Barrick Mining Corp (B) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Barnes Group third quarter 2006 earnings conference call. At this time all participants are in listen-only mode. (OPERATOR INSTRUCTIONS). As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to turn the presentation over to your host, Mr. Brian Koppy, Director of Investor Relations.

Good afternoon, and thank you for joining Barnes Group's third quarter 2006 earnings call and Webcast. This is Brian Koppy, Director of Investor Relations for Barnes Group, and with me this afternoon our Barnes Group's retiring President and CEO, Ed Carpenter, our new President and CEO, Greg Milzcik, and Senior VP of Finance and Chief Financial Officer, Bill Denninger. Following our 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 financial 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 Website.

On today's call, certain non-GAAP measures related to the Company's performance are discussed. Reconciliations of these measures to U.S. GAAP are provided in our earnings press release, and are available on the investor relations section of the Barnes Group Website, at BarnesGroupInc.com.

Our discussion today will reference schedules that are also available on our Website. But before we turn to the first schedule, I would like to turn the call over to Ed for a few opening comments.

Thank you, Brian. Good afternoon. I have appreciated the chance to work at Barnes Group over the last eight years. Together, our team has built a financially stronger and globally competitive company -- more than just doubling in size; by most financial metrics, I think, it is much stronger. I want to thank the employees of Barnes Group for their dedicated work and effort in each one of our businesses -- Associated Spring, Barnes Aerospace, and Barnes Distribution. The cash flows from these businesses have enabled our investment growth, and the competency and the effort of the folks at our corporate office have further leveraged that flow beyond normal expectations.

I would also like to take a moment and thank the investors and the analysts who have supported and followed Barnes Group. Your ability to take the time to understand our objectives and achievements have helped propel Barnes Group to record heights. Thank you.

I would like to thank the Board of Directors for their support of initiatives at Barnes Group, whether that's been employee development and education, where we clearly have made top-quartile investments, support of our acquisition programs, innovative RSPs, and keeping a very strong balance sheet.

Finally, with their commitment to succession planning and two years of extra work, it resulted in the election of Greg Milzcik as President and Chief Executive Officer, and I wish Greg and his strong management team every success. Greg?

Thanks, Ed. Good afternoon. Today Barnes Group reported another quarter of solid results, which continued to demonstrate our market success and effective execution of our growth strategies.

Our third-quarter highlights include strong top and bottom-line growth. For the 15th consecutive quarter we achieved double-digit revenue growth. And in the third quarter, sales were in excess of $300 million for the second consecutive quarter, a sustainable threshold.

Net income of $19 million was up 61% from the adjusted 2005 results, with comparable diluted EPS of $0.35 up 46% from the adjusted $0.24 in the third quarter of 2005. Operating margins improved across all three businesses, as each demonstrated improvement in the number of financial and operating metrics. The Company's operating margin was 9.5%, a 3 percentage point improvement over last year's adjusted level.

Third-quarter results also validate Barnes Group's commitment to embrace globalization and balance our business between domestic and international operations. The recent acquisitions of both European-based Heinz Hanggi within Associated Spring, and KENT within Barnes Distribution, significantly contribute -- contributed to the balance of our business between domestic and international operations. As of the third quarter, more than one-third of our business is now based outside the U.S.

Turning to schedule 2, I will discuss a number of operational highlights within each of our businesses, beginning with Distribution, where strategic acquisitions are contributing to favorable top and bottom-line growth. The KENT acquisition is being judiciously integrated and significantly enlarges our presence in Europe following our successful acquisition of Toolcoom Supplies in the UK last year. KENT provides added scale and scope to drive balanced, sustainable and profitable growth within our European operations.

Barnes Distribution's operational activities continue to generate positive results. Service levels and distribution costs remain within our targeted levels. Other metrics such as average order size, which remains over $400 for the third quarter in a row, and lines per order, which are up 4%, are key indicators of the effectiveness of our process improvements. Throughout the rest of the year, Barnes Distribution will maintain its focus on growing sales, maintaining service levels, and integrating the KENT acquisition.

Moving on to Associated Spring, as expected, Associated Spring's operational performance continues to improve. Associated Spring's focus to improve profit levels, grow high-margin business, and improve the traditional operations are being met with success. The traditional operations continue to recover, as topline revenues grow and margins improve. The overall economics of the business are improving as we work with our customers to change our manufacturing footprint to provide lower costs and enhance our productivity. The specialty operations business, with their highly-engineered products portfolio, continues to make progress.

