Enpro Inc (NPO) 2013 Q2 法說會逐字稿

Good morning. My name is Steve and I will be the operator on this conference today. At this time, I would like to welcome to everyone to the EnPro Industries second quarter 2013 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Mr. Don Washington, Director of Investor Relations for EnPro Industries, you may begin your conference call.

Thank you Steve and good morning everyone. Welcome to our quarterly earnings conference call. I'll remind you that our call is being webcasted at EnProIndustries.com and you can find the webcast link and the slides accompanying the call in the Investor Relations section of our website.

In a moment Alex Pease, our Senior Vice President and CFO will review the results for the second quarter of 2013. Steve Macadam, our President and CEO who is usually on these calls has chosen to attend GST's asbestos liability estimation trial today and so he won't be with us.

Before we begin, I will point out to you that you may hear statements during the course of the call that express the belief, expectation or intention as well as those that are not of historical fact. These statements are forward-looking and involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties are referenced in the Safe Harbor statement included in our press release and are described in more detail along with other risks and uncertainties, in our filings with the SEC including the Form 10-K for the year ended December 31, 2012 and the form 10-Q for the quarter ended March 31, 2013.

We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances on of which such statements are based.

You should also note that EnPro owns a number of direct and indirect subsidiaries. From time to time, we may refer collectively to EnPro and one or more of its subsidiaries as we, or to the businesses, assets and debts or affairs of EnPro or a subsidiary as ours. These and similar references are for convenience only, and should not be construed to change the fact that EnPro and each subsidiary is an independent entity with separate management, operations, obligations and affairs.

I want to remind you that to our financial results reflect the deconsolidation of Garlock Sealing Technologies, LLC, Garrison Litigation Management and their subsidiaries, effective June 5, 2010. The results of these entities will remain deconsolidated during the pendency of the Chapter 11 legal proceedings to resolve asbestos claims against GST. We refer to this, as you know, as the asbestos claims resolution process or ACRP. GST's summary results are presented separately in our earnings release.

And now I'll turn the call over to Alex.

Thanks Don. Thanks to everyone who has joined us on the call this morning. As Don mentioned, Steve is attending GST's asbestos liability estimation trial today. As I'm sure most of you know, the trial began last week and is scheduled to conclude at the end of next week. Because the trial is in progress, it's not appropriate for us to make any comment about it beyond our continued confidence in the arguments GST has presented to the court.

We believe that GST's arguments show a couple of important points. First, its products were not the cause of asbestos related disease and secondly, if settlements in the years leading up to its Chapter 11 filing in 2010 reflected increased costs of defense and higher trial risk caused by tort system abuses, including the suppression of evidence and were not representative of any true legal liability.

Although portions of the trial are being held under a confidentiality order from the court, the order does not prevent GST from presenting these arguments and evidence supporting them in full during the trial. We appreciate your understanding of our reasons for not commenting further on the trial or on when or how the case may be resolved. While it remains possible that a settlement may be the ultimate outcome of the ACRP, we have no assurance that this will be the case, nor can we anticipate what, if any value of GST might be preserved.

Now let's look at our second quarter performance. Sales in the second quarter were up $306 million up; $4.1 million from the second quarter of last year. More than half of the increase or about $2.3 million came from the benefit of two extra weeks in Motorwheel sales in the year's second quarter. As you will recall, we closed the Motorwheel acquisition in mid April of last year. The remainder came primarily from increased sales in environmental upgrades in the engine products and services segment.

Conditions in most of our markets were consistent with the second quarter of last year with two notable exceptions. At the Technetics Group, demand was down, especially in the semiconductor market and sales remained below the high levels we saw in the second quarter of last year. At STEMCO, however, demand improved and sales were up across all product lines, including brake products. STEMCO also benefited from the two weeks of Motorwheel sales that weren't included in last year's second quarter.

By geography, demand was fairly even with a year ago in North America, excluding Fairbanks Morse, but down slightly in Europe. Segment profits were $43 million, up about 14% from the second quarter of last year. The increase is evidence of our continuing cost discipline and improved pricing. With this discipline, segment profit margins improved significantly, reaching 14% of sales, up from 12.4% of sales in the second quarter last year. We had about $2.1 million of unusual expenses at the segment level in the second quarter of both years.

