Barrick Mining Corp (B) 2003 Q3 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Barnes Group Inc third quarter earnings conference call. At this time, I would like to inform you that this conference is being recorded and all participants are in a listen-only mode. At the request of the Company, we will open the conference up for question-and-answers after the presentation.

I will now turn the conference over to Mr. Phillip Penn, Barnes group, Director of Investor Relations. Please go ahead, sir.

Thanks Anna. Thank you for joining us on the call Web cast to discuss our third quarter results. With us are Ed Carpenter, Barnes Group's President and CEO, and Bill Denninger, SVP of Finance and CFO.

Keeping with our past practice, I would ask if you have any questions that are purely data related, hold them for me after the conference call. That should give us time to focus on the broader issues that are more interest to everyone on the call today. Second, I want to just remind everyone that certain statements we make on the call today both during the formal presentation and during the question-and-answer session may be forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and may cause actual results to differ materially from those contained in the statements. We encourage investors to consider these risks and uncertainties that are described in our periodic filings with the Securities and Exchange Commission which are available through the Investor Relations section of our corporate Web site.

With that said, let me now turn the call over to Ed Carpenter.

Thanks Phil. There are a large number of companies reporting today and that's why we pushed the time of our call back a bit. We will move through the initial comments quickly and get to q and q. Let me first refer you to Schedule 1. Let me start with a few key take-away points that we want to stress. Overall, I thought it was a good quarter.

First, while sales were up 13 percent to $222 million, this mostly reflected the Kar acquisition which we did earlier. Second key point, our operating profit growth in this quarter was very solid, up 40 percent in fact. Our operating margins also expanded by more than a full point, and that's in a quarter where one of our three businesses, Associated Spring, usually sees some seasonal weakness. There was some noise in the quarter that affected the operating profit, both negative and positively, but most of these were planned actions on our part and Bill will cover that in detail.

Third key point, diluted EPS was up slightly, even with a sizable jump in our outstanding shares. In addition to follow-on offering and the stock we issued for the Kar acquisition, the dilution calculation was also affected by a sharply higher stock price. I don't think we will hear too many complaints about that particular issue. The fourth point I would like to stress here is that we are happy with the achievement by the team at Barnes Distribution this quarter. We are operating profit triple and the integration of Kar really continued to accelerate. Final take-away, we saw very strong order fundamentals this quarter. Delivery on this specific gross initiatives that we've been talking about over the last several quarters. So, coming full circle, we had a good quarter, in fact, a good first nine months of the year. With those five key points covered let me offer you some more detail on each of our three businesses and I'd like to refer you to Schedule-2.

Let me start first with Barnes Distribution a very positive story for us in the third quarter. Sales were up nicely, mostly due to the acquisition of Kar Products this year. Kar contributed about $30 million in sales and the integration of those operations was an important driver of operating profit more than tripling versus last year. Through our national and regional sales growth in Distribution, our e-commerce platform and our Tier-2 strategic partners, we generated nearly $6 million in incremental sales this quarter, more than triple what we had last year. We are continuing to find that the e-commerce platforms are critical to our winning new national account relationships, especially where customers need a tailored solution to their procurement process.

To that end, we signed 58 new national and regional accounts in the third quarter giving us 249 new accounts since we started our focus on these customers seven quarters ago in January 2002. We continue to believe that over time these new Tier-2 partnerships will grow to be a very substantial relationship for Barnes Distribution. We are pleased with the success we've had to date with these growth programs and look forward to them to continually ramp up aggressively into 2004. The integration team at Barnes Distribution continues to do an outstanding job of consolidating Kar in our historical businesses together. The U.S. portion of the integration, which represents about 85 percent of Kar's total sales, will be completed by the end of this year, well ahead of our original plan. Our first Distribution center consolidation, which is the last phase of integration process, started about two weeks ago and that is in New Jersey and has gone very smoothly. Not always flawless, as there is a few minor hick ups, but we now have established a clear road map on how the process will work with other distribution centers in the U.S. over the rest of the year.

