RBC Bearings Inc (RBC) 2006 Q4 法說會逐字稿

Good day ladies and gentlemen. Welcome to the fiscal 2006 fourth quarter and year-end earnings conference call. My name is Michelle and I'll be your coordinator for today.

[OPERATOR INSTRUCTIONS]

As a remainder this conference is being recorded for a reply purposes. I would now like to turn the presentation over to our host for today's call Ms Lauren Murphy from Ashton Partners. Please proceed, ma'am.

Thanks, Michelle. Good morning everyone, and thanks for joining us today for the RBC Bearings fourth quarter and full year 2006 earnings call. On the call today will be Dr. Michael J. Hartnett, Chairman, President and Chief Executive Officer, and Daniel A. Bergeron, Vice President and Chief Financial Officer. Before beginning today's call, I must preface all comments with a Safe Harbor statement. Some of the comments made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those projected or implied due to a variety of factors. We refer all of you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial conditions. These factors are also described in greater detail in today's press release and on the company's website at www.rbcbearings.com. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website.

Now, I would like to turn the call over to Dr. Hartnett.

Thanks, Lauren. Good morning and thank you for joining our call today. Today I'm pleased to report that our fiscal 2006 was a solid one. This morning I would like to walk everyone through some of the highlights of the year, review our strategy and give some additional insights into our fourth quarter performance and the business environment that we currently are operating within. Then Dan will talk about the financial results in more detail. And finally, I'll close out our prepared remarks by giving you some insight into the trends in our end markets and providing some first quarter guidance before we open the call to your questions.

To begin, I would like to draw your attention to the fiscal year results, RBC reported this morning for fiscal year 2006. We had revenues of $274.5 million, up 13% from '05. There was 200 basis point improvement in gross margin to 30.2% or $82.9 million in total, a 20% growth in operating income to $38.6 million, and excluding non-recurring expenses a 29.5% growth in adjusted operating income to 45.4 million. Net income was $12.4 million, up 71.3% from a year ago period.

The company is performing a little better than we had planned, and we are happy about that. I'd like to take a minute and thank the RBC team for their good work. It has allowed us to produce outstanding performance quarter-after-quarter and enhance our great track record with our customers, our suppliers and our investors. Now let's talk a little bit about last year's performance and that was driven by the following. Number one, we had strong end markets and some product mix shift to more highly engineered and proprietary products.

Number two, our ability to service and grow the respect of our customers was enhanced all year, and just a little word about that. RBC has a process that consistently delivers the right, high quality product from the tens of thousands of different designs we produce, to the right customer of the thousands of locations we supply, at the right time and the right place in the world. And we do this correctly hundreds of times a day sometimes thousands of times a day.

Our commitment to improving operational efficiency is very strong and many of our efficiency products -- projects and some call these Six Sigma events, initiated in previous years contributed to margin expansion this year and will continue to bear fruit in the near future. I'd like to talk a little bit about our growth strategy and sort of recap what's going on there. And this is an amazing time in the history of many of our markets, and it's a very exciting year for RBC. It's a period when important new franchises that will last more than a generation are now being created. For example, the number of aircraft and defense systems under development today must be unprecedented.

Consider the current design program under development that we are currently involved in. The Airbus A380 Jumbo Jet, the A380 Cargo, the A350 Redesigned, the A400 Troop Carrier, Boeing 787, Boeing 747-8, the light jets under development such as Embraer's 190, 300 and 100 series. The very light jet aircraft that are being built today by Cirrus, Eclipse and Cessna, and all the associated engine programs that are going through the engine makers today like the GE GEnx engine for the 787, the Pratt F135 for the Joint Strike Fighter. The Pratt 600, which is a 300-pound turbine engine to power the very light jets. Rolls Royce's Trent 900 and Trent 1000, and Snecma's GE90 for the 777 -- Boeing 777 ship.

