MSC Industrial Direct Co Inc (MSM) 2006 Q3 法說會逐字稿

Good morning.

I will be your conference operator today.

At this time I would like to welcome everyone to the MSC Industrial Direct 2006 third quarter earnings conference call. [OPERATOR INSTRUCTIONS] I will now like the turn the call over to Mr. Eric Boyriven of Financial Dynamics.

Sir, you may begin your conference.

Thank you and good morning, everyone.

This is Eric Boyriven of Financial Dynamics and I would like to welcome to you to the MSC Industrial Direct fiscal 2006 third quarter results conference call.

You should have received a copy of this morning's earnings announcement.

If you have not, please call our offices at 212-850-5752 and a copy will be sent to you.

An online archive of this broadcast will be available within one hour of the conclusion of the call and will be available for one week at www.mscdirect.com.

Certain information pertaining to go non-GAAP financial measures that may arise during this broadcast can also be found on the same Website in the Investor Relations segment.

Let me take a minute to it reference the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995.

This conference call may contain certain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the Company.

Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, they can give no assurance that such expectations or any of its forward-looking statements will prove to be correct.

Important risk factors that can cause actual statements to differ materially from those reflected in the Company's forward-looking statements are included in today's earnings release and in the Company's filings with the Securities & Exchange Commission.

In addition, the information contained in this conference call is accurate only on the date discussed.

Investors should not assume that the statements made in this conference call remain operative at a later time.

The Company undertakes no obligation to update any information discussed on this call.

With that said, I would like to introduce MSC Industrial Direct's President and Chief Executive Officer, David Sandler.

Please go ahead, sir.

Thank you.

Good morning, everyone, and thank you for joining us today.

With me are Chuck Boehlke, Executive Vice President and CFO; and Shelley Boxer, Vice President of Finance.

I will be providing some details on the quarter, market conditions and J&L.

Chuck will give details of the financial results and the effect of J&L on our guidance and then we'll open up the lines for Q&A.

Third quarter results were strong.

We continue to execute our strategy, take share and grow.

We exceeded our guidance for sales and gross margin came in slightly higher than expected.

Consequently, we reached the high-end of our earnings guidance.

I am very pleased with MSC's performance and the business model is being executed at a very high level.

Market conditions continue to be solid.

Our customers are generally confident and optimistic.

We continue to hear that order flows are steady, and that raw material supplies and pricing have stabilized.

There is still concern about costs in general in the marketplace.

The ISM Index continues to be positive and is staying well north of 50.

And historically, that's been a strong indicator of future growth for MSC.

As part of our strategy, we have developed some excellent tools to help our customers reduce their overall procurement costs for MRO products.

That was once again demonstrated to me during the recent trip to visit customers in the mid-Atlantic region.

One of those visits was to a customer whose business manufacturers items for the electrical power industry.

They have been a steady but essentially small volume customer for us.

They were splitting their purchases among any distributors while searching for the lowest product price.

Our field sales associate was able to demonstrate that the total cost savings that could be achieved by consolidating their purchases to MSC would be considerably more than any savings that could be generated on the product costs alone.

They agreed to test our VMI system, which reduces inventory levels and eliminates costly out of stock situations and to also test the work flow management tools on mscdirect.com, which reduced paperwork and manual purchasing steps.

The test was very successful.

And their business with us has been growing steadily for the past 18 months.

They are currently at an annualized $275,000 in purchases and still growing, as they consolidate more and more of their MRO purchases from other suppliers to MSC.

This customer has come to the conclusion that MSC's value basket of cost reduction tools is the right solution for them in an era of stiff global competition and significant cost pressure.

We continue to execute on our West Coast growth plan and we are very pleased with the results to date.

The sales growth from customers in the West whose accounts are being managed by a sales associate is considerably greater than the Company's overall growth rate.

We expect to continue to grow our salesforce in the West in Q4 to fuel continued growth in that market.

The MSC salesforce was 565 at the end of Q3 and in line with our expectations.

The J&L salesforce currently stands at 131.

We will be combining the J&L field salesforce with ours.

And the total salesforce should remain steady at approximately 700 associates at the end of Q4.

We closed on the J&L acquisition three weeks ago.

We continue to find that J&L is a solid, growing business with a talented team of associates generating excellent margins.

We're making progress in our integration plan and we fully expect to realize the $20 million in synergies resulting from gross margin improvements and cost reductions that we forecasted.

