NN Inc (NNBR) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you so much for standing by, and welcome to the NN, Inc. Second Quarter Results Conference Call. (Operator Instructions.) As a reminder this conference is being recorded today, Thursday, the 2nd of August, 2007. I would now like to turn the conference over to Ms. Susan Garland of the Financial Relations Board. Please go ahead.

Thank you. Good morning. Welcome to NN's 2007 Second Quarter Results Conference Call. If anyone needs a copy of the press release, please call my office at 212-827-3746 and we will send you a copy. 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.earnings.com.

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 an overview of the quarter, and afterwards, we'll open up the lines for questions. Please--I'd like to now turn the call over to Rock. Rock, please begin.

Thank you, Susan. Good morning, everybody, and thanks for joining the call. I have with me this morning Jim Dorton, our CFO and VP of Business Development, Will Kelly, our Chief Administrative Officer, and [Tom Burwell], our Corporate Controller. Today, Jim is going to discuss an analysis and commentary on the second quarter and first half of 2007 results. And I'll conclude the call with a general business overview. I'd like to turn the call over to Jim.

Thanks, Rock, and good morning, everyone. Results for the second quarter were unsatisfactory in total, but they varied considerably by business unit. The metal bearing component segment was actually ahead of business plan for the quarter on the strength of the--of European demand and the strong Euro. Plastic and rubber segment was just slightly off. And of course, the precision metal segment, made up of our new acquisition, Whirlaway, was way off, due to their miss on sales, which was the main factor cited when we lowered earnings estimates for the year on July 25. And Rock will talk more about business dynamics in a few minutes.

On the 25th, we also announced a restructuring and impairment charge for the restructuring of our European precision ball plants, which will be taken over the second and third quarters. We said that the charge would be in the range of $14 to $16 million. We now believe the actual charge will be in the approximate range of--or approximately 16.2 million pre-tax, 15.5 million after-tax, or $0.91 per share. Of this amount, in the second quarter we recorded a charge--pre-tax charge of 15.3 million - 14.9 million after-tax - or $0.87 per share. This is all a non-cash charge consisting of the following - 11.9 million for the elimination of purchased goodwill at our German ball plant, and the write-off of certain intangible assets in the other European ball plants; 3.3 million for the write-down of excess and obsolete production assets at several European ball plants; and a $.4 million tax credit--net tax credit offset to these charges, which is net of the impairment of certain deferred tax assets at the European ball plants.

In the third quarter, we will take the remainder of the charge, which will be approximately .9 million pre-tax, .6 million after-tax, or about $0.04 per share. This is a charge for employment and legal restructuring costs. After we make these changes, we will have a leaner, tighter organization and an asset structure that should be more profitable going forward.

Now, just to recap the results for the second quarter, we had sales of 107.3 million, an increase of 23.7 million, or 28%, compared with the same quarter last year. 17.1 million of the increase was for the Whirlaway sales, which, of course, was not in last year's results. 3.8 million of the increase was currency translation, and the remainder was from generally stronger demand for precision balls in Europe, and strong demand for rollers worldwide.

Whirlaway had a sharp decline in orders, which negatively impacted the quarter and caused us to reduce the outlook for the remainder of the year in our pre-release. Excluding Whirlaway and the restructuring and impairment charges, we had net income of 3.6 million, or $0.21 per share, versus net income of 3.5 million, or $0.20 per share in the second quarter of last year. Currency translation had a positive impact as the Euro averaged $1.35 this year versus $1.26 last year.

Without the impact of the Euro, these adjusted results would have been basically flat with last year. Including Whirlaway and all the charges, we had a loss of 11.8 million, or $0.69 per share. There is a table at the end of the press release that reconciles the GAAP and non-GAAP adjustments for your later reference.

The effective tax rate for the quarter was strange - a negative 10% rate. And this is a result of the pre-tax restructuring and impairment changes not having much tax benefit. Without the restructuring charge and some other non-operating adjustments to the tax rate, the tax rate would have been around 33%, which is relatively low due to the mix of income by country and other adjustments. The tax rate for the third quarter should be in the 37 to 38% range, even with the write-off in the third quarter.

Looking at the balance sheet, our cash balance was slightly higher than normal at quarter-end. However, since then, we've repaid $5 million in debt early in July, so the cash and debt are now both lower. Working capital is at a generally high level, which is not unusual for this time of year. Also, we have built some safety stock inventory in precision balls to deal with the restructuring actions just to be sure that we meet customer commitments. We think inventory will decline through the balance of the year. You will also see a large reduction in goodwill and a reduction in intangible assets, which is associated with the restructuring and impairment charges, and this is partially offset by some growth in those areas due to the currency impacts.

