Curtiss-Wright Corp (CW) 2004 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to Curtiss-Wright's Third Quarter 2004 Investors' Conference Call.

All lines have been placed on a listen-only mode, and the floor will be opened for your questions and comments following the presentation.

At this time it is my pleasure to turn the floor over to your host, Mr. Martin Benante, Chairman and CEO of Curtiss-Wright. Sir the floor is yours.

Thank you Kristen and good morning everyone. Welcome to our Third Quarter 2004 Investors' Conference Call.

Joining me in the call today is Mr. Glenn Tynan, our CFO who will begin our forum today.

Good morning everyone and thank you Martin.

If you do not have a copy of our earnings release, which was issued yesterday, please call Ms. Deborah Torre at 973/597-4712, and she will be happy to email or fax a copy to you and add you to the Curtiss-Wright distribution list for all future press releases and all other corporate communication.

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 functions, 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 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 electronics 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.

In addition we will be discussing some non-GAAP measures, primarily relating to the effect of amortization on our operating results. Due to the change in accounting for business combinations enacted a couple of years ago, and the fact that we have been actively acquisitive since that time, for comparative purposes we feel it is important for investors to understand the impact that this accounting change continues to have on our operating results. These measures may not be comparable to financial measures of other companies, do not represent alternatives measures of the Company's operating results, and should not be considered as an alternative for measures of performance presented in accordance with GAAP.

Now Martin will begin our discussion regarding Curtiss-Wright's financial and operating performance for the third quarter of 2004.

Thank you Glenn.

Today I'll begin the call with the quarterly performance update and then hand the call back over to Glenn for a discussion of our segment performance and financial position.

At the conclusion of Glenn's remarks, I will provide an overview of our outlook and then open the call up for questions.

I am pleased to report another strong quarter of double-digit sales, operating income, and net earnings growth. We have increased our sales 25 percent to $236 million from $189 million in the third quarter of 2003. Acquisitions contributed approximately $43 million in incremental sales during the third quarter of 2004.

Operating income increased 19 percent to $25 million in the third quarter, with acquisitions contributing $2.8 million in incremental operating income. Our strong operational performance resulted in an 18 percent increase in net earnings to $15 million or 68 cents per diluted share for the third quarter as compared to $12 million or 60 cents per diluted share in 2003.

Net earnings during the third quarter included an $800,000 after-tax expense or approximately 4 cents per diluted share for costs related to compliance of Sarbanes-Oxley rules for '04. This one-time cost was partially offset by a one-time tax benefit at approximately $650,000 or 3 cents per diluted share.

Curtiss-Wright also experienced higher amortization expense in the third quarter of $2.6 million or 7 cents per diluted share, which caused the drag on our operating margin. New orders received in the third quarter increased 89 percent to $240 million, and our backlog reached a new record level of $571 million.

During the first 9 months of 2004, we also achieved double-digit growth in sales, operating income, and net earnings. We are very please with the progress we have made during the first 9 months of 2004, and we are well positioned in each of our markets for continued strong performance.

I will now turn the call over to Glenn to discuss our segment performance and financial position. Glenn.

Thank you Martin.

On a consolidated basis, we generated a 25 percent increase in sales and 19 percent increase in income in the third quarter. On a year-to-date basis, our sales increased 22 percent and our operating income increased 21 percent over the prior year. These results were driven by contributions from our acquisitions in 2003 and 2004, and solid performance in our base businesses.

Let me take a brief moment to explain to you how we evaluate our acquisition and organic business performance. For quarterly reporting purposes, our acquisitions are segregated from our results of our base businesses for a full year, or the more likely event of a mid-quarter acquisition, 5 quarters. For year-to-date reporting purposes, acquisitions remain segregated for 2 years.

An acquisition is considered based when the reporting period reports fully-comparable current and prior-year data. Therefore, for the third quarter our organic growth excludes the 14 acquisitions acquired since the second quarter of 2003. And for the first 9 months of 2004 our organic growth excludes all acquisitions since January 1, 2003.

Excluding the acquisitions, we achieved 2 percent and 4 percent organic sales growth in our base businesses during the third quarter and 9 months year-to-date periods respectively. During the same periods, our organic operating income grew 7 percent and 12 percent respectively.