The Canadian portion of the integration which requires the construction of a brand new warehouse is on phase to be completed in the first half of 2004, which is right in line with our original schedule. As we've said in our last call, through the integration of Kar's headquarters, purchase cost savings and the consolidation of the distribution centers, we expect to see cost savings in the range of $10 to 12 million. We expect to be at that run rate by mid-2004, as the Canada portion of the consolidation has been completed. Finally, we begun to dispose of some of the real estate and change some of the staffing which was a wash in the distribution profit this quarter. All in all, positive quarter for distribution and given the momentum behind the initiatives we've just discussed, I think there is potential for continued improvement as we go forward into 2004.

Let me move to Barnes Aerospace, sales volume was down, consistent with this stage of the commercial aircraft cycle. Operating profit was up nicely though as the actions taken by the team last year primarily the reduction of workforce, by about 25 percent, helped us increase operating margins from last year. While the improved profitability is a good story, it's not the only important story for Aerospace this year. First, the sales team secured orders for in excess of $51 million, the first time we've done that in a quarter since 9-11. Three important aspects of order booking this quarter. First, there are no large cancellations. We indicated on the last call with you, the cancellations we saw in the first half of this year, we felt were one-time events and so far this most recent quarter would confirm that.

Second point, we booked in excess of 10 million production orders for the GE90-115 engines, a program we've talked to you about for more than a year. If you are new to the story, this is the largest aircraft engine ever built and is an exclusive engine on the new extended Boeing 777 aircraft which will have it's first customer deliveries in April of '04. We have substantial content for each of these engines and there are now more than 60 aircraft on order, which implies with spares about 140 engines that will have to be built over the next several years.

As we mentioned before, our content is about $600,000 per engine. A third notable aspect of the orders this month is that we booked a substantial level of military orders, including almost $10 million that were military orders for sales directly to the U.S. Government, including one very large order that we've been working on for sometime relative to the U.S. Army's tank command. On our last call we indicated that orders for this quarter would exceed $40 million and exceed $50 million in the fourth. Because of the advantageous timing of the large tank command order which we thought would hit in the fourth quarter, the reverse is more likely to happen. With these orders our backlog, which essentially represents just the OEM side of Aerospace work is closing in on $150 million again and giving us excellent visibility on sales into 2004. On the overhaul and repair side of Aerospace, the seasonal slowdown was typical as maintenance was deferred out of the busy summer travel months and with half our overhaul pay orders coming from Asian carriers we are recovering from impact of SARS over the summer. However, Order input were strong in September, which should lead to steady sales in October and beyond. We see this stemming from two macro trends, first the number of aircraft's that depart in the desert has actually fallen in the past two months. As planes have returned to active service, naturally and more planes mean more engine, which leads to more overhaul and repair work.

Secondly, we hear and total release for the significant number of the maintenance had been deferred by airline by utilizing parts in the desert fleet and the well has essentially gone dry, no pun intended. With these two macro issues now we are in the same road. We believe that our overhaul and repair business should stay strong over the balance of the year. One final note on Aerospace, an important note. During the quarter we entered into revenue-sharing partnership or RSP with one of the major Aerospace OEMs in exchange for up-front capital investment on our part, the effect which will be visible on our balance sheet this quarter, we now have exclusive rights to manufacture a set of replacement components for the remaining life of the engine program and that should be several decades. We suggested to you on our July call that a substantive financial improvement at Barnes Aerospace would be likely in '04 and everything that I have just talked about further strengthens our belief this will be the case. Let me now transition to Associated Spring. At Spring the sales were up slightly less than 1 percent and all that increase is really was due to foreign exchange. That is acceptable results considering the dynamics of our end market this past quarter. In light vehicle this seems to be confirmed by results of the some of the other major T 1 suppliers. Our sales continue to outperform the sector as a whole, down 4 percent versus the 5 percent decline in light vehicle production. Our sales to the big three were off about 4 percent versus the 9 percent drop in their production and our sales to Japanese transplants were especially strong, up 21 percent, nearly double the 11 percent rise in their production. So, clearly and this has been the case for several quarters now, we are growing exactly where the customer demand is strongest. In light trucks such as Pick-up and SUV and among the transplant companies. Growth in nitrogen gas Spring has made up most of what we lost in light vehicles with their sales up in the quarter about 19 percent. Our industrial product sales in the U.S. were flat, but up in certain other markets. The industrial sales overall were up about 9 percent. Sales to telecom and electronic were down about 25 percent. We will help ourselves as a time in the last call and telecom and the electronic market may be study to improve or just not seeing in. Certainly there is no longer contracting is rapidly but this is no (inaudible) taking places. Finally our sales for the heavy truck marker was down 13 percent versus last year but As we previously said, we made a conscience decision to exit truck brake spring line when we closed our plant in Dallas in the 2001.So this has been a plant repositioning on our part.

