Integer Holdings Corp (ITGR) 2014 Q2 法說會逐字稿

Welcome everyone to the Second Quarter 2014 Greatbatch Incorporated Conference Call. Before we begin, I would like to read the Safe Harbor statement. This presentation and our press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involves a number of risks and uncertainties. These risks and uncertainties are described in the Company's Annual Report on Form 10-K. The statements are based upon Greatbatch Incorporated's current expectations and actual results could differ materially from those stated or implied. The Company assumes no obligation to update forward-looking information included in this conference call to reflect change in assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions, or prospects.

I would like to remind everybody that this conference is being recorded for replay purposes.

I would now like to turn the call over to today's host Vice President, Finance and Treasurer, Betsy Cowell. Please proceed.

Thank you, Derick. Hello, everyone and thank you for joining us today for our second quarter 2014 earnings call. With us on the call are Thomas J. Hook, President and Chief Executive Officer and Michael Dinkins, Executive Vice President and Chief Financial Officer.

In terms of today's agenda, Tom will start us off with an overview of our results for the second quarter, remarks on the product lines and a mid-year strategic update. Michael will then provide additional comments on the 2014 second quarter and first half financial results and discuss our 2014 guidance. We will then open the call up to Q&A. As we've done in the past, we are including slide visuals to accompany this presentation which you can access on our website www.greatbatch.com.

Now let me turn the call over to Tom Hook.

Thank you, Betsy, and good afternoon to all of you who are joining the call today. Our second quarter revenues of $172.1 million were consistent with the prior year. However, on a year-to-date basis, we generated 8% organic constant currency growth. As expected, our vascular and orthopedic product lines were the key drivers, delivering 25% and 12% organic constant currency growth versus the second quarter of 2013 respectively. I will provide more insight on the sales performance drivers later in the presentation.

Our operating leverage continues to improve as we move through the year with second quarter adjusted operating income improving 7% and totaling $23.8 million. Adjusted diluted earnings per share totaled $0.60, also a 7% increase when compared to the same period in 2013. Cash flows from operations totaled $19.5 million versus the prior year usage of $1 million driven by the improvement in net income, improved management of working capital, and last year we had an estimated tax payment of $11.5 million related to our convertible debt.

Now I would like to provide some comments relative to our various product lines. Cardiac rhythm management neuromodulation sales of $80 million were 4% below the comparable quarter of 2013 and in line with our expectations following the strong 23% organic growth in the first quarter. On a rolling four quarter basis, our organic growth is 11%, which indicates that we continue to outperform the market growth. Our growth is driven by feedthroughs and shield assemblies in high single digits which is consistent with first-quarter performance.

We experienced softer battery and lead sales attributable to the timing of customer shipments and the initial impact associated with the end of life for two legacy products. We had factored these end of life products into our guidance and had plenty of advance notice from our customers. Although the business may vary on a quarter-over-quarter basis, over the long term we believe we have enough new business opportunities to offset these end-of-life products. When you couple that with the continued success of products that our customers have in the marketplace, we are well positioned to grow our cardiac rhythm management neuromodulation category.

Second quarter orthopedic product line sales were 17% above the prior year totaling $37.9 million. This is a 12% increase on an organic constant currency basis versus the second quarter 2013 revenue. Instruments and delivery systems are fueling the double-digit growth complemented by our strong implant business. Our success is attributable to expanding and deepening customer relationships with quality products and fast turnaround time from order to delivery. We are confident that despite being up against strong second half comparable, for the year, orthopedics will be in the double-digit range.

Portable medical product line second quarter revenue of $16.7 million is 24% lower than the same period of 2013 due to a tough comparable quarter and a loss of some low-margin business.

As previously discussed, we have changed our strategy to focus on more profitable longer life customer programs. In conjunction with our strategy, in June we announced plans to transfer our portable medical operations to a new facility in Tijuana, Mexico. We are investing in capacity to grow this line of business which our customers feel is a positive step for us to take. We do not believe that this announcement is impacting our current quarter results as reflected in the growth of our new deal pipeline.

Our vascular product line revenue grew 25% as our catheter offering's growth almost doubled again in the second quarter. We anticipate continued strength in our vascular performance for the remainder of the year.

The energy, military and environmental product line sales totaled $21.4 million for the quarter, a 4% increase over the same period last year and in line with our expectation of mid single-digit growth.

