NN Inc (NNBR) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the NN Inc. first-quarter results conference call. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, May 1, 2008.

I would now like to turn the conference over to Marilynn Meek. Please go ahead, ma'am.

Thank you. Good morning. Welcome to NN's 2008 first-quarter results conference call. If anyone needs a copy of the press release, please call my office at 212-827-3746 and we will be happy to 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 at 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 overview of the quarter, and afterwards we'll open up the lines for questions.

Now, with that said, I would like to turn the call over to Rock Baty. Rock, please go ahead.

Thank you, Marilynn. Good morning, everybody, and thanks for joining the call. With me this morning I have 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 provide an analysis and commentary regarding our first-quarter results for the quarter ended March 31, 2008. Then I'm going to conclude the call with comments regarding our global end market economic conditions and our operating performance for the first quarter.

I'd like to turn the call over to Jim now.

Thanks, Rock, and good morning, everyone. The first quarter was a good beginning to the year for NN. As we mentioned in the press release and as we will discuss today, we made great progress with our newest operations, demand is solid, and we have some leverage on profitability. This led us to a record quarter in EPS.

We spoke last quarter about our plans to make significant progress at the three newest operations of the Company -- Whirlaway, China and Slovakia. And we were successful in improving volumes and profitability at each of these operations, despite the U.S. economic slowdown, the depressed U.S. housing market and weakness in U.S. auto sales. Improvements in these three operations added $1.4 million to net income or $0.09 per share versus the first quarter of last year.

Demand for precision balls and rollers was very strong during the quarter and remains so today. Good industrial growth worldwide and a solid European automotive market offset the weak U.S. auto sector for NN. We were ahead of plan in rolling elements in the U.S., Europe and Asia.

The plastics and rubber business in the U.S. did experience a reduction in demand due to the weaker U.S. auto sector in general and the American Axle strike in particular for industrial molding, our plastics business.

Overall, sales rose $13.6 million to a record $121.5 million in the first quarter versus the first quarter of last year. $8.1 million of the increase was due to currency translation -- that's the weak dollar or strong euro -- and $5.5 million of the increase was real growth. The weak dollar versus the euro tended to inflate our sales, but did not drop to the bottom line in the first quarter, due to currency losses on non-euro sales from Europe, which have been increasing. So our good results reflected fundamental improvements in our new operations and in our base business.

Gross margins were slightly lower than the first quarter of last year, principally due to the currency losses on non-euro sales in Europe I just mentioned. Compared with last year, we experienced significant inflation in labor, energy, healthcare and manufacturing costs, in addition to certain contractual reductions in sales prices. All of these negatives were offset by our Level 3 program, which is on target to deliver significant planned savings this year.

SG&A expense in total was up, but this was primarily due to currency. As a percentage of net sales, SG&A dropped from 8.7% last year, the first quarter of last year, to 8.4% in the first quarter of this year, which is ahead of the 8.6% target that we announced for 2008.

Net income totaled $5.1 million or $0.32 per share, also a record. This is up 45.5% from $0.22 per share in the first quarter of last year and ahead of our 2008 business plan.

The average tax rate was 30.2% compared with 39.4% in the first quarter of last year. The major change was the fact that we were more profitable in China and Slovakia, where we have low tax rates. Also, the new lower corporate tax rate in Italy had a positive impact. Finally, we had a onetime adjustment related to our German tax position. Looking at the rest of the year, we would expect the average tax rate to be between 32% and 34%.

Taking a look at the balance sheet, you will see that we had some increases in working capital, most of which was due to currency translation and seasonality. Removing these factors, our accounts receivable and inventory are on target to reach the goals we set for this year, which we announced as a net reduction in working capital of $6.6 million.

Debt totaled $111 million, which is flat with the end of the year and is now below two times annualized EBITDA. We continue to plan for debt reduction of approximately $20 million this year, dependent on our stock repurchase activity and any changes in our expansion plans.

Capital spending totaled $4.8 million for the quarter, which is on target with our announced 2008 spending plan of $18 million. We did not repurchase any stock during the quarter under our approved stock repurchase program.

That complete my financial comments. Now, back to Rock.

Thank you, Jim. I would like to close today's call with comments regarding the global economic situation as we see it and as our customers see it and the resulting impact on revenues, and then also conclude with general comments regarding the overall performance in the first quarter.