During the quarter we completed the transfer of production out of Barnes Precision Valve's facility in Suburban Detroit to other domestic and international facilities. Barnes Precision Valve's international footprint and global customer base, along with Barnes Group's strong Singapore presence, make Barnes Precision Valve's entrance into Asia a smooth transition. Barnes Precision Valve is now well-positioned to expand along with its Asian customers.

Associated Spring's objective for the balance of the year remains the same -- focus on profitable sales growth and operating efficiencies.

Moving on to Aerospace, which reported record sales and profits, we continue to increase the capacity of our operations to meet higher production demand from our customers through investment in high-tech equipment and by driving operational excellence initiatives in each of our facilities. The recently announced addition of another aftermarket revenue sharing program to the portfolio continues to strengthen and leverage our Singapore operations and diversify our business. We are very pleased with the performance of our new aftermarket RSPs.

Our aftermarket MRO activity is very robust, due to strong industry fundamentals and the benefits of investments made in 2000 to develop relationships with key customers. Our proven ability to engage new customers and platforms and develop new repairs is necessary for continuing momentum within the aftermarket MRO business. Our aftermarket revenues are now approximately one-third of our Aerospace segment and provide excellent balance with our OEM business.

As Barnes Aerospace moves into the fourth quarter, they will continue to focus on operational efficiencies and rigorous capacity planning to meet strong demand and their aggressive year-end objectives.

Before turning the call over to Bill, I would like to thank Ed for his tremendous contribution to Barnes Group. He leaves behind a transformed organization that is significantly better managed and positioned for growth than it was when he arrived. His efforts have solidified and bolstered the organization for continued balance, sustainable and profitable growth. On behalf of the Board of Directors and employees, I want to thank Ed and wish him well in his future endeavors.

Now I would like to turn the call over to Bill for a financial update.

Thank you, Greg, and good afternoon, everyone. Turning to schedule 3, we once again posted double-digit quarter-over-quarter sales growth. The 19% third-quarter sales growth rate is comprised of [about] 9% from organic growth, 6% from Barnes Distribution's Toolcoom, SPD and KENT acquisitions, and 3% from Associated Spring's Heinz Hanggi acquisition. Currency changes added another 1%. I will go into more detail on sales when I discuss the results for each business in a few moments.

The benefit of our double-digit sales growth was compounded by a 0.8 percentage point improvement in gross margin, as cost of sales improved 63.2% from an adjusted 64% last year with reductions in all three segments. The higher gross profit margins in each of the operating segments were driven primarily by mix and operating efficiency.

SG&A was reduced by 2.2 percentage points to 27.3%. This reduction was driven by lower expense related to stock compensation and improvements of Barnes Aerospace and Associated Spring, currently offset by an increase in Barnes Distribution -- the result of higher selling costs.

Operating income increased 73%, with an increase in operating income margin of 3 percentage points to 9.5%. Interest expense at 6.8 million was up 54%, primarily due to higher average borrowings, which increased 151 million over the prior year to fund organic growth acquisitions and RSP investments.

Third quarter effective tax rate was 20%. It continues to reflect favorable tax incentives from the Singapore government. The adjusted prior-year rate was approximately 14%. The prior-year rate includes several retroactive and out-of-period items. Changes in our tax rate are largely dependent upon the mix between domestic and international earnings. Our projected full-year effective rate is now in the low 20s.

Net income for the third quarter was 18.9 million. This was a 61% increase over last year's adjusted level of 11.7 million. And on a comparable basis, diluted EPS was $0.35, a 46% increase. Prior year's adjusted results exclude certain items that should be viewed as retroactive or out of period. Detailed reconciliation of these items is provided in our press release.

Average diluted shares for the quarter increased to 53.5 million, or 8% over the prior year, but up only about 1% sequentially. We expect diluted shares for the fourth quarter to be slightly higher, bringing the full-year average to approximately 53 million. And for next year, we would expect average diluted shares to be in the 55 to 56 million range.

Turning to schedule 4, I will review the results of each of the businesses, starting with Barnes Distribution, where sales for the third quarter of 135 million were up approximately 19%. Organic sales growth was 3%, driven by North America, currently offset by declines in the non-KENT European business. Toolcoom, SPD and KENT acquisitions contributed 16.4 million, or 14%, and currency change was 1.6 million, or about 2%.