We continue to see strong growth from the energy sector which is benefiting from market and market share growth. We are also seeing favorable trends in our rechargeable battery assembly business as customers become more aware of the benefits of rechargeable applications.

Our strategy remains unchanged. We expect our growth drivers to continue to deliver double-digit growth which would be well balanced by the large slower growth markets such as cardiac rhythm management yielding 5% overall revenue growth.

Our plans and execution capabilities enabled the Company to return two times our revenue growth rate to the bottom line. Operationally, we maintain a culture of continuous improvement. Earlier this quarter Greatbatch announced $45 million of investments in capacity and capabilities to better align our resources to meet customer needs. This includes investing around the Company's existing footprint in Tijuana, Mexico to serve our vascular and portable medical customers.

Secondly, we established an R&D hub in the Twin Cities area. This will serve as the technical center of expertise for active implantable medical device development, implantable lead design, system level design verification testing and continuing engineering.

We believe these initiatives will generate up to $17 million of annualized savings with most of the upside beginning in year 2016. As you know we received CE Mark approval for Algovita, which is previously known as Algostim, in the June time frame.

We continue to efficiently move through the Algovita regulatory process and we believe we'll be in a position for FDA approval in early 2015.

Michael Dinkins will now take you through a more detailed look at our second quarter results and our 2014 guidance before we take your questions.

Thanks, Tom, and good afternoon everyone. And I am very pleased to be on the call today to provide an overview of our second quarter and first half 2014 performance. I am going to cover a few slides and refer everyone to our press release we issued earlier today for more details regarding our financial performance. On slide 12 we have some key financial data for the quarter.

I want to highlight a few key items that show the financial footprint of our strategy. Although on this slide you see 0% organic growth, our year-to-date organic growth was 8% in line with our total year target of delivering at least 5% organic growth on an annual basis. As we have often stated, our revenue growth from quarter to quarter can vary quite a bit, which is why we focus on a rolling four-quarter measurement and year-to-date growth performance.

The other key highlights of our strategic plan showing up in our financial performance is our improving operating margin performance. In the first quarter our adjusted operating margin was 12.8%. In prior year for the second quarter, it was 13%. This quarter we achieved an 80 basis points improvement to 13.8%.

We have a disciplined approach focusing on delivering on our commitment of 5% organic growth and two times that amount to the bottom line, and we know we have to improve our margins to achieve this objective.

I will now discuss the second quarter earnings referencing slide 13 which provides the key drivers of the 7% improvement in our adjusted diluted earnings per share performance to $0.60 for the second quarter. 75% of the improvement comes from an improvement in our gross margins as we delivered 34% gross margin for the quarter, which is 60 basis points improvement from prior year. This improvement is driven by ongoing productivity efforts and lower performance-based compensation, which more than offsets volume-based price concessions provided to our customers in exchange for long-term agreements.

On a year-to-date basis, our performance-based compensation is in line with prior year. In other words, the favorable performance-based compensation advantage is due to timing. Our first quarter performance-based compensation was recorded in line with our strong performance. So a smaller adjustment was needed to the second quarter 2014 versus the second quarter 2013 adjustment.

Operating expenses accounted for $0.04 dilution with lower general and administrative expenditures partially funding sales, marketing and R&D investments when compared with second quarter 2013.

Other items explaining the $0.01 adjusted EPS improvement include interest expense, which was lower in the quarter, generating $0.01 adjusted EPS accretion due to reduced debt levels and favorable interest rates. Our outstanding debt is now $192.5 million, which results in a less than 2 to 1 leverage of adjusted EBITDA ratio.

A lower effective adjusted tax rate in the quarter of 30.8% versus 32.4% for the second quarter 2013 reflects that more of our earnings come from lower tax countries as our orthopedic business continues to perform well. This accounted for $0.01 improvement to our adjusted EPS.

Offsetting the interest expense and tax rate favorability was the impact of the continued increase in diluted shares outstanding due to the increase in our stock price. In the quarter, we have $0.03 unfavorable impact as our year-to-date diluted shares outstanding is now 25.8 million. We expect our shares outstanding to continue to increase, because of the treasury method of accounting and now expect weighted average diluted shares to be 25.9 million shares by year-end.

We expect our interest expense for the remainder of the year will be in line with second quarter 2014.