As result of some of the new emission standards kicking in this October we saw some sequential sales growth in our other products but that may be a one-time effect for this quarter. We will take it. Follow-up on other sales items we discussed last quarter, we continue to be extremely pleased with the demand for the new F-150 truck for which we have an average incremental $4 per vehicle versus the old model. Not only is the new truck selling well, but more than 60 percent of the buyers have elected to take a more powerful, but optional engine, so incremental is running little stronger than the original plan. Looking to the rest of the year I would expect improvement from Associated Spring, light vehicle production is scheduled to be down, but less so than the third quarter, with the rest of our markets at least stable and expected strong growth from nitrogen gas. And some of the realignment we made this quarter, I think Associated Spring will be just fine. During summary, I see Distribution and Aerospace doing extremely well for the balance of the year into 2004. Now that we have taken some corrective steps, I believe we will regain momentum at Associated Spring, as well. Let me turn the call to Bill Denninger, who will give you detailed financial view of the quarter.

Thank you Edmund, good afternoon. Let me begin by recapping the financial highlights from the third quarter, referring to Schedule Three with sales increase of 13 percent and operating income up 40 percent, operating margin improved 120 basis points to 6.3 percent from 5.1 percent in the third quarter last year. As you may have seen from the financial statement attached to the press release, cost of sales increased 7 percent, well below the rate of sales growth, this is due in part to shift in sales mix in favor distribution. And selling and administrative expenses were up 41 percent, the biggest driver here is the selling and commission expense for the 600 additional sales folks from the current acquisition completed in February of this year. Interest expenses were up about 2 percent, function of slightly higher average borrowings in this year's quarter. Another income was down about 1 and-a-half million, an effect of substantially lower foreign exchange gains this year than we had in Q3 of last year. I'd like to take a moment and expand upon this. The issue here is cash we have in Brazil where we moved from U.S. dollar based investments to Real, the local currency, about a year ago. We did those when the Real stopped valuing and began to appreciate against the U.S. dollar to avoid any losses following a long period of gains as the Real devalued.

Moving on, you can see net income for the third quarter, increased 29 percent to $9 million, translating to diluted EPS of 38 cents up from 36 a year ago. Diluted share count was up 21 percent, as Ed mentioned, in the quarter. You do not see the same present increase of EPS as net income. The increase in the number of shares was due to completion of the follow-on of equity offering earlier this year. The share issuance associated with the current acquisition and the impact of a much higher stock price which puts more options in the money. So, with that stated, a good quarter for the company overall.

Turning to Schedule Four, let's spend a couple of minutes on each businesses starting with Associated Spring. Third quarter sales at Spring were up slightly at 81 million compared to a year ago quarter, but this did include favorable foreign currency translation, primarily in Sweden and Germany. Adjusting for the sales were down about 3 percent. Higher sales of nitrogen gas Spring products where industrial markets were essentially offset by a decline in sales with North American Light Vehicle market. And some of lower sales heavy truck and Telecom electronic products. The decline in operating profit at Spring is due to higher personnel cost as incremental pension and severance expense taken during the third quarter was approximately $1 million. We did have a benefit in the quarter from the 2002 closure of our Spring plant in Dallas, Texas as we are no longer incurring the shut-down expenses that took place last year. However that benefit was offset by two items. First, 540,000 dollar reduction in carrying value of the same plant in Dallas which is currently for sale. And secondly, some initial cost related to new product launch the New York product launch, which represented a similar amount.

