EnerSys (ENS) 2012 Q2 法說會逐字稿

Good day, ladies and gentleman, and welcome to the second quarter 2012 EnerSys earnings conference call. My name is Latasha and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions) I will now like to turn the call over to Mr. John Craig, Chairman, President, and CEO.

Good morning, everyone. Thank you for joining us for our conference call this morning. During this call, we're going to be discussing the results of our second quarter for fiscal year 2012, and we'll also comment on the general state of our business. Joining me on the call this morning is Mike Schmidtlein, our Chief Financial Officer, and before we get started, I would like to ask Mike to cover information regarding forward-looking statements.

Good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on management's current expectations and are subject to uncertainties and changes in circumstances. Our actual results may differ materially from the forward-looking statements for a number of reasons. Our forward-looking statements are based on management's current views regarding future events and operating performance and are applicable only as of the date of such statements.

For a list of factors which could affect our future results, including our earnings estimates, see Forward-Looking Statements included in item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in our quarterly report on Form 10-Q for the quarter ended October 2, 2011, which was filed with the US Securities and Exchange Commission. In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP information and the non-GAAP information, please see our Company's Form 8-K which includes our press release dated November 9, 2011, which is located on our website at www.EnerSys.com. Now let me turn it back to you, John.

Despite the headwinds we faced during our second fiscal quarter, I'm pleased we reported last evening that our earnings for the quarter were $0.58, which tied a record for EPS for any second quarter, and exceeded our $0.55 midpoint of our guidance. Our sales for the quarter were $547 million, which is up 16% year-over-year and down 4% sequentially. Our adjusted operating earnings were $43.2 million, or 7.9% of sales. Year-over-year, Europe showed improved quarterly operating earnings, while the Americas and Asia were lower.

On a sequential basis, our operating earnings percentage declined to 7.9% from 8.7%. As we discussed on our last conference call, we normally experience a seasonal decline in revenue in our second quarter and anticipated several one-time cost items. We were able to partially offset these items with positive pricing versus commodity costs. In a few minutes, Mike will provide further details explaining our performance by geographic area.

On the acquisition front, we were very active and closed three transactions since our last conference call. In South America, we acquired Industrial Battery Holdings, a leading South American manufacturing distributor of lead acid reserve and motor power batteries, with manufacturing facilities in Brazil and Argentina. This acquisition will provide us with a manufacturing footprint and an increased sales presence in South America to serve not only our local customers there, but also our global customers that do business in that region.

In South Africa, we entered into a majority-owned joint venture with Power Tech Batteries. They have manufacturing facilities in Port Elizabeth, South Africa, and headquartered in Johannesburg. The joint venture will manufacture market reserve and motor power lead acid batteries for sub-Sahara Africa, and like South America, will serve our global customers in that region. Additionally, EnerSys entered into an agreement with Lithium Technology Corporation for a majority-owned joint venture in Germany to produce large-format lithium ion cells. We will use these lithium ion cells in energy solutions for aerospace and defense applications, as well as renewable energy and specialty high-power applications.

In order to create a highly focused organization for our worldwide lithium technologies, Sanjay Deshpande has been appointed Senior Vice President EnerSys Advanced Systems. In his new position, he will lead and coordinate all lithium global production operations, engineering, and product development. We're still very active in pursuing additional acquisition opportunities, and hopefully in the next coming months, we'll be able to announce additional deals that we've closed on.

Now a couple of additional highlights that took place in the quarter. In September, one of our Chinese manufacturing facilities, which is located in the Jiangsu Province, was shut down by the Chinese government as part of their environmental review. In November, the facility was allowed to reopen. And we also purchased $49 million of EnerSys stock since our last conference call. We continue to maintain a record backlog, and order activity in our markets has been very good. Our motor power organic sales in the quarter were up 16% year-over-year, and the worldwide industrial fork truck data for September was up 18% over September of last year, and this should bode well for our motor power orders during the next several months. Reserve power organic sales for the quarter were flat year-over-year, and we anticipate a modest increase in reserve power sales in the second half of fiscal year 2012 versus the same period last year.

In the third quarter, we believe we benefited from sequentially higher volume, improved pricing, and lower commodity and manufacturing costs. These benefits were partially offset by increased operating expenses in China as we continue to ramp up production in our new Chongqing facility and restart our Jiangsu facility. Therefore, as reported last night or last evening in our press release, we expect adjusted diluted earnings per share to be in the range of $0.67 to $0.71 for the third quarter, which puts us on track for potentially producing a record third quarter. As I said at the conclusion of our August conference call, I anticipate that the second half of this year will be stronger than the first half of this year. Our second quarter results and third quarter guidance give me even more confidence that we will achieve that level of performance. Now with that, I will ask Mike to pick up further on our results and our guidance.

Our second quarter net sales increased 16% over the prior year to $547 million, primarily from solid organic growth of 8%. Stronger foreign currencies and higher selling prices both increased revenue 3%, while the impact of acquisitions added 2%. On a regional basis, Europe's second net sales increased 18% to $245 million compared to the prior year. Our sales in the Americas increased 14% to $252 million, while our Asian business increased 12% in the second quarter to $50 million. On a product line basis, net sales for reserve power increased 8% to $267 million, while motive power continued in its solid recovery phase with an increase of 24% to $280 million.

On a sequential quarterly basis, second quarter net sales decreased 4% over the first quarter, with 3% from lower volume, 2% from weaker foreign currencies, offset by 1% from pricing. All of our regions experienced sequential declines in revenue, with Europe and the Americas down 3% and Asia down 13%. On a product line basis, our motive power business was down sequentially 8% as the normal summer slowdown occurred. Sales in our reserve power product line increased 1% sequentially.

Net sales for our first six months of fiscal 2012 increased 23% over the prior year to $1.12 billion. On a regional basis, our European operations net sales increased 26% to $498 million, the Americas increased 20% to $512 million, and Asia, 25% to $106 million. The 23% increase for 2012 includes an increase of 12% in base volume, 2% from acquisitions, 3% due to pricing, and 6% from stronger foreign currency translation. On a product line basis, net sales in reserve power increased 17% to $533 million, while motive power increased 29% to $583 million.

