Materion Corp (MTRN) 2008 Q2 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Brush Engineered Materials second quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Michael Hasychak, Vice President, Treasurer, and Secretary for Brush Engineered Materials. Thank you, Mr. Hasychak. You may begin.

Good morning. This is Michael Hasychak. With me today is Dick Hipple, President, Chairman, and CEO, John Grampa, Senior Vice President Finance and Chief Financial Officer, and James Marrrotte, Vice President and Corporate Controller.

Our format for today's conference call is as follows. John Grampa will comment on the second quarter 2008 results and the outlook, and Dick Hipple will give a market update. Thereafter, we will open up the teleconference call for questions. A recorded playback of this call will be available until August 16th, by dialing area code 877-660-6853 or 201-612-7415. The call will also be archived on the company's website, beminc.com. To access the replay, click on quarterly earnings conference call under the investors page. The broadcast -- the broadcast requires Real Player software, which is available as a free download from the icon as indicated.

Any forward-looking statements made in this announcement, including those in the outlook section and during the question-and-answer portion, are based on current expectations. The company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release issued this morning.

And now I'll turn it over to John Grampa for comments.

Thank you, Mike. Good morning, everyone. Thanks for taking the time to join us today. My format today will be similar to formats that we've used in the past. I'll review the quarter and then I'll comment on the outlook. And then following my comments, Dick Hipple will provide you with a market update focusing on some encouraging developments. And then we'll open the call for questions.

I will attempt to adequately reinforce and expand somewhat on the key points made in the press release about the quarter. I'll comment on five specific items. First, the factors affecting the reported sales compared to the prior year and the important progress that is embedded in the numbers once you remove the influence of metal price and the media market factors.

Second, I'll review the factors affecting the reported profit comparisons, especially the prior year non-recurring items, prior year non-recurring gain, and the current year lower of cost or market charge. These items do distort the operating performance comparisons and they do need to be understood.

Third, I'll cover the specifics of the trends in media. As most of you know, significant swings are with ruthenium material prices, material sources and demand factors, as well as new product and market ramp rates can and has dramatically affected the comparisons. It's, therefore, important to review what is happening with all of our new materials that support the Perpendicular Media Recording market. Dick will be updating you on the status of our product qualifications in media and the current order levels which have improved significantly.

Fourth, I'll review the balance sheet, which is strong and is expected to continue to strengthen.

And, finally, I'll review the share repurchase authorization.

And then following my comments on those five points, I'll review the outlook identified in the press release.

Before I begin the review, I should reinforce what most of you should already know, and that is that the fact that the first and second quarter comparisons to the prior year are the most difficult comparisons of the year due to two factors. The first is last year's sizeable benefit from the sale of ruthenium-based materials into the media launch, which included a sizable, non-repeat cash gain related to a significant increase in the market price of ruthenium that had been purchased in 2006, at a much lower cost.

And second, volumes into the media market were significantly higher in the prior year's first half compared to the first half of this year.

Let's begin reviewing the five factors. First, the factors affecting sales. As you know, this morning we reported sales for the second quarter that were about $13 million or 6% ahead of the prior year's second quarter level. As in the first quarter of the current year, a major factor that negatively affected our growth was lower shipments to the media market which is directly linked to the re-qualification process we've been reporting on.

In the second quarter, sales to media were approximately $25 million below the prior year levels. Approximately 60% of this is due to the lower ruthenium metal prices and customers supplying their own metal and the balance, approximately 40%, is from lower volume. Sales increased in the company's other businesses by 18% in the quarter. The year-to-date growth on this basis is approximately 19%.

Metal price inflation, or said differently, that portion of both precious and non-precious metal price increases that we were able to pass on to our customers in the quarter, was approximately 12 to 13 percentage points of the 18% growth. We continued to see solid growth in many of our other key markets, including growth in oil and gas, telecom infrastructure, heavy equipment, wireless and photonics, and medical, consistent with the trends noted in the first quarter and throughout the prior years.

Growth of our new products did remain strong. I'm going to briefly address the media market and then Dick Hipple will follow later with additional comments on media as well as comments on some of our other markets.

