Materion Corp (MTRN) 2013 Q1 法說會逐字稿

Greetings and welcome to the Materion Corporation First Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief 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, Michael Hasychak, Vice President, Treasurer, and Secretary for Materion Corporation. Thank you. Mr. Hasychak, you may begin.

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

Our format for today's conference call is as follows. John Grampa will comment on the first quarter 2013 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 May 9 by dialing area code 877; the number is 660-6853, or you can dial 201-612-7415. The conference ID number is 411602. The call will also be archived on the Company's website, materion.com. To access the replay, click on events and presentations on the investor relations page.

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 - the call to John Grampa for comments.

Thank you, Mike. Good morning, everyone, and thank you for taking the time to join us this morning. Today's agenda is similar to that of our past calls. I will review the results for the quarter, and then I will review the outlook. Following my comments, Dick Hipple will review the current state of our key markets and provide his perspective on certain specific key new product initiatives, and there is a lot of good news to report on these initiatives. Following Dick, we will open the call for your questions.

As I normally do, I'll cover sales, earnings, and margins. I will also review the key changes in business levels by market, comparing the first quarter of 2013 to the first quarter of the prior year, as well as, sequentially, to the fourth quarter. I will also provide an update on the facility consolidation initiatives and the physical inventory adjustment announced on February 13. I will follow these with a review of margins and brief comments on the balance sheet and cash flow, as well as the outlook for the remainder of the year.

Before I begin, though, I want to call your attention to the non-GAAP value-added sales and margin reporting, by segment, that is now included in the press release, along with the usual GAAP reporting. As many of you already know, we are providing this additional insight, because our - in our businesses, the cost of gold, silver, platinum, palladium, and copper are generally passed through to customers, and movements in their prices can influence reported sales and margins expressed as a percent of sales without affecting margin dollars and underlying profitability.

We analyze our business on a value-added sales and margin basis internally. Value-added sales is a non-GAAP measure that deducts the cost of these five pass-through metals from sales and removes the potential distortion in the interpretation of business level and profit margin changes that can be caused by changes in these metal values.

Value-added sales, gross margin, and operating profit margin, expressed as a percent of value-added sales and the related reconciliations to the GAAP numbers, are included in the press release, by segment, along with the related comparisons, the first quarter of the prior year and the fourth quarter for sequential comparison purposes. We believe this information in the form provided is useful to our investors.

In my briefing this morning, comments on business levels and margins will be in value-added terms. Gross margins and operating profit margins will be expressed as a percent of value-added sales, and changes in business levels for the Company in total, as well as by market, will also be expressed in this context

Let's begin with a review of the six key points highlighted at the beginning of the release. Sales for the first quarter were $299.2 million, down $54.5 million, or 15%, from first quarter 2012 levels. Herein lies a great example of why value-added sales reporting is so relevant. Value-added sales for the quarter were down - were about $151.3 million, down only $6 million, or 4%. Comparing sequentially to the fourth quarter of last year, business levels were flat, in value-added terms, as opposed to being down 2% on a GAAP basis.

Net income for the first quarter was up 11% from prior year levels, and EPS was $0.33 per share, in line with the estimates we provided earlier. This compares to $0.30 per share for the first quarter of the prior year and sequentially, to $0.12 per share in the fourth quarter. When comparing to the prior year first quarter, the 11% higher net income on the 4% lower value-added sales is due to higher value-added gross margins and a lower effective tax rate.

While the reported EPS was within the range that we had provided on February 28, it was at the low end of that range. An unexpected delay in the shipments of specific high margin beryllium and composite materials negatively affected the quarter, while better margins overall helped to offset the impact of the delays. These specific delays were unrelated to the new beryllium facility. These specific orders are expected to ship in the second quarter of the year. Otherwise, business levels were pretty much as expected in the quarter, in line and on track for the year.

Gross margins as a percent of sales was 16.2% in the first quarter, a 220 basis point increase when comparing to the first quarter of the prior year. Gross margin expressed as a percent of value-added sales was 31.9% in the quarter, up 50 basis points from first quarter 2012 levels and up 280 basis points, sequentially, from the fourth quarter 2012 levels.

