Barrick Mining Corp (B) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Barnes Group fourth-quarter and full-year 2012 earnings 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. William Pitts, Director Investor Relations. Please proceed, sir.

Thank you, Frances. Good morning and thank you for joining us today. With me is Barnes Group President and CEO, Greg Milzcik; Senior Vice President of Finance and Chief Financial Officer, Chris Stephens; and Senior Vice President and Chief Operating Officer, Patrick Dempsey.

If you have not received a copy of our earnings press release you can find it on the Investor Relations section of our corporate website at BGINC.com. During our call we will be referring to the earnings release supplement slides which are also posted on our website.

Our discussion today includes certain non-GAAP financial measures which provide additional information that we believe is helpful to investors. These measures have been reconciled to their related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of our press release and in the form 8-K submitted to the SEC.

I want to remind everybody 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 and may cause actual results to differ materially from those projected.

Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at BGINC.com.

Let's begin today's call with opening remarks from Greg followed by a more detailed review of the quarter and full-year results and our initial 2013 outlook discussion from Chris. After that we will open up the call for questions. Greg?

Thanks, Bill, and good morning. As you would expect from our press releases, we certainly have a lot to talk about today. First we announced that we have entered into a definitive agreement to sell our Barnes Distribution North America business, BDNA, to MSC Industrial Direct for $550 million.

This is a good transaction for both companies. It is an excellent opportunity for BDNA and its employees to further develop their full potential as part of MSC where the primary focus is on industrial distribution.

As I think about the significant evolution of our portfolio with the sale of Barnes Distribution Europe in 2011, the acquisition of Synventive in 2012, and now this announcement on BDNA, we have succeeded in advancing along the strategic path that I have discussed with you for some time.

Second, this morning we reported fourth-quarter and full-year results that delivered one of our best years of financial performance. Despite some enduring challenges in a few of our global end markets, we managed to delivered record fourth-quarter net income, improving operating margins and generated solid cash flow allowing us to move quickly to pay down debt associated with the acquisition.

We ended 2012 with record year-end backlog of $677 million, up 16% from 2011, driven by growth in our Aerospace OEM business. This backlog gives us confidence heading into 2013 as it supports continued sales growth.

And finally, we announced my retirement from Barnes Group and our Board's election of Patrick Dempsey as our new President and Chief Executive Officer. After serving as President and CEO since 2006, and with the first days of our transformation complete, that is to move to a more closely aligned differentiated Aerospace and industrial base business, I feel it's the right time for me to pass the leadership baton over to Patrick.

I will continue as executive Vice Chairman until our annual shareholder's meeting on May 3 to ensure a smooth transition. Patrick has been our Chief Operating Officer since 2012; he joined the Company in 2000 and has served in several leadership positions over the years. As Chief COO, Patrick has been responsible for oversight and direction of the Company's global business segments.

To close my comments today, I'm extremely pleased with the performance that the Company delivered in 2012 and I have all the confidence that Patrick will lead Barnes Group to delivering sustained performance. Right, Patrick?

Thanks, Greg, appreciate the opportunity and looking forward to the challenge.

Now let me hand the call over to Chris to go through the financials.

All right, good morning. All right, thanks, Greg, and good morning, everybody. I would like to begin by highlighting key points of our fourth-quarter and full-year results and then end with color on our 2013 guidance. I will also provide additional details on the BDNA announcement.

Turning now to slide 3 of our supplement, sales of $327 million in the quarter were up 16% driven mainly by Synventive. Income from continuing operations was approximately $30 million, or $0.54 per diluted share, up 26%. For the full year sales of $1.2 billion, up 5%, and income from continuing operations was $1.78 per diluted share, up 9%.

2012's income for continuing operations included $5.9 million pre-tax or $0.08 per diluted share of short-term purchase accounting adjustments and acquisition-related costs. Excluding these items adjusted diluted EPS from continuing operations was $1.86, which is up 13%. These results were generated by the sustained execution to produce differentiated products and processes that enhance operating margin.

As an indication of our progress, even with the sales headwinds in some of our end markets, we delivered adjusted operating margins of 11.6%, up 70 basis points.

Let's now turn to segment performance and I will begin with Aerospace. In the fourth quarter Aerospace generated sales of $101 million, up 2%. Higher OEM sales were largely offset by sales declines in Aerospace aftermarket. Operating profit was $19 million, up 5%.