Now let's review the factors affecting the profit comparisons. The earnings we reported this morning, while ahead of our expectations, were, on a GAAP basis, below the prior year at $0.35 a share diluted versus last year's $0.38 a share. Excluding the noted ruthenium lower of cost or market charge, which was previously announced and expected, the operating run rate for the quarter was $0.53 a share, $0.18 a share higher than the GAAP-reported $0.35 a share. We pointed this out because we believe that it is important to understand the real profitability of the quarter without the anomaly that is brought on due to the vagaries of the ruthenium market.

Ruthenium prices dropped in the quarter from over $415 an once to $300 an once, resulting in a $6 million charge. Since the end of the quarter, ruthenium prices are up approximately 2%.

In the first half of the year, the company had actually recorded a $21.4 million pre-tax or $0.60 per -- $0.66 per share after tax, $4.5 million, or $0.14 per share, of which occurred in the second quarter. This gain, which we identified as non-operating, was due to a significant increase in ruthenium market prices that occurred then. The company benefited, as that material was sold, had been purchased earlier at a much lower cost.

In the second quarter of 2007, the company also recorded a $4 million pre-tax or $0.13 per share lower of cost or market charge for ruthenium.

In the press release issued this morning, we've embedded a table that illustrates the impact of each of these factors, as well as other factors. I call your attention to this table as we consider the presentation of operating results in this manner to be a better representation of our baseline business, which we refer to as the operating run rate.

Now let's turn to media. As you know, the most significant factor driving our growth in both 2007, as well as our expected growth in 2008, is the growth of our new magnetic media materials for the Perpendicular Media Recording segment of the data storage market. The growth here is dependent on the rate at which the market and our customers transition to the new perpendicular media recording technology and our ability to both capture and maintain a share of their business with our new products and our production capabilities.

You'll recall that a rapid product launch resulted in a very high sales and profit level in the first half of 2007. Then, as previously announced during the fourth quarter of 2007, the company experienced a significant setback in this market. The setback was driven primarily by a changing material specification at our largest media customer, which, in turn, resulted in necessary manufacturing process changes and a lengthy re-qualification process. This resulted in lower shipments while the re-qualification process was underway.

Media volumes were approximately 20% of the prior year's level in the first quarter and began to recover, reaching approximately 70% of the prior year's volume in the second quarter. Volumes in the second quarter were 60% ahead of first quarter volumes. Dick Hipple is going to comment further on this in a moment.

Now let's turn to the balance sheet. The company's balance sheet remained very strong in the second quarter, even considering the acquisition made earlier in the year. And the company continues to have significant financial flexibility. Debts to debt plus equity ratios remain healthy and below 20%, and funded debt to EBITDA is still well below one.

While the acquisition of Techni-Met was approximately $87 million, balance sheet debt has increased by only $52 million year-to-date.

The company increased its precious metal consignment lines by $95 million to $205 million, and increased its revolving credit agreement by $115 million to $240 million in late 2007, adding both financial capacity and significant flexibility. The increased capacity and flexibility adds the liquidity to support expected organic growth and to take advantage of acquisition and augmentation opportunities plus other capital considerations as they surface, including the announced share repurchase.

That completes my comments on the second quarter. I'll now comment on the share repurchase plan and the outlook.

As indicated in the press release, the company's Board of Directors has authorized the company to repurchase up to one million shares, or approximately 5% of the company's outstanding shares of common stock. The primary purchase -- purpose of the repurchase program is to offset dilution created through shares issued under company stock-based compensation plans. The authorization provides the company the flexibility to use its strong balance sheet to repurchase shares over time while maintaining an appropriate level of liquidity to support the company's primary strategic goals which include utilizing available capital for organic growth and strategic acquisition opportunities.

The plan to repurchase shares does not represent a deviation from the company's strategic focus and the company does not see any change in its growth expectations and acquisition opportunities. Stock repurchases will be made from time-to-time through brokers on the New York Stock Exchange. The repurchase program may be suspended or discontinued at any time. Those comments, along with the comments made in the press release represent the full extent of which we'll comment on the subject of the share repurchase plan today.

Now let's turn to the outlook. As you know, the specific guidance we provided in the press release today is guidance on the outlook for the full year only. This is consistent with the change in practice that we announced in mid-2007. The company is updating the previously provided guidance for the year. At this time, the company expects earnings for the full year to be in the range of $1.45 to $1.70 per share. This includes the negative effect of the charges taken in the first and second quarters of this year. Excluding those charges, the operating run rate is in the range of $1.75 to $2.00 per share, up as much as 18% compared to the prior year operating run rate. The guidance assumes that a significant macroeconomic downturn does not develop during the second half of the year.

