Commercial Vehicle Group Inc (CVGI) 2007 Q4 法說會逐字稿

Good morning. My name is Monica and I will be your conference operator today. At this time, I would like to welcome everyone to the CVG Fourth Quarter 2007 results conference call. (OPERATOR INSTRUCTIONS.)

I will now turn the call over to Mr. Chad Utrup, CFO. Sir, you may begin your conference.

Thank you, Monica. And welcome, everybody, to the conference call. As usual, before we begin the formal portion of today's call, I'll first read through our Safe Harbor language. I'll then pass the call over to Merv to take you through a brief overview, and then I'll take you through our financial results for the fourth quarter and the full year of '07 and our outlook for the full year of 2008. And then we'll take time to answer your questions.

I'd now like to remind you that the conference call contains forward-looking statements. Actual results may differ from anticipated results because of certain risks and uncertainties. These may include, but are not limited to, the economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, risks associated with conducting business in foreign countries and currencies, and other risks detailed in our SEC filings.

And with that, I'll turn it over to Merv.

Thanks, Chad, and thanks to everyone who has joined the call today.

As you are undoubtedly aware, 2007's North American Class 8 build rate was about 44% lower than that of 2006. While we certainly expected emissions regulation driven downturn in the cycle, it is deeper and lengthier and more prolonged than what we had expected, or anyone else had expected.

The volume drop was also made worse by a production mix shift away from domestic purchasers to buyers in Mexico and other export markets. Whereas, 2006 mix showed only about 11% of North American production destined for Mexico and export, the mix in 2007 saw those markets accounting for closer to 30% of the total North American build.

In response, throughout the year we've reduced equivalent headcount by nearly 1,200 people. We also rationalized our operations by closing our Seattle Truck and Marine facilities, and a small construction facility in Red Granite, Wisconsin.

Although these were tough decisions, responding to a change in market needs is necessary to keep CVG competitive and sustainable over the long term. As we made these changes we were careful not to cut too deeply in order to protect our long-term capabilities. And we remain confident that we will be in good position when volumes return to the North American Class 8 market.

Another impact of the downturn in North American Class 8 market has been severe financial distress for many of our suppliers in the industry. On one hand, the industry slowdown forced some swift footwork in our supplier development ranch to move tier two work to more established supply partners. On the other hand, tougher times also presented CVG with the opportunity to make acquisitions.

In November and December we moved very quickly to make two strategic moves. The first was our purchase of thermoforming assets at Gage Industries. This was an opportunity to acquire competing business at a very good price, while also helping solve a supply issue for some of our key customers.

The second was our acquisition of certain assets and liabilities from Short Bark Industries, which has been the primary source for seat covers. Left unresolved, the value chains of both CVG and our customers would have been threatened. Quick action allowed us to acquire certain SBI assets that are key to our business, and should provide a good future return for our investors.

In October we acquired PEKM, a wire harness manufacturer with facilities in the Ukraine and Czech Republic. This acquisition will give us a better position in Central and Eastern Europe, first in the area of new markets and customers for CVG and, second, as part of our low cost sourcing and manufacturing strategy.

Most notably, PEKM brings to CVG an important new truck customer, the German-based MAN. In fact, PEKM won the supplier of the year honors with MAN in 2006. In addition, PEKM's production base is a viable platform for internal international growth with established CVG customers.

Despite the downturn and our need to rationalize parts of our business, CVG's Global Construction Group broke ground in a world-class plant in Aqua Prieta, Mexico. This move will help us become more efficient by consolidating multiple Mexico facilities and help us better serve existing customers.

We also recently completed our move into a much-needed corporate headquarters that has already started to function as our centralized R&D center. This new facilities, which consolidates four others into one, will bring CVG's leadership and functional teams together on a day-to-day basis. It will operate as a world-class research and development center where all of our engineers and centralized (unintelligible) can work more closely together.

At the end of the year plant productivity showed that we have functioned well despite the lower volumes caused by the downturn. At the end of the year we continued to improve our safety and quality performance.

Our China team doubled its sales and continued positive trends in productivity and attracting new customers.

In conclusion, while we realize we could have done better in some areas, we also feel we responded capably to the perfect storm of an industry downturn that included a shift in production mix and a declining dollar. While 2007 was a tough year, we achieved a number of positive accomplishments and we feel we were able to better position our company to go forward as a global competitor.

I'll now turn the call over to Chad to review the financials. Following that, we'll open it up for our question and answer session. Thank you very much.