Barnes Distribution's operating profit was 9.2 million, up 65% from last year's adjusted 5.6 million. The operating margin for the third quarter was 6.8%, up from the adjusted 4.9% in 2005. Contributions from recent acquisitions and lower stock compensation expenses drove this higher operating profit.

Associated Spring sales of 112 million were up 12% from prior year. These results included 7.6 million from the Hanggi acquisition and a favorable impact of 1.8 million from foreign exchange. Excluding acquisitions, sales were up about 2% over prior year within specialty operations. Each of the businesses within specialty ops realized significant sales growth, with the exception of nitrogen gas products. However, as anticipated, the nitrogen gas product business is currently realizing increased sales and order flow. Sales have increased over the last two months from a low in July, and orders for the last two months were at the highest levels since March.

Also, our efforts within the traditional business generated topline revenue growth of approximately 6%, due to ongoing price improvement and strength in the heavy-duty truck and telecommunications end markets. Associated Spring's financial improvement in the third quarter was broad-based, as both the specialty operations, which includes Heinz Hanggi, and the traditional business contributed to the 4.5 million increase in operating profit and the corresponding increase in operating margin of 3.5 percentage points to 9%.

Our stock compensation expense also benefited Associated Spring's third quarter. These expenses were partially offset by expenses of approximately 600,000 for closing Barnes Precision Valve's Suburban Detroit facility. The remaining Barnes Precision Valve closing expenses are projected to be lower in the fourth quarter, at about 450,000.

Turning now to Barnes Aerospace, which continues to achieve record results, third-quarter sales of 77 million were up 30%. Operating profit improved 72% for another quarter with very impressive dropthrough. Total OEM sales for the third quarter were up 15% to 52 million. Commercial sales were 37.6 million, which includes a 58% increase on sales of components of the GE90 engine family to 17.4 million. Military sales were 13.5 million, and industrial gas turbine sales were 800,000 in the third quarter.

Barnes Aerospace orders for the quarter were 119 million, up approximately 70% from the prior-year level of 70 million. Orders for this quarter were abnormally-high due to additional bookings received from Goodrich as a result of our previously-announced strategic partnership.

Backlog increased 44% to a record 367.7 million, of which approximately 58% is scheduled to ship in the next 12 months. Long leadtimes for titanium and certain platforms continue to extend the scheduled backlog. Commercial orders of 65.6 million were up 83% from a year ago. The commercial backlog of 285 million was up 55%. Military orders on backlog in the third quarter were 26 million and 73 million, respectively.

Aftermarket sales increased 76% to 25.4 million for the quarter, including MRO sales of 17.2 million and aftermarket RSP sales of 8.2 million. Aftermarket MRO activity is being driven by strong industry fundamentals and the strength of Barnes Aerospace technology and capability. In addition, a number of service bulletins issued in the early part of this year are increasing the demand for our MRO services.

Barnes Aerospace also continued to expand its presence in the aftermarket by entering into an additional aftermarket revenue sharing program. Commitment for this RSP agreement is 19.3 million. These aftermarket RSPs continue to be meet our expectations and are an excellent complement to our aftermarket maintenance repair and overhaul operations.

Barnes Aerospace has now produced quarter-over-quarter growth in operating profit for 11 consecutive quarters. Third-quarter results reflect a record operating margin of 14.7%, up from 11.1% in 2005. This improvement was primarily driven by higher sales volume and the increased percentage of aftermarket activity.

Turning to schedule 5, cash was 32 million at the end of the quarter. The gross debt to capitalization ratio was 46%, just slightly above our targeted range reported of 45, due to funding required for recent acquisitions. Our debt to EBITDA ratio was 2.7 times versus the debt covenant of 4 times, giving us additional borrowing capacity of over 200 million.

Capital expenditures for the third quarter were approximately 9.5 million. Our year-to-date CapEx was approximately 33 million. Full-year CapEx is now estimated at approximately 40 to 45 million, with depreciation and amortization of about 40 million. The higher capital expenditures this year are for investments to increase capacity, primarily in Barnes Aerospace.

