Curtiss-Wright Corp (CW) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Curtiss-Wright Second Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Jim Ryan, Senior Director, Investor Relations. You me begin.

Thank you, Glenda, and good morning, everyone. Welcome to Curtiss-Wright's Second Quarter 2017 Earnings Conference Call. Joining me on the call today are Dave Adams, our Chairman and Chief Executive Officer; and Glenn Tynan, our Vice President and Chief Financial Officer. Our call today is being webcast, and the press release as well as the copy of today's financial presentation are available for download through the Investor Relations section of our company website at www.curtisswright.com. A replay of this call also can be found on the website.

Please note, today's discussion will include certain projections and statements that are forward looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations that are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC.

In addition, certain non-GAAP financial measures will be discussed on the call today. A reconciliation is available in the earnings release and at the end of this presentation.

Please note, any references to organic growth exclude the effects of foreign currency translation, acquisitions and divestitures, unless otherwise noted.

And I would like to turn the call over to Dave to get things started. Dave?

Thanks Jim. Good morning, everyone. For our agenda today, I'll begin with the key highlights for the second quarter 2017, followed by Glenn, who will provide a more thorough review of our quarterly financial performance along with updates to our 2017 guidance. Then I'll return to wrap up our prepared remarks before we move on to Q&A.

We're very pleased with our second quarter results. EPS was $1.13 for the first quarter -- for the quarter, which was well ahead of expectations, and we continued to see the positive momentum to begin in the first quarter. We achieved solid growth in sales, operating income, and operating margin in each of our 3 segments, which is a tremendous testament to the hard work of our team. We produced robust sales growth of 7%, 5% organically led by a strong performance on the AP1000 program. In addition, several of our end markets that have been challenged for some time, appeared to be turning the corner, which is an encouraging sign.

Further, to reiterate what we've been consistently communicating, once we get some tailwind on those challenged markets, combined with the leaner cost structure now in place, we would expect to generate strong profitability. Our second quarter performance clearly validates that view. We produced a 22% improvement in operating income and a 190 basis point margin improvement despite purchase accounting cost associated with that TTC acquisition. We also produced a solid cash flow performance that generated a free cash flow conversion of approximately 145%. Based on the strong first half of the year, we've increased our full year 2017 guidance for sales, operating income, operating margin and EPS. Included in these expectations is an improved outlook for TTC, as we now anticipate that there will be accretive to operating income and EPS for the full year 2017, better than prior expectations to be breakeven. Overall, we remain confident that Curtiss-Wright will deliver another solid performance this year.

Now I'd like to turn the call over to Glenn, to provide a more thorough review of our second quarter performance and updates to our 2017 financial outlook. Glenn?

Thank you, Dave and good morning, everyone. I will begin with a review of our second quarter end market sales. Overall, we experienced a 4% increase in sales to our defense markets and then 8% increase in sales to our commercial markets. In the defense markets, our results primarily reflect the contribution from TTC for sales of flight test equipment on the F-35 program within the aerospace defense market. Elsewhere in aerospace defense improved demand from embedded computing products supporting ISR programs, including fighter jets and UAVs, with partially offset by lower sales on the Seahawk helicopter program.

In Ground Defense, higher sales of Turret Drive stabilization systems to international customers, were more than offset by lower domestic sales. And finally, in Naval Defense, higher CVN-80 aircraft carrier revenues were more than offset by reduced production of Virginia-class submarines due to timing and lower CVN-79 revenues as this program advances towards completion.

Moving on to the commercial markets, I will begin in commercial aerospace where sales were down slightly, principally due to lower sales of actuation equipment on wide bodies, which more than offset higher sales on narrow bodies.

In Power Generation, strong sales growth of 20% was primarily driven by timing of production on the 2015 China Direct AP1000 order. We also experienced higher revenues on the 2008 domestic order, as production advances towards contract completion expected later this year. In addition, our results reflect improved demand in the Nuclear Aftermarket business due to the seasonally high spring outages.

And finally, in the General Industrial market, sales increased 6% overall continuing the recent positive trend led by better-than-expected performance in industrial vehicle products. This was principally due to higher on-way -- highway sales of products on Class 8 trucks as well as higher off-highway sales on the medium-duty commercial vehicles, particularly in China. In addition to sales of industrial valves, principally serving the oil and gas market, demonstrated modest sequential improvement compared with the first quarter and were flat year-over-year.

