Barrick Mining Corp (B) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Barnes Group fourth-quarter and full-year 2010 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Chris Stephens, Senior Vice President of Finance and Chief Financial Officer. Please proceed, sir.

Good morning, and thank you for joining Barnes Group's fourth-quarter and full-year 2010 earnings call and webcast. This is Chris Stephens, Senior Vice President of Finance and Chief Financial Officer, and with me this morning is Barnes Group's President and CEO, Greg Milzcik.

I want to remind everyone that certain statements we make on today's call, both during the opening remarks 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. Please consider these risks and uncertainties that are described in our periodic filings with the Securities and Exchange Commission and are available through the Investor Relations section of our corporate website at BGInc.com.

We will begin today's call with brief opening statements by Greg, and then I will provide additional financial details. We will then open up the call to your questions.

Let me now turn the call over to Greg.

Thanks, Chris, and good morning.

With reported fourth-quarter and full-year 2010 results today, we are pleased with the progress we're making and continue to see top-line benefits from our sales initiatives and investments; marked improvement in many of our end markets; and our commitment to maximize the efficiencies gained through our Company-wide Barnes Enterprise System.

In the fourth quarter, we again achieved double-digit sales growth and significantly improved our profit performance over prior year. Sales grew 10.4% during the fourth quarter and 9.6% for the full year. Operating profit significantly improved over fourth quarter last year and grew 43% for the full year with margins expanding 7.6% in 2010. And net income for the fourth quarter of $11.5 million and $53.3 million for the full year was up 86% and 37%, respectively.

Given the top-line improvement and our focus on operational efficiencies, our earnings per share increased 91% to $0.21 per diluted share for the quarter and 32% to $0.95 per diluted share for the full year.

Productivity for the year, as measured by sales per employee, was up over 7%. All of this would not be accomplished without the strong execution by our employees, who continue to leverage the benefits of the Barnes Enterprise System. Our performance throughout 2010 was primarily driven by volume leverage we gained from improving end market conditions, the launch of several new product and process introductions and the benefit of completing several restructuring actions during the year.

Transportation and industrial end markets showed substantial improvement in 2010, which benefited both our business segments. And we're starting to see improvement in our high-margin aerospace aftermarket business.

With a much improved business outlook, we are poised to capitalize on the success of 2010 and continue that positive momentum into 2011. Our priorities for 2011 remain clear. Profitable sales growth, continued focus on lean, and our never-ending commitment to quality.

Now let me discuss the two business segments in more detail.

In Logistics and Manufacturing Services, our end markets continued to show improvement. As we started to see in the third quarter, aerospace aftermarket is showing signs of increased activity, and we expect improvement in repair and overhaul demand to benefit us in 2011.

We had a 7% top-line improvement in the fourth quarter and expect to see mid to upper single-digit improvement in aerospace aftermarket in 2011.

Our Barnes Distribution business in North America delivered an 8% sales growth in the quarter, and was up 5% for the year. Daily sales average, or DSA, in this business showed year-over-year improvement each month since February of 2010. We're confident in the investments we have made, combined with the continued top-line improvement and expect profitable growth in 2011.

And we feel confident that the BD Europe team continues to execute on the right playbook, and we expect 2011 to show improvement over 2010.

Turning now to Precision Components, which delivered a 15% increase in fourth-quarter sales and ended the year with 19% top-line growth. With another quarter of margin expansion, the segment ended the year with operating margins at 8.3%. Orders for the full year were up 42% and backlog increased to $444 million from $399 million at end year 2009. The positive signs have sustained recovery in end markets this business serves.

The North American automotive market continues to bounce back, ending the year at 11.9 million units produced. In line with third-party outlook, we expect production rates will continue to improve in 2011. Our 2011 guidance assumes between 12.5 million and 12.8 million units produced in North America this year. Our European manufacturing business and their export-driven focus delivered a 53% order improvement in 2010 versus 2009, providing a nice tailwind heading into 2011.

Aerospace OEM sales were up slightly in the fourth quarter compared to 2009. An important metric here was that our 2010 orders were up 40% compared to 2009. This brings year-end backlog in at $347 million compared to $326 million year end 2009.

In summary, we are pleased with the strong performance in 2010 and we are encouraged by the positive momentum going into 2011. We will continue to build on our strengths of capturing new business by providing industry-leading quality, service and delivery to our customers. We will leverage lean tools and principles in order to increase efficiency and drive productivity, and we firmly believe the Company will build on its success and drive sustainable, profitable growth for increased stockholder value.

