禮恩派 (LEG) 2006 Q4 法說會逐字稿

Good morning. My name is Mandy and I will be your conference operator today. At this time I would like to welcome everyone to the fourth-quarter 2006 earnings call. All lines have the placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS). Mr. DeSonier, you may begin the conference.

Good morning thank you for taking part in Leggett & Platt's fourth-quarter conference call. I'm Dave DeSonier, the Vice President of Investor Relations and with me today are the following -- Dave Haffner, our CEO and President; Karl Glassman, who is our Chief Operating Officer; Felix Wright, who is Leggett's Chairman of the Board; Matt Flanigan, our CFO; and Susan McCoy, our Director of Investor Relations.

The agenda for the call is as follows -- Dave Haffner will start with a summary of the major statements we made in yesterday's press release and then will add some further comments regarding major strategic initiatives. Karl Glassman will discuss trends in our various markets. Dave will then address our outlook for 2007. And finally, the group will answer any questions you have.

This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded or broadcast without our express permission. A replay is available from the IR portion of Leggett's website. In addition, I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties and the Company undertakes no obligation to update or revise these statements.

For a summary of these risk factors and additional information, please refer to yesterday's press release and the section in our 10-K entitled forward-looking statements. I'll now turn the call over to Dave Haffner.

Thank you, Dave. Good morning and thank you for participating in our call. As announced yesterday, we posted record sales and earnings per share in 2006. Acquisitions contributed most of the full-year sales gain, but this increase was partially offset by declines as expected from restructuring and divestitures. Organic sales were roughly flat for the year. Inflation-related growth was offset by modestly lower volume in certain of our businesses.

Fourth-quarter organic sales decreased slightly versus the prior year reflecting lower unit volumes and less inflation as we began to anniversary the late 2005 pass-through of higher oil-based raw material cost. In the North American bedding market volume was weak for most of the year and softened further beginning in September. Automotive demand and, to a lesser extent, custom store fixture demand was also soft for most of the year. In contrast our residential furniture components, office furniture components, machinery and foam businesses performed very well.

Full-year earnings per share grew to a record $1.61 which was comprised of $1.56 in operating earnings and a nickel of net nonrecurring items. EBIT margins improved in four of the five segments during 2006. Margins declined as expected in industrial materials primarily due to changes in the global steel market.

The restructuring that we announced in September of 2005 was completed this past year. We expected recurring annual benefits of approximately 30 to $35 million from that activity and we have experienced the anticipated benefit during the last half of 2006. We updated our growth targets in 2006 and discussed three initiatives that should help us attain those goals over the next few years. The first initiative was the addition in June of a senior level executive in a newly created position with responsibility for companywide engineering and innovation efforts.

The second, in September we established five new business development positions, each reporting directly to one of our five segment presidents and dedicated solely toward profitable growth. By year-end we staffed those positions with an impressive group of individuals, all of whom possess significant M&A and/or business development experience. All five were promoted from within the Company and are highly successful candidates who are familiar with our executives, objectives, practices and culture.

The third initiative is the addition of a new corporate function reporting to the CEO with responsibility to uncover new growth platforms. We're in the process of searching for the right executive to lead this effort. We also revised our margin targets this past year and are committed to reaching those new targets by 2009. Margin improvement should come from higher volume, new products, restructuring benefits and purchasing and continuous improvement initiatives. Our target for working capital is approximately 19% of annualized sales, but this amount will vary from quarter to quarter with the seasonality of our businesses.

We ended the year at 21.4% primarily due to softening demand in certain markets and opportunistic prebuys of raw materials. Working capital should be more closely in line with targeted levels by the end of the first quarter. We continue to generate strong cash flow. Cash from operations increased 7% for the year. As planned excess cash, after funding growth and dividends, was used to repurchase shares. We bought back 6.2 million shares during 2006 and reduced shares outstanding by 4.6 million shares by year-end.

The balance sheet is in excellent shape. We ended the quarter with net debt at 28% of net capital. And with those comments I'll turn the call over to Karl Glassman who will discuss the segments in more detail. Karl?

Thank you, Dave. Good morning. And residential furnishings segment several factors led to higher earnings and margins in the fourth quarter versus the prior year. These factors include lower restructuring related costs, the reimbursement of Canadian lumber duties, absence of last year's worker's compensation charges, operational benefits from our restructuring activities and income from recent acquisitions. Full-year earnings and margins also reflect these positive factors.