Profit benefited from higher OEM sales and lower employee-related costs, primarily incentive compensation, but was partially offset by the profit impact from lower aftermarket sales and a valuation adjustment on inventory that supports our aftermarket repair and overhaul business. Operating margins increased to 18.8%, up 50 basis points in the quarter.

Full-year Aerospace sales were $390 million, up 2%. Sales growth in OEM and aftermarket repair and overhaul was partially offset by a decline in aftermarket spare parts sales. Full-year operating profit was $63.3 million, up 1%. Operating profit for the year was impacted by many of the same factors that drove our fourth-quarter results and for 2012 our operating margins were 16.2%, down 20 basis points.

In our Aerospace business we continue to see solid growth in OEM while aftermarket continues to be soft. OEM sales were up 10% for the quarter and up 5% for the full year. Backlog for the total Aerospace segment grew to a record of $548 million, up $73 million or 15% from year-end 2011.

As a reminder, while backlog is a helpful indicator, sales can be affected by a number of factors over time including in-sourcing decisions, material changes, production schedules and volumes of specific programs, to name a few. We continue to believe the industry's expectation for commercial aftermarket production is realistic and supported by high unit backlog at Boeing and Airbus and by forecasted air-traffic growth.

In the quarter aftermarket MRO sales were down but up 5% for the full year. Sales in our high-margin revenue-sharing programs were down 21% in the quarter reflecting a trend we have seen for several quarters now. If you recall last year's fourth quarter, we had strong sales due to the benefit of a large customer stocking order that we received in December. So a decline in the fourth quarter actually was expected.

However, similar to other industry participants like GE and Pratt, our fourth-quarter spare part sales improved sequentially. For us, we actually saw a 20% sequential improvement from Q3.

Despite growth in airline traffic and capacity during 2012 it was a soft year for Aerospace aftermarket. Today many market participants are anticipating a stronger aftermarket in 2013 with anticipated air traffic and capacity growth again this year. We believe further deferred maintenance and inventory destocking by the airlines becomes more difficult. Accordingly, we likewise foresee a recovery in the Aerospace aftermarket. However, we remain cautious about the timing as well as the size of a 2013 recovery.

At Industrial fourth-quarter sales were $148 million, up 44%. Synventive sales of $44 million contributed to most of the growth while organic sales were up 2% and FX was 1% unfavorable. Operating profit of $15.2 million for the quarter increased $8.4 million driven by the profit contributions of Synventive and operating margins increased 10.3%, up 370 basis points.

Industrial's full-year sales were $497 million, up 13%. Synventive added $60 million, organic sales increased by $10 million and FX decreased sales by $13 million. Full-year operating profit was $43.9 million, up 12% primarily benefiting from the profit contribution of Synventive.

Noted earlier, operating profit was partially offset by the $5.9 million of short-term purchase accounting adjustments and transaction costs related to Synventive. Excluding these items adjusted operating margins increased to 10%, up from the 8.9% last year.

Within our industrial segment, our nitrogen gas products business once again delivered double-digit sales growth in the quarter. The team did a great job completing the facility expansion in Sweden, the 2012 nitrogen gas products delivered a record year.

In our other European manufacturing businesses we did see continued weakness as a result of the economic environment and the waning European automotive production. At Associated Spring global sales declined slightly in the fourth quarter but were essentially flat for the full year.

At Distribution quarterly sales were down 4% to $80 million as a result of softness in our North American markets and our focus on more profitable accounts. Operating profit in the quarter was $5.6 million, up 41%. This improvement was driven by favorable pricing actions, customer mix and lower employee-related costs, offset by higher pension costs and the profit impact from lower sales. Operating margins increased to 7%, up 230 basis points.

Distribution -- Distribution's 2012 sales were $351 million, down 1%, but full-year operating profit was $29.4 million, up 14%. The profit increase was driven by factors similar to those experienced in the fourth quarter. Full-year operating margins increased to 8.4%, up 110 basis points.

The Company's effective tax rate for continuing operations was 19.2% in 2012 compared to 21.7% in 2011. Last year's effective tax rate included the recognition of $1.8 million of discrete tax expense related to tax adjustments for earlier years.

And in 2012 the effective tax rate was impacted by the absence of this discrete item, a change in the mix of earnings attributable to higher taxing jurisdictions and the impact of a decrease in the repatriation of a portion of our current year foreign earnings to the US. The company repatriated $8 million in 2012 and $17.5 million in 2011.

