Barrick Mining Corp (B) 2018 Q2 法說會逐字稿

Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes Group Inc. Second Quarter 2018 Earnings Conference Call. (Operator Instructions)

William Pitts, Director of Investor Relations, you may begin your conference.

Thank you, Sharon. Good morning, and welcome to our second quarter 2018 earnings call. With me are Barnes Group's President and Chief Executive Officer, Patrick Dempsey; and Senior Vice President of Finance and Chief Financial Officer, Chris Stephens.

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 on our website.

Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors. These measures have been reconciled to the 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.

Be advised 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 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 now open today's call, as we customarily do, with remarks from Patrick, followed by a review of our second quarter results and our updated 2018 outlook from Chris. After that, we'll open up the call for questions.

Patrick?

Thanks, Bill, and good morning, everyone. In the second quarter, Barnes Group delivered very strong operating performance as adjusted earnings per share grew 11% to $0.90, the best quarterly results in recent history. We achieved this high level of performance through sustained strength in our Aerospace segment and continuing improvement in our Industrial segment. In addition, total company adjusted operating margin expanded 120 basis points from the prior year period, and we ended the quarter with another record total backlog, which now stands at $1.2 billion.

During the quarter, and shortly thereafter, several positive capital deployment events also occurred. While some of these are modest, they contribute to our overall growth strategy and our objective to be a good steward of shareholder capital. I'll discuss those in a moment.

First, let's start with a review of the quarter's performance, beginning with our Aerospace business. Second quarter performance was excellent. Sales were up 12% compared to a year ago with original equipment manufacturing, OEM, up 7% and aftermarket up 21%. In our OEM business, we continue to see a meaningful transition to newer programs like CFM's LEAP engines. With the commercial Aerospace industry continuing to forecast increased aircraft production levels, our OEM orders remain robust, more than doubling last year's second quarter intake and in excess of 60% growth sequentially. As you would expect, given the second order strength, OEM backlog grew to another record level, supportive of longer-term production increases.

In our aftermarket business, sales growth was robust as both MRO and spare parts sales were up over 20%. Airline traffic and capacity remained strong, and relatively low oil prices have contributed to older aircraft remaining in service longer. So we envision a favorable market environment that continues to support our aftermarket business.

As an aside, I attended the Farnborough Airshow last week. Events like this are a great opportunity to speak to current and potential customers as well as to get a sense for the overall sentiment of the industry. Much like the recent MRO's America conference, the industry outlook is extremely positive. With solid order trends, large backlogs at aircraft OEMs and healthy traffic and capacity metrics, we continue to believe our Aerospace business is favorably positioned for the next several years.

For 2018, we continue to expect that OEM sales will grow into high single digits. In the aftermarket, our full year outlook has once again improved with MRO revenues expected to be up now in the low teens and spare parts up in the low double digits. Our operating margin outlook is for the high teens, consistent with our prior view.

At our Industrial segment, sales declined 1% over the prior year period, and organic sales were down 4%. That said, book-to-bill was 1x, and while backlog was slightly down from last quarter's record due to the impacts -- impact of FX, it remains very healthy at $348 million, which is 8% higher than at this time last year.

At Molding Solutions, total sales decreased 4%, while organic sales were down 8%. Overall, end markets served remain robust, and you may recall that last year's second quarter was particularly strong. On a sequential order basis -- or on a sequential quarter basis, Molding Solutions sales were up 6%. The primary driver to the year-over-year decline was in our molds business where sales levels can be lumpy quarter-to-quarter. An inherent characteristic of the complex, high-cavitation molds is that they require on-site customer acceptance of extensive validation approvals of the completed systems. Sometimes, depending on the timing of product launches or customer availability, this can cause a shifting of sales to the right. Case in point, our second half FOBOHA sales are forecasted to be substantially higher than the first half.

Within the SBU and with respect to hot runners, we anticipate automotive program launch strength in Asia to offset softer demand in North America, while Europe automotive hot runners fall somewhere in between. Nonetheless, automotive hot runner sales remain at historically high levels.

With our molds business, medical and personal care end markets remain strong with a corresponding benefit for hot runners in those same end markets. For the year, our forecasted Molding Solutions sales growth remains in the mid-single digits, both total and organic.

