Enovis Corp (ENOV) 2008 Q4 法說會逐字稿

Good day, and welcome to today's Colfax Corporation's fourth quarter earnings call. Today's call is being recorded. For opening remarks and introductions, I would now like to turn the conference over to your moderator, Mitzi Reynolds. Please go ahead, ma'am.

Thanks, Anthony. Good morning, everyone, and thanks for joining us. My name is Mitzi Reynolds, and I'm the VP of Investor Relations. On the call today, we have John Young, our President and CEO, and Scott Faison, Colfax's Chief Financial Officer.

I'd like to point out that our earnings release is available in the Investor Section of our website, colfaxcorp.com. We will also be using a slide presentation to supplement today's call, which can be found on the Investor section of the Colfax website. Both the audio of this call and the slide presentation will be archived on the website later today, and will be available until our next quarterly call.

In addition, a replay of this call will be available for approximately two weeks. The replay number is 888-230-1112 or 719-457-0820 for international participants, and the access code is 4053059. This information is also listed in the press release.

I would also like to note that in order to help you understand the Company's direction, we will be making some forward-looking statements during the call, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.

It's possible that actual results might differ materially from any forward-looking statements that we might make today. The forward-looking statements speak only as of the date that they are made, and we do not assume any obligation or intent to update any forward-looking statements, except as required by law.

During the presentation, we do will describe certain of the more significant factors that impacted year-over-year performance. Please refer to the accompanying slide presentation. With respect to any non-GAAP financial measures during the call today, the accompanying information, required by SEC Regulation G relating to those measures, can be found in our earnings press release under the Investor section of the Colfax website.

Now I'd like to turn it over to John.

Thank you, Mitzi. Good morning, everyone. I'll begin with some of the fourth quarter's more significant highlights and some of the key performance measures we achieved. I'll follow with some annual highlights. We'll then review our strategic end markets and current outlook. Finally, I will review the financial results, and then we'll open up for a question-and-answer session.

As we announced in the press release issued this morning, Colfax had an excellent fourth quarter. Adjusted net income was $17.5 million or $0.40 per share, a 19% increase over last year's fourth quarter, despite a $0.03 currency drag on earnings. Net sales for the quarter were $159.3 million, an increase of 11%, including organic growth of 19%.

The fourth quarter is seasonally our strongest quarter, as many of our projects have year-end deliveries. During the quarter, our results were negatively impacted by foreign currency translation, as the US dollar appreciated sharply against the euro and Swedish krona, which had a 9% negative drag on sales versus prior-year.

Adjusted operating income increased 15% to $28.6 million, and the margin improved by 70 basis points to 18%. This improvement was driven by a 210 basis point increase in our gross profit margin. Adjusted EBITDA increased 11% to $32.1 million, and the margin remained flat at 20.1%, reflecting higher SG&A expenses, mainly associated with public company costs.

Orders for the quarter were down 19% overall and 16% organically. This includes commercial marine cancellations of $14 million during the quarter. We anticipated this decline, as we had an abnormally large order rate in the fourth quarter of last year, combined with the slowdown in commercial marine orders. The fourth quarter is typically our seasonally weakest order quarter of the year. Even including the impact of fourth quarter 2008 marine market cancellations, fourth quarter orders were comparable to the fourth quarter of 2006.

Turning now to a brief look at the year. 2008 was an excellent year for us, including record sales and orders. Net sales were up newly 20% to $604.9 million, an organic increase of 14%, which was in line with our double-digit growth expectation for the year.

Orders grew 15% to $669.2 million and an organic growth rate of 7%. Adjusted net income was $53.7 million or $1.22 per share, an increase of 33% over 2007. Adjusted operating income increased 25% to $90.8 million, while adjusted EBITDA increased 20% to $105.6 million. We ended the year with a backlog of $337.3 million, up from $292.8 million at the end of 2007, which was net of negative foreign exchange impact of $14.5 million.

Now moving on to a look at our end markets. We participate in five strategic and diverse end markets, which are -- commercial marine, power generation, oil and gas, Global Navy, and general and industrial. We discuss growth in sales and orders on an organic basis, which excludes the impact of acquisitions and foreign currency.

The commercial marine market is our largest single end market, and represented 24% of our fourth quarter sales and 25% of our sales for the year. Organic sales grew 34% for the quarter and 17% for the year. 2008 strong sales were driven by growth in international trade, changing environmental regulations, and demand for oil and other commodities.