Let's now take a look at Barnes Aerospace. Operating profit there was up 36 percent to $2 million a year ago. This was on a 6.4 million, 14 percent sales decline. Now, you would normally expect to see a significant profit reduction with that kind of sales decline. So we do think this is an excellent result. The profit increase reflects benefits of cost reduction efforts taken during 2002, efficiency improvements at our OEM operations, and the absence of about $700,000 in severance that occurred last year. Going forward with the excellent job our team at Aerospace has done in the last couple of years, take out cost and operate more efficiently, there is earnings leverage for each incremental dollar of sales we achieved. And given the new sales expected in 2004 from the GE90-115B program, the new military orders Ed mentioned, higher level of sale from our appear and overhaul operations and the revenue sharing partnership, we see operating margin at Barnes Aerospace improving by at least a few percentage points from current levels into high single-digit range.

Moving now to Barnes Distribution, where the operating profit increased from 3.3 percent last year to 7.1 percent this year driven primarily by higher operating contributions from Kar Products and higher overall gross profit margin.

Looking at U.S. operations, we had a very slow start for sales in the months of July and August, with an increase in DSA, they excelled the average in September. Based on what we've seen so far, October looks to be off to a good start, as well. However, we are not seeing much of a broad-based turnaround, but the environment did get better as the quarter progressed. And as Ed pointed out we are seeing good results from key sales growth initiatives. Gross margin for Barnes Distribution U.S. operations excluding Kar were up 80 basis points from a year ago. With Kar the result is even better with gross margin in the U.S. up almost 5 full percentage points.

During the quarter Barnes Distribution recognized incremental gain from sale of Distribution centers, but all of the gain was offset by severance expense of about $800,000. These two items essentially canceled each other out. Quick comment on Distribution operating margin. Because of the seasonal nature of the business, especially during December, sales are typically quiet a bit little slower in Q4 than Q3. So, it is not likely we will be able to sustain the 7 percent margin into the fourth quarter, but we certainly do expect to see year-on-year improvement in margin next year at Distribution.

Let's move on now to Schedule 5. As you can see, we got an effective tax rate of 16 percent in the third quarter of 2003, which translates into rate for the first nine months of the year of 19.4 percent, which does reflect our latest outlook for the full year. That is bit below the range we discussed with you in July due to expected mix of foreign and domestic income for the full year. Current outlook for effective tax rate in 2004 is in the low 20s moving over time to mid-20s if the economic recovery in the U.S. fully develops, we see a higher mix of U.S. soured income.

Finally, on Schedule Five, we continue to be careful with capital expenditures, spending slightly over $3 million in the quarter, which is well below our depreciation levels. CAPEX for the first nine months was about 11 million. We see that in the range of 15 to 18 for the full year. We haven't completed all our planning yet, but I expect CAPEX to move up to $25 million in 2004.

Continuing on that of Schedule Six you will see that total debt at end of third quarter was $243 million, down $9 million from the end of June. And our cash balance also moved up nicely with majority of the cash in overseas operations. With the decrease in debt, increase and cash and increase in stockholders equity to over 300 million for the first time in the history of our company, our net debt capitalization ratio was reduced to 37 percent. This was within although the high end of our targeted range. So we are pleased with the current balance sheet position. Let me turn back to Ed for wrap-up before we open up for questions.

To wrap up, I think the economic recovery at least from our perspective is still epidemic. There have been improvements from earlier in the year, but not broad-based rebound. The company has done well I think, in delivering both top and bottom-line growth in the first nine months of this year. Clearly, we are not waiting on recovery to advance the business. Some of the growth programs and other initiatives we've commented on today, I think we are in very good position to close out 2003 on a strong note and continue to have momentum into 2004. Thanks for your time. Let's turn back to Phil to begin the Q and A session.

Thanks Ed and we are ready to start the Q and A whenever you ask.

The question-and-answer session will begin at this time. If you are using speakerphone, please pick up the handset before pressing any numbers. If you have a question, press "* 1" on your push-button telephone. If you wish to withdraw the question, press "* 2". Your questions will be taken in the order it is received. Please stand by for the first question. Our first question comes from Matt Summerville with McDonald Investments. Please state your question.

