Park Ohio Holdings Corp (PKOH) 2007 Q3 法說會逐字稿

Good morning and welcome to the Park-Ohio third-quarter 2007 results conference call. At this time, all participants are in a listen-only mode. After the presentation, the Company will conduct a question-and-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time.

Before the conference call begins, please remember that the Company will be discussing some issues that are historical and some issues that are forward-looking. When the Company speaks about future results or events, there are a variety of factors that may materially change their actual results from those projected. A list of the relevant factors may be found in the earnings press release as well as in the Company's 2006 10-K filing with the SEC on March 16, 2007.

The Company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Additionally, the Company may discuss EBITDA. EBITDA is not a measure of performance under Generally Accepted Accounting Principles and is considered a non-GAAP financial measure as defined by the SEC. The Company may present EBITDA because management believes that EBITDA could be useful to investors as an indication of their ability to incur and service debt, and because EBITDA is a measure used under the credit facility to determine whether they may incur additional debt under such facility. For a reconciliation from income before income taxes to EBITDA, please refer to the Company's current report on Form 8-K furnished to the SEC on October 30, 2007.

Now the meeting will be turned over to Mr. Edward F. Crawford, Chairman and Chief Executive Officer. Gentlemen, you may begin.

Good morning ladies and gentlemen. Welcome to the Park-Ohio third quarter reporting conference for 2008. May I introduce the President and COO of the Company, Matthew Crawford.

Thank you very much. The third quarter was marked by continued strength in our businesses, which are either located internationally or serve the global markets as well as positive progress in our U.S. businesses which serve the auto and truck markets. On a consolidated basis, revenue was up 5% to $269 million, EBITDA was up 30% to $23.8 million and EPS was up 63% to $0.53 per share.

Looking specifically at the segments, ILS first. ILS continued to suffer year-over-year negative comps from last year's strong truck market which caused revenue to fall 10.1% to $134 million. More importantly and as expected, ILS revenue increased sequentially from the second quarter by 2.2% as we saw increasing demand in the truck market and new business, although both of those were offset by weakness in our automotive customers.

We expect revenue to continue to strengthen moderately during the rest of the year, although a strike currently ongoing at International Truck will cause some headwinds as it continues deeper in the fourth quarter. We're very optimistic going into 2008 when we expect to return to our double-digit growth trend. Consistent with our year-over-year revenue challenge, ILS EBIT was also down approximately 6% year-over-year during the third quarter. Sequentially though, EBIT was -- EBIT increased 49% to $8.3 million due largely to the aggressive margin improvement actions taken during the second quarter. We expect ILS to enjoy continued progress as incremental revenue takes hold into the next year.

Looking now at Manufactured Products segment, revenue grew 26%. This result is consistent with the prior quarter's growth and continues to reinforce the importance of the growing global end markets for oil and gas equipment, as well as the induction heating and melting systems.

As we've stressed during prior conference calls, we believe that demand for these products will permanently benefit from more geographic end markets for this type of equipment, and also for the spare parts and service dollars which followed these installations.

As expected, EBIT improved 43%. Much of this improvement was due to the revenue increased, but continued profit improvement at our rubber business was important to our results.

Looking now at our castings unit, revenue at the Aluminum group was up 24% in what is often their most challenging quarter due to summer shutdowns. All of this growth was driven from new business volume while the underlying volume demands from our customers continue to be soft. Unfortunately, we expect continued softness through the fourth quarter to offset some of the new business volume, but looking into 2008 we're very excited about continued new business awards which we intend to implement during the first half. EBIT rebounded from a loss last year to a gain of $1.249 million. This represents a nice turnaround from 2006. We still believe this group will continue to underperform, though, until we can increase the annual run rate to approximately $200 million, and we anticipate doing this during calendar year 2008.

Looking at the balance sheet, non-cash working capital decreased during the third quarter by approximately $7 million. Bank borrowings came down by approximately $14 million. We expect continued debt paydown during the fourth quarter and anticipate meeting our goal of generating approximately $25 million for debt paydown, although we anticipate at this time probably to keep some of those dollars in foreign accounts as we finance further expansion globally. So it may not all come home for paydown of our bank debt. Capital expenditures were $5.3 million during the third quarter. We expect capital expenditure for the year to be on the high side of the 16 to $17 million range we gave on the last call. Year-to-date, cash tax payments totaled $4.4 million, or about 16%. This is a good estimate for the full-year percentage of cash taxes. We expect the full-year effective tax rate for book purposes to be about 36%.