This year in the second quarter, most of the expense was for an early retirement program at Fairbanks Morse Engine that we expect to produce about $3 million in annualized savings. Last year, most of the second quarter expense was from an inventory step-up at the Motorwheel acquisition. Excluding those expenses in both quarters, segment margins were 14.6% this year compared to 13.1% a year ago.

Net income in the second quarter of 2013 declined to $8 million or $0.35 a share from $10.2 million or $0.47 a share in the second quarter of 2012. An adjustment to an environmental reserve for a previously owned business reduced net income by $4 million after tax. The pretax amount was $6.3 million. The adjustment reflects an accrual related to a business that was divested in 1983, well before EnPro became an independent company.

Excluding the reserve, interest due GST and other selected items, net income improved by 17% to $19.5 million or $0.87 a share in the second quarter of 2013. Last year on that same basis, second quarter net income was $15.7 million or $0.76 a share.

Looking at our consolidated results in the first half of the year, sales were down about 6% from what we reported in the first half of last year, excluding the effect of the Motorwheel acquisition. About half of the difference was due to the effect of the changed percentage of completion accounting for new engines, which we've described in detail in the past. The remainder primarily reflects lower demand in our markets compared to the first half of last year, especially in Europe and in our semiconductor market.

Excluding foreign exchange and the contribution to Motorwheel, segment profits were about 11% below the first half of last year. This decline came largely because of lower volumes and an unfavorable product mix at all operations, especially Fairbanks Morse, which had significantly lower margins in the first half of this year due to the onetime cost of the early retirement program, softer demand from the government aftermarket and higher than anticipated costs on the engine refurbishment project we discussed on our first quarter call.

Better pricing and lower SG&A expense helped offset a portion of the effect of mix and volume. Segment margins in the first half of the year were 12.6%, a decline of about 0.6 of a point from the first half of last year.

On a GAAP basis, we earned $0.74 a share in the first half of this year compared with $1.11 in the first half of last year. Excluding interest due GST, the environmental reserve and other selected items, we earned $1.43 in the first half of this year compared to $1.67 in the first half of last year. The deconsolidated operations of GST continue to perform well. Third party sales in those operations were $58 million, about 2% better than the second quarter of last year, as activity in North America improved.

Operating margins were 28.5% as the business benefited from price improvements and lower costs. In the second quarter of 2012, GST's operating margins were 23.6%. GST's earnings before interest, income taxes, depreciation, amortization and asbestos related expenses improved to $18.3 million in the second quarter of 2013, up about 24% from the second quarter of last year. Adjusted net income at GST, which excludes intercompany interest and ACRP related expenses, was $11.3 million, an increase from $9.1 million in the second quarter of last year.

GST recorded $13.1 million in asbestos related expenses in the second quarter, an increase of about $4 million from the second quarter of 2012. These expenses increased significantly as the estimation trial approached. In the first half of this year, asbestos related expenses at GST totaled $24.1 million. As you know, GST is required to pay the expenses of all parties involved in the case and we expect they will continue to be high through the end of the estimation trail. GST continues to generate cash and had about $173 million in cash and long-term investments at the end of the quarter.

Now let's take a look at our second quarter results in more detail. Gross margins were 35.7% in the second quarter of 2013, up from 34.1% in the second quarter of 2012. Gross margins benefited from effective management of our supply chain and stable raw material costs. We also benefited from modest price increases at all operations, as we continue to ensure our products are priced to reflect the value they bring to customers.

SG&A expense of $75.6 million in the second quarter, was about the same as in the second quarter of last year. SG&A included $8.5 million in corporate costs, a decrease from the second quarter of last year and in line with the level of corporate expense we expect to see in each of the next two quarters.

Now let's look at our segments' operating performances, beginning with the Sealing Products segment. The segment sales were $165.9 million in the second quarter, about equal to the second quarter of last year. The segment's sales this year benefited from the additional weeks of Motorwheel sales which came to $2.3 million.

Sealing Products segment profits were up substantially from a year ago, growing 21% to $27.7 million. Profits benefited from very strong performances at STEMCO and the consolidated Garlock operations and from a small contribution by Motorwheel. The comparison to last year also benefited from lower restructuring expense this year and a charge last year for an inventory step-up at Motorwheel. These benefits were partially offset by lower volumes at Technetics.