Regarding share count, our fourth-quarter average diluted shares outstanding were 55.2 million.

We have solid fourth-quarter cash generation as cash provided by operating activities was $59 million. This performance allowed us to reduce debt by over $40 million in the quarter. Total debt to EBITDA improved to 3.1 times, down from 3.4 times at the end of the third quarter.

For 2012 cash provided by operating activities was $136 million, up 13%. Free cash flow, which we define as operating cash flow less capital expenditures, was $99 million, up 17% from 2011. And our full-year cash conversion was a solid 104%.

Turning our attention now to our outlook, on slide 5 of our supplemental slides, please note that our 2013 outlook does not include any impact from the announced sale of BDNA and the CEO transition. We will update our outlook upon closing of this transaction which we anticipate will occur late March or early in the second quarter.

For 2013 we expect sales to grow 14% to 18% with operating margins in the range of 12% to 13%. EPS is expected to be $2.03 to $2.18 per diluted share, up 9% to 17% from 2012's adjusted earnings per share of $1.86. Our 2013 cash conversion is anticipated to be greater than or equal to 100% of net income, even though we do expect higher CapEx spending of approximately $50 million.

Our guidance reflects the following items -- pension expense, as expected, is going to increase by approximately $3.5 million to $4 million in 2013 as a result of the lower discount rate of 4.25% versus 5.05%; interest expense is expected to approximate our fourth-quarter run rate for planning purposes totaling around $17 million to $18 million for 2013; depreciation and amortization is expected to be roughly $70 million and about $38 million of that amount reflects our outlook for depreciation; and we expect the 2013 effective tax rate to be in the mid 20s.

And finally, let me provide some color on the recently announced divestiture of BDNA to MSC, which is summarized on slide 2 of our earnings release supplement.

First the deal -- the transaction involves the divestiture of BDNA with operations mainly in the US and Canada and 2012 sales are approximately $300 million, the purchase price is subject to certain adjustments.

And second, we would expect the after-tax proceeds to be immediately used to initially reduce our debt levels after closing.

Third, going forward we expect to use up to half of the after-tax proceeds to buy back shares. Our Board yesterday approved a new 2013 repurchase program of 5 million shares which supersedes the 2011 program. We plan to file a 10b5-1 shortly and expect to repurchase between 4 million and 5 million shares in 2013 depending on our stock price. This of course is subject to change and we will provide repurchase activity updates during future earnings calls.

Fourth, we expect to report BDNA and discontinued operations in the first quarter of 2013 and we will realign our reporting segments into two, Aerospace and Industrial. The remaining business within the distribution segment, Associated Spring Raymond, will be realigned in the Company's Industrial segment. The financials will be adjusted on a retrospective basis to reflect discontinued operations and segment realignment.

And finally, this transaction helps improve our balance sheet as we pursue value enhancing acquisitions and continue to invest in strategic profitable growth initiatives.

So let me end by making three points before we turn the call over to your questions. One, we delivered on our expectation of closing the year with solid fourth-quarter performance. Two, we have made significant progress towards strengthening our balance sheet by focusing on reducing debt levels given the Synventive acquisition. And third, the recently announced BDNA transaction clearly provides a win-win and allows us to improve our balance sheet and seek value enhancing investment opportunities.

So with that, operator, we will now turn the call over and open it up for questions.

(Operator Instructions). Edward Marshall.

Wow, where do I start? Can you shove anything else in that release?

Yes, we've got a lot to talk about.

We are pretty happy folks, though.

Yes, I think there are a lot of happy people out there today. I mean just the deal multiples alone -- I am assuming that it looks a lot like just because of the synergies that are anticipated between the two businesses because they seem higher than some of the other multiples in the Industrial space.

I'll tell you that there are tremendous synergies from a variety of perspectives. And I think that when we looked at how many synergy -- how much there was with synergies with MSC compared to our own Company, it just confirmed our overall strategy that we need to be a more closely aligned manufacturing service business.

And I think that the folks at BDNA will really appreciate being associated with a pure distribution company. They think distribution; they have been very successful over the years. The sales folks will have a lot more to sell, the product line offering will expand. So I really think this is a win-win and it's part of our transformational strategy. We're definitely doing what we said we would do and I'm really pleased.