Now a few comments about our adjusted consolidated earnings performance. As you know, we utilize certain non-GAAP measures in analyzing our Company's operating performance, specifically excluding highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items. Please refer to our Company's Form 8-K, which includes our press release dated November 9, 2011, for details concerning these highlighted items. Our second quarter adjusted consolidated operating earnings were $43 million, or a decrease of 10% in comparison to the prior year, with the operating margin down 220 basis points to 7.9%. Higher volume, cost savings, and incremental pricing could not offset the higher commodity costs we experienced in the second quarter compared to the prior year.

Plant disruptions also had negative impacts. Excluded from our adjusted operating earnings for the second quarter was approximately $1 million of highlighted items. On a sequential quarterly basis, adjusted consolidated operating earnings decreased $7 million, with the operating margin down 80 basis points from the sequential volume decline and plant interruptions. Our Americas business segment achieved an operating earnings percentage of 11.1% versus 15.6% in the record second quarter of last year, and 12.4% in the previous quarter. In addition to the impact of rising sequential commodity costs, our Americas business segment experienced a decline in their higher-margin sales from the prior year.

Europe's operating earnings percentage of 6.0% was higher than last year's second quarter of 4.6% and the previous quarter's 5.6%, in spite of incurring nearly $2 million in additional costs from the June strike in Poland, without which Europe's operating earnings percentage would have been nearly 7%. Asia's operating earnings were less than $1 million for the second quarter, reflecting higher commodity costs, start-up costs in Chongqing, and temporary closure costs in our Jiangsu Province facility. The reported operating earnings percentage in our Asia business segment decreased in the second quarter of this year to 1% from 8.7% in the second quarter of last year and 5.9% in the prior quarter. Sales in the quarter were $50 million, up from the prior year, but down $7 million from the prior quarter.

If you exclude the business development costs for our new Chongqing facility and the India expansion opportunities, the operating earnings percentage in the Asia region would have been approximately 3.8%. Our new central China facility in Chongqing started production in October. Our Jiangsu Province facility reopened in November. In the long-term, this disruption in Jiangsu should be a favorable event which reduces Chinese competition and pricing pressure by eliminating substandard environmental operators.

Our first six months of fiscal 2012's adjusted consolidated operating earnings were $93 million, or an increase of 8% in comparison to the prior year, while the operating margin decreased 120 basis points to 8.3%. The increase in the first six months' earnings was due to similar factors as discussed above for the second quarter. Our adjusted effective income tax rate of 26.3% for the second quarter increased 200 basis points from the first quarter due to the discrete items benefiting the first quarter. We believe our tax rate for the remainder of fiscal 2012 will be between 24% and 26%.

Despite our reduced operating earnings, our adjusted diluted net earnings per share, which were $0.58 in the second equalled the record set in the prior year. The main drivers to holding EPS constant were lower interest expense and taxes, as well as the initial effects of our share repurchase program. For the first six months of fiscal 2012, adjusted diluted net earnings per share were $1.26, 19% above the prior year's $1.06. The key influences on earnings for the first six months of 2012 were the increase in net sales partially offset by higher commodity costs, net of cost savings and pricing.

Now some brief comments about our financial position and cash flow results. Our balance sheet remains very strong, with substantial liquidity, secure and favorable debt facilities and a strong capital position. We now have $96 million on hand in cash and short-term investments as of October 2, 2011, with over $300 million undrawn from our credit lines around the world. Our leverage ratio, which must be maintained below 3.2 times as calculated in our US credit agreement, was 1.1 times, which includes the impact of our stock buybacks. Our net-debt-to-total-capitalization ratio was 22% as of October 2, 2011.

Capital expenditures were $24 million for the first half of fiscal 2012, comparable to the $24 million in the first half of fiscal 2011. Our capital spending focused on our new facility in Chongqing, China. Our plans for acquisitions, investments and added capacity and premium products can all be met with our existing cash and credit facilities. As we execute these plans, we will continue to asses our capital structure for strength and efficiency. Our repurchase of over 5% of our shares outstanding, or 2.6 million shares, for $58 million in the first half of this fiscal year is an example of those plans.

We recently announced three transactions which closed in October, two joint ventures and an acquisition, which strengthened our position in two key geographic regions and in one advanced technology. Those transactions have an aggregate investment of approximately $40 million. We expect to generate adjusted diluted earnings per share of between $0.67 and $0.71 in our third quarter fiscal 2012, which excludes expected charges of $0.07 per share from our restructuring programs and acquisition activities. Our anticipated third quarter earnings will increase due to higher volume and pricing, as well as a modest decrease in commodity costs. Our outlook for the second half has improved since our last call. We look forward to the opportunities we will have with these additional acquisitions and we continue to believe that market volatility is beneficial to our Company in the longer-term due to the strength of our balance sheet. Now let me turn the call back to John.

With that I would like to open up the lines up for questions.

(Operator Instructions) Steve Sanders, Stephens, Inc.

Good quarter. First maybe on pricing, I think when you gave your guidance in August, you were pretty cautious, given the macro developments out there. Sound like you feel quite a bit better about that now; but we're also seeing the auto guys struggle a bit. I don't know if that bleeds over into your business or not. But just wanted to see if you could talk about what you're seeing in terms of pricing around the world?

Our pricing right now compared to the last quarter is up slightly, it's holding fairly well. And I think going forward with what we've seen happen to commodity costs, specifically lead, lead coming down, and since we have about 35% of our business in [automatic] pass-through's, it would stand to reason that we will see some price reduction take place relative to the commodity costs coming down. That being said, though, I believe that we are in a period now that the first half of the year when the commodity costs were going up, pricing was playing a catch-up to lead costs, and now that lead costs is coming down, we should be having favorable price-to-lead ratio for the second half of the year.

And then specific to Europe, can you just talk about how the order book has developed over the past couple of months, and how that varies by country as you go around Europe?

Well, I don't want to break it down by country, mainly because of competitive reasons, it would be pretty easy to figure out what we're doing with our competitors from that. But generally speaking, when you go back and look at our last conference all in August, we started to see a slow-up in orders, or the orders weren't materializing. In fact, I said at that time it reminded me of 2008, that we were seeing some things that were cautious. During that conference call, or just after that conference call, we took some actions to slow up spending, to control things, because it locked like 2008 all over again. Now what's happened with it is, we've actually seen orders pick up in 2011, and can pick up considerably compared to where they were just since our last conference call. And that includes Europe, too. Europe has picked up for us compared to where we were, and it's looking very positive. I feel a lot more bullish now than I did 3 months ago about things. Even though the things we're reading in the press that's happening in Europe, the bad things there, people are still buying batteries, companies are still buying batteries from us.

