Barrick Mining Corp (B) 2005 Q2 法說會逐字稿

Call audio begins in the middle of operator instructions.

(Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Brian Koppy, Director, Investor Relations. Please proceed, sir.

Thank you and good morning for joining Barnes Group's second-quarter 2005 earnings call and web-cast. This is Brian Koppy, Director of Investor Relations for Barnes Group, and with me this morning are Barnes Group's President and CEO, Ed Carpenter, and our Senior VP of Finance and Chief Financial Officer, Bill Denninger. Following their prepared remarks, we will be happy to answer your questions.

In addition, I want to remind everyone that certain statements we make on today's call, both during the formal presentation and during the question-and-answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements. We encourage everyone 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 website.

Now, let me turn the call over to Ed. Ed?

Thanks, Brian. Let's move quickly because I know everyone's busy. Go to Schedule 1, if you could, please, second-quarter highlights. Topline was up over 11.3%, with good growth in all three businesses. Record sales -- $280.5 million. Improvements in operating profit and net income were in excess of 30%, and that is excluding the gain on the NASCO joint venture.

We had strong operational performances in all three businesses, all up from prior year. We are increasing our full-year estimate of EPS to a range of $1.95 to $2.05. That's up from the prior estimate of $1.80 to $1.90. And importantly, yesterday, the Board increased the quarterly dividend up 10% to $0.22 a share.

Let's go to Schedule 2 if we could, please. These are the takeaways we would like to maybe chat about for the second quarter. First of all, in Barnes Distribution, they saw increased service level and lower distribution costs. Importantly, their average order size in that quarter increased 17% over prior year. Their sales were driven by strong activity in corporate account, Tier II, and their Canadian business was up nicely in the quarter. European sales and margins improving.

Associated Springs' takeaways include revenue growth continues, both organic and acquisition. It's primarily focused on our specialty industrial products, not our legacy business. They also saw productivity levels improving across the board. For example, sales per employee were up 10% year over year. Their pricing programs are starting to take traction. It's still tough with some of our big customers, but the impact of the steel prices is beginning to decline.

In Barnes Aerospace, they are doing a terrific job capitalizing on strong industry fundamentals. Last month, I was at the Paris Air Show, something I've done since the mid-'80s. The business outlook was the most positive I've seen in some 20 years.

More quantitatively, though, Aerospace's backlog is now up 60% year over year, a nice problem for the oncoming 18 months. We saw continued growth in their aftermarket business. It was up 26% and now generates almost 50% of their profits. Importantly, manufacturing operations have been expanded in Singapore, giving us advantages in both labor and other costs. And we signed a sixth aftermarket RSP agreement during the quarter.

Let me turn it over to Bill Denninger for more details on the second quarter. Bill?

Thank you, Ed, and good morning, everyone. I'm pleased to discuss with you today another quarter with strong operating performance for Barnes Group. Let me start by reviewing highlights of the income statement as shown on Schedule 3. Second-quarter sales growth of 11% included about 3.5% from our Barnes Precision Valve business, formerly known as DE-STA-CO, and about 1.3% from changes in current exchange rates.

For the third consecutive quarter, each of our three business segments had solid organic growth. I'll go into more detail on sales when I discuss the results from each business in a few moments. A nice positive with the sales growth was an improvement in gross margin as cost of sales moved to 63.7% from 65.2% in the prior year, a drop of 150 basis points, driven by reductions in all three businesses.

Selling and administrative expenses as a percentage of sales were flat with the prior year, at about 28%. That result was an increase in operating income of 34% and an increase in operating income margin of 140 basis points to 8.5%. Net other income of 9.1 million includes 8.9 million from the sale of our interest in NASCO at the end of April.

Interest expense of 4.3 million was up about 17%, primarily due to an increase in the effective borrowing rate, specifically a short-term rate on our revolver increased from 2.5% a year ago to 4.2% in the second quarter. In addition, average borrowing was up about 13 million this year as a result of increased working capital needs, driven by the higher sales.

Turning now to Schedule 4, the effective tax rate of 35% includes the impact of the sale of the NASCO interest. Excluding that item, the tax rate would be approximately 25%. This adjusted rate of 25% is up from last year's second-quarter rate of 23% due to continued profit growth in the U.S., driven by Barnes distribution, Barnes Aerospace, and Barnes Precision Valve.