Additionally, our full-year earnings reflect improved market conditions in our foam and fiber businesses and gains from building sales. These improvements were partially offset in both the quarter and the year by continued weak bedding demand, increased price competition, decontenting in certain instances and higher energy and transportation cost.

In the segment organic sales grew slightly during 2006 in part due to full-year unit growth in upholstered furniture components and inflation in our foam businesses. Weak demand in the U.S. bedding market offset some of these full-year gains and also contributed to organics -- and organic sales declined for the segment in the fourth quarter. The fourth-quarter year-over-year decrease also reflects difficult prior year comps driven by hurricane-related purchases of low end bedding in late 2005.

We have aggressively protected our bedding market share during the past year in the face of price competition and decontenting by our customers. Product development plays a key role in improving margins while maintaining or increasing market share in our bedding component business. Our product designs for both innersprings and box springs have recently been introduced and are being accepted very well in the market.

In commercial furnishings and components organic sales declined in both the fourth quarter and full year 2006 on lower unit volumes. Demand for custom fixtures and displays softened in the latter part of the year, but this decrease was partially offset by continued growth in our businesses supplying office furniture components.

Earnings and margins increased for both the fourth quarter and the full year primarily due to lower restructuring-related expenses, absence of last year's worker's compensation charges and operational benefits from the restructuring. These gains were partially offset by lower sales volume. Despite these margin improvements we are still not where we intend to be. We are realizing the expected restructuring benefits and margin should continue to improve as volume increases. Furthermore, we are addressing a few remaining performance issues.

The wood plant upgrade that we discussed last quarter is substantially complete at one facility. We expect to roll out this new equipment and technology to our other wood operations which represent about 30% of the fixture and display group's volume. This project should deliver margin improvements from reduced labor, lower working capital requirements and increased capacity at these facilities. In addition, this upgrade should provide significant manufacturing flexibility and increase our speed to market which is a critical factor in winning additional business at higher margins.

In the aluminum products segment organic sales increased in both the fourth quarter and the full year due to inflation and commodity prices. Unit volumes were down for both the quarter and the year. Volume increased in several of our markets during the year, but these gains were offset by declines in outdoor grills. Fourth-quarter earnings and margins decreased primarily due to lower volume and startup costs associated with our Auburn die cast facility. Margins were also negatively impacted by the pass-through of higher raw material costs with no incremental profit.

For the full year earnings and margins improved primarily due to restructuring benefits and other operational progress over the past year along with lower restructuring-related expenses. Small engine sales were weak during the last half of 2006 in part due to the absence of significant weather events that drive generator and snow blower sales. This market softness, which is expected to persist into 2007, is affecting our Auburn operation. We are refining the operation's cost structure to the extent practical and are also pursuing other business for this facility.

In industrial materials sales declined in both the fourth quarter and the full year primarily from continued weakness in the U.S. bedding and automotive markets. These sales declines impacted segment earnings during the quarter and year. When we forecasted 2006 we expected lower margins in the segment. For the previous two years margins had been above our long-range targeted levels mainly due to unusual market conditions that resulted in unsustainably high margins on our rod production. The global steel market has changed and rod margins have narrowed.

In specialized products organic sales increased slightly in the fourth quarter and were essentially flat for the full year. In our automotive business growth in Asia and Europe has helped offset market weakness in North America, particularly in larger vehicles that contain more seats with higher end features. Machinery volume was stronger in 2006 reflecting improved demand for bedding-related equipment.

In our commercial vehicle products business demand for fleet van interiors has grown in 2006, but we have experienced market softness for commercial truck equipment caused in part by production cuts by the OEMs and associated shortages of commercial truck chassis. The situation was corrected late in the year and truck chassis are now available.

Although segment margins improved this year, they are still well below our targeted levels in part due to lower volume in North American automotive and portions of the commercial vehicle businesses as well as the continued weakness in the U.S. dollar to the Canadian dollar. And with those comments I'll turn the call back over to Dave.

As we announced in yesterday's press release, we should post record sales and earnings in 2007. We are expecting modest organic growth for the full year which is below our long-term targets. The three initiatives that were discussed earlier should ultimately help drive higher levels of growth, but they are in relatively early stages so we are not forecasting a significant contribution from them in 2007. This forecast also does not include the impact of future acquisitions and divestitures. We are currently evaluating several acquisitions that offer very good long-term potential for the Company and will very likely complete some of those transactions in 2007. In addition, we periodically review our businesses to ensure that their strategies and profitability still fit well within our portfolio.