Segment margins improved to 16.7%, about 4 full percentage points over the second quarter of last year on flat sales. However, in last year's second quarter, restructuring expenses and the Motorwheel expenses reduced margins significantly. Those items totaled $1.8 million. If we adjust for them and a small restructuring charge in the second quarter of this year, margins improved to 16.8% from 14.9% a year ago.

Looking at the businesses within the segment, sales at the consolidated Garlock operations were the same as in the second quarter of last year. Although volumes were down, especially in Europe, the consolidated Garlock operations benefited from modest price increases and the acquisition of a small Chinese distributor of industrial seals. The results of the Technetics group continue to be affected by the comparison to a period of very strong demand in the first half of last year by customers in the cyclical semiconductor market. That market was much softer in this year's second quarter and Technetics semiconductor equipment sales were down considerably from the second quarter of last year. Technetics saw somewhat softer demand for products sold into other high performance markets as well and profits declined significantly as Technetics volumes decreased. Although lower costs helped to counter some of the effect of lower volumes, margins declined.

At STEMCO, sales were up sharply. A portion of the increase came from the additional two weeks of Motorwheel sales but demand was stronger across all of STEMCO's product lines, including brake products manufactured at STEMCO's Rome and Motorwheel operations and particularly aftermarket fields which carry very strong margins. Acceptance of STEMCO's brake products is growing among fleet operators and OEM customers. As this key piece of STEMCO's strategy matures, we expect the brake business to continue to improve. As volumes and mix improve, STEMCO recorded significantly higher segment profits and profit margins.

Second quarter sales in the Engineered Products segment were $95.1 million and equal to the segment sales in the second quarter of 2012. Neither GGB nor CPI showed a meaningful year-over-year change in sales, as both businesses were able to make up the effect of slight reductions in volume with improved pricing. Despite flat sales, profits and margins improved in the segment. Excluding restructuring expense from last year, profits were up 20% or about $1.6 million. Segment margins improved to 9% in the second quarter of this year. A year ago, adjusted to exclude restructuring costs, segment margins were 7.4%.

At GGB, profits and margins increased from a year ago as pricing more than offset the effect of lower volumes. CPI's profits and margins also increased over the second quarter of last year. Even though volumes were lower at CPI, pricing was better and SG&A decreased due to the benefits of restructuring over the past several quarters. The performance of CPI drove most of the increase in Engineered Products segment's margins.

As you know, we've taken a number of steps to improve profitability at CPI. We face the challenge of integrating several small acquisitions as we operate in an environment of low demand. The full results of our efforts at CPI aren't likely to be realized until market conditions get better. In this light, we continue to look closely at CPI's performance and will continue to work hard to ensure the business is positioned to deliver the full value we expect.

To complete the review of our segments' performance, let's take a look at the Engine Products and Services segment. We reported a 7% increase in sales at Fairbanks Morse to $45 million. Most of the $2.9 million increase came from sales in environmental upgrades to installed engines. Last year in the second quarter, there were no sales of these upgrade packages.

Parts revenue was up slightly over the second quarter of last year, while engine and service revenues were about the same. All engine revenues were recorded under the percentage of completion method in the second quarters of both years. Profits and margins were down from the second quarter of last year. The $1.4 million decline in profits and the drop in segment margins of more than 4 points, are both attributable to the $1.9 million restructuring expense related to the early retirement program.

Excluding this restructuring expense, the segment's margins were 18.3% in the second quarter compared to 18.5% in the second quarter of last year. FME's backlog was $149 million at the end of June, slightly higher than at the end of March. FME recently won its largest commercial contract in some time, with a $21 million agreement to supply 5 dual fuel engine pump sets to an oil pipeline in South America. While Navy shipbuilding programs continue to be the mainstay of FME's new engine sales, the team there is working aggressively to create opportunities such as this to sell new engines in other markets.

Our GAAP net income of $8 million or $0.35 a share was down from $10.2 million or $0.47 a share in the second quarter of 2012. Our GAAP earnings reflected a tax rate of almost 41% in the second quarter. A year ago the tax rate was just over 32%. The effective rate for the second quarter of this year increased due to an increased mix of US earnings with our tax at a higher rate than our non-US earnings. Our year to date rate of 28.5% is much lower because of an unusually low rate in the first quarter. As you will recall, our first quarter rate benefited from expired domestic tax provisions that renewed retroactively. We should return to more normal rates for the rest of the year and we expect our full year rate to be in the range of around 30% to 33%.