At Nitrogen Gas Products, second quarter sales increased 5% in total and 3% organically. Most tool and die markets have remained relatively healthy through the first half of the year, with Europe and China leading the way and North America a little softer. Overall, we expect full year sales to be up low single digits with a modest lift from this week's Industrial Gas Spring acquisition, more on that in a moment. We anticipate organic sales to be down low single digits. So keep in mind that this reflects a comparison to a very strong 2017.

For Engineered Components, second quarter total and organic sales increased 1%. Sales growth primarily came from nonauto transportation end markets. Manufacturing PMIs for our key regions remained strong, and that is reflected in the growth seen in our general industrial end markets. Operating performance at Associated Spring continues to improve with the heavy lifting now behind us. Our Engineered Components revenue expectation is unchanged with 2018 sales in line with 2017 levels.

At the Industrial segment level, our prior outlook holds, with 2018 full year total sales growth in the low to mid-single digits, with organic growth in the low single digits. Forecasted operating margin is projected to be in the mid-teens.

Before closing my remarks, I'd like to take a moment to discuss capital allocation. For some time now, we've spoken about our priorities, which encompass investing in our existing businesses to drive growth, pursuing value-enhancing acquisitions and returning cash to our shareholders. Our actions have been very consistent with these stated priorities throughout the transformation of our portfolio over the last several years, and 2018 is no different.

First, we continue to invest in our business as we expect to increase capital investments approximately 20% higher than our run rate over the last 3 years, and roughly half of those investments are directed towards growth programs. In addition, we entered into [scope] expansion of our existing RSP agreements to cover dual-used parts for the CFM56 and the CF6 engine families, that is parts that have both a military as well as a commercial application. Our investment of $5.8 million is a participation fee, whereby such dual-used parts will be subject to the same terms and conditions and pricing as set forth in the existing RSPs. This is a nice add to our profitable and growing part of our aftermarket business.

Second, with respect to acquisitions, we announced just this week the acquisition of Industrial Gas Springs, IGS, a designer, manufacturer and supplier of customized gas springs. IGS has approximately $15 million in annual revenue and is headquartered in the United Kingdom, with distribution and assembly capabilities in the United States. The company has diversified end markets, which include general industrial, transportation, aerospace and medical. This acquisition allows us to scale and broaden NGP's technology portfolio and customer base. We see this as a great opportunity to add to this part of our portfolio.

And lastly, we continue to view the return of cash to our shareholders as an important element of our capital priorities. In May, the board authorized a 14% increase to the quarterly dividend. And during the first half of 2018, we have repurchased just under 2 million shares. Combined, the dividends paid and share repurchases have returned approximately $134 million of cash to our shareholders so far in 2018. As I mentioned during our inaugural Investor Day last fall, we strive to be good stewards of our shareholders' capital, and we believe our balanced approach does just that.

To conclude, we had a great second quarter and are well positioned to deliver another solid year in 2018. Our business outlook has improved, and we remain committed to driving our profitable growth strategy to generate increased value well beyond the current year.

With that, let me now turn the call over to Chris for a discussion of the financial details of the quarter and an update on our increased full year outlook.

All right. Thank you, Patrick, and good morning, everyone. Let me begin with highlights of our second quarter results.

For the quarter, sales were $375 million, up 3% from the prior year period, with organic sales growth of 1% and an FX benefit of approximately 2%. Net income was $49.4 million or $0.93 per diluted share, up 13% from $0.82 from last year's second quarter. On an adjusted basis, EPS was $0.90, up 11% from $0.81 last year. Second quarter 2018 adjusted EPS excludes the benefit of $0.03 related to U.S. tax reform, while the second quarter of last year's -- last year excludes restructuring actions, which provided a net benefit of $0.03 and short-term purchase accounting adjustments related to the FOBOHA acquisition of $0.02 in the -- in our Industrial segment.

Moving on to segment performance, beginning with Industrial. Second quarter sales were $250 million, down 1% from $252 million in the prior year period, driven by lower organic sales of 4%, offset in part by a favorable FX impact of 3%. Operating profit was $38.3 million, up 1% from an adjusted $37.9 million in the prior year period, as productivity was offset in part by the profit impact of lower organic sales. Operating margin was 15.4%, up 40 basis points from an adjusted 15% last year. As Patrick mentioned, the Industrial team continues to drive performance improvement. The operating margin delivered in the quarter was up 220 basis points sequentially from the first quarter.