In closing, we think continued strength in our Manufactured Products segment combined with further programs at ILS and GAMCO -- excuse me -- further progress at ILS and GAMCO will set the stage for a very good 2008. Having said that, we expect slower automotive volumes and slower than expected rebound in the truck industry, compounded by a strike at one of our larger customers to cause 2007 earnings to come in at the lower end of our previous estimate. We now expect 2007 EPS to be between $2.10 and $2.25.

Thank you. With that, I will turn it back over to our Chairman and CEO, Ed Crawford.

Thanks, Matt. Let me point out some areas of the Company which I think are important to emphasize on today's call. Number one, the strength of our -- the growing strength of our international component of the Company. Five years ago, the sales -- our international sales in this Company were less than 5% of the revenues. Not only did revenues increase, the percentages increased. Today, sales, international sales for our Company, are between 20% and 25%, or approximately $250 million. That is a very, very important part of the future of this Company. We realized three, four, five years ago that we would have to continue expanding our operations, continue to emphasize international sales. Particularly with all the currencies and everything that is happening, to be fluid, to be part of the future, to be in the places where we want to grow with the people that are going, like in Asia. It's all about being there, having our facilities and having the products that they can and will buy from us.

So our international sales strategy is working. I expect that segment of the Company to continue to grow into the future and it's very, very important for the success of Park-Ohio to concentrate increased sales in this area.

A couple of comments about the trucking and -- as is affects the ILS division, supply chain management division. We started into this expecting sales could be down as much as $65 million approximately [affect us]. It was higher than that. It's all in the Class A. It's not in all segments of the trucking business, it's over the road rigs, the ones that you're dodging in and out as you're coming back and forth to work. But I will tell you this, the pent-up demand for new trucks and new engines that will start to hit the marketplace in '08, '09 and '10, are -- we are there, we are positioned. When you go through a cycle, as strong as it was in '06, and you go through this '07-'08 cycle, which has been anticipated, and I think the Company's doing very well considering the impact the loss of such a tremendous amount of volume does to the one very, very important division in the companies. But this is there, the trucks will be made, the engines are going to be changed and we're perfectly positioned.

Unfortunately, we have the responsibility to our very large customers and very important customers to our Company to maintain our facilities, maintain our capability. And it's like being in the fire department. We have to be ready at all times. We have the expenses to stay in position to support the ramp up when it comes. And when it comes, just like it did the last time, this will turn on. We anticipate based on our customers this is a third-fourth quarter event, it will start to ramp up. But no mistaking, '09 and '010 are going to be dynamic years as for example the Company enjoyed in '06 and '05 when they were ramping up the other new engines. So I feel very good about that part of it as I do about international sales.

And just a couple of comments on the Aluminum business. The long-awaited turn in revenue and sales is upon us. I've been talking about this now for 18 months. Quite frankly, I'm very pleased to be able to say we are there now. I mean, as anticipated, '08, '09, '010, this is an important part of the Company. I see tremendous opportunities here. And the first time in '08, there's a very, very high likelihood that this Company will do in excess of $200 million, from the current run rate. The business in place -- we have written over $40 million in new business in the last 45 days. This business will be coming on, be phased in in the first and second quarters of '08, resulting in a dramatic turnaround. But more important, reflecting a good investment, staying the course, riding this aluminum business as competition has been eliminated one at a time, and we are really well, well placed to take advantage of a business that will return in volume. But we're getting a bigger -- bigger piece of the existing market. I look to aluminum to be, as described, a very, very important part of '08, '09 and '10. You combine that with the anticipated return of the trucking business, those two events in themselves give us a lot of optimism for what we see in '08, '09 and '10 in the Company.

Lastly, the supply chain management business is more diversified. Yes, we have new business coming, and yes, we've tried to offset the trucking. Actually we've done a very good job. When you consider how much, and I'm very proud of our management on that side. When you consider how much our trucking is now and that revenue hasn't sunk because we have added new business and we're kind of in that storm where everyone knows in supply chain management as you add new business, 40 to $50 million of new business, there's expenses in getting it started. And these expenses are being flushed through the balance sheet and P&L as we talk about it today.