Just if I could speak to the timing; it looks like there is $400 million after-tax give or take some changes. You said by end of first quarter, beginning of second, is that right?

Yes.

Okay and the proceeds, did you say half the proceeds will be used for debt and the other half will be used for stock repurchase? Just can you go over those numbers again for me?

So, immediately, obviously when we get the proceeds we will reduce our debt. And the expectation in terms of the use of those proceeds, we said up to half of those proceeds would roughly be used to buy back shares. And we would anticipate that to be roughly 4 million to 5 million shares in the year. And again, of course that is subject to change. As you know, we are continuing to look at opportunities from an acquisition point of view but that is our thought right now.

Okay, so I'm -- just so I can (inaudible) back. You say half the proceeds you mean $200 million will be placed towards debt, the other $200 million will be going towards -- that's where I'm getting a little --?

Yes, yes, so there is multiple -- clearly there is multiple uses. So if you start with the $400 million of after-tax, we are going to immediately reduce our debt level so that is one.

By what amount? By what amount are you saying? Are you saying $400 million?

Roughly. Some cash will be outside the US and our debt sitting in the US, so a majority of which will be reducing our debt levels.

Okay.

You know, we are going to take a look at -- we'll obviously to take a look at pension funding as well as investments in the business. But the headline is we'll immediately reduce our debt and about up to half the proceeds would be used to buy back shares.

So let me just clarify what you are saying. You're basically saying $400 million worth of cash, give or take, will go immediately to debt, you will refinance at some point and that will be used -- those refinancings will be used for pension or debt -- I mean your share buyback or (multiple speakers)?

Yes, I wouldn't call it refinancing. I think we were just -- we have a $750 million revolver that is out there. So we would take those -- most of those proceeds and reduce US debt.

I got you. Okay, so on to the guidance, and you made few comments about the MRO business in the fourth quarter. Did you actually give up -- give the number for the fourth quarter?

In terms of MRO --

Yes.

-- in the fourth quarter?

Yes.

Yes, so quarter over quarter we were down actually 13% in MRO and on the revenue-sharing programs we were down 21%. So net-net our aftermarket had a tough quarter. But I did comment sequentially the good news is that we saw sequential growth in our spare parts, our revenue-sharing programs from third quarter to fourth quarter.

And I would also comment that if you look at the responses to inquiries from the OEMs as well as some independent analysts, they are pretty bullish on aftermarket in the back half of the year. We are taking kind of a wait and see approach, but at the same time the profitability of the airlines combined with continued growth in flight hours, et cetera, sooner or later it has got to happen, we are just being a little more cautious than most.

Okay. So if I can kind of cut to the guidance and how the aftermarket and your thoughts for next year. You are saying you're being a little bit, and you just said it again, wait-and-see kind of approach, conservative approach. Obviously some of the industry dynamics, your customers like GE are a little bit more apt to be a little bit more bullish. I know we have heard the song and dance before --

Exactly. After a few times you start to get gun shy.

I get it. What is your expectation that you are building into the guidance for that business for 2013, bearing I know you don't give individual segment guidance level --?

Right, we are looking at somewhat flattish.

Flattish, okay. And so, your customer is saying up 10 -- 5% next year certainly means there is upside to that number?

Potentially, but [they] have been wrong before.

Guidance looks like right in line with what we were looking for in the operating profit but EPS was a bit shy. Was there something going on in the tax or interest that changes next year? I mean you are paying down some debt and I understand that is not in the number there, but --.

Exactly. That is one caution and obviously wanted to get some color on guidance excluding the two announcements. But so given that we wanted to at least profile out. I think the headwind of pension expense clearly was a drag on 2013 as we looked at that. But the rest of the business, that is how we are profiling out the year. And again, I would say just a little bit cautious on the Aerospace aftermarket and our outlook for 2013.

But based on the revenue growth -- based on the operating margin growth and if you kind of peel back the EPS assuming things are static from 2012 to 2013, it appears the number, certainly the low end of the range is not even close. Is there something going on with the share count, the interest expense, the tax rate, something else that changes from 2012 to 2013 that we can kind of think about?

Yes, share count for purposes of planning, again prior to the transaction, we don't expect that to significantly change much. Clearly you've got the headwind of an incremental interest expense that is factored in given the leverage, again before transaction. And then tax rate rise we do anticipate that to be more in the mid-20% aside from this transaction.

Like stepping back to the 24% or so that you --?

