NN Inc (NNBR) 2003 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the NN Inc third Quarter Result Conference Call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. [operator instructions]As a reminder, this conference is being recorded today, Thursday, October 30, 2003. I would now like to turn the conference over to Miss Susan Garland with FRB Weber Shandwick, please go ahead.

Thank you. Good morning. Welcome to NN Inc.'s Third Quarter 2003 Conference Call. By now, you should have all received the copy of this morning's earnings release. If anyone still needs a copy please call my office at 212-445-8473, and we will send you a copy immediately following this call. Before we begin, we ask that you take note of the cautionary language regarding forward-looking statements contained in the press release. The same language applies to comments made on today's conference call and live webcast available on www.fulldisclosure.com. Please note this call is being recorded on October 30, 2003, contains time-sensitive information and is intended for replay till November 6, 2003 only. With us this morning is Rock Baty, Chairman and Chief Executive Officer and members of NN's management team. First, management will give an update and overview of the quarters' results, and afterwards there will be an opportunity for Q&A. Now, I'd like to turn the call over to Rock, Rock please begin.

Thanks Susan. I have with me this morning from our management team, Steve Fray (ph.) our Corporate Controller; Will Kelly, our Chief Administrative Officer and Manager of Investor Relations; and Dave Dyckman, our VP of Business Development and CFO. Dave is going to begin the call this morning with an overview of our third quarter results as well as an outlook for the fourth quarter and the balance of the year, and then following Dave's comments I'd like to conclude the call with general comments regarding our third quarter actions that support our overall long-term strategy, as well as discuss our business planning process for 2004, and comment just briefly on some key initiatives associated with that plan. With that, I'd like to turn the call over to Dave.

Thanks Rock. First, I'd like to focus on third quarter results. Revenues in the third quarter of 2003 were up 36% versus 2002 third quarter. Roughly 70% of this improvement was due to including the results of our recently acquired operation in Veenendaal in Netherlands in 2003's results. Excluding the contribution of Veenendaal, sales were up 10% versus the third quarter of 2002 with currency accounting for 6% of that. This marked the sixth consecutive quarter of improved revenues versus the prior year. The underlying economic environment is difficult to assess and continues to be a concern. As mentioned in the press release, earnings per share for the third quarter, excluding the 1 cent gain on the sale of certain NNRK assets with 17 cents, which compares favorably with the third quarter of 2002's 14 cents per share. Bridging this improvement, we had the negative impact of inventory build and favorable variable stock option accounting in 2002, which was not repeated in 2003 or negative 2 cents. Sales mix, negative a penny and one-time ramp up expenses supporting new business we discussed in the second quarter call as well as material surcharges in Europe that we anticipate passing through in January, collectively negative 2 cents. These were more than offset by the benefit of accretion from our purchase of Veenendaal and SKF Euroball ownership for 3 cents. Accretion from the Veenendaal acquisition on the penny, volume which contributed 2 cents and currency and tax each contributing a penny. Moving to 2003's third quarter, EPS is 17 cents. By division, IMC and Delta combined for 2 cents per share for the quarter and the Ball & Roller and NN Euroball divisions contributed 5 cents and 10 cents respectively for the quarter.

Now changing focus to debt. As of September, our net debt level of $81m was a million higher than at the end of June. The components of this change include cash flow from operations of roughly $7m, offset by $4m in incremental working capital associated with new business and certainly dollar requirements, dividend payments of $1.3m and capital expenditures of $2.7m. With regards to year-end, borrowing for the currency movement, we are forecasting December net debt level to be roughly $4m lower than September. As for the fourth quarter outlook, while we anticipate fourth quarter revenues of approximately $64-$65m, our current forecast includes incremental currency of $1.7m. As indicated in our release, our corresponding EPS is 17 to 18 cents per share compared to our previous guidance of 20 cents for the quarter. The 2 to 3 cent difference results from two primary factors; first, 1 to 2 cents from volume related to anticipated softer automotive demand in the quarter; and second, a penny impact from a launch of both the company wide lean initiative discussed in the release as well as efforts required to address stocks for poor legislation. This puts our full-year EPS estimate at 76 to 77 cents per share, representing a healthy 40% increase over 2002's 54 cents per share. And with that, I would like to turn it back over to Rock.

