Curtiss-Wright Corp (CW) 2003 Q4 法說會逐字稿

Good morning, and welcome to the Curtiss-Wright 2003 investor conference call. (OPERATOR INSTRUCTIONS). At this time, it is my pleasure to introduce Martin Benante, Chairman and CEO of Curtiss-Wright. Martin, the floor is yours.

Thank you, Lynn, and good morning everyone. Welcome to our 2003 year-end and fourth-quarter investor conference call. Joining me on the call today is Mr. Glenn E. Tynan, our CFO, who will begin our forum today.

Thank you, Marty. If you do not have a copy of the earnings release, which was issued yesterday, please call Ms. Joanne Haas (ph) at 973-597-4711, and she will be happy to e-mail or fax a copy to you and add you to the Curtiss-Wright distribution list for all future press releases and other communications.

Before we begin, we will make certain forward-looking statements on today's call, such as statements about the company's confidence and strategies or expectations about the results of operations, future contracts or market opportunities. While we believe that our operating plans are based on reasonable assumptions, we cannot guarantee that we will meet any expectations that might arise from these forward-looking statements or their underlying assumptions. Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Security Reform Act of 1995, and involve risks and uncertainties that may produce results or achievements that are materially different from those expressed or implied during this discussion. Such risks and uncertainties include those factors that generally affect the business of aerospace, defense, marine and industrial companies. Please refer to our SEC filings under the Securities Exchange Act of 1934, as amended, for a more thorough discussion of risks and uncertainties, as well as further information relating to our business.

Now, Marty will begin our discussion regarding Curtiss-Wright's financial and operating performance for the full year and fourth quarter of 2003. Marty?

Thank you, Glenn. I am pleased to report our eighth consecutive year of revenue growth along with higher operating income and earnings. During 2003, we increased sales 45 percent to 746 million, from 513 million in 2002. Operating income, before pension income, increased 42 percent in 2003, as compared to 2002.

Net earnings in 2003 were 52 million, or $2.50 per diluted share, as compared to 45 million in 2002. However, 2002 included certain non-recurring income. Excluding the non-recurring income in 2002, or net earnings increased 26 percent in 2003.

The increase in 2003 net earnings was achieved despite a significant decline in pension income in 2002 of 5.6 million, or approximately 17 cents per diluted share, and an increase in interest expense of 3.9 million, or approximately 11 cents per diluted share.

During the fourth quarter of 2003, our sales increased 11 percent to 194 million from 174 million in the comparable period of 2002. Operating income before pension income in the fourth quarter increased 23 percent to 26 million from the prior-year period. In addition to our acquisitions, performing better than our acquisition models, cross-marketing of products and new technologies generated growth in many of the markets in which we compete.

Net earnings for the fourth quarter of 2003 were $15 million, or 70 cents per diluted share, as compared to 14 million in the comparable quarter of 2002. The fourth quarter of 2002 also includes certain non-recurring income. Excluding the non-recurring income, our net earnings increased 22 percent in the fourth quarter of 2003 over the prior year. The increase in fourth-quarter net earnings was achieved despite a decline in pension income and an increase in interest expense from 2003 for 2.4 million, net, which is approximately 7 cents per diluted share.

Our outstanding performance is due to both our diversified strategy and growth in our core markets. We were able to increase sales and earnings despite a slowdown in some of our markets because we continued to deliver to our customers the high-performance and technologically-advanced products for which Curtiss-Wright is renowned. Or market leadership in existing technologies and product innovations, as well as our geographic expansion, continues to drive improved performance in each of our business segments.

New orders received in 2003 were 743 million, up 55 percent from 2002. Approximately 48 percent of the new orders received were military-related. New orders received in the fourth quarter of 2003 were 225 million, up 69 percent from the fourth quarter of 2002. Backlog increased 6 percent to 505 million at December 31st, 2003, up from 478 million at December 31st, 2002.

Our complementary business segments have produced a balance that enables us to continue to achieve profitable growth during the weak economic cycles and geopolitical uncertainties. While the commercial aerospace market remained soft, the ramp up of military programs have resulted in strong growth in our defense business, including aerospace, naval and land-based platforms.

Curtiss-Wright generated increased sales in 2003 in markets that have experienced downturns, specifically power generation, oil and gas processing, and certain industrial markets. In addition, with our recent acquisitions of Peritek, Systran, Novatronics and Dy 4 Systems, we have built a leading global position in the emerging defense electronics market. Electronics represents one of the fastest-growing sectors of defense spending and integrated combat systems and unmanned technologies are developed.