Good morning. I have a couple of questions. First, can you talk about -- you know you just briefly mentioned two things that I think are pretty important. The RSP program in Aerospace, can you give us a little more color on that in terms of your expectations and what you had to invest up front? As well as talk about the new product launch that is taking place in Associated Spring. It sounded like a $0.5 million in cost associated with that in the Q3. Is that going to repeat and exactly what kind of product are we talking about here?

Let me take the easy one and I will let Bill take the tough one. The RSP we can give you more color on it. We are a little limited in terms of confidentiality agreements. Our investment will be about little over $17 million in that business and it will be booked on our balance sheet as of the end of the Q3 with the first payment which is the largest one made at the end of the quarter. Then, we will follow that on with a much smaller payment in later years. It is a program that is specific to a set of engines and a set of parts that we know how to make. We also got for that in addition to getting the repair parts, we now have a long-term agreement on the production parts for that same engine. Without talking about details that I just can't, I would say to you when we ran the calculations we had a nice teens IRR on this high teens, high IRR on this. So we are very pleased with it. We think it is a very good program for folks in Aerospace, because it gives us a different kind of load into one of the OEM plants.

OK, and then on the new product launch in spring.

Let me comment on that. This is a consumer product launch by spring. A number of its divisions both domestic and foreign, very exciting opportunity for us in the Q3, we did have a good deal of costs, as we indicated. The sales now should ramp up in the Q4 to the point we aren't going to see an incremental hit as we did in the Q3. So we are confident that one-time cost, if you will, is behind us.

OK. Is there any way that you can talk about what the revenue opportunity here is for the product or exactly what it is?

Now we'd like to, but that would get into a customer specific nature and the reason that it is a larger dollar volume than we have in most cases for a single product because it is an assembly, not just the springs and it is a proprietary product that we have a patent on. We have a long-term supply agreement so we think this will be a very attractive product.

That color is helpful. Last and I will hop back in queue. The nitrogen gas business I think you said was up 19 percent. Bill, do you have that figure excluding foreign currency and Ed, then could you comment on what sort of growth rate you think is sustainable in that business in 2004?

I'm looking, hold on one second.

Is it sustainable while in 2004.

Yeah Bill would see if he can grab the foreign exchange. If he can't do it right here, we will give it to you later. As you know, we've talked about this business as having very different characteristics because of the demand for this kind of product and we still see it in the high single, low double digits. We've said that consistently and we look at their strategic plans and programs going forward and we are quite confident that, that is a business we can grow.

I will follow-up with you on that later on that, we don't have it at our finger tips right now.

Sounds good. Thanks.

The next question comes from David Siino with Gabelli & Co. Please state your question.

Hello, Good morning. Good afternoon, pardon me. Bill, a question for you conceptually. I understand there is new legislation out of Congress making it easier to repatriate cash you have overseas. It is my understanding that significant amount of your $60 million or so is overseas. Does that change your thinking in regards to uses of cash and how much cash you want to have on the balance sheet going forward?

David, it certainly presents a opportunity assuming it eventually does pass. The tax will leave 5 percent. We have certainly talked about what makes sense for us. We also want to keep in mind other opportunities for investment offshore. The first question is if and when this passes what will be in the final bill, but it is clearly something that we hope will pass and give us flexibility.

And we are trying to stay very close to it David, so that we understand how it is really going to affect us. Hopefully it will pass.

OK, and just one more question on the RSP. The capital investment up front was just for the manufacturing facilities to make these parts?

No, it was for a payment in most risk-sharing programs people make up front capital and capitalizable investment so that you can participate. In this case we are the exclusive producer of these parts out into the future as I said for decades. We will make some capital investment in that because we are strongly considering where we should make this, whether we should make it domestically or put it into one of our foreign facilities. To the extent we will do that outside of the United States there will be an incremental capital investment.

OK Thank you.

Not significant.

Thank you.

The next question is from Michael Hagan, BB&T Capital Markets. Please state your question.

Thank you. Good morning guys. Just trying to get a better sense of what the orders rate is looking like in Aerospace. It Sounds like you had a little moved forward into Q3 from Q4 related to the tank order. Are you guys still expecting low to mid 40s on a quarterly rate going forward?