Property, plant, and equipment also declined due to the impairment charges, again, partially offset by currency impacts. Capital spending totaled 3.6 million during the second quarter and is at 6.8 million year-to-date, which is right on plan and just about flat with last year. We are continuing to build up our production capabilities in China, which is where the heaviest spending was. And this will continue until the middle of next year.

We did not repurchase any stock during the first quarter, but our share repurchase program remains authorized.

At this point, overall cash flow is below plan due to the working capital buildup and the lower profits at Whirlaway. However, we still expect to make significant progress toward our debt repayment goal of $12 million by year-end.

That completes the financial comments. And now, back to Rock.

Thank you, Jim. I'd like to close the call today, if I could, with comments regarding the general business overview. From a revenue perspective, my initial comments will deal with total revenue, but specifically the trends we are seeing in our base metal bearing components and rubber plastics businesses. Year-to-date sales for the total Company during the first half of 2007 were 215.2 million and slightly ahead of plan forecast of 210 million for the year-to-date, the increase coming from translation related increases associated with the continuing weakening of the dollar versus the Euro and economic strength in Europe. In comparison to 2006, good demand in Europe and global industrial markets in general offset lower demands in North American automotive, and the end result essentially being flat year-over-year in terms of revenue comparisons for the first six months of '07 versus '06.

For our base business, we expect the same trends that occurred in the first half of the year to continue for the remainder of the year, namely, good European economic environment in both automotive and industrial offsetting lower but stable levels of business in North America.

With respect to our newest acquisition, Whirlaway, we expect full year revenues to be 12 million less than the original plan of approximately 80 million that we forecasted at the beginning of the year guidance. Specifically, we are forecasting lower revenue for the last half of the year than we experienced during the first half, which was already at lower than planned levels. As we mentioned in our July 25, 2000 (sic) earnings revision guidance release, the impact of this 15% reduction from plan levels has had the effect of Whirlaway's first full year with NN going from a forecasted $0.10 per share accretive year to an estimated loss of $0.09 per share.

Although slow automotive demand impacts the revenue slightly at Whirlaway, two issues are responsible for the majority of the reductions for 2007. First, the pre-build issue associated with Class 8 truck diesel engines, and second, the pre-build associated with the new SEER 13 energy ratings and also low housing starts impacted the HVAC business. Both issues have been significant and have served to simultaneously reduce volume at Whirlaway for 2007. Our revenue is down some 30% with our customers in these markets, which collectively account for more than 50% of Whirlaway's current business.

The results from Whirlaway thus far are obviously very disappointing. Both end market issues were identified in terms of the pre-build in our due diligence process as part of the acquisition. Unfortunately, the magnitude of these reductions were not fully understood or recognized at the time. When the pre-build issues are resolved, we believe both the diesel engine and the HVAC markets have very favorable long-term economic characteristics that make them attractive for served end markets at both Whirlaway and NN.

With respect to our operation in China, the reduction in earnings versus our original plan and earnings guidance relates to the issue of timing of revenues. We are in the process of obtaining customer approvals and at the same time adding incremental capacity. Delays in the revenues associated with the approval process principally have meant a revenue shortfall for the year of approximately $3 million. We are estimating total shipments for the year of approximately 6.6 million, which is still below breakeven volumes.

Our original guidance for 2007 was for the facility to be slightly above breakeven. There has been very good progress on the operations side of the business made during 2007. The development from both a quality and productivity perspective has met--have met our expectations for the startup. We have significantly narrowed the incurred loss that we incurred last year versus the loss that we will incur this year. We have been awarded new business for the facility and when the timing issues are resolved during the second half of 2007, we expect the plant in 2008 to swing from a loss in the current year to a solid profit for 2008.

Finally, I would like to restate our overall belief that the Whirlaway acquisition will prove to be an excellent long-term investment for NN. The company's engineering and manufacturing competencies remain attractive and meet the end market diversification and growth potential objectives we identified at the time of the acquisition. The business remains an excellent platform to profitably grow both organically and acquisitively in the next five years. We remain committed to the grow objectives outlined in our long-term business strategy. We are positioning all three product platforms - metal bearing components, rubber and plastic components, and precision metal components, to achieve the profitability objectives that we are--we have outlined in our 2005 strategic business plan.