Thanks Dave. I would like to conclude today's call by commenting on just a couple of issues if I could. First, both issue strategy execution in the 2004 business plan. First, strategy execution, as you know we continue to be focused on that from our management team perspective as well as at the Board level. And the execution of the strategy involves three very long-term objectives. First, we want to continue the product offering, expansion that we've discussed in terms of multiple bearing components, as well as other possible precision components. Second and important part of the strategy is that geographic expansion of our manufacturing base, essentially, following our customers where and when they need us from a geographic and global perspective. And third, we intend to focus on the $1.7b captive internal production of our customers bearing component.

In support of the strategy in October, we announced the acquisition of KLF, a small precision ball operation in Slovakia. This acquisition is very consistent with the three long-term objectives I just mentioned, and the strategy to further expand our overall global manufacturing base. We chose Slovakia for our initial entrée into Eastern Europe for several important reasons. First, it provides a solid manufacturing base, centrally located within Eastern Europe itself. And importantly, is in closed proximity to our global bearing customers, many of whom have already established operations in Eastern Europe. Second, Slovakia offers an excellent site with respect to access to skilled and well-educated employees. The operation also offers an overall low-cost structure including excellent incentives from the Government of Slovakia itself. Third, while the existing business that outlined in the release is relatively small, we are very optimistic regarding the long-term growth prospectus for the facility based upon the growth --projected growth rate within Eastern Europe.

The second issue I'd like to kind of discuss is our business planning process for 2004 itself, this is an ongoing process and we are scheduled to complete it by mid November. Although, plan as I mentioned is not complete, I'd like to make several comments regarding initiatives associated with 2004. As we continue to express and Dave mentioned as well it's difficult to get a firm hand on overall demand based upon the continuing uncertainty of the global economies that we serve. However, our plan will reflect essentially flat economics in Europe from 2003 to 2004, and moderate growth -- slight-to-moderate growth in the U.S. of 2-3% excuse me, in North America. Having said that, in terms of the moderate economy outlook, in terms of small growth in both our North America and European markets, it's important for me to convey that based upon those overall economics and the actions that we have taken over all last 2-3 years in terms of capacity, the industrial demand and the overall automotive demand in our customers end markets provide us at NN with sufficient volume to achieve good levels of asset and facility utilization for 2004. We will continue to focus on debt reduction for 2004 by prudently managing both working capital and capital expenditures, we will support the execution of our overall strategy, continuing, and specifically you can expect to here on us working on further geographic expansion, specifically Asia and more specifically China. The first step in that process as we see it is to recruit a Managing Director for NN Asia; we currently have a global search for that individual ongoing.

The continuing integration of our two most recent acquisitions Veenendaal and Nove, Slovakia is another key focus for 2004. We have got much work and effort to fully integrate not only from an operational but a sales marketing perspective these operations and to get them to contribute the financial and sales growth returns that we expected when we concluded the acquisitions.

In 2004, we will also continue to fully comply with the requirements of Sarbanes-Oxley. Having said that for a Company the size of NN, the new law, is and will continue in 2004. It creates an unbelievable drain from both our management and financial resources perspective. The cost of compliance for Sarbanes-Oxley will increase dramatically for NN in 2004.

Finally, I'd like to comment specifically on a new corporate initiative at NN. For over a year, we have been searching for a common set of skills and tools that our management team and employees can utilize to achieve what we've called the quantum leap in cost and quality improvement in our manufacturing and bearing component products facilities. Our customers and NN both face incredibly competitive market pressures with demands for year-over-year reductions in the selling prices and dramatic improvements in product quality.

To meet that competitive need at NN, we have instituted a company wide program, we called Power Lean, which integrates the principles of Lean manufacturing, Six Sigma and Total Productive Maintenance into our operations. With now nine global bearing component manufacturing operations, in the US, Ireland, Italy, Germany, the Netherlands and Nove, Slovakia, a common approach is needed to the ongoing cost, quality and service improvements that are required in today's marketplace. This is a program with no end; it represents a long-term change in the way we are doing business at NN and an investment in our employees and the organization itself to provide a common set of skills and tools to proactively refund to the future needs of our customers. We are very excited about the program, we believe the program will yield substantial cost and quality benefits and ultimately allow us to better serve our customers, employees, and shareholders moving forward.

With that I'd like to open the call for questions.