In the media market, shipments strengthened as the second quarter developed and as re-qualifications of ruthenium-based products progressed. The company is also seeing stronger demand thus far in the third quarter, and expects to see progressively higher shipments of Perpendicular Media materials in the third and fourth quarters of the year when compared to the second quarter of this year.

The company has seen and expects to continue to see strong demand from the cell phone handset market for the materials provided by Advanced Materials Technologies and Services, as well as stronger demand for the company's products from the medic -- for the medical, oil and gas, heavy equipment, and other domestic -- other industrial markets throughout the second half.

When considering the second half, recognize the seasonal factors that occur in our business. The third quarter is historically seasonally weaker than the second quarter for the company in its markets in Europe, as well as in certain of our domestic industrial markets. We expect this to be the case this year as well. We expect added media business to help offset a portion of the seasonally weaker third quarter. We expect media business to also progress leading to a fourth quarter that is stronger than the third.

It is important to continue to reiterate that the company's earnings estimates are subject to significant variability. Metal price changes, metal supply conditions, fluctuations in demand levels driven by such factors as customer inventory swings, product qualification rates, and new product ramp-up rates in critical markets such as the media market, can and have had a significant effect on actual results.

The outlook for the remainder of the year is based on the company's best estimates at this point in time and is subject to significant fluctuations due to these as well as other factors.

I'll now turn the call over to Dick Hipple. Dick will provide you with a market update. And following Dick's comments, we'll open the call for questions.

Thank you, John. First of all, I'd like to express my congratulations to our Beryllium Products division for securing the partnership with the government to build a new beryllium pebbles plant. This project is strategically important to both the company and also to our country. We expect to start the plant up by mid-2010.

The other significant news that John alluded to in his comments is our progress in the media market. We are now re-qualified at all major media producers for our ruthenium targets. And all of the required equipment modifications have been completed to assure product consistency to customer specifications. This progress explains our near-term strengthening of shipments to the media market of the ruthenium layer.

Our qualification trials for our next generation products for both the ruthenium layer and oxide layers are progressing well and is still holding to a schedule that would support a start-up ramp before the end of the year.

Overall, the media market or the hard disc drive market remains robust and is expected to grow at least 15% year-on-year. As the insatiable demand for more storage, particularly video, continues to expand.

Moving on to our other significant markets, the overall consumer electronics space continues to grow. And, as you know, we have been concerned here due to the unpredictability of consumer behavior with the instability of our current economic environment.

As we look forward to the rest of the summer season, there are unknowns such as impacts from supply chain discontinuities caused by the Chinese Olympics and the speed of which Europe comes back from their normal summer holidays. One needs a very good crystal ball these days to gauge the possible negative outcomes of these events.

In the telecom space, which reflects the capital spending side of electronics, this also remains solid. It is particularly strong in a market that almost disappeared after the telecom crash. And that is the building of undersea communication cables where we supply what is known as undersea repeater housings in our Specialty Alloys division.

Our defense business focused in our BE and Ceramics division, remain strong and the bookings have gained strength since the push-outs we saw earlier in the year. We have seen a leveling off in our commercial aerospace business as the MRO business, or the maintenance and repair business, has been impacted by the airline cutbacks. But this softness has been more than made up by the strength in our oil and gas applications. And as you would expect, the automotive business is off in the U.S. and is counterbalanced by stronger conditions in Europe, certainly being helped by exchange rates. So we see our overall markets currently holding up through these turbulent conditions.

Another point I'd like to make is that I'm very encouraged regarding our progress in our manufacturing performance in our Specialty Alloys, BE Products, and Engineered Material Systems, our productivity and yields are significantly above last year's level.

Thank you, and I guess we're ready for questions.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (OPERATOR INSTRUCTIONS) Our first question is coming from Chuck Murphy with Sidoti and Company. Please state your question.

Morning, guys.

Morning.

Hi, Chuck.

Just wondering if you could give us some more details on Alloys' very sharp sequential improvement. And you mentioned that the product mix was favorable there. If you could say specifically what we're talking about.

Well, there's a couple things going on there. The, as I mentioned, the yields have improved. We've also been very aggressive on pricing.

Yes.

