Curtiss-Wright Corp (CW) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Curtiss-Wright Second Quarter 2018 Financial Results Conference Call. (Operator Instructions) I'd now like to turn the conference over to Senior Director of Investor Relations Jim Ryan. Sir, you may begin.

Thank you, Shelby. And good morning, everyone. Welcome to the Curtiss-Wright Second Quarter 2018 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 a 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 and 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.

Beginning this quarter, coinciding with the initial reporting of the acquisition of Dresser-Rand's government business, which we are now calling DRG, the company has elected to change the presentation of its financials and guidance to include an adjusted non-GAAP view that excludes first-year purchase accounting costs associated with this acquisition. We believe this change in approach will provide improved transparency to measure Curtiss-Wright's core operating and financial performance, including quarter-over-quarter comparisons, and show better comparisons to company peers.

Reconciliations for current and prior year periods are available in the earnings release and at the end of this presentation as well as on our website. Also please note any references to organic growth exclude the effects of foreign currency translation, acquisitions and divestitures unless otherwise noted.

Now I'd 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 and an update on our full year 2018 outlook. Then I'll turn it over to Glenn to provide a more detailed review of our second quarter performance as well as updates to our 2018 guidance. Finally, I'll return to wrap up and then move on to Q&A.

Before I start talking about the quarter, I want to add a few remarks to Jim's introduction. We are fortunate to have found 2 great acquisitions in the last 2 years that provide solid, strategic and financial benefits and will be accretive to our story for years to come. As an organization, we take pride in the fact that we try to be very clear and transparent with all of our disclosures, adhering to a standard GAAP presentation of our financial information and guidance. So after conducting extensive research of our peers and numerous discussions with the investment community, we elected to provide an adjusted non-GAAP view of our financial performance for the first time beginning this quarter. We believe this view provides our investors the information necessary to better understand Curtiss-Wright's core operational and financial performance.

Now on to the quarter. We delivered strong second quarter results, exceeding our expectations, as higher sales and improved profitability drove a strong operational performance, particularly in the Commercial/Industrial and Defense segments. Adjusted operating income rose 28% on a 9% increase in sales, generating a 260 basis point improvement in adjusted operating margin to 17.6%. This strong performance led to adjusted diluted EPS of $1.80, up 49% compared to the prior year's adjusted results. Free cash flow and new orders were also quite strong, providing optimism for our full year outlook, where we increased all key metrics, including sales, operating income, operating margin, diluted EPS and free cash flow.

As a result of our strong operational performance year-to-date and our outlook for continued momentum through the second half of the year, we increased our core diluted EPS guidance by $0.28. We also introduced an adjusted full year 2018 diluted EPS guidance range of $6 to $6.15, representing year-over-year growth of 21% to 24%. And finally, we expect to deliver another robust performance overall this year, led by our continued drive for operating margin expansion and free cash flow generation.

Now I'd like to turn the call over to Glenn to provide a more thorough review of our second quarter performance and financial outlook for 2018. 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 19% increase in sales to our defense markets, while sales to our commercial markets increased 3% year-over-year. Starting with the defense markets, our results reflect strong organic growth of 9%, with gains across all 3 markets, partly due to timing of sales originally expected in the second half of this year.

In aerospace defense, our results reflect solid demand for flight test equipment and actuation systems, most notably on fighter jets, including the F-35 program. In ground defense, we benefited from higher sales of embedded computing products on various international programs. And finally, Naval Defense, our results reflect increased aircraft carrier revenues, most notably on the CVN-80 program as well as a solid contribution from our DRG acquisition.

Moving to the commercial markets, beginning with commercial aerospace. Core OEM sales of products and services were up a little over 10% in the quarter but were largely offset by reduced revenues from FAA directives that are winding down.

In Power Generation, our results reflect lower revenues on the domestic AP1000 program, which was substantially completed in the second half of last year as well as a decline in the nuclear aftermarket sales as expected, following seasonally strong outages in the second quarter of 2017. While we are expecting a sharp increase in the second half of 2018 on the China direct AP1000 program, revenues in the second quarter were essentially flat year-over-year.

And finally, in the General Industrial market, strong sales growth of 14%, 11% of which was organic, reflects increased demand across a number of energy and industrial applications.