Turning to the first half performance, gross profit improvement through the first half accounted for $0.26 improvement to our adjusted EPS versus the first six months 2013. Both mix and productivity drive this improvement along with 8% organic growth.

Our operating expenses reduced our adjusted EPS by $0.14, because of four drivers. First, last year before we filed the PMA for Algovita, formerly known as Algostim, we adjusted our performance for a design verification testing or DVT. Since we filed the PMA, we do not make an adjustment for DVT. The year-to-date impact of this change accounts for $0.08 of dilution.

Second, as you know we increased our sales and marketing resources, which are contributing to an 8% year to date organic growth. At this time last year, we had not built out these resources. So the impact is $0.08 on our adjusted EPS.

The third driver is higher research and development cost, primarily because of the lower first quarter NRE reimbursements from our customers an impact of $0.02.

The final driver was reduced general and administration costs, which added $0.04 for the first six months of the year.

Below the operating line, we have a positive $0.03 improvement with lower interest expense contributing $0.05 because of reduced debt levels and favorable interest rates. The first half effective adjusted tax rate was 32.5% compared with 33.7% the first half of 2013 which account for $0.02 improvement to adjusted EPS.

We continue to experience the headwind of the rising diluted shares outstanding due to the increase in our stock price. For the first six months of 2014 this impacted adjusted EPS by $0.04.

We expect our adjusted effective tax rate for the remainder of the year will be approximate 32% to 34%.

Now I'd like to provide comments on operating cash flows.

Cash flows generated from operating activities totaled $19.5 million during the quarter with the improvement driven by the increase in net income partially offset by the increase in working capital, in line with our higher revenues.

We remain diligent with our collection processes as our day sales outstanding improved 7 days since the end of 2013.

Our inventory planning is in line with our sales expectations for the remainder of the year.

Capital expenditures are in line with our expectations and were $6 million for the second quarter and $12 million year to date.

Last and most importantly, we delivered another quarter of improved return on invested capital performance to 8.8%, up 40 basis points when, compared to prior year.

Turning to our 2014 outlook, which is on slide 17, as we head into the second half of 2014, we are reconfirming our guidance. However, we do expect our fourth quarter revenues to be stronger than the third quarter.

With that, let me now turn the call back over to the moderator to take questions.

(Operator Instructions) Matthew Mishan, KeyBanc.

On the cardiac neuromodulation side I think last quarter you talked about some inventory build by some of your customers. Do you think you've seen the full payback there in this quarter or could that drop for a bit?

I think in certain product lines within CRM, we'll see some inventory builds come back in, but they'll be offset by some of the legacy products phasing out. So there will a be push-pull effect of the overall number. Again we know we're still growing when you look at the smooth quarter-over-quarter data, which is what we look at most of the time, but because we only have proactive visibility to the inventory builds ahead of time it's hard to predict those. So what time period they'll come over is probably the balance of the year and the legacy products will probably also phase out over the balance of the year and the two things will offset each other somewhat. But it's hard to forecast it precisely.

Okay. And I guess the answer to the other question on the end of life impact it's kind of initial, it should continue ongoing for the next several quarters?

Yes, typically what you can expect is that when new product lines come in, as they will get launched there is an inventory build and then the legacy products will, as they're ramping up, be phased out. And most of the time the new product introduction and the legacy product are linked and in this case the legacy products are disconnected. The legacy products are different. In other words, they're different products, different systems than the products we've won on new systems.

So they are a little bit disjointed, but they're happening at the same time over the balance of the year time frame. So even though they're disconnected they're still happening over the next two to three quarters of time.

Right. And on the margin side, really a nice quarter there. Just curious what changed this quarter from the previous couple of quarters. I mean sales are relatively flat versus where you were at in the first quarter and you were able to get a 100 basis point improvement sequentially. So what's changed there?

Just across the board as you know we have the spirit of continuous improvement across the Company in every single facility we run, whether it's a manufacturing facility or administrator or a research facility. So we are -- through our cost reduction initiatives that we've announced last year we are getting full-year effects of those operating expenses. And then on the plant force where we've done consolidation products and the transitions have been completed and we are getting more stabilized operations after a year. We're just operating the plants more effectively and efficiently. So we are bringing out the benefits of prior investments.

And as you know because of the investments that we've announced where we're going to consolidate several more manufacturing facilities, we're just on the beginning side of taking more cost out and rejuvenating that loop again for another time. And we expect the same type of trajectory for benefits on those projects as well.