With that, I'd be happy to answer any questions--all of us would--that you may have.

Thank you, sir. (Operator Instructions.) Our first question comes from Holden Lewis with BB&T. Please go ahead.

Good morning. Thank you. A little bit of just housekeeping here. What was the impact of price during the quarter, either increases or for a drawdown from your new contracts?

It was about $1 million, Holden.

$1 million was--in terms of positive impact from price or negative?

Negative impact.

Okay. And we can sort of expect that level going forward or are the contracts kind of ramping so it will increase?

No. No increase. About that level moving forward.

Okay. And that includes into 2008?

Yes.

Okay. The organic growth rate then, sort of stripping out the currency [indiscernible], it was very solid. Was that just Europe or are you seeing sort of broader strength across North American industrial markets? I mean, how broad is that improving organic growth rate?

Very broad in Europe, but as I mentioned in the--in my comments, the strength in Europe in--if you think about it--for the first six months anyway--in the quarter it was very strong and it more than offset good levels of demand in North America, but somewhat suppressed because of automotive--the automotive piece. But generally speaking, good industrial demand globally offset by some--the softness, as we all know, about the North American piece in automotive. So the quarter was very strong and showed good organic growth. Year-to-date, if you take the impact of currency out and the factors that I just mentioned, we're just--it was just slightly above flat, frankly.

Right. But it improved in Q2. And I guess the point is there's nothing to suggest that that improvement isn't durable based on--?

--No. In fact, we see kind of what happened in Q2, we--you have to deal with the seasonality of Europe in the third quarter, of course. But the demand remains strong. Our customers and everything they are telling us and what they are saying publicly say that the demand in Europe is going to remain strong for the balance of the year.

Okay. And then, just talking about the write-offs of debt in Germany. I mean--or in Germany and Europe. You acquired the businesses. For the most part, right now, Europe and Germany, in particular, is getting very strong. So I have to think that the business over there is getting better. And yet it seems like you're writing off the goodwill from the deal. You are writing down a bunch of assets. I mean, is this effectively sort of a--plus you're building up inventory, and one could speculate on the reasons. But I mean, is this sort of a move to downsize the Western European operations, or what's sort of the end game of these write-offs in what is an improving market?

As Jim mentioned, the impairments that we're taking and the write-offs--the restructuring write-offs, deal with fixing specific plants with specific levels of volume that has implications in particular for our German operation and our other operations as well. And it's an acknowledgement that--in the case of Germany, that we are going to fix the level of employment and fix the level of business that we put into that facility over the next couple of years. And any incremental growth will occur in our other facilities in both Western and Eastern Europe, as well as the U.S. and China.

Okay.

And so, having fixed the level at a certain level of business, Holden, it implies certain cash flows and earnings out of that specific facility in Germany in particular. There's other--there's a few other issues that Jim mentioned, but essentially, we're talking about the German facility.

Okay. And so, a sense that you are downsizing certain of those facilities.

Yes.

And [inaudible] are part of that process.

Yes. Although we--the majority of the downsizing of the German facility has occurred over the last several years. And so, this recent announcement is an additional downsizing, but not nearly to the magnitude that we--that's occurred over the last two or three years.

Okay. And you think that once you sort of work through this in 2007, that you'll kind of have Western Europe where you want it to be, or will there be more incremental steps going forward?

We think we've got it where we want it to be given increasing demand in Europe and incremental demand that can support the additional facilities globally. Not just Western Europe and Eastern Europe, but China and our North American operations as well.

Okay. But you think you need--what do you have, five plants I think in Western Europe? You think you need all of those?

Well, we have four in our ball operations. And, yes. I mean, the consensus is on this restructuring those facilities will be needed long-term, as well as our operations in the--our two ball operations in the U.S. and China.

Okay. I'll jump back in the queue. Thanks, guys.

You bet.

Thank you. Our next question comes from Mark Parr with Keybanc Capital Markets. Please go ahead.

[Indiscernible], Rock.

Hey, Mark.

I had a couple of questions, if I could.

Sure.

First, if you talk about the foreign currency revenue impact, I mean, what was--do you have an estimate of the impact on earnings from foreign currency?

A penny.

Okay. That's helpful. Thanks.

Jim actually mentioned--attempted to mention that in his comments that it was essentially on par, excuse the pun, with last year in terms of the--if you take the currency out.