We are expecting improve EBIT margins next year. Margins should increase in every segment but residential furnishings with gains coming primarily from a full year's restructuring benefit and other operational improvements in addition to lower restructuring-related costs. In the residential segment EBIT margins are expected to decline primarily because the reimbursement of Canadian lumber duty will not recur. The combined sales growth and margin improvement should result in full-year earnings of $1.65 to $1.85 per share or operating earnings growth of approximately 10%. This EPS forecast includes a possible nickel of non-recurring income related to asset sales.

For the first quarter we anticipate that sales will be about 3% lower than in the first quarter of last year. This primarily reflects forecasted demand weakness, price deflation in certain markets and restructuring-related sales decreases. First-quarter earnings are expected to be between $0.31 and $0.36 per share. This does not include any potential gains from asset sales.

Profitable growth, both organic and acquisition, will continue to be our top priority for the use of cash. We also plan to continue increasing our dividend and use excess cash to repurchase shares. Our use of cash in 2007 will be consistent with these priorities. We expect to spend approximately $180 million for CapEx with about half related to internal growth and efficiency improvement projects and roughly half for maintenance capital. Dividends will require about $125 million. We should spend approximately $300 million in 2007 for acquisitions and share repurchases combined. Cash used for acquisitions will depend on the timing of those opportunities. And with those comments I'll turn the call back over to Dave DeSonier.

That concludes our prepared remarks. We appreciate your attention and we'll be glad to try to answer your questions. In order to allow everyone an opportunity to participate, we request that you ask your single best question and then voluntarily yield to the next participant. If you have additional questions, please re-enter the queue and we will try to answer all the questions that you have. Mandy, we're ready to begin the Q&A.

(OPERATOR INSTRUCTIONS). John Baugh.

Just quickly on the store fixtures and display area, the comment there was that it weakened in the second half. What's the outlook for that business in terms of volume? And you obviously had an EBIT percentage gain because of restructuring, but what's sort of the forecast on the EBIT margin going forward in light of whatever the volume outlook is?

John, it's Karl. What happened to us in fixtures in 2005 were a couple things. One, as you remember, that we walked away from some business through our restructuring activity. The sales were down about $46 million. Approximately half of that was business that we just walked away from -- it wasn't good business, it didn't fit our strategic goals, it didn't hit our margin needs. There was also an element in the fourth quarter of 2005, one of our major customers had a significant shipping quarter that did not repeat in the fourth quarter of 2006. So there was that quarter-to-quarter shift -- it was more quarter-to-quarter softness than it was late half year to half year.

So going forward though, we expect growth in the couple percent range, specifically in the fixture side of the business. We've secured a number of new large accounts, but there's about a 10% churn every year of programs that just don't repeat, so we're constantly trying to backfill for that. But we're being pretty selective, that we are not top-line focused in that business. We are much more focused on producing EBIT dollars, albeit at the same time developing consistent long-term customer relationships.

And with regard to margins, John, we will see significant additional improvement in the margins in 2007. I've been looking at the profit center budgets as Karl was talking, and it will still be within that 24 month range that we spoke about last time to get us up to our long-term margins. But there will be a significant improvement in the margins in 2007.

Thank you.

Susan Maklari.

Good morning. It seems like volume is really going to be the key to '07. You're getting the benefit of your restructuring coming through. In terms of the different segments, can give us some sense of where you feel maybe there's the most upside to volume or the most downside, too?

In order the largest upside would be in specialized because of the continued benefit of the CVP strategic growth, but residential we're currently forecasting to grow about 2%. We have a lot of moving parts there and a year-on-year reduction in average unit selling prices in bedding. So as we talk we're dealing with some customer decontenting. At the same time we are dealing with a more competitive environment, but we are forecasting real unit growth in bedding in 2007 despite the industry consensus for flat to negative sales.

So that bedding kind of negative -- kind of drives -- is such a large part of residential it drives that minimal 2% organic. Commercial, in total we're in the 1% to 2% range also. Aluminum is a similar number. Industrial we're looking at a slight reduction and that's because of continuing year-on-year average price reductions.