So the simple answer is over the last year, we've continued to settle our operations down and ring out progressive continuous improvement benefits based on investments we've made over the past three years and it continues to work despite the flat revenue year over year and the quarter.

Congratulations on getting the CE Mark approval for Algovita. Can you walk through what you're doing in Europe with that product over the next five or six months while you are still waiting for US approval?

Our plans in our Algovita for Europe are that we are continuing to evaluate partnership opportunities and we are planning for a limited release of the product in the clinical environments for first in human work. And we haven't publicly announced what those plans are yet, but plan to do so in the future conference call, most likely on the third quarter conference call. But right now we're just executing, bringing it out to partners that will help us bring it to market for the initial clinical studies in Europe.

Okay. And last question from me then I'll jump back in the queue. Looks like the net debt level creep in lower here. How are you thinking about use of cash going forward and maybe talk a little bit about the timing as well?

I'll let Mike chime in here, but strategically we're still obviously investing in these operating investments for consolidations. As one of our strategic moves we reviewed on other conference calls is to invest in targeted investments and acquisitions that fit our current scope and strategy of product lines. And then the excess cash we will obviously judiciously use to retire the debt that we have. Mike?

But we are very aware of the fact that our debt level is low and the cash we are building on that balance sheet. It will be a topic of discussion with our Board in the near term and we will provide more guidance in terms of what we will do as we come out of those discussions.

Charles Haff, Craig-Hallum.

Hi, everybody. Thanks for taking my questions. A couple of questions for you here on vascular. You said you had two times the product offerings this quarter. Can you talk a little bit about the vascular product offerings, how many you have and if all of the products are -- that were recalled or had [ship holds] have now been cleared?

Yes. Charles, you're right. The catheter offerings growth doubled in the quarter and you're correct, some of the products that we had recalled voluntarily we have reintroduced back into the marketplace and as expected, they are seeing very good uptake which is driving the growth. And we expect that following the launch of that and the positive reception that we've received, we expected that that growth and momentum will continue throughout the remainder of the year.

And it's specifically being driven by those products that we had launched and then recalled and then re-engineered the inspection and remediated the processes [as well]. Now they're back on the market again post the remediation and we're seeing very good success with them and we have a lot more confidence that the customer (inaudible) lot more confidence in driving their volume. And we expect the volume to continue to grow because it's a solid product line.

Okay. And if I look back at last year, your second half 2013 comps are pretty weak because of the recalled products, I guess, not a lot of new product flow. Now that you have that those issues cleared up, should we assume the second half of this year will probably be higher from a growth rate perspective, be higher than the first half of this year?

I'd just say in general, from a vascular product line perspective, you can expect to see the momentum continuing that we've built in the first half of 2014. What that math looks like compared to the numbers of 2013 it will fall out where it's at. But I think you'll just see the momentum continuing to grow at a double-digit growth rate. And obviously then our intention is to continue to push on the catheter product offerings in the future as we relocate those operations down into our Mexico operations to be able to pick up margin advantages and actually increase the capacity of our plant so that we can continue to maintain that growth rate in the out years as well. So I do expect that vascular will be a double-digit grower for us beyond 2014 as well.

Okay. Thanks for that. And then a couple of questions for Mike. In terms of the leverage, Mike, you're now about two times on the leverage side. Have you done any analysis or do you have any opinions on where the optimal leverage for this business should be?

I continue to believe that an optimal level will be somewhere like 2.5 to 3. And therefore, as I mentioned earlier we are very aware of the fact that we are below that and continue to generate a fair amount of cash. And as Tom indicated, with our continuous improvement we're hoping that we can continue to widen margins. All that means is that we will have to make a decision about what we do with the excess cash.

We continue to be active and looking for acquisitions that makes sense for the Company strategically and that's one option that we will continue to explore along with other options that we'll discuss with our Board.

And one clarification, Charles, is that as we mentioned acquisitions to both Matt's question and yours, I want to reiterate to those that are listening on the call is we want to do acquisitions at a reasonable price. We're not going to -- just because we have favorable cash flows and a leverage position that's advantageous, we're not going to reach to do deals at prices that don't make sense.