We've seen a lot of -- a lot of raw material increases. And I'm talking about outside of copper because copper basically is pass-through. So there's a lot of other material pressures we have. They've been very successful at passing through prices. And the other is the mix itself. We -- we're seeing some real strength in the oil and gas sector. The ToughMet product that we have, undersea communications is also a very good, high-margin product for us. And so we're seeing a nice change in the mix there. So that's helping them out also.

And you mentioned in the press release that part of the reason for advanced materials sales decline was that the customers were using their own ruthenium. And you mentioned specifically what the impact on the sales were. Any sense on what the impact on the operating profit was from that?

Well, the -- Chuck, the customer use of metal versus our own metal --

Yes.

-- obviously, just to refresh for everybody, when we receive customer metal, it's fundamentally a toll processing charge that appears in the -- both the top line and in our profits. The toll charge does not change whether it's our metal used or their metal used.

Yes.

So the profit is essentially the same. There's fundamentally no difference in the P&L, their -- it's indifferent, their metal versus our metal.

Okay. Yes --

Sales line only.

Okay. I mean, I kind of assumed that, but I didn't know if you were getting a little bit of margin by selling them your ruthenium. But it sounds like the answer's no, right?

Yes, that's right.

Okay.

Fundamentally, no.

All right. And I know, Dick, you mentioned that the re-qualification is done for the [ru]. Can you say kind of where you are in the re-ramp stage? I mean, have you -- any idea what your market share is currently at that customer? And what do you think it could get back up to?

Well, as you -- as John reviewed earlier, the sequential quarter-to-quarter change does reflect getting back into the market. And we have not shared the exact market share where we are in the -- in this market space. We've all -- we've always articulated that we felt that we write the ship and we'd certainly like to see ourselves at a 30% market share in this space. We're certainly not there at this point in time and we're fighting our way back in here.

Okay. If you had to use kind of a baseball analogy, would you say you're in the second inning of the re-ramp or the eighth inning?

We're certainly not in the eighth inning.

Okay. Second inning, fair?

(Laughter)

Closer to the second.

Okay. Okay. All right. And final question. As far as the new ruthenium customer that you're getting and shipping the other layers of the hard drive, the oxide and the cobalt, where do you stand with that? Have you already started shipments or is it just --

No, these are all -- that -- it's just qualification shipments at this point, not production.

Okay. But you do expect those to come in the second half still?

Well, I -- yes, as I mentioned, we would certainly -- we hope to start to see the early shipments for production in the fourth quarter.

Okay.

And again, as you might expect, it's difficult to exactly predict how that's going to fall, but, I mean, we're -- that's what we're targeting.

Okay. Good. That's all I had. Thanks.

(OPERATOR INSTRUCTIONS) Our next question is coming from Rob Young with Wm Smith and Company. Please state your question.

Hi. Good morning, guys.

Hi, Rob.

I just have a question regarding the recent weakness with Western Digital and SanDisk and how that affects your immediate business.

Western Digital and who?

And SanDisk. The HDD manufacturers. How does that affect some of your -- some of your media business?

Okay.

Well, the -- you're talking about the two different spaces between the flash and the hard disc drive?

That's correct, yes.

Okay. Right now the hard -- the hard disc drive space is -- seems to be quite robust.

Yes.

And I don't track, personally, the flash area as closely because we're not a big player there. That space does seem to swing around quite a bit, quite a bit more than the hard disc space. I don't see any conflict, if you will, that -- there's been a lot of discussions, well, will flash overtake the hard disc space and you have that natural conflict with the storage market, if you will. But what's happening is there's basically room for everybody because the demand for storage is just incredible. So what happens is that, for example, your laptop space now is -- your typical laptop today when you buy it's got 180 gigs is the minimum you can get, and that's going up to 350 gigs or whatever. Your flash drive isn't really anywhere close to that kind of space.

And so what you have is you've got this growing demand everywhere. So you've got your hard disc drive guys growing and you also have the demand for the flash growing. But there's room for both, if you will, and they're both growing. So there's not really a conflict, one against the other. The hard disc drive is able to grow a lot more capacity. Cost-wise it's much more efficient capacity on the hard drive than the flash. So that's what ultimately I -- protects the hard disc drive space on the long term.

Okay. Great. And then from a ramp of flash, assuming that does occur, do you feel that that is going to be similar to what you saw with HDD versus say like another technology like tape?

I'm not sure I quite understand it. The flash space, we don't participate in the --

Right. Right. I'm just talking about just the -- just the total market.