On the other hand, once that is absorbed and we have the benefit of that business, you will seek a dramatic spin in the earnings, in the revenue in '08 and '09. So when you talk about the Aluminum business, I think we are there. I like the international content of the Company and the growing portion and the trucking business will come back. The numbers we're achieving are in spite of -- I'm not talking negative issues about trucking and aluminum, I'm just talking about the issues that are there, building for the future. But Park-Ohio has a way profit continuing to grow, continuing to increase the earnings because we are well diversified. We are balanced. And right now, our international business is carrying the day. Well, that's fine. But in '08, '09, we're talking about other divisions. And hopefully sometime in the future all these will come together. But, again, we're overall here very optimistic and this is a tough year. It's a tough year for everyone. But the future looks bright for your Company.

Now we are ready to answer any questions.

(OPERATOR INSTRUCTIONS). Philip Volpicelli, Goldman Sachs.

With the aluminum business, I wanted to understand Matt and then Ed's comments. I think Matt if I understood you correctly, the organic business will be down again in the fourth quarter and the new business will be up, but the rate of growth will be less than what we experienced in the third. Is that what you were saying?

I think what I was trying to indicate is, despite positive movement in new business and accretion to the overall business in terms of platforms, in terms of parts, in terms of everything we can measure, we're making progress. We do anticipate, on a per by-part volume basis, the fourth quarter to be difficult. So I think that we're continuing to battle and will battle into the fourth quarter this interesting problem of getting new awards, implementing awards which are being offset by what we see as a pretty weak build rate in the fourth quarter.

So maybe if I restate it, there's a chance that the organic business is down more than what can be offset by the new business?

No. I think we're going to see year-over-year incremental improvement in revenue, just not at the rate that we would like to see it.

Understood, okay that's good. Then looking into next year, historically, you have had about 55% to 57% of your Aluminum revenue in the first half of the year and then the remainder in the second half. If we kind of extrapolate the $41 million roughly of revenue in the third quarter here, it sounds like it's going to be over $200 million next year. Are you guys just being conservative, or should we kind of be careful of some lumpiness in some of the new contracts?

No, we're being conservative.

Okay. And then the margins, I'm assuming that the new contracts are coming in at margins that are acceptable to you. Should we anticipate the trend of margin erosion starting to swing at some point in the first half of next year?

Yes, and let me talk about that for a second because I don't want to sound like a manufacturer here, but that's kind of what I am. When you are operating these five plants, anytime you have underabsorption, there is -- the [breaks], these are amazing facilities. At $55 million, at $45 million it breaks even, at $55 million it's really making a lot of money. We have, along with the [am cats] outfits we bought about 3.5 years ago now, four years ago, we have deployed those. So this is now -- all of our -- we anticipate all five of our facilities next year to be fully absorbed, and that's where we get the margins. This facility as I have indicated, once those facilities get north of $200 million, a lot of good things happen. And it's going to be north of $200 million, and I hope the next time we speak, we'll be talking about additional awards.

And then on the ILS portion, if I heard you correctly, basically it's the second half of 2008 when we are going to see inventories or demand for your products rise in anticipation of a very strong 2009 year ahead of the emissions change?

No, Philip, I will jump in on that, it's Matt. We view unfortunately, because we get so many questions about it, we get a little defensive. I think dad was speaking specifically about what our expectations are on the tuck market. This business, you know, truck is not the 30% part of our business that it once was. So we have a significant new box of business. We see that returning to that double-digit growth trend beginning earlier than the second half, I would think by the second quarter at a minimum. So, no, there's multiple facets in play. The cream to this story is going to be the return of -- or the increased truck builds, but we're not waiting around for that. I think this new business that we're getting and some of the other positive changes at the cost line and the margin line are going to begin to benefit us much earlier than that.

I think Matt's saying, addressing that correctly. When we talk about the truck business, I think we are being a little defensive because no one likes to give up that kind of volume in any given period, but we have that business and we have those relationships, this kind of legacy thing, and Matt is absolutely correct. We are writing new business. This Company continues to grow organically and we just look upon that as like the homerun in the World Series. When it comes back, you throw it on top of it, it's like a double layer of chocolate dressing. So -- but don't misunderstand my comments to say that the Company organically is not growing. It's just that we happen to know and everyone asks us about trucking because it's such a big block. Anytime you add 75 or $100 million of business on top of business that's doing 500, you're going to feel it. But we'll do well coming right out of the gate with new business and -- which we're quite frankly absorbing the cost right now to do it. Again, there is a lag time between -- get a $10 million block of business, you invest the inventory dollars, you set up the warehouses. These are all expensed items on an ongoing basis, and then all of a sudden, the profit shows up some four months later like the books. So, again, I think Matt made an important clarification there.