We have created a full platform of product offerings in the ruggedized embedded systems market to provide computing solutions for the military, as well as medical and industrial controls market. Defense electronics is expected to remain the largest portion of the defense market, as the move to network-centric warfare becomes the dominant trend in military spending over the next decade. And, as prime contractors increasingly focus their attention on core competencies, such as system integration, Curtiss-Wright is well-positioned to capitalize on the expanding outsourcing market for embedded systems.

I will now turn the call over to Glenn to discuss our financial performance in more detail.

Thank you, again, Marty. Our 2003 financial results continue to reflect strong performance in each of our business segments. We have continued to grow our business through strategically-focused acquisitions, as well as organic business development. Excluding contributions from our 2002 and 2003 acquisitions, we achieved organic sales growth of 9 percent and 6 percent for the fourth quarter and full year 2003, respectively.

This organic growth was achieved despite year-over-year reduction in our domestic commercial aerospace OEM, and repair and overall businesses of 8 percent for the quarter and 20 percent for the year. Our organic growth and successful integration of recent acquisitions more than offset a significant reduction in pension income, and increasing interest expense, as compared to the prior year. In addition, foreign currency translation favorably impacted total sales by 4 million and 14 million for the fourth quarter and full year 2003, respectively.

Earlier, you heard Marty refer to operating income before pension income, as well as referred to our performance in 2003 relative to 2002, excluded non-recurring income. Beginning with the fourth quarter of 2003, operating income for all periods presented reflects a reclassification of pension income from nonoperating to operating to better conform to current reporting requirements. In addition, 2002 included approximately 3.5 million pretax of non-recurring income, which is outlined in our press release.

Management believes that in order to understand how the company performed operationally, and consistent with the way we evaluate our performance, our results have been adjusted for the aforementioned items. As reported, operating income for the year 2003 increased 29 percent to 89 million, from 69 million in 2002. Net earnings in 2003 increased 16 percent to 52 million, or $2.50 per diluted share, as compared to 45 million in 2002, or $2.16 per diluted share. Operating income in the fourth quarter increased 20 percent to 26 million, from 22 million in the prior-year period. And net earnings for the fourth quarter of 2003 increased 8 percent to 15 million, or 70 cents per diluted share, as compared to 14 million, or 65 cents per diluted share, in the fourth quarter of 2002.

I will now turn to our segment performance. In our Flow Control segment, fourth-quarter sales of 78 million were up 2 percent over the comparable prior-year period. The improvement was due to higher sales of valve and electronic products to the nuclear naval market, higher sales to the commercial power generation and heavy truck markets, and a full-quarter contribution from the December 2002 acquisition of Tapco. This improvement was mostly offset by lower sales at EMD (ph), which was driven primarily by the timing of revenue milestones with the Navy.

Operating income in Flow Control increased 7 percent during the fourth quarter over the comparable prior-year period. The improvement was die to higher sales and favorable sales mix. In addition, the improvement was attained despite unanticipated shipping delays, which resulted in an operating loss for the quarter at our Butterfly Valve unit.

In our Motion Control segment, sales for the fourth quarter increased 12 percent to 78 million over the comparable period in 2002. This growth was driven by our acquisitions of Collins Technologies, Peritek, Systran and Novatronics during 2003. In addition, we achieved 5 percent organic growth in our base businesses, which was driven by stronger European ground defense sales, resulting from expedited delivery schedules. And an increase in sales of military aerospace products for F-16 spares and JSF development and slightly-higher European sensors and drive sales. These higher sales were partially offset by lower domestic ground defense sales for the Bradley fighting vehicle, and lower sales associated with the overhaul repair services provided to the global airline industry.

Operating income in Motion Control increased 27 percent during the fourth quarter, compared to the comparable quarter in 2002. We enjoyed a favorable sales mix due to scheduled ramp-ups in various military programs. These improvements were partially offset by lower margins at our European sensors and drives business. Additionally, the operating margins for the overhaul and repair business improved over the comparable period last year, mainly due to cost control initiatives.

In our Metal Treatment segment, sales were 38 million in the fourth quarter of 2003, an increase of 37 percent over the comparable period last year. The improvement was primarily due to our acquisitions of AMP and E/M Coatings in 2003. In addition, we had higher revenues from shot-peening, including sales growth from our new laser-peening technology. Operating income increased 55 percent in the fourth quarter over the comparable period of 2002. This improvement is due to the contributions from acquisitions, the higher base revenue and cost containment initiatives.