While sales were strong, order activity declined significantly. Organic orders declined 58% for the quarter, and were down 2% for the year. Orders are net of cancellations during the year of $15 million, $14 million of which was in the fourth quarter. These order cancellations were mainly for containerships and bulk carriers.

Given the current global economic crisis, we believe additional commercial marine cancellations are probable. So far this year, we've had cancellations of about $5 million. Our commercial marine order book for 2009 continues to be fairly full, but we are monitoring our backlog in this market closely.

Reported cancellations in the global shipping market totaled 210 vessels in 2008 compared to the approximately 10,000 ships currently on order. Shipping rates, which had plunged in the fourth quarter, have recently increased.

For 2009, we are focused on growing our sales in the high spec ship applications, including floating production storage and off-floating vessels, and growing our aftermarket sales to help mitigate the slowing activity in new ship construction.

Moving on to oil and gas, sales in this end market were 15% of our total sales for the quarter and 14% for the year. Sales on an organic basis were up 11% for the quarter and 2% for the year. Organic order growth has been very robust in this market, and was up 37% for the quarter and 34% for the year. New orders were being driven by strong demand in Latin America and the Middle East.

We anticipate activity in the oil and gas markets to remain favorable, as capacity constraints and global demand drive development of heavy oilfields, but we may experience project delays. In pipeline applications, we expect demand will increase for our highly efficient products, as customers focus on total cost of ownership. In refinery applications, we believe a reduction in capital investment by our customers will reduce demand.

While we haven't had cancellations in the oil and gas market, we have seen some customers take a wait-and-see approach to booking orders, based on the current price of oil. Specifically, a number of Canadian projects where exploration costs are high, are on hold. However, other customers are moving forward with development. National oil companies, which are restricted by their boundaries, tend to continue developing their resources, even as oil prices change.

For example, Ecopetrol, Colombia's state oil company, recently announced that it plans to boost spending by 35% to $6.2 billion in 2009. The majority of the investment will be for the expansion and development of heavy crude and mature fields. Also, Shell recently reaffirmed its plan to maintain CapEx spending at about $32 billion for this year.

Turning now to power generation, for the fourth quarter, organic sales in this market were down 3%, due to a large project that was shipped in the fourth quarter of 2007. Sales for the year increased 21% organically. Organic orders were up 59% for the quarter and 13% for the year. This strong order growth in the fourth quarter was attributable to demand for new power generation equipment.

In the power generation market, which represents about 14% of our total sales, we expect activity in Asia and the Middle East to continue to remain strong, as economic growth and fundamental under-supply continues to drive significant investment in energy and infrastructure projects. Both Iraq and Saudi Arabia have recently announced plans to significantly enhance their countries' power generation capabilities. In the developed economies, we expect efficiency improvements to drive demand.

Sales into the Global Navy market for the quarter were 8% of our total sales, and orders were 10% of our total orders. Organic sales and orders increased 20% and 38%, respectively, for the fourth quarter, primarily related to the Navy's new ship construction program. While organic sales were down 2% for the year, organic orders were up 22%. We are currently working on several new shipbuilding contracts for the US Navy, including a Virginia class submarine, a CVN-78 Ford class aircraft carrier, the first two DDG-1000 Zumwalt class destroyers, and an LPD-17 San Antonio class amphibious vehicle.

In addition to new ship construction, we believe that demand will increase for integrated fluid handling systems, such as our smart valve system, that reduce operating costs and improve efficiency. In addition, we expect nations outside of the US to continue to expand fleets to address their national security concerns.

Now for a look at our general industrial end market, which encompasses several different end markets. We believe continued infrastructure development throughout the world will drive capital expenditures in our sales in the general industrial market.

General industrial sales were 39% of our sales in the fourth quarter and were 38% of our orders. On an organic basis, sales increased 23% for the quarter and 17% for the year, while orders declined 15% for the quarter and were up 1% for the year. The growth in sales in this end market for the quarter and year were broad-based across several sub-markets, with distribution in chemical being particularly strong.

We expect demand to soften this year in the chemical, building, construction, legal engine and distribution portions of this market, primarily in Europe and North America.

Turning to a geographic look at our sales for the quarter, about 45% of our sales came from Europe; 33% from the Americas; and 22% from Asia and the Middle East. Organic sales were up across all geographic regions.

Gross profit margin for the quarter increased about 200 basis points from 34.2% to 36.3%, and was up 120 basis points for the year. The improvement was primarily due to more favorable pricing and efficiency improvements in our European and US facilities.