Reported net income of 18.7 million includes an after-tax gain of approximately 4 million from the sale of our NASCO interest. Excluding the effects of that gain, net income increased 30% to 14.7 million or $0.61 per diluted share. With our stock price depreciating during the quarter by about 22%, our average diluted shares outstanding increased by approximately 2% to 24.2 million. Our projected weighted average diluted share count for 2005 was about 24.5 million.

Our capital expenditures for the quarter were 6.2 million compared to 8.4 million a year ago. Capital expenditures for the full year are expected to be around 30 million with an expected depreciation in the same range. Capital expenditures are primarily focused on investments needed to increase capacity. The estimated amortization of intangible assets this year is expected to be a little over 3 million.

Turning now to Schedule 5, I will review the results for each of the businesses, starting with Barnes Distribution, where sales for the second quarter of 113.3 million were up approximately 6% from the second quarter of '04, including about 1.3 million or 1% from currency changes. As Ed mentioned, we continue to experience improvement in our key customer-related performance indicators, which are average order size, lines per order and dollar value per line, and customer service levels are being maintained in the desired range.

Barnes Distribution's operating profit was 6.6 million, up 34% from 4.9 million in 2004, generating an operating margin for the second quarter of 5.8%, up from 4.6% last year. This significant improvement was driven by higher sales volume, the beneficial effects of our distribution center integrations effort last year and benefits from the first-quarter reduction in force, partially offset by increased sales personnel and product costs. Barnes Distribution continues to make improvement in its overall logistics comps, which are down approximately 12% from last year as a result of improved fill rates, increased average order size and continued operational improvements within the distribution centers.

During the second half of this year, Barnes Distribution will focus on strategic sales initiatives, continued operational execution and global sourcing capabilities. As a result, we continue to project Barnes Distribution's operating margins for the full-year '05 in the 5 to 7% range, up from 3.2% last year.

At Associated Spring, the second quarter reflects continued progress in improving operationally, intangible benefits resulting from our activities aimed at mitigating raw material costs increases. Specialty operations, such as nitrogen gas products, Seeger-Orbis or retaining rings in Precision Valve continued their strong profitable growth.

In addition, dedicated efforts to attract new customers and penetrate existing customers are providing material results. Orders from new customers so far this year are approximately 25 million, which is typically a full-year run rate.

Sales of 111.5 million were up 18% from prior year and reflect strong growth in the nitrogen gas and industrial markets. Acquisition-related sales were 8.8 million and the foreign exchange impact was a positive 2 million. The nitrogen gas products business had sales of 23.4 million for the quarter, an increase of 26% and the third consecutive quarter of over 20 million in sales. Nitrogen gas products' success continues to be driven by its effective strategy of overall accounts leadership and value-added differentiation for its customers.

Industrial product sales of 30.8 million, an increase of 24%, included approximately 14% of organic growth. Transportation sales into the light vehicle and heavy-duty truck markets increased 14%, almost entirely driven by acquisition-related growth. Our outlook within the heavy truck market remains favorable as we are well-positioned with key customers there.

The recent increase in light vehicle sales data provides us with additional confidence in the automotive manufacturers' ability to achieve their production goals of roughly 16 million builds for the year, which would be on target with our expectations.

Telecom and electronic sales of 2.9 million were down from 3.6 million last year. However, growth in high brightness LEDs, or light-emitting diodes, and new technologies within the cellphone market are expected to stabilize sales within this market sector.

Associated Spring's operating profit in the second quarter was 10.6 million, compared to 8.1 million reported in the second quarter of '04. This 31% increase was driven by the additional sales volume, partially offset by increased incentive compensation costs. Second-quarter net raw material costs were up in the range of 5 to 700,000 compared to the year-ago quarter.

Based upon first-half results, we are now projecting a full-year net expense increase due to raw materials compared to last year of around 1 million, down from the earlier projections of 2 to 3 million of higher net expense. This improvement comes from lower-than-expected cost increases and continued success in implementing price increases.

Associated Spring's operating margin for the second quarter was 9.5% compared to 8.6% in the second quarter of 2004. Year-to-date, Associated Spring's operating margin was 9%, reflecting its strong first half. However, the second half will bring historical seasonality to its results, with additional manufacturing shutdowns. As a result, for the full year of 2005, operating margin continues to be projected around 8%.