Our balance sheet remains strong, with working capital of 239 million as of December 31st. Total debt outstanding was 225 million, and our net debt-to-capitalization ratio was 18 percent at December 31st.

On January 31st, we completed the acquisition of Dy 4 Systems for 110 million. The total consideration was paid in cash, including approximately 40 million borrowed under our existing revolving credit facilities. Our free cash flow, defined as net earnings after-tax, plus depreciation and amortization, less CapEx, was 50 million in 2003 and 14 million during the fourth quarter.

In 2003, our depreciation and amortization was 31 million, and capital expenditures were 33 million. We anticipate that our free cash flow, as defined herewith, will be between 52 and 57 million in 2004.

I will now turn the call back over to Marty for some closing remarks before we open the call to your questions. Marty?

Thank you, Glenn. We began the year 2004 confident in our ability to continue to build our solid business foundations and generate long-term shareholder value. We delivered significant increases in revenues and earnings in 2003. But, perhaps the most dramatic return, which directly benefits our shareholders, is the strong performance of our share price.

Over the past year, the value of Curtiss-Wright common stock has increased 41 percent while increasing 94 percent over the past three years. An indication that our confidence in our ability to continue to deliver long-term value to our shareholders, we increased our annual dividend by 20 percent. In addition, we have greatly enhanced our liquidity by completing a two-for-one stock split.

We believe these steps will further attract the interest of new investors. While 2004 is likely to continue to present a challenging business environment, our diversification strategy and ongoing emphasis on technology will continue to generate growth opportunities in each of our three business segments. We look forward to generating another strong performance in 2004, and to provide our investors with superior returns.

I would like to now provide guidance for our anticipated 2004 performance. We anticipate total revenues in 2004 to be approximately 890 million, an increase of 19 percent over 2003. We anticipate operating income in the range of 102 to 110 million, which represents a 16 to 25 percent increase over 2003. We also anticipate an earnings-per-share range of between $2.70 and $2.95 per diluted share, which would represent an increase of between 10 and 20 percent, despite essentially no pension income, and higher anticipated interest expense in 2004.

With that, I would like now to open it up for questions.

(OPERATOR INSTRUCTIONS). Eric Hugel, Stephens Inc.

Good morning, guys. Good numbers. With regards to your guidance, can you maybe give a little more detail as to segment level, and I guess what you are expecting out of your motion, your flow business and MIC (ph) for '04? And maybe address margins -- what your expectations are or what you believe you can achieve?

Sure. Eric, we expect from our Flow Control division, approximately a 9 percent increase in sales, and approximately the same increase in operating earnings. The OI percentage will be between 11.5 and about 12.5 percent. From our Motion Control we have a 35 percent -- approximately a 35 percent increase in sales. And it also will generate between 11.5 to 12.5 percent OI. And in our Metal Treatment, sales of approximately 160 million. And in will generate profits in OI between 14 and 15 percent.

Great. Can you talk about, with regards to -- I guess in previous conference calls -- last conference call, you talked about, I guess specifically, in the Flow Control business, your carrier work for '04. You were expecting to do about 40 million. And for the sub business, I guess, you were talking about the build rate being more at about 1.5 still. I guess you said you'd do about 60 million on a sub that would be more, I guess, in the $90 million range. Are those still sort of what you're looking for, for '04?

We are looking for an increase in the -- the aircraft carrier will be $40 million sales in 2004. The submarine will be closer to the one ship set (ph). The defense budget did come out with a multiyear procurement, but that was that one submarine per year. We're hoping that this fiscal year will increase the ship set rate. But, right now, it looks like we will be at one submarine a year.

Okay, I guess one more question were with regards to Dy 4 Systems. I mean, can you address some of the stuff that is going on there with regards to the acquisitions? The impact of purchase accounting? How long you would expect margins to be affected by that as you burn through whatever you wrote up in terms of backlog and stuff like that? And any efforts that you have ongoing there with regards to, maybe, new product introductions or, I guess, that we could infer for Dy 4 Systems and for your whole embedded electronics? What kind of growth do you expect out of that business going forward?