Selling, general and administrative expense increased $4.5 million during the quarter, primarily due to $2.1 million of public company costs and a $2.2 million insurance gain recorded in the fourth quarter of 2007.

For the year, SG&A expenses were up $26.7 million, primarily due to the following items -- $3.8 million related to foreign exchange rates; $4.1 million related to a reserve increase for a legacy legal matter; $4.2 million of public company operating costs; $2.1 million related to the acquisitions of Fairmont and LSC, and the overall impact of higher volume.

Now for a look at the balance sheet. Our financial condition remains strong. At year-end, our debt to adjusted EBITDA was less than one times. We had approximately $130 million available under our revolver, and cash balances at the year-end were $29 million.

We had some further minor declines in inventory during the fourth quarter. Inventory is down on a currency adjusted basis by $1.7 million on top of about a $2 million decline in the third quarter. For the year, inventory is up by $15.6 million, but inventory turns are flat year-over-year. We had substantial receivable growth for the quarter and for the full year, resulting primarily from our strong sales growth in the fourth quarter.

Receivables increased by $5.8 million for the quarter and by $20.6 million for the year on a currency-adjusted basis. We will continue to focus on working capital turn improvement, and believe it is even more critical in today's economic environment.

Net cash flow from operations was a use of $31.5 million for the year. One-time cash outflows related to the IPO were $42.4 million. Asbestos was a cash outflow of $21.8 million for the year, and cash paid for a legacy legal settlement was $11.7 million.

The start of our asbestos coverage litigation trial has been delayed due to a change in the presiding judge. We anticipate that the trial will begin in the first half of 2009.

We received $11.5 million in reimbursements from insurance carriers in the fourth quarter, just partially offset by a $7.6 million payment made to a primary carrier for deductibles and self-insured retentions in the primary policies. We have no further obligation under these policies.

We received an additional $7 million of reimbursement in January. For the year, claims and the cost to resolve claims continues to track along our earlier projections, which resulted in the annual liability and defense costs, before insurance and asset adjustments, to be $5.4 million for the year.

In November, we announced a stock repurchase program. As of year-end, we have repurchased 795,000 shares at an average price of $7.18 for a total of $5.7 million.

In summary, we had an excellent fourth quarter and a very good year in 2008. We're well-positioned heading into 2009, with a higher backlog than we had at the beginning of 2008. However, we expect that the second half of the year could be challenging, if current economic conditions persist.

We remain focused on minimizing or eliminating expenses, while continuing to fully fund our growth initiatives and pursue acquisitions. I think it's important to note that we were able to grow our business over the past three years without adding additional square footage, so we believe that we can be just as flexible if our business begins to slow.

We remain cautious in our outlook, but continue to expect organic sales growth in the range of 1% to 3%, and adjusted earnings per share of $1.10 to $1.17 for 2009.

With that, I'll open up the floor for questions and answers.

(Operator Instructions). Jeff Hammond, KeyBanc Capital.

Just I wanted -- SG&A came in a lot lower than I had anticipated. You called out the bump in public company costs. Can you just talk about what's going on there? What's driving the SG&A cost control and what's the sustainability of the run rate you saw in the fourth quarter?

Well, I mean, I think our -- I mean, from an SG&A perspective, we probably came in pretty close to where we had thought we would be. The additional public company costs, I think we've been pretty clear about, as we've added some additional costs in corporate and, in particular, the expensing of equity-based compensation. But from an overall expense control on the SG&A side, I think we were really consistent with our internal projections.

Plus Jeff, too, there's a portion of those expenses, of course, are in euro and kronor, and they were driven down by the FX impact too.

That's helpful. And then as we look into the first quarter order trend, any major changes or outliers from the trends you've seen into the fourth quarter?

No. No major changes at this point. It's pretty early in the year and our order rate tends to be pretty lumpy from month to month. So at this point, I certainly wouldn't comment on any perceptible change in trends.

Okay. And then final question, looks like you had a pretty sizable bump in pension and post-retirement. Can you just speak to what's going on there?

Sure. We have the valuations done and our funded status on the pension plan is obviously not in the same position it was last year at the end of the year. The change in the funded status is about $57 million. Most of that is in the US -- 90% [of] in the US. They aren't significant cash contributions projected and we have about another $2 million that needs to go in, in 2009. And not too much dissimilar in 2010 at present, without factoring any relief that's being talked about now.

Mike Schneider, Robert W. Baird.