Next I will discuss the key drivers of our second quarter 2018 operating performance. Please note that I will refer to the adjusted results as noted on the slide, which exclude the first-year purchase accounting costs for DRG in 2018 and TPC in 2017. Starting with the Commercial/Industrial segment, operating income increased 19%, and operating margin was up 160 basis points to 16.6%. This performance reflects favorable absorption on solid sales growth of 7% as well as the savings generated from our prior and current year restructuring initiatives. In the Defense segment, adjusted operating income increased 47%, while operating -- adjusted operating margin increased 560 basis points to 26.4%. This performance reflects favorable absorption on strong sales growth of 16%, the benefit from our ongoing margin improvement initiatives and favorable contract adjustments in the Naval Defense business. Also note that the prior year adjusted operating income for the Defense segment excludes approximately $5 million of first-year purchase accounting costs associated with the acquisition of TTC. In the Power segment, adjusted operating income increased 10%, while adjusted operating margin increased 30 basis points to 16.2%. This performance includes favorable absorption on solid sales growth in our naval business and increased profitability on the China direct AP1000 order despite flat sales.

However, these benefits were partially offset by lower revenues and underabsorption in our Nuclear Aftermarket business and domestic AP1000 program. Also note that the current year adjusted operating income for the Power segment excludes approximately $7 million of first-year purchase accounting costs associated with the acquisition of DRG.

So in summary, overall Curtiss-Wright second quarter adjusted operating income increased 28%, driving a strong 260 basis point improvement in adjusted operating margin to 17.6%. Next to our 2018 end-market sales guidance, where we've made several changes, highlighted in blue on the slide, to reflect a $30 million net increase in total Curtiss-Wright sales. As a result, we now expect overall Curtiss-Wright sales to grow between 8% and 9%.

Starting in the defense markets, we've seen strong order growth, stemming in part from the fiscal year 2018 defense budget, which drove more than $150 million in new orders in the second quarter. As a result, we now expect aerospace defense sales to grow between 11% and 13%, driven by increased demand for flight test instrumentation, embedded computing products, supporting fighter jets and ISR programs.

In addition, we now expect Naval Defense sales to grow between 20% and 22%, led by recent order activity. The combined impact of all of the aforementioned defense market changes is now expected to drive overall defense market sales growth of 13% to 15%.

Moving to the commercial markets. Power generation sales are now projected to grow between 2% and 4%. We continue to make good progress on the production of our reactor coolant pumps for the China direct AP1000 program. We are currently performing ahead of schedule and continue to increase the profitability on the contract. Under percentage of completion or POC accounting changes in profitability can impact the revenue and margin profile of a program. Lower cost estimates can result in deferral of revenue recognition but also result in increased profitability. We are deferring $20 million of our projected China direct AP1000 revenue out of 2018, which will help to lessen the sharp decline that we originally expected to see in 2020. We have also increased the full year 2018 operating income guidance in the Power segment, partially due to this change in the China direct AP1000 program. So to recap, we remain ahead of schedule and are optimistic regarding our long-term execution of this program. We will revisit the China direct AP1000 forecast in early 2019 as we finalize our 2019 guidance.

Moving on. General industrial sales are now projected to grow between 8% and 10% due to widespread increased demand for industrial controls, valves and vehicle products as well as surface treatment services. Overall, commercial market sales growth remains unchanged at 3% to 5%. The updated 2018 sales order flow chart is available at the end of this presentation and will be available on our website.

Moving to our 2018 financial outlook, starting with sales. Based on the aforementioned increases in end-market sales, we raised Commercial/Industrial and Defense segment sales by $20 million and $10 million, respectively, while the Power segment sales remain unchanged. Regarding our 2018 profitability, we increased our reported operating income guidance by $30 million and reported operating margin by 40 basis points, reflecting higher sales as well as operational improvements in all 3 segments. We also introduced adjusted full year 2018 guidance, which reflects an additional $14 million increase to operating income and 60 basis points improvement to operating margin, reflecting the exclusion of DRG's first-year purchase accounting cost. As a result of all of these guidance updates, total Curtiss-Wright adjusted operating income is now expected to grow 11% to 14%, while overall adjusted operating margin guidance of 15.2% to 15.4% reflects a 50 to 70 basis points increase compared to 2017 adjusted results. Continuing with our outlook by segment, starting with the Commercial/Industrial segment. We now expect sales to be up 4% to 6%, primarily due to the improved outlook in the General Industrial market. We have increased operating income guidance in this segment by $6 million to reflect the higher sales, while operating margin guidance increased 30 basis points to a new range of 15.1% to 15.2%. As a result, segment operating income is now expected to grow 9% to 12%, generating 60 to 70 basis points in margin expansion compared with the prior year results. In the Defense segment, based primarily on the strong year-to-date performance, we now expect this segment sales to be up 4% to 5%. We increased operating income guidance in this segment by $3 million to reflect the sales increase, while adjusted operating margin guidance increased 20 basis points to a new range of 21.5% to 21.7%, a 10 to 30 basis point improvement compared with the prior year adjusted results.