Okay. That's what I thought you said. So--but I wasn't sure if you were going at it from $0.18 to $0.20 or--.

--Sorry.

All right. Oh, that's okay.

One thing that we've talked about doing, Mark, and I probably should have mentioned it in my comments, and I've talked about we're going to start doing, is reporting in our press releases our divisional platform results. Namely, the precision metal bearing components results, the rubber and plastics results, and the precision, our newest platform, in three--so I--the second reporting is already that way in our Q. But in our press releases moving forward we intend to outline what all three divisions did, and then roll up the total company.

Okay. All right. Along those lines, is there any more granularity you want to put around the results of the rubber? I mean, you said the rubber business was just off a little bit. I mean, like, can you give us some more specific numbers as far as revenues and EBIT performance?

It's--they're very close to plan.

Okay.

First--in the first six months, the total division, the total business. IMC, the results continue to be very, very good and the returns very good. And Delta has trailed a little bit based upon weak automotive demand, but has improved in the second quarter versus the first quarter. And so, that business unit - the rubber and plastics business unit - we expect to be essentially on plan for the year or forecast the same.

Okay. If I could--okay, I appreciate that. If I could shift gears a bit back to Whirlaway. Your longer term optimism is--seems to be a function of the potential for better revenues to unfold in '08. Are there any other initiatives going on at Whirlaway or other things that we need to be thinking about besides just the basic recovery of the end markets?

Well, we're certainly instituting Level Three Lean Initiatives to improve the cost structure of the company--of the business moving forward. That's a big issue. But there's--.

--What do you think the benefits--potential benefits from Level Three implementation are in '08?

I think that they're the equivalent of what we've experienced in our other businesses, Mark. And we've been--what we've said publicly, what we've seen in some of the improvement that we've seen in Level Three relative to our other businesses. But--.

--Do you think it could be a couple of hundred basis points?

Yes. I mean, our other businesses have seen 200 to 300, so, yes. And then, of course, on the revenue side, their--as I've mentioned before, their competencies in engineering and design and automation of complex components into sub-assembled assemblies, there's good potential to organically grow the business. Forget about any bolt-on acquisitions that might make sense long-term for us. There's really good organic growth prospects and applications marketing to apply their specific capabilities to needs of customers in other segments of existing markets or other new end markets that they currently are not serving.

Okay.

And we did a lot of marketing. You can look at it and say, well, you sure missed it on two of the end markets relative to the demand here. But we did a lot of marketing work and a lot of end market work on the due diligence side of this acquisition. And we remain very comfortable that it can grow at very nice organic growth rates long-term.

Yes, in fact, those are the two markets that we were some of the most excited about and still are long-term - HVAC and the diesel engine market.

The demographics on the HVAC side and the economics and environmental on the diesel side are all pointing to that they're going to be very good markets long-term.

Okay. Do you think along those lines looking at the near term, do you think we've seen the trough as far as the revenue momentum out of Whirlaway, or will the third quarter because of seasonal issues be the trough?

Well, normally the third quarter for them is strong versus the first and second. And they aren't seeing. But I think the two issues are going to divorce--I mean, they've been simultaneous up to this point in terms of HVAC and diesel. I think that the pre-build issues on HVAC will work themselves out - at least what our customers are saying - more quickly than the diesel will.

Okay.

And the majority of--out of the 50% that I mentioned, more than 60% of that 50% is on the HVAC side. The diesel--you can read everything that we see in terms of what they're saying, but I think that's going to take longer.

Okay. And one more question, if I could. I remember going back to the mid-90s where we had an extended period of a weak dollar--and actually into the early 90s where you had a tremendous opportunity to grow the business via exporting of balls from the U.S. into Europe.

Yes.

And I'm wondering if we're on the verge, or if we've begun to see, perhaps, a similar type of fundamental condition emerge for your domestic operations.

Well, if we--I think that it's a similar situation relative to currency, but our manufacturing footprint is quite different in that we have productive assets and close to the customer in Euro-denominated costs and revenue in Europe. I would say though, Mark, that the thought process in terms of the restructuring that we talked about and moving forward, there are certain products that only--we only produce in a couple of facilities. One of the--our Erwin, Tennessee facility is an example--where incrementally we--part of the plan is to serve the European marketplace with some specific products out of our U.S. operations given that we think the currency situation will be--will last at least for the foreseeable future, a couple of years probably.

Yes. So you--is it fair to think that we might look at somewhat of a mix shift?