Our fourth quarter operating performance was generally in line with the low end of our guidance for the quarter, with a few notable exceptions.

Our revenues of $178.5 million were positively impacted by a few thousand unit increase in the overall Class 8 market, and then offset by fluctuations in other markets, product mix and currency related adjustments, but overall in line with the lower end estimates for the quarter.

Operating income of $4.7 million was below our guidance for the quarter and was impacted by the incremental transfer and start-up costs related to the final steps of our Seattle facility closure.

In addition, our three recent acquisitions did not perform to our initial expectations during their first few months due in part to temporary delays in the movement of product to our Ukraine operations and other operational adjustments made during the first few months of integration.

Excluding these short-term impacts, our core operating performance was in line with our expectations for the quarter.

As mentioned in our press release from several weeks ago, we were negatively impacted by the mark-to-market of our foreign exchange contracts by approximately $4.9 million during the quarter, or roughly $0.15 on a diluted EPS basis.

Our contracts continue to benefit us on a cash basis. However, the last two quarters of 2007 have shown the negative side of the current method of accounting for our contracts, versus 2006, where we recorded positive gains under the same methodology.

We have taken the appropriate actions since the beginning of 2008 to designate all new contracts as hedges under GAAP accounting in order to eliminate these swings in the income statement on a prospective basis. We will continue to see the mark-to-market adjustments until all of our existing contracts expire, most of which expire by the end of 2008, with the remainder expiring throughout 2009 and 2010.

SG&A expense for the quarter was down considerably from prior quarter run rates, and is primarily related to the actions we've taken in cost cutting and other adjustments, such as the elimination of our incentive compensation plan for 2007. This was a difficult decision to make given the hard work by all of our employees during a difficult year, but we feel it was appropriate given our overall performance and market conditions.

Our tax rate for the quarter was lower than our normalized tax rate and was primarily related to the true-up of deferred tax assets, revised estimates of tax credits, and adjustments for valuation allowances for certain foreign tax credits.

Fully diluted earnings per share for the quarter came in at a loss of $0.15. Excluding the non-operating effects of mark-to-market and our tax adjustments, our diluted EPS was actually approximately $0.04 for the quarter, which was below the lower end range provided for the quarter and primarily the result of the items I previously mentioned.

As we look at our results for the full year 2007, we are obviously disappointed in not capturing all of our cost savings and synergies which we set out to achieve at the start of the year. However, we are proud of what we did accomplish during 2007 given the volatile market swings and general economy, among other things.

We have continuously pointed out that under constant business conditions, our operating contribution margin to be in the range of 25% to 30% on any change in our revenues. Excluding our acquisitions and our Seattle restructuring, our revenues dropped by approximately $251 million, or 27% from 2006 to 2007, and our operating income dropped by approximately $76 million. This is a 30% contribution or detrimental margin. And while it is short from our initial thoughts for the year, it is in line with our overall sentiment on contribution impacts even during a drastic year of decline such as 2007.

We believe this speaks volumes towards our flexible manufacturing processes and our ability to reduce variable and fixed costs while remaining focused on our overall growth and diversification strategy.

Now, looking at 2008. Due to the overall economy and depressed freight markets that we've seen over the past 15 months, we have based our guidance for 2008 on a range of 175,000 to 215,000 North American Class 8 units, which includes approximately 40,000 Mexico and export units. This is in line with several of our customers' views, but below ACT's estimates.

Obviously, this is well below the trend line demand and where expectations where for 2008 12 months ago. While it is early to tell on the timing of a rebound, we would expect 2009 to meet or exceed trend line demand of approximately 275,000 to 300,000 units.

We estimate that the global construction market will increase by approximately 4% in 2008 as it relates to our products, and we anticipate our net organic growth and other market penetration for 2008 to be in the range of 7% of our ongoing sales, or approximately $45 million.

The annual impact of our price concessions with our customers is estimated to be in the range of 1.5%. Depreciation is estimated to be approximately $20 million, and amortization approximately $700,000.

As usual, we have given no effect, positive or negative, for any impact of marking-to-market our existing foreign exchange contracts, and our tax provision rate assumption is approximately 36%.

We have estimated approximately 21.7 million diluted shares for the full year.

Given these assumptions, our expectations for revenues for the full year 2008 is in the range of $762 million to $814 million. Our operating income is expected to be in the range of $17 million to $30 million, and EBITDA, defined here as operating income plus depreciation and amortization, is in the range of $38 million to $51 million. Our fully-diluted EPS expectation is in the range of $0.10 to $0.50 per diluted share.