Now let me turn the call back over to Chris, who will run through some of the financial details. Chris?

Thanks, Greg. I will first start off by providing some details on our results for the fourth quarter and full year 2010, and then shift the focus to 2011 by providing comments on our guidance which we have summarized on an earnings supplement slide that is available on our website.

Starting with the top line, the Company ended the year with another quarter of double-digit sales growth, and as Greg mentioned, we were able to grow the top line 9.6% in 2010. Our fourth-quarter sales of $283 million, including a negative FX impact of approximately $3 million, increased 10.4% from prior year.

We continue to see positive trends for growth within our Precision Components business segment, primarily from continued strength in transportation and industrial end markets. Full-year orders were up 7%, greater than sales, which provided a nice lift in backlog versus year end 2009.

For Logistics and Manufacturing Services, we experienced another quarter of steady improvement. An encouraging sign is our high-margin aerospace aftermarket business delivered a 7% increase in the fourth-quarter sales over prior year and 3% sequentially. Our Barnes Distribution North America business grew 8% over fourth quarter 2009 as we continue to see improvements in transportation and manufacturing end markets.

Our European distribution business was flat over prior quarter, excluding the impact of FX. So overall, the steady improvement continues in the end markets that we serve, and we see the benefits in our financial performance.

Operating income in the fourth quarter increased 62% from prior year and increased 43% for the full year. Operating margins for the Company came in at 7.6% for the year, reflecting a nice improvement from prior year at 5.9%. And full-year margin expansion of 170 basis points is primarily from higher sales volumes, particularly within our business units that served the transportation and industrial manufacturing end markets. And productivity benefits, coupled with the absence of 2009 restructuring charges.

Turning now to cash flow, during the fourth quarter, we generated operating cash flow of $19 million. This brings 2010 operating cash flow to $66 million and free cash flow to $37 million, after reducing operating cash flows for capital expenditures of $29 million in 2010.

Our full-year cash conversion of 69% is significantly lower than 2009, mainly due to increased working capital requirements to meet increased customer demand, giving growth in the much improved end markets that we serve.

With regard to share count, fourth-quarter diluted average shares outstanding was 55.6 million, which was relatively flat to prior year. During 2010, we were an active buyer of our stock. For the full year, we repurchased 1.5 million shares under the 2008 board-authorized repurchase program. Under this program, we have another 1 million shares that we are authorized to buy, which we plan to do on occasion during 2011.

Moving on to the tax rate, the Company's effective tax rate for 2010 was 16.8% as compared to 2.4%, driven by increased earnings from higher tax jurisdictions; and we repatriated a dividend from a portion of current-year foreign earnings to the US in the amount of $7.5 million. The impact of the repatriated dividend increase increased tax expense by $3 million and increased our annual effective tax rate by 4.7 percentage points.

Let's now turn to our guidance for 2011. Building on the positive momentum from 2010 with sales up 9.6%, operating margins improved to 7.6% and diluted EPS up 32%, we expect our top line to increase 5% to 8%, including the impact of FX; operating margins to expand to approximately 9%; and EPS to be in the range of $1.15 to $1.30 per diluted share, up 20% to 35%.

Our guidance takes into consideration a few key drivers from 2010, some of which we wanted to highlight. Pension expense is expected to increase $2 million in 2010, primarily due to the impact of a lower discount rate and the impact that had on pension accounting. Capital expenditures are expected to significantly increase from 2010 levels to a range of $40 million to $50 million. Depreciation and amortization are expected to be between $52 million and $55 million.

Cash conversion is expected to be 90+% in 2011, given the anticipated increase in capital expenditures during the year to help support new growth programs.

With that as background, let me highlight a few key factors in our 2011 guidance range. On the higher end, we would benefit from a faster ramp in our higher-margin aerospace aftermarket business, better volume leverage, and stronger productivity gains, given our focus on lean and quality. The lower of the range reflects the possibility of a slowdown in economic recovery; auto production levels, primarily in North America at or below 2010 levels; and commodity and price inflation that may make it difficult for us to offset either through productivity actions or timing of price increases.

So to summarize our third consecutive quarter of double-digit sales growth and margin expansion helped the Company deliver a 32% growth in diluted EPS in 2010. As we look ahead, we will continue to drive profitable sales growth in lean enterprise efforts to improve our performance. We believe our strong market presence and a more efficient operating structure will continue to benefit Barnes Group for continued long-term success.

Operator, we will now open the call for questions. First question, please.