Thank you sir. Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator instructions] Our first question comes from Larry Baker with Legg Mason. Please go ahead with your question.

Good morning.

Good morning, Larry.

Good morning, Larry.

Just a couple of housekeeping questions to start with it, if I may, the share count going forward will stay at the 17/2 level of this quarter?

It's a good [inaudible], we've modeled there and we're beginning to model in 17/3, Larry.

Okay. Alright. And then the definite tax rate this quarter, so what does that imply for the fourth quarter as well as '04?

As far as '04, you should see at this point, your planning should be normal tax rates. With regards to...

36.5 -- 37?

Yeah, consolidated.

Okay.

And with regards to the fourth quarter, there is potential benefit but we haven't gone through the process with PW to confirm that there is going to be benefit, we don't think it would be even if its there to the extent that you saw this quarter. This quarter is just a natural roll off of tax reserves that we carry -- three year tax reserves, and as we filed in September it's just the time of the year that you see that.

Okay, and then finally with the -- your interest expense came in a little bit better than I had expected, is that -- is the less than a million dollars a quarter sort of a good number going forward, I think it was with the debt payment that you have scheduled?

Yes, less than a million dollar is a good volume.

Okay, good. Can you talk about, I guess, gross margin compression in this quarter? There were some cost pressures that you had experienced earlier, are those still there, I think, surcharges on scrap, and then just sort of what -- how you work through the Veenendaal acquisition in terms of bringing those margins up to get to your overall margin -- gross margin back up?

Let's handle this -- this way, I will talk to the gross profit margin, Q3 of this year -- the last year and then maybe Rod can expand upon initiatives within Veenendaal looking forward. As you know and we talked about this in the last quarter, Veenendaal's gross profit margins tend to be in the high- teens. So, there is a dilutive effect, which explains the majority of the difference, percentage to sales wise. Last quarter we talked about, I think, we call them just certain operating inefficiencies or issues and a key one was the material surcharge. And yes, we have experienced that this quarter but again as you know, Larry, it's a timing difference in our ability to pass that along contractually is in January. We did have sales mix, which impacted margins slightly this quarter, which I commented on earlier, just in particular case little bit heavier material content in some of the products but I think for the most part the ramp up of business -- new business that we'll talk about in the second, dribbled a little bit into third but for the most part we were able to get that behind us. And I hope that that answered your Q3 question but let me hand it over to Rod, he can talk Veenendaal specifically and then comeback if -- comeback to me if I didn't do a good job there.

Okay.

Did it answer your questions Larry on that piece?

Yeah.

Veenendaal, I mentioned it, I commented briefly on it, in my comments Larry and both the Veenendaal and now Slovakia, you know we -- when we acquire businesses and we -- in virtually every acquisition that we have had historically, the margins are lower than our corporate averages and it takes time to get the margins to level that we like to see. And 2004, the plans for Veenendaal are conveyed improving margins and having said that how we go about doing that as a company, many of the initiatives that I mentioned on the Lean Sigma maintenance excellence program are the facility with, you know, the two of which to make those and achieve those operational improvements, we've got manufacturing in organization on improvements to make and been involved for example in terms of process and lean initiatives as well as sales initiatives in terms of the integration into NN actively going out and achieving additional volume until the two-pronged approach both from the sales perspective as well as operational and we do anticipate improved earnings and margins for 2004 or rather Veenendaal.

Okay, can you talk a bit -- other companies that have gone through the Six Sigma program, this is not exact relationship but frequently are able to generate savings in the period offset the implementation cost, sort of almost pays for itself by that program?

That's a good -- an excellent point, I mean honestly Dave mentioned -- small -- this year in the fourth quarter here we are just getting the program up and rolling in the fourth quarter and in reality full implementation will take six -- another six and nine months in terms of getting employees trained in the process for 2004. And we not only fully expect to offset the cost of the program moving forward but to have a tremendous returns versus the investment we are going to make. So this quarter happens to be a situation for what Dave mentioned that we will see, you know, we saw a little bit -- in terms of his comments on the fourth quarter, but we fully expect to offset the costs associated with doing the program in 2004 and well beyond that in terms of returns and improvement.

Can you quantify something about '04 in terms of your target for either gross margins or operating margins whichever one you tend to look at?