That's right. As you know that, in fact it was in the federal registry. That tank order was little over $7 million. And we would expect that that was a pull forward. You know, it was kind of good news because that gives us shipments in the Q4. We think it begins to develop a relationship with a company that has a little different demand pattern, not only because it is military, but because it's tanks. It is gas turbine parts for the tank engine. That's terrific. If your question focused on the Q4 orders, right now you are spot on to where we thought it would be, between 40 and 45 rather than 50.

OK. And I guess over in the distribution side, I know you are pursuing Tier 2 type accounts. When you see low volumes in the overall macro environment, producers tend to stop out sourcing as much and try to keep as much production volume to themselves. Is that the case or are you starting to see may be a little bit more pushed out to these customers that are in the secondary and tertiary tiers?

The answer is that most of the primary users of our products have other kinds of maintenance products, are really trying to simplify their procurement process. And in some cases we have the primary relationship with somebody and we will go get other product for that customer and bill it through our system, so that he really has one point of contact, our sales guys in his industrial operation and we can do that. In this case we said some of the other folks who may be in HVAC or electrical or in the power supply business, that they have the primary relationship and if you think about our parts, they tend to be small and we can handle them very well. Rather than themselves, the tier guy trying to handle it, we just come in behind that and support him with his relationship with the customer and we can handle it that way. And when we first started this, we were doing it with one or two and we think this is a terrific service that we can provide customers and the partnership that we can enjoy with other distributors.

I think your question gets to the key issue here in terms of what is our selling proposition and Distribution and a key part of it is to reduce customer procurement cost.

All right. Good quarter, guys. It looks like you are executing well here.

Thank you.

The next question comes from Mike Harris with Robert W Baird and Company. Please state your question.

Hi, guys.

Hey Mike.

Talking about our folks in Associated Spring here, I calculated a normalized operating margin from the segment of about 7 percent, which comparing that to last year's 8.1 percent in lower sales volume, was a little bit lower than what I was expecting and I know you talked about some of the reasons why margins were down a bit. But, can you review that again? I mean, why are we seeing that year-over-year degradation? Even in keeping in mind, I'm using an unnormalized margin of about 7 percent for Q3?

I will go ahead and jump in if I can, Mike. I think we said in the press release and during the call there were a number of one timers coming through in the third quarter.

Which I've adjusted for.

Right. I mentioned the product launch, as well and that's (inaudible). That was about half a million pretax.

$500,000. OK.

And, I think that probably gets to a range of what we expect in most third quarters. Third quarters tend to be weaker because of plant shutdown on that occur during that quarter. And, actually this quarter the third quarter we saw four-week instead of standard 2-week shutdown production for the Ford Taurus impacts the number of our plants during the states in a pretty significant way.

OK. So, then margins into a Q4, then you are expecting to improve on what you saw in Q3?

I think that is a fair statement, yes.

OK. And then, just sticking with Associated Spring, I know that you have reduced your exposure to the heavy-duty truck market. But, can you remind us what your current exposure is as percentage of overall segment sales?

While Will is grabbing that number for you, I would say what we did is, we took an exit of one particular product line because, we felt it was a commodity line and that we exited in things like specialty springs for fuel injectors, for fuel injections, for diesel engines or for other kinds of more highly-engineered springs. We still think its a very good market and particularly where we are operating now at the low end of heavy-duty production cycle, still people are still talking about much better demand next year. We just haven't quite seen it.

Sure.

Every truck is running around 5 percent or 6 percent of Spring's total sales.

OK. Great. That's helpful and then, just when you look at -- look out to 2004 what is your forecast for light-vehicle production in North America?

Now, that's a subject of discussion timely tomorrow morning at 8 o'clock. So, stay tuned.

Exactly. And then, so, my questions already have been answered. I just want to confirm. This is just minor, but, Obviously it is nice to see orders from GE aircraft engine program being booked in the backlog this quarter. I just wanted to confirm that, you expect revenue from these orders to begin in the late Q4 or early Q1 time period?

Exactly.

OK. Great. That's all I had.

Once again, ladies and gentlemen, if you do have a question please press "*1" on your pushbutton telephone at this time.

The next question comes from Matt Summerville. Please state your question.

This one is for Will. Will, can you talk about what your thoughts are on the pension expense in 2004 versus 2003?