It's possible. Yes, it is possible on certain products. Yes.

But that hasn't begun to happen yet?

No.

Okay. All right. Okay, terrific. Thanks for the additional clarification, and look forward to seeing you soon.

Okay, Mark. Thank you.

Thank you. Our next question is from Robert Toomey with EK Riley Investments. Please go ahead.

Hi. Good morning.

Good morning.

You mentioned a minute ago--the comment came up about organic growth. Can you talk a little bit about organic growth in each of the major divisions in the first half, or what that was?

As I mentioned, for the first six months the organic growth was about 1% in our metal bearing components business, flat in--to slightly down because of automotive in rubber and plastics. And our rubber and plastics division, by the way, is essentially a North American business and has more than 70% of its revenue derived from end market automotive demand. So down in rubber and plastics, slightly up in metal bearing components, and we've mentioned what happened at Whirlaway.

Right. And I had a question on cash flow. Did you mention what operating or free cash flow is in the first half, or do you have that?

No. The only thing we--we don't usually have the whole cash flow statement at this point. But I gave you the capital spending numbers, and you've got depreciation and net income. So you can do a rough calculation, and then we'll have the full cash flow out when we file the 10-Q.

So there wasn't much in terms of working capital?

No, working capital was a large net negative, which is typical--in the second quarter, which is typical of our mid-year results, same as last year. I think working capital is up year-to-date $8 million. So--but that typically surges in the middle of the year and then goes down by the end of the year.

Okay. And can you comment on what your current effective capacity utilization is right now?

I would say in our ball--our metal bearing components business it's high - with the exception of China, it's high. It's in the 85 to 90% range for both balls and rollers. And in plastics and rubber, probably in the mid-80s. And obviously, at our newest operation, Whirlaway, I would guess down in the 60 to 70% range.

Okay. You mentioned earlier that you have--you feel very good about the prospects for your production facility in China, and that you--I think you said you expect production and shipments from that facility to improve later in the year. Did I hear that correctly? And also, can you talk a little bit about where you see the long-term growth potential from that facility coming from?

Yes. We actually have booked business for 2008 that is substantially higher than the 6 million that we shipped--6.6 million that we're estimating we're going to ship in '07. And frankly, the miss between the 6.6 and the over 9 million that we had in our original business plan is a combination of many things. I touched on the biggest issue, which is customer approvals. We also have been adding capacity in advance of the 2008 revenue that we see moving forward. And we hope to have all the capacity in place required to bill--to book business in 2008 by the end of the fourth quarter of 2007. We're adding capacity as we speak for the next five to six months.

And the revenue is coming from a variety of geographic areas. It's coming from Korea, it's coming from India. Very little, honestly, in China--some in China, but very little in the domestic Chinese market. It's more serving our Asian and global customers with their Asian presence out of that facility. But we do have the business--we're--in terms of total revenue to make it very healthy financially and from a profitability perspective moving forward. It's trying our patience, of course, and I'm sure our investors' patience, with respect to achieving the profitability that we know is there. There aren't any structural issues out there that are saying, well, we really can't achieve what we thought we were going to when we invested what we've invested to date. We'll have when this is all done probably a $15 million investment in the facility. And we expect it to generate 20 to--low 20s in revenue with really nice returns.

Okay. And in terms of structural issues or impediments of achieving those returns in China, there's nothing going on with the government or the business structure that would prevent that?

No. Honestly, it's a really nice place to do business. We've got a good management team in place, a good Chinese management team, good Chinese employees out on the plant floor in terms of production employees. It's a brand new facility with state-of-the-art equipment. The production and quality coming out of the facility has been very, very good, at levels that are good. Of course, there's inefficiencies associated with a start-up. But those are to be expected and we're working our way through those.

Just a couple of quick ones, if I might. Sorry to dominate here. But the delays that you've seen in shipments from that plant in '07, those are--do you feel confident that you will ultimately see those shipments? Are these just sort of bureaucratic delays at your customers, so to speak?

Yes, I do. As I mentioned, I think that the approvals, as well as some of the other issues of timing of revenue, will work themselves out the last half of the year here. And we're anticipating first and second quarter of next year to be at a level that will match up with the installed capacity that we've put in place.

And the orders you have for '08, you feel--you said you're ramping a lot of capacity for that business in '08. You feel confident that that's solid business that will come through?