And consider all the associated suppliers making landing gear, actuation devices, wing assemblies, doors, cargo beds, navigation devices, and simultaneously add to these all the defense programs in the work for new Laser Guided Munitions. The US governments need to return the large US helicopter fleet to pre-Iraq conflict readiness levels. The new concepts in night vision systems and guided missiles by Lockheed, Boeing, Raytheon and BAE. Completely new fighter aircraft such as Lockheed's Joint Strike Fighter, and add the sub-systems, engines, landing gear, wings, doors, actuation, navigation, targeting control and weapons, and you have some idea what we see for demand for new and classic RBC products or motion design solutions required from our engineers and business development folks on a daily basis.

We have major active programs with all of the aforementioned systems and a great many others. And today we are at the beginning of a new generation of aviation and military products that will be in service for the next 50 years. And that's just -- that's what happening in these markets today, which is we feel a very unique period in the beginning of the 21st century.

A little bit about end market demand and mix. Throughout fiscal 2006, we experienced strong demand for our products. This was without a doubt an important component of our overall performance. Sectors including oil and gas, construction and mining, aerospace and defense continued to demonstrate strong current demand for our existing offering and we see this strength continue through fiscal '07.

In 2006, the aerospace and defense side of our business accrued an annual rate of 24%, while the industrial side was a solid contributor exceeding our performance goal of twice GDP growth when the fluctuation of Class 8 truck volume is normalized. We should mention that to a limited extent, we were able to realign capacity during the year to favor demand trends in our end markets. This created a shift in product mix in favor of aerospace and defense products at the expense to some extent, of industrial products at some locations.

This was an improvement - a permanent improvement in mix from a profitability standpoint, and represents the direction we want to take the business. We expect this trend to continue for several years, albeit modestly and given the number of programs under development that I've outlined earlier. Consequently for fiscal 2006, we ended up with roughly 44% of our sales in the aerospace-defense sector and 56% went to industrial customers. The split before -- the year before was 40% and 60% respectively and we see that balance heading towards a 50/50 split over the next 24 months.

I'd like to talk a little bit about our relationship with our customers. And we are extremely proud of the service levels that we provide our customers and we consider this a fundamental underpinning of our success. Sometimes this means solving difficult problems of motion and delivering complex mechanisms on time to demanding customers. In this regard, our efforts at Lockheed Martin have recently earned us the prestigious STAR Supplier Award.

Our reputation for jet engine products continues to grow. We are developing important new applications for the GE GEnx engine that will power the 787 Dreamliner with sub-suppliers in the United States and Europe that will result in new revenues for us beginning as early as this year. Our engineering capabilities, coupled with the ability to execute cost effective design solutions in manufacturing, make the difference time-after-time on many programs such as these throughout RBC, and create an environment where important long-term relationships with world class customers can be expanded.

I'd like to talk now a little bit about our operations. During the year, we focused on finding new ways to reduce our cost footprint and improve our manufacturing methods. These operational initiatives have both near and long-term implications. For example, during the most recent quarter, we were able to consolidate the operations of our Nice Bearing facility combining production with other RBC locations and eliminating the expense of maintaining an independent plant site. We did this after careful planning, so that the change would not have a material impact on production or our ability to service our customers.

You'll continue to see results such as these reflected in margin improvements over the next 12 months. Our management team and employees throughout the world remain focused on enhancing performance through cost control, method improvement, price and mix management. I'd like to now just touch on our strategy. And first of all our core operating philosophy is to provide our customers with a unique design for manufacturability solutions to complex problems of motion.

And this was the premise of the business when the company was incorporated when we did the IPO and it continues today. Overall this approach has served us well over the years, and we've been able to develop and expand our professional and operational infrastructure simultaneously. This is one of the reasons that has accelerated RBC's development.

Our growth strategy is pretty simple. It has four basic components. And the first is, to expand our product offering with innovative bearing solutions and particularly with all of the projects that I mentioned earlier. Our second, is growing our OEM customer base and adding new customers. We seek opportunities to expand our OEM business with existing customers by becoming an indispensable partner in solving their design problems. Our existing blue chip customer base offer significant expansion opportunities as many of them are multi-billion dollar firms at the top of their market that have potential projects. Also they provide excellent references and referrals for other accounts as well.