Oh, no, I -- I see -- I see the flash space continuing to grow and continue to grow in their capacity. They do have -- again, it's a higher cost technology per storage. Certainly they come down the curve, but so is hard disc drives coming down the curve. There are some limitations with regards to the flash technology. But, again, I don't -- I don't see that that's going to harm our space, because our space continues to grow. They're still trying to get additional capacity in the hard disc drives, which is the market that we play in. So it was only two years ago your typical laptop had 80 gigs, now it's 180 gigs plus.

And really, the flash, the only time we -- I've really seen the flash enter the space is with the Apple, the new what -- whatever it's called, the Apple, the thin Apple Mac. It's a fairly small storage capacity. I think it's around -- it might be even 80 gigs. But you spend another $400 or $600 per computer for a lot less storage capacity. So you can see that's really not a competition for the hard disc.

So they'll continue to get -- to grow, but so will the hard disc drive guys.

Great. And then I was hoping that you could comment a little bit briefly on just some of the R&D initiatives that you're planning for on kind of a what's-next-after-media technology, just kind of another growth area that WAM might be pursuing.

Well, again, the -- media, in my mind, doesn't stop. We're in the space today which we really weren't in this space two years ago. So now we're in the space. And, as I mentioned before, media will continue to grow and the technology changes will continue to grow. So we expect to grow with that, so that we will have technology developments in this space that we expect to continue to have a long-term platform and media and we expect media to be growing over time, you know a significant space. So I don't think we can write that space off if you follow me there.

So I -- we've got a new platform and it's called media, and I see that. And we're working in a lot of other areas. We've got -- we're working in the new area of solar, which is the thin film side. It's actually quite a small market at this point in time, but it will grow over time. And we're trying to get -- figure out exactly how we can grow effectively in that space. We've got a lot of great technologies that we feel fit in that space. So we're working on that. We've got some interesting growth. We've targeted the photonics area, which is the high-intensity LEDs, if you can think about energy over the long term that, as you shift from normal light bulbs to LED technology, that's got a long-term length as we try to save energy. There's a lot of material developments in that area that we'd be working on. Through our new acquisitions, medical is now unfolding as a new space of growth for us. And we -- we're working hard in that area also.

Perfect. And then just one more, if I could. The growth in Alloy, is that in any way linked to some customer diversification in the telecommunications space?

Not really. The -- we're finding that -- well, let me -- let me step back a minute on that. The growth, Alloy is growing in new customer spaces today in what I call the bulk area. You got the strip products which basically go as -- goes into electronic connectors and then the bulk side goes into heavy mining equipment, oil -- oil and gas, aerospace. It's that bulk space where we're getting a new diversity of customers based on the expanding application base.

But when I mention the telecom space, that's the -- there is a global investment going on on telecom infrastructure. And if you think about the different markets, it's -- a lot of it's Asia-driven. Although you've got next generation stuff going on in this country and in western Europe because simply the demands for -- you can imagine what the -- example, the I-phone demands and the new Nokia platforms with just -- you want to have streaming video on your phone. I mean, the backbone technology now really has to increase. And so that results in telecom infrastructure.

The one I had mentioned was actually the connectivity, if you will, from different regions of the world where they -- when the telecom boom was happening back in 2000, or so, they were building undersea lines to keep up with the Internet, if you will. And those lines are basically full now. It took quite a long time to fill them all up. And then there's a whole other generation going on with additional capacity required. And, actually, new regions of the world are being connected that weren't connected before. So that's the -- that's kind of what's driving the undersea optic build.

Okay. Great. That's all I have. Thank you.

Our next question is coming from Bob Schenosky with Jefferies and Company. Please state your question.

Thanks. Good morning.

Morning, Bob.

First question I had is, the inventory levels were up from the year end. Is this a function of the ramp back into media or is it a function of certain metal -- certain metal prices that are higher?

No, actually, it's neither of those case. Media inventory is down a little bit from year end. Most of our inventories across the other businesses have increased in order to support the higher levels. Part of the increase is also due to our acquisition of Techni-Met. And then our -- our Utah operations actually have started -- we opened a new pit this year. So we're pulling more ore out of the ground, so we're creating inventory out there in Utah.

The price increases in copper and the precious metals primarily are offset by the use of LIFO accounting. So that's not really affecting that balance of the inventory. It's more quantities on hand rather than the price effect.