Let me address the market as a whole. Right now, we intend to ship about $156 million of embedded systems this year. That takes into account Dy 4 Systems only being near 11 months out of the year. Apparently, the three acquisitions that we currently just made, which was Dy 4 Systems, Systran, and Peritek -- our purchase accounting is approximately $3.25 million. So, if you take a look at that 10 cents per share, so, in reality, our guidance could have been $2.80 to $3.05, and have a good chance of hitting $3 per share if it was not for that write-off. We anticipate growth there to be double digits over the next five years, just as the market is growing. We will anticipate that we will gain that. And we are also in the midst of developing products that, I think, will be very well-received in both the defense -- mainly in the defense -- but also the industrial market and medical markets.

All right, can you more specifically address how the purchase accounting affects -- I guess, is it all written off in the first quarter, second quarter? And then we could expect cleaner margins, where they would be ex-purchase accounting going forward? How long do we feel that impact?

Well, you're going to feel the impact for five years. But obviously, the main portion of it will burn through within the first year to two. It is very similar, as you start to see some of our margins increase, as I announced today, you are seeing the effect of that purchase accounting, and coupled with our cost reduction program that are improving those margins.

Okay. I will let other people ask questions.

Peter Arment, JSA Research.

Good morning. Nice quarter. Your guidance for '04 assumes zero pension expense or income? Is that the way you're modeling it?

That is correct.

Okay. Also, the Q4 gross margin was 35 percent, which, sequentially is up 500 basis points. I'm just curious whether there is anyone one-time award fees in there or whether these are mix issues that you are seeing such a good improvement?

They are just mix issues as we see improvement.

Okay, so it's just volume-related?

Well, volume -- you know, the volume, when you compare it to last year, is not that great. I think you are seeing some effective cost reductions coming in.

Okay, and particularly in the mix area, what is making that margin spike up?

We have had quite a few items that we brought in -- our new products in Delta valve, where we have the coking. We started to receive some very good margins from our laser-peening. We just opened up our laser-peening facility in Europe. We are starting to see some improved margins out of our Metal Treatment Company, both in our coatings area. We are seeing an uptick in our heat-treating, and also we brought on this second laser-peening.

What were the laser-peening sales in '03?

It was right around $5 million.

Okay, and you are expecting another significant ramp-up in '04?

Well, we will see at least a 40 percent increase in '04. You know, the thing that we think is going to be interesting is we are baking (ph) our fifth laser, which is a rotating head laser, and the sixth laser is a mobile laser -- we think we have quite a few applications that customers are currently lining up for, for that mobile laser for structures that cannot be disassembled and brought to our facility. So, I think you're going to see good improvement in 2004. But, I think you will see very nice improvement in 2005.

Okay. Excellent. You mentioned the 156 million that is being generated from the embedded to computer systems or the product (indiscernible) area. Are you seeing a huge potential on the organic or market share gains, given the size of that market and now some of the position you are in with these recent acquisitions?

Yeah, we definitely see the potential for that.

Can you give us a little color in terms of the market share potential that you guys are looking at over the next few years? I mean, just big picture?

We just look to do very well there.

We've done well in every market that we've ventured into. I don't see any reason why we would not look to do very well there. I think we have made good investments. We've brought on good companies and also very, very good people. I think the management teams that we have picked up are very good. When you couple that together with our management team at our controls division, I think it makes for some -- an exciting piece of our business that I think has very good potential.

Is there still opportunities for acquisitions in that market?

Definitely. Without a doubt.

Okay. Just one final question, the delay in your Butterfly Valve unit, is that something that is going to carry into Q1? Or, has that been resolved?

No, we are resolving it. We had a problem with one of our actuator suppliers. We intend for those -- we are starting to see those actuators now, so it will be over with by the first quarter.

Okay. Great. Nice quarter, guys. Thanks.

Jim Foung, Gabelli & Company.

Good morning. Good quarter, guys. Yeah, I guess, can you just address what may be one-time issues in the quarter? It seems like you had some (indiscernible) bankruptcy, (indiscernible) delays with the actuators? I mean, can you just kind of give us a ballpark in terms of how much that might have been taken together, and how it impacted you in the fourth quarter?

Jim, a couple of things. The customer bankruptcy is something that is in the Metal Treatment segment that happened earlier in the year. What it is, is our major customer of one of our units went bankrupt. So, you know, it's affected their sales. It's not like a write-off of a customer receivable or anything like that. It just depressed that particular unit's market -- you know, it had been ongoing (multiple speakers) throughout the year. It didn't happen in the fourth quarter (multiple speakers) It's an ongoing --.