The third part of our growth strategy is increasing our after market sales and we are always working to increase the percentage of our revenues derived from the replacement market for the following reasons. Number one, it counters the OEM cycles and number two; it improves the economy of scale derived from selling more of the same or similar design. We are growing the sales to keep existing distributors by expanding coverage, adding customers in lightly represented regions, and adding new products that solve [old] problems, where it's determine that there is a significant economic base of demand. This is a very important element of our daily work.

And finally, the last growth strategy element is pursuing selective acquisitions. We have a strong track record of acquiring companies that fit -- are complementary to our target markets and accretive to our financial performance. I believe, that there will be further opportunities to take advantage of consolidation within this industry in both the industrial and aerospace markets. We regularly evaluate opportunities to acquire companies that have complementary products or markets. And this year as you'll remember, we acquired Southwest Products Company last September.

Last year we acquired US Bearings. Both of these businesses operated at Southern California and this quarter we've combined both operations into a single operating unit in Southern California. And certainly we'll continue to pursue similar opportunities like this in fiscal 2007. So looking at the fourth quarter, just a quick recap. Our net sales for that quarter were 75.8 million, up from 72.3 million a year ago. We saw an 11% growth in gross margin to $23.3 million, 30.8% respectively and operating income improved nearly 18% to $12.3 million. Excluding one-time charges, we saw a 24.7% growth in adjusted operating income to $13.5 million.

I'd like to turn it over to Dan in a minute to review the results of our fiscal performance in greater detail. But first, I wanted to take a chance to remind everyone of a few items. On the sales side, as I alluded to earlier, we continue to see sales in the aerospace and defense side of our business strengthen. For the year, this segment was up 24% on a year-to-year basis. Again our ability to respond to this demand shift continues to be a great benefit to us.

Also on a quarter-over-quarter basis, I wanted to remind everyone that during the third quarter because of an acceleration of business activity in several of our end markets, many customers shortened their product request dates and created Q3 demand at the expense of our fourth quarter. While our fourth quarter was still strong and came in above our guidance, we estimated this shift in revenues between quarters to be between $2 million and $3 million. We believe that we'll continue to see some acceleration in demand from our end markets and to the extent we can, we are trying to accommodate that, but it's difficult to predict and so our forward projections remain closer to our original plans.

Now on gross margin performance, I'm pleased with what we've reported during the quarter. Gross margins continue to expand, fueled by increasing manufacturing efficiencies, [improving] methods, continued tight controlled costs, product volume expansion in a favorable, generally favorable pricing environment. RBC's operations should continue to show improvements from these factors and these cost reduction activities remain a priority item for the team.

I'm now going to ask Dan Bergeron to give a little bit more details on the financial performance.

Thank you, Mike. Net sales for the fourth quarter fiscal 2006 were 75.8 million, an increase of 4.8% from 72.3 million for the comparable period last year. Net sales for the fourth quarter of fiscal 2006 of 75.8 million exceeded company's quarterly guidance range of 73 million to 75 million. Net sales to the aerospace and defense customers increased 13.3% in the fourth quarter of fiscal 2006, compared to the same period last year.

Net sales to our core industrial markets of construction, mining, semiconductor capital equipment and distribution, were up 5.9% offset by a decrease in year-over-year volume in our Class 8 truck market, resulted in overall flat growth for the diversified industrial group in the fourth quarter of fiscal 2006.

Gross margin for the fourth quarter of fiscal 2006 was 23.3 million, an increase of 11% from 21 million for the comparable period in fiscal 2005. As percentage of net sales gross margin was 30.8% for the fourth quarter of fiscal 2006, compared to 29.1% for the same period last year. This margin improvement was mainly driven by manufacturing efficiencies, product mix, continued cost control and pricing.

SG&A for the fourth quarter of fiscal 2006 was 9.6 million, compared to 9.6 million for the same period last year. As percentage of sales SG&A was 12.7% for the fourth quarter of fiscal 2006, compared to 13.2% for the comparable period in fiscal 2005. Other net for the fourth quarter of fiscal 2006 was 1.4 million, an increase of 0.4 million from 1 million for the comparable period in fiscal 2005. Included in the 1.4 million in the fourth quarter fiscal 2006 is 1 million associated with the consolidation of our Nice Bearing facility in Kulpsville, Pennsylvania into other RBC operations and 0.2 million of stock option compensation expense.