That's good. Last question relates to the margins. I think there was a comment in the Q saying that you were shifting your focus a bit in Asia to focus more on margins and less on volume. So I'd be interested in a little bit more color there. And how should with think about trends in the Americas going forward? Seems like the order book is still good. Maybe pricing is good. I know you had a tough comp last year on the Americas margins, but just some additional color on how we should be thinking about the margins in Asia and Americas going forward.

Mike, why don't we do this. I'll take the one on Asia, you take the one on the Americas. Let's start with Asia. In Asia what's happened is that there was some long-term contracts done that we walked away from because of low-margin business. Since then, what's happened is there has been a crackdown on companies that have anything to do with lead in China, and as I mentioned earlier, one of our plants was shut down by it, we're back up again. Roughly 2000 battery manufacturers in China, about 1500 of those are going down. Some have come back up, many will never reopen again. So to make a long story short, we walked away 6 months ago, 9 months ago, from some low-margin business. Now what's happening is there's a tightness that's going to take place in that market. We're going to hold our pricing up, and hopefully what we'll see is improved margins in China because of what's happened with the lead situation.

The second point is that we have our new factory that's coming online. It's just starting up, we aren't going to see significant margins on that plant this year. It's too early. We'll take a very methodical and slow approach to make sure we're building quality products coming out of that plant like every other plant we have around the world. But once that thing fully kicks in next year, we should see enhanced margins coming out of that plant because of slower costs. Mike, the Americas?

So, Steve, you're right. The comp comparing the prior year, the second quarter of last fiscal year, that was a record quarter, 15.6% operating earnings. Coming off the first quarter of this year, where we were at 12.3%, 12.4%, say, and now we're done to 11.1%. I see a rebounding, albeit a soft improvement from where we now for the next quarter, and then maybe a little stronger in the fourth quarter. So don't necessarily expect to get back into the plus-15% range we were a year ago, but I think something 11% to 13% is something this business is capable of doing.

To pick up further on that, too, on the Americas, if you go back probably 2 conference calls ago, I said at the time, when we're running 15%-plus op earnings in the Americas, that you really have to ask yourself, is that sustainable? Our competitor is going to come in and start undercutting prices. Our strategy at the time was, hey, we're going to stay competitive and we're going to stay ahead of the curve in the Americas, but the real opportunity for EnerSys in total is to make the real improvements that are needed in Europe. That was the big one. I'm very pleased that Europe has seen improved operating earnings in the last few quarters and continue on the trend to ultimately get to 10% operating earnings. But there comes a point when you're running 15%, 16%, 18% operating earnings or whatever the number is in the Americas, your competitors will attack that market, and I don't think it's sustainable to try to hold at that high end and continue to take share.

And, John, do you guys have any sense of how much capacity is being taken out of China? Based on your market share and your run rate, it's a couple-billion-dollar market. Has anybody come up with a good number on how much of the capacity might be permanently shut down?

I wish I could get the answer to that question. It'd an excellent question, and I don't know the answer to it. We can't find it. All we can do is to try to follow what our competitors do, but there's no data that's out there. We do know that many of our competitors are struggling right now with the same issues that we were struggling with prior to this week. We just got our plant started back up again.

Michael Lew, Needham & Company.

With regards to another question on China, you mentioned the plant that was allowed to reopen on a conditional basis. Could you elaborate or provide some color on what's being negotiated? Is it related to volume quotas?

No. The situation in China is simply this, if you go back to March of this year, the central government put a real crackdown on any companies that had anything to do with lead. The reason for that, there were hundreds of people that ended up with lead poisoning, and there was a little bit of social unrest taking place. The government took very stringent actions. They walked into your factory and said, you're closed down, and they cut your electricity off. They didn't check anything, they'd just come in, they closed the factories down. That happened to some 1500 factories in China that produced lead acid batteries.

In our situation, in every one of our plants across the world, we put in the tougher of US standards or local standards. So we made major investments in our factories to protect the environment. In fact, if you compare our Jiangdu plant that was shut down to the Chinese standards, we are significantly below the levels that they require. We're in outstanding shape. The only issue with it was, that plant was some 20 years old, and within the last few years, the local government allowed to have an apartment complex that's built within 500 meters of that factory. One of the Chinese rules or laws there, that you can't have a residential facility within 500 meters of a factory, and by the way rest of the world allows it. In fact, we have factories that are next to hospitals, elementary schools, residential areas, but China does not allow that.

After an independent study was done, they looked at our plant and saw that it really is that safe. They've allowed us to reopen again. But we still had this problem of the apartment complex being there. So ultimately, is there a possibility that something came back that we have to move that plant some day or something else? yes, that's a possibility. But they do understand, we're not polluting, and that's why they've allowed us to reopen.

So in other words, the risk of being shut down again in the near-term is relatively low at this point in time?

In my opinion, that's fact actual statement.

And also in your outlook, you're forecasting growth across all the geographies. How would you rang them by volume? Would it by Europe, Americas, followed by Asia?

Right now what the data indicates by orders coming in, and as I mentioned on the Industrial Truck Association data, I mentioned globally it's up 18%, in the Americas it's up 22%. Europe is up 14%, and Asia is up 25%. So I think what you'd see on this thing that the big growth coming for us would be the Americas and Asia number 1, and Europe would be down to the number 3.

And also last question, how much of a contributor was thin plate pure lead this quarter? You mentioned a decline in higher-margin sales. That would seem to imply thin plate pure lead. Was it down much?

The actual volumes weren't down. There were some negotiations that were done on some higher-priced items that we did come down on some pricing and some of the things, but the volume has been reasonably good.

So are you starting to experience a pick-up in demand again in that piece of business?

I think it's been fairly consistent on a percentage basis. In other words, if you're looking 18%, 19% of our total revenue, I think that the mix has been relatively constant in that area.

Elaine Kwei, Jefferies.

John, in your comments, we're pleasantly surprised to hear anything positive about Europe these days. I was just curious to any thoughts you have about what's driving the order pick-up that you've seen there, and whether that was in both the reserve and motive businesses, or more so in one or the other?

It surprises me also with all the bad things we read about Europe. But the thing I have to take a look at is what our backlog is and what our order take is., and what the new truck industrial fork truck data says. And it seems to be different on the data that we're looking at compared to what we're reading taking place in Germany and Italy, specifically. But again, just to repeat the numbers, Europe is up 14% total on new electric fork truck orders. And when they're up 14% on the new truck orders coming in, that means our batteries sales to support those trucks should be up.