I won't go into a lot of details due to the highly competitive nature of the information.

But I can tell you when the new fiscal year begins in September, Kennametal products will be in our new Big Book, and we will be actively selling them through MSC.

J&L will also begin selling MRO products at that time.

The combined field salesforce will be led by Tom Cox, our Executive Vice President of Sales.

And for all the reasons that we outlined when we announced the transaction, we remain strong in our belief this is a great acquisition for us.

I am more confident than ever about our future.

We believe that we have the right model and the right team to thrive in one of the most competitive business environments in the world.

All of our core execution metrics remain solid.

And I would like to thank all of our associates for their hard work in generating these excellent results.

I would like to provide some guidance for Q4.

At this point, we think that sales will be in the range of $382 to $388 million.

And that diluted earnings per share will be in the range of $0.49 to $0.53, including the charge of approximately $0.02 per share for the effect of expensing stock options.

Chuck will fill in more of the details now and I will turn the mic over to him.

Thank you, David.

MSC had another excellent quarter financially.

We grew sales by 14.3% over the same quarter last year, while some taking some modest price increases to conform our pricing to market conditions.

Gross margin of 47.3% was slightly higher than our expectations.

And gross margin for Q4 should be about 45.8%, which reflects the effect of J&L's lower gross margin.

Operating expenses in Q3 were somewhat higher than expected as our increased earnings outlook for the year necessitated an increase in the accrual for incentive compensation that reduced earnings by about $0.01 per share.

Operating margin of 17.9% of sales was an improvement of 90 basis points from last year's third quarter.

Incremental margin, which we call read-through, excluding the stock option expense and the incentive compensation accrual, was approximately 33% and in line with expectations.

Balance sheet metrics remain solid with 2.8 annualized inventory turns and ARDSO's of 40 days.

Free cash flow, which we define as cash provided from operations less capital expenditures, was $35 million in the quarter and $75 million year-to-date.

Capital expenditures have increased as expected.

We utilized approximately $150 million of our cash resources for the J&L transaction and borrowed $205 million.

We currently have about $40 million in cash reserves.

We entered into a new $280 million loan facility, which was closed simultaneously with the closing of the J&L transaction.

The $205 million we borrowed is in the form of a five-year term loan with amortization of the principle beginning in year two.

The remaining $75 million in the facility is in the form of a five-year revolving credit facility and there are currently no borrowings outstanding under the revolving credit facility.

The interest rate payable for all borrowings is based on the Company's leverage and is currently at the lowest level in the agreement, 50 basis points over LIBOR.

Similar to Q4 of last year, the tax accrual will be reduced by approximately $1 million in Q1, bringing our full year fiscal '06 tax rate to 38.6%.

I would like to explain how J&L affects our guidance for Q4.

We expect the sales contribution for J&L to be in the range of $64 million to $68 million, representing growth of approximately 11% over the prior year.

We will break out J&L sales for this quarter's guidance but not in the future.

This is due to the combination of the two field salesforces and subsequent realignment of customer relationships between MSC and J&L in order to best serve the customer.

That makes it impractical to identify the sales contributions of the two separate companies on the old basis.

Implicit in the sales guidance for Q4 is projected sales growth for the MSC business of 15% when taken in the middle of the guidance range.

We've widened the guidance range due to the addition of J&L, as it will take some time to install our forecasting methods at J&L.

We expect that J&L will generate an operating margin of about 10.5%, excluding costs relating to the acquisition such as integration costs and the amortization of intangibles.

Including the estimated amounts of these costs and the interest related to the transaction, J&L will be neither accretive nor dilutive to fourth quarter earnings.

However, some things could affect our Q4 estimates.

There are some parts of the integration plan that are not finalized.

Most notably, we have not made a final decision on the future of the two U.S.

J&L distribution centers.

We have committed to the J&L DC associates that a final decision will be made by August 31.

That decision could have an impact on integration costs in Q4 and therefore, in earnings as well.

The rest of J&L's U.S. associates have been notified as to who will not be continuing with the Company, what their severance arrangements will be and an approximate timetable.

There will be no changes made to the J&L associates in the U.K.

These decisions have been reflected in our guidance and also in our estimate of the total savings that we anticipate.

We are moving forward with our plan to increase J&L's gross margin by extending our buying arrangements with suppliers to J&L.

As this is implemented, and the older higher cost inventory is sold, we should see J&L margins begin to rise.