Yes. So what we are kind of guiding in that number would be roughly mid-20s.

And don't forget we still have the management fee increases year over year that are affecting the aftermarket as well.

Right, but that should be related in the operating profit line.

Right, exactly (multiple speakers) point.

Okay, thanks, guys. I appreciate it. I'll get back in line.

Matt Summerville, KeyBanc.

A couple of questions first on the transaction. Because I know your tax rates differ so much by jurisdiction, how much EPS accretion was there in 2012 from the business you are selling?

Oh, that is a good question.

Yes, again, for purposes of disclosure, Matt, we don't get to the SBU level.

Chris, is there any color you can give us then to button it up in terms of the EBITDA generated by the distribution segment and then we can make our own Raymond adjustment?

I would say again, at the SBU level we are kind of cautious of that. And as you mentioned and I will comment again, this relates to the BDNA divestiture within our distribution segment and we will take the Associated Spring Raymond business, the remaining part of our distribution business and move that to the Industrial segment.

As you think about Synventive for a moment, how much, if you back out the one-time cost of the transaction and inventory step up, how accretive was it to 2012 versus what you anticipated and how much accretion on an incremental basis are you factoring in for 2013?

So, Synventive, as you recall, last quarter we talked about this short-term purchase accounting adjustment. That ended up being an 8% impact to the full year -- I'm sorry $0.08 for the full year. So when you think about that impact and in the overall business, we were down -- roughly we guided that we would have no dilution.

We were down about $0.01 to $0.02 for the year actually. So it was a little bit higher on that one time item. And then we are staying consistent with our contribution of Synventive to 2013 where we grew -- we commented on $0.16 to $0.18.

In general we are very happy with the business. We think six months in we are still -- there is no buyer's remorse.

And then as you think about -- you mentioned the backlog in Aerospace early on in the call, how (inaudible) about $550 million I think. How much of that do you anticipate on shipping in 2013?

Roughly two-thirds of that gets shipped out in 2013, roughly 60%.

And keep backlog as -- it is a very fluid -- it depends on customer and everything else and how they have horizon. So we've got to take that with a little bit of a grain of salt.

Okay. And then I guess would you say your OEM business at this point, excluding 787, so your legacy platform, would you say that you are seeing a business level out the door? So parts going out the door is commensurate to how many planes the OEs intend to build as they raise their forecast?

I would even include 787 in that. There has been no halt to 787 ramp-up at all. I know they have the issues with the battery and the like, but there has been no impact that I have been able to ascertain. And that is the feedback we are getting from our customers as well.

So we are seeing it -- there is a delay of six to nine months or it's in advance of six months to nine months. In other words, it's six to nine months from the time we ship a product before it gets out to the OEs -- the final OE that is.

And then just one last one on the Industrial business. You talk about Europe being soft outside of nitrogen gas spring I guess; we are almost two months into the year. Are you still seeing that strength in nitrogen gas carry over? And I guess from a cost structure standpoint you have seen several quarters now of Europe not doing a whole lot outside of that business. What is your approach to the cost structure in Industrial for 2013?

Well, there are a couple of things. One is we are still bullish on nitrogen gas products as a whole, long-term we have a very good view on our Heinz Hanggi business because of the emergence of the gas direct injection technology. But also there are some key points about the European auto [specific] PMI which has been public for a little bit and we are seeing it in increased order rates at our [Cedar] business. So I think stabilization and slight improvement would be the way I would characterize Europe right now.

Thanks, guys.

Peter Lisnic, Baird.

Congrats, Greg and Patrick.

Thank you.

Thank you very much.

You're welcome. So first question if I could just, Chris, you talked a little bit about BDNA and the numbers there with Raymond, but the total segment is $350 million in revenue, you have quoted about $300 million in the press release. So is it safe to assume that Raymond is about a $50 million business and can we make the assumption it is around a corporate level EBITDA margin kind of business just as we are doing this math looking forward?

Yes, I would say, first of all again, we cautioned to comment on SBU-related profitability. But you are right, Peter, when you think about the $50 million roughly for our Raymond business would be transferred into Industrial.

All right, all right, that is fine. And then as you are looking at the growth rate for 2013, I'm just wondering if we could parse out Aero and Industrial -- just color commentary, not specific numbers if you don't want to give specific numbers.