Operating profit margin as a percent of sales was 3.2% in the first quarter, a 40 basis point increase when comparing to the first quarter of the prior year. Operating profit margin expressed as a percent of value-added sales was equal to the prior year first quarter levels, at 6.3%, and up 560 basis points from fourth quarter levels.

Operating profit and operating profit margin expressed as a percent of value-added sales were negatively impacted in the quarter by the costs of the previously announced facility consolidations and the costs related to the previously announced inventory short. The sequential improvement in both gross margin and operating profit margin is primarily related to the impact of the inventory adjustments and facility consolidation costs.

The value-added sales, when compared to the prior year levels, were down approximately 4% in the quarter, primarily due to two factors. First is the unexpected push out of the beryllium and composite shipments that I noted earlier, and the second was an expected phase-out of shipments of materials into an existing disk drive application that is reaching end-of-life.

Overall, with the cost factors included, when comparing to the first quarter of the year - of the prior year, value-added sales were higher by 13% in automotive, 20% in medical, which helped to offset a decline of about 26% in defense and science and 18% in energy.

Comparing value-added sales in the first quarter, sequentially, to that of the fourth quarter of 2012, business levels continued to improve nicely in areas that had been weaker in the second half of 2012. Medical was up 12%, automotive electronics was up 8%, consumer electronics was up 7%, and industrial components and commercial aerospace was up 3%. These offset the impact of the defense shipment delays that I noted earlier and slightly lower sales in other areas.

Let's now turn to the facility consolidation initiatives and the inventory adjustment. As you may recall, the facility consolidations are in the advanced materials segment and include the shutdown of five smaller facilities and the consolidation of the businesses of those facilities into other Company operations. The P&L impact in 2013 is expected to be neutral, with some costs incurred in the earlier quarters being offset by benefits beginning to appear in the later quarters.

These initiatives are on track, and the full benefit, which is expected to be greater than $0.20 per share, is still expected to appear in the year 2014. Costs in the first quarter were in the $0.02 to $0.03 per share range, and the costs in the second and third quarters of the year are expected to be roughly the same in that range.

The second factor, the physical inventory adjustment recorded in the fourth quarter, was announced on February 13. In January and February of this year, as the yearend fiscal inventories were being taken and completed, the Company became aware of a sizeable short and potential theft of precious metal from its Albuquerque, New Mexico, refinery. You may recall that an internal investigation ensued, an arrest was made, and a minor amount of stolen material was recovered.

The Company began further investigations, including an investigation of the physical inventory results, and engaged an outside team of forensic experts and criminal investigators. The results of these investigations are not yet complete at this time. Given that an investigation is on an extensive - extensive investigation is ongoing, we cannot disclose anything other than what we have disclosed to this point, and, as such, we may not be able to respond to any questions you might have today related to the potential theft or the related insurance claim.

During the first quarter, we completed our regular quarterly physicals across our facilities. We completed additional forensics and systems investigations at Albuquerque. In the quarter, a physical short of $2.3 million was identified in Albuquerque. We believe a portion of this short may have occurred early in the quarter and may relate to the ongoing investigation.

I'll now turn to the balance sheet and cash flow. Both the balance sheet and the statement of cash flows are attached to the press release. The Company began and ended 2012 with a very strong balance sheet, and the strength of the Company's balance sheet and its cash flow provide the flexibility to return cash to shareholders in the form of a regular quarterly dividend, which was initiated during 2012. The Company debt to total capital level remained at the healthy 19% level in 2012.

The Company's cash flow is generally negative in the first quarter, due to seasonal and other operating factors. It is not unusual for the Company's debt, net of cash level, to climb in the first quarter. For example, in 2010, 2011, and 2012, the first quarter debt, net of cash level, increased in the range of $30 million to $35 million in each of these years, then decreased in subsequent quarters. We expect the same this year. In the first quarter of 2013, debt, net of cash, increased by only $15 million, about half the normal seasonal rate.