For Aerospace, the second quarter's performance was very strong. Sales were $126 million, up 12% from $113 million last year. Operating profit was $25.6 million, up 29%, reflecting the profit impact from higher sales volumes in both OEM and aftermarket, partially offset by scheduled OEM price deflation. Operating margin continue to expand, up 270 basis points to 20.3%, once again benefiting from the healthy aftermarket demand in the quarter. Aerospace total backlog ended June at another record level, $829 million, up 21% compared to a year ago and up 11% sequentially from the end of the first quarter.

Second quarter book-to-bill was 1.7x. For OEM specifically, backlog was $818 million on the strength of second quarter orders, the majority of which are for deliveries beyond mid-2019. Accordingly, we now expect to ship approximately 45% of the OEM backlog over the next 12 months.

Other items. Interest expense increased 600k to $4.1 million primarily as a result of the higher average effective interest rate as compared to a year ago. Other expense for the quarter was 900k versus income of $6 million in the prior year period. Last year, we had the benefit of pretax pension curtailment gain of $7.4 million as a result of restructuring actions recorded in the quarter.

With respect to taxes, the company's effective tax rate was 15.9% in the second quarter 2018 compared to 15.4% in the prior year period. In the current quarter, the company benefit -- benefited from several reversal of certain tax valuation allowances, a discrete item worth approximately $0.08 per share. In addition, adjustments related to the U.S. tax reform of approximately $0.03 per share benefited the quarter and have been excluded from adjusted income.

Last year, the primary driver of the lower tax rate was merging several legal entities in Switzerland, which allowed the company to adjust the valuation allowance on previously reserved net operating losses that would have otherwise expired.

2017's full year effective tax rate was 69.6%. Excluding the impact of discrete tax expense related to U.S. tax reform, the effective tax rate for 2017 would have been 20.2%.

With respect to share count, our second quarter average shares outstanding were 53.1 million shares. During the quarter, we were an -- we were active in repurchasing 1.4 million shares at an average cost of $59.47 per share. We now have 1.8 million shares available for repurchase under existing board authorizations.

Through June, cash provided by operating activities was $88.6 million versus $102.4 million last year, with working capital needs primarily driving the change. Year-to-date free cash flow, which we define as operating cash flow less capital expenditures, was $64.2 million compared to $75.1 million last year. First half capital expenditures were $24.3 million, down slightly from $27.3 million in the first half of last year.

With respect to the balance sheet, our debt-to-EBITDA ratio increased slightly to 1.8x at quarter end due in part to increased borrowings from our share repurchase. Under our existing debt covenants, additional borrowing of approximately $455 million of senior debt would be allowed, while approximately $390 million remained available on our credit facility at quarter end.

Turning now to our updated 2018 outlook on Slide 5 of our supplement. We forecast 2018's total revenue growth of 5% to 6%, with organic sales growth of 4% to 5%. FX is now expected to benefit revenues by approximately 1%, and we expect acquisition revenues of approximately 1%. Operating margin forecast is 16.0% to 16.5%, an increase of half a point on the lower end of our range as compared to our prior view. Adjusted earnings per share are now anticipated to be in the range of $3.18 to $3.28, up 10% to 14% from 2017's adjusted $2.88 and up $0.14 at the midpoint from our prior outlook. Half the increase is driven by operational performance, while the other half represents tax and share count favorability.

A few other updated outlook items. Interest expense is anticipated to be 16 -- around $16.5 million. Our effective tax rate for 2018, excluding second quarter, is $1.5 million adjusted for U.S. tax reform, is expected to be approximately 24%. The average diluted shares are forecasted to be approximately $53 million, and our CapEx expectation remains at $60 million to $65 million. And cash conversion is expected to be greater than 100%, unchanged from our prior view.

One last item to cover before I close out remarks is that -- and that is related to tariffs. We have analyzed the potential effect of Section 232 and Section 301 tariffs in our business to frame the possible impact on our results. This SBU-level review is based on our current understanding of the reach of these tariffs. We also consider risk mitigation actions and countermeasures that we may -- that may be applied to lessen that impact. While this remains a very fluid area, our 2018 full year outlook includes an estimated net impact of $2 million, primarily with our Molding Solutions and Engineering Components businesses.