But with the pending divestiture of BDNA, just building a model ex that I think is going to be important. So just kind of what is the color on Aero, Aero growth as you look to 2013? You gave us a little bit of color there. But -- and also the outlook for Industrial specifically would be helpful.

Yes, no, no, no, very good, good question. So on the Aerospace side, obviously strong backlog, record backlog, right, contributing a majority in terms of the OEM space. So we expect that to be double-digit growth clearly going into 2013.

When you factor in the kind of I would call planned flattish level for Aerospace aftermarket we are being a little cautious there, rightfully so given 2012 in terms of how that played out. For Aerospace the segment we would expect low-double-digit growth.

On the Industrial piece I'll actually -- let me comment on two pieces. One is without Synventive and then one is kind of with Synventive. Obviously a lot of M&A contribution growth -- inorganic growth, if you will, in that number. So without Synventive we actually see I would say mid-single-digit type of growth globally, all right, within the industrial segment and that would be the addition of our Raymond business to that segment.

Clearly with Synventive the revenues we anticipate are consistent with what we have communicated in the past and we are close to 25% to 30% type of growth. So we -- I would say industrial without Synventive, that mid-single-digit and Aerospace being low-double-digit is what we are anticipating for 2013.

All right, that is perfect. And then just on the -- you were very clear on the capital allocation side. But I am wondering as you are kind of going through some of these moves with the portfolio in integrating Synventive, what is the appetite for maybe adding on to the business, not necessarily via a new school or leg to the school, but just what the appetite for acquisitions might be and maybe what the pipeline looks like.

First of all, we have a large appetite for acquisitions, especially now. But we are looking at several things. Our strategy of becoming a more closely aligned differentiated Aero/Industrial business stands solid. And I might add Patrick had a major hand in, as well as Chris, in developing that strategy. So we expect that to continue going forward.

For right now we are looking at businesses for acquisition that are aligned with the Synventive orientated platform as well as our Aero and Industrial platforms to meet those criteria. So bolt-ons to existing businesses is the way I would identify those, not necessarily another leg of the stool, but building out a business that could potentially become another segment such as Synventive's hot runner market may be one of the long-term goals.

Okay, all right. And then that leads into my last question which is actually for Patrick and if he can opine or talk about whether or not there is any changes in the strategy. It sounds like not just given your answer there, Greg. But I'm just wondering, as that transition occurs should we think about any sort of adjustments to the operating model as we look forward?

Thank you and thank you for your question. First I might just say that I am very excited to become the CEO of Barnes Group and for the opportunity to lead the Company forward. I would also like to just express my gratitude to the confidence that the Board has expressed to me as well as Greg to lead us forward.

What I would highlight is that one of the great benefits of being selected as an internal candidate by the Barnes Group Board of Directors through our internal succession planning process is the fact that, as Greg just mentioned, as a member of the senior leadership team I have played an integral role in the development of our current corporate strategy.

And as such I am fully committed to it along with the rest of our senior leadership team to its successful execution. So, we are excited to continue to accelerate our strategy forward. And today's announcement is a significant -- with regards to BDNA is just one more significant milestone on that path forward.

Alright, that is very helpful. Thank you all for your time and congratulations.

(Operator Instructions). Scott Graham, Jefferies.

So I just want to make sure -- earlier, Chris, you indicated that the aftermarket and OE numbers, when you said quarter over quarter you mean year over year, right on that?

So let me -- are you talking about 2012?

Fourth quarter.

Yes, fourth quarter, let me give some color on fourth quarter. So OEM quarter over quarter was up 10%, aftermarket was down for an overall -- Aerospace for the quarter was up 2%. And then Scott, just to elaborate, from a full-year point of view we saw 5% OEM growth year over year down on the aftermarket side with an overall Aerospace of 2% growth.

The second part of what you just said is a full-year number or --?

Yes, full-year number -- year over year is 2%, quarter over quarter was also 2%.

Okay, what I'm trying to understand is your definition of quarter over quarter -- you mean sequential?

No, that would be fourth quarter last year over fourth quarter --.

Okay, so that is year over year?

Year over year, yes.

Fine, okay. Next question is could you tell us the Synventive contribution to operating income dollars?

No, (laughter) to be blunt about it. We cautioned about disclosing profitability at the SBU level, but I can say that aside from my earlier answer to the question when it was brought up, we saw a slight dilution to the year.