I'm wondering first, just on the cancellations within the commercial marine space. So, $15 million last year, $5 million already year-to-date. Just given where you set the guidance, does that change your -- or was that an assumption of the run rate as you guys built your '09 model? And I guess just any insights on the $5 million year-to-date. Has there been a change in the composition of those cancellations or types of ships? Just some more color on that, because it seems like the run rate is much higher.

No, from a run rate perspective, it's pretty consistent to what we saw in the fourth quarter. And the composition of the cancellations hasn't changed. It's primarily containerships and some bulk carriers. And we did factor in cancellations into our forecast for 2009 as well.

Okay. And I guess as you guys built your '09, was that the type of run rate you built in? Or had you actually even assumed it accelerated?

No, that's consistent with what we had in our model.

And John, you mentioned that the 20 cancellations were on a base of -- call it 10,000 or 200 cancellations were on a base of 10,000 (multiple speakers) --

200 ships -- that's the total market.

How about the similar type of ratio -- the $15 million in cancellations or the $5 million run rate is on a backlog of, what, in your commercial marine business?

Yes, we don't give detail on backlog by end market. And it's hard to kind of match that up anyway, just because of timing differences between when ships are booked in the cycle compared to when our orders are booked and de-booked. But I think overall, there's certainly no major differences in our business versus the market.

I think if you look at the cancellations that we've taken off our books, the vast majority of that has actually been pushbacks, where customers -- our customers have come to us and said, we want to push these orders out two years. And our response is, well, I think we're going to take those off our books at this point, and we can revisit it in a year or two down the road.

Okay. And then within the backlog, I've seen letters from Canadian players, particularly in the tar sands area, coming back to their project suppliers and looking for -- in effect, renegotiating the prices that are already embedded in the supply agreements.

Have you seen that type of stuff? And is that just a -- kind of a stealth way we're going to see the backlog impacted as well as you go into 2009/2010?

As of yet, we haven't seen any significant renegotiations. Obviously, customers are very focused on price in today's market, given the change in commodity prices and change in the overall economic situation. But I wouldn't say it's been a significant impact for us at all at this point.

Okay. And then just building on the prior question on SG&A, in the gross margin line, I'm curious -- the number was quite impressive, especially year-over-year. Were there any unusual contract true-ups or percentage of completion true-ups or anything that would have boosted GM or gross margins unusually?

No. No, I mean it was a pretty straightforward quarter. And we did have some significant revenue growth in the fourth quarter. So at that level, there was a fair amount of overhead absorption, which would certainly help in the gross profit margin side. But there was really nothing unusual.

There was nothing significant. We hit exactly -- almost dead-on where we projected to come in at gross profit percent for the year. So, I mean, we were able to do what we expected we were going to do.

Okay. And final question, just on the orders, as we try and just calibrate our expectations for order declines, I guess, in 2009, based on the decline this quarter. If we try and assume -- and this is multi-variable, I understand -- but if I try to assume some backlog erosion in 2009, gets you to this 1% to 3% organic growth rate, seems to me orders -- you're expecting to be down, and I know this is a fuzzy number, but down somewhere between 20% and 25% organically in 2009 for the year?

Yes, I would say that is a multi-variable equation, Mike. I mean, part of it is due to timing -- you know, when the timing of orders, in terms of the timing of shipment of those orders.

So, I mean, from a guidance perspective, we haven't commented on order growth or our expectation for orders for the year, because that's very difficult to do in our business, given the lumpiness of the orders and the timing issues associated with that. I mean, we certainly have factored in our own internal expectations for how the backlog will play out during the course of the year, but sort of -- you add up all those multiple variables and I think we're pretty comfortable with that 1% to 3% organic growth.

Well, put differently, you do expect to burn backlog in 2009?

Yes.

John Inch, Merrill Lynch.

Let's start with power gen. Why were the core orders up 60%? Were there really easy comps? Or was there just a big order that you got in there? Maybe a little more color on that segment. And what did the comps do year-over-year? Like, what was the fourth quarter of '07 versus say, the third quarter of '07?

Yes, from a -- I mean, again, quarter-to-quarter, we do get a little lumpy on timing of orders. So it's hard to draw a lot of conclusion over the year-over-year comparison, other than I think if you look from the last four quarters for the whole year, we were up over 20% order rate in power, and certainly believe that that -- you know, that's one of our -- certainly one of our strongest end markets right now.

The comp in prior year probably was a little bit lower fourth, but from a new project basis, activity level remains pretty good on the power side. And certainly we're hopeful that will continue during the course of 2009.