I'd like to now turn the - turn to the outlook for the balance of the year. As noted in the press release, our expectations for 2013 have not changed. We expect earnings for the year to be in the range $1.75 to $2.00 per share. As we entered 2013, we were seeing demand levels improving in many of our markets, especially in those markets that were weaker in the earlier quarters of 2012.

Order entry in the first quarter was approximately 6% above second half 2012 levels and 4% above first quarter shipments. We at this time do expect the improving trends to carry into the remaining quarters of the year.

The beryllium plant is operating at its highest level since the 2001 (sic - see press release) startup, and shipments for defense applications, based on known government spending levels, are expected to result in improved operating performance in this segment, sequentially, through the remaining three quarters of the year. This, coupled with higher order entry levels and improving margin trends in the Company's other segments, should result in sequentially stronger quarters as the year progresses.

To clarify a bit more, for your modeling purposes, we expect EBITDA for the year to be in the range of $92 million to $102 million and interest expense to be approximately $3 million. We expect depreciation and amortization to be in the range of $38 million to $43 million and capital spending to be at or slightly below depreciation levels.

We expect a tax rate for the year of between 27% and 30%, and we expect cash flow to be used to drive debt down by as much as $45 million to $55 million from first quarter levels, leading us to a debt of total debt plus equity ratio in the low teens. I'll now turn the call over to Dick Hipple, and Dick will provide you with a market update.

Thank you, John. Our first quarter results were in line with our expectations, in spite of having some shipments slip into the second quarter in our beryllium and composites division and having some higher cost at our Albuquerque plant, as a result of our extensive follow-up investigations and studies.

All in all, market levels have been modestly improving, and, most importantly, we saw a lift in our consumer electronics market after a long slumber. Our medical applications and automotive electronics continue to grow nicely for us, as they did throughout 2012. Defense and science continues to be a weak spot for us in the first quarter, in part, due to timing of shipments.

In the current uncertain macro environment, the most important factor for us is growing through new platforms and applications, which will carry us forward with stronger growth. You have heard me mention some of our pending growth platforms, and I am happy to report that in the first quarter we did achieve some milestones. We did receive our first production orders for optics gesture control used in gaming devices. We received our first orders from Audi and Volkswagen for our new aluminum-clad patented dovetail connector for hybrid batteries.

Our startup in Singapore, where we have expanded our gold slug supply manufacturing, has won new accounts from LED manufacturers in Asia. Our expanded capability to ship BE speaker dome material is supporting dramatically increased demand across the globe in high-end sound systems. These are just a few examples.

So, as we move into the second quarter, we are certainly cautious, given Europe's slowdown, slower growth in China, and fairly anemic US conditions, but I am excited about what the Materion team is doing to find growth opportunities to differentiated technology and finding new solutions for our customers. Also, we expect to continue to produce higher levels of beryllium from our new pebbles plant, which will continue to support improved profitability from the BE and composites division as we move through the year.

Thank you. Operator, we are now ready for questions.

Thank you. We will now begin conducting a question and answer session. (Operator Instructions) Avinash Kant, D.A. Davidson.

Good morning, Dick and John.

Morning.

First question - you did see meaningful improvement in margins in the current quarter. Now, you also had highest production in - at the pebble plant. So, could you tie that little bit of - and maybe give us some idea about how much of the improvement in the margins came from higher production at the pebble plant, and how much was from other sources?

Avinash, this is Jim Marrotte. If you look at the one summary page that we provided to you with the press release, it shows the value-added sales ratios, and if you look at the beryllium composites group, we had a margin of about 22% here in the first quarter versus 14% last year. That margin growth there is primarily the impact of the increased efficiencies and output that we saw in the pebble plant.

Okay. So, the - if you were to look at the overall margin growth, corporate wide, that seems like that was the biggest contributor?

Yes.

That would be the single largest contributor, correct.

Yes, yes.

Right, right. And more than 50% of the contribution in growth maybe from there?

There's a lot - lots of puts and takes, but it was a significant portion of our improvement.