So in summary, a very solid quarter. Our full year earnings expectation improved on the strength of our Aerospace segment and margin recovery in our Industrial segment. 2018 cash generation and conversion expectations remain strong, allowing for the capital deployment items mentioned by Patrick. At the same time, our balance sheet remains well positioned for potential strategic acquisitions, which support our long-term growth strategy.

Operator, we will now open the call to questions.

(Operator Instructions) Your first question comes from Michael Ciarmoli with SunTrust.

Patrick, just can you give us an update sort of on the North American auto market? It sounds like it's -- I think the last quarter, in your slide deck, you used the term leveling. Now it's softening. Maybe sort of what kind of the current expectations are? And I think you did say you expect some of the Asian Pacific and Europe markets to sort of act as an offset. But how concerning and how watchful or cautious are you being on that market?

So relative to auto production overall, Mike, I would say that we continue to feel positive about global auto production growing nominally. What we're seeing is a shifting of where our revenues are coming from between the 3 regions where we play a role across North America, Europe and Asia. In North America, the softening we've seen that we've referenced is primarily in our hot runner business, which came off, if you recall, a historical high last year. So the hot runner business within our Molding Solutions hit record highs in 2017. So what we've seen -- when we talk about a softening, it's a little bit of a pullback from the peaks but still relatively healthy as an overall business.

Got it. That is helpful. And then maybe just shifting to the Aerospace side. Obviously, you guys continue to have tremendous growth over there. Can you just talk about any update on what you're seeing in the supply chain? We keep hearing a couple of suppliers. Obviously, no surprise there. There's some bottlenecks and challenges in the engine world. But any constraints or challenges that you guys are seeing? Any implications? I know, Chris, you just mentioned the tariffs. But raw materials, I mean -- and again, it seems like you guys are really executing on point there. But anything on the horizon, either above you guys or down lower in your supply chain that raises a concern?

Well, let's start on the point you made, which is that I want to commend our Aerospace team for what they are doing, which is executing flawlessly on the ramps that we're experiencing. Just coming back from Farnborough, as I mentioned, the general conversation across the board, I think, was concerns over the supply chain or pieces of the supply chain being able to ramp to projections that are being talked about in terms of even increased rates over the current schedule. For us, what we see is some challenges in terms of raw materials and the supply of those raw materials. But overall, I think that's improved and continues to improve. So in general, I think people are very optimistic. The scrutiny that's on the supply chain at the moment is intense. I will say that. And again, I'm very glad to be able to say that Barnes Group is performing, I think, almost ahead of expectations, which, again, is a credit to the team at our Aerospace division.

Got it. And then maybe just the last one for me, jumping back to Industrial, I think you talked about having a lot more confidence in FOBOHA in the second half. And I think we've been waiting for this validation and customer acceptance here for maybe a couple of quarters. What's sort of given you the confidence now? I mean, do you actually have those agreements in place or better line of sight to kind of call for that strength to finally materialize?

Yes. So I think as we think about our organic growth, Mike, on a year-over-year basis, and the fact that our performance year-to-date, what we've seen is that as we look at the first half of 2018, headwinds organic growth in Q1 was centered around our Nitrogen Gas Products business, which we're very pleased to see return to positive growth in Q2. But as you highlighted, in Q2, what we saw were headwinds shifting to the Molding Solutions Business primarily due to the timing of mold shipments. So I think it's important to take a few minutes to highlight the nature of our mold product lines, which, overall, we believe, are a very important piece of the value proposition we bring to this market, yet orders and sales can tend to be lumpy from quarter-to-quarter. Over the last year alone, just to put it in perspective, we've seen variations of 50%-plus from 1 quarter to another in terms of both orders and sales, which, in dollar terms, could result in swings of up to $15 million or more, either up or down in a given quarter. So as we look at our organic growth in the first half of the year, whilst there's reasons for us, we feel confident going into the second half. To your point around working closely with the customers, what's unique about the molds that we're producing is that both Männer and FOBOHA, what they manufacture are amongst the most highly complex in the industry, pushing the envelope of design engineering and precision manufacturing to create systems that are capable of producing precise plastic components of the highest quality at high cycle speeds in millions, if not billions, of units. So as such, there's an extremely close working relationship with the customer throughout the process, in particular through the final validation steps. And this is where the customer buys off on the system before it ships to their facility or at their facility. So we're continuing to work extremely close with the customer every step of the way to coordinate this validation process. It's subject to a range of variables, but not from a quality or a delivery standpoint, but moreover, from a timing relative to product launches and/or the customer's availability, as I mentioned, to be on site for the necessary validation. So we're continuing to work it. We have a high degree of confidence. A lot of the components of -- are the molds that we're planning on shipping in the second half of the year are well through the manufacturing process. And so the validation is where the emphasis is going to be, and we're very confident in that regard.