Next I will discuss the key drivers of our second quarter 2017 operating performance where we produced higher profitability in all 3 segments. Starting with the Commercial/Industrial segment. Operating income was up 12%, and operating margin was up 160 basis points to 15%. This performance reflects the benefit of our margin improvement initiatives, most notably, for facility consolidations in 2016, as well as further actions taken in 2017.

In the Defense segment, operating income increased 14% and operating margin was up 50 basis points to 16.8% despite a 300 basis point margin dilution from TTC. As shown on the right side of the slide excluding the TTC dilution, operating margin for this segment would have been 19.8% or 350 basis point improvement from the prior year. This improved performance reflects higher profitability on our embedded computing products and the benefit of our ongoing margin improvement initiatives.

In the Power segment, our second quarter results were strong, as operating income improved 54% and operating margin was up 410 basis points to 16.6%. Those improvements were principally driven by the timing of production on the China Direct AP1000 contract as well as higher profitability in our Nuclear Aftermarket business, driven by the benefits from margin improvement actions taken in 2016 and 2017.

In summary, overall second quarter operating income increased 22%, which led to 190 basis point improvement in margin to 14.7%. Further, as shown on the right side of the slide, excluding the 50 basis points margin dilution from acquisitions, overall operating margin would have been 15.2%, up 240 basis points from the prior year.

Next to our 2017 end market sales guidance. In the defense markets, overall sales are still expected to grow between 7% and 9%. In the commercial markets, based upon improved demand in several industrial businesses, we have raised our general industrial market sales guidance. As a result, we now expect sales from this market to grow between 2% and 4%, an improvement from our prior guidance of a sales decline of 1% to 3%. In addition, we now expect total commercial sales to grow between 1% and 3%, while total Curtiss-Wright overall sales are expected to grow between 4% and 6%.

And finally, in the appendix of our presentation, you will find a 2017 end market sales waterfall chart. Continuing with our 2017 outlook, we are raising our full year sales, operating income, operating margin and EPS guidance. Starting with the Commercial/Industrial segment, and based upon the increase to our end market guidance, we now expect this segment sales to be flat to up 2%, an improvement from the previous guidance of flat to down 2%. We have also increased the operating income guidance in this segment by $3 million, while operating margin remains at 14.3% to 14.5%.

Next in the Defense segment, we increased operating income guidance by $3 million, to reflect lower amortization estimates related to the TTC acquisition. Operating margin is now expected to range from 19.6% to 19.7%, reflecting a 60 basis point improvement over our previous guidance. Looking ahead to the second half of 2017, we expect TTC to be accretive to both the Defense segment and overall CW margins and contribute positively to our EPS. On a full year basis, we now project TTC to be accretive to both operating income and EPS.

Next in Power segment, where we produced the strong first-half performance, our guidance remains unchanged at this time pending the outcome of the West bankruptcy. We also increased our guidance for corporate cost by $1 million due primarily to higher year -- year-to-date FX transactional losses. As a result of these guidance updates, total Curtiss-Wright operating income is now expected to grow 4% to 7%, while operating margin is now expected to grow 10 to 20 basis points to a new range of 14.7% to 14.8% reflecting a $5 million increase in operating income and a 10 basis point improvement in margin compared with the prior range.

We also made some slight modifications to our guidance for interest expense, based on the current run rate as well as taxes based on the higher earnings.

In summary, based on all of the aforementioned guidance changes, we have increased diluted earnings per share by $0.05 to a new range of $4.45 to $4.55, which represents EPS growth of 6% to 8% over 2016 results.

For your EPS modeling purposes, we anticipate the third quarter to be slightly better than the second quarter, followed by a typically strong fourth quarter.

Next, to free cash flow. Second quarter free cash flow was $73 million, generating free cash flow conversion of approximately 145%. This performance keeps us on track for solid free cash flow in 2017, ranging from $260 million to $280 million with an expected conversion rate of approximately 134%. Both of our free cash flow metrics remain in line with our long-term guidance, which includes maintaining a minimum free cash flow of $250 million, and an average free cash flow conversion of at least 125%.

Now I'd like to turn the call back over to Dave to conclude our prepared remarks. Dave?