Okay, okay. And on the new product side, you - I think Dick gave a few examples about the - some of the new orders that you are getting. Could he give us some idea about how big these opportunities are, and where do you expect to be in a year or two or in three years' timeframe? For example, talking with automotive opportunity or some of the LED opportunities, how far could they go?

Well, typically, these kinds of opportunities, for us, should they gain a traction, could be in the range of $10 million to a $20 million type opportunity.

Okay. And I may have missed a few numbers when you talked about growth - sequential growth in different division - different end markets. I think you talked about medical being up 12%. Was automotive up 8%?

Which period are you referencing? Sequential to the fourth?

I'm talking - sequentially, in Q1, compared to Q4 - medical, automotive. I think you gave commercial aerospace and - yes - and consumer.

Yes. Sequentially, to the fourth quarter, medical was up 12%, automotive was 8%, consumer electronics was up 7%, industrial components and commercial aerospace was up 3%.

3%, right?

Yes.

Okay. So, in terms of linearity of revenue, also, John, how should we think of, like, Q2, Q3 up, sequentially, and Q4, how do you see that seasonally?

I think Q2 is going to be up from Q1. So, sequentially, we still anticipate increases in the second quarter, compared to the first, if that's what you're asking.

Yes. No, I was talking about you have the full year guidance, right, on EPS, so, I was thinking how do you see the year tracking on a quarterly basis?

Well, I think each quarter will be -- at this point, will be stronger than the prior quarter, so, second, third, and fourth quarter sequentially stronger, and there are two or three factors that you'll have to recall in all that. Not only do we see some improvements in the markets, in general, but we have the beryllium facility continuing to ramp, as the year progresses.

And secondly, as the year progresses, we also expect the facility consolidation costs to decline, and by the time we get to the fourth quarter, have a little benefit from the facility consolidations as well. So, those two factors will allow the growth in earnings sequentially.

Also, in the fourth quarter, we will have an event - the shipment of the hydroxide, which happens only twice a year. That will also help boost the fourth quarter a little bit.

And that shipment is what - roughly, $7 million, $8 million? Roughly, how big is that?

No, no, no, no, no. Those shipments are typically $4 million to $5 million of sales value and maybe $0.05 to $0.06 a share of earnings impact.

Perfect. Thank you so much.

Martin Engler, Jefferies.

Hi. Good morning, everyone.

Good morning.

Had some questions on the special charges during the quarter. Maybe you could review them again. There was charges associated with the consolidation of the facilities. I think that was $0.02 to $0.03 per share impact for 1Q and expected to be a similar impact on 2Q.

That's correct.

And then, there was another charge for another inventory adjustment of $2.3 million, and that would be pretax?

That's correct. Pretax.

Okay. And that was not previously anticipated? Is that correct?

That's correct.

Okay. And then, within - I note - in the release, you noted outside - well, within performance alloys, you've been successful implementing some price increases. Can you talk about any of the other segments, and what's going on with the pricing fundamentals there - if you'd have - had any other successes for increasing prices in 2013?

Yes, we have taking - taken the same program that we've had in alloy, and we're executing that in our other divisions, and, along with alloy, we've had a pretty aggressive pricing strategy in our high beryllium business, also given the uniqueness of that product. So, yes, we've certainly recognized the benefits of the new pricing program that we've initiated in the last couple of years in alloy, and it's taking roots in the other divisions at this point. So, very beneficial for the Company.

In the past, that's been a - pretty good for helping out the performance - alloys, and would you expect similar traction within the other segments in the coming years and kind of a similar impact [at the] margins?

I would think that - my view of that - I don't expect a similar impact, because we walked in with much higher - we have some very - much higher margins in some of the other divisions, so I think we had a lot more low hanging fruit, if you will, in the performance alloy division than some of the other divisions. So we do expect - because you can always get better. We do expect improvement in the other divisions, but not to the degree that we got in our performance alloy division.

Okay, that's helpful. And, if I could, one last question. On order entry, you noted decent improvement there versus where second half levels were last year from several different end markets. Do you anticipate further improvement for the remainder year - of the year to be coming from growth from these end markets, which are currently doing well and growing, or do you expect some turnaround from the weaker end markets?