Your next question comes from Edward Marshall with Sidoti & Company.

So I wanted to ask about the Industrial segment. Looking at -- you're down about 2.5% organically for the first half 2018. As we kind of think about the second half, kind of following on what was, I guess, just discussed, I'm looking at potentially -- looking at the full year guidance of 4% to 5% organic growth, and I'm trying to understand kind of what the components are for the Industrial business. How do you get there?

Yes. So on the -- the primary driver of the Molding Solutions, and again, with a view to the shipments that I just mentioned, Mike (sic) [Ed], that our forecast around molds, in particular, we're looking at Molding Solutions being up mid-single digits for the year; Nitrogen Gas Products being low single digits; and then Engineered Components, flat. So for Industrial in total, looking at that low single digits to mid. The primary driver, again, though, and why I took the time to emphasize the complexity of what happens on the molds business is really the driver. The -- our automotive and the hot runner side of the business continues to see strength in Asia is relatively holding its whole in Europe and as I mentioned earlier, a little softening in North America.

So if we take Nitrogen Gas Products and Engineered Components in the first half of this year, are they trending? Are they at those growth rates that you just mentioned, flat for Engineered Components and low single digits for Nitrogen Gas Products?

Yes. Engineered Components has been flat pretty much on a year-to-date basis, and that's our projection for the full year. As it pertains to NGP, we saw a softer Q1, and then we saw a rebound in Q2 with organic growth up 3%, total sales up 5% for NGP in the quarter. And relatively, again, the thing I want to highlight, which I think is really pertinent when it comes to our Industrial business, is that for all of 2017, if you recall, we were a positive outlier, with our Industrial business in 2017 achieving 10% organic growth. So coming into 2018, we had some tough comps that were already set in place. And so looking at the full year in the low to single -- to mid-single digits, we think is a -- will be a nice result coming off of what was a very strong 2017.

Got it. And looking at the margin increase there in Industrial, how much of that do you think is, say, productivity? How much is mix? How much is -- how much might be driven by ability to get pricing over inflation, et cetera?

Yes. So relative to Industrial, I think, let me first start by acknowledging the team did a wonderful job of returning to mid-teen operating margins in the quarter, which, as you know, was a high priority for us. The heavy lifting is behind us as it pertains to Engineered Components, in particular, Associated Spring. We successfully exited the facility that we had discussed in prior quarters and consolidated those lines into our other facilities. So we are seeing some productivity flow through from that as well as the additional businesses within Engineered Components continue to add -- do well throughout the quarter as well. So productivity, overall, has been a contributor. And again, the Molding Solutions business and Nitrogen Gas Products contributed nicely as well.

Got it. And a final question on the tax. Maybe this is for Chris. The $0.08 of discrete tax item, that was left in the $0.90 number as well as the guidance. Is that right?

That's right. Yes. It's reflected there. Yes. The only adjustment from a Reg G point of view was just the U.S. tax reform. There was an adjustment based on further clarity around U.S. tax reform that was $0.03 that we Reg G.

(Operator Instructions) Next question comes from Tim Wojs with Baird.

So I guess, just as -- maybe just a different way to just ask that -- ask you a question on, on order activity in Industrial, just given the compares, if you take out the molding or the FOBOHA business that's kind of lumpy there, how would you think sequential orders kind of Q1 to Q2 track relative to kind of historical expectations?

Well, if I look at our book-to-bill for [BI] in totality, it was about 1x. If I look at the individual SBUs, I'd say that was reflected into each of them. So whether it was Molding Solutions, NGP or Engineered Components, we saw 1x book-to-bill in the quarter.

I would agree, Patrick. Yes. Exactly. When you -- whether you look at EC, NGP.

Yes.

Right.