The second thing is that when you take a look at what happened in reserve power over the last -- telecommunications industry in total the last 6 to 12 months, they have really had issues and slowed up in spending. They haven't deployed 4G, but what's happened is there's been replacement business because of what was put in place back 10, 11 years ago, they're starting to see replacement batteries take place. Our order pattern right now on reserve power in Europe indicates that we should see a modestly higher order take in second half than we would see in first half. Again, I can just look at the orders coming in, look at the backlog and look at the industrial trends, which does not correlate with what we're reading in the press.

Great to hear, John That's really interesting. With the recent South American and South African acquisitions, how much revenue would you say now is coming emerging markets within the different regions, and are those new markets also split evenly between motive and reserve?

As we've said in the past, that our high-target areas is expansion in China, which is our new plant, we've talked about India,, we have activities going on there, we've talked about South America, we've talked about Africa. In the Africa market, I recently was in both Johannesburg and Port Elizabeth with the factory, I met with the management team there. We have a very impressive partner. I am very pleased with the partner we have in power tech there. Their operation, they cover just a small portion of the market in total and reserve and motive power, as an example, they don't have thin plate pure lead, they don't have a lithium. We're going to take and bring into the market all of our worldwide products. Anything that we have in our portfolio, we're going to bring into the markets there. So as far as the growth goes, I think it will be both in reserve and motive. I don't know which will be the greatest, I think that will come back to customer acceptance. I think that the upside is probably, I would guess for us, probably would be a little bit greater in the reserve power side, only from the standpoint that we do business with a lot of global customers, telecom customers, that do business in Africa, and they have not done business with us in the past, because we weren't there, and now we're going to be in that region.

When we announced, and I won't mention which one of the acquisitions, but one of the 2 in South America or South Africa, when we made the announcement that we would be in that region, we immediately got a call from a large OEM that they want to meet with us and they want in that region because they want to do business with us there. So immediately, we're going to bring business into that market with just the synergies that we have globally in the sales organization.

One last one, this might be more for Mike. When will all the share buybacks be fully reflected in the share count? Will that be by next quarter or fiscal year-end?

Well, the benefit of the share buybacks, which are concluded at the end of the second quarter. So the third quarter will have the entire benefit of those buybacks. So there was just under 300,000 we acquired in the first quarter, 2.4 million shares in the second quarter. So all in, it's about 2.65 million shares that you'll get the benefit. You'll get that benefit entirely for the third and fourth quarters.

Congrats on a great quarter.

Paul Clegg, Mizuho.

Congrats on strong results and strong guidance. I was wondering if you could quantify the impact of the Chinese plant closure on your guidance. Where I'm going with this is whether there's more upside from it being back online for a full quarter once you get to the March quarter?

Well, the impact, as we stated the MD&A section of our Q, the impact on this existing quarter was a charge of about $400,000 or $500,000. I would expect a comparable charge, because we're bringing the plant online now in November, so we're going to have some inefficiencies and costs there. In terms of its impact on revenue, it isn't as great because one of the benefits of being a global manufacturer, we're able to source product from any one of our plants, and it really helps us to diminish the top line impact, albeit we may be producing it at slightly higher-cost locations. So the margins end-to-end might not be as good. But it's still going to be, let's call it an impact of perhaps as much $0.01 in the third quarter, which we factored into our guidance.

That you could see a reverse. And then how does the initial quality control look out of the Chongqing plant? I think that was one of the factors driving caution, on how much ramp headwinds could be there. And then also, I think you moved one of the Jiangdu lines there. Will you move it back?

The second part of the question, I don't know the answer to it yet. We probably will leave it there since we moved it. The reason we moved it was because, if the Jiangdu plant had any problems of any sort, we could still support the market out of the new factory. We haven't discussed that internally yet, so I don't know the answer to it. But I think there's a high probability we will leave it there, just as an insurance policy.

And quality control was the other.

Quality control, what we are actually doing is that the products we are building in the new plant, we are actually shipping to a second plant to have a second set of eyes look at them. So we're doing testing upon testing just to be sure, and everything looks very good. Our Vice President of Global Engineering, Dr. Rod Evans, located in Europe, is personally involved with this from a quality standpoint, an engineering standpoint, process control standpoint. We want to be sure that everything is right on this thing before we start shipping product to customers. So at this stage everything is looking great.

One final one on the pricing and lead environment in China. With so many battery operations being shut down, you said sensitivity to lead, I'm assuming that you're sourcing all of your lead in China from China. Has the price of lead in China tracked what we've seen on the international markets, or have we seen a squeeze on it there because of the impact on shutting down operations.

Typically we do buy most of lead in China, but when the arbitrage between the LME and the Shanghai exchange that we will import lead in to use for our batteries. As it stands today, the Shanghai exchange fully loaded with VAT is running about $1.10 a pound, and the LME this morning was about $0.88 a pound.

Michael Gallo, CL King.

Congratulations again on the good results. A question, John. I guess, as you look at some of the crackdown on the Chinese facilities, I was wondering if you see any impact on the Chinese export business into Europe, and I was wondering if that's actually potentially helping the volumes within the European market, some of that export business gets cut off by shutdown?

Excellent question. We're starting to see it, but I think we're just at the beginning of it. And it is my belief that the crackdown in China is going to be a very positive thing for EnerSys. The reason being, we made the investments on the front end to protect the environment, many of our competitors didn't. We've been operating at a competitive disadvantage, or cost disadvantage because of the investments we had to make to run the equipment and everything else to protect the environment. And again our competitors had a cost advantage because they didn't do it. Today, those competitors are either going to make the investments, or they're going to cease to exist. They're going to close their doors.

Now, with the costs going up, and when we take in the impact of the currency with the Yuan Renminbi versus the Euro, I've got to believe that the cost of batteries coming out of China are going to be more expensive than they have been in the past. So either the Chinese manufactures that are shipping into Europe, they're either going to take a haircut on margins, a big one, or they're going to have to increase pricing. And I think that will have a very positive impact on our Company going forward. In fact, I would go as far as to say that the positive impact of what's happening in China could be felt more in Europe for us than in China.

John, just as a follow-up to that, how much of the business in Europe is currently being shipped in from guys in China?

When you take a look, we're the largest -- everything we're talking about, by the way, I'm going to keep it to the reserve power side, because the motive power side, they really don't really don't ship batteries over. On the reserve power side, we are the largest single supplier of reserve power batteries, we're the largest market share size in Europe. But if you take the Chinese manufacturers in total, or in aggregate, they are larger than we are.