In the Power segment, our top line guidance remains unchanged. However, we increased our operating income guidance in this segment by $4 million, partially due to the higher profitability on the China direct AP1000 program and partially due to lower long-term intangible amortization estimates related to the DRG acquisition. Our adjusted guidance for this segment also reflects the aforementioned $40 million adjustment. As a result, adjusted operating income is expected to grow 22% to 26%, while adjusted operating margin is expected to increase 40 to 60 basis points to a new range of 15.1% to 15.3%.

Continuing with our 2018 financial outlook. In addition to the aforementioned increases in operating income, we reduced interest expense guidance by $1 million due to lower expected debt levels and increased other income by $1 million, based on the run rate of our full year pension income. We also lowered our share count slightly to reflect the additional second quarter share repurchase activity. In total, these changes result in an adjusted full year 2018 diluted EPS guidance range of $6 to $6.15. This consists of a $0.28 increase in our core reported diluted EPS, driven by strong operational performance as well as a $0.25 adjustment for the first-year purchase accounting costs associated with the DRG acquisition. This new adjusted EPS guidance range represents strong growth of 21% to 24% over 2017 adjusted results. For your EPS modeling purposes, we expect the remaining purchase accounting costs to impact the third quarter and still expect the fourth quarter to be our strongest, both on a reported and adjusted basis.

Next to free cash flow. We continue to generate strong free cash flow, driven by our continued focus on efficient working capital management. Although not shown on the slide, second quarter free cash flow was $87 million, generating a free cash flow conversion of 116%. Based on the strong operational performance and our improved outlook, we raised our full year 2018 free cash flow guidance by $10 million. 2018 adjusted free cash flow, which excludes the $50 million voluntary pension contribution made earlier this year, is now expected to range from $300 million to $320 million, with an adjusted free cash flow conversion rate of approximately 115%.

I also wanted to take this opportunity to mention that we have begun repatriating approximately $190 million in cash from our foreign subsidiaries, of which $150 million has been received as of June 30. The remainder is expected to be collected by the end of 2018. We previously announced our plans to utilize the first $50 million of that repatriated cash to fund additional share repurchases via a second 10b5-1 program, which is underway. As a result, we are currently deploying 2 $50 million 10b5-1 programs in addition to our available opportunistic share repurchase program. While we have yet to disclose the uses for the remaining repatriated cash, I will reiterate that Curtiss-Wright remains committed to a disciplined and balanced capital allocation strategy.

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

Thanks, Glenn. Before my closing remarks, I wanted to provide a few updates on the AP1000 program. Westinghouse and its partners in China recently announced that the Sanmen Unit 1 AP1000 nuclear reactor has been connected to the grid and is working through power testing. Commercial operations are expected to start before year-end. In addition, fuel loading has been completed at the Haiyang 1 reactor, and plant heat up has been initiated prior to reaching criticality. Commercial operations for this plant are also expected to start by year-end. We continue to expect that the successful commercial operation of the Chinese AP1000 plant should open the door for additional interest in new AP1000 reactors and Curtiss-Wright RCPs. Regarding the impact of China tariffs on our current China Direct AP1000 order, I'm pleased to report that to date no tariffs have been issued which impact this program. We've also accessed the impact of the first and second waves of U.S. tariffs, and we do not expect these tariffs to have a material impact on our margin in 2018. Looking ahead, we will continue to assess the changing landscape and any potential impacts.