Great, I appreciate the color. My last question, the $25 million of cash you plan to generate and I think the comment was that you were going to pay down less debt than that. Would you guys care to give us a sense of how much cash you will keep on the balance sheet and how much debt you're looking to pay down?

I think it remains to be seen tax-wise how much money we choose to keep abroad, and then that also ties to our investment strategies abroad. Obviously we're growing quickly in many countries abroad, including Western Europe. We talk a lot about China and India. We've been growing in other places as well. So that's going to be a combination of some tax strategy and some growth planning, but we would expect to pay down for the year in excess of $15 million. How much closer -- how much further above $15 million it gets to $25 million depends on those two factors.

Richard Paget, Morgan Joseph.

Happy Halloween. How are they are -- you guys settling into the new offices?

Well, we're actually sitting in our new office, and one that is a little unruly here. The carpet is not in. Everything is kind of hanging around. But yes, over the next 90 days, we should complete the transition.

On the ILS, margins seemed to have rebounded quite nicely, even though revenue run rates aren't what they once were. Is this an impact of you guys better managing your costs, or is this kind of some of the new business has gotten into that run rate where all of the expenses have already been taken?

I think that it is -- this definitely has a lot to do, particularly in the third quarter, with really managing our costs. I would tell you that I think that the cost focus of this organization was really running the quarter, if you will. It doesn't mean we were ignoring growth, but we took it as a challenge I think. And you heard on the last call I think how disturbed we were to here at the poor profit performance. So I think we did an excellent job there. Of the two, I would tell you, I think cost performance -- I think the incremental business is certainly helping, but we have really battened down the hatches in the third quarter. So I think that we will continue to see margin enhancement definitely off the second quarter results. That's a pretty low hurdle, admittedly. We look to enhance from the second quarter as well in the fourth. I don't know how big that opportunity is. Ultimately, it's going to be difficult to get much higher until we see that incremental revenue in '08.

Okay, but you think you could potentially at least meet third quarter or at least be close to it?

Absolutely. I think that -- that is our plan. The wild-card here right now, and once again, I hate bringing up truck again, but the wild-card here is this International strike. That is the worst kind of hit to us, because depending on how deep it goes into the fourth quarter, I mean we are fully operational, ready for them to end the strike and they are striking. So, that is an important customer to us. We support all of their plants. The answer to that question is, but for that strike, it's close enough that that strike could impact our overall ability to meet or exceed the third quarter margins.

Okay, and then on Manufactured Products, it's still good growth there, but if I look sequentially from the second quarter, it was down a bit. Is this order lumpiness, is it seasonality?

Yes, you're never going to get the continuity there that we get in the other businesses because we obviously have sometimes very large jobs that go through. And depending on our ability to negotiate higher versus -- they're all pretty high margin on a relative basis -- but average to good margins is going to affect a quarter's profitability.

But in that segment, you've had two years of pretty strong growth, you know, 25%, 30%. How much more is it sustainable going into '08 of having at least double-digit growth?

I think that obviously the year-over-years are going to get a hell of a lot more challenging going into '08. So I'm not prepared to comment on that, other then I agree with you it's a challenge both from a people standpoint, just from every aspect, just from a capacity standpoint. So I will reserve comment on that until we get through our budget process or close our budget process. But I would tell you, in terms of demand, in terms of what's out there, I feel very strongly about the comment I made that some of our investments combined with the change in the global markets and demand for this, both from an OEM and new equipment standpoint and the parts and service business [that tails], this is no longer the typical cycle that a lot of these businesses went through based on when they were kind of dedicated to the U.S. or North American market. This is a permanent shift. And as I have mentioned on prior calls, a lot of this equipment has 12- to 18-month lead times, so we have pretty good visibility. And while I'm not going to comment on growth rates at this point, what I will tell you is, we are feeling pretty comfortable about where we're at right now.

The backlog is still strong?

Yes. I mean, obviously, not all of the products are 18 months, but we are feeling pretty good about the future of that business. And maybe I'm using too strong a word when I say permanent, but the reality of it is, even if the new equipment market in Asia or -- softens a little bit, we still have an incredible base of new business there that we now can service and repair. And we don't talk about it much, but subtly, we've done a very good job increasing our market share, particularly on the spare parts and service side in Western Europe. So that is a combination of a couple of things, and one is a permanent shift in the business globally, and secondly is our strategy to expand our footprint. So this is not an aberration. On the other hand, I can't comment on continued growth in the next year at this juncture.