So, in summary, third-quarter results have demonstrated the benefits of a well-balanced organization consisting of diverse businesses which have been able to achieve sustainable and profitable growth. As a result, and based on current market conditions, we are increasing our outlook for the full year 2006 to $1.33 to $1.35 per diluted share.

Thank you. I will 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). Yvonne Varano, Jefferies.

I was wondering if you could give us a little bit of an update on the business. I think you're trying to get some new business out of Ford, and then I know heavy-duty trucks has been very strong here. But when do you anticipate starting to see a slowdown in that portion of the business?

Thank you. First, I think that we're not anticipating a huge impact out of the heavy-duty truck, because it is a very small portion of our overall business. And the ongoing business with Ford is primarily some of our business going into the Monterrey, Mexico facility.

Okay. And then, on the margin side in Associated Spring, we saw a nice increase in the quarter. Is that something you think is sustainable up at that level?

We do think it is. It's driven by price. We're going to continue to push price where we can. It's also a function of specialty ops, which continued to rebound and is moving forward very nicely. So, yes.

You made some comments on nitrogen gas spring, which seemed that that business was tracking better than it was in the last quarter and continues to be on track. Is that fair?

I think that the comments that we made on our expectations in the second-quarter conference call still stand firm. And that is, we saw recovery through the quarter with improving orders and sales levels from the second quarter. So, I think it basically met our expectations.

Terrific. I know you gave the number on the GE90 and I just missed it. I was wondering, Bill, if you could just give me that again.

One second, please.

You're looking for the sales, Yvonne? This is Brian. What specific number were you looking for?

He broke down the sales between commercial --

For this year, the GE90 sales were 17.4 million -- for this quarter I should say -- were 17.4 million, with orders around 30.7 million.

Robert Stallard, Banc of America.

I'd just like to say best of luck to Ed. (indiscernible)

Thanks for your support.

I'd like to touch on the organic growth situation. Bill, you gave the breakdown by -- in Spring and Distribution. I didn't catch what it was in Aerospace.

All the growth in Aerospace was organic.

You did have contribution from fresh RSPs, didn't you?

It's [also] organic the way we look at it.

So, if I strip out the RSPs from this quarter, I'll come to a more conventional organic number?

You're speaking of the RSPs completed this year?

Yes. The ones that are there this quarter that weren't there last quarter.

As you know, we are adding additional RSPs to the book. The way we look at the RSPs is more as part of our overall aftermarket business. And as a result, growing that business, it's not necessarily as we look -- view it as acquisition-type goals. But if you want to know, the RSP sales for the quarter were about 8.2 million for the quarter.

Greg, I was wondering if you could comment on whether any parts of your Spring or Distribution business are seeing any sign of slowdown from the U.S. economy.

Actually, we have not. I know that's a concern. But so far we're seeing organic growth. We're seeing improvement in the Distribution business, in key metrics such as DSA and dollars per order. So in general, I think, things look pretty good.

Bill, you mentioned that the debt to cap has climbed up to 46%, which is [fairly] over the top of your target range. Do you anticipate bringing that ratio down over the next few quarters?

Absolutely. Obviously, a function of additional investments in RSPs or acquisitions, but we continue to generate very solid cash flow. And yes, that ratio should come down over time. Back to your earlier question on Aerospace, on the OEM side, sales were up about 15%, and MRO without the RSPs was up 57%.

Just as a final question -- Greg, now that you're the boss, what do you anticipate doing differently from what Ed was doing previously?

First, I'd like to thank Ed again for probably as smooth a transition as anyone could possibly hope for. Second of all, I think I am inheriting just a great management team. And I'm not simply saying that for appearance; it truly is a great team. I think that also reflects a lot of emphasis on the talent of the organization.

I think going forward we're going to continue with the acquisition effort. We're going to continue to drive organic growth. Probably one of the things that I tried to drive in the various operations over the past seven years has been continuous improvement, investment in lean. I think that will continue to be a hallmark going into 2007, because, I think, productivity improvement is key to our success long-term. So, I think, if anything, we'll probably emphasize continuous improvement more than ever.

Matt Summerville, KeyBanc.

A couple questions. First on the Aerospace business, I guess, moving -- looking out into 2007, based on what you're seeing now, do you still anticipate double-digit growth in that business and something in the neighbor low to mid-teens? Does that sound reasonable? That being number one. Then when you look at the backlog in the business, how far out now does it extend? And do you think it has peaked as of yet?