Okay, thank you.

Shawn Harrison.

I wanted to get back to the margin question. If we look on an apples-to-apples basis 2006 to 2007, backing out the gains and the charges from each of the business units, do you still expect to see EBIT margin growth in all business units except residential, or is there going to not be any progress and we equalize the restructuring?

Shawn, this is Dave. There will be -- we do expect EBIT margin improvement in all of those other segments -- with the exception of residential and that's because that countervailing duty recovery that we had this year.

Shawn, the most significant rate of improvement would be in commercial.

Okay. I guess if you want to -- is it possible to rate the -- the rate of improvement in the other remaining business units? If commercial is going to see the greatest, who's second and so on?

It's possible. I don't have it mathematically in front of me.

Specialized would be second, aluminum would be third, industrial will continue to perform at about this year's level which is at its long-term forecasted range. So yes, that's how I would rank them.

I guess I'm surprised seeing aluminum third in the fact that the Briggs business looks to be softening even further. Are you willing to give a new revenue estimate for that business given that it looked to be last quarter half of the original dollar amount? What is it looking like at this time?

Shawn, actually the original forecast was for roughly 50 to $55 million of volume. We had forecast -- last quarter we had forecasted '07 in the 30 to $35 million range. We expect now, based on some insight from Briggs, for that to be on the high side of that. Briggs is in a very tough position. It's difficult to forecast catastrophe; none of us like to deal with it. But with the soft snow blower season early in this snow season and having no idea what's going to happen from a generator draw standpoint, there are high inventories as they have made comment on. But we're very, very comfortable with the Briggs relationship.

Okay. But I guess backfilling the facility then, I think last quarter you talked about working on it but there wasn't anything in hand. Is there anything more you can add to that?

Not really. And that it's a long process. We were so geared to Briggs as we were ramping up that we're out quoting business literally every day, but I cannot tell you today that we've landed ex million dollars worth of business into that facility. That facility is a state-of-the-art low-cost facility that will be very accepting as the appropriate place for new volume, but it's not something that's done real quickly.

I might give a little more clarity, too, Shawn. With regard to aluminum's profitability, we anticipate that the Auburn plant will have very, very much better operating results as you would expect us to from a startup perspective last year. And if we are able -- and we are pursuing additional volume -- if we are able to put non Briggs volume into that facility, then we will do even better than what we've projected.

When do you expect the facility to break even then?

Towards the end of the second quarter.

Okay. And what is the typical lead-time on if you land a program say in the first quarter of actually bringing it into the facility. Is it a quarter?

It varies so much. It depends on whether it's true transfer, what's called transfer volume where the tools are effectively done or whether it's new products or improvements of existing products. But it's more than a quarter. On transfer volume it could be a quarter, but in general it's probably more like six months or so.

Okay, thank you.

Keith Hughes.

I wanted to ask another residential -- your product that's petrochemically related, have you seen any movement on input prices there either up or down in the last three to four months?

Keith, a very, very modest softening. Nothing that is on a year-on-year basis that's substantive. The foam chemicals are down about 2%, the same with the polymers -- they actually go into the plastic side of things, but no, really nothing of any magnitude.

How about on your steel inputs?

Steel would be slightly down.

Laura Champine.

I had a question about the pace of acquisitions. With 2006 acquisitions adding 1% to growth in 2007, it's a disappointing rate. Can you talk about why that rate has been below your historical acquisition pace and where you expect 2007 acquisitions to end up?

In generalities, Laura, one of the things that we purposely did is we went through some restructuring activities. As we slowed the pace of adding things into our digestive system we needed to get the house in order, if you will. And we didn't disregard any significant strategic opportunities. Contrarily we had time to do a little more due diligence on some of those than we might have otherwise which is a good thing.

So part of that disappointment, if you will, was self-imposed. We wanted to get the house in order before we added a significant amount of additional businesses. It is reasonable to assume that there will be some larger and good acquisitions completed in 2007 and we're just not in a position to talk about the timing or the specifics of those.

Can you talk, Dave, about segments of your business where there might be attractive acquisitions?