But again, the performance of the business as we carry it into 2013 we anticipate that to deliver $0.16 to $0.18 of EPS to the year. So again, just echoing Greg's comments, we are very pleased with the acquisition, it's going very well and we are progressing.

Good try, Scott, though.

Well, you know. Well, Greg, now I am going to come at you a little bit here. So we have a great job done by you guys selling Barnes Distribution Europe, then you fix up Barnes Distribution North America and you sell that at what looks to be a pretty good price.

You have got the largest OE backlog -- or Aerospace backlog you have ever had. You just completed a partially transforming acquisition from Synventive and you have got now a bunch of proceeds to continue to upgrade the portfolio. You are a young guy and you are retiring.

That sounds perfect (laughter).

Help me understand why you would retire right now?

Well, first of all I am really pleased -- I always say that if you leave the place in better shape than what you found it you did a good job. And that is very satisfying to me. But I am well into my seventh year as CEO and I think it is healthy for the Company, as well as for me, for a change. And don't forget linked 2008 and 2009 are like dog years, so it is equivalent to 17 years as CEO.

For all of us.

I won't relive that. But I never truly intended to make being a CEO a lifetime career. And I intend to continue working for the rest of my life, so when I say retire that is just retiring from this particular position. But I will continue to make endeavors long-term.

I intend in the short-term to work with individuals and organizations helping to shape public policy in manufacturing in America, which I think is sorely needed. So that is what I intend to do short-term.

Well, okay (laughter). I thought we would get a little more from you, but it's okay, I get that. Patrick, on to you. Just given what I laid out there, you now have this grand opportunity to continue to move -- trade the portfolio up into higher margin businesses. Could you give us an idea of what you are looking at? Do you think -- is it more on the Industrial side? More on the Aerospace? A balance of the two? A third leg? What is your view here?

Yes, from my perspective I think the focus will continue on the Aerospace and the Industrial segments more so than thinking about it as a third leg. As we continue to execute our strategy, we would love to transform into more differentiated intellectual property-based products, processes and systems.

And so, I think we are actively continuing to fill the pipeline and are very aggressive in terms of our continued focus on identifying potential targets and excited to continue to leverage the most recent transaction into future growth and the balance sheet will be in great shape for us to make our next strategic moves.

All right, well, great. Thank you and congratulations on a good day.

Ed Marshall.

I am assuming you are not going to give guidance X the sale of the business, is that right?

That is right, Ed.

So we want to get through the transaction and I would expect close at end of March, early part of the second quarter that we would be able to share some color on our first-quarter call.

Makes sense. Is there any way you can kind of look at the position on your debt, assuming the $400 million proceeds are paid off on debt and what that interest expense for the year might look like, or at least the rate of the interest that might look like assuming you pay down certain tranches of debt that you would like to?

Yes, no, understood. I would rather wait for the first quarter. It's not that I'm trying to not answer the question; it's just that we will have a lot of moving parts, one being the timing of that cash, thinking about the deployment, thinking about timing of share buyback. There will be many factors, so I would rather caution until the first quarter and then provide as much color as I can then.

We discussed this at length. There are so many variables that we would love to be open kimono, right now to give you guys an ability to build a model going forward, but we just can't.

Right. Out of curiosity, your guidance of $2.03 to $2.19 and the other ranges as well, does that include -- is that GAAP? Are you including anything from Synventive? And I think you kind of alluded to that earlier in the call.

Yes, it is including Synventive in those numbers, so it's (multiple speakers).

Well, not just the acquisition of Synventive, but any inventory accounting, anything else like that?

Yes, it's a full up -- it's a full up number, exactly. It's not an on an adjusted basis. $2.03 to $2.18 would be on a GAAP basis.

What is the assumption for say one time charges or accounting charges that is going with Synventive?

Yes, they were just -- it's short-term purchase accounting that we discussed with the 2012 issue given the inventory turns. So it is really behind us. As we go forward it is more recurring in nature in terms of the purchase accounting impact.

Okay, so the GAAP number is just as close to the adjusted number at this point anyway?

Right, right, exactly.

All right, perfect. Thanks. Good job.

At this time we have no other questions in the queue. I would like to turn the call back over to Mr. William Pitts for your closing remarks.

Very good. Thank you, Frances. We would like to thank everybody today for joining us this morning, we look forward to speaking with you next quarter. So at this time we will conclude our call.

And, ladies and gentlemen, this concludes your presentation. You may disconnect. And have a good day.