We are still working on our 2007 projections. We give guidance when we complete the fourth quarter. So, at this point we're really not prepared to talk about sales growth rates for Aerospace in '07. Backlog, as you said, continues to grow, and that certainly augers as well. And no, we don't anticipate that we're going to start to see that backlog fall off anytime soon based on the incoming order rate.

If you look at the quarter growing 30%, I think that's the fastest growth rate, at least since I've been covering the stock, that I've seen. I guess, is there -- I guess, where are you seeing -- I guess, relative to what I was looking for, I was at about 20% growth. That, obviously, was a tremendous amount of upside relative to my expectations. Where do you think, maybe from the analyst standpoint, we're missing in the Aerospace business? Are we not fully baking in what's going on with Goodrich? Was Goodrich better then you thought? Were the RSPs higher than you thought? Can you just provide a little more detail there?

I would just say that the aftermarket side of the business has grown faster than, as Bill mentioned, 67%, or some number like that. And we anticipated a certain amount of that, but I think it was more robust than we expected. The reason we anticipated it, because there's been somewhat of a maintenance holiday or delay going on with the condition of many of the airlines. But in general, I think that we're happy with the MRO or the aftermarket growth. And I think we're meeting the challenge.

Bill, I think on the second-quarter conference call you had sort of given some margin expectations for the full year by business. Have those changed at all at this point?

I can give you a quick update. Starting with distribution, we're looking at 6.5 to 7%. Spring would be 8.5 to 9; we've tightened up the range a little bit. And then, again, Aerospace around 14%.

What is driving the 3 million -- we'll use 53.5 or so for this year -- 53 million shares this year to 55 to 56. What's driving that share [accrete]?

It's really an expectation of higher stock price, which drives stock option exercises.

(OPERATOR INSTRUCTIONS). Peter Lisnic, Robert W. Baird.

Sounds like at Spring, if I hear you right, you're expecting -- or at least in the specialty operations, you're expecting growth to accelerate maybe in the fourth quarter, and then heading into 2007. Is that a reasonable way of thinking about it, off the 2% that you posted in the third quarter?

First of all, the fourth quarter in our business traditionally declines from the first half of the year.

I understand the seasonality, but the year-over-year comparisons shouldn't --

I think we're continuing to see some improvement. And again, I'll defer to until end of the fourth quarter to give guidance into 2007. But I think in general it looks positive.

But it sounds like in September you saw really good order numbers come in; right? I just want to reconfirm that that's --

We saw sequential monthly improvement in orders in the third quarter.

Alright. In the Distribution business, were there any costs, any non-recurring costs that you incurred in terms of getting KENT folded into the mix?

No, not yet. We're still involved in early integration planning there, and more work to do. No incremental expense to speak of in the third quarter.

I guess, last question, if I could. On the Aerospace side, you mentioned Goodrich providing more of an -- not more, but somewhat of an abnormal lift to the quarter. Is there a way that you can quantify that number for us?

That was relative to the orders number.

Relative to orders and not sales. Okay. And what's the --

That was basically because of the deal we signed in the last quarter.

And then continuing on Aerospace, can you give us a sense as to what the cash requirements or cash outlays will be for RSP for the remainder of the year and in 2007?

Just one sec.

Why don't I get back to you on that, Peter. I've got to -- I'll dig it out. It's pretty straightforward. Over the next six or seven months we'll pay out the remaining (inaudible)

So, it's all going within a couple quarters is what (multiple speakers). Just to follow up on the share count question, 55 to 56 for next year. I'm assuming that you're not -- you don't have any share repurchases baked into that number?

No we do not.

(OPERATOR INSTRUCTIONS). Matt Summerville, KeyBanc.

Looking at Spring and Distribution, if you look at the core business, how much of the increase is volume versus price, pulling out FX?

From the Spring side, in the traditional business (indiscernible) sales were up about 6%. And I don't have an exact number on that, but roughly half of that would have been price. And on Distribution, we continue to see pressure from the suppliers on costs, so we're working hard to pass that through. It's probably 2 to 2.5% (multiple speakers) the U.S. primarily.

So, volume and distribution was only up 1.5%? Is that right?

DSA in the U.S. was up 5.2%. You've got to look at DSA. Of that, probably 1.5 to 2 is price.