John, were there one or two very large projects that accounted for this? Or are you telling us it was (multiple speakers) project --

No, it was pretty consistent. No, there weren't a significant amount of -- I mean, there was no one large project. I mean, in the third -- I know in the third quarter of '07, we had a tough comp in power, because we did have, in one sort of fell swoop, we had a number of large orders. But the fourth quarter was -- there was nothing really to call out in particular on project business.

Yes, we're really talking about a $5 million, $6 million increase in power generation for the quarter. So, a couple of orders can make a significant difference on a percentage basis.

Okay. So there's nothing you would draw from the fourth quarter that might suggest this business, if you sort of parse out this seasonality, the lumpiness, the year-over-year comps, there's nothing you're drawing from this that says -- power gen in the quarter looks like it actually might be picking up. That's -- I'm assuming that's kind of what you're saying?

Sure, that's -- and I think that's why -- step back, John, and said let's look at it for the full year, because you get a better trendline. And for the year, we were up a little over 20% on order rate. And I think that is an indication of certainly the strength of the power market. But I wouldn't call out anything specific over that one quarter of large increase.

John, the global industrial economy has really hit the skids since December. Things seemed to have just deteriorated across the board in North America and Europe through to February. What's going on within your general industrial businesses?

I kind of hear you on the chemical side and so forth, but did you discern visible deterioration within the segments in the Western markets that might correlate with what's going on in the broader general industrial economy? Or is that still potentially on the come, just because of the timing of projects? And how should we sort of parse your general industrial business with what's really going on, in terms of the global economy?

Well, I think the simple answer is yes. I mean, we've certainly seen the impact of the slowdown on the overall general industrial economy. We tend to be a little later cycle than maybe some other companies.

But on the general industrial side, we had a -- in the fourth quarter, you could see the year-over-year orders declines, and which basically put us at a roughly flat level for the whole year on an orders perspective in general industrial.

And I think we're going to continue to see that in the near-term. I mean, that was a factor certainly built into our outlook for 2009; in particular, the chemical market has slowed. Building and construction, and diesel engine are really three areas where we've seen activity levels slow through the fourth quarter, and certainly anticipate that trend continuing.

How much of a lag is in this business, John? Meaning, I see that orders are down 15%. Depending on what company you look at, activity probably is consistent with that and it's gotten worse in the first quarter. Does kind of what's going on in general industrial suggest that the sort of -- as part of your plan, the declining lagging impact just kind of gets worse and spills into 2010.

Is that -- I mean, I guess the point is you've reiterated guidance, but general industrial globally seems to be worse, so though you only gave guidance at the beginning of January. So just how to marry the two? Does this [trying] to continue to lag and get worse, even if you get some stability in end markets? Or how to think about that?

Well, that's certainly a difficult question to answer on timing. But I think we are a little later in the cycle than maybe some of the other general industrial companies out there. And so we could be seeing it a little bit later than others. I think that's a fair assessment.

But there's no obvious mathematical algorithm that you've invoked to say, well, there's a two -- out in balance, there's a two-quarter lag or something like that?

Well, I wish I had that crystal ball, John.

So do I. Hey, what about pricing? Obviously, there's global deflationary pressures. Can you remind us what sort of price impact was sort of what you guys had for price impact, on a net basis in '08 and what you're anticipating for '09?

Yes. In '09, the anticipation clearly is going to be a flattish pricing year. I mean, I don't think we anticipate really any expansion in pricing. We did have positive price impact in '08 -- 3% to 4% -- kind of 3% to 4% range. It's always difficult to nail that number down exactly, given the project nature of the business. But we did have -- certainly had more than a couple of points of positive price in '08.

Okay. And then just lastly, John, how are you thinking about M&A? I mean, some companies are suggesting activity is going to be, based on their strong balance sheet, is going to pick up. Others are suggesting sellers are withdrawing from the market because they don't like the prices.

I mean, Colfax, part of your whole strategy with M&A would strike me this is a pretty good time to be pretty actively looking at a lot of stuff. What's going on and what would you anticipate, without being too predictive, I mean -- do we expect things to pick up or what?

Sure. Well, I'll answer it in two parts. I think first, I think our financial position right now, very low debt, nothing drawn on our revolver and a reasonable cash balance on the balance sheet, positions us well to continue our M&A strategy. And you're right, it is a core part of our overall growth strategy.