In summary, Curtiss-Wright is performing well, and we're positioned deliver strong results in 2018. We expect synchronized sales growth in all end markets, generating 5% to 6% organic growth and 8% to 9% overall growth, including DRG. We are driving continued operating margin expansion, with an adjusted 2018 guidance range from 15.2% to 15.4%, led by increased sales and our ongoing margin improvement initiatives. We also expect to deliver strong double-digit growth and adjusted diluted earnings per share and more than $300 million in adjusted free cash flow. We continue to deliver on our strategy and produce 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 Kristine Liwag from Bank of America.

When I look at your 2018 operating results and compare that with adjusted 2017, it looks like incremental operating margin was 21%. Is 21% a good heuristic for the business going forward? And considering the cost cutting you've achieved in the past few years, should we expect to see upside to that 21%?

Well, I'll continue with what I just said. It's really hard to put one number on the whole company because we're so diverse because every business has their -- you'll see in some of our segments now has their own incremental kind of margin profile and there's many businesses within that, that have their own. But I've said 25% is a fair number for the overall enterprise. And yes, I think there could be upside to that for sure.

Great. And maybe to the China AP1000. Congratulations on the fuel loading of Sanmen 1. If I recall correctly, there was parallel development by a Chinese producer for reactor coolant pumps for the AP1000 after you did a technology transfer. How is that manufacturer doing? And at this point, would you be able to get incremental volume from them if they're not doing well? And then also as a follow-up to that, when would you expect to get more Chinese orders for the next set of power plants?

We're not sure when we'll get the next set of orders. We do believe, as I indicated in the narrative, and we've talked for a while now, that with the -- going on the grid that, that will produce the excitement that's necessary to really start that ball rolling. So it may can happen anytime from end of the year to maybe a year or so. These are long gestation kind of programs. And so we are not counting those chickens before the eggs hatch this time around. So it could be a little while, but on the other hand, it could come in relatively soon after they produce power. With regard to the indigenous production by Chinese national company, we don't know of any qualified supplier of RCPs other than ourselves at this point. Last we heard they're still working to build the unit. And that -- as -- you've followed us, Kristine, for a long time, you saw how long it took us to get there. So -- I've made -- I made a statement in the past that I do believe that they will be successful and they will build a unit. Will it look identical to ours? Will it perform identically? Should, but there's a -- there are a lot of nuances that go into one of those things. And we do believe there will be a partner in this process for years and years to come. So we're basically not looking over our shoulder in that regard, but we don't have anyone in the plant there in the competitor, let's call it, competitor's plant, so we are unable to really see the progress. We do hear through our people that are on the ground in China as far as what is passed around relative to the narrative over there. And like I said, there's nothing qualified as of yet. And so we don't know if anything's gone through testing at this point either.

And a next question comes from Nathan Jones from Stifel.

Obviously, very, very strong performance here. I would just like to get a little bit of color on some of the things that may have been pulled forward into 2Q '18, some of the things that might have been a little bit onetime in nature. And a couple of bullets I'll refer to specifically from the slide deck are high sales in defense that were partly timing. I'm wondering if you could quantify what it was that got pulled into second quarter that you're expecting later and the favorable contract adjustments for the naval business. I'm wondering if you can give us any color on that. Is that something that's onetime in nature? Or is that something where your estimated profitability has turned out to be too low and you've had to adjust that up and make it a catch-up or something like that?

I don't -- Nathan, that's a good question. It's not -- I don't -- wouldn't call onetime, but we did have some timing issues certainly in the Defense segment that impacted their sales and margins. First on the favorable contract adjustments, these were early -- earlier-than-planned closeouts on a couple of Naval Defense contracts and the adjustment was $4 million to both sales and OI. So if you take that out the contract -- take the contract adjustments out, defense OI margin was more like 24%, still not too shabby. But they also had the benefit of favorable absorption on higher sales of their higher margin COTS and TTC product lines, which also help their -- produced about $7 million in OI. Now part of that is timing, and part of it is not. And it's due to early receipt of materials on certain contracts that were planned in the second half of the year. It's about $10 million in sales and $4 million of the OI improvement.