Operating income was 12.3 million in the fourth quarter of fiscal 2006, compared to operating income of 10.5 million for the same period in fiscal 2005. Operating income for the fourth quarter fiscal 2006 at 12.3 million, exceeded the company's quarterly guidance range of 11.4 million to 12 million. As a percentage of net sales, operating income was 16.2% for the fourth quarter fiscal 2006, compared to 14.5% for the same period last year. Excluding the cost associated with Nice Bearing facility consolidation and the stock option compensation expense, operating income would have been 13.5 million for the fourth quarter fiscal 2006 or 17.8% of net sales, well above the company's quarterly guidance range of 11.4 million to 12 million.

For the fourth quarter fiscal 2006, the company reported net income of 6 million, compared to net income of 7 million for the same period last year. The reason for the decline in net income year-over-year is a result of the company booking a tax expense of 3.2 million in fiscal 2006, compared to a tax benefit of 1.7 million in fiscal 2005. Income before taxes in fiscal 2006 for the fourth quarter was 9.1 million, an increase of 72.6% from 5.3 million in the comparable period last year.

Cash provided by operating activities in the fourth quarter fiscal 2006 was 11.5 million, compared to cash provided by operating activities of 5.2 million for the same period of last year. CapEx for the fourth quarter of fiscal 2006 was 2.6 million, compared to 2.9 million for the same period last year. Net sales for fiscal 2006 full year were 274.5 million, an increase of 13% from 243 million for the same period last year. Net sales of 274.5 million for the fiscal year exceeded our guidance range of 271.8 million to 273.8 million. Organic growth for the year was approximately 12.2%.

Net sales to our aerospace and defense customers increased 24.2% for fiscal 2006 compared to fiscal 2005. And net sales to our core industrial markets of construction, mining, semiconductor capital equipment and distribution were up 8.1% in fiscal 2006, offset by a decrease in year-over-year volume in our Class 8 truck market, resulted in overall diversified industrial growth of 5.4% in fiscal 2006, compared to the same period last year.

Gross margin for fiscal 2006 was 82.9 million, an increase of 21.2% from 68.4 million for the comparable period last year. As a percentage of net sales, gross margin was 30.2% for fiscal 2006, compared to 28.2% for the same period last year. The margin improvement was mainly driven by manufacturing efficiencies, product mix, cost control and pricing. SG&A for fiscal year 2006 was 41.9 million, an increase of 9.2 million from 32.7 million for the same period last year. The increase of 9.2 million was mainly due to non-recurring compensation expense of 5.2 million, higher cost to support our increase in volume and higher cost associated with being a public company.

Operating income for fiscal 2006 was 38.6 million, compared to 32.1 million for the same period last year. Operating income excluded non-recurring compensation expense of 5.2 million, stock option compensation expense is 0.4 million, non-recurring management fees is 0.2 million and 1 million associated with the consolidation of our Nice Bearing facility, resulted in 45.4 million for fiscal 2006, compared to an adjusted operating income of 35 million for the comparable period last year. As a percentage of net sales excluding these charges, adjusted operating income was 16.5% for fiscal 2006 compared to 14.4% for the same period last year.

For fiscal 2006, the company reported net income of 12.4 million, compared to net income of 7.3 million for the same period last year. Net income excluding the after tax impact of these charges, resulted in net income of 19.3 million for fiscal 2006, an increase of 43.6%, compared to an adjusted net income of 13.5 million for the same period of last year. If you turn to page six of the earnings release that was released today, you will see a reconciliation of reported operating income and net income to adjusted operating income and net income.

Cash provided by operating activities was 24.6 million for the fiscal year 2006, compared to 9.9 million for the same period last year. Capital expenditures for the year ended April 1st were 10.3 million or 3.8% of net sales, compared to 9.5 million or 3.9% of net sales for the same period of last year. Total debt minus cash on hand for the period ended April 1st, 2006 was 149.6 million, compared to 217.4 million for the same period of last year. Cash on hand for the period ended April 1st, 2006 was 16.1 million, compared to 2.6 million for the same period of last year.