Lastly, the valuation of J&L by a professional evaluation firm is not yet complete.

Consequently, we have not finalized how much of the intangible assets arising from the transaction will be amortizable through the income statement.

We have continued to use our initial estimate of $2.5 million per quarter in amortization in our earnings guidance for Q4.

This may change when evaluation is complete.

I will now turn it back over to David for the wrap-up.

Thanks, Chuck.

I would like to provide some context to our presentation since there are so many moving parts.

Over the last several years, MSC has made lots of progress and we've delivered on all of our promises.

We intend to continue to do so.

We've only owned J&L for a very short period of time.

It is a terrific business and will be an important part of our future.

Everything we've seen so far reinforces our conclusion that the acquisition of this business is additive to our business and will help us achieve our long-term goals.

We're confident of our ability to execute on our plans and to continue to build value at MSC.

We're all very excited about the future and look forward to sharing our progress with you during these regular conference calls.

Thank you and I'll now open up the lines for Q&A.

[OPERATOR INSTRUCTIONS] Your first question comes from David Manthey with Robert W. Baird.

Hi.

Good morning.

First question on GP, if you could talk about why you think gross profit was higher than your expectations in the current quarter or what were the key factors that led to that?

And then second, looking forward, if you could talk about your expectations for core gross margin in the fourth quarter excluding J&L?

David, hi, it is Chuck.

The third quarter guidance that we gave, frankly, had not contemplated taking a small price increase in Q3.

And as we said in the script, that actually did occur during the course of the quarter.

It was small but was able to provide a little bit more in gross margin dollars for us.

And it was driven by market conditions, as most of the non-Big Book price increases are throughout the year.

And your second question, I am sorry, David was about guidance for Q4?

Looking forward, should we assume that core MSC gross margins are still in the 47 to 47.5 range?

Plus or minus the same as what you saw in Q3.

Okay.

Great.

Then, just two more.

In terms of the read-through that you're expecting, again, there are a lot of moving parts here and thanks for giving us some clarity on J&L next quarter.

When we run through the numbers, is it safe to assume that the core read-through we're looking at is still in that 30%, 35% range?

Right.

Very similar to what you saw in Q3 would be our expectation for the separate MSC stand alone piece.

Okay.

And then the final question.

It's been awhile since we've sort of got an update on the USPS arrangement.

And I am just wondering if you can share any highlights there, any updates on the progress that you've made in the past year or so?

David, it is David.

Hi.

We've made a lot of progress with our government program.

Because of the highly competitive nature of the program frankly and the marketplace, it isn't something that we would like to comment on specifically.

Suffice to say, though, that we are very pleased with our progress.

And our overall government program is an important one for us today and will continue to be an important one for us in the future.

Okay.

Fair enough.

Congratulations.

Thanks.

Your next question comes from Holden Lewis with BB&T.

Great.

Thank you.

A couple of things.

Sort of in the supplemental data, you had mentioned that the J&L salesforce now stood at about 131.

I think that you were using 140 originally.

Are we just getting a more precise number rather than prior rounding or have you seen a fair amount of poaching?

Or have you begun to cull some of the folks out?

What has sort of taken place in the head count?

Yes, Holden, as we combined our sales teams and as we announced a transaction and began to combine the Companies, you're correct in noting there has been a bit of attrition, is the word I was looking for.

In any event, we're very comfortable with how we're progressing.

We're very comfortable with the progress that we've made.

And in fact, that that attrition was largely by our design as part of this combination.

Okay.

And then looking at your average order size, it is not that typical for average order size to tick up in Q3 over Q2, and it did this time around.

I assume that that's related to pricing.

Though, if there is anything else in that number, can you let us know?

But the question is, typically you seen a step up in average order size in Q4.

Have we sort of moved that up, so that maybe Q4 is flattish against Q3?

Or are we going to see a more typical sort of step-up in Q4 on top of the Q3 increase as well?

Holden, this is Chuck.

I think part of that is correct on the price increase.

But also, as we said without going into a lot of detail, our government national account programs are growing beyond what the core rate of growth is.

And that generally is bigger order sizes, larger order sizes.

And I think you're seeing a lot of that read-through in Q3 as well.

Okay.

And then in terms of expectations; because usually you're embedding higher prices into the book as that begins to roll out.

So Q4, Q1, you tend to see prices increase just as a function of that.