Our adjusted EPS in the second quarter was $0.87 compared to $0.76 in the second quarter of last year. After tax adjustments that increased our $0.35 the second quarter 2013 GAAP earnings to $0.87 are $0.06 of restructuring expense primarily for the early retirement program at Fairbanks Morse; $0.18 for the increase in the environmental reserve; $0.22 due to interest for GST; $0.02 for other non-operating items and $0.04 to adjust the tax accrual.

Our free cash flow was slightly lower in the first half of 2013 than in the first half of 2012. Several factors affected this change. Our operating earnings were somewhat lower. We made a larger pension contribution this year. Our capital spending was higher year to date than last year, primarily because of the discount purchase of a manufacturing facility that we formerly leased. Longer-term, this investment will help us reduce expenses. For the full year of 2013, if we carry out all of our plans for expansion, which includes completing a friction product manufacturing facility for STEMCO, capital expenditures could be as much as $50 million .

We ended the first half of the year with a cash balance of $58.2 million, up about $4 million from our balance at the end of last year. On the balance sheet, I'll remind you that we continue to record our convertible debt as a current liability because the conversion rights have been triggered by the gains we've seen in our share price. As long as the debt meets the conditions for conversion, it will be recorded as a current liability. However, we have no indication that any holder is likely to convert prior to the maturity date in October 2015.

I'll close with a look at what we expect for the remainder of 2013. Although we had minimal year-over-year sales growth in the second quarter of 2013, sales improved meaningfully over the first quarter of the year, especially in our sealing products segment. Profitability also improved sequentially and margins grew in all three segments as we benefited from more stable markets and strong price and cost discipline. Typical seasonal factors accounted for a portion of our sequential growth, but we believe the improvement also indicates a level of stability in many of our markets.

However, opportunities for growth remain limited. In 2013, certain of the North American markets served by our Sealing Products and Engineered Products segments may improve modestly compared to last year, but sales in those segments will continue to be affected by the cyclical downturn in our semiconductor markets and low levels of demand from Europe.

In our Engine Products and Services segment, we now expect 2013 sales to decline by more than 10% from 2012, even though we expect a significant increase in engine shipments this year. As you know, much of the revenue associated with those engines was recognized last year under percentage of completion accounting.

With limited opportunities for growth in our Sealing Products and Engineered Products segments and a decline in the Engine Products and Services segment, we expect 2013 sales to be less than those we reported in 2012. In this environment where we don't expect to benefit from higher volumes, our focus remains on leveraging the strength of our brands, exploring the new products and markets we have entered through acquisition, maintaining cost discipline and pricing strategies and executing the enterprise excellence initiatives that support our continued success.

And now we'll open the line for your questions.

(Operator Instructions) Ian Zaffino, Oppenheimer.

It's actually Tom Narayan for Ian. The EBIT margin for Garlock, the 31.4%; does that include the $13 million asbestos expense?

No, that excludes the asbestos related expense. That's an EBITDA.

Could you talk about organically, why outside of that margins were better for Garlock?

Garlock has been very proactive in terms of its pricing discipline so we've been able to communicate a lot of the value proposition of the Garlock line of products which has enabled us to pass on price. We've also been very proactive on the cost side of the equation and we benefited from the fact that PTFE prices have come down fairly substantially. So we're at a level of PTFE pricing that we haven't seen in the past 20 months or so. And of course PTFE is the largest driver of raw material costs in that business.

Jeff Hammond, KeyBanc Capital Markets.

Just kind of going back to the margin improvement, clearly a lot of improvement relative to a flat sales dynamic. As we look into the second half, I guess two questions, one, if you can kind of give us a better sense of what was in your control, benefits from restructuring and the likelihood that that carries forward and then how much of the profit improvement was mixed price? And then as you look into the second half, how sustainable are some of these favorable profit drivers?