Okay. And then ILS has a pretty broad-based customer list, and outside of the U.S. auto and trucking, what are you guys seeing out there? I know that there are certain businesses that are tied to residential construction that are suffering a little bit and some people are becoming a little bit more bearish on the overall economy. What are you guys seeing out there?

We've been skeptical, as you know, sort of cautiously optimistic, but having been in the truck market, it forces you to be a little pessimistic about everything. Quite frankly, the only significant deviant to plan that we saw in the third quarter was the automotive content, which as you know is not a big part of ILS, but it's not insignificant. Certainly, that injured us in the fourth quarter. Other than that, there were some plus and minuses, but nothing that I would tell you is a significant variant to plan.

Just a quick clarification. Did you say you -- guidance is $2.10 to $2.25, or $2.10 to $2.20?

Well, we said $2.10 to $2.25. Really, all we did is take off the -- the top $0.10 of the range is now out of play.

Okay.

I'm sorry, I misspoke. $2.10 to $2.20 -- we took the top $0.15 out of the range.

Okay, I just wanted to be clear. Thanks.

Sarah Thompson, Lehman Brothers.

I have a question on ILS. Can you break it down then, if you are saying truck is no longer 30% of your business, can you just tell us what percentage is truck, what percentage is car?

Obviously I can do that off-line. I would tell you that I think all truck is 18%, 19%.

Of ILS?

Correct.

Okay. And then, are you guys willing to give a number in terms of -- I know you said you've got a bunch of business coming online, but even how much new business was in the quarter?

I'm not prepared to comment on that right now, other than to tell you that we are seeing -- we're implementing business now and have been awarded business now that gives us the comfort level to say, as I mentioned during the call, that 2008 even with some pretty very conservative numbers in truck is going to provide for a more typical double-digit growth here.

Sarah, keep in mind, and if we go back to when this all started and the trucking was a very, very large number, it's not that we are not interested in trucking business. We're maintaining our position in the trucking business, particularly Class A. But, clearly, there has been motivation here to add other types of businesses, okay? That is why the swing into the Class A is such a dramatic issue when it comes and goes every couple of years.

Right, that's why I was asking for the clarification on the numbers.

Sarah, we're trying to get away from -- I know we've done it on prior calls -- giving actual customer names and signings. We're trying to get away from that a little bit, for two reasons. One is, competitively, we don't think it's a great idea to name names. Secondly, I don't think that we -- we have been burned by one guy moving forward and one guy moving back late -- the people implementing late. We've just decided we are better off to [just] characterize for you what we are seeing in terms of growth percentages going forward.

Okay, that's fair. I guess the reason that I'm asking about truck, and I think probably most people on this call would agree with this, is that every truck manufacturer you talk to has no idea when trucking is recovering. So if you guys think it's second quarter, that is great. There's people that think it's quarter, there's people that think it's not until 2009. So I'm just trying to separate out how much of your number is at risk around you guys think it's coming in the second quarter.

Sarah, I can answer it this way. Obviously at this rate, they're giving us build rate numbers. So, once again, they are not giving it out through '08. But, as you know, we are pretty close to the actual production lines. If you want the answer, the real answer to your question, we are not -- our estimates -- when I say double-digit growth next year, we are not anticipating -- we're anticipating more conservative truck estimates than anything you have seen from any kind of public rag.

Okay, terrific, that is very helpful clarification then.

We're been burned on this once. We're not planning on getting burned on it again.

Fair enough, thank you very much.

(OPERATOR INSTRUCTIONS) [John Baum], a private investor.

Great balance sheet management. I was noticing that inventories were down. Are you doing a better job managing, or is that tweaking ILS a little bit?

John, this is Rich Elliott. That's ILS, and also the capital equipment business.

Also, Richard, other current assets were up. Is that up $10 million -- is that prepaids, what is the --?

Yes. Other current assets bounce up through percentage of completion accounting at the induction business.

Okay. And are we going to be using up all of the tax loss carryforwards this year, or are we going to be going a little bit into next year?

It looks like we're going to carry through into 2008.

All right. So we can look at -- I think the earlier comment was, we are looking at cash taxes somewhere at the 16% or 17%. Was that what Matt said?