I would say right now, you're also correct that activity level is not robust. But we continue to be very active in looking at new opportunities, and certainly think that at some point during the year, and most likely probably towards the end of the year, that activity level will pick up. And I think sort of our view is, is we need to be ready from a balance sheet perspective to be flexible and to be opportunistic, if those opportunities present themselves.

(Operator Instructions). Shannon O'Callaghan, Barclays Capital.

So, just a little follow-up on the order trends year-to-date. I mean, you guys, I think you said on the last call, that fourth quarter is typically the lowest order quarter of the year. I mean, do you expect, when you think sequentially, I mean, do you expect a typical seasonal uptick in 1Q? Or are we kind of running on a sequential basis now and not on a year-over-year basis?

Yes, that's a good question. I think we definitely had seasonal patterns. And if you go back through history, in the 12 years I've been associated with this business, we run pretty consistently that seasonal pattern, the one outlier being the fourth quarter of '07 was unusually strong.

And that really is really the only fourth quarter in those 12 years we built backlog in the fourth quarter. So I think the seasonal pattern more than likely will hold, with the exception of the timing of overall economic recovery -- whatever that timing is, I think will have an impact on it.

So, I think the direct answer to the question is, is we're monitoring the order rate very closely to see if it does become more of a sequential quarter-to-quarter situation, and therefore, start to impact our delivery schedules out into the late second quarter, third quarter, fourth quarter.

We do have a -- call it a six-month visibility on backlog for the most part. So we can certainly have at least one, potentially two quarters, of view before we see those delivery schedules start to -- either start to fill in or not fill in.

Okay. So, just from like -- from a sort of dollar basis, I mean, year-to-date, we're sort of tracking like we were in Q4?

Well, again -- I mean, I try not to draw too much conclusion after one month, because we do have some lumpiness. And so, it's one of the reasons we certainly don't issue monthly order numbers because of that, because it's difficult to draw conclusions on a month. So I think probably better off to see where we end the first quarter, and we'll discuss our guidance for the balance of the year at the first quarter call.

Okay. And just a follow-up on the SG&A. It did come down sequentially. I guess maybe that's normal, which is why it's more in line with your expectation; but as a percentage of sales, I mean, how should we think about it? Or have you done things to take out SG&A? And what's a reasonable percentage of sales to think about, going forward?

Yes, I think one thing to note in the fourth quarter, part of that sequential anomaly is currency. The fourth quarter -- the currency -- the dollar strengthened greatly, so all our euro-based costs shrunk due to currency. But from a run rate perspective, the fourth quarter, very high revenue quarter for us; therefore, we usually leverage SG&A pretty strongly in the fourth quarter. That's a consistent theme.

So from a percentage basis, fourth quarter tends to be a lower SG&A percentage of the total, but I certainly wouldn't take that quarter rate and apply it to every quarter going forward.

Okay, but even on a dollar basis, I mean, you went from almost $33 million down to $28 million rounded. Was that just a typical kind of -- is that part currency and part other things? Or is that something that you did?

I mean, I think, obviously, we have continued to control costs in the overall operation of the business, but there wasn't any specific actions taken in the fourth quarter, in terms of a restructuring situation, in terms of taking that cost out.

Okay. And then just as you're looking across the markets and talking about some delays, some cancellations in different parts of the business, I mean, in terms of your view into these different projects, is there a theme you're finding across -- what kind of projects are going forward and what kind aren't? I mean, is it the strength of the customer's credit and balance sheet? Or is it the stage of the project, how far along it is? Or are you getting any sort of themes running through it?

Well, it's a mixed bag. I think, for the most part, what we've seen is that orders that are on the books have kept to a reasonable schedule. We always had some movement quarter-to-quarter on estimated ship dates, based on typical project delays that have nothing to do with economic situations.

But from a trendline perspective, I would say -- the one thing is that you definitely have more caution in some geographies of the world -- you know, I think the oil sector is probably the best one to call out. The higher cost regions of oil production are certainly the most cautious right now, given the price of a barrel of oil.

And then I think the other trendline is, is that certainly some of the national oil companies have a longer-term view in the market, and have got capital budgets associated with that longer-term view and are trying to stick to it. So we have certainly seen some projects continue to develop on that normal timetable on those national oil companies, as opposed to other customers that, again, have been a little more cautious.

Okay, great. Thanks a lot.

And it appears we have no other questions in the queue at this time. I would now like to turn the conference back over to your moderator, Mitzi Reynolds, for any additional closing remarks.

Don't have any closing remarks other than thank you for joining us today, and we look forward to updating you next quarter. Thanks.

That does conclude today's conference. You may now disconnect.