement, the best way to think about the pre-penalty payment is, look at the savings that we are getting now, and basically present-value that back to when those other payments are due. And essentially, we would have to pay that up front.

So I think that is one of the things holding back doing that. It is, we would really just be prepaying that interest savings up front. So it is all about what type of rates could we get in the market now, and we are looking at it. It certainly is a favorable environment, but the penalty is pretty significant, to pay that all at once and up front. So -- but we haven't ruled anything out, and we will keep looking at it.

Okay. Great. Appreciate it.

Our last question in queue at this time is also a follow-up from the line of Mr. John Franzreb of Sidoti. Please go ahead.

John, this might dovetail into Jason's question. You repatriated $35 million during the year. Could you just talk about how much cash is overseas? And maybe a little bit about the priority uses of cash going forward?

Yes, so the roughly $223 million cash that we have, about 80% to 85% of that is held overseas. And so we have a pretty structured, disciplined program to try to repatriate a certain amount each year. But it tends to range in the $20 million to $30 million range, because were trying to, basically, limit the cash tax cost of that to as minimal as possible, if any at all.

So we will keep working on that. But as far as cash uses go, obviously, our first priority is to ensure that we can make the investments in bulk businesses that we need to make, both in the US and overseas. And then from there, we are continuing to try to ensure we have the best and strongest balance sheet that we can have, from both a total debt and a net debt standpoint. So we will keep working on the debt side of the balance sheet.

And we -- in the past, we've had a long-term dividend that we have been giving. We have been steadily increasing that dividend. That obviously will continue to be something that -- our (inaudible) books at each quarter, to continue doing. I think the cash priorities that we have had over the past couple of years, few years, are really the same priorities that we will have going forward.

Okay. Fair enough. And I know this has always been a moving target, depending on geographic sales mix. But for modeling purposes, what should we be thinking about for tax rate for 2014?

Yes. The tax rate does get to be pretty complicated when you look at the pretax mix. But I think the easiest way to think about it is, look at the rate we had in 2012, which was about 38.5%.

We went up about 10 percentage points this year, but it was an unusual year, with the large restructuring charge that we had in France. That really affects the rate that we have to record.

So if you start from where we were in 2012, that's a pretty good range to start with. We're not prepared, really, to give any real guidance on the rate right now, but that is a good place to start. And then as we see how the mix starts coming in 2014, we will try to provide some better guidance on how the year is looking.

Okay. Thank you very much, John.

There are no further questions in queue at this time. I would now like to turn the call back over to today's panel for any closing remarks.

Thank you everyone. Thanks, especially, for the questions and for participating on the call. And John and I will look forward to seeing all of you in the near future at one conference or another. Thank you, and have a good day.

Ladies and gentlemen, a replay of this conference will be available by the Albany International website beginning at approximately noon Eastern Time today. That does conclude our conference call for today. We would like to thank you for your participation, and thank you for using AT&T. Have a wonderful day. You may now disconnect.