William Bremer, Maxim Group.

Good color so far, John. We all probably appreciate it. Can you give us a little bit more on what you're seeing on the reserve side? In particular, what end markets are really coming in at this point? Are they the data centers, the net-workers, the telecom? Is it hot, where are you seeing strength in the end markets, and if you could then break that down into the Americas, Europe and Asia, I would appreciate it.

In the Americas, the reserve power side is coming steady with the telecommunications industry. There's still deployment of new equipment going out. We still have blackout areas in this -- or dropped calls in this country. We have the data hogs, as I call them, with the iPhones and such that are requiring more bandwidth and it's requiring more batteries to add to it, and also we're starting to see a little bit of replacement kick in with it. So the Americas in the reserve power and telecommunications is strong. I say strong, it's much better. We are seeing new customers come in. With some things that's happened with our competitors, we have pick up market share. In fact, in last year, we reported last time we picked up 5 points of market share because of our performance. I've said many times in the past, we are not the cheapest the industry, but we are the best value. And we service, service, service our customers, and take very good care of them on that end. So the UPS business, is a solid business that's going well with us.

Now on the European side, Europe way overpaid for the 3G license. In fact, if you go back and look at some of the prices that were paid for them, they were north of $50 billion to pay for the license. And I think what you've seen is that Europe telecom's have learned they're not going to be paying those kind of high revenues or those kind of high prices for these licenses going forward. Because of that what's happened, is there's been a slow-up in 4G, and it's not taking place in Europe. So what we're seeing taking place in Europe right now is mainly replacement, it's more replacement, yes there are some expansion, but it's mostly replacement. When 4G breaks loose, and you find the negotiation between the telecom's and the local governments there, that they come to an agreement on the right price for those licenses and 4G does break loose, I think what we're going to see is going to be a pick-up in telecommunication battery sales. So right now, Europe is flat.

Let me go to the Middle East and Africa. Middle East and Africa though is going very well for us. We're seeing percentage-wise, it's a smaller market, but it's picking up quite well. I've talked about China, China is into a little bit of an issue right now because of what's happening with the lead situation, but I anticipate we're going to continue to see growth in that market, too.

One follow-up. When you mentioned the replacement of and the pick-up that you'll probably see when 4G does kick into place, o you think that's going to be filled regarding your lithium product launches, or is that still going to be possible a thin plate pure lead, or what's your take on that?

Well, my take on it is this. I read an article just yesterday in the Wall Street Journal about one of the lithium companies, and by my calculations, it looks to me like they're selling their batteries for a little under $1000 per kilowatt, and their manufacturing cost appears to be just over a $1000 per kilowatt. So when you're looking at a cost basis of $1000 per kilowatt, and by the way ours is in a very similar ZIP code with it, between $850 and $1000 per kilowatt, and you're looking at lead acid at $150 per kilowatt, I think that you're going to have to find a real solid reason to spend that kind of premium. And if you're looking at putting a battery that requires a very small space, that's very light, you may pay the premium for it. Most applications will not require that kind of premium. So we'll go either way with it. If the customer wants lithium, if they want nickel cadmium, if they want lead acid, we have the complete product offering, but I think what we'll see, to jump to the chase, is you'll see a small percentage that will be lithium, most of it will continue to be lead acid.

Jeff Bencik, Kaufman Brothers.

John, can you give us a sequential pricing in volume impact in each region?

Mike?

Typically I would say on a sequential basis, they were, as we said sequentially, all of the regions were down on volume, organic volume, from the first quarter. Pricing-wise, I would say Europe and Americas were favorable in their pricing, while Arab was probably slightly unfavorable. As we move to the next quarter, I'm expecting organically that they're all going to improve, along with having improved pricing. So hopefully that gives you -- pretty much the quarter we just absorbed or just reported on, pretty negative on both. The pricing was okay, but everyone's volume was down. As we go to next quarter, I'm looking at volumes and pricing going up, and henceforth the improvement of $0.11 from the $0.58 reported this quarter to the midpoint $0.69 for next quarter.

Can you also give us an idea of the impact from lost production from the plant closure?

As we reported, the impact was roughly $400,000 to $500,000 for the second quarter. I would anticipate a similar impact in the third quarter as we start this plant back up, which we are in the process of doing.

Was that lost revenues or lost OP?

That's really manufacturing costs that are not being absorbed by product because there's no production going on. The revenue side, as I said earlier, we're basically able, through sourcing through other locations, to be able to supply the product. The margins might be slightly down. That's why I mentioned a little while ago that the impact for the upcoming quarter is I think about $0.01, and it's been reflected in our guidance.

Just to add more color to it, when you first noticed that, that plant was down, immediately what we did was we covered all production or all sales requirements outside of China, in other words in the rest of Asia. We started shipping product from our Eastern European factories. Now, as it works out, when you're shipping a product from Jiangsu, China, to Singapore, let's say, that the cost difference between that and shipping it from say Bielsko-Biala, Poland, that the product cost going in is very close to the same. So because we're highly-automated in that plant in Poland.

So in our motor power business in Asia in total, about 50% of the volume is in China, so we were able to bifurcate this thing and take care of the rest of Asia with our European operations and have really virtually no impact on revenue or earnings. The second phase was get a production line in the new factory just in case we don't get up right away to cover things. The third thing is we had some inventory in place that we're able to cover sales, too. The fourth thing is we have shipped product, plates they're called, or the internals of the batteries, from Europe to China to build batteries. So net-net, as Mike said, it will have a very modest impact on our earnings because of the actions that we were able to take immediately to offset the plant being down.

And then in terms of, has the Chinese government inspected the new plant and approved your continuation of it?

Absolutely. Right on the front end. I'll say in Chongqing, they were excellent to work with. We did this thing state-of-the-art from top to bottom, and we're in an isolated area, it's an industrial park, so there's no residential areas. Again, the only problem that we had was that the local government approved building an apartment complexion next to our factory after our factory had been in operations for many years. And they are, as far as I know, the only country that has that requirement that you can't have a residential area next to a factory. We have it all over the world, they're all over the world that way. It's not just us, it's our competitors, it's any battery manufacturer. The point of it is you need to contain the lead within the plant and not allow it out.

And finally can you talk about your expected revenue contribution from your recent acquisitions in JVs?