I'm going to begin with comments regarding the end market conditions and our revenues. As Jim mentioned, revenues were very good in the first quarter and well ahead of last year's first quarter, and in fact better than our business plan forecast developed late in the fourth quarter of '07. Total revenues of $121.5 million were up 12.6% from the first quarter of '07 and 6.6% better than our original business plan.

Excluding the impact of currency, which Jim also mentioned, we experienced good organic growth of 5.1% in comparison to the first quarter of '07 and 3% better revenue than our original business plan. These good organic growth rates were driven principally by new market share and good overall levels of end market industrial demand in North America and Europe.

Automotive demand in Europe remains at good levels also. As we mentioned in our release, the negative impact of North America automotive was forecasted pretty much at current levels at the beginning of the year.

Our strong revenue results are a reflection of our current global footprint of the Company and are lessening dependence on the U.S. economy. Namely, 57% of our first-quarter revenues were manufactured and sold from our five manufacturing facilities within and in Europe. 41% of our revenues came from manufacturing facilities in the eight facilities within the United States. However, 25% of that 41% is in fact exported outside the U.S. So a combined total of approximately 70% of our revenue is currently derived and sold to customers outside the U.S., and of course, the balance from our single Chinese facility in Asia.

Although there is a great deal of discussion regarding the current state of the U.S. economy, and specifically automotive results in North America, we estimate our end market exposure to North American automotive to be in the 17% to 19% range of total NN revenues. While we were impacted, as Jim mentioned, by the downturn in the first quarter, particularly in the rubber and plastics segment, the impact was more than offset by overall strength in Europe and secondarily North American industrial end markets.

As we mentioned in the earnings release, our outlook for the second quarter is a continuation of the good overall levels of demand and resulting revenues we experienced in the first quarter. Our major global customers continue to forecast good demand for their products on into the second quarter of 2007 in their served end markets. These are all positive signs, given the perception in the U.S. regarding the state of the U.S. economy and, almost by default, the global economy in general. Currently, we see no evidence from our customers regarding a bleak global economic outlook. To the contrary, their forecasts continue to be very positive.

Finally, I would like to conclude today's call with comments regarding our overall performance during the quarter. With respect to earnings, Jim has covered the relevant issues in terms of our performance. It was a record quarter from both a net and EPS perspective. I would like to comment specifically on improvements we achieved during the first quarter that are consistent with our financial and operational goals and objectives we established at the beginning of the year.

Our new acquisition, Whirlaway, was solidly accretive to earnings in the first quarter as a result of improvements in both revenues and operations. As a result, we experienced good margin improvement at Whirlaway during the first quarter. In the short term, their revenues are forecasted to improve 10% for the full year, and the first quarter reflected that improvement, even with a decline in automotive demand.

With respect to long-term growth prospects, we have recently concluded an extensive marketing plan which targets and applies Whirlaway's core competencies in complex assembled fluid control components to end markets where they can provide real future value to customers. We remain optimistic regarding the organic growth and resulting profitability prospects for our newest precision metal component operations.

New business in China, coupled with improved operating performance, also led to improved results for the first quarter versus prior year. Margins in China also dramatically improved, and although the facility was slightly below breakeven for the quarter, the magnitude of the loss was substantially reduced and the trends for the upcoming quarters are meeting our original plan and forecast for the facility in 2008.

Our operation in Slovakia during the first quarter was profitable. Like Whirlaway in China, improving revenue and operational performance led to margin improvement in this operation as well. Our Level 3 initiatives did meet plan for the first quarter in terms of established quality and cost improvement objectives. We continue to see excellent Company-wide results with respect to Lean Six Sigma and total productive maintenance-focused improvement activities.

Our metal bearing components business, comprised of U.S. Ball and Roller and NN Europe, were ahead of plan for the quarter. We did experience negative translation currency issues associated with the continuing strength of the euro in our Netherlands operation. We are currently working with our customers to alleviate this issue and expect resolution during the upcoming second quarter.

We made progress during the first quarter on working capital, as Jim mentioned, in terms of improvement goals both for inventory and accounts receivable. As we mentioned in the release and Jim also mentioned in his comments, the first quarter we traditionally see volume-related increases in working capital, but our utilization of working capital did improve in the first quarter in line with our objectives.