With capital expenditures of approximately $20 million, we anticipate our net free cash flow to be in the range of $5 million to $10 million for 2008.

Obviously, these estimates for 2008 have been adjusted since we provided our initial outlook for 2008 one year ago, given the significant decrease in total North American Class 8 volumes, as well as adjustments for content and customer mix trends which we have experienced this past year.

Despite the fact that the Class 8 market may see a further 15% to 20% reduction from 2007 levels, we believe the actions we have taken over the past year, such as the closure of certain long-standing operations and three acquisitions in the fourth quarter, plus our flexible cost structure and focus on diversification in other key markets, are proving beneficial for 2008 and beyond.

In other words, a further 15% to 20% decline in the Class 8 market from 2007 could ordinarily mean an $11 million to $15 million reduction in our operating profit for 2008, on top of an $8 million to $10 million reduction for annual price-downs to our customers.

But, with our planned cost-savings objectives and the effects of our facility consolidations, acquisitions and growth outside of the Class 8 market, we have instead put together a plan to eliminate this negative impact to our operating profit for 2008 and become an even stronger, more diversified company for the future.

As we look forward to 2009 and what is anticipated to be a more normalized production year, an increase in Class 8 build rates to a range of 275 to 300,000 units could have the effect of increasing our revenues to a range of $900 million to $950 million, and our operating margins closer to our historical run rates.

While this is not definitive guidance for 2009, we are providing these figures as an indication of our company's performance as the Class 8 truck market recovers.

With that, I think we would like to open up the calls for any questions.

(OPERATOR INSTRUCTIONS.) Your first question comes from David Leiker with Robert W. Baird.

Good morning. This is Keith on the line for David.

Good morning.

I just wanted to dig into the quarter-to-quarter change in gross profit and the contribution margin there. It looks like we had relatively flat North American build but the U.S. share was higher and gross profit was down. Can you just provide a little more detail there?

Yes. Keith, if you take -- using Q3 '07 and Q4 '07, I presume that's what you're talking about.

Yes.

If you exclude the acquisitions, which roughly for the quarter were probably $16 million of revenue or somewhere close to that, and roughly breakeven. Like we said -- Merv and I both touched on it -- the acquisitions were down a little bit from our initial expectations.

But, if you exclude those, I think you'll see that revenues were pretty flat. They were up a little bit from what you're talking about for the North American -- or the US-Canadian share, but some of our other markets, recreational and some minor currency impacts pushed it back down a little bit. So, it was still in line with kind of our lower end range, but it was pushed up from the US-Canadian market, and then pushed down from some other market adjustments.

Okay. Great. If I take your '08 guidance, it looks like you're expecting EBITDA of about $45 million. I believe your max covenant is a net debt of 2.5 times EBITDA, which would put it at $113 million. Are you going to have any issues in 2008 with debt covenants again?

Yes, if -- where the market is, where we're projecting at the 175 to 215, that's obviously a lot different than the beginning of the -- a year ago or even six months ago. So, the same way that we addressed it in 2007. We virtually have zero bank debt so we don't anticipate any questions. And we'll go through those discussions with our banks the same way we did the middle of 2007. So in short, no, we don't anticipate any issues with resolving that.

Okay. If we look at SG&A in the fourth quarter, and we were running about up 16% prior to the fourth quarter and we were down 30% year-over-year in the fourth quarter, what's a good run rate for that going forward in 2008?

I think the fourth quarter a big portion of that reduction is obviously some cost cutting measures that we took for the fourth quarter. And the other portion of that is, frankly, the elimination of our incentive program for 2007. So, ongoing run rate is probably going to be in that -- we're probably $62 million to $64 million for the year for '07. It's going to look abnormally high from 2007, but you've got those types of swings.

Okay. What kind of tax rate do you expect in 2008? Back to a normal level?

Yes. Expecting around 36%.

Okay. And then--.

That's what we've planned.

Was there a CapEx number during the quarter?

This -- fourth quarter, 17.3, I think -- 17.5.

Okay. That's great. Thanks, guys.

Oh, I'm sorry. That's for the year. It's around $6 million for the quarter.

Okay. Thank you.

Your next question comes from Peter Black with Winfield Capital.

Good morning, Peter.

Good morning. How you doing, guys? My question as basically just asked and answered.