Yes, and that does vary year-to-year. We still believe that there's an important opportunity to have die casting and tooling capability in Asia. And so we continue to pursue an acquisition which would actually take the form of a joint venture -- a majority owned joint venture in aluminum. The specialty part of our business has a couple of very interesting targets, if I can call them that -- potential partners is what I'd really prefer to call them -- that are under considerable consideration right now. And our industrial materials has another very intriguing strategic opportunity. I get excited when I think about them and I get frustrated because I can't talk about them yet. But with regard to residential -- Karl, can you share?

Laura, the thing that I would add is you, from a residential perspective, should expect to see us continue to grow the GEO components strategy. One of the acquisitions in the fourth quarter was Lone Star which is just a company, in the state of Texas obviously, that just does a fantastic job in that business with three locations. They will be the platform for not only more acquisition growth but maybe more greenfield, that they'll open sites that we won't talk about from an acquisition standpoint, but they're greenfield opportunities. I would say that from a residential standpoint it would be the continued growth of our GEO components strategy.

Thank you.

Budd Bugatch.

I guess for my question, could you talk a little bit about the organic growth versus the acquired growth expectations Q1 and maybe the out quarters as well? If we're going to get to a negative 3% in Q1 and 2% overall for the year, how does that break out?

On a year basis it's about 50% organic, 50% continuation of acquisitions on the first quarter. Obviously we accelerate in the second and third quarter. Budd, I don't have those numbers specifically for you as we sit here.

And we're dealing with some first quarter deflation that is really causing us to forecast that 3% softness in sales that you know of, and I made reference to at the year-on-year reduction in wire-based prices, steel softening. And that also that our foam selling prices were at their peak in the fourth quarter of '05. As time passes they will mobilize.

And some of that deflation is also in bedding and as you're more competitive does that have a bigger impact in Q1?

Yes. It's not only price though, Budd. It's what we call decontenting. Customers specing lower-priced -- I don't want to say lower quality because they're our products, but --

I'm not talking pricing, I am just talking unit pricing because that impacts the decontenting. I understand that. And my last question or my other question is just can you tell us what the dollar impact on Auburn was and startup in Q4 and what do you think it will be in Q1?

I can get to Q1 if you can get (multiple speakers)

Well, I was working on Q1.

Well, go that way and I'll go the other way.

Budd, I think it was roughly $2.5 million in the fourth quarter?

That's right, Budd.

And the first quarter is about $1 million.

Down 1 million?

Yes.

Down $1 million, Karl, is that what you said?

Yes. Down $1 million.

Thank you very much.

Your next question comes from Gabor Bognar

I'd like to step back a bit from this quarter alone to observe a trend. And the trend is that for three consecutive quarters now your results have fallen short of your guidance in one respect or another, which seems previously uncharacteristic of the business. Could you please comment on what has changed either inside Leggett or perhaps in the operating environment that is making it more difficult for you to assess the outlook just three months ahead? And in this context perhaps can you specifically talk about the competition you're getting from China which only recently you started mentioning as a potential concern. Thank you.

I guess if I look at fourth quarter, we feel like we came within our guidance. We always issue a range and I don't remember when we last were outside of the range. So there's a lot of noise around sales and that's the primary driver. And so sales were toward the lighter end of guidance in the fourth quarter, but we were still within the range. So I'm not sure about the comment that said we missed the range three times in a row. And then toward China -- I don't know.

I think for three or four years we've been talking about China being both a threat and an opportunity. We have a number of facilities in China that perform extremely well. We're very well positioned as our customers elect to either relocate to China or augment their U.S. manufacturing from China. So from the standpoint of our participation in that market we're pleased. But there is continued price pressure. I would say that it has probably impacted our residential businesses more than the others, but I think that we're, much like every manufacturing company in the United States, that none of us are immune from the Chinese pressures.

It's interesting that the return on assets that we have deployed in Asia, most primarily China, are returns that are higher than our corporate average. And so that's one of the reasons that we continue to be careful with our bets or our investments, but we're willing to move manufacturing capacity to Asia to assist our customers whenever it makes sense, and that's really been part of the primary driver for our Asian growth and will continue to be that way because there's a substantial amount of labor in our customers' finished product even when there isn't a substantial amount of labor in our component or subassembly. As we make those moves -- not that we like to export jobs and business -- but as we make those moves we expect to maintain or, in some cases, improve margins and returns.

Thank you.

Shawn Harrison.