It's kind of easier if I tackle that division by division. I just talked about the Garlock situation. I think that's probably quite sustainable. Always the first and second quarter tend to be the strongest for Garlock because of the way the turnaround season materializes. Then the third and fourth tend to be a little bit softer from a volume standpoint. But all of the cost discipline, the pricing improvements, the lower raw material costs, I think will continue to benefit Garlock so I'm pretty optimistic that those margin levels are fairly sustainable.

Technetics we talked about, is highly exposed to the semiconductor market and so we've sort of struggled there on the volume side. On the margin side, the thing we're concerned about is the nuclear mix, so as we look out at the nuclear sales, we see a little bit of a softer backlog, which would have a downward pressure on margins. Although margins for that division weren't great this quarter anyway, so I think it's probably in line to see some slight headwinds, depending on what goes on in semiconductor.

STEMCO we saw just a very very strong quarter, particularly in the aftermarket field side, which carried really really high margins. So their margins were substantially higher than they were a year ago. So I do see some headwinds there, particularly because the second half of the year tends to be dominated more by the brake business and also by the OEM business. So I think that there are some headwinds there. Relative to last year, we've seen some pretty substantial improvements, so last year Rome was struggling with a lot of the integration work that they were doing and this year they're performing in the low double digits, based on all the operational improvements.

So I do think there's a little bit of headwind for STEMCO. Overall for the year, for sealing products segment, I would anticipate that they'd be a little bit softer, maybe a couple of points softer as we sort of finish the year, than they were in the quarter but still pretty strong.

Then if we go to engineered, GGB, we continue to see improvement at CPI so literally every month we've seen margins improve there. We really haven't benefited much from any sort of sales leverage. But I expect them to continue to improve as we go through the year. GGB, we're really sort of struggling with the European automotive situation, so there, I don't see margins changing much from what we reported in the second quarter. I see them finishing the year at about that level. But I think there is some upside.

Then at Fairbanks Morse we mentioned the softness in the aftermarket driving some weakness there. I do think that for the year they'll probably be about a point better than where they finished in the quarter but I don't think they'll be at the levels we saw last year.

On Engineered Products it sounds like you think that 9% is sustainable into the back half or should we see a downtick because seasonally that business seems to dip down?

Seasonally the business does tend to slow, but I think that will probably be offset by the ongoing improvement at CPI. The European market for GGB lately appears to be reasonably stable, so I don't anticipate much more softening there.

Engine products last quarter you were talking about a down 15, I think you changed that language to down more than 10, so is that ultimately less bad or should we still think about a down 15?

There's been a couple of developments. First of all, the environmental upgrade sales have been substantially stronger. Obviously, last year we didn't sell any of them. So that's been stronger than we anticipated. We also, as I mentioned in the script, we had the sales of these Columbian commercial engines, which is a really big deal. So that's five engines that will be delivered next year and of course under percentage of completion accounting, the bulk of the work will be done this year. So that's a very positive development.

On the negative side of the equation, this quarter we're slightly less optimistic on the outlook for the aftermarket than we were last quarter, which has a big of a margin effect.

(Operator Instructions) Joe Mondillo, Sidoti & Company.

I wanted to clarify that last question regarding engine. So you're getting a benefit from the Columbian commercial businesses that you just got, the environmental upgrades as well. Could you just help us get a little better idea in terms of what your margin expectations are, given you're expecting aftermarket to come down, but what kind of margin profile are we looking at with the Columbian commercial and environmental upgrades? It sounds like maybe margin comes down a little bit in the back half compared to what we saw in the second quarter.

I would actually anticipate that it improves a little bit, because remember, in the second quarter we had 1.9 million.

I'm saying excluding the 1.9 million, looking at 18%.

Yes, so if you're looking at it at 18% relative to where we think we'll end the year, I think we'll end the year a little bit softer than that. The first half of course was much lower than we would traditionally expect because of these restructuring expenses, the cost associated with the commercial contract in Canada and so forth. So the second half will be substantially stronger than the first half. And then I anticipate we end the year kind of a couple of points maybe lower than where we were last year.

CPI, I think I lost you a little bit when you were talking about that part of the business. Last call you said profits were the best in third quarter of 2011 or what not, whatever it was; did profits directionally continue to improve in the second quarter? And if you could just talk I guess maybe a little specifically on the specific markets that you sell to in that business and how that's trending?