I continue to see a better incremental hit year-over-year related to the last three years return. We, like everybody else, are seeing a pretty positive turn around in that situation this year but that won't have significant impact and I mean, I believe the pension year-over-year will be about a million dollar higher because of expense.

In '04 versus '03?

Yes.

What was it in '03 versus '02, if you can just remind me?

Incremental was about $3 million year-over-year.

OK. Thank you. And then Ed, can you talk about moving into 2004, if we back away from triple 7 for a second. What your thoughts are in terms of the underlying growth rate of the military business and then what you expect to see next year on commercial OE and after-market standpoint?

I think while we hope to get some improvement in overhaul and repair business just because everybody has put off as long as they can and I think its, operators are trying not to spend money if they are not buying planes. With the trends I discussed a few minutes ago, I think we feel, that is going to come back. If we look at our OEM business, we're really running right now to be essentially flat for next year even though we think there is upside opportunities, we're staffing for the commercial OEM to be flat and the upside for next year would be in the military business and I think as we reported to you, that continues to gain momentum for us.

So, overall, I think that Aerospace will be up next year, but I think, commercial itself -- if you listen to Boeing and Airbus of the world and power guys that's really what they are seeing, too. We might see a little plus on that from the 90-115B, but we're trying to run the plant on the commercial side of it as if it's going to be flat next year.

Based on the schedule you are looking at now, talking about GE 90 in 2004, and you shared what you anticipate the content to be per engine, what sort of revenue numbers are you looking at, do you think you can book in '04 off that program?

You are talking shipments?

Yes.

In the range of $14 to $19 million.

OK. And then the other thing I wanted to talk about, it sounds like, some of the cost savings associated with car are coming in a little sooner than what you had thought and you are still kind of hanging to, you know, the total run rate of $10 to $12 million. How much of that will you capture in '03 and what do you think would be teed up for '04 as being incremental on top of that?

We originally, as you may remember, said that the actual net benefit in 2003 would be virtually 0 because it was a number of expenses that hit P&L that offset the savings we get. Basically, I think, we are still there. May, be a little net saving, but I haven't gotten an update in the last month or so. But I think, incrementally, there should be significant pick-up, the part of that $10 to $12 million showing up early next year and early 2005 and it might relates to the Canadian piece of it, which we hope to wrap up next year.

We have a 1 o'clock meeting tomorrow scheduled to go over that, but I think one of the other things that a lot of the work that we've done to do the integration, particularly in the network portion of it and consolidation and Distribution centers is really now reaching its fruition. I mentioned we had one warehouse where we are already shipping both all the products to all the sales people, that is the traditional Barnes Distribution, as well as car and we will get through a lot of that this quarter, which will cause us some expenses we will see coming into this quarter. But, again, I still feel very good about the overall effect.

Give you flavor, in the neighborhood of 2 and-a-half million of expense will hit the P&L this year. So, you can think about that being offset with savings and maybe a little plus. So, that reduces the year-over-year next year incremental.

OK. And then, just one last question. You mentioned the national regional e-commerce and Tier 2 being, I think $5.9 million, that's all those initiatives folded into one number?

That is correct.

And, then, when you look at the 250 or so accounts that fall under one or more of these programs and run rate in revenues being, I guess close to $24 million, what is the aggregate opportunity on these 250? Is there a number, that there you talk about or can share in terms of where this could go if you don't get any more new accounts going forward?

(inaudible) clarify one thing. In a 249 new accounts really is to attract the national region selling initiatives.

OK.

But obviously, you are right and in the, this is in the areas implying a better than $24 million a year when you put all the initiatives together, that, we think, will ramp hard in 2004 as all the new ones we added in 2003 is start to kick in.

And, have you talked about what you feel is the revenue opportunity from what you captured this year?

Really going to be a subject of planning in a meeting tomorrow morning.

OK. OK. That's all I have, guys.

And we get time for one more question.

No further questions in queue.

Excellent. I will take it back over then. Thanks for joining us today. If any one of you has a follow-up call my office at 860-973-2126. Ooze we will talk to you in February.

Ladies and gentlemen, if you wish to access replay for this call, you may do so by dial in 1800-428-6051 or 973-709-2089 with an ID number 308151. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.