We prefer not to do that right now as I mentioned, the plan is not complete. You know, we would in kind of normal economics and with the Slovakian acquisition there is a variety of reasons why we are couple of weeks later in the process than we normally would be, but as I mentioned it's kind of mid-November now and at that point we can certainly discuss it.

Okay, and because the variety in this year of gross margins and I tend to throw the depreciation and amortization in there as expense, it's still like a 400 basis points swing from the first quarter down to the third quarter which even with your seasonality is a fairly unusual shift.

Yeah, it is but one thing you got remember is the percentage of our business in Europe in the third quarter, for example, was the fall integration of Veenendaal as well as the 100% ownership of Euroball, that with the August shutdowns and the volume being down slightly in the third quarter, those -- I think we will see a seasonality in our business more so than we have seen in the past is the kind of best way to put it, especially in the third quarter.

Okay, but your sales forecast for the fourth quarter doesn't show any improvement over the third quarter?

Well, that's a reflection of a pretty substantial reduction in automotive demand for the fourth quarter versus the third.

Okay. All right, I will stop here. Thank you very much.

Thank you. Our next question comes from Greg Ramsby [inaudible] with the Deprance, Rand and Zollo (ph.). Please go ahead with your question.

Thanks. Good morning guys.

Good morning Greg.

Hi Greg.

You just partially answered one of my questions, which was, can you look out across your business sort of by region and talk about the outlook and I mean, obviously, Europe is weaker, but can you give me a little bit more detail about, you know, what you think you are going to see in the fourth quarter and your expectation maybe beyond that, just in terms of what you are seeing in the businesses by region?

Yeah Greg. The fourth quarter, I mean, you know, the automotive reductions in terms of -- versus the third quarter and second quarter are in the range in North America of around 3-4%, that's what we are seeing. For 2004, there were some, you know, even as early as or as late as two or three months ago there was some forecast that said the automotive build rate in Europe were going to be higher than North America. Now, the most recent forecast are that Europe is essentially going to be flat, just a very small increase, two-tenths of a percent. You know, they are going to build about the same number of light vehicles that they did last year, around 60m.

In North America, because the fourth quarter should be down, the actual increase in North America for 2004 is projected to be around 3% up. But, in total both North America and Europe build rates are around 16.3-16.4, and I tried to mention in the call and convey in the call that -- both are healthy levels of automated production even though year-over-year economics when you look at it is flat or relatively close to flat. But in terms of our ability to manage our utilization and capacity, that's very decent demand on automotive front. That's about 50 -- we mentioned about 50% of our overall end market demand driver. The other general industrial segment we are forecasting flat in Europe and flat in the US both for next year until something happens that we see differently; most of our customers say the same things, they are not seeing any incremental increases there. And again that level is sufficient for us to have decent utilization of our facilities for 2004. I mean, we would love to have a little bit more incremental revenue on the economic front, but it's not a disastrous demand front for us for 2004 by any means.

Okay, now you also mentioned -- I think Dave mentioned there were some ramp up for start up cost for new business. Can you talk a little bit about the new business and when it's going to start and how significant it is?

Yes, Greg, it is David. It has already begun and the ramp up being principally getting an end product in a relatively tight timeframe, so we had some higher than usual shipping costs and a lot of these businesses in Korea as we mentioned partially reflecting a weaker dollar, but it was expensive to get in the game and servicing them in the way they needed to make the transition. It's pretty substantial business for us to the tune of -- this year may be in the neighborhood of 2-3m; next year potentially double that depending on how economics go. So, what you saw in my comments reflected just working capital ramp up on the debt side and also expenses of getting in the product early on.

Okay, so that's behind you now, as you start shipping and what not?

Yes.

Okay, thank guys.

Well, now the only other side is the material surcharge but I don't think we are...

Right, okay thanks.

Thank you. Our next question comes from Michael Correlli with Barry Vogel & Associates. Please go ahead with your question.

Hi good morning.

Good morning, Mike.

Couple of questions; first of all what percentage of your sales now goes to automotive?

Roughly 60%

Yes, I mean it can vary but between 50 and 60. I mean it's kind of a broad range and it depends on kind of how the mix goes, but with the acquisition of Veenendaal it's approaching 60%.

Okay and then capital expenditures what do you expect those to come in for this year and do you have any idea for next?