Would we expect to see the average order sizes, again, continue to move up in the subsequent couple of quarters?

Holden, David.

I certainly can't nor do we want to begin to forecast average order size because there are several different moving parts there.

What I can tell you, though, is that consistent with what you've seen in our Big Book pricing and pricing actions, there will be some price increases and net overall increases in what we launch in September.

Okay.

So, we haven't necessarily pulled our price increases forward at all?

You were just able to get additional increases?

Listen, we look at a lot of factors, market conditions being one of them and what opportunities and what competitive moves we see and also what we see from suppliers.

And what we're actually having to take that we're not able to hold off on the supplier increase side of the equation.

Okay.

And it was kind of odd that you're mentioning that you're getting these price increases at a time when you're also noting most of your customers are saying that price conditions have stabilized.

Is this more of a real price increase that you're getting just because market demand is so good as opposed to because material costs are increasing or not?

Well, I think that when we say "stabilized," the raw materials and energy certainly have continued to escalate, especially products that are petroleum-bases, raw materials and so forth.

But stabilized is a relative term.

It was -- the volatility was off the charts.

And while pricing has consistently moved up, it is just not quite as volatile or the same types of spikes that we had been experiencing.

Okay.

All right.

And then lastly, the increase in your CapEx, is that just the WMS system or is there something else in there?

Remind me what that was.

That's it.

That's the single item that's driving the CapEx in aggregate beyond levels we've seen in the recent years.

Okay.

All right.

Thank you.

Your next question comes from Dan Whang with Lehman Brothers.

Good morning.

Just a question on the performance in your West Coast business.

Obviously, the growth rate there are doing very well, well above the Company average.

Could you perhaps comment on that?

Is it the additional scale and presence that your building and are allowing you to make additional traction?

And maybe additional details on that would be great.

Ben, I am going to share a little bit, but it is an area that we've said for competitive reasons, we really keep close to the vest.

Was that Dan, by the way?

Yes.

Thank you Dan.

So, we've been investing now out West for the last couple years.

We are seeing traction on those investments.

We're really pleased with the performance that we're getting.

As we've said, that we're actually getting disproportionate growth from the resources that we've been concentrating out West, than what our overall growth rates have been.

And you're now seeing that begin to really fuel that West Coast region.

So, we're going to continue to invest.

We've said that for Q4, for example, that is an area we'll continue to -- with our investment program and we're really pleased with progress there.

Okay.

And I think in the example that you talked about with your customer and the success that you've had with the VMI program, I was just trying to find out, currently what percentage of your customer relationship utilizes the VMI in developing that?

And where could that go going forward?

Well, let me start with that it isn't a metric, a measurement that we actually break out publicly.

Of course, it is something that we watch internally and not only the growth rates, the amount of revenues going through VMI and the number of customers that we cover in that area.

But that isn't something that we like to disclose.

As far as we've come with VMI, we still think that we're in the very, very early stages of what the possibilities are.

We think that there is huge usability to our current customer base and our combined customer base.

And we think that the runway for a program like that is very long.

And we're, frankly, just in the early innings of the success that we're going to see there.

So, really exciting value-added program for us.

And finally, just a question on price, I think you talked about a modest contribution by price in the quarter.

Can you quantify how much that was?

I can't quantify it.

But what I will say is that the pricing contribution to our sales growth is roughly 5% in the quarter.

That's the cumulative effect of pricing moves through the year.

Okay.

Great.

Thank you very much.

Thank you, Dan.

Your next question comes from Bob Little with MD Says Investor Service.

A couple questions.

Can you give us the sales number for sales through the Website in the quarter?

Yes.

It was posted I believe this morning on the Website.

Sales for mscdirect.com, is that what you're looking for?

Yes.

I've got it.

I put my specs on here. 66.8 million, which reflects an annualized run rate of 260 million, which also means that now 20 -- just about 20% of sales is now flowing through our Site.

Okay.

There was a little bit of static on the line.

The dollar number again was what for the quarter?

Sorry about that.

Let me get it again. 66.8 million.

Got it, okay.

Could you just in terms of general background give us an idea of what percent of the purchases that you make, the products -- excuse me, that you acquire, the products that you acquire are obtained through reverse mortgages over the -- excuse me, reverse auctions over the Web?

We actually don't talk about or breakout the details of some of our purchasing programs.

But certainly, auctions and the auction and eAuction tool is one of the tools that we do use.