Thanks, Glenn. Before I wrap up and we move on to Q&A, I wanted to provide a few brief remarks on the AP1000 program. I'll begin with an update the Westinghouse bankruptcy. In short, the overall financial impact is not expected to be material to Curtiss-Wright, and we believe our current exposure ranges from 0 to $3 million. Regarding our 2008 U.S. contract, we have delivered 12 RCPs thus far with 3 remaining for the V. C. Summer plant in South Carolina, and one remaining for the Vogtle plant in Georgia. We expect to complete final shipment of these RCPs before the end of 2017. As a reminder, revenues on this contract are recognized based on percentage of completion accounting, and to date we have recognized approximately 97% of revenue, margin, and cash on the U.S. contract.

Moving on to China, testing activities continue at the Sanmen 1 site as they advance towards startup. Fuel load is anticipated to begin in the coming months, and China's current expectations are for the Sanmen plant to start up by the end of 2017, closely followed by the Haiyang plant in early 2018. We look forward to the successful commercial operation of these plants as it should open the door for additional China interest in new AP1000 plants and Curtiss-Wright RCPs.

Regarding our 2015 China Direct contract, we continue to ramp up on the production of our RCPs. We expect strong revenue on margin contribution from this order over the next couple of years. As a reminder, RCP production is expected to peak in 2019. I also want to reiterate that for the 2015 contract, our pumps are being sold directly to the Chinese. As a result, we do not believe the Westinghouse bankruptcy will have an impact on our ability to secure new RCP orders from China, the largest potential AP1000 market in the world.

Regarding future AP1000 orders for markets outside of China, such as India and the U.K, we remain in a wait and see mode at this time, although, there are some encouraging signs. But particular interest is the outcome from a recent meeting between President Trump and India Prime Minister, Modi, which has renewed interest for new nuclear power plant development in India. According to several media reports, construction would be handled by an Indian firm for 6 AP1000 nuclear reactors. Should this move forward, it could represent an opportunity for 24 Curtiss-Wright designed RCPs.

In summary, Curtiss-Wright is well positioned to deliver solid results in 2017, and we're growing increasingly optimistic about our trajectory for 2018. We now expect sales growth in both our defense and commercial markets in 2017, although, we remain cautiously optimistic about a few of those industrial markets for the remainder of the year. Further, as we progress through the second half of the year, you'll begin to see TTC's solid contributions to our profitability and earnings as we move past the purchase accounting charges.

We remain committed to maintaining a balanced capital allocation strategy between operational requirements, including increased investment in R&D, acquisitions and returning capital to our shareholders.

On that note, concurrent with our earnings release issued last night, we declared a 15% increase in our quarterly dividend. We look forward to continuing to deliver on our strategy, and producing solid financial results to drive long-term value for our stockholders.

At this time, I'd like to open up today's conference call for questions.

(Operator Instructions) And our first question comes from the line of Michael Ciarmoli from SunTrust.

Dave, just to maybe go further into the AP1000 update, you kind of mentioned at the end there, with India there's been some positive press out there maybe involving Doosan industries, looking to maybe pick up the construction. It seems they are progressing in more advanced talks on India. Can you maybe just -- maybe elaborate? It seems like once Westinghouse emerges from bankruptcy that program and those projects could be a go. Can you provide any more color?

Well, I will say, we've been reading the same things, and we saw that article on Doosan, and that was really encouraging and that was partly the reason for the wording and the prepared remarks. And when you read that, we knew things were happening over there. We've been talking to Westinghouse for a while, certainly on the indemnification side, from the legal aspect. And we did know that there was in-country interest in building the construction site of the nuclear power plant. So everything is said -- is exactly the way we are feeling that it could lead to -- it's certainly an encouragement to us and it could lead to something that -- as to the when, that's anybody's guess at this point. We don't know, but as we had stated, well, several years ago when you and I and the rest of us lived through the waiting process for China, we were all extremely elated when it finally came and we will be once the Indian order finally comes, but we are encouraged by -- I just -- I wish I could give you some more timeline to it but I really can't.

Okay. And what about U.K. with Mooreside? It sounds like that's another one progressing, I think Kapco, Power is kind of -- they've come in, they're talking about their own reactor technology. Do you see any movement one way or the other, positive or negative on the U.K. side?