The weaker end markets of energy and industrial components - I wouldn't expect robust turnaround in those markets. They - they're not - well (multiple speakers) - [I don't think they'll] be getting worse, either.

Yes, I would expect - yes, I think best way to think about it - energy was pretty darn soft the second half of last year, and I think they've gone through some inventory adjustment. So we're seeing some growth there, but it's not going to be a big strong lift. I think a good way to think through it is - for example, I think Schlumberger just had their earnings call, and what you find there is that US is quite - has been soft, picking up a little bit, and they've seen the growth on the international drilling, and US has been soft. So, it's kind of balanced out.

It's tempered down the growth of the oil and gas market, driven by the natural gas pricing down, but you should note that natural gas pricing now has started to come back up again. So, we do expect to see the oil and gas sector have modest growth this year versus the - so, we'll pick up growth versus the decline that we saw in the second half of last year.

Okay. And then, you already noted you have some visibility on the defense side, where you expect some improvement of orders there as well.

Yes, we do have visibility there.

Okay. Excellent. Thanks very much.

Edward Marshall, Sidoti & Company.

Good morning.

Morning.

I just had a quick question - I had some questions on the charges in the quarter. The - as I look, kind of - did you say it was $2.3 million for - and I know you just reviewed them a few times, but I want to be perfectly clear. $2.3 million for the inventory correction, correct?

That's correct. That's correct.

And how much was it for the consolidation of the facilities?

About impact of $0.02 to $0.03 a share -- $600,000 to $800,000.

And was there any other charges in the quarter?

No.

Okay. So, if I look at kind of the advance - if I look through the segment review, looks like the advanced materials margin jumps out - obviously, beryllium and composites, and then, we'll get to the third. But that $2.3 million plus the $600,000 to $800,000 - does that all run through AMT, or is that run through other segments as well?

All - it all runs through AMT.

Okay. So that kind of levels out the margin there.

Yes.

The beryllium and composites - I guess that - the shortfall there - I guess, in the margin, we were closer to breakeven last quarter. That's the missed shipments. Can I quantify the missed shipments of about - is it about $4 million that'll get pushed into Q2?

I - it's approximately $3 million and - little over $3 million that'll get - that was pushed out.

Okay. And that - so, that'll get pushed out?

And that's like - and that - let me just give you added color to that, Ed.

Yes.

In that business, those margins are pretty high, so that's a - north of a 50% variable margin business, so it's quite [impassive].

Yes. So, it looks like - it almost looks like $16 million, $17 million, at the 4Q run rate, is probably your break-even point in that business. I think you've improved the gross margin a little bit, or so it appears, so maybe that number's dropping. But is that a fair assessment of that business and how we should kind of review it going forward?

Sure. It is.

Okay, great. And then, what happened in the corporate segment? It looks like that dropped pretty significantly in the quarter - or materially, in the quarter. Can you tell me what maybe didn't occur there that's happened in prior quarters, and is that the run rate we should expect for the full year - that $1.2 million? The all other segment?

Yes, that's - that might be a little lighter than what you would see going forward, but we shouldn't see anything too dramatically different.

First quarter prior year was a little higher than that, but -

Yes.

But it's not going to move around a whole lot.

Was there a benefit in the quarter or something that might have hit that line or --?

No, there was nothing extraordinary here - onetime benefit or anything like that, no.

Okay. So - and the tax rate was unusually low. Did you mention - I know you talked about the tax rate a little bit, but --.

Yes, we talked about that also in the last call. The research and experimentation tax credit went into law after the beginning of the year.

All right.

And under the accounting - as you know, the prior year benefit ended up getting recorded in the first quarter of this year. So that's about $0.03, I think.

Yes. About $0.03 in that tax benefit.

And that - all of that $0.03 is from last year, and then, the lower -

From last year.

Yes.

The ongoing impact this year is in the estimated - the forecasted tax rate.