Let me talk about the profitability situation first and then I'll talk about the individual market dynamics. The profitability for the year has really improved dramatically over the course of the year. I would say that if you were to compare the first quarter with the second quarter of the year, it's basically flat. Although June was the strongest month from a profitability standpoint that we've had all year. So I'm optimistic that the trend continues to improve and I think the trend will continue to improve through the end of the year. So that's sort of it on the profitability picture.

On the market picture, you really sort of have to draw a little bit of a matrix and on the X axis of the matrix you'd have North America and Europe and under the Y you'd have refining and kind of all other. So in Europe, the story is actually much more positive than it was last year. The European businesses which are predominantly refining and process industries really performed well. We had a number of wins on the OEM side and the profitability over there is quite strong.

In North America, the refining business hasn't been quite as strong as what we would hope and obviously we've got the natural gas side of the business which is up in Canada which has been quite a bit weaker than what we thought. Does that give you some color on the market picture?

That's good enough. I guess I have two questions. First off, on Technetics it obviously sounds like it's a challenge with that business, especially with the semiconductor exposure. I'm wondering your feeling on where we are in the cycle? Do you expect directionally from where we are now that we continue to bleed a little bit into the back half and then hopefully stabilize? Or do you think we've seen a huge decline already and we've maybe hit bottom?

Let me just adjust some of your language, because I don't want anybody on the call to think that we're struggling in Technetics. That business is performing exceptionally well. So you'll recall when we completed the Tara acquisition, really the strategic intent of that acquisition was to expand the business from really just a specialty field business to an entire engineered system component business. We basically bought the things that go around the seals, the bellows and the pedestal and so forth that go around the seals. That strategy is coming together very very well. Just recently, last quarter was the Paris air show and the level of discussion there was significantly more sophisticated than it was even just a year ago. So we have a huge amount of optimism for the future of that business.

Now the trick is, obviously if you're selling products into aerospace for example, those are long lead, long sales cycle things. You don't just sort of confirm a sale and then deliver it next quarter; that takes a year or 18 months to develop. But in general, we feel really really good about that pipeline. And to some extent the softness in semiconductor has been a bit of a blessing because that's enabled us or forced us to really double down our efforts on both the aerospace side and the down hole oil and gas side, where we've seen some successes as well. So from a market development standpoint the business is performing really well.

And then from an operational standpoint the business is also performing really well. The beauty of the acquisition of Tara is those guys really understood how to operate in the semiconductor environment so they're very good at gearing the operations to these very rapid cyclical downturns and so they're highly responsive. We don't keep a huge amount of fixed costs burden, so we can scale up and down as the market adjusts. So I just want to be clear, the business is performing very very well.

That said, semiconductor is about 30% of the business and the primary customer for our semiconductor business is Applied Materials so when that market's down, obviously there is a leverage effect on Technetics. Now, depending on who you talk to, there's some optimism for a second half recovery. When we talk to Applied Materials, they're more focused on the first half of 2014, so the market signals in semiconductor are a little bit mixed. We also have some concern because the nuclear backlog is a little bit softer than it has been previously and obviously the nuclear product line carries really strong margins for us.

So there are some market effects going on but I just don't want anybody to think that because the market is a little bit soft the business is struggling in any way.

The GST margins nearly almost 30% - 28.5%, what's the upside of that business? It's just incredible how profitable that business is.

You're killing me Joe; 30% isn't good enough for you?

I couldn't even believe it could get this high so I'm wondering.

I'm teasing you. The business is exceptionally disciplined on cost. They've been doing a lot of work on their commercial excellence programs. Obviously we do have some benefit from the reduction in PTFE prices, which PTFE is a huge percentage of their raw material costs. You'll remember last year PTFE prices really spiked. I think they're just doing a great job on all fronts.

I will mention that Q2 in particular tends to be dominated by some seasonal factors related primarily to process industry turnarounds, so we did have the benefit of that which likely won't continue. There's also some softness in mining and the construction segments. So I think there's probably more headwinds than there are tailwinds. I don't want to mislead anybody, but it was a very strong quarter for them.

There are no further questions at this time. Presenters, I'll turn the call back to you.

Thank you Steve and thanks everybody for dialing in today. As usual if you have any follow-up questions feel free to contact me on my direct line at 704-731-1527 and we look forward to talking to you again next quarter. Thanks.

This concludes today's conference call. You may now disconnect.