On April 18th, 2006, the company completed the secondary offerings down approximately 9 million shares of common stock at a price of $20.50 per share. The company sold approximately 3 million shares yielding net proceeds of approximately $57 million. The full amount of net proceeds were used to repay outstanding debt under our term loan. The impact of this transaction on our debt and leverage ratio will be reflected in the first quarter of fiscal year 2007. As of June 8th, 2006 the company had approximately 20.5 million shares outstanding and 1.8 million fully vested options and warrants.

I'd like to turn it back to Mike, for some final comments.

Thanks, Dan. Well, we are pleased with our year-end and our fourth quarter of 2006, and we are very confident in the year ahead. Our major markets are strong, the pricing environment is generally favorable. Our new product efforts are increasingly more productive and the manufacturing efficiency of our operations is improving quickly.

So overall, we believe the short and long-term picture is very favorable. We expect our aerospace, defense, construction, mining and after market segments will remain strong, and we do anticipate a slowdown in the Class 8 truck segment later in the year and that's -- we've already seen some of that slowdown already. We believe that this factor will have little impact on the company's overall performance, and we'll provide a time window to restructure some of our operations to more efficiently support an expansion in these markets expected in 2008 and beyond.

As Dan mentioned earlier, in April we completed our secondary offering, which included the exercise of an [overall] allotment. Through the offering we were able to raise $57 million, which was used to pay down our outstanding indebtedness. We used the proceeds from this offering and the cash internally generated to pay down debt. In fact, our net debt to EBITDA ratio at the end of the first quarter will be less than 1.6.

As you can tell from this call, we believe that we are -- there are many growth opportunities ahead for the company, and the company is in a strong position to execute on them. We will continue to strengthen our customer relationships, develop new products, enhance operating efficiencies, pursue strategic acquisitions and reduce debt, with a focus on increasing shareholder value.

Looking ahead more immediately to our first quarter based on the current market conditions the company expects financial performance to be as follows. Net sales for our first quarter fiscal 2007 are expected to be in the $71 million to $72 million range. First quarter 2007 operating income is expected to be in the $12 million to $13 million range.

Operator at this point, I'd like to turn it over to you for any questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

And our first question comes from the line of Walter Liptak of Barrington Research. Please proceed.

Thank you, good morning.

Good morning yes.

First question I have is on the tax rate for the first quarter, what tax rate are you using and what will you use for the full year?

I think 37% going forward.

I'm sorry 37% for the quarter and the year?

Yes.

Okay. And the share count of 20.5 million in June, on a fully diluted basis would be added in the 1.8 million vested?

Well under the treasury method you'd have to take into consideration the stock price, any deferred tax implications. So I think a good fully diluted number would be around that 21 million mark.

Okay. And on the consolidations effort at Nice, does that impact gross margin in the first quarter?

No. It's -- the consolidation went extremely smooth. We took $1 million [P&L] hit in the fourth quarter of which around 600,000 was related to severance cost and around 400,000 for impairment of fixed assets that [wind] up writing off next year in '07.

Okay. Yes, thanks for that detail. I guess what I meant is that the cost savings resulting from this -- from that effort, does that show up in SG&A reduction or does that show up in gross margin?

It'll show up in gross margin and that will start to phase its way through the P&L for the course of the year.

Okay. So I guess, if we look at gross margin in the first quarter versus what you did in the fourth quarter, are we going to see a seasonal improvement in the gross margin, as a result of this consolidation and other efforts? Or will we see a sequential decline in gross margin?

I don't think there will be a decline. The -- we should see a slight improvement in gross margin in the first quarter.

Okay. Okay I just have a few more questions and then I'll let someone else ask a few questions. But the - a lot of concern out there right now with industrial companies' potential slowing in the second half. From your commentary it doesn't sound like you're seeing any slowdown except for in heavy truck. Could you comment on any production schedules for the second half or any possibility for delays in the calendar, second half?

No. Other than the heavy truck I mean we're just -- we're not seeing it anywhere Walter. I mean we -- our production schedules are obviously for the aircraft-defense stuff, are pretty heavy. And the lead time on that -- those products is longer than the traditional commercial products. So a lot of those products are all the way out through the year in terms of our logistics planning.

The commercial products is -- because a lot of our markets are