Well, we can comment to this year but again we going to prefer not to comment about next year. Are you still there Mike?

Yes.

Okay, we anticipate about 10m for this year.

Can you comment as to which way you think it will to go next year versus the 10m this year?

No, we are going to stay silent with regard to our forecast for next year.

All right and then just a couple of questions on costs, Sarbanes-Oxley costs. Can you give us an idea, you know, magnitude what that might look like next year versus what it was this year?

Well, this will be my direction to you; again, we don't' want to comment about next year but we have just begun the Sarbanes-Oxley efforts with regards particularly to the financial documentation needs to be put in place. We are launching that in the fourth quarter and if you take that for full year naturally it -- I should have given you enough information that you can kind of get there yourself. We anticipate that program going through the bulk of next year.

Okay, and then source material surcharge have you been able to pass on the surcharges. You said you could start to pass them on the first of the year. Do you have any idea how that's hurt you this year and what kind of benefit you might have next year by being able to pass it on?

Material surcharge has been in the neighborhood of 1-1.5% depending on the quarter you look at on material acquired in Europe, that's in the neighborhood of -- may be a 1-1.5m I would guess, didn't hit the whole year.

Okay, so the cost for this year would be about a 1-1.5m?

No, no in terms of just that material -- material in Euroball.

But I think he is asking the earnings.

Okay, Mike may be we should ask you to clarify your question.

Oh, I want to know what kind of additional cost that you experienced this year from surcharges that may be you might not have to experience next year, if you could pass them on under the new contracts?

Yes. Okay, roughly in the neighborhood of 400,000-500,000 -- 400,000.

Okay, so it's not a huge number.

A couple pennies.

Yes it may be 2 cents.

Okay. Alright, great. Thank you.

Sure.

Thank you. Our next question comes from Brian Raphine (ph.) with Morgan Dempsey Capital Management (ph). Please go ahead with your question.

Good morning guys.

Good morning.

Can you give us an idea on a capacity utilization basis, you know, you can break it up by company or by plant kind of where your add factory wise?

How about if we just say generally speaking in the U.S., the utilization rates would be in the 75-80% range.

Okay.

And in Europe, around, a little, you know, around 80 there.

Okay. In the Slovakia area, you talked about a fairly would be - let's believe would be a little lower wage based. What's -- what kind of support have you got from the government and what's the infrastructure like relative to the water sewage, electricity, roads, that type of things?

As you may -- I don't know as you may or may not note Slovakia attempts to be a relatively developed Eastern European country; as a result the infrastructure tends to be good, where you need to obviously insulate yourselves is environmentally, because there is a long, long history of operating there not under EU, necessarily standard, so in that areawe pay particular attention to. But the interest on the infrastructure, that's reasonably good. Other incentives, obviously improved tax incentive and there is relatively good local training, educational institutes -- that the labor supply, well being less expensive, it's very well trained.

Okay. What type of order of magnitude in your general wage base versus the Netherlands versus Germany, what's Slovakia be on a percentage basis, you know, hourly rate?

20%.

20% less or 20% at the base there.

20% up.

80% less.

Okay. In the ball side, you guys have had some initiatives relative to rollers, where is that for '04?

Above and beyond Veenendaal. On the U.S. side, we have certain customer growth programs, but there is not a large doorstep there that you would see that's significant to the overall business. I think what we -- well, we are also trying to focuses on diversity of product, not just cylindrical which has been traditionally all we supplied in the U.S.

Okay. Could you give us kind of an order of magnitude dollar wise what that business might be in total dollar sales?

Today, it's in the neighborhood of $7m annually.

Okay.

And anything we might do in 2004, honestly would maybe potentially add an incremental $2m or $3m.

Okay. Any initiatives in industrial molding IMC towards new products diversification?

Yes -- well, in the case of IMC again, two-thirds of their business serves non-bearing component of bearing customers and we are interested in growing that business intrinsically and expand a fair amount of time with the marketing and sales group there on the key marketplace serve (oh), which we have talked about this in the past but they do fiber optic connectors, they serve some of the handheld devices encasements, but anyway I would tell you that the magnitude of growth there over the last ten years has been phenomenal and the outside bearing component part of the business, probably 25% of their current volume has been driven by mixed growth, and most of that outside of bearing components. And in the case of Delta, I think you asked that question?

Yeah.