Okay. And did you - we talked about book to bill, and we talked about the order patterns, and you mentioned, kind of, second half to 1Q and 1Q to last year's 1Q. Is it not a fair assessment to look at it from the 4Q and sequentially? Is that not a fair assessment, because I think fourth quarter --

That's why we present it sequentially versus comparing it to prior year only, because we think that sequentials is really more important to investors.

Right. So, is it - did - you gave it kind of second half '13, but did you provide kind of the fourth quarter look, in comparison, on the order book?

It's about the same. I'd have to look it up.

Yes. (inaudible) It was in that 5% to 6% range.

In that same range of 5% to 6%, yes.

Excellent. And so, we talked about - and this was kind of the beryllium facility and working towards profitability, and it looks like, if you didn't have the push out, you'd be darn close, if not profitable. As we kind of go through the year, I think the original outlook for that business was in - somewhere in around 3Q, you'd be in about $6 million to $8 million run rate, starting in 3Q. Are you still on track for that, or has that changed?

I think your assessment that we may have been a little profitable in the first quarter, based on that push out, is correct, so we should become profitable in the second quarter. I don't recall that run rate - of saying that run rate would be achieved in the third quarter, but we could be close to that.

I think we got a good shot at it.

Okay. And then, finally, as we look kind of for the balance of the year, and we always talk about Christmas builds and so forth - well, let's call it holiday builds, are we - is there any assessment, at this point, as to what we should assume for 2013? I know the inventory's relatively lean.

Well, I think that - yes. Two things for you - the holiday builds have a tendency to also begin, predictably, in our advanced materials segment. In the late August timeframe, you begin to see the order entry and the order patterns, and that carries between the last month of the third quarter and into the first month of the fourth quarter.

Yes.

So, that's sort of the timeframe and kind of affecting both quarters a bit. I think it's really kind of early to really predict what the heck is happening there, because our build time or our lead times on those orders -- because a lot of it's precious metal, there's quick turnaround, and the customer base knows that, so you get the orders a week or two before you ship.

Yes.

So it's a little premature to be able to predict what that's going to be.

But certainly, I can -

I rely - I'd probably rely more on asking you that question than you asking me.

Okay, fair enough. Thanks, guys.

Marco Rodriguez, Stonegate Securities.

Good morning, guys. Thank you for taking my questions. Most of my questions have actually been asked and answered, but just have a couple real quick follow-ups here. When thinking about the beryllium segment, can you kind of help me understand, once you hit a normalized run rate, what would be a normalized operating margin there?

The - you're thinking in terms of the [VA] margin?

Yes.

At the profit line?

At the operating margin line, yes.

At the segment level, Jim.

10% to 12% -- double digits.

Okay. That's helpful. And then, following up in regard to your guidance, if I heard you correctly, it kind of sounded like you took up the higher end of EBITDA from like in the 90s to $102 million, and I believe you upped your debt reduction plans. Can you talk a little bit about that? What's driving those?

Actually, I did not. We lowered the upper end of the EBITDA from $105 million to $102 million.

Okay.

And then, the debt number is the same. I just - I quoted it as from first quarter levels. The number that I provided previously was $30 million to $40 million from yearend levels, and with first quarter debt climbing $15 million, I just added that to it. So, from first quarter levels, it's $45 million to $55 million; from yearend '12 levels, it's $30 million to $40 million. It's the same.

Got it. All right. Thanks a lot, guys.

[Tadik Leque], Gabelli & Company.

Hi. Good morning.

Good morning.

Couple of questions. One, on the EBITDA guidance, why would you not actually increase the guidance? Why -- you went from $105 million to $102 million. What's the rationale behind that?

Well, in the first quarter, we were light on the EBITDA from the guidance and estimates that we had provided. The year's forecast is giving us a lower tax rate, so the offset to that, in our total guidance, comes from a lower tax rate and a slightly lower - offsetting slightly lower EBITDA.

But is there a chance, given the fact that the markets are - seem to be improving - your end markets are, that you could actually do better than the guidance?

Sure. There is - there's always that chance. It's a question of how strong the end markets really get.