That our project management team and purchasing teams do utilize with our supplier base.

And it has been a successful part of our program in helping us to maintain and drive down our cost position.

Having said that, we don't break it out further for competitive reasons.

If you can, quantify it, could you say whether it is significant or insignificant, just give a very rough idea?

I can't.

I can't go there, other than to say it is an important part, an important program within our buying scheme.

Okay.

And would it be possible to tell us what percent of your purchases are manufactured abroad?

We don't actually break out domestic versus overseas purchases or branded versus private label.

I will tell you that it is a robust part of our plan and it is going to be -- continue to be a growing part of our strategy moving forward.

That's you will I have.

Thank you.

Your next question comes from Brent Rakers with Morgan Keegan.

Yes.

Good morning.

Maybe first starting, and, Chuck, I apologize if you already mentioned this, but have you given a sense for what the revenue growth rate trends have been in the month of June so far?

For June, we have a June so far?

Yes.

Through Brent, David, through Tuesday, actually, it is 15.2%.

Great.

Then I know you won't give the specific price increase number in the quarter.

Would you maybe give a sense for when those price increases were enacted?

Were they at the beginning of May?

No.

We really -- Brent, it's Chuck.

We wouldn't disclose that exact timing of a price increase.

I think that David summarized it before where we've gone year-to-date.

And again, I earlier talked about the fact that we took it, albeit modest, was something we didn't anticipate in the guidance that we had set several months ago.

So, it definitely was helpful to ticking the margin back up to to the 47.3 that we realized in Q3.

And Brent, it's David.

The only add-on to that would be, certainly any actions that we've taken through the quarter and now are anticipated with the launch of the Big Book are factored into our Q4 gross margin guidance.

Great.

And then back a little bit on the West Coast.

I know you've had a couple announcements with some new branch openings over the last three, four, five months or so.

Could you maybe remind me how much branches you now have open on the West Coast and if any of those are stocking locations?

We've got a branch in L.A., we've also got Oakland, and in San Diego, and that is -- let's see.

Two in L.A., San Diego, Oakland, and we're continuing to invest there, but we don't share details beyond that.

L.A. has been open for a couple of of years.

And it is only in the last half, a dozen months or so that we've begun to build out and open up our San Diego and our Oakland facilities.

As you know, within our model we are not -- they're not sales offices as opposed to stocking branches.

Okay.

Great.

And just a couple more questions.

And if you can make any additional comments on the stepped-up level of growth in your non-manufacturing customer categories, if you can comment on varied strength within government versus commercial?

Or any other color would be great there.

I think the only color that I would want to give there, again because of competitive -- for competitive reasons; certainly, is when you take a look at our combined large customer business, which really is a combination of our government in national accounts businesses, it is an area that we have focused on for the last few years.

It's an area that we have invested heavily in.

And it is an area that is growing quite dramatically and really contributing significantly to our growth rate.

And then just maybe to wrap up.

Maybe -- do you have any kind of pre-J&L Companywide employee number we can kind of work off of?

Companywide pre-J&L?

Companywide pre-J&L.

Yes, pre-J&L, total associates for MSC in the 3,100 to 3,200 range, in there.

And just the last question.

Looking at your guidance for fourth quarter mailings, it looks to be down significantly from where you had it before, and significantly below trend.

Are there any message in the kind of reduction in advertising here?

Just that we're constantly looking at our investment programs, how best to focus, where we're going to get the best return, where we're going to drive the most growth.

And our merchandising, marketing teams have really done a great job of really mining the productivity in those programs.

How best to both attract and grow, attract new customers and grow customers in a more productive way.

And so, those are all the factors.

That coupled with where we think we're going to get the best bang for our buck on growth driver and investment spending that contribute to what you're seeing in where we came out in Q4.

Great.

And I am sorry, just one other question.

I think you guys had mentioned earlier in the call that -- you referred to both your own catalog as well as the J&L catalog.

If sounds like for the time being, then, you're still going to keep both of those catalogs issued in the next year.

Is there -- first of all, is that correct?

And is that something that you would consider evaluating over the next several years, maybe consolidating that to one catalog?

Well, we're going to be very careful about talking long-term about how best to maximize the assets in J&L that we've acquired.

Having said that, for today to answer your question directly, both catalogs are out there.

Both catalogs are in vibrant use and both brands continue to flourish in the marketplace.

Thanks again.