Finally, I would like to summarize my comments by stating that we are pleased with the first-quarter results. Our customers are forecasting a continuation of good demand in the majority of our end markets for the upcoming second quarter. While we are encouraged with the overall revenue and operating trends in our businesses, we see the necessity and the opportunity to further improve our qualitative and quantitative earnings moving forward. Given our current outlook for the second quarter, we repeat our claim of the first quarter of cautious optimism regarding the results for the second quarter and the full year.

With that, we would be glad to answer any questions you may have.

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

I only had three other calls to listen to at 11, and I picked you guys.

Good choice.

Yes, that makes us feel good, Mark.

Nice quarter. You talk about cautious optimism for the second quarter. Are you realistically thinking that second quarter could be a repeat of the first quarter?

When I think cautious optimism, it's probably more aligned with comments regarding the full year and the third and fourth quarter, Mark. We have pretty good visibility, honestly, regarding the second quarter in terms of demand and revenue. And we do see, at least for the second quarter, somewhat of a repeat of the first quarter in terms of overall revenue, yes.

Okay. So was there anything below the revenue line that was unusually helpful other than the -- did you have a pickup on the tax rate in the first quarter?

Yes, Mark. Most of the tax rate pickup is sustainable. We did have a small adjustment in there that I mentioned related to some adjustments to the German deferred tax position that won't be repeating. That's why I said I thought 32% to 34% is a better tax rate for the rest of the year.

Okay. So we can use like a 33%. All right, that sounds good. Any particular reason why you chose not to buy back more stock in the first quarter? Was there something --

I think it was more caution of what this year was going to bring.

I think that it was prudence more than anything, Mark, from the perspective of our current debt levels -- as Jim mentioned, we're now under two times on funded debt to EBITDA. But it was just, based on what was happening in the fourth quarter and everything that we were hearing relative to global economics, it was more prudence than anything.

Okay. What's your available liquidity right now?

Well, we have a $135 million credit agreement, of which we have roughly $60 million borrowed. We can't borrow all that because the covenant levels wouldn't allow that, but we have in the -- I don't know exactly what the number is, but we have plenty of availability.

What -- $30 million, or would $40 million be a reasonable number? $40 million or $50 million?

I think that the debt to EBITDA would start to restrict us at about somewhere between $20 million and $30 million. Now, for an acquisition that's not an issue, because we'd be buying EBITDA. But for a capital expansion or share repurchase, it is an issue.

Okay. I will ask one other question, and then I will pass it on. Are you seeing -- you talked about share gains that you achieved in the first quarter. And I just -- maybe, I guess that's a better way of asking the question -- could you give some color on what was the basis behind the share gains? Because this is clearly something you hadn't expected or it's better than your plan. So could you talk a little bit about that?

Yes, Mark. We did in fact have the share gains that I reference in our original plan. But the 5.1% overall organic growth, combining the market share gains plus what happened economic-wise, as we mentioned, did exceed what our original plan was. And we got -- most of the new business occurred at Whirlaway and in our metal bearing components business in the U.S. and on balls, and tapered -- from new tapered roller business in our Netherlands operations.

You think customers might be prebuying a little bit in front of expected rising steel costs?

I don't get that sense at all. I think this is (multiple speakers)

Chrome is through the roof.

Yes. No, there's no question that we're seeing a midyear increase in the U.S., as I mentioned, and also scrap on the European side. But I don't -- I really don't think there's any false demand out there with respect to that issue based on what customers are saying.

Okay. Congratulations on a great quarter. Great work, guys.

(Operator Instructions). Holden Lewis, BB&T Capital Markets.

Can you guys speak a little bit about the impacts of the strike? Obviously, 17% to 19% exposed to U.S. automotive isn't a lot, but nor is it chicken feed. Can you just talk about maybe what you saw in March, and if this were to extend sort of April/May/June and into the second quarter, what would kind of be the expected impact of that?

Without getting too specific here, we do, as we mentioned, the biggest exposure that we have in terms of individual businesses is in fact rubber and plastics. I am seeing Delta, and they did see a pretty significant reduction, not because of the overall level of automotive build, but because of this existing strike.

And as we look at a forecast for the second quarter and an impact of that, it's more of the same for us versus what we saw in the first quarter, and that is that the healthy demand that we're seeing in Europe in particular and on the industrial side in North America we think will offset any impact of Delta and IMC reductions versus our plan moving forward, for the second quarter, at least.