Just a follow-up on two things. The first thing, if I'm looking at the EPS guidance, assuming we get to the 2% organic sales growth, what's the difference between $1.60 and $1.80? What has to occur? Is it solely just restructuring benefits coming down faster or operational improvements? I'm just trying to get a good handle on how I get to $1.80 versus $1.60 next year?

Let me make one clarification and then I'll let Karl or Dave answer the question. It's 2% total sales growth and it's about half acquisition, half organic. That's what's in the forecast. And if you guys want to talk about the range.

Well, the range is a direct results of taking over 300 profit centers and going through with critical detail, Shawn. I know we've talked to you about this before, how we do it. And then rolling those up and then making sure that we test it against the corporate burden which we continue to attempt to throttle back and develop what we believe is the EBIT that we're going to generate. We get with Matt and go through the financial leveraging aspect or net interest aspect and we make an estimate of how many shares are going to be out there and fully diluted. So that's basic arithmetic. There are significant improvements associated with our restructuring activity that we are realizing and are still gaining some strength on. So all of that is baked into this budget.

I'd say two big levers, one would be growth. So if we're above or below that 2% is going to move us up or down in the earnings range. And then the other would be the degree of margin improvement that we achieve. So if we achieve less or more that's also going to move where we end up in that EPS range.

And Shawn, this is Matt. One point of clarification just to make sure everybody's on the same page here. We talk about that acquisition growth that is implied in our guidance right now. Those are acquisitions that have already occurred, they are already in the house. What is not in there of course are any acquisitions that happen from this point forward that we're working on. Dave mentioned a few, but none of that activity is implied in this guidance, only what has already occurred in 2006 that then anniversaries into 2007 is part of that growth statistic.

So is it safe to say then if we hit that 2% use kind of the midpoint, $1.70 excluding the gains as you're starting point and then how sales progress through the year, either move it up or down from there?

Yes, that's a good analysis.

Just secondly, on the free cash flow, as I look at it right now, after dividend, after your capital expenditures, I'm looking at maybe $200 million in free cash flow. Where do we see -- where does the extra cash I guess come from? Is it from reductions in working capital to fund the anticipated acquisitions and share growth or is there something else I'm missing?

Good question. What bridges that to give you another $100 million plus of additional cash will be continued improvement in working capital for sure compared to where we were at the end of year, and also the fact that we're sitting here today at about 28% leverage. And as you well know, we have an intention to get to near 30%. So there's some additional cash that will be available just from making that continue to happen. And so that's where you get to that $300 million Dave mentioned in his comments.

I'd say too, we come out with more like 250 to 300 of free cash as opposed to your 200.

I wasn't including working capital in there at that point in time.

We're not either. There's no cash been generated from working capital.

So assume that's net neutral next year?

No, don't assume that.

That would be a dramatic improvement.

But there will be an improvement compared to what happened this year certainly.

Okay, thank you.

(OPERATOR INSTRUCTIONS). Charlie Carter.

I wanted to ask what the structuring benefit expectations are. Going forward you had said, Dave, that benefit from the high restructuring is going to show up and I just wanted to know if you guys could put a range around the expected benefit. And then kind of going backwards when you all implemented the restructuring, earlier you had obviously an expectation and I wonder how much of that has sort of been chipped away by just decontenting, deflation or just other unexpected competitive or other issues that have obviously hurt that number to some degree?

Good questions. Early on when we put that overall restructuring and consolidation analysis together we estimated that we should enjoy a 30 to $35 million annuity or improvement in profitability. It looks like we should do that. We experienced that in the back half, if you will, of last year. So there's reason to believe that we'll get the full amount of that and maybe even more, we'll see. So we're pleased with meeting our expectation, again 30 to $35 million per year of EBIT improvement.

Now to your point about what other things have been headwind, if you will, sort of like a differential equation. We've got some positive things going, we've got some negative things going. It would be difficult for me to quantify, but I would say there may be a 5 to $10 million worth of things that have happened to us that are not at all directly related to the restructuring that have caused us to reduce EBIT accordingly.

Karl mentioned jealously protecting our market share through some repricing. And then our engineering guys, in conjunction with marketing and product development folks, have value engineered some things that maintain market but maybe generate slightly reduced EBIT. So there is some of that headwind and we've got that taken into consideration in this forecast.

Okay, thanks.

At this time there are no further questions.

Then I guess we'll just say thank you for your attention and we'll talk to you again next quarter.

This concludes today's conference. You may now disconnect.