And in the case of Delta, it is all bearing component related. It's their focus and they tend to focus in the outfield environment which is automotive and they have got some very nice platforms with a couple of customers that I think had we not seen some of the or at least we weren't planning on the automotive platform push outs, that we had hoped to see in the earlier part of '04 but we are learning. They are being delayed 6 months to a year now. We -- I think we would have had greater cause to be jumping up and down about Delta's opportunities for next year but it's really a question of the economics and getting those platforms from the automotive companies, the big three principally, into the market place.

Okay, Roderick, you made some comments on -- the NN balls are relative to the automotive area. Anything else, you know, other areas aerospace, general industry, construction equipments, relative to balls and rollers -- dual wide.

Yeah, I mean, just to comment on that, I mean, that's been the area that has remained relatively at depressed levels since Mid-2001 and our customers, you know, we obviously have to listen to our customers closely on that; so, much closer to the end market drivers than we are. And you know, they are essentially saying it's at the level that it has been at for the last 24-36 months with no perceptible difference moving forward in terms of what they foresee at least for the next couple of quarters.

Your -- issues on Power Lean of Six Sigma, can you kind of give us a sense of color relative to when you talk in general about productivity, are you talking about reductions in salvage scrap, cycle time production or shipping rate service responses, what do you guys are really talking about there, is there one area or several areas that you are looking to upgrade?

The reason that we like the program and the integration of Lean Manufacturing in Six Sigma and maintenance is that it so closely fits with our business. And having said that, the whole process starts out with an evaluation of all nine manufacturing facilities and in what area can we get the biggest bank for our effort with respect to those three fully integrated areas. Some of our plants have done a much better job in Lean for example than others, and some have and therefore the focus in those facilities will likely be in Six Sigma and maintenance excellence. In other facilities I'd say (ph.) job on the Six Sigma side and conversely not as well as main, so the current state of each facility is going to determine where we focus our efforts, but the company that helping us through the process, Rockwell Automation, they are manufacturing firm, the are poly-systems division and they are the first firm that we have seen that's a manufacturer that has delivered solid results and they have been at it for three years. The expectations that we have internally for these improvements on either quality, on the maintenance side, the service side and throughput and productivity and cost side, I said quantum leap and we have expectations that we will see quantum leaps in each of those areas.

Okay. You guys have the automated bin system in the U.S. Is that something that applies to Europe or is that something that's universal throughout all your factories for your customers?

That was the part of the original Ball and Roller business and because of the integration of Euroball with its former earners SKF and INA/FAG, there had been quite a bit of its visibility while we had linked systems there. Today they are actually actively trying to build a comparable bins type system in Europe.

Okay.

Okay

Is that 1, 2, 5 year, what type of time horizon?

No, I would guess it is in the next year, year and half kind of things

Okay.

Euroball and the European operations today are first order business, all get on a common system which they are -- not sort of Veenendaal relative close to doing, which is good movement within the three years that they have been operating. And once on the pin system and then you can make use of bins type system.

Okay.

So, we have the knowledge of decoding that goes in or say what it takes, it is just the matter of getting everybody on the same system first.

Okay. What have you guys experienced domestically relative to healthcare inflation?

Looking forward we probably healthcare -- this is Will speaking, we experienced probably as high as 25% in some areas this year over last year. Looking forward into next year, we are in the process of getting our clients back, but we see again 15% plus increase in healthcare.

Have you guys had to create a tiered healthcare system or have you gone to, you know, a kind of inferior benefit package or are you -- is there more co-pay or how you guys are doing it?

We are keeping those relatively stable. We are actually seeing where we can add benefit in way to our employees where we can for little or no cost. But we are not looking at tiered or any kind of increasing co-pays. One thing we do see increases in next year going forward is the D&O insurance.

Okay.

I think that has diluted down a little bit with the Sarbanes-Oxley, so that's where we see some potentially big increases.

Okay. Good enough. Thanks guys. I appreciate it.

Thank you.

Thank you. [operation instructions] Gentlemen, we appear to have no additional questions, please continue.

Thank you again for joining the call this morning.

Ladies and gentlemen, this concludes the NN Inc. third quarter results conference call. And if you would like to listen to a replay of today's conference, please dial 1-800-405-2236 followed by access number 556586. Once again, we thank you for your participation and you may now disconnect.