I don't know what you've been hearing relative to the strike, but I doubt, based on everything I'm reading, that it will go all the way through the end of the second quarter.

You've been saying that European automotive is strong and healthy. You've been saying the same about sort of global industrial. It's just that the potential from this is -- it's kind of a delta relative to what you have been seeing in the past. It's kind of making the automotive side of things somewhat weaker. So if the other businesses are relatively stable and this is weakening, would we expect to see your rates of growth maybe step down a bit from the levels they've been at, or--?

Versus the first quarter, as an example?

Yes, the first, fourth. You've been running that mid-single-digit growth in terms of ex-currency now for a bit.

We saw -- two of the three months in the first quarter were impacted pretty significantly in the U.S. by the two operations I mentioned. And in fact, when we talk about what the second quarter looks like, we did forecast that that would continue on in through the end of the second quarter, at least. And as I mentioned relative to the third and fourth quarter, we really don't -- who knows at this point.

But in terms of overall revenue, those two operations are smaller, and our ability to flex costs in each of those operations is good. And that's what, in fact, has been happening.

Can you also comment about the pricing component? You noted some -- your typical price-downs, that sort of thing. Can you talk about what happened to pricing in the quarter?

It was down slightly. I mentioned in the year-end conference call on February 28 our plans for pricing moving forward as a company. We still have two long-term contracts in Europe specifically that call for year-over-year price reductions. And so that impact did impact us in the first quarter and will continue to impact us probably through the end of the year, although we are raising prices and have started to raise prices in the first quarter on noncontractual areas of our business. And then, in fact, where we have contractual extensions and/or negotiations going forward for new contracts, we're asking for price increases there as well.

But the pricing, net, in the quarter was --

Was negative. It was negative, Holden. And if you want to think about it in terms of the impact on margin, it probably impacted us by 50 basis points on margin, although Jim made the point that Level 3 offset that, the inflation in our business, which it did. But in terms of just pure -- the math, it impacted margins by about 50 basis points.

But then as we go into Q2 -- so you got no price increases in during Q1. When did you start putting price increases in?

Well, we've been raising prices beginning kind of mid-first quarter, but understand that the majority of our business, the lion's share of our business, is under contract globally.

Okay. And then the rest of it -- is there sort of a lag before you see the price increases you've put in actually starting to bit a little?

Well, again, on the noncontractual side of things, we are raising prices. But the math in the absence of dealing with some of these contracts, just -- it's hard to move the needle on the margin side with respect to that without addressing the contractual issues.

But presumably, it might work to neutralize some of the negatives --

Yes, in the last three quarters of the year. I think that's a fair assessment.

Okay. Now, what was the net impact on you from raw material increases? What was the impact of margins from that and what are you expecting going forward, given what we're seeing?

Nothing. No impact on margin.

Really?

No. We're passing along material increases as they occur, with the exception of where we've got inflation in our business, as Jim mentioned, that's non-raw material related. And some of our tooling is an example. He mentioned manufacturing supplies, I believe, in his comments. Some of our tooling has a lot of steel in it. So that's an issue moving forward.

Okay. And so if you -- so the pricing that you're putting through, then, that is more real pricing? That's not just as an offset to materials? Or are materials -- it wasn't an impact in Q1, but it could be in Q2, and so you're (multiple speakers)

No. The material inflation -- raw material inflation is passed along as incurred now. There's no delay there, even with our large contractual situations, no delay, and certainly no delay on the noncontractual areas of our business.

Great. So that pricing, then, is something which -- at least some of it may go right to the bottom line?

Yes, although -- yes. I mean, the pricing increases we're asking for we hope to offset the inflation that we talked about, as well as get some margin. That's true.

Okay, all right. Great. And then lastly, can you just fill in sort of the operating cash flow? What did you do in the quarter? Do you have it?

Yes, just one second. I already give you the CapEx of $4.8 million, and you know net income of $5.1 million and depreciation of $6.3 million. So if you factor in all the changes in working capital -- and this is adjusting out currency, right? We had cash flow from operations of $5.6 million, currency adjusted. Is that right? Oh, I'm sorry. I was looking at the wrong thing. $4.6 million.

That's what you are likely to -- that's what you report on the cash flow statement?

Yes.