Our operating margins continue to be affected by higher amortization expenses due to our robust acquisition activity in recent years. On a consolidated basis our operating margin was 10.8 percent in the third quarter versus 11.3 percent in the prior year. However, approximately 40 percent of the amortization expense for the first 9 months of 2004, or $2.6 million occurred in the third quarter. Excluding amortization our consolidated operating margin for the third quarter would have been 11.9 percent.

Our acquisitions generated operating margin of 6.3 percent in the third quarter, while our base businesses generated an 11.8 percent overall margin. Excluding amortization, our acquisitions operating margin would have been 10.4 percent, and the margin from our base businesses would have been 12.2 percent.

Now I will turn to our segment performance. Our Flow-Control segment increased sales 12 percent to $94 million in the third quarter principally due to the contributions of acquisitions. Sales growth was achieved in the commercial power generation, and oil and gas markets, as well as defense electronics. This growth was offset by lower sales of Flow-Control products to the US Navy, primarily due to the timing of contractual revenues.

Operating income for the Flow-Control segment increased 39 percent in the third quarter over the prior year. This improvement was due to strong organic operating income growth of 47 percent, primarily due to higher volume in our commercial power generation, oil and gas, and defense electronic markets, favorable sales mix, and implemented cost controls.

Operating margin for the quarter for the Flow-Control segment was 10.5 percent versus 8.4 percent last year. Year-to-date operating margin was 10.8 percent versus 11.5 percent last year. The increase in operating margin for the quarter was due to a couple of items. First the third quarter of 2003 included one-time negative adjustments for contract costs over some inventory write-offs, which did not occur in 2004. Second, the acquisitions for this segment completed in the second quarter of this year produced relatively low margins in the third quarter. The base businesses generated operating margin in the third quarter of 12.2 percent.

In our Motion-Control segment sales increased 39 percent to $98 million. This growth is primarily due to contributions from acquisition. Sales from our base business actually decreased by 5 percent as compared to the third quarter of 2003 as a result of lower sales of F-16 spares and lower ground defense sales due to the declining production levels on the Bradley Fighting Vehicle. These declines were partially offset by an increase in sales of repair and overhaul services and integrated sensor products.

Operating income in the Motion-Control segment increased 9 percent to $10 million in the third quarter of 2004 resulting from strong volume, favorable sales mix, and cost controls. In addition, the operating margin for our repair and overhaul business has improved substantially from the prior year primarily due to cost control initiatives and higher volume.

Amortization has had the most profound impact on the Motion-Control segment. Operating margin for the margin was 10.6 percent versus 13.6 percent for last year with acquisitions generating operating margin of 9.9 percent for the quarter, while the base businesses generated operating margin of 11 percent. Excluding amortization, the overall operating margin would have been 12.6 percent in the third quarter with the acquisitions at 14.2 percent and the base businesses at 11.8 percent. Year-to-date excluding amortization overall operating margin for this segment would have been 12.6 percent.

In our Metal-Treatment segment sales for the third quarter of $45 million were 26 percent higher than 2003. Organic sales growth of 21 percent was driven by higher global shot-peening revenues due to a pickup in the general economy and strong sales from our laser-peening technology. Operating income improved 58 percent during the third quarter. Margins improved substantially as a result of the higher sales volume, especially in our higher margin laser-peening business.

Now I would like to take a moment to update you on our financial position. During the third quarter of 2004, Curtiss-Wright generated $18 million in free cash flow defined as net earnings plus depreciation and amortization plus capital expenditures. Depreciation and amortization was approximately $11 million in the third quarter and capital expenditures totaled approximately $7 million. At the cost of the third quarter, we had working capital of $224 million.

Our total debt outstanding was $349 million, which equates to a net debt-to-capitalization ratio of 37 percent. Our liquidity position remains very strong with approximately $250 million available under our current credit facility. These metrics are well with our financial targets, and we are committed to maintaining our strong balance sheet and credit profile as we continue to execute our growth strategy through both internal programs and strategic acquisitions.

I will now turn the call back to Martin to conclude our presentation. Martin.

Thank you Glenn.

During the third quarter, we announced and completed the acquisition of Synergy Microsystems. Synergy is the leading provider of embedded computing solutions and provides Curtiss-Wright with extended technological expertise, further diversification of our product offerings and also strengthening and expanding our position in several key markets.

We continue to look forward with our strategic plan, which includes both acquisitions and internal growth initiatives. For example, in the third quarter our Motion-Control announced a $7.3 million contract from United Defense for providing embedded computing systems for their Bradley Fighting Vehicle.

Just this week, we announced a $10 million contract with Nord Micro to provide motor assemblies for the Cabin-fresh control systems in existing commercial aircraft, including the Airbus A320, A330, A340, and the Boeing 737 series. Additionally, approximately $2 million of this contract covers the supply of motors for installation on new Boeing aircraft.

In our Metal-Treatment segment we remain on schedule for our fifth and sixth laser coming online in the first quarter of 2005. We continue to explore new market opportunities for our laser-peening services such as aerospace link parts, medical implants, highly-stressed automotive parts, oil and gas applications, among many others.

In our Flow-Control segment, our Delta guard choker valve continues to be very successful. We had record orders in 2004 while capturing 100 percent of the new installations worldwide since its introduction.

Many of our existing technologies across our business segments are at only the beginning of their life cycle which will provide us and our investors with many opportunities in the near term, as well as into the future.

Overall, our defense markets are stable and our embedded computing business has yet begun to realize the full benefit of our extended product portfolio and opportunities for sub-system integration. While it is still early in the integration process, we do believe we have established the market leading positions in the high-growth embedded computer market. As we streamline our capabilities, we expect to achieve significant synergies from the cross marketing of our products and technologies in multiple markets.

In addition, improved commercial markets, including power generation, commercial aerospace repair and overhaul are providing strong growth in our Flow-Control and Motion-Control segments. The economic strength in commercial and industrial markets is also fueling higher demand for our Metal-Treatment segment shot-peening and laser-peening technology.

In closing, on a full-year basis we expect to be in line with our previous guidance of earnings per diluted share between $2.85 and $3.05. We have now concluded our presentation portion of our conference call and would like to open the line up for questions Operator.

Thank you. The floor is open for questions.

(OPERATOR INSTRUCTIONS).

Chris Donay (ph), SunTrust.

A question of the impact of Sarbanes-Oxley and amortization expenses going forward. Has all the Sarbanes-Oxley been fully recognized? And how do you expect the amortization expenses to change over the coming quarters?

The charge for Sarbanes-Oxley had a 4 cents impact this quarter. We also experienced some expense last quarter and will experience some expense in the fourth quarter, and it'll be about 2 more cents or so in that area.

As far as the amortization is concerned, we expect the next quarter to be in line with amortization with this quarter.

Okay, and there's been a lot of noise recently about the ship-building budget and the Navy's issues with that. Can you just comment on what you're seeing from the noise that we're hearing in that regard?

We know that the ship-building schedules are going down except for the submarines that we're on and also the aircraft carriers. The aircraft carrier has been pushed out by 1 year, so that would mean that our revenues for next year will go down some. But the thing is we are the preferred supplier on those platforms, so we will get the business.

Okay, and last question. I think last quarter the run rate on the laser peeing was about $10 million. Can you just update us on where that stands right now?

That's still at the same rate.

Okay, thank you very much.

Thanks Chris.

Peter Arment, JSA Research.

Just a question about the Q4 guidance. You're still comfortable with guidance and I guess it looks like you'll have a range of somewhere between 77 cents and 97 cents. May if you could just talk about -- hello?

Ladies and gentlemen please hold for just one moment.

Stop ducking my questions!

If you ask the same one, we'll have more technical difficulties!\

Jay obviously picked up on it and asked the question I was interest in in terms of the range. I guess overall you don't see any impact, or you didn't mention at least, I didn't hear about raw materials and the impact that's having on margins. Could you just maybe give us a little color on that? And that's all I have.

We're not really seeing it. A lot of our contractors are allowed to pass along increase escalations on the material, but the answer to Jay's question about the same level of shipments but increase $1 million down in profit, we have seen energy costs increase and also medical cost increases associated with MIC, and that's one of the reasons why it limited their margins.

Okay great, thank you.

Peter were you okay with our explanation of the fourth quarter?

Yes, that's fine. It was addressed perfectly.

Okay great, thank you.

(OPERATOR INSTRUCTIONS).

Eric Hugel, Stephens, Inc.

Hey guys, hopefully you're not going to hang up on me too!

Depends on what you ask Eric!

Can we get a little more maybe just talk about the individual business. You had given some margin guidance, you addressed the sales, but in terms of Motion and Flow Control margins, you had talked about previously a range of 11.5 to 12.5 percent. Is that still doable? And in Metal Treatment, that 15 to 17 percent range?

In Metal Treatments, yes. But in the Motion Control and Flow Control, no and the reason why is just simply the amortization effects. If you were take the amortization effect out of it, yes we would be in that range.

But I would assume that last quarter when we talked about that you knew what the amortization costs were. What sort of changed?

Because we brought more business in in the third quarter which had the effect in the third quarter and in the fourth quarter. So it's not going to be where we say 11.5 percent, it'll be right up against it, but it may be a little bit below it.

The reason why we're bringing out this amortization effect obviously is that fact that it tends to drag your operating margins. We're going to continue with the 5 companies in which that will happen. It tends to drag your EPS but obviously you get all the cash that we were expecting in the first place.

So the thing is our cash flows are good. It tends to drag our statistics, but not from an operational standpoint. We have very strong operational results.

Eric one other thing you've got to understand too it takes a couple, there's a period of a couple of months to get through the valuation process when you value them. So it's a little bit of a lag before we know the actual number a couple months behind when we acquire. So even some of the ones in the first half of the year we're still finalizing, getting the right numbers and all that, so it takes a little bit.

Sure, just to avoid any confusion with regards to your guidance now, this 3 cent tax benefit that you guys realized during the quarter, now that's factored in to your guidance?

Yes.

Could you give us any -- actually I wanted to talk about your embedded computer systems business now is about $200 million. Actually it's more than half, it's about half the Motion-Control business, obviously different sort of growth dynamics than the actuation business and sort of the commercial and military and aerospace sort of actuation stuff. Could you sort of give us some of what you're seeing right now over the next couple of years as sort of a growth rate that we can use to project that part of that business out?

As we have indicated in the past, the market itself is growing at double-digit rates. The areas that we are in are doing well. We expect that we will grow at that rate for the next few years.

Double-digit?

Yes.

Okay, is there any update yet, I know you said you weren't going directly for any awards on the 77 but you were looking for some sub-contract awards. Any movement there?

Well, the only one that we received is we received this motor assembly that we've talked about. There is some (indiscernible) for the 77, but we have about 8 opportunities on the 77. We have yet to receive an award, but they're all still in the making.

Are there any large potential contract awards out there that we could, that you are pretty well factored into guidance that, well obviously you haven't given '05 guidance yet, but any for upcoming contract awards that we should be looking out for that potentially you could win? I know there was something out there for the carrier landing systems.

That's correct. There are a few contracts out there. One is the arresting gear contract that we feel pretty good about, and we expect that to be let in the fourth quarter. The other is competing with Westinghouse on reactor head vents repairs, which is a very nice business. And it's something that we have been wanting to enter into. It's any from $8 to $15 million, the reactor repair, and we expect that we will be getting contracts shortly in that area.

And that would be for you as Westinghouse-built contracts, reactors primarily?

That is correct.

And that's per reactor for multiple reactors per plant?

That's correct, but not all of them have to be repaired at the same time. They are repaired based on how they're tracking experience. But that's a very nice increase in incremental and also puts us in another aspect of commercial power.

Okay, any additional broad thoughts on 2005?

No, not right now. We're looking at integrating the companies that we have. We think we have a lot of good potential not only from what we've acquired but also from what we have developed. And we're excited about 2005.

But nothing you want to sort of share in terms of lag in organic sales growth and earnings on a broad level.

Are we having technical difficulties right now?

All right, if you guys don't want to go there I understand. Rather than get disconnected, I'll finish. Thanks guys.

Thanks a lot Eric.

Tyler Hofo (ph), Sidoti.

I don't know, I got disconnected several times so I'm not really sure what's been asked and what hasn't. The last question you were asked about the 77 opportunities, you have about 8 out there right now.

Right.

Do you have any idea on the timing of when some of those might be announced?

We expect the end of '04 and the early part of '05.

Okay, thank you. And as far as, recently it's been in the news, I think there are about 50 or 60 Boeing-737s that had some problems with the skins on their airplanes. I was just wondering, could that potentially be an opportunity for the Metal Treatment business?

I don't think so, no. The thing is that I am not familiar with the circumstances associated with it so obviously, if it has cracking, it's something we can't help them with. Boeing does their own shop-peening, and their own forming. Well, actually they don't do their own shop-peening, they do their own forming. So I'm not too sure that would end up being an opportunity for us to help Boeing.

Okay fair enough. And I know other people are asking about the op margins in the Metal Treatment business, but I mean, what's it really going to take here to get the operating margins back to around 17 percent level that we saw in the second quarter?

If you take a look at what we've done so far for this year, if you take a look at their organic growth compared to their margin increase, it's almost double. For what they've grown percentage-wise is sales, their operating income has increased, doubled that increase in percentage. You're going to see that continually take place as they get more and more volume associated with that business. So again, the percentage in op increase is greater than percentage in growth in sales by almost 2 to 1.

Okay, all right. That's all I've got. Thank you very much.

Jay Khetani (ph), SD Cullins (ph).

Just a couple of quick follow-ups. I think, back to Metal but just on the top line, you talked about $160 million in sales for the year, would say the fourth quarter falls off. Is that still a realistic number? I would imagine that...

We would expect it to be greater than $160 million.

And are you seeing production rates coming up in your facilities as a result of the build schedule increases that are planned for '05?

No we have yet to see that, so a lot of our increases have been in laser peening and also in the automobile and more of the industrial area. So we haven't even seen an increase on the commercial side. We have seen increases also on the military side as far as shot peening is concerned. But have yet to really see an effect on the commercial side.

Do you have any guess as to when you might start to see that happening? I guess you're thinking about the Airbus wing forming.

Both Boeing and Airbus are speculating that their 2006 numbers will be going up, so if that's indeed going to be the case, then we would see the volumes start to increase in the middle of 2005.

So what, a 6 to 9 month advance?

Yes.

Okay, and just the softness in the F-16 spares and then the Bradley business this quarter, are these items that should be continuing at this level going forward? Is there anything timing-related here? Is there some business that's just going away?

No, you notice that on the Bradley we just received a $7.3 million contract. You know there's going to be contracts that are going to be awarded for munitions that are currently being used in war where they're going to have to be updated. So I think you're going to see another influx of that. We happen to have a large buildup on the F-16 prior to going to war. They are also being used. So I think you'll see it's going to tail off, it's going to come back again also as munitions are being able to be freed up to be repaired.

Okay, great thanks very much.

Okay, thanks Jay.

Eric Hugel, Stephens Inc.

Hey guys, 2 follow ups. Any upside to your tax rate from the new tax bill that you guys can see right now?

Eric not that we know of yet. Our tax guys are still going through that but not that we can see so far.

Okay, my second question is I guess had just asked the question in regard to whether you are not seeing the uptake yet. But it looks like Boeing and Airbus are raising the bill, their numbers look like they're going to actually start coming up mid-'05. What kind of lead times do you have on your actuation systems, the Boeing and on your wing-forming business to Airbus? Because Boeing and Airbus are looking at '05 numbers being nicely greater than '04, and then '06 taking another step up.

On the actuators, we're a few months ahead. We are really a just-in-time supplier on the actuators. But on the wing, we're at least out 6 to 9 months. So we should be seeing some input from that if that is indeed the case. And obviously it's going to require VAE to make the wings in order to get them into our plant. But one way or the other, if the do it, we're going to be the recipient of it. And obviously we have the capacity to take care of whatever volumes they're looking at.

Is A380 wing still ramping up or is that sort of steady right now? Because it's such a backup line in terms of 1 A380 is what 5 A320s or something like that?

Yes as far as size and also revenues are concerned. They continue to ramp up.

Okay, thanks guys.

Steven O'Doyle, Lord, Abbott.

I'm glad all management teams don't have that special red button you have there! Maybe just on the aircraft carrier front, obviously you're aware of the push-out, but what was that going to contribute in '05 and did it contribute in '04?

In '04 I think it did approximately 40. And '05 was a number that I really don't have at my fingertips right now.

And the 40, I know there was some movement on that number before, but that's inclusive of the full development?

That 40 this year, yes.

Okay.

We'll be receiving development contracts in the future also. Again, we have 3 different segments, actually 4 segments that supply and have different lead times, supply hardware to an aircraft carrier, at least as far out as the 3 years to 1 year. So we have development going on all the time on the aircraft carriers.

Right, so just trying to get an impression when you say that due to the push-out is likely to decline somewhat, what should we anticipate as kind of the incremental decline year-over-year?

I don't think we're going to see a decline year-over-year.

Okay.

We're going to see a decline in what we had originally expected, but I don't think there will be a decline from year to year. In fact, there's not going to be a decline for year to year.

Okay, and that goes the same with '05 over '04?

Yes, that's what I'm saying. It's going to be, they're basically going to be equal.

Okay great. And just so I understand, in the Flow Control, I think you guys are looking for organic growth of some 14 percent in the back half, and obviously by the numbers you're anticipating a strong fourth quarter. What is it that gives you the confidence there? What's driving that?

There's a lot more contract of military sales, which gives us organic growth.

Okay, and what programs would those be specifically?

They're also on aircraft carriers and submarines.

Okay, so that largely, if I look to the numbers still anticipating $380 million for the year, $111 million in the fourth quarter that is largely contractual?

Yes.

Okay, and looking at the Metal Treatment, if I look at year-to-date results it looks like you're obtaining an incremental margin of some 26 percent on every incremental dollar. Is that the appropriate margin percentage to think of? Ought it to be higher just given the mix of laser?

The thing is that as the volume continues to build up, the percentage of incremental dollar will go up. And right now we're not at the height of where I think we would see the economic recovery or the aerospace industry going to. And obviously whatever volume those it will be the recipient of those dollars, and you'll see the, depending on the volume, you'll see the incremental cash flow and profitability come from that volume.

New orders in the quarter, obviously book-to-bill over one were up very nicely. Any commentary in terms of where you're seeing particular strengths?

We are seeing particular strength on the commercial side, which is something that we feel very good about. We have had increases -- now we've been buying military companies more than we have the commercial and we see for the year that our military sales are probably going to be up somewhere around 32 percent or 31 percent, and our commercial sales up 22. We've gotten a lot of good organic growth in both power, about 22 percent year-over-year, and also in our gas and oil, which is about 17 percent year-over-year. So we're very satisfied to see Metal improvement coming up, gas and oil coming up, and power coming up. That's also starting to show that recovery coming in. That's going to be how strong it's going to be.

And just the last question, on the guidance and this may have already been asked. I'm not certain. The range that's implied, what are the assumptions that lie behind the high and the low end there?

The assumption is that if we hit the $44 million incremental increase over an average quarter that will be closer to the higher range. And if we don't, it will be closer to the lower range. But we've had good fourth quarters, so we expect it to stay close.

And I guess 3 quarters of the year you're effectively saying is contractual.

Yes, most of what we ship is contractual, so you see numbers going up and down, it's based on contracts. And we have had, especially on the military side contracts swing from the third quarter into the fourth quarter that we knew a littler earlier on in the second quarter. So we don't expect to see much shifting now and it's just a matter of performance, which I feel very good about.

Okay, thank you very much.

Jim Foung, Gabelli Company.

I guess just on the last question, the $44 million incremental revenues. Does that capture the timing of shipments in Flow Control where some of those products are pushed up?

No, there has been some shipped on the Flow-control side obviously, but the contracts for the fourth quarter we expect to ship. I'm not too sure what the question was Jim.

In your press release, you talk about the lower sales of Flow-Control products to the US Navy.

Oh, that's for the quarter.

That was in the quarter, right?

Right.

And that's more of a timing issue. When do you to deliver those revenues?

Mostly in the fourth quarter.

Okay, so is that included in the $44 million of incremental revenues that you expect?

That's correct.

Okay, so that's included then. And then Martin you talk about 8 potential opportunities. Could you give us what the aggregate dollar value might be in these 8 opportunities of new businesses?

You mean for the 77?

Yes.

I'd rather not.

Okay, all right I just have one last question then. Pension expense, do you have kind of a preliminary idea what it will look like for '05? As you look at the discount rate, is that going to go down in '05, and that's going to pump up your pension expense from this year?

The discount rate will probably lower Jim, I think you're right on that. But we haven't received the final calculation for '05 yet. When we pull together '05, we'll have that number.

Okay, I mean as you look at it now, you're talking about 25 to 50 basis points lower than what you had?

That's probably safe.

Okay, thanks.

Gentlemen there appear to be no further questions at this time.

Well thank you Kristen and thank you everyone for joining us today. And we look forward to speaking to you again during our 2004 year-end call in February. Take care.

Thank you.

Ladies and gentlemen this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.