I'll give it to you in aggregate. First year we're going to be looking in a ZIP code of about $100 million on the 3 we talked about.

Can you talk about your market share in South Africa and in South America?

In South Africa I would say that we're number 2 today, and in meeting with the management team there, what we talked about, what does it take to become number 1, and how fast can we do it. We're going to be very aggressive in the sales and marketing organization. I would say that in South America, and let me qualify South America. We're basically doing business in Brazil, Argentina, and Chile. In those markets I would say that we're probably number 2 or 3.

So still substantial upside there?

Absolutely. In fact, that's the thing we like about it. We look at these companies and say, they're not market leader today, and with the products that we have, they're in bringing in international customers, that how do we take those companies from being 2, 3, or 4 within a given market to take them to number 1? And it's by giving greater technology, it's by putting business practices in place that we have that we've used over the years to be where we are and to bring in global customers.

Tom Daniels, Stifel Nicolaus.

I was wondering, looking at your gross margin and adjusting for [unabsorbed] lead that you guys each quarter. We got an adjusted gross margin of around 21.8%, and that compares to last year's 26.4%. My question is, as you guys get favorable lead tailwind's, you used to talk about a 25% gross margin. Is that still achievable, or has competitive dynamics in pricing, et cetera, subdued that ability to get there?

When you take a look at the correlation between lead and gross profit, it's an excellent correlation. And the problem that we have is every time that lead goes up, we're playing catch-up on pricing. Just mathematically, if you raise your pricing to offset the commodity costs, you're gross profit percentage is going to go down, just mathematically. So as lead is dropped down, you get the double benefit of just the mathematical calculation of making margins go up, and if you hold pricing, it adds to it. So as the lead cost has come down and we hold pricing, we should see enhanced or improved gross profits.

We will definitely see an expansion in, let's say the next quarter or 2, just because of the trailing effect. Normally pricing is trailing our cost by anywhere from 2 to 4 months. So we're in this period where we will see an expansion in our margins because of the fact of that trailing nature. Now, what normally happens is if your costs are going down, commodities are going down, there's an expectation of future economic growth may be declining. We're not seeing that yet, but I will put that caveat out there that says if the commodity costs continue to track downward that would presumably indicate lower future economic activity levels. But in the short-term call, lets call it the next 2 quarters, you'll see an expansion in our gross profit.

The other part of the question, are we giving up on 25%? The answer is heck no. We're not going to give up on 25%. Lead is going to do what it does and we're not going to be able to control that. So therefore, we need to continue to look at how we can reorganize, restructure, take product costs out, improve service to customers to get better pricing. We need to keep working those things. If you take a look, you see restructuring costs in our P&L, and those restructuring costs in part are coming because if the lead is going to impede us from hitting 25%, then we have to find another way of doing it. But we're not going to give up on that target, we're going to keep pushing as hard as we can.

Just one other question. Strategically when you guys look at your lithium ion investments and understanding it, we have some players in the United States that may be struggling. How do you think about partnerships, et cetera? Is it on a chemistry basis? Is it on a manufacturing cost capacity basis? Is it on an-end market customer basis? How do you guys think about it?

It's real simple, it's about making money. We look at it and look at those markets that we can go into and think about how we can make a good return. It goes back to the example we talk about earlier. When you have a battery or electric chemistry that costs you $1000 per kilowatt to make versus one that costs $150, you better not look at putting that $1000 technology into the area that $150 will take care of it. But if you're looking at putting a battery in let's say a satellite or in a proton rocket or something, the lead acid battery is not the right electric chemistry for that particular application, it's too heavy, it's too big.

So you have to look at, what is the right technology that fits the application that will make a fair return. And some of the things that people are looking at or are into today in putting lithium ion technology in applications that you can use other technologies, we're not interested in those things. The reason we're not, goes right back to the start of your question, does it make money? Can you make a good return for shareholders? So we're very selective in those applications that we're looking at and we're trying to fit the right technology with the right application to make a fair return for shareholders.

And the new FERC ruling could possibly open up the grid storage application, seems like a lithium ion opportunity today, maybe a lead acid, do you guys look into that at all? I know it's not really a market you play in right now.

We do play in that market. We do have the technologies. We can put in the sodium battery that's out there today, one that has got a lot of hype in the past., right now that particular battery is getting some pretty bad press, but that was supposed to be the one that was really going to take that arena over in storage for off-the-grid. And we opted not to invest in that because we didn't believe it in it long-term. I'm glad we didn't. And now when you take a look at other technologies that are out there today, whether it's nickel cadmium, or it's lead acid or it's lithium ion, we can make batteries today for those technologies.

Our GAIA joint venture, which are large-format lithium ion cells, fits perfectly into that thing. But I still question, is that the right technology economically for that application? And if the end user or if the customer decides it is, we'll provide that battery for them. We don't care if we sell them lithium ion, we don't care if sell them, lead acid, we don't care if we sell them fuel cells or nickel cadmium. We have all of them.

Bill Dezellem, Titan Capital Management.

I have a group of questions. First of all, if we circle back to the last conference call, you had mentioned then that the guidance you were providing at that time was actually different than the guidance, difference being lower, than the guidance that you had in mind literally a week before the call, or maybe it was 2 weeks before the call. Will you please discuss how orders actually did develop and how sales developed relative to that plan 1 week before the call?

It wasn't so much sales. It was what we saw in first the month's results. In other words, if you go through our process and look at it, we're projecting here what a quarter is going to be. Keep in mind that we're already through the first month of the quarter. If you go back to that point in time, and you're exactly right, it was literally just a few days before we took our guidance down, and the reason we took it down was because of what we saw in July results. And what we saw in July results were not what we expected. They were lower than what we expected. And then we started looking at other things that came about that took place within a very short period of time, we started putting it together and said we're not going to go out with this higher guidance. And thank God we didn't. Because if you take a look at the stock buyback that we did, if you take that out, our $0.58 would be $0.57, which is exactly at the high point of the guidance we gave. Mike, do you want to add to that at all?

I think we looked at our share price in the 10 days before we issued that guidance, went from somewhere in the low- to mid-$30 to the low- to mid-$20, and that was without us releasing anything. It had told us the market expected that our prospects were dimming. So we heeded that warning and said, let's look at it from a more conservative bend than we normally would.