Within Spring, now that you've completed this latest move, if you will, or facility consolidation, how much of your production would you say is in low-cost at this point? And I guess, what's your longer-term target?

First of all, I don't think we necessarily have a target, per se. Because if you look at our recent acquisition in Switzerland, which is hardly known for low-cost -- being a low-cost (indiscernible), it's also something where we've been able to bring technology to bear and differentiated highly-engineered products. So, we don't target it necessarily in that form. But we have restructured the organization, with Monterrey providing various components, as well as Barnes Precision Valve's footprint changing and shifting to Singapore to open up that market. So I think in general, it depends on the product that we're targeting.

So, is there a way to quantify how much of your production right now is low-cost?

We look at it domestic versus international within Spring. And if you look at the manufacturing footprint that we have today, we manufacture, roughly, call it, 55% of the business outside of the U.S.

For Barnes overall it's a little over -- a little bit higher than one-third outside the U.S.

Just getting back to the spring business, on the traditional side, if volume was up 3% in the third quarter, what would your expectations be for Q4? And how, I guess, are you functioning or planning around the production cuts that are facing you, at least with the big three? And actually the transplants are supposed to be down in the fourth quarter as well.

I would continue to emphasize that it's a smaller and smaller portion of our overall business, so it has less impact than ever before. And second of all, I think it's consistent with the guidance we gave for the balance of the year. We have already built any reduction into the plan.

But, I guess, from my standpoint, what I'm trying to understand is what those expectations actually are for Spring, for the traditional piece of the business.

In the fourth quarter, based on the latest production numbers we have, sales impact somewhere in the $2 million range, and minimal impact from a profit point of view.

Perfect. That's very helpful. In the third quarter, then, was your nitrogen -- were nitrogen gas shipments up or down versus a year ago? And then, I'm trying to recall last year. Would it be reasonable to assume, based on the trend you're seeing in that business now, that in Q4 you're looking at a double-digit volume increase?

Sales were down in the third quarter, but I said we saw a sequential monthly improvement. Fourth quarter there is somewhat seasonal. I don't have a number in front of me that I can talk about, but certainly I would think flat, maybe up a bit, based on the order rate.

Just moving over to Distribution for one last question. You typically talk about and give more precise data on, I think, the traditional distribution business and what's going on with your national accounts and your tier twos. Can you talk about that?

Corporate accounts, up again around 10% both for the quarter and year-to-date. The tier two business, up 35 to 38% versus the third quarter and nine months. Core business up just slightly 1 to 2%.

And the reason that's not up more is because you're seeing a slowdown in your European distribution business, your core European business? Is that right?

We are seeing a slowdown in the historical Barnes Europe Distribution business. That certainly has been offset with the acquisition of Toolcom and KENT now in Europe.

Just to correct one item, the core business -- Brian corrected me here -- was down about 1% on the quarter. But a lot of that has to do with smaller accounts. You know that our average order size is moving up and we're discouraging smaller orders from smaller customers.

So, some of that is at least by design?

Yes.

Derrick Wenger, Jefferies & Company.

I didn't catch the total amount of depreciation and amortization for the quarter, and if you have a CapEx outlook for calendar year '07.

We don't have a CapEx outlook yet for '07. Depreciation and amortization for the quarter was around 10 million.

Schon Williams, BB&T Capital Markets.

It looks like Matt actually addressed most of my questions. Could you talk a little bit about strengthening in volume that you saw in Springs? I think you specifically maybe mentioned telecommunications. Did I hear that correctly?

Yes. We have some business that we manufacture antennas for mobile phones, or mobile devices nowadays, and that was particularly strong. In addition, we had a pretty good space business in our traditional Spring business.

Can you comment on that any further?

We had strong orders in heavy-duty truck, which we anticipated. Other than that, I think we were pretty happy with the results of the traditional business, seeing organic growth. As we mentioned in previous quarters, we have been focusing on profitable growth. So, we have allowed some business to [attrit] naturally. And I think that seeing the organic growth is a very positive sign.

Ladies and gentlemen, this concludes the question-and-answer portion of today's conference. I will turn the call back to management for any closing remarks.

Thank you very much, everybody; appreciate your time to listen to us. And if there are any additional questions, please do not hesitate to give the Investor Relations department a call. Thank you.

Thank you for your participation, ladies and gentlemen. Have a wonderful day.