(Operator Instructions). Fred Buonocore, CJS Securities.

First question relates to the aerospace aftermarket. What did you say it did sequentially in terms of growth over Q3?

Well, the whole story is the second half of the year was much stronger than first half. We had about 20% improvement. Sequentially, Q3 to Q4 was about 3%. Year over year was about 7%.

Chris Stephens Fred, overall, year over year was down as we saw it track throughout the year. But sequentially, up 3% and quarter over quarter we were up 7%. So we're seeing that lift go through 2011.

Got it. And you had indicated that you expect to see mid to upper single-digit growth in 2011?

Yes, basically, we completed a survey of our customers, and that seems to be the general consensus, although we have not seen much in the spare part, part of our business as far as growth of the spares, and part of that may be continued cannibalization of aircraft engines, and we're examining that very closely.

Okay, that's helpful. And how do you expect that to track? Is this something that you -- we kind of went through this year and you saw it more back-end loaded, which it did turn out to be for you. Do you expect it to kind of just to be steady sequential improvement through the year? Or do you think you get a bigger pop in the second half of the year?

That's what we're looking at, something more steady. This recovery certainly is different than the previous one, and we had a very strong recovery in 2004 after 9/11. We had about a 30% lift, and it came like a light switch. And we're not seeing that this time.

And some of the surveys that we're doing out in the field, we seem to be hearing the same thing. It's a combination of things with the introduction of new aircraft, the cannibalization efforts inventory levels. It's a fairly complex equation.

Got it. And then finally, can you talk a little bit about where we are in the process on BD Europe distribution profitability, please?

Well, this business is about 9% of our business. Our systems and reliability of our systems certainly improved greatly. And most importantly, we're seeing the expected profitability flow-through, which means that if we continue to drive the top line, we will achieve the desired number. So we have hope that the team will continue to execute on the plans, and will show improvement in 2011.

Thank you very much.

Edward Marshall, Sidoti & Company.

Good morning. I wanted to kind of focus on kind of PCS in the quarter. I think you said flat OEM on revenue. But, I'm sorry?

Just a question. Did you say PCS?

Precision PCS --

Got it, right.

Yes.

Yes, Precision Components? So, you were flat on OEM as far as revenue is concerned for aerospace. But, is there any info that you could provide kind of from a volume perspective? Because I look at some of the material guys now that have improved for five to six quarters sequentially, and have been showing year-over-year growth for three years now; I would start to assume that that would start to flow through.

So also noting the backlog coming down and that's largely aerospace. On a sequential basis, I just kind of want to see what's going on there, if you can kind of add more detail.

Some of it has to do with the platforms that you are on. For example, the 787 platform that we have had extensive pushouts, and we reviewed the current schedule. The wild-card there is going to be the inventory levels at our customers as they feed toward Boeing. And when we survey those customers, we find the inventories are all over the place. So how they react to it is going to affect our outlook.

As far as other issues, we expect the 777 and the GE90-115, which is our largest program, to have about a 9% to 10% improvement year over year as it feeds into increased production rates. So I think you're going to see some of that turn as the year goes on.

And also, as the 787-8 eventually ramps up, and it will. I know this program has been delayed and I'm not about to declare Q3 the actual delivery point because I think that's just enough. But there's enough in the pipeline right now that we have pretty good visibility going forward, especially on the 777.

Right. I mean certainly it's trending in the right direction, but, I guess the question of what I'm trying to cut to, is there pricing that you are finding some pushback on from some of your large OEM customers that may be affecting the revenue even though volume might be slightly up?

Actually, the biggest challenge we face right now is in new product introduction, and that's certainly putting a damper on profitability as well.

Okay, but are you seeing any pricing pressure?

Nothing abnormal.

Okay. And it's hard not to ignore the material inflation that is going on, whether it's carbon, whether it's high alloy stainless --

Right.

And kind of focusing on I guess the margins for PCS, whether it's kind of your automotive spring business or whether it's your aerospace engine business, kind of where do you see the margins trending in 2011 for that?

Well, first of all, as we have stated in previous calls, we have spent years, literally years and years, working on material pass-through agreements, and we have captured most of the material pass-through on our automotive section, which hurt us tremendously in 2004. We're about 90% covered. There are some delays in that. For example, it may be a quarterly open or a semiannual open, so there will be some delays and shifts, but we're pretty well covered.

On our Aerospace side, almost all of it is material pass through, one for one, so there's really little affect on that side. I think we're in reasonable shape when it comes to that type of material.