Okay. Yes, I appreciate the discipline there. And, Mike, on operating cash, you have about $25 million generated in the first half. What do you think the second half should shake out relative to the first half? Should it be a lot higher, should we be getting -- be thinking above $50 million here, $60 million? I mean, what kind of help could you give us on that?

I think that it will be comparable to the first half with the addition of the fact that there is about a $20 million bonus payment that we make in March and we won't be making in the second half. So you should add that to the run rate of the first half so it actually would be a little bit higher.

So we could end up closer to $70 million for the full year you're saying?

I would hope we would be at that number or better.

That would be terrific. And I think I had one more -- oh, yes, on the sales and marketing expenses, so that clipped you by about $0.03 in the first quarter, $0.05 in the second quarter. How do you see that? Is that kind of flattening off here or do you still see acceleration in the sales and marketing expense as we go through the year?

As we've built the team over the course of last year and then into the beginning of this year, so those expenses for the team are filled out. We may have a few incremental adds over the remainder of the year, but we've got the bulk of the team in place now.

So as we look on the run rate going forward, it's adjusted obviously based on the performance that they post. But we are on a run rate where we're comfortable, it's consistent with our guidance. When you look at the math quarter over quarter on a year-over-year basis, then you'd have to obviously do the math to generate what the comparables are. But we're at the run rate we need to be at moving into the second half of the year. The team is full and it's all in place and transitioned.

Okay. If I could just sneak one more in here, last one on SG&A, you had some seasonality in SG&A. Last year second quarter was about $1.8 million higher than the first quarter. This year you are flat second quarter versus first quarter. What should we kind of think about in terms of the seasonality of SG&A? I'm just thinking about dollar basis here. How should we be thinking about that? Was last year a very kind of more seasonal year and this year should be more moderate from seasonality, any help there would be appreciated?

I think last year as we built the team, we have some costs that would run through for hiring people in terms of accruing for relocation and those type of expenses. So what you are seeing now is more of a run rate and you won't see large swings from quarter to quarter.

Glenn Novarro, RBC Capital Market.

Hi, guys. This is Julia Kufman calling in for Glenn Novarro. Just bringing the attention back to the CRM, your neuromodulation business, can you speak to some of the underlying trends and [whether your ability] and order timing was attributed [not just with] CRM or the neuromodulation part? Thanks.

Yes, certainly overwhelmingly for us, the cardiac rhythm management neuromodulation product lines for us are dominated by CRM, overwhelmingly dominated. So any trends that we would see in our reported results are really driven by the five principal customers that we sell to in the CRM, two Europeans and the Big Three in the US. When we look at that, the underlying trends are, we see the same macro trends from a end market perspective where the market is stabilized. There is a return to growth, still greedy, it's somewhat challenged. As Greatbatch is an innovator and a product designer in these categories, new platforms and new innovations tend to drive our business because we get to take current technology and upgraded it with the customers to drive their performance of their systems. So the way we win is on product design, we've seen still a steady stream of product designs. That does lead to legacy products being discontinued and new systems being launched. So there's a constant turnover.

We securitize that by long-term agreements that we have in place with all five of our CRM customers that are comprehensive in nature. That gives us very good predictability to the products that we will sell. As you know, the uncertainty is the timing in which we will sell them because we are dependent on their regulatory approval timing which is why because of that unpredictability, we use the smooth data. And what the smooth data is telling us is we're winning more new deals than legacy products are being retired. So we are growing slightly faster than the underlying market and as the underlying market continues to stabilize and return to a low growth rate, we think we'll grow a few percentage points above that because of our product technology wins. And that is effectively the trend that we are on in the current year. That trend we were on last year and then the trend we expect to continue on into 2015 where CRM will be kind of a low single-digit grower for us in that 2% to 3% range.

Great. Thanks. And portable medical, you've been pruning the portfolio for a few quarters now. Can you speak to how some of your new product launches will offset the negative impact from discontinuing low-margin product lines for the back half of the year?

As you know we just announced obviously the portable medical facility relocation to our New Mexico facility and what we could announce that when we were doing the product pruning I thought that most people like yourself familiar with Greatbatch would know we tend to prune the product portfolio before we move to facility. So we don't move business that we don't want. So that pruning was completed last year. Its effect rolls throughout 2014 because the year-over-year comparables will drop that unprofitable business. We have done a very good job of winning new portable medical business and now that the facility project has been announced and is on time, we could be even more aggressive in terms of our positioning on new business because we know we will have the operating capabilities in the 2016 time frame to deliver against those targets.