One additional question. I know you talked about it in the beginning of the call, about some of the stress that some of your competitors were having. And you used your kind of advantaged position to be able to make some acquisitions. Given the lower guidance for free cash flow and the fact that you may have to go back to your banks and re-jigger some of those covenants, do you expect, in terms of capital allocation, to have to slow down your acquisitions this year and focus more on some additional cost savings at the Company? Or how are you thinking about your capital allocation this year?

Foremost, right now our group has got three acquisitions to integrate into the Company, and cost reduce in the current business that we had before the acquisitions. So, at current time, those are our focuses, are the cost reduction and the integration of the three acquisitions that we just made.

Okay. And then one last question. I know -- I looked at some of the earnings reports of the European truck manufacturers, like MAN and Scandia, which I guess was at the end of the third quarter. And their business was pretty robust and I think they spoke about Russia and Eastern Europe as being very high growth markets. And now projections for European growth are coming down pretty significantly. Have you heard from PEKM -- I'm not sure how you pronounce it, but have you heard or not whether or not they're expecting build rates to start coming down in Eastern Europe in some of their customers?

The thing with PEKM is they are in a growth mode simply from the fact that a lot of product that they have today was made internal at the customers' location. And that is being moved out of the customer into PEKM and will continue to do so according to our sources at the company.

So we haven't -- Peter, we haven't heard anything that's screaming at a downturn in that side of the market. Ours is a little bit different. It's more market penetration and growth within the market as opposed to riding the market, if you will.

Thanks. Appreciate it.

Your next question comes from Derrick Wenger with Jeffries.

Good morning.

Good morning. A couple questions. The capital expenditure guidance for '08 and '09. And if you could reiterate those -- that '09 kind of possibility in a return to the more normal market. And then just a recap. I think you said $62 million to $64 million for SG&A is a level on '08. If you could just verify those.

Yes. I'll talk to 2008. The capital that we had put out there is about $20 million, roughly.

Okay.

We didn't put out 2009. And regarding 2009, we're not putting out definitive guidance, but it's just kind of a range. If the market goes to 275,000 to 300,000 units, based on our general assumptions, we can see that that could possibly put us in a $900 million to $950 million revenue range with getting back to some more historical margin run rates, which a lot of you ask about fairly frequently.

And what that means is really just getting into closer to maybe where we've seen prior to the last downturn. And I don't want to peg a specific number, but when you're getting into where we are this year -- or last year and this year, which is the 5% to 6% range on a -- I'm talking EBITDA basis -- levels that get more to a normalized production level, like 2009, we're anticipating it to be, really helps us push back up to those historical run rates.

Okay. And the $62 million to $64 million, that's for '08 in terms of SG&A?

Correct.

Okay. Okay. Thank you very much.

Your next question comes from Alan Weber with Robotti.

Good morning, Alan.

Hi. First, I misunderstood something. When you talked about the global construction and Mexico, what is it actually that you're doing?

Well, first of all -- and let's take Mexico, we -- I guess a little over a year ago we put together a plan to consolidate four plants in Mexico into one and create really a world-class facility that had the capability of taking on more business. That was opened and has been accomplished.

And part of the overall construction on an international basis with PEKM, it provided us the ability to not have to do a greenfield operation in Eastern Europe for one of our large global construction customers. And we were able to immediately go ahead and start putting the opportunity for that international business in Eastern Europe into PEKM. So, it saved us a large financial hurdle with capital and resources of starting an Eastern European construction wire and harness business.

Okay. And then one other thing. On the Gage Industry and the Short Bark acquisitions, can you explain, where those kind of -- did you make those acquisitions only because they had issued you -- I mean, are they the kind of acquisitions you'd want to make or they were kind of defensive or just because of what was happening in the industry?

Well, let's start out with Gage. Gage was a competitor of ours. And it would certainly be the type of acquisition that we would want to make. It eliminated a competitor. It gave us the ability to take business that was already landed, that was already integrated into their company, or launched I guess I should say. So, the launch costs were already sunken costs.

And it allows us to go in and take issues that we know how to fix and start fixing them. And it gives us a good chunk of business. I think about $16 million worth of business. And it's a business that we know and that we can fix, and it gives us the ability to purchase the company, basically for the assets, what it would cost us just to buy the equipment. Or less.

Okay.

And now Short Bark Industries. It's not the one that we would -- if we -- just open with it. If we said, okay, let's have a target. Let's target this particular industry, no it would not be.