Okay. Great. And the second question I had is, John, you mentioned, short of an economic downturn in the second half. Is this relative to the second quarter? And would a scenario of a second half GDP in the 1 to 1.5% range coupled with a slowdown in Europe put risk to your range?

A significant one would put risk to the range. But we certainly don't see that unfolding at, certainly, at this point. And everything that I was referring to was relative to where we stood in the second quarter.

Okay. Great. Thanks.

Our next question is coming from Mark Parr with KeyBanc Capital. Please state your question.

Thanks. Good morning, guys.

Morning.

Morning, Mark.

I had a couple of questions. John, did you quantify or talk about in the second quarter earnings impact from foreign exchange gains?

Did not.

All right. Do you have any color on that you can share?

Sure.

It's about $0.02 or $0.03, somewhere in that --

Okay.

-- versus the second quarter of last year.

Okay. That's helpful. Another thing. Just we're getting -- we're starting to get into this phase two technology investment on pure beryllium on the pebbles. And I was wondering, how should we think about the financial impact of that from a GAAP perspective during the construction phase? And then once that -- once that facility is operational and how -- what sort of a financial change, financial impact change should we think about versus the current sourcing situation you have for beryllium?

Well, you will see a grossing up of the balance sheet, if you will. As we spend money, you'll see our investment in property, plant, and equipment growing and you'll see an offset of a liability for unearned income growing from the amount that the government is actually going to pass. So you're going to see liabilities and assets growing together.

The net income statement effect, in the long term, is going to simply be the added depreciation and/or lease expense associated with a project of our own money that we put into the facility, which is only going to be a fraction of that $90 million that the whole project is going to cost.

Okay. Do you have any sense of what the anticipated return on capital is for that, for that project?

Well, Mark, I think the way to think about it is, is that it -- that it's impotent because we are -- we're -- our investment in the facility is 20% of the total. That investment is a leased facility and some land.

Okay. All right. So --

That's pretty good.

Not too bad. I have one other question, if I could, in the Alloy business. Clearly you got some nice benefits from mix there in the quarter and also some growth. I mean, let's go -- let's go back to baseball analogies. I mean, if you were looking at your -- at your mix, say on a scale of one to ten -- maybe this isn't a baseball analogy. But how'd you characterize the mix, in terms of one being very poor mix, ten being highest with the possible mix, the mix in the Alloy business in the second quarter, say, versus, say the first quarter of last year?

It's not the highest it can possibly be. That's a tough question, Mark. But --

It would -- I mean, I realize that. I mean, you could never get there. But, I mean, are you over 50% as far as the most recent mix?

Yes, I mean --

Yes.

-- it's a good mix. I --

It's good. But there's still the traditional business --

The traditional --

Yes, I mean, for example, I'd like to see -- I'd like to see our strip business stronger, the gold side of that business, and it's not as strong as it could be. I mean, we could -- let me put it this way. We could actually have a better mix than we have today.

Okay. Is that -- is that something that you think is -- if I was going to try to think about the potential mix momentum in that business over the next 12 months, should I think about it stabilizing, improving, maybe like calling back a little bit? I mean, how would you -- how would you think about that right now?

Well, I never -- I certainly wouldn't look at -- for improve -- I mean, we're going to try to do everything we can to improve it, obviously. But I just -- I don't see anything on the horizon that would -- that's going to really --

-- suggest a major change.

-- suggest a major change --

Yes. Right.

-- in the current mix.

Yes.

Okay.

Steady -- I mean, for example, I mean, all of a sudden if you had one of these strong legs all of a sudden disappear on you, it'd be a problem. Let's say if the telecom would just disappear like it did one time before, that's an issue. Or right now we see these markets being fairly stable right now, and so I don't see a major mix change going on.

Okay. All right. We'll attach -- thanks for all the color. And congratulations on the good second quarter.

Appreciate the comment.

(OPERATOR INSTRUCTIONS) One moment, please, while we pool for questions. We have no further questions at this time. I'd like to turn the floor back over to management for any closing comments.

Yes. This is Michael Hasychak. I wanted to point out that I neglected earlier to -- for the recorded playback, when you dial the number 877-660-6853 or for international calls 201-612-7415, that you need to provide an account number of 286 and a conference ID number of 291059.

I'd like to thank all of you for participating on the call this morning. I'll be around for the remainder of the day to answer any questions. My direct dial number is 216-383-6823. Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.