[OPERATOR INSTRUCTIONS] Your next question comes from Adam [Uhlman] with Cleveland Research Company.

Good morning, guys.

I was wondering if you might be willing to take a stab at what kind of sales synergies you folks think you can get with J&L selling the MRO products?

And then also, with MSC now selling the Kennametal carbide products, what the opportunity is?

Adam, it is David.

We think that the opportunity is just enormous.

The ability to take the Kennametal products and many of the J&L value-added type programs into the MSC customer base we think is very exciting.

And certainly, being able to take our MRO -- MSC's MRO product line as deeper penetration into the J&L customer base, we think when you take a look at all of that, it is a very exciting revenue opportunity for us.

Having said that, and I am sure you would love to dig for some specifics, which it is not something that we're going to share and it is still very early on.

The only other thing to remind everyone is that; as exciting as the revenue opportunities are, we think that's all additive to our long-term plan because it isn't something that we use in our valuation of the J&L acquisition.

It is kind of the -- what I will call the "frosting on the cake."

Okay.

The sales synergies aren't included in that 20 million of synergy savings?

Exactly correct.

Those synergies and how we base our evaluation and what we've talked about are exclusively focused -- roughly split 50/50 between gross margin improvement opportunities and reduction of OpEx.

Nothing in that number comes from revenue synergies though clearly, we're very excited about what those revenue synergies will yield for us.

Okay.

Great.

And then I think last quarter in the Q there was a disclosure regarding this large customer growth contribution to sales growth.

I was wondering if you might be able to update us on what that was?

Adam, what we've begun to do is describe -- break out our growth a bit.

I talked about it just a few minutes ago; where our large customer segment, which principally consists of our government customer segment as well as national accounts, has now been broken out.

So, that you will continue to see on a quarterly basis what percentage of our growth comes from that large customer segment.

Okay.

Do you have that figure handy or do we have to wait for the Q?

Adam, it is Shelley.

The Q is going to be filed in a couple of days.

And I don't have it in front of me but I think the numbers are similar.

And then the last question that I had here was just a clarification of the last statement regarding the going to market, J&L, Big Book and the MSC Big Book.

I missed it.

Is it for this year's coming Big Book, there is still going to be two Big Books, is that correct?

Yes.

There is a J&L catalog and there is an MSC Big Book and our current plans remain unchanged in that area.

Okay.

Got it.

Thank you.

Adam, best wishes for success with Cleveland Research, looks like a great new firm.

Thanks a lot.

You're welcome.

Your next question comes from Duncan Thomas with Bear Stearns.

Good morning, guys.

First question, just regarding the J&L acquisition, you talked about making a decision come August 31 regarding the two DC's.

Does that include a potential closure of one or both of those facilities?

Duncan, it is David.

We are evaluating what the -- what our best posture with those DC's should be and it could go all over the board.

And certainly, one alternative would be a closure, another alternative would be leaving them exactly as they are.

And then several different variations on the theme, which we'd rather not talk about on this call.

But it is something that we're going to evaluate very carefully.

Those DC's do a terrific job for supporting that region for those customers from a service perspective.

And we want to make sure in looking at them that we take a very measured approach to how best to serve our customers.

And all of that is going to be factored into our ultimate decision there.

But those numbers are not in your accretion estimates for late '07 and '08?

The $20 million.

The synergies we spoke about would be achieved and expect to be achieved kind of regardless of what that decision turns out to be.

Okay.

And just lastly, sort of a broad question.

Your manufacturing sales have accelerated each of the last four quarters.

And I know you don't have too much insight into specific end markets.

But are there specific end markets that you can point to or is it just a broad based continued increase in manufacturing?

Duncan, it is a two fold answer actually.

There is broad based strength out there.

And frankly, there are several end markets that we could point to and that we do point to in our business on where we see greatest growth, greatest opportunities for growth.

Our team and our sales team is very focused on making sure that we are capitalizing, especially in those fast growth areas.

And frankly, reallocating our time from those segments that aren't growing quite as as well as we would hope.

In any event, while we look at that internally, certainly the breakout of those segments is not something that we would want to broadcast competitively.

I understand.

Thanks a lot, guys.

Nice quarter.

At this time there are no further questions.

Management, are there any closing remarks?

Everyone, thank you so much for taking the time dialing in today.

And we look forward to speaking to you all again in the future.

Thanks, have a great day, all.

This conclude's today's conference call.

You may now disconnect.