What it does do for us, though, it allows us to take and saved a lot of money from a company that if they went into a formal bankruptcy proceedings would have shut us and our customers and also some competitors maybe down. That would have not done anything good for us or our industries. And this allowed us to take and go in and buy it at an asset-based level.

And it also fits into our strategy of being able to -- they're in a low-cost country with Mexico. They're in an Appalachian area of lower labor costs. It allows us to take some of our cut-and-sew, that is in our higher labor cost areas of our company and that are eating up a little bit more valuable floor space where we could put a higher technology level into these plants. And allows us to take and move this production, say, in one of our plants that's doing cut-and-sew into a lower labor cost area. And then, in that plant, take and put a higher technology and more value-added business into.

So, from a strategic standpoint and opportunity for the Company, it worked out very well. But no, it would not be something that we would normally go after.

Okay. And then just a financial question. For '08, were you talking, Chad, basically no kind of working capital? You're not really going to be using cash for working capital and it won't contribute anything to its cash flow? Is that basically the case?

Working capital, it may be a gain of a couple million, but we're really expecting just to be relatively flat, Alan. Our range for net free cash flow for 2008 is like in the $5 million to $10 million range. And that includes maybe a couple million of working capital gain.

Okay. All right. Great. Thanks a lot. And I guess we'll look forward '09 numbers.

We all look forward to seeing some more trucks come out of these factories and us putting a lot of parts into them, and it will happen. The underlying demand that we've seen for this industry for several years now has been in the 270,000 to 275,000 range. You've got two years of that, supplying back to back in North America at historically slow rates. It is even more putting an emphasis on 2009 for a good recovery, in our estimation.

Okay, great.

Your next question comes from Peter Nesvold with Bear Stearns.

Good morning, Peter.

Hi. This is [Ryan Brinkman] for Peter Nesvold. It looks like the net interest expense picked up in 4Q, whereas previously it had been trending downward. Is this just because of less interest income due to a cash outlay for PEKM, or is there something else behind that?

No, it's -- I mean, we spent roughly $30 million in the fourth quarter, Ryan. So, it's pretty much based on that.

Okay. I appreciate it. Thanks.

Yes.

Your next question comes from [Rafi Lehman] with Eaton Vance.

Good morning.

I was just curious if you could comment on truck order activity that you've seen recently? ACT just reported the fourth month in a row of plus 20,000 net new orders. And I guess that's tracking at a seasonally adjusted rate of about 258. Your projection for builds for '08 is quite a bit lower and I'm just wondering why.

Well, if you remember '07, which is pretty much etched in parts of my body, these numbers were all very flashy and we were going to have a great second half of the year. We're going to have a great second quarter, a wonderful third quarter. It was going to kick up and then a fabulous fourth quarter. Those quarters never did happen.

And for us, the order rates are good things to keep track of. There's also things as tonnage miles. There's things as our customers. We have a great opportunity with fleets to get input straight from the fleets with all of our sales and marketing with our seats exactly at the pull-through. With the top 100 fleets in the nation we're over 80% of those. So we're in a lot of contact with them. We're in a lot of contact with our customers.

And frankly, all this put together is where our numbers are driven. And ACT is a wonderful service and they provide a lot for our industry. But, we're not there with them on the 250.

But, do you see the increase in demand -- is it just that you don't see it continuing? That there has been this uptick for the last few months but it may not continue the way they project it, or is it that you haven't really seen the uptick to match what they're reported?

Well, the rest of the indicators in the economy we haven't seen trend along with the production -- or with the order intake. And frankly, we go on production units that are coming out the door for us. And we're not seeing any uptick yet.

Okay. Thanks very much.

(OPERATOR INSTRUCTIONS.) Your next question comes from [Joe Merbar] with Loomis Sayles.

Good morning.

Hello. I only had one question, but now I have two after that last question. As far as this uptick in order rates which you guys, I guess, really aren't seeing, going back to I think Q2 and Q3, you guys were mentioning how difficult it was to run some of the lines based on the jerkiness of the OEMs. So, in terms of either Q4 or this supposedly higher run rate, from an operational perspective, is it getting easier to run your lines?

Well, it's getting easier not to think it's going to have a tremendous uptick in the next quarter. So, right now -- last year in '07 everyone was continuously planning on the uptick happening in the next quarter. And it keeps you whether -- on the edge whether you maybe cut back more or whether you get ready for a take off in demand so you don't lose the extra margin on the uptick.