Yes. Anything can happen in today's environment. But we do have commitments from customers. And I mentioned that we will have invested 15 million to build capacity in the low 20 millions in terms of revenue. We're anticipating not getting to the--to 22 million in 2008. It will be something less than that. But it will certainly be high teens in terms of revenue.

And some of this business is--it's not just taking it from another competitor or out of our other plants. A big portion of the business comes from actually our customers shutting down the existing internal ball production facilities and replacing it with our production in China. So it's got a high likelihood of happening.

Okay. And just one other question, if I might, and that is you're saying Europe's strong. Can you just comment on what you think the outlook in the North American market is over the next six to 12 months? Thanks very much.

Okay, Robert. Continued--no change from the first six months. Namely, North American automotive in particular at reduced levels, but not horribly bad levels relative to our capacity utilization, as I mentioned. We've said all along that the general level of automotive build, even with a 6 to 8% reduction, is a level that's good enough for us from a capacity utilization perspective. And continuing on the industrial side, relatively healthy industrial demand in North America. But the net of all of that is pretty much the same steady level of business in North America that we saw in the first six months, which is certainly at a level that, from our U.S. operations at least, is profitable.

Great. Thank you.

You bet.

Thank you. (Operator Instructions.) We do have a follow-up from Holden Lewis. Please go ahead.

Thank you. Can you also give an update on Slovakia? That one hasn't gotten a lot of discussion, but in the past it hasn't been quite sort up to where you want it to be. I mean, are we making money in Slovakia now? Are we shifting a bunch of production over there? Can you just give us an update on that one?

Sure. It's a good question, Holden, and we didn't specifically talk to it. Really, from an operational perspective, nice improvement in 2007 there as well versus their business plan. They're very close to achieving their business plan this year - maybe EU150,000 to EU200,000 short of their business plan in terms of earnings. Slightly below breakeven for 2007. But we have timing issues on revenue there in terms of customer approvals as well in automotive balls. And we, like China, anticipate turning profitable, above breakeven, in 2008 on a basis of those timing issues.

Having said that, we have--there are some structural issues relative to price on certain products there that will serve to reduce the overall returns--limit the overall returns in 2008 that we're trying to deal with as we speak. And so, the level and the qualitative returns that we see short of the issue on pricing being resolved in Slovakia, we see a lower level of return in '08 in Slovakia than we do in China. But we--one of the issues is pricing on a specific product that we're trying to deal with in a proactive way prior to the first quarter of '08.

Okay. So revenues, things are going well there, but margins--.

--Holden, I'll just tell you. Revenue up--is up this year 35% versus last year. And it's going to continue to ramp. And like China, the earnings or the losses has narrowed dramatically.

Okay. And so, can you just give an idea as we sort of look forward to 2008, and you can lump China and Slovakia together, if you want to sort of make the actual numbers a little murkier. But I mean, what do you kind of expect the bottom line swing to be, if you take China and Slovakia together from '07 to '08? Can you give some sense of what the bottom line EPS swing that you're expecting from those businesses?

It's a very good question and it gets into guidance for '08, which I won't--I'm not going to go there this early in '08 relative to guidance in '08. But it is fair to say that we expect a significant swing in profitability in both of those operations, versus what we've had in '07. It's also fair to say that we expected a significant swing in China in '07 versus '06, and there was. I mean, there was a $700,000 improvement in the loss in China. But we were expecting much bigger improvement than that--.

--Yes--.

--As we mentioned in the call. So I mean--but the swing is substantial in both operations in '08 versus what's occurred in '07. And that's really all I want to say at this point.

Okay. Just to try to squeeze a little more out of you on it, nothing on '08--can you at least give us a sense of what sort of the bottom line impact in '07 is and we can make our assumptions about what that's going to translate into? I mean, what--?

--I'm not sure we're willing to do that in terms of specific numbers in either facility. We really have never talked about individual plants within an individual segment or platform in our segment reporting in the Q. And I don't want to do it now. I'm sorry.

Okay. All right. Thank you, guys.

You bet.

Thank you. Management, there are no further questions at this time. Please continue with any closing comments.

Again, thank you for joining the call.

Thank you, ladies and gentlemen. This concludes the NN, Inc. Second Quarter Results Conference Call. If you'd like to listen to a replay of today's conference in its entirety, you can do so by dialing 1-800-405-2236 or 303-590-3000, use the access code 11093514. Those numbers again - 1-800-405-2236 or 303-590-3000, enter the access code 11093514.

ACT would like to thank you very much for your participation today. You may now disconnect. Have a very pleasant day.