Then did you get the dividend in this quarter? Last year, the dividend fell into Q2.

No, it's accrued in there, $1.4 million.

$1.4 million? Okay, great. Thanks, guys.

John Rogers, Ferris, Baker Watts.

Just a quick question. With the Whirlaway business now seeming to get into order, are you all going to start looking for potential acquisitions?

I think that the short-term answer to that is that we're going to continue to leverage and integrate Whirlaway. And as I mentioned, we just concluded a very extensive marketing plan that's focused 100% on organically growing that business. And one of the reasons we liked the acquisition in the first place was the ability for that business to grow organically.

And so the first priority beyond further integration and continuing improvement in the operating performance of the Company, as a first priority, we want to grow and fund what we think are going to be significant organic growth opportunities as priority one. And honestly, that takes us through this year, I think you could expect, unless something unique came along. But you can assume that you wouldn't hear anything on the acquisition front through the end of this year, at least.

And then, of course, based on the marketing plan, to the extent that an acquisition would make sense to enhance some of these new end market diversifications that would totally complement the existing marketing plan that we have in place for the business, acquisitions are always possible. But in the short term, and by the short term over the next two or three quarters, I don't think you'd expect to hear anything on the acquisition front.

And then in the China facility, you said you were just operating essentially just below breakeven. How did the volume in the second quarter look compared to what you saw in the first quarter?

Better than the first-quarter volume, and essentially on plan -- when I say plans, our business plans for what we had for the year.

Do you have 100% approvals for the end customers that you were looking to --

No, we don't. That's a continuing issue, but it's improving as we speak. And we are probably 60% of the way there on those issues. But again, in terms of what we had physically planned for on the forecast side of things, for China we're pretty much on plan.

And also, we've got significant opportunities from other -- to supply other Asian operations from there that are helping to fill the gap, and in fact could create a problem later on that we don't have enough capacity there.

And aren't contingent necessarily on approvals. Some of the industrial side -- industrial businesses don't require that kind of an approval.

Mark Parr.

Guys, I was wondering if I could just get a little more color on the Level 3 implementation. It's clearly having positive bottom-line impacts. But could you talk a little bit about where we are in the process? How much more is there to go? Is there any way to specifically quantify the impact of this implementation?

Mark, we have been -- we're entering our fourth full year of Level 3 in terms of implementation, and we have now taken 170 key managers globally through the program. We call them Level 3 Masters. They go back into their business units and manufacturing facilities and begin to implement Level 3 initiatives on Lean Six Sigma and PPM.

And in fact, I get the question a lot -- does the program still have legs in terms of opportunity to continue to improve the business, both quality- and cost-wise? And my answer is yes. And the first quarter is a good example of that, because our level, our rate of improvement in the first quarter of '08 was in fact better than our rate of improvement for all of '07 as a percentage of revenue and a percentage of cost of goods sold, however you want to measure it.

And the activities of engaging -- the essence of the program is of developing skill sets and a toolbox of skill sets throughout the Company relative to lean enterprise, lean manufacturing, Six Sigma and PPM. But way beyond that is the cultural transformation and a consistency to the improvement process in all 14 of our global manufacturing operations. And that consistency to approach relative to improvement, continuous improvement, continues to pay great dividends.

And the final point I'd like to make is that the program by definition engages the 2300 employees on our plant floor in our manufacturing operations around the world in the improvement process itself. They are closest to the action. They know where the improvement opportunities lie. And this program solicits not only their input, but their contributions to make it happen.

And so I can honestly say that I don't see it tailing off in terms of rate of improvement for the balance of this year or on into '09. By definition, it's a continuous improvement process that can continue to deliver good results.

Would you look for the benefit of that this year to be 100 basis points on EBIT?

Well, I know that we talk a lot about the fact that, for a variety of reasons, the margin needle hasn't moved, and it --

Part of that, though, has been the price reductions that have been built into some of (multiple speakers)

Well, the price reductions as well as this quarter -- for example, currency hit us hard on the margin front relative to sales in non-euro-denominated currencies out of Europe. So we always have these, well, this hit us or this us. But at the end of the day, Level 3 has done a great job of offsetting cost inflation in our business and other areas of inflation.

But it points to the overall need to raise prices in our business. You know, we recognize that our customers -- customers certainly don't like to talk about price increases, but we don't need huge increases in selling prices from a competitive perspective and/or what we can offer our customers to help on the margin line versus what we've experienced over the last two or three years.