So I would expect our product development wins in portable medical which have been healthy will continue at a healthy rate and will enable us to get that back to be a double-digit revenue grower in the 2016 time frame when those projects precipitate out.

And just for your information, that portable medical project has about a 24-month gestation period on average because typically FDA or CE Mark regulated devices for customers were early in the product design process and it takes about 24 months actually for us to be at shippable revenue.

So our product design wins have been healthy, our capabilities and operations will be where we want them to be in 2016 and we have got to manage the transition in the meantime for portable medical product lines. However, we see a really enormous market in portable medical and we see our capabilities needing to match up to that and we see no shortage of opportunities to win business in that area and we are orienting the business to be able to go out and capture that and we did -- we just finished the same exercise in orthopedics, as you know and after a year of pruning the orthopedic product line and then a year of moving it, we are now enjoying going on a year and a half of growth in orthopedics that's in the double-digit range and we're enjoying all the returns on those investments.

We expect that to happen in vascular going forward and now we expect it to happen in portable medical following that and I think we're on just a very healthy trajectory. We've done this before in many product lines and we have good confidence on how it's going to turn out in portable medical, but it will take really until the end of 2015, beginning of 2016 to be at the point we want to be.

Okay, great. And then just shifting back to the QiG Group, again congratulations on Algovita, is there any additional regulatory milestones in the US before you hear about final FDA approval next year, early next year?

I really will be silent until we -- we've been following through on the FDA processes and inspections and we will continue to do that. We won't have any milestones we will announce and we expect that the timelines will be consistent with what the FDA's performance has been on other neurostimulation systems. So we expect late 2015, early 2016 is the window which we will get the approval and everything is proceeding according to our plans.

Early 2015.

Excuse me, early 2015. I misspoke, late 2014, early 2015. Thank you.

Okay.

I apologize.

Okay. And then is there any updates on CARDIOMONIX? You guys had sort of presented that at your Analyst Day and [I don't think we have had any] updates. Is that still a focus for you?

We don't have any updates on CARDIOMONIX program to deliver. Just that it's currently an active project, but we are still silent on what we're going to do going forward.

Charles Haff, Craig-Hallam.

Just wanted to spend another second on acquisitions. I appreciate your comments that you said you're going to be very disciplined in terms of what you buy and the prices that you're willing to pay, but when you think, Tom, about adjacencies or tuck-ins, what might be some areas that would make sense for your business?

I think within our current strategic envelop, Charles, we've got plenty of targets as we've obviously done historically, a lot of acquisitions in the cardiac rhythm management. But as you know in our other product lines, which we're a very small player and the market is much larger when you look at the markets in orthopedics, vascular, portable medical you will find a lot more targets even in traditional markets like energy, military and environmental. If you look at the markets, it's that we are a very small player, the markets are large, and I do believe there are products that would fit into those market categories in our manufacturing capabilities quite nicely. So there are typically smaller companies, maybe single or dual product line companies, not large transformational acquisitions. As you know, our strategy is targeted acquisitions.

And for the entire 10 years I've been in the Company we've had active dialogs with a long list of potential targets, and we don't always control the timing of when those sometimes family-run companies would like to transition. But as markets have come back, the med-tech industry has stabilized, I believe that there is more of an interest in exiting and we will -- now that we're shopping in more earnest and focused on targeted deals that make sense with our strategy, we've had no shortage of inventory of conversations there. It just comes down to doing what you started out with. And your question which was, we have to negotiate a disciplined deal because we're not going to pay just to get a deal done. I think our strategy is sound organically. We will only do deals inorganically that makes sense and obviously our Algovita project, which is coming to market, will provide us a nice growth opportunity into the future or a monetization event if a partner elects to buy it. So I think we don't have to reach on M&A unreasonably.

And that will conclude today's question-and-answer session. I'd like to turn the call back over to Ms. Betsy Cowell for any closing remarks.

Thank you, Derick. I'd like to remind you that both the audio portion of this call as well as the visual slides will be archived on our website, www.greatbatch.com and they will also be accessible for the next 30 days. Thank you everyone for joining us and have a good afternoon.

Ladies and gentlemen, that conclude today's conference. We thank you for your participation. You may now disconnect. Have a great day.