So, we see it remaining fairly flat. What we see going on in the factories coming out to us, the orders, is flat, even if there are production -- even if there are orders coming in to the OEMs. And there's also our understand -- there's trucks in the field that are on the sales lot. So, we've got to look at those inventories. And for us, with all that blended together, that's where we come up with our prediction on the numbers.

Okay. So, I think you gave the example, I think back in Q2, that an OEM would come to you and, with little notice, saying we're shutting our line down for two weeks. So, you still are receiving that type of jerkiness in terms of production flow.

We're still seeing that. And we're still seeing -- I think one of our customers may even be on strike right now. So, we're seeing things like that pop up that probably keeps us a little bit more cautious than some of the others.

Okay, great. And then back to my original question. The -- what was the revenue breakout in Q4 between North American Class 8 and everything else? And is that 4% revenue growth number for '08 on global construction? Could you give us possibly for the non-North American Class 8 for '08 what your revenue growth thoughts are?

The Q4 number, I don't have it in front of me. We don't break it out on a quarter by quarter basis. But, the acquisition piece of the revenue for the fourth quarter was in that $16 million to $17 million range. And the 2008 growth -- were you asking about the construction market or the organic growth?

Well, I was just wondering what your thoughts on revenue growth would be for the non-North American Class 8 market.

Oh, it -- the growth and market penetration that we have currently planned for 2008, roughly 7%. It's like $45 million. It generally splits with the same breakout that we have in our overall markets, meaning -- in 2007 for example we're probably close to, say, 40% to 43% of our sales in 2007 was OEM heavy truck business.

Okay.

And close to 25% is construction, and the balance is other markets, like military and so on. So, it generally trends in that direction.

Keep in mind our non-North American Class 8 business is only through the recent acquisition of PEKM. So for us as a company, that's a very small portion of our business. We certainly intend for it to become a very much larger portion of our business and we are making great strides and great progress in Asia with our customers there and growing our business, as well as in Eastern Europe and Western Europe growing our business with our existing customers. So, we've got a very positive trend going in Class 8 markets in non-North American right now.

All right. Thank you.

Your next question comes from Alan Weber with Robotti.

Good morning again, Alan.

Good morning again. The after market business? Any changes there, or that's continuing to grow? Or how is that doing?

That's continuing to grow. It's going very well. We're currently making some internal changes to put a much greater focus on the after market business. Our eventual vision for our after market is that it will be separate from our OEM business. And we'll move also into a little bit more of a distribution area, where we may not manufacture all the products that we distribute. And it'll be more of a centralized operation with -- that is split out from our OEM business.

Okay. And then, when you talk about the export of the trucks, when you gave these projections, like for '09 of 275,000 to 300,000, I think Class 8, we all know those are just kind of guesses to some extent. Do you -- what are your thoughts about the export part of that in '09 or like that?

Well, personally, and us as a company, when we look at it, when we see getting back up in the 275 to 325 area of business, we see the export market to Mexico and everything going back down to the 10% to 12% range versus this past year's range of closer to 30%.

Okay. And do you see long term the content that -- on the Class 8 that does get exported, do you see long term the content on those trucks increasing for the company or not really?

I think long term they will because as countries get more demand for the trucks and get more demand for drivers, and their economy expands and grows, to retain good drivers you're going to have to start looking at a little bit more of the creature comforts.

And as their infrastructure in some of these second and third-world countries develop more, and their infrastructure, then it determines the need for long-haul trucks -- like we're seeing in a country like China and Eastern Europe continent, the demand is growing for better trucks. And the infrastructure growing where it's allowing more cross-country trucking.

Okay. Great. Thanks an awful lot.

You're welcome.

There are no further questions at this time. Do you have any closing remarks?

We would -- this is Mervin. We would -- really appreciate you guys joining us for the call and you had a lot of great questions today. We look forward to '08 and we certainly look forward to seeing some volumes like we're projecting for '09.

We've got a -- this is a -- we feel very comfortable with our company and we think we have a great company. We're also moving into more of the technology areas with our company. Some of our product is looked at more as a commodity. And we certainly are looking to move those into the engineering -- engineered products areas such as with the green wave that's going on through more of the acoustical engineering areas and the thermal engineering areas, where the product keeps out more of the noise from the road, provides better insulation to the cabs, for the drivers, to help retain heat or the temperature that the driver wants.

So, these are things that are helping drive our company for the future. And we have a very positive outlook with our company and with the industry.

Thank you everybody for joining us.

Goodbye.

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