Okay. That's helpful. Appreciate the transparency as always. The volume was still quite a bit higher in the Defense segment than, I think, we'd expected. Is there any more information you can give us on the timing of some of these contracts? Has the acceleration in some of this revenue here not just accelerated 2H into 2Q maybe a little bit but accelerate in 2019 into parts of 2018. It sounds like some of the JSF stuff might be proceeding faster than you'd originally expected. Does that still affect the back half and your outlook on revenue there?

Yes, I can't -- I don't know about the '19 pulling, but I don't know of any particular -- any one program ever Defense segment, but embedded computing has like thousands of programs, right? So I don't know of any one particular one. I don't know if the JSF moving any faster than the normal schedule as far as I know. But -- so I don't see that.

Okay. One last one just on price cost, which is still the topic of the day out there in industrials. I know you guys said that you don't expect any material impact on margins from tariffs, but we do have additional inflation out there in the markets. Where is Curtiss-Wright on price cost? And do you expect that to be positive, negative, neutral in -- for the remainder of 2018?

Yes, we've checked with our supply chain team, and it's been deemed to be an immaterial impact for 2018. However, we would pass any cost increases along to our customers where we are able to, of course. However, what we have seen is a shortage of electronic components, which is causing some delay in deliveries to our customers and also some increase in cost because of the supply and demand we have to expedite and pay little bit more money to get what we need. It's mostly in our embedded computing and industrial businesses. And it's due to the increased use of passive components like capacitors and resistors, primarily in automotive and smartphone applications. I mean the electronics is spreading so fast among -- all throughout the industrial arena, but -- so that's where we've seen some activity on the cost -- input cost side.

So it sounds like you've seen some cost inflation there, but you've also seen profitability improved, so you're being able to pass that along?

Right.

And a next question comes from Asher Carey from R.W. Baird.

I want to turn back to the Power segment. Visibility in the Nuclear Aftermarket can be difficult. Just wondering could you talk a bit about the challenges you've been facing here so far year-to-date in the aftermarket, which has been a headwind on sales and profitability year-to-date, just timing related or should we expect this to persist and for Naval Defense to carry the second half of the year in this segment?

No, the segment is going to -- well, both the AP1000 -- I'll do each one -- and the Nuclear Aftermarket are both going to be up in the second half. So new -- in the aftermarket, Q2 was down as expected because -- compared to the prior year because 2017 the second quarter was the seasonally highest for the outages in the industry. So that's what happened there. H2 we expect significant sequential quarterly improvement in this business due to the timing of outages, which is heavily weighted to the second half in 2018. So in a way, it is a timing issue, and that's what you're seeing there. On the AP1000 program in the second quarter, I think we said China direct AP1000 revenues were flat. However, we did improve their profitability, but it was offset by underabsorption on the lower domestic AP1000 sales. Here too, we expect a sharp increase in the China direct AP1000 sales despite the $20 million adjustments we made out of 2018. So you're going to see a good second half from the Power segment, strong.

And a next question comes from Michael Ciarmoli from SunTrust.

Maybe, Glenn, just on the cadence of earnings here and sort of the split. You obviously laid out that pull forward. So obviously, the 40%/60% earnings split, I mean, it sounds like that's no longer applicable. Should we be thinking something about this sort of balance, 55% in the back half or are you guys thinking of a 40%/60% split?

No, it has changed, obviously, based on the second quarter. It's -- I think it's more -- I want to say 50% -- 54%, 56%, something like that. It's closer. It definitely has changed. And yes, that's -- I think that was...

Okay. On the commercial segment, I mean, the topic of incremental margins came up earlier. I think you were close to 39% in the second quarter for the Commercial/Industrial segment. You obviously raised that forecast. Is there any reason why those incrementals in that segment can't continue? I mean, based on the margin outlook for that second half, it seems like the incremental modules -- margins would be a little bit more pedestrian, below 20%. I mean, is there any mix, any sort of changes with the profitability that would relegate you guys to a sub-20% incremental margin for the second half in that segment?

No, no. That segment is -- has been very strong in the restructuring in the past and this current year. And they've set themselves up with a cost structure. If they get any tailwinds from some revenue, it's going to be a good solid incremental margin, and you're seeing that in the second quarter. But now I don't see anything -- their sales will be somewhat flat I think in the second half, but their margin will be up. They will continue to -- again, if they continue to get any sales tailwind, it could be a good sign, good trend.