Regarding the negotiations between the UAW and Associated Spring, there's not much to report, other than that both sides continue to discuss the key issues in an effort to reach settlement.

Turning now to Barnes Aerospace, which had another strong quarter across the board. We continue to capitalize on strong industry fundamentals as we realized growth in both the OEM and aftermarket businesses. Second-quarter sales of 58.3 million were up 9% in the second quarter of '04 and operating profit improved 33% -- a real nice drop-through.

OEM sales for the second quarter were up 6% to 44.2 million. Sales from the GE90-115B engine of 7.7 million grew approximately 64% from a year ago. Commercial sales were 31.1 million, military sales were 10.7 million and industrial gas turbine sales were about 1 million for the second quarter.

Barnes Aerospace orders for the quarter were 74.8 million, and backlog increased to 245.7 million, of which about 70% is scheduled to ship in the next 12 months. There were no significant onetime orders related to expanded raw material leadtimes recorded during the quarter. Commercial and military OEM orders in the second quarter were up significantly, to 41.3 and 14.5 million, respectively. Aftermarket sales increased 26% to 14.1 million for the quarter, including MRO sales of 10.1 million and aftermarket RSP sales of 4 million.

Ed mentioned we entered into an additional aftermarket RSP agreement during the quarter, which had a participation fee of 18.5 million. These aftermarket RSP agreements continue to be a good addition to our Aerospace portfolio and provide excellent returns. Under the RSP agreements, we have now committed a total of 117 million of participation fees and have paid out 72.5 million. The balance will be paid out over the next four quarters.

A 34% increase in operating profit at Aerospace generated an operating margin of 11.7% compared to 9.6% in 2004. This improvement was driven by the higher sales volume and an increased percentage of aftermarket activity. For 2005, Barnes Aerospace operating margin is projected to be around 11%.

Turning to Schedule 6, cash on our balance sheet at the end of the quarter was 32 million. The gross debt to cap ratio was 42%, within our targeted range of 40 to 45%. We expect to maintain a gross debt to cap level within that range during 2005, absent any acquisition activity.

Our trailing 12-month debt to EBITDA ratio was 2.5 times versus a debt covenant of 3.25 times, giving us additional borrowing capacity of about 77 million. As a result, we continue to feel that our balance sheet is well-positioned to support near-term growth initiatives.

So, in summary, another good quarter, and we think a very good first half. We see solid momentum in all three groups as we move into the third quarter. Thank you. I'll now turn the call back to Brian.

Thank you, Bill. We will now open the call to your questions. We ask that you limit yourself to one question and one follow-up so that as many individuals as possible have an opportunity to ask their questions. Operator, the first question, please.

(Operator Instructions). Robert Stallard, Banc of America.

Just a couple of questions actually regarding the rest of this year. Ed, you mentioned some of the seasonality that we can expect in the next couple of quarters. I was wondering if you could elaborate on what you think the impact will be this year and looking at last year, if you can see what the absolute number is. You have taken DE-STA-CO on board this year. Do you think that we will see a similar sort of scale of slowdown in Q3, Q4, and also how is distribution going to move around?

Well traditionally, we -- go ahead, Bill.

Robert, it wasn't clear to me. You're asking specifically about Associated Spring or (multiple speakers)

Both for distribution and on Spring, because both see differences in Q3 and Q4.

Historically, Spring, we would see a drop in the second half at the sales line, which obviously translates down to the profitability, and that relates to shutdowns of key customers both in Europe and the U.S. And if you go back and look at our results, you'll see that pretty clearly. Distribution, somewhat less. They do have a slower fourth quarter due primarily to the holidays.

What Evans is -- a lot of their customers will shut down in the back half of the year, the last week or two, and so they traditionally start getting limitations on what they can ship in, probably the -- mid-December at the best. So we've tended to see that over the years and I would think we will tend to see the same thing this year.

And in terms of the sales decrease, you could see it could be similar in terms of what you saw in 2004.

Yes. 2004 was a little bit distorted. You may recall that we did the -- what was then DE-STA-CO, which is now Precision Valves for us, in the September time-frame. That would have added -- I'm going to -- I'm doing it from memory, but it's somewhere between 8 and 12 million --

About 8.

$8 million worth of sales in the second half that wasn't in the first half.