That's correct.

Okay. Any initial budgeting for CapEx for '08?

No. I don't -- well, let me just stop and say, you know our range. Typically, conservative everything tightened down is 13 to $14 million. Our super aggressive times have been 20. But beyond that range, I wouldn't want to tell you anymore.

Okay. Very good. Any other asset sales planned for the fourth quarter?

You know, we are continuing to try and look through the portfolio for some of these non-performing idle assets. So I think we would love to have some of that happen, but I don't know that it's meaningful. I think that it's maybe $1 million here, $2 million there, that kind of thing.

Okay. And then finally, directing this to Eddie, can you give us a little bit of color on what ILS looks like in China and India right now and the buildout?

Right on schedule. One of the things as you know when we step into a new arena, particularly like India, and not so much China and Hungary and so forth, it's just the acquisition we made is pretty much on schedule. Matt just recently came back from a major strategic meeting with all of our people in Asia and Hong Kong and we got our hands on the bridle here. We're going to go very slowly here as we will until we -- it's going to take us a couple of years to really determine where we want to invest heavily or not. For example, maybe we're not going to be as anxious to expand the business in India right away relative to other opportunities we have. So I want to get to know more about that marketplace, where it's going before we really engage and try to grow that business.

Are you trying to file some new customers over there too? Are they giving a little bit of guidance in certain areas where you want to be. Are you --?

Obviously, the two customers we're following around the world are people like Dell and IBM. And there are other industrial accounts. The one thing that we are -- and we have been talking about this as you know for many years. We finally I think we have identified a beta site in China, mainland China, for ILS around an industrial company with a very high-profile with the support of the government. We will be moving into a real test site relative to introducing our vision of supply chain management to that country. That is five years in development. We've finally -- and believe me, before you can get anything done this dramatic in China, it requires government sign-offs and everything else. But we're virtually there and we will begin. I expect it will be relatively small, but with the success there, the long-awaited development in all Asia. And I think I have said before, their supply chain systems are in like 1950s. They don't even know what just time is over there. So a lot to be accomplished, but we're going to be very, very careful when we take our systems over there and so forth to make sure -- and not to get trapped in their inventory dollars. In fact, we might introduce the concept of just a service model with them still maintaining the inventories, in just rent a [mobster] in the black box on [fee-type] basis. So we're not set in stone how we're going to do it, but we don't want to own a bunch of Chinese inventories, I can tell you that.

(inaudible).

I have two quick questions. The first one is on backlog, if you can comment on backlog by business and wherever you could, that would be helpful. And secondly, on the ILS side, can we expect more cost management going forward?

We don't typically comment on backlog relative to the ILS business or the Aluminum business, because we're basically tied to their production line. So it's very difficult to tell shifts in production. I think on the capital equipment side, we talk about that more. And looking at the segment as a whole, particularly in the forging business and the capital equipment business, we feel we have very good visibility. So without giving actual numbers, which we haven't in the past, I would tell you that we're very looking very deep into 2008 at this point.

And then, the cost management on ILS going forward?

Absolutely. Cost management, I think that we were extremely aggressive in the third quarter. As I've mentioned, I think the margin saw the benefit of it. I'm not suggesting we'll be any less aggressive, but I think that our focus is going to be more even keeled towards revenue growth and adding the people that can enhance that growth profile.

(inaudible) when can we see real revenue growth on ILS? When can we -- which quarter? Do you expect something happening in Q4, or is it out into Q1 now?

In terms of what?

Revenue growth at ILS.

Obviously, we saw sequential growth in the third quarter versus the second. But if you are referring to year-over-year growth, then obviously the '06 versus -- all of '06 versus '07 and even the first quarter of '08 are going to be very challenging comps because of the emissions changeover in the truck market. So there is going to be a very, very difficult comps until the second quarter of next year. That does not mean we're not going to grow sequentially. I know I talk about that a lot because I think it's a better, a more important metric relative to how the business is doing. But year-over-year is going to be tough until we get through that truck build issue of last year. So I would say the answer to your question, second quarter of next year.

Ladies and gentlemen, we would like to thank you for joining us this morning in this call and we look forward to continuing positive results as we move towards 2008. And we look forward to speaking with you on the next conference call. Thank you very much for joining us.

Thank you. This does conclude today's Park-Ohio third quarter 2007 results conference call. You may now disconnect.