Okay. That's fair. And then I've got -- I have asked about it in the past I think. Your ground defense forecast is unchanged, but yet you continue to put up strong double-digit growth here. I think the comps get a little bit tougher. But, I mean, any dynamic there that would predicate a potential slowdown or lack of follow-through? I mean, I think you called out $150 million in defense orders. I mean, it seems like the tempo is going to continue there, and to get down to that flat to 2% really implies -- again, you've got tougher comps. But is there any changing dynamic in that ground defense market that we should be aware of?

Well, I know in the domestic they are -- we've been starting to hear more and more about modernizing vehicles. And we have the future combat system. We have the GCB. Now they finally realized, well, we have these strikers and every -- all these ground vehicles around, and they're going to modernization. So that would be a dynamic that would certainly help us improve in that market. But it's...

Nothing changing to the negative though in the second half, right?

No, not to my knowledge. No.

Okay. Okay. Last one from me. Just more color on the orders. I mean, that was a multiyear high, I think, $700 million in orders. You talked $150 million on defense. Can you give any color to the other segments on orders? Was there any concentration of a particular product or were they pretty broad based?

It's pretty broad based and large because most of them are defense related -- well, they're -- almost all of them are defense related. So in the Power segment, we had $64 million of orders for CVN-80 and Block V subs for pumps and valves. We also have $54 million in the Power segment for the addition of DRG. And part of that that's part of the order that we announced right after we bought them for the CVN-80, I believe. And in the Defense segment, they have like $39 million of orders for international navies and flight test equipment, specifically on the F-22. Those are the big, big, big ticket items. Organically, the orders were up 18%.

Commercial segment orders, do you have that number?

I think it's flat.

I think it's down slightly, a couple of million dollars that's all, year-over-year.

(Operator Instructions) And our next question comes from George Godfrey from CLK.

I just wanted to just make sure I heard that right. DRG 1, Glenn, in the quarter was $50 million on the order book?

$54 million.

$54 million. And orders were up 18% organically. I just want to get that clarified.

Yes, yes.

That's great. And then I heard what you said about the cadence of earnings in the year being -- going from 40%/60% split to more of a 45%/55% split. Do you think the smoothing of revenue and earnings pattern takes place in 2019 as well at both the top and bottom line that is less cyclical on a quarter-to-quarter basis and more evens out?

We don't know. Because quite frankly, some of what's -- when I mentioned material receipts, I don't want to get too deep in the weeds on revenue recognition rules and all that stuff. But it basically -- in some cases, where we used to ship and bill -- record revenue when we ship and bill, now we record it over time, and some of that you see was happening in the second quarter. So for instance, in defense, you used to have humongous fourth quarter. Some of the sales that we would have reported revenue in the fourth quarter we receive the material on now. So we start to report over time. So we don't know yet. This is our first year in it, but it might be our new profile, but it's too early for me to tell that.

That's great. Okay. And then, Dave, I heard your comments about the China plant being up and running, and that's great. Do you get the sense that power officials in India might perhaps be monitoring that very closely and could be looking to move forward on their nuclear plants?

I do believe, George, that they're watching that very closely. I think the world is watching it extremely closely. And from all the reports that we're getting, it has generated that kind of buzz, being the latest, greatest, safest nuclear power plant in the world. So in that regard, it's great press and moving right along. I believe though that the Indians are not quite there yet. It's going to take them a while like it did the Chinese early on, and we -- I don't think it's going to hurry up their plan, but it will certainly contribute to the recognition that these things are good, they're active, they can be built, they can be built on time given the right infrastructure to do so. And I know Westinghouse is working that very closely, in fact, with the Indians right now. And we're -- both Westinghouse and Curtiss-Wright have been involved in dialogue with India on what sort of pricing expectations they might have, and we're still working through indemnification language. So it's just reinforcing the activity in China. Sanmen and Haiyang is reinforcing what it is we've said all along. And -- but I think the orders out there, India are -- they're going to follow the follow-on orders in China. So it might be a couple of years before we see it but certainly some very strong forecast opportunities out there for us.

I'm showing no further questions. I would now like to turn the call back to Chairman and Chief Executive Officer Dave Adams for any further remarks.

Thanks, Shelby. And thanks to all of you for joining us today. We look forward to speaking with you again during our third quarter 2018 earnings call. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.