So you see a stock price going down. You see at that point in time that the predictions of global economy was lousy. You look at orders coming in were not near where they are today, and you look at July results, and you say, you've got to be honest. We didn't like taking it down, but what we're going to do is we're going to put on the table what we think is the right numbers. And unfortunately, and I'll say unfortunately, we only came in at $0.58. I wish we had been up $0.68, but we weren't. But we did give proper guidance on it.

And from a seasonal standpoint, presumably the month of September is normally the strongest month in the quarter. So trying to remove the seasonality from the question I'm asking here, how did strength in orders develop as the quarter went? You had mentioned July was soft.

Yes. This happens historically that you'll see July orders will go down some, August orders, because of the summer down period, they usually are weaker, then they start to pump back up in September and October. I think one of the things of the things if you look back on the history, I think one of things that played on us is what happened in 2008. We saw the same pattern take place in 2011 that we saw in 2008, and what it did it, it made us very cautious. And what we did during that conference call, during that period of time when we saw it, we made some cutbacks on things that we would have done if it wouldn't have been for taking our guidance down.

As an example, we had a worldwide executive meeting planned, the top worldwide executives, 30 people, to get together for a few days, we cut that out. I won't go into some of the other things, but that's an example. We cut out a lot of things until we saw what happened. I am very pleased that the orders since that period of time have come back and have been strong. And I will go as far as to say, if you look at our daily order take back in August, our last conference call, and you look at it as of this morning, it's up double-digits to where it was.

Congratulations. Allow me to shift to the Chinese lead crackdown. I have a few questions there also. How many days was your plant shutdown, basically from when to when?

Went down on September 6 and it's just opened back up this week, 2 months.

And then, of the 1500 Chinese plants that were reviewed, you had mentioned many of them had regulatory issues. What is your sense at the activity that many of those plants are doing to correct their issues? Are they spending a lot of money to do it, or are they taking another path? What insights can you share there?

Well, and again, I'm going to emphasize this is my sense because I don't have hard data on it. I will tell you this, I'm President of Battery Council International, and we were contacted by Chinese officials, and we sent a group over from the US to work with Chinese officials and battery manufacturers on what does it take to build factories that are environmentally safe. We did that because, number 1 it's the right thing to do to protect human beings, but secondly, it can be done. You can build batteries in a very safe environment. We do it across the world. And many of the Chinese manufacturers obviously didn't want to follow those standards.

Today, the government is very strict on this. You will make the investments, you meet the environmental requirements, or you will not do business. Many of the factories are still shut down. Now what percentage of those are in specifically lead acid batteries that are direct competitors of ours, I don't know the answer to that. It's my belief though a lot of these is what the e-bikes, the electric bikes, that were small manufacturers that got started up. I think that industry got creamed pretty hard. But I think it's too early to tell on this, and it's hard to get information out of the whole thing. All I know is that we're back up running again and I'm very pleased with that.

And then my final question in this arena, is this crackdown significant enough that it could be the single largest factor to allow you to reach your 10% operating margin goal in both Asia and Europe?

I don't think it's going to -- I haven't thought of it quite that way, to be honest with you. I don't think it will be the single largest, I think it will be a multitude of things, I think it's going to be everything from sending product to high-cost factories to low-cost factories. I think it will be continued better service. I could go on to 5 or 10 things. It don't think it's going to be just one item, I think it's going to be a host of things. But this definitely will help.

Howard Rosencrans, VA.

A couple of quick questions. In terms of seasonality, I know you've had a lot of cyclical factors that have almost overridden seasonal factors over the past few years, and I know you did make a comment that F2H is up versus F1H. But seasonally March is the strongest quarter. Would you still expect it to be this year?

Yes, I would.

And in terms of China, forgetting what happened near-term, near-term being let's say the balance of this fiscal year, you have capacity of about $400 million, and worst case in your mind, would you like to be there in a year or 2, and let's say with a margin progression, so you get to -- I think you've thrown out 12% as a target, if I'm not mistaken, a sort of higher-margin target for that region. Is that what you have in mind, a year or 2 and $400 million?

Yes. I think that's a fair assessment of it. And just to talk a little bit further on that thing. I've said before that I want to see our operating earnings at 10% minimum as a target internally. We keep pushing towards that, and I also say that to get to that 10%, I would also like to see 25% gross profit. Now, in Asia, it's 12%. The reason it's 12% is because if you look at DSO with telecommunication companies, they're payables, they're out in some cases, in many cases, 200-days-plus. So I'm factoring in a 2% cost of capital because of the that excess primary capital that's required to support that business. Now, as we see the business, if it started to swing more toward motive power, which pays more in reasonable terms, and less on the telecommunications side, I would say they' be at 10%, too. But when you have DSO running at 200 days, we need to have a higher target over there than just the normal 10%.

Now, as far as your number at the capacity, I don't know that capacity is $400 million or not. I don't think it's quite that high currently, but make no mistake about it, that is our target. We want to get to $300 million, we want to get $400 million. We want to be number 1 in that market. And the reason we're making the investments over there is because we didn't have a cost-competitive [block] product line and we made an investment in Chongqing because we said we're going to do 1 of 2 things. We're either going to get out of that market or we're going to get really into that market. We're not going to continue just to hobble along. So we're making the investment to be a major player in that market.

And just a little more color on the Americas, which you commented, you were seeing the high end was a little sloppy during the quarter, and so where the -- I guess that would do it, that'd be great.

(Operator Instructions) Michael Carelli, Berry, Vogel & Associates

Congratulations on the good performance in a tough environment, and being aggressive on your share repurchase program. 2 questions for you. First on the lead cost price versus material cost squeeze, if I'm reading correctly in your Q, it looks like you had about a $6 million squeeze in Q2 and about a $4 million squeeze in 1Q. How do you expect that to look in 3Q and 4Q if lead costs were to stay where they are currently?

I expect we will see, we saw a benefit on the lead side in our second quarter, but it got completely gobbled up by other commodities going up. So as we move to the third quarter, there I expect to get the benefit of lead costs and commodity costs going down. So that is a significant portion of the other factors, including better volume, and better manufacturing costs, that will help us in the third quarter. As we look at the fourth quarter, I don't have a whole lot of visibility right now, the way we FIFO our inventories. I know the LME today is $0.885. If it holds there, that bodes well for the fourth quarter; but I'm reluctant to tell that you I could stretch where I think lead costs are going to go beyond what I know today. And what I know today is in the third quarter, I will receive a benefit in this quarter sequentially from lead and commodity costs.