Right. Now, I remember that early in the quarter. So, it wasn't a fourth-quarter event, then?

No.

Okay. How about the actuator issues? And, I guess, some timing issues of EMD (ph)?

Well, the timing issues at EMD are just contractual contracts. They are just contractual shipments. I mean, we either have good contractual shipments in that quarter, or we do not. So, it just happened to be that they have had a light contractual timeframe.

Okay, so that businesses is pretty much on tract, just more -- (indiscernible) (multiple speakers) how the orders --?

The fourth quarter of 2003, Jimmie, for EMD had two humongous, rather large commercial contracts that were completed in the fourth quarter. So, that is obviously affecting quarter-over-quarter, but they are on-target.

Okay. I guess a broader question is, as you make these acquisitions and it kind of changes the make-up of your company, how much visibility do you have with your business? I mean, how much -- how far can you see as the make-up of your business has to change? I mean, are your businesses coming in more cyclical than in the past where we might get some more quarterly operations with timing of orders and stuff? Can you just kind of --?

Sure. The thing is, is that a lot of the businesses that we had have long-term contracts. So, we have very, very good visibility. When you think about most of the Flow Control and controls business, which is 80 percent of our business, consists of long-term contracts, predominantly. We do have long-term contracts in the MIC, or the Metal Treatment industry, as far as Airbus is concerned. We know what programs are coming through. Quite frankly, on the Metal Treatment, we are starting the production of A-380 (ph) wings, or the forming of A-380 wings. So, an A-380 wing to us is equivalent in revenue to five A3-20 wings. So, that is why we have some pretty good organic growth there.

We can see things on a long-term basis. The thing is, is that there are some trends that take place, such as -- we received last year a lot of spares and overhauls for military programs with the anticipation of the war. We're not really projecting any post-war influx of repairs or items such as that. So, those are the kinds of areas where we are not really familiar on what will take place.

Okay. And then, I guess just moving on to that overhaul and repair, can you kind of just give us an idea what the revenues were in the quarter and for the year for your overhaul and repair business?

Unidentified In our overhaul and repair business for the quarter, it was about $6 million. We are projecting a slight increase next year of about 24 million, 45 (ph) million in that area -- a slight increase in our overhaul area. But, we also expect better returns based on cost reductions than we have had this year.

It was $6 million in the quarter. And what was it for the year in 2003?

2003 was about 22, 23 million.

Okay. And you are expecting 24 million this year, right?

Right. 24, 25.

And you are expecting better margins because of cost reductions, right?

Right.

What was the margin last year?

They were in the single digits.

Okay. One last question, and I will let someone else come on. Did you reset your discount rate and return on assets last year regarding the pension plan?

We did, Jim. We did not change our long-term rate of return (multiple speakers) 8.5 percent for us. But we did lower our discount rate to approximately 6 percent.

And, from what?

From 6.75.

Okay, and how many years (indiscernible) do you use.

It's a ten-year.

Ten-year smoothing (ph)?

Yeah.

So, you don't have very much variation in there, because that's a long window there.

Right.

Okay. Great. Thank you.

Eric Hugel, Stephens Inc.

Marty, can you, maybe from a 10,000 foot level, when you look at the overall business, and maybe going out '04, maybe sort of a little beyond, maybe next two or three years, sort of look at from the collection of businesses that you have, sort of what is a good sort organic growth rate in topline bottom line, that sort of -- when you do your plans, that you sort of target ex-acquisitions and stuff like that?

Hello?

Hello?

Hello?

Eric?

Eric -- can you hear us?

I can hear you. Can you hear me?

Yes, we can. Sorry.

Marty, I guess my question is -- .

I heard your question. This year, our organic growth is going to be somewhere in the area of 8 percent. That was somewhat reduced because we anticipated about a $20 million contract on refurbishing the Vincent aircraft carrier. We were supposed to get a contract for a leakless valve, which we would have had about $16 million-worth of sales, and probably about a 25 percent margin, and anywhere between 3 and $4 million-worth of additional revenues there. But that was put off until next year.

We think that we will continue to see, as time goes on, for the next three to four years, good growth rates in the defense market. We also anticipate, in the next couple of years, the economy doing better, and also the return of commercial aerospace. And I think what you will see two to three years out, is you are going to see a very good -- probably the height of our military shipments with the economy starting to come up, and MIC, which is at the low point of their returns on sales -- where we are somewhere in the area of 13 to 15 percent. And they are normally, in good economic times, in the 20 percent range. So, I think what will happen is, you're going to see some very good profitability and good growth coming out of our company for the next two to three years.