And just in relation to what you expect for the rest of the year, Bill, you said you expect the overall Aerospace margin this year to be 11%. That would basically imply the margin is going to come off a bit as we move through the rest of the year in Aerospace. Is that you being conservative or is there some traction there that is different in the second half?

I think what Bill was saying is it is going to be around 11%. And that's got -- we don't tend to give ranges, but that's kind of the range. We're thinking of that as a range. We don't see major deterioration in that, but it has been a good first half.

Yvonne Varano, Jefferies & Company.

Thanks. In your Aerospace forecast, I was just wondering what kind of build rate for the 777s that the GE engine is going into that you are forecasting?

This year, it's still around one delivery, but the plane itself is supposed to be ramping up I believe to 1.5 toward year-end.

We still have more engine kits then, multiplying that by two, because we're also -- we're well ahead of the airplane delivery schedule because of when the engine is put on, as well as when our part is required in Cincinnati. In addition to that, we do get some mix of both product that will be put on actual engines versus initial spare supply. So, we see that there is a slight ramp-up in the second half versus the first half for that product for us this year.

And then just remind me how far in advance does the air part go out prior to actual shipment of the plane?

Shipment of which product?

The delivery of the plane.

I don't really know that answer. We tend to focus on the engine itself, and we rely on our customer to give us visibility out into the future and so that's why we tend to look at perhaps five kits. If we were shipping five kits in the first quarter, and we may get up to I think seven kits towards the end of the year, so that would give you that kind of feeling. But we don't track the actual triple 7 extended-range or long-range itself, Yvonne.

Okay. And then when you say five kits, is that per engine or per pair of engines?

That would be each kit is for an engine.

For an engine -- okay. Thanks.

So if I say five, that would be --

For five engines.

Yes.

And then I know you said it in Associated that you have some pretty significant ramp-up in your new customer sales in the quarter. Could you just give a little more color on what is driving that?

I think, Yvonne, it's just basically just a thrust on the part of the sales and engineering group to get out there and both line up new customers as well as get additional business from existing customers. I mean, it's a strategic initiative, basically, that's really taken hold.

Okay, I didn't know if there was a new product or one new customer in the quarter that might be driving that.

No, it would be broad-based.

Matt Summerville, KeyBanc Capital Markets.

Couple questions. First, either Bill or Ed, could you walk through -- it sounds like you're getting a little bit of price in all of your businesses. Maybe the magnitude of price increase you're getting in Spring, Aerospace and Distribution?

Well, that's what we think is pretty sensitive information. I mean, we obviously analyze that. I can tell you that for the Company overall in the first half, the net impact of pricing was about a positive 2%.

Okay, perfect. And then, in the distribution business, you mentioned that Europe appears to be doing better, and you actually -- I can't remember the last time you actually talked about your European distribution business, so I would like a little more color on what you are seeing there.

And then, Bill, you mentioned that you provide these margin ranges that you still see 5 to 7 potential here in distribution, which, you know, you are at 5.5 round numbers for the first half. That would imply a number much greater than 7 to get to that seven in the back half. And I'm wondering how I should think about the margin progression in particular. As I think Ed said, there is seasonality in that business as well, and typically you see fourth-quarter margins lower than any other time during the year.

Maybe I can comment on distribution first, Matt.

Yes.

You are right. We are at 5.5. We've given the range of 5 to 7, and you are right, the fourth-quarter sales tend to drop because of the holidays. But I think Ed talked about, or maybe I did, the significant improvement and the accomplishment in reducing logistics costs, other cost drivers there, and we expect those efforts to continue and to continue to deliver results. You're right. We'd have to have a real strong third and fourth quarter to hit 7. So that's probably on the upside. But we do look for sequential improvement quarter by quarter.

In terms of Europe, which is primarily UK and France, and then we've got a lot of operations inside of Raymond, we are seeing, particularly at the topline, a little stronger growth than we're seeing domestically here. Some of that is exchange, so you have to be a little careful. And the document I'm looking at, I can't break out exchange. But it is just, one, I would say last year was a tough -- a little tougher economically in the markets that we served in the UK and France. Secondly, we have worked very hard on a couple of new initiatives in both countries relative to alternative channels in both those -- in both countries, those initiatives have been successful.

Okay, and then Ed, are you able to give any more insight into what your anticipated content is on the A380 per engine?

Not yet. No, I couldn't do that to you.

I will get back in queue, thanks.