On a year-to-date basis though, just -- I'd point out that our Molding Solutions business is 1.2x. So again, on a year-to-date basis, NGP and EC being around the 1x.

Right.

Okay. Okay. And that's kind of what you're talking about with the FOBOHA that, that all comes back in the second half, it sounds like, so okay. And then just on the OE -- on the Aerospace side. If I look at the guidance for just aftermarket MRO and RSP, year-to-date, I think, we're up nearly 20% in aftermarket and kind of mid-teen -- low to mid-teens, it looks like, for the year. So it does imply some -- a slower outlook in the back half of the year. Is that just visibility, just not having a ton of visibility into the aftermarket on a quarter-to-quarter basis? Or is something else kind of worth pointing out there?

Well, again, on our aftermarket, as we highlighted, it's been a wonderful first half to the year. What we've seen in the first half is some really nice revenues coming from the CF6 side of our RSPs and CRPs. And so the question for us is whether that CF6 level of activity will continue on an ongoing basis. Recognizing that this -- that particular engine is in its sunset years, and so there's been a resurgence through the demand that the overall industry has seen into 2018. So what we're looking at is still continued strength in the CFM, which makes up 80% of the RSPs and another larger part of the CRPs, which is embedded within our MRO. So strength as we move forward on the CFM; a little, say, caution on the CF6, which is why we haven't just projected the first half performance to -- through to the full year.

Okay. And on a relative basis, if I remember, the CF6 is probably a little better on a profitability basis for you relative to the CFM.

Tim, we don't really disclose that piece of it. But it -- the RSP is, obviously, a very high-margin business for us.

Okay. Okay. And then the last piece, just on capital use. I mean, you bought back, I think -- in the quarter, I think you bought back more stock than you've bought back in most years. So was it just opportunistic? I know the stock was kind of a little funky after last quarter. Or is it kind of a change in how you guys were viewing the M&A pipeline or just capital use, in general?

No. Tim, I would view it opportunistic. We clearly saw an overreaction, we feel, of our stock in terms of the first quarter performance. We have pretty good confidence of us being able to get back some in second quarter as well as our second half, as the guidance reflects. So we felt it was an opportunistic way of going after the capital deployment side.

And all I'd add to that is that we continue to be positive as we have been on the M&A side. So it's an area that we continue to put a lot of energy and focus into.

Okay. And then sorry, I'm going to squeeze 1 more in. I lied. The RSP that you had in the quarter, was that just completely opportunistic? Or are there more of those kind of dual opportunities potentially in the pipeline?

I would say that it was an opportunity that arose given that we were -- as we were reviewing our continued composition of the existing RSPs, it became evident that there was an opportunity for a dual-use application of some of the parts. When we initiated these agreements back in the early 2000s, we focused primarily -- exclusively on commercial. And what this agreement has done is pulled in the military side, whereby the economics of the deal match that of the commercial side. And so we thought it was a really nice opportunity to have some incremental volumes against these same parts but with a military application, recognizing that military is a very small part of the fleet subsequently why you saw the low participation there.

Your next question comes from Matt Summerville with Davidson.

This is Drew Haroldson on for Matt Summerville. Going back to the question on margin on the Industrial segment, how much of a sequential improvement in profitability came from improvement in execution in Engineered Components versus other factors? Any granularity you could give on that would be helpful.

Yes. I would say, on that one, when we look at the improvement, as we mentioned before, just the overall margin expansion kind of the past 3 quarters, 2 to 3 quarters in this business, we are getting the benefits of 2 major actions: one was we announced the consolidation of 2 facilities, and we're starting to see the benefits of that here in the first half. We'll see more of that in the second, as reflected in our guidance; and the other is the execution challenges that we faced in Associated Spring. We're starting to see that recovery. And again, most of that is going to be in the second half in terms of expansion, if you will, on the productivity side. So we're getting industrial back to the mid-teens in terms of operating margins, and that's what our expectation is for the second half of the year and guiding to the mid-teens and getting back to where we were, call it, 18 months ago.

At this time, I will turn the call over to Mr. William Pitts for closing remarks.

Great. Thank you. We'd like to thank all of you for joining us this morning, and we look forward to speaking with you next on October 26 with our third quarter 2018 earnings call.

Operator, we will now conclude today's call.

This concludes today's conference call. You may now disconnect.