Obviously you continue to look at acquisitions and I know growth is a number 1 focus for the Company. You did a great job of being aggressive and opportunistic on the share repurchase during the quarter. Any thoughts about additional repurchases in the quarter? Is that something you might consider opportunistically, or is that all you're planning to do for now? Any thoughts on that?

Yes, our thoughts are very, very straightforward on it. Our number 1 priority is we want to maintain a very strong balance sheet. I don't want to see us get levered up 2.5 or something like that. I want to be sure with this volatile world that we live in that we've got a very, very strong balance sheet. Now that being said, when we looked at where we were headed, our debt-to-EBITDA by year-end, if we wouldn't have done some things, we would be at a 0.5. And that's just a poor use of the asset, to have cash sitting in the bank and not doing anything, it's a very poor use. So we kept looking at, what are our priorities.

Our priorities haven't changed, number q is to continue to reinvest in what I call ourselves. And that is new product and designs, enhanced customer service, just taking better care of customers with better products, and keep building really good things for the end users. That's number 1. Number 2 has been acquisitions, and number 3 has been a stock buyback, number 4 has been a dividend. To answer your question on stock buyback, even during the last conference call, I said at that time I didn't plan on doing a stock buyback. And 6 days later we announced we're going to do one. And the reason we did it is because our stock went down to $17 a share, or just over $17. And the answer to your question is, if the market doesn't want to recognize the value of what we think the Company is worth, and we have the cash to protect our strong balance sheet, we will always consider doing that. We're going to do what's right for the shareholders, ultimately. So if we're under-priced in our opinion, we're going to buy.

At what point would you consider the fourth priority, which is a dividend? What would lead to that? Is it that you feel like you've done all the acquisitions that make sense for the Company as far as product line extension and geographic extension and you're generating great cash and so it might be time to consider a dividend? At what point does a dividend enter the conversation?

Well I think it's a point when, first off, we're going to keep focusing on those first 3 items, and let's say that our earnings went right through the roof, hypothetically, and even if we looked at everything that's possibly out there, and let's say we had a debt-to-EBITDA 0.1, then we would look at a dividend back. And that's not to say we're giving up on the first 3, that could be a scenario where we just have a lot more money than we have opportunities in there. I don't see that in the cards right now. I think we have a lot of great opportunities with new product development, acquisitions. That's what took us from a $200 million Company in 1994 to well north of a $2 billion Company today and continuing to grow. Is how do we get this Company to $3 billion, $4 billion, $5 billion, and how do we keep expanding this business and looking for the right returns? And long-term, it's a better investment to keep doing what we're doing for our shareholders than to merely do a dividend back in the short-term. But we get to the point where that's no longer the case, then we have to consider the dividend.

Dana Walker, Kalmar Investments.

Last year your sequential revenue, December versus September, was up 7.5%. I recognize you haven't sought to provide that type of guidance in the past, but would that be out of line?

Well, again, we don't want to give guidance out on the revenue side. In fact, all we want to do is, our policy is we'll give the guidance on earnings, where we think it's going to fall, and even how we get to the earnings, some of the questions have asked about lead, that's really going a little bit further than we care to go. But I will say that, what I've said already, Dana, about the order take coming in, I did mention that the orders right now are up double-digits compared to where they were. You're going to have to draw your own conclusion on that one.

As one thinks about how a manufacturer might have responded to less conviction about orders, what happened at the plant level during the quarter, particularly noticing that your inventories came down by roughly $14 million from June to September? And what implications would that have had on your gross margin?

Dana, I think you have to look at the translation impact as you look at out inventories, as well, as the Euro moved down. These are measured at the end of the quarter, at the end of the period. So translation had a bigger impact on the balances than, say, the actual unit volume.

Therefore, there was not an overt effort to bring down your inventories? That's correct.

Our inventory turns improved slightly, and, we like to be as efficient as possible, but there's always that opportunity cost that if you don't have enough product on hand. So it's a fine balance that we play there.

Would you have had less normal, though, smoothness at the manufacturing level through the quarter as you might have taken some downtime just out of respect for the unknown?

Well, no. The way we think at it, we do a forecast, a rolling 12-month forecast. What we try to do is level our production as much as we possibly can, and the reason for that is we have 31 plants across the world, and if all of the sudden you go into a factory and one week you're running real high volume and next week you cut it way back, your manufacturing cost associated with that is horrendous. To have $1 million variance in one of our factories in a given month, plus or minus is not a large number. So they have to be very well managed with inventory going up and going down. But to Mike's point, we manage that inventory around what we think customer demand is going to be, because we want product on the shelf when the customer wants it. Because all of a sudden when they call a competitor and there's 15-week lead time, and they call us and it's a 3-week lead time, we pick up a lot of sales associated with having the right product, the right location, at the right time.

Thinking back to July, when you looked at that month and were unhappy, was the primary mover to that, would that have been a volume issue or would it have been a price realization issue, given that the commodity was still rising at that point?

I would say the pricing was not as robust as we expected when we looked at the actual results for July. Our order intake was not very compelling, and all of the macro news that we were seeing, it was a combination of those 3 things.

Plus the Poland plant strike that took place.

So to John's point, we knew there were some discrete items that were working against us. We knew we had that plant interruption in Europe. We knew the first quarter had some discrete tax items that we did not expect, and they did not repeat themselves. So we didn't get that benefit. So we really felt, and to John's point, we think our guidance, we came in at the high-end of our guidance when you exclude the share repurchase impact. So we think we played it right, and we think we're positioned well in our guidance for this upcoming quarter.

Final topic for me. We've talked a lot about China and how the competitive and the supply landscape would change. What, if any, observations would you offer about the Americas or Europe, either from a competitive standpoint or from a market-share standpoint, that would be less obvious to generalize?

Dana, I think we've hit most of the key points on it. I think that maybe the other one I'd add to it, but we talked about in a prior call, we have picked up 5 points of market share last year, and I attribute that to -- and that's in the Americas, I attribute that to really being very, very customer-focused and being the best value in the industry. Our market share motive power, we're right at about 50% today in total. I think the real trick to it is that we provide the best value to our customers, and that's what we're highly focused on. Our organization is highly focused on taking care of those customers.

Well, done. Our commendations to the team.

I show no further questions in the queue, and I'd like to turn the call over for any closing remarks.

Thank you very much. Thank you, everyone, for the interest in our Company, and have a good day.

Thank you for your participation in today's conference. This concludes the presentation, and you may now all disconnect. Good day.