Michael Greenwald, BB&T Capital Markets.

Can you go into a little detail -- I was sort of expecting a little improvement at the SG&A line. Is it higher incentive comp, are there more salespeople -- what's going on there that's keeping this flat?

The biggest driver is what you just said -- it's higher incentive comp.

Okay. And one other question. Can you go into a little more detail along the lines of what the last gentleman just said about the margins in Associated Spring? What's getting you -- I think you said you expect the full year to be around 8%. What's getting you there on the full year, in the second half, at least?

Are you questioning how we go from 9 after six months down to 8? Is that your question?

Correct.

I think we talked there about the seasonality -- I mean, it's sales-driven, and you see a falloff in sales in the second half historically, and we expect the same thing to happen this year.

You're traditionally -- we're watching capacity very closely, but traditionally in both Aerospace and in Associated Spring, the second quarter is typically the best quarter because of customer demand. It's been that way for a number of years. The second thing that I would point out is that we're ramping up capacity in Aerospace in Singapore, and we're going to be doing this -- we're bringing a second line on in Monterey, Mexico, which is the new facility. So in both cases we will expect expenses in the second half for those expansions.

I guess what I -- I didn't elaborate that very well. But I guess I would expect a bigger falloff due to the seasonality. I mean, is it mix-driven that's maintaining it at sort of at such a high level? To get to the -- (multiple speakers)

The falloff, if you analyze the numbers, it's not a huge falloff. It's 2 to 3 points, in terms of a percent of the full year.

And the other thing is -- which is important to look at as you look at historical numbers is to begin to recognize that over the last three to five years, Associated Spring has changed its mix of products. And as it became less dependent on the big three and more focused on what we call specialty industrial products, like nitrogen gas, springs, retainer rings, precision valves, those products with a little better margin tended not to also have as much seasonality.

Thanks. One other extra -- one additional question. In the higher guidance, can you go into a little more detail as far as is this largely aftermarket sales within Aerospace, a higher margin, mix sales within Associated Spring? But I mean at what extent does the lower raw material prices having -- how -- to what extent is that playing into the increased guidance?

Well, I mean, all three groups -- we walked through the way we came up with the guidance. We're seeing improvements in all three groups. Certainly one of the factors at Spring is what we think is going to be a lower impact from net raw material increases. But that higher guidance is reflective of improved operations and results at all three businesses.

I would say when you looked at the chart that we did, and we're obviously not going to discuss it in that kind of detail, but there were probably 10 or 15 -- well, there were more than 10 -- 10 to 15 factors that were pluses and minuses. Bill just talked about that. I mentioned earlier the Singapore and Monterey expenses. We've still got some unknowns relative to material titanium at Aerospace, so we may have a little contingency in our mind on that. So, we're not taking all the operational improvements that we've seen in the first half to the bottom. Plus, we had the seasonality that we've talked about.

John Haushalter, Robert W. Baird.

Just two quick questions for you. One on the acquisition front. You guys are kind of hitting the lower end of your target debt to cap range, or you will be kind of at the end of the year. Are you seeing stuff out there that you would like to acquire? Or could you just kind of comment on pricing in the marketplace?

We are seeing -- there's a lot of product out there. We're looking at it. As you know, we're very -- we are quick sellers and very slow, methodical buyers. And the product we're seeing out there, if it's -- I think the prices have at least stabilized. I would say a year ago, they started to take off and people were -- particularly outside the United States, the prices were a little high, whereas now, we've seen them come down or at least stabilized. And we can -- a good strategic buyer can make a good purchase today if you find the right product, and we're seeing a lot of opportunity out there.

Okay, and relative to kind of continuing into like a seventh RSP, would you be more inclined to do an acquisition or just another RSP with your cash, or -- as you build up cash?

They tend to be independent decisions. As you alluded to, our debt to cap has come down nicely. We've maintained a pretty strong cash position in addition to that. And so we would view that we have capacity to do both.

So certainly not mutually exclusive.

And then for the transportation side, can you just kind of split out how you did with the big three and then kind of the transplants?

John, this is Brian. I can give that detail off-line, because I will go through all the -- kind of the subsegments and how we got to those numbers in transportation.

Robert Stallard, Banc of America Securities.

I was wondering if you could comment on the raw material situation. You did say it's getting better. You were in negotiation with some of your suppliers. How is that progressing, and how you see this trend progressing through '05 and into '06?