We are seeing some material increase in the materials for our distribution business, and we're passing that cost through, and I don't think there's anything critical right now, but we remain very vigilant. The fact is that, I think for the foreseeable future, we're going to see commodity price increases as well as various products.

So in the guidance range remarks on the key factors, when it says low end, that's commodity and price inflation, is that more towards the distribution business? Or is -- are you saying maybe it's more of about timing and kind of when that hits and how fast you can get it through?

It would be both. It would be both.

Okay. And then if you could, what's the interest expense guidance for 2011 if you have any?

I would say on that, we basically -- given the current debt levels and as we enter 2011, pretty comparable number going into next year would be a safe assumption.

You know, one thing I would mention is that given our debt structure, we've got a number of activities that we will be entering into this year, primarily the fact that our revolver, our $400 million revolver, comes due September, 2012. We'd probably look -- we will look to enter into a new one kind of mid-this year.

So we continue to benefit from a low interest rate, which we are hoping -- obviously happy about. As we look to refinancing in the future, there will be a little bit of a head wind to us, so the timing of that may change that outlook, but I would say -- safe to say, pretty comparable rate or pretty comparable number.

That makes sense. Thanks, guys.

Yes, thanks, Ed.

Christopher Glynn, Oppenheimer.

A question on the aerospace aftermarket or rather the OE side. Can you update what the range of potential push-outs could amount to? You did that last quarter; and maybe what you think you absorbed in the fourth quarter?

When we did the calculation, and it's pretty straightforward, we mentioned that there was there was over 50 engine sets pushed out. And when we do the rough calculation, we think it will be under $10 million hit for the year from our previous estimate. So, it's measurable, but at the same time, it's not a game changer.

To 2011.

Right.

Yes.

We think -- and that includes the 787 and 747-8 because there's comparable engines on those.

That -- as I mentioned in a previous answer, we are surveying our customers' inventory levels; for example, we supply to Spirit or to Goodrich or GE, and looking at their inventory levels, there's different philosophies on how to maintain those inventory levels for the ramp up. So that may have some affect on that $10 million number.

Okay, so the $10 million is for 2011. And to get a kind of cumulative picture, do you have a level of pushout you could quantify that hit in the fourth quarter?

A couple million dollars.

Yes, it was not much, Chris. We didn't see much in the way of a significant pushout in the quarter in 2010.

Okay. And just wanted to be a little updated on the nature of your typical 4Q seasonality since myself and consensus continued to model it wrong. And sequentially operating profit down as much as revenues there, so just some kind of explanation around that?

Well, I would say I don't think the modeling was that far off. I think that we had some issues with flow-through as far as the new product introduction and transfer of work. $0.23, $0.24 was not unreasonable, but at the same time, things do happen and we have to take that into account.

Yes, Chris, I would just add that typically the distribution business will see that seasonality in the fourth quarter. We saw that to some degree, clearly, the pushout of 787, as we commented before.

So although we ended up $283 million in top line, when we look at some of the items that, from an execution point of view, and that number being higher than I would say the analyst average, but we looked at execution, primarily, as Greg mentioned, within our BA OEM business as well as some other parts of our business; with new product introductions, we have completed -- the good news is we have completed some large restructuring actions in the year. Some of that carried into the fourth quarter, but that is now behind us. So we're entering 2011 cleaner than how we ended 2010.

So I would say those are the primary drags, if you will, on earnings as you look to fourth quarter. But again, the good news is, is that the majority of that heavy lifting is behind us. We're entering this year with a healthy backlog, especially in our BA OEM business. That continues to show progress, which is good news. And we're obviously looking forward to continuing to see the improvement in 2011.

Okay, thanks. And then just last one on BDNA, I think the thought you've conveyed is that we really need higher than low to mid 70's capacity utilization to really kick that into the growth that was seen at other distributors. And now that we're tracking towards that, will we expect a stronger year-over-year increase in 2011 than we saw in 2010, which did pick up, actually, as the year went on?

Absolutely. I think that what we're seeing is our DSA has improved every month year over year since February, so the past year. January saw the largest or the highest DSA level in two years. Q4, the large order size we've seen in two years, so in general, I think it's heading exactly the way we expected it to.

Okay. And just the margin target or a range that's in the model for BDNA?

We're not going to comment on that independently, but we are getting the flow-throughs that we expected on profitability, so I think that everything is coming together. It's probably two quarters, three quarters longer than I wanted, but I think that the process of maintaining a higher staffing level, allowing more rapid expansion, is going to pay off in 2011.