And so the answer to your question in terms of what it physically can contribute, forget about what it offsets. It has been contributing much more than 100 basis points of improvement over the last three years. It's more like 200 basis points of improvement. But it's been offset, as we mentioned, by the things that I've talked about.

Right, okay. Any additional color you can provide on your long-term contracts? And have there been any changes in terms of the, A., the opportunity to rebuild some of that, or are you going to be seeing more winding down?

I would call it winding down. Two of our three major contracts are up this year. And I don't want to say wind down, but I think from both our customers' perspective and our perspective, long-term contracts -- and by long-term, I'm talking beyond a couple of years, beyond 24 months -- don't seem to make sense from our perspective or our customers' perspective anymore. There's just too many unknowns in the marketplace with respect to what's happening on global economics and inflation and whatever else.

And so our intention moving forward is to shorten the length of these contracts. And I think our customers certainly support that as well, by and large. They support the fact that they understand that these three- to four- and five-year contracts don't make a lot of sense anymore in today's environment.

All right, terrific. Thanks for the additional color, Rock.

Holden Lewis.

Currency came in ahead of expectations. Operations in general look like they're coming in ahead of expectations. One could argue this quarter alone has already provided you about a third of your original guidance. Do you have any color to add to your original annual guidance? It wasn't mentioned in the release or in this call.

I'm really surprised that it took 10 or 15 minutes into the call, Holden, for you to ask that question. No, all kidding aside, we didn't speak to the overall guidance. But if you look at the results of the first quarter and then what we envision on into the second quarter that we've already spoken about here this morning, there is obviously upside potential relative to our original guidance.

But erring on the side -- erroring, if that's a word, on the side of prudence here, given no real view of the third and fourth quarter, we just felt like it was prudent to say cautiously we're optimistic that there's upside potential versus the original guidance, but we didn't want to speak to it in this first quarter after just one quarter.

Okay. Perhaps you can help out a little bit. About seasonality to your business, it kind of looks like going back to Q1 is kind of historically maybe a little bit stronger seasonally, but you've had so many sort of lumps and things like that that it's kind of hard to really divine a real seasonal pattern. Do you have an idea of seasonally how earnings would work out under sort of normal circumstances?

Yes, you can say that the first and second quarter historically are our two strongest quarters. Third quarter is our traditionally our lowest because of the European shutdown. And then the fourth quarter tends to be a much better quarter than the third in terms of quarter-to-quarter comparisons and just slightly below first and second.

Whirlaway has lessened that trend somewhat, although you couldn't see it last year, because they had such a poor third quarter. Hopefully, it's a little bit flatter this year.

Then can you -- I just wanted to make sure I heard correctly -- that $1.4 million that you talked about, that is net income and that's the collective contribution form Whirlaway, China and Slovakia as a group?

Versus last year.

Versus year-ago levels.

Yes.

Okay. And Whirlaway, then, was -- Slovakia is profitable. Whirlaway is profitable. China is just a little bit below breakeven, so they're not there yet. Any reason to think that Whirlaway and Slovakia and China don't all build on this profitability -- seasonally unusual volumes -- I mean, any reason to think that this $1.4 million doesn't become better as the year goes on?

No. I mean, a key to the earnings improvement for '08 was a swing in continuing contributions from our existing operations, but a swing in these three operations from disappointments in '07 to improvement in '08. And there's no reason to believe that the improvement won't continue.

And in terms of the comparisons, did the losses from these businesses get deeper or narrower as 2007 progressed? Did the comps get easier or harder?

The comps get easier, especially at Whirlaway. Whirlaway had a relative -- not a good first quarter, but their comps get much easier because their second, third and fourth quarter were progressively worse.

What about China and Slovakia?

Pretty consistent from quarter to quarter, pretty flat with those operations, although Slovakia improved somewhat in the fourth, but pretty consistent.

(Operator Instructions). We have no further questions. I would now like to turn it back to management for any closing remarks.

Thank you again for joining today's call.

Ladies and gentlemen, this concludes the NN Inc. first-quarter results conference call. If you would like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000, entering passcode 11113635. (Operator Instructions). ACT would like to thank you for your participation. You may now disconnect. Have a pleasant day.