Robert, the reason we've dropped our estimate, if you will, of the incremental expense this year is because the negotiations were quite successful, actually, in terms of our ability to push out any further price increases on the specialty wire -- or cost increases this year.

On certain specialty wire.

Certain -- and then some of the higher-volume wire. So we're very pleased with that result, and the end result is what I said -- we've dropped our estimate. Other contracts will be coming due toward the end of the year, and obviously, we will be focused on them as well. I'll also tell you that Spring is actually going after a number of their vendors with price-downs given what's happened to the market price, at least on the flat steel side.

So there are still things that could change this year and certainly could change next year on the raw material front.

Sure.

Yes.

Matt Summerville.

I have a couple of follow-up questions. Can you talk about the overall outlook in the nitrogen gas business? I mean, how much visibility do you have there? Year to date, you're up 20, 22%, something like that. Do you see similar kinds of comps in the back half of the year? I believe if I'm not mistaken, in the third quarter in particular, you might have an easy comp relative to last year. Can you talk about that?

Yes, we do have an easy comp, you're right. Last year, you may recall at the end of the third quarter we said that was the first -- at the end of the third quarter in '04, we said that was the first time that we had seen nitrogen gas not have double-digit growth since we owned it, really. So we're watching it very carefully, and frankly, we're looking at that very closely right now.

They've started off this third quarter very well, so our visibility on their order input is it's not the same as a distribution where we know what our orders are going to be when we get -- about noon the day before we ship them. There, there's a little more visibility. But it's really not out in the long term. I heard an anecdotal report based on their distributors' meetings, and that seemed to be very positive, and this was a global distributor meeting. So, we continue to feel very good about that business.

How fast do you think the market is growing? And then, is part of the growth that you've been able to obtain the result of market share gains?

I think we continue to gain market share, but, as you may remember some discussions earlier, we continue to believe that nitrogen gas springs are taking business away from mechanical springs. We've just started an operation, a small assembly operation in China in one of our other facilities, and that's done remarkably well in the second quarter.

So, I think you can see even in -- I wouldn't call China a less-developed country, but perhaps in a situation where you wouldn't have expected to see as much nitrogen gas that there is acceptance of this technology and the advantages of this technology over the older traditional mechanical spring. And we've seen the mechanical die springs, which were an important factor in two, through our Raymond business to be flattish for the last three or four years, and we're a strong player in that business.

And then just two more quick once. First, on the acquisition pipeline, you mentioned it. What's the average deal size that you guys are looking at these days. And then, Bill, if you could talk about what your -- what operating cash flow looked like in the second quarter and what your cash flow expectations are for the year.

I would say that acquisitions -- the pipeline -- and I wouldn't even call it a pipeline, I would almost call it a funnel, Matt, because you end up with a lot coming in and then you're never quite sure which ones will come out the end. And so I would say if you looked at our mix of size on our last nine acquisitions, that would give you a range and a likelihood of what could happen. And they ranged in size from $5 million to $4 million -- $5 million in sales to 110.

And on the cash flow, the reason we don't issue the cash flow with the press release is we're still working on some foreign currency translation effects that you need to do for U.S. GAAP purposes. So I've got some internal numbers I will share with you, just to give you a feel for the direction. And this is in line with our historical performance, where we tend to use cash or at best break even in the first half due primarily to working capital increases.

So, in the first half, again, internal numbers here, there was -- or first quarter, I should say, there was a negative what we call free cash flow of around 10 million; that reverts to a positive 12 or so in the second quarter. So, on a net basis, we're up a couple of million. And that would have been higher except the working capital itself was up significantly in the first half, again, due to higher sales. So we would expect in both the third and fourth quarter to generate, as we have in the past, significant free cash flow.

Okay and then just Bill, I can't remember, or I may have missed it. Did you mention what your full-year tax rate should be?

Well, the fact that we booked 25 would indicate that that's our projection for the full year. In other words, it's a full-year number that you record. And again, that's outside the NASCO discrete gain.

At this time, gentlemen, there are no further questions.

Great. Thank you, operator. If there are any additional questions about matters discussed this morning, please feel free to contact the Investor Relations department. Thank you again for joining us today.

And once again, ladies and gentlemen, we thank you for your participation in today's conference. This concludes today's presentation. You may now disconnect. Have a great day.