Great. Thank you.

Thank you.

Matt Summerville, KeyBanc Capital.

A couple questions. First, Greg, how much revenue would you say you have baked into the guidance related to 787 for 2011? And then, can you remind us what we should set our expectations for as far as content on that aircraft, as well as on the 747-8?

Well first of all, we're expecting -- we have a number for the number of engine sets that we expect to deliver, which is down from our previous forecast by about 50 engine sets, which I mentioned that before. And, I'm doing the math real quickly in my head. But it's probably in the 25 million to 30 million range. And that's -- like I said, that's down.

And it really depends on how the rest of the program goes through the year, but that's essentially what we have in the plan. So if they stop production tomorrow and don't restart it, that would be the magnitude of the impact. And that's -- I'm using back-of-the-envelope-type of calculation. As far as our revenue per aircraft, we're looking in the $350 million to $450 million range --

On the 787.

Yes, by 2013. Right now, it's higher than that.

Yes, Matt, I would only add, just a couple things happening in our BA OEM business. Obviously 787 which Greg commented on, but also, we anticipate a nice lift on 777 increasing its production rates midyear. And the good news, as we all saw, was they're actually increasing those rates even higher in 2013, which will benefit us obviously in 2012.

So the backlog is healthy heading into this year. I think schedule changes with Boeing, with GE as it relates to those engines and Rolls Royce, we will see how that plays out. But we are pleased with the healthy backlog heading into 2011.

Yes, you sort of brought up my next question was 777-related. I thought if we looked back in mid-2010, you had already kind of seen that uplift, and now it sounds like there's going to be an incremental ramp yet still. So can you help me close the loop there?

Yes, that's what we're seeing, actually. There was an increase, so it's not a perfectly smooth transition between engines and airframe.

Yes, even when we saw the reduction from 7 to 5 and 5 back up to 7, it kind of took a longer period of time.

It's like an accordion. There's differing delays based on inventory levels and spare requirements and all the rest of those things. But we are using our schedules that we're given by our customer when we're looking at the actual ramp of increases.

Right.

Okay. And then, just a couple questions on distribution, Greg. In the past, you've commented on the profitability or lack thereof in that business. I guess I don't understand why that's something you're not willing to comment on now. Given that it's a third of the Company that has been challenged with execution issues for years, I guess this is sort of an opportunity to say hey, we're -- the worst is behind us; we lost money if that was the case in 2010; we're going to make money in 2011; this is kind of what we're thinking.

As I mentioned earlier, the BDNA, I think -- I will remind folks that prior to the recession, we managed to get it back to double-digit ROS. And through the recession, we improved on the business and we also maintained staffing levels that were higher than necessary for the conditions. That was largely to capitalize on the business. We're seeing a nice lift in early this year. DSA continues to improve. We're profitable year to date, and we expect to be throughout 2010 or 2011.

Okay. And then, I guess the other question I would ask, are you still investing in this business in the pace that you had been the last few quarters? Is some of that behind you? Have you dialed that back? And again, just long term, strategic strategically, can you remind us again why it makes sense for Barnes to have this business?

Well, first of all, the Barnes Distribution North America has been in our portfolio since 1964. And rarely, and there's lots of data out there going back in public information, that if you look at the return on assets and the cash flows associated with this business when it's running properly, it's a superior business. And, it's extraordinary when you look at the ROA you can get out of this business.

And, I'm 100% confident -- well, 99.9% confident that we are heading in the right direction. The flow-throughs we're getting on incremental profitability are right where we want them to be. The lift that we are seeing in January and early into February are all positive. So I'm pretty happy with this in our portfolio.

Okay. Thanks, Greg.

Peter Lisnic, Robert W. Baird.

This is Josh Chan filling in for Pete. If we look at the 4Q results relative to your guidance, it seems that sales were actually better than the top end of your range even. So could you go through where you were positively surprised on revenue?

Actually, in the PC side, we had a higher lift. We had about a $20 million improvement in sales year over year, and I think going into 2011 with the backlog that we have as well as the continued improvement in our end markets, we're going to continue to see improvement in the top line.

The thing I would comment there for everybody's appreciation is most of our end markets are still early in the recovery point. And we think that we have an extended period of time to capitalize on above-average growth rates in our end markets because of this recovery.

We were harmed more in 2009 than most because of the auto content as well as some of the industrial areas. But we also think that these are going to recover for an extended period right now.