So would you say like a low teen sort of organic growth rate over that time period is a reasonable assumption?

Well, I would say sticking to 10 percent, 8 to 10 percent, because things do come out that you sometimes don't anticipate. So, I think we're going to see good growth.

Right. I guess maybe this is a question for Glenn. Your tax rate was a bit lower in the fourth quarter. Is that something we can expect going forward? Or is that sort of a onetime thing?

No, no, I think, as I said previously, we are continuing to try to lower our tax rate. And we will continue to do so, going forward, Eric.

So, the 37.5 -- is that a good rate going forward? Or should it come down more?

It will be in that area.

Okay. And, I guess, can you sort of maybe talk about the seasonality -- maybe distribution of earnings? Give us some idea -- is there any sort of, just in the way your plan lays out, can we expect sort of a big quarter anywhere? Sort of how should we think about that?

Right now -- a lot of it is based on contracts, so first quarter is light, third quarter is seasonal light because of MIC. But we have very strong second and fourth quarters, based on what we have right now. Whether or not we pull some of that forward where we could improve the first -- but right now the first quarter looks a little light compared to the others, with the second and fourth being strong quarters.

(indiscernible) had a great quarter, margin-wise -- 15.8 percent. You know, and considering December is pretty much a shutdown month, are you being conservative on your '04 expectations for margins out of that business?

Am I allowed to say that now? (laughter). Let's just say that we're not saying we're turning the corner, but I think we will start to see good things come out of MIC.

Okay. Great, Marty. Thanks.

Jim Foung, Gabelli & Company.

Actually, Marty, that was kind of my question. When I look at where you ended the fourth quarter in your margins in each of the segments, they are way above what you are guiding for the year in 2004. So, I mean, are you just kind of -- I mean, is there something (technical difficulty)

I think that we are -- you know, again, I think there was nothing exceptional in the fourth quarter. I think we had -- we're going to see good mixes like that. I think you are seeing cost reduction programs come to the forefront. And, you know, we feel very confident about it -- let's say we feel very confident about our guidance.

Okay, I mean, it seems like it is kind of a conservative guidance, given where you're ending the quarter last year. And --?

Well, we let our -- what we've done over the last few years. I mean, if you take a look again at our sales growth since 1996, it has been 23 percent compounding of growth rate. Operating earnings since that time has been 28. You know, we don't need to really sit back and talk about laurels. Our performance, I think, should be the forerunner of what we do.

Jimmy, also, if you look -- you really have to look at the operating margins for the year. If you look at the year, the fourth quarter is always a big -- has been a big quarter for us. So, I think if you look at the year, our guidance is right in line with (indiscernible) improvements over the year.

Right. The first half of '03 was entered -- coming into the first half of '03 was a weaker period for you, and you kind of anticipated that. And then, second half was stronger as these markets came back for you. So, you're really starting our with the second half with the economy improving here?

Yeah.

Year-over-year looks a little better. All right, all right. Let me move on to the second question -- the embedded computer business -- I mean, it seems like it is really a -- kind of a subgroup in your defense electronics -- or, your military defense business. How big do you want this to be? It's $156 million today. I mean, on top of your organic growth -- I mean, how big do you want this business to be three to five years out or three years out?

Well, the thing is, this embedded systems market is, I think, approximately 5 billion of which 2.5 billion is outsourced. Our sales will be in the area 156 million, and is supposed to grow at a double-digit rate. So, obviously we want to grow at least what the market trend is and better.

Okay. And then, do you have an idea in terms of -- can you kind of put a sense around what size you would like it to be in proportion to the rest of your company? Like a $500 million business over three years with acquisitions and stuff?

All I can say is as big as it can get. (laughter).

Okay. What kind of margin does this have? You know, I mean --?

Normally, if you take a look at good companies in that range, you're talking about 17 to 18 percent EBITDA levels. So, it is a good business.

That makes about 14, 15 EBIT level?

We just track the EBITDA.

Okay. Okay. Terrific quarter, guys.

There are no other questions at this time.

Great. With that, I would like to conclude our conference call and look forward to talking to everybody in our first quarter of 2004. Thank you very much. Take care.

Thank you.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a great day.