Right, right. And the other question I have is on use of cash. You touched on paying down debt. From a strategic perspective, are there other things you might be looking at - maybe small deals or maybe buying back shares, other things?

They're all on the table. The assumption is that they're not - that that will not happen, but they're always on the table in our - in -- as we assess the flows and opportunities that come to us.

Thanks a lot.

(Operator Instructions). Mark Parr, KeyBanc Capital Markets.

Thank you. Good morning.

Good morning, Mark. How are you?

Doing good - the sun's shining. I appreciate all the color. I just wanted, first of all, just to congratulate you for sharing the detail on the value-add - the value-added revenues. I think that's extremely helpful. I had a couple of questions. I was wondering - I think you indicated that overall orders were up - was that 6%, year on year? Is that right?

That's correct.

That was - no, that was over the second half of last year.

Oh, over second half.

Okay. Over the second half of last year. Can you give some sense of how the orders trended compared to the first quarter of 2012?

We'd have to look that up. I don't have it tip of my tongue. I think it is up or maybe about flat.

All right. And then, I guess what I - where I'm trying to go with this is - and I understand the delay and the deferred shipment and the consolidation costs running off and the continuing improvement with the pebbles facility, but just trying to get a better sense of the base business. I mean, Dick, do you have any sense of how April's unfolding, say, compared to the first quarter run rate or compared to last year? Any sense there, as far as order momentum?

The - I don't have the data in front of me, Mark, but relative to the first quarter, sequentially, it's about the same, and it's - the majority of - I shouldn't say - shouldn't use the word majority. The second quarter May timeframe is when you generally start to see some lift, and the - in our seasonal patterns, and then, also, the growth for the year - we're not tempering from where we had anticipated to be when we put our initial guidance out there.

Now, there are winds of caution coming from a variety of markets, but, at the same time, we know that our programs in places like defense, for example, on the beryllium composite side, are funded, as an example, which gives us some tailwind, right, vis a vis, anything that might happen on the negative side on the market side. So, we've got that plus the launching of some programs plus the lowering of the costs associated with the facility consolidations sort of as tailwinds in the end numbers, and we are not assuming aggressive and robust growth in markets.

Okay. All right. But it's - is it fair to say, though, that you would expect the markets to be at least stable to up modestly, overall?

Yes. That is correct. Yes. And we did have a sales level - or, order entry level in the first quarter that was above sales level.

Yes. So that was - that's certainly encouraging. And, too, you think about the first quarter or first month of the quarter, it's not unusual for input rates - order input rates to fall off a bit, is it? Isn't that fair? So that --

I tell you what - the order pattern for the last two years is so unpredictable, I wouldn't say anything's normal anymore.

Yes.

All I can say is we're encouraged right now that we don't see it going south, and, as you point out, we see it stable to up modestly.

Okay, I get it. Point taken. All right, guys, good luck on the second quarter, and congratulations on the 1Q outcome.

Yes, thank you.

Edward Marshall, Sidoti & Company.

Final question from me, just to follow up on the - all the charges and the benefits in the quarter. What is, say - what is the look of the - if we strip out all these charges and normalize the tax rate, what does the quarter look for you, just out of curiosity? What would you would have - what would you have reported if these extra costs and benefits weren't in there? Looks like there's roughly $0.07 from -

$0.38 to $0.40 report.

$0.38 to $0.40, right. Okay. And the tax rate -

That's also the tax benefit, correct?

Right, right. And the tax benefit, you said, was $0.03 for the full year 2012, correct? So, about $600,000?

Yes.

Yes.

And then, there was the facility consolidation of about $700,000, right? And the AMT - and the inventory charge at $2.3 million.

Yes.

Yes. Yes, that's correct.

Okay, perfect. Thanks, guys.

Thank you. Mr. Hasychak, there are no further questions at this time. I'd like to turn the call back over to you for closing comments.

Thank you. This is Mike Hasychak. Thank you very much for participating on the call this morning. I'll be around the remainder of the afternoon to answer any further questions. My direct line is 216-383-6823. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines. Thank you for your participation.