Yes, Josh, the only thing I would add is that in addition to Greg's comments, we continue to see that higher revenue coming from our lower-margin business in terms of our portfolio. So that is somewhat changed a little bit throughout the quarter versus how we guided.

We did guide for the full year at $0.95 to $1 at the end of the third quarter. So it's kind of within the range, but the story, the mix in terms of the actual results, is primarily due to that.

Okay. So it sounds like on the profitability side, you have somewhat of an adverse mix and then also the new product introduction costs at Aerospace?

A good way to summarize it, yes.

Aerospace and some transfer of work at our automotive.

Yes, completion of our larger restructuring actions, which I said before, are behind us as we enter 2011, which is good.

Is there a way to quantify the transfer of work/new product investment in Aerospace in terms of dollar?

You know, it's pretty much all over the place. I wouldn't comment on a specific number.

Okay. And then if I look at the 2011 guidance, both this revenue and EPS forecast, its implied incremental operating margin is about 25%. So, with Aerospace aftermarket growing again, I would have expected that to be a little higher. So could you explain the thoughts behind the flow-through between revenue and profitability in 2011?

And we hope that plays out that way as well.

You have to have some assumed mix, and that's the basis of the plan. We're pushing for as much flow-through as humanly possible.

Yes, at the same time, as Greg commented earlier, some of our end markets are still rebounding, specifically the automotive end market is rebounding. So we're going to see improvements in the top line out of that part of our portfolio. And to the extent aerospace aftermarket really kicks in and a higher margin business for us is able to exceed our guidance expectations, we would be on that higher end.

But it is -- we do have a portfolio serving, really, three and markets, as you know, in terms of aerospace, industrial, and transportation.

Right. Okay. And then finally, you mentioned pension accounting for 2011. Was there an impact this quarter?

No. This is really just kind of looking at the overall pension expense heading into 2011. We expect that to be $2 million higher, primarily due to the lower discount rates and the impact that had on pension accounting.

Okay, great. Thank you for your time.

The way to think about it is just $2 million headwind heading into 2011.

Okay. Thanks.

Scott Graham, Jefferies.

Good morning. Just one kind of housekeeper and then something on the Distribution. Could you put some numbers around the sales growth in the components of Precision Components of the different businesses within there, you know, US transportation, European industrial --? Could you just help us understand some of the dynamics of each of those individual end markets for you?

Basically we had very strong growth out of our European businesses, as well as our automotive business, and the aerospace OE was the -- somewhat laggard.

Yes, that's exactly. So when you think about PC serving the aerospace side being relatively flat, and then the transportation and industrial end markets that primarily is out of our associated spring business, which is a global business and our European manufacturing businesses, as they serve those two end markets, those grew substantially. Those grew incremental to what the overall segment grew.

Right, yes. Truthfully, I can figure that out. What I'm asking if you can say US, were they all up 20% and Aerospace, OEM below 5%? Is that maybe a fair way to characterize?

That's getting a little too granular --

Yes.

-- for our reporting.

All right, fair enough. I wanted maybe just to go back to, for a second, because if I recall the third-quarter conference call, you seemed to have a different tone this time than last time on the European Distribution business; where it sounded to me last time as if you were really looking to potentially do something corporate, potentially divesting that business if the numbers really did not come through in spades in the fourth quarter.

And if I read that wrong, I'm sure you will tell me, but it doesn't look like the European distribution numbers came through again. I know that things may be incrementally improving, but if you look at this business, it's not just that the business itself is -- was losing money in 2010, but its margins are significantly below the peer group of industrial distributors. So I'm just wondering what the thinking is there on that business in 2011, and why would we keep that business if it's under-performing in the peers and diluting the Company return-wise?

Well, first of all, if you look at our history over time, we're not in love with any of our businesses. We look at the portfolio on an ongoing basis, but I'm not going to comment on that as it would be inappropriate.

You're not going to -- at all?

At all. I won't comment on any of those strategic items until we have something that makes sense, whether it's an acquisition, divestiture, or any of those things, it would be inappropriate from the planning perspective.

Okay. I just thought I heard you say something much more definitively last quarter. But no, that was all of my questions. Thank you.

Okay, thanks.

Thanks.

We're showing no more questions at this time. I would like to turn the call over to Chris Stephens for closing remarks.

Okay, thank you. Thank you for joining us this morning. As a follow-up, we will be available for any follow-up questions that anyone may have and I appreciate you joining us. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes our presentation. You may now disconnect. Have a great day.