You know we haven't seen anything since Kapco has in there with the dialogue. We do know, obviously, that Westinghouse has been looking for a construction firm alongside with the Mooreside folks, and we do know that there was and has been remains a very high interest in the AP1000, we were the only ones that -- were designated by the regulatory committee in the U.K. as being approved for that. So a lot is at play in that regard, and I think when you're dealing with a Generation 3 technology like the AP1000 as the latest and greatest from a safety perspective, I would certainly hope that the AP1000 has the leg up on any other kind of design, but yes, we're reading the same stuff there that there's some interest, and new gen is basically the owner in there. I think a lot is still up in air relative to Toshiba who is the main owner of that -- the new gen in that consortium over there. So I think that there are a lot of balls are up in the air in that regard, but still we feel positive about it. I know that the contacts that we've had with Westinghouse feel the same way. So we're hopeful.

Okay. And then last question from me, and I'll get out of the way here. The Power generation, obviously off to a strong start, I think you're up 13% year-to-date. You kind of qualify that there is no real of financial impact from Westinghouse, but then you kind of said, Westinghouse gives you some caution. If we're going to get powered down to your 3% to 5% growth, that sort of implies you're going to be down second half versus first half and down on a year-over-year basis as well. Is there just conservatism there? Or was there just pull forward on the AP1000? There's aftermarket, I know it was seasonally strong, does that slow? Can you just give us the puts-and-takes with that guidance for the rest of the year?

Yes. In the Power segment it was up. It was mostly due timing with this half of the year. There is -- what I was trying to say, there is a potential for some upside but with the West bankruptcy hanging out there, which should be resolved in the third quarter, we thought it was prudent not to update the guidance at this point and just wait and see what happens in August. SCANA is supposed to announce by August 10. We're not sure if that's going to happen or not. The second half of the year, it's really the After what's driving down the revenue, obviously, the China Direct is still doing well, but the Aftermarket is going to be down and the Nuclear Aftermarket is going to be down in the second half, mainly because the first half concluded the spring after season so. And also the AP1000 domestic program is coming to an end, so they're going to be down in the second half of the year. So that's -- that has nothing to do with China Direct contract, that's for sure. And also softer down second half of this year as well in power.

And our next question comes from the line of Ryan Cassil from Seaport Global.

You guys talked a bit and I'm sorry if I missed it, but you increased the guidance for Commercial/Industrial, I think you called out vehicles. But I was wondering if you could just kind of run through some of the categories there and maybe in particular talk about what you're seeing in the Severe Service Valves side.

I'll talk from a high level first and let Glenn get into details. Overall, we're seeing pretty much across the board some resurgence that we had expected a long-awaited, and as we've been talking about there was a -- there's been a pickup in overseas China, for example, ETCs with some of our businesses located over there. And that is due to the regulatory -- finally the issuance of the -- what is it? Euro 4 for EPA emissions type (inaudible) regulations and those are finally being instituted over in China and India. So that's picking up for us. The Class 8 has picked up. The midsize has all along been doing fairly well for us. So -- and that is steady eddy. The only one that has not really rebounded much is the ag side, but everything else, medical, mobility all have been on the uptick and seeing increased orders and so forth. So what we had said in the second quarter or in the beginning, right after the first quarter, we said, we'll wait and see how things are looking, and certainly, second quarter has panned out pretty well for us. So that's why you see some guidance change there. And then, from the valves side. We continue to see strength in -- as compared to where we've been in the past. You know we were down -- we were down 25% in '16, and then we were saying, we were going to be down 5% this year, now we've changed it to flat to down 5%. So that trajectory is moving upward and we're positive about that momentum, feel very good about it. And the visibility continues to be -- it's not robust order intake, but it's order intake and that's great. That's exactly what we were hoping that we would see, it would be a slow rebound upward for us. And that's pretty much from a high level explains on where we're at. Glenn, do you have more detail?

No, it's pretty much the same. The guidance range was based on the first half performance, but it's all the same thing. It is in the vehicles, it's on the highway Class 8 off-highway, medium mostly in China so -- and the medical has been up very well in the first half as well. So all 3 of those are the basis for our guidance range.

Okay. And on the valves business, are you feeling any change in competitive pressures, pricing dynamics? Or you're finding it fairly easy to pass through the raw material inflation?

No real -- yes. No real change from the last couple of quarters. There are people out there nipping at our heels and everybody is nipping at everybody's heels with a smaller pie as it were. And so that hasn't really changed, nothing that has come to my attention. And so we continue to deal with that, but we have some very nice, strong proprietary slices out there that we deal with and we have that protection. We also have low-cost manufacturing sites around the globe that help us as well and still produce great margins in that area. So I'd say that while the order is, like I said, the order intake has been fairly steady, in some cases it's fairly decent, it's just smaller quarters, not huge projects. And that's okay, you just have to learn to deal with the scale at that point. But I wouldn't characterize it, Ryan, as any sort of significant change in terms of a competitive pressure. Raw material wise, I haven't heard of anything there that's really affecting us. So it appears to be in abundance of that and at moderate prices. So I don't really see any dramatic changes from what we've seen in the last couple of quarter. Other than it's more positive from the perspective of orders.

Okay. And then, moving to the Power side. There's been some bailouts over the last 18 months in the U.S., and perhaps, the back half is kind of already baked here. But how are you guys feeling about demand shaping up for 2018?

Well, you know we still stick to our guns with what we said at our Investor Day in the Aftermarket side because they are receiving orders and their backlog is up, but it's -- these are multi-year orders so that's going to turn into revenues for them in 2018, so we expect that improvement to happen. 2018 is another year in the China Direct, with increased revenue. You guys have seen our graphs on that, we're pretty much staying on course with that. So it looks good for 2018, basically, we're hoping for that continuing the orders in the Aftermarket though.

And our next question comes from the line of Kristine Liwag from Bank of America Merrill Lynch.

I have a 2-part question on Commercial Aerospace. So first would be a clarification one. Is the weakness in Commercial Aerospace OE, specifically from actuators on the 747 and 787 programs? Just because you had 2 different information there, one from your press release and one from your prepared remarks. I just want to make sure it's the same thing? And -- or if not, if there are other moving parts?

No, I think you're right. It is the 747 and 787. Yes.

Great. And then the second part. From my understanding there hasn't been a change in production rates for those aircraft. Can you discuss what's driving that weakness? Is this a timing thing, an inventory correction thing? Or has there been some market share shift we should be aware of?

It must be a timing thing, I can't -- because we are at different times at the cycle and production so that's all I can think of really.

Great. And maybe a separate topic. Can you provide more color on how we should think about TTC margins going forward? And what the key drivers of change would be?

Yes. The margins going forward are going to be similar to what you're going to see in the second half of this year. They are going to be accretive to the overall defense margins without going into the -- we don't go into specific margins by a product business unit. But again, it's going to be accretive to the Defense segment margins.

And beyond (inaudible)

Similar to second (inaudible)

I guess my question is more beyond this year. How high can TTC margins go with you as a new owner? And how much upside can we see from here?

Yes, I'm Sorry. I was trying to point that beyond 2017. If you look at the -- when you see the second half of this year or the Defense -- our Defense segment, that would be -- you'll see the impact of TTC. That's -- and it will be similar to that going forward, at least until next year. I can't go beyond that.

(Operator Instructions) And our next question comes from the line of George Godfrey from CL King.

You raised the revenue EPS and OP margin but kept the free cash flow unchanged. So my first question is, what gets that to be raised, or looking at it another way, what keeps that from being raised as well here?

Well it's going to be -- if we exceed our targets for working capital, reduction would be one. Number 2 would be, if the receive advance payments that we didn't expect current this year, that kind of thing -- that can -- that doesn't -- does happen, we negotiate different terms, but those are the -- those would be the 2 because right now we're driving to a working capital target which gets us closer to top quartile in our peer group. And if were to exceed that, that would definitely have a positive impact. And the other would be, again, advance payments.

Got it. And then my second question is, as you talked about the potential for an India or U.K. contract in the AP1000 program, and the second China deal went direct. If you were to look at a third China deal, the U.K. or India, what would be the more likely to come first or what deal do you think has the most incremental momentum right now?

I would say, just thinking out loud. It would be probably the China order would be my first guess because we have been saying all along that once these plants get powered up, which we're hearing that they will be by the end of this year Sanmen 1 certainly, and Haiyang 1 first of next year. The excitement is there. They've definitely got an appetite, its built-up continues and the providers or energy providers, operators in that country want to do something and they have a 5-year plan, they have a longer-term plan. And if they wait much longer they won't make their 5-year and 10-year and 20-year plans on energy production. So we know that it's there, we know the interest is there. They're waiting for confirmation that this AP1000 plant works, does what it says it's going to, and we believe that it will. So once that happens, we believe that, that will be renewed interest that will spur the regulatory agencies in country in China, in particular, to go ahead and release the energy providers to go ahead and start acquiring more and breaking ground. Now I think that you've got the Mooreside in India that are hanging out there, could happen anytime, but I think just given the scale and size and magnitude of the type construction requirements and so forth -- it's big and it takes a long time to gut through those, and China has already gutted through them. So just to me, on the surface, it looks like they've already cut the path. They'll go next and then one of the other 2 will pop up after that.

And our next question comes from the line of Myles Walton from Deutsche Bank.

It's actually Louis Raffetto on for Myles. So just -- most of my questions have been answered. But I wanted to just circle back, I know you have briefly covered the topic, about capital deployment. So I know you sort of gave us overview, just wanted an update on the sort of M&A and you're keeping the read book pretty steady. So just any update you can provide there?

Yes. We are keeping it pretty steady as we have in; years past. And we've got on the [repo] side, we've got authorization for $200 million. We have $100 million into -- that's actually $52 million for coverage of dilution on a 10b5-1. And then we've got $100 million for opportunistic that's out there, and we have taken advantage of that, a little bit, and as we saw the share price become a pretty good deal to us. And so that -- we'll continue in that regard keep looking at it and as we did last year and the year before, we said, we'd look at toward the end of the year, seeing how things are going from the acquisitive side. And so we're not quite at that point yet, but toward the end of this quarter we'll be looking at that side again. And from the acquisitions, we continue to look at several and they don't all make the cut, and like I said before, the cut line is pretty high. And so after we dig into some of these, if they don't meet up with full expectations, and/or at least come close to full expectations, then they fall out and so that's just typical, that's the nature of that beast and you can't predict when they're going to come up when they're not. But we do have opportunities. And I might just say, add additional piece of color to it that it sort of ties in with what Kristine asked about TTC, and then ties into M&A side. I was out at TTC last week. And I spent the day there with the folks, and what happens in something like this is we get a great company that then -- I go out there and other folks go out and we talked to them about, well, how can we grow this further and faster? How can we get more entrenched into this marketplace to make a 1 plus 1 equal 3 or 4. And -- so that's one of the benefits of the M&A side. They have ideas on how they can grow that business. And so it's sort of an exponential opportunity from an effect perspective. So while we already had some targets in mind that we chase on a regular basis, they've come in with some additional ones. And so that is really a positive opportunity for us. Covering the waterfront there on the capital deployment, we saw that we increased the dividend, that's part of the giveback. And while it wasn't a whole lot it was something demonstrable and we feel very strongly about where we're going with this corporation. And so we'll do that sort of thing and then capitalizing some of our facilities for ongoing needs as that third element and we do look at those and we have done some of that, that is some restructuring and so for that has yielded significant savings in terms of ongoing and up margin improvement initiatives. So we do like to stick with the balanced approach, and so far so good, we're happy with it. I'm happy with the way we're going on the M&A front. We do have opportunities that are meaningful and hopefully, if they do make that final cut then we can execute on them.

Great. Glenn sort of a covered this, just making sure. It sounds like you guys originally guided a 35% of EPS in the first half, came in at 40% of sort of the new -- high-end of the new range. So is that sort of a little bit better Commercial/Industrial versus original expectations than some of this production timing in Power? Is that sort of the main driver of that change?

Yes. And we raised our guidance based on the first half actually, in the industrial vehicles. The performance in the Q2 in the defense segment was purely timing in the second half of the year. And in the Power segment, it's mostly timing with the second half of the year. So it was really the pull through of the Commercial/Industrial segment. I'll say that from an EPS standpoint, it was a little bit of an anomaly for us when we started the year because now if you look at where we are at, it's pretty similar where we always were, which is a lower EPS in the first quarter and second and third quarter is about the same and the fourth quarter being the highest. So it's not out of a norms for us. But it did come in better than we expected, no question about it.

And at of this time, I'm showing no further questions over the phone lines. I would like to turn the call back over to David Adams, Chairman and CEO for closing remarks.

Thank you all for joining us today. We look forward to speaking with you again during our third quarter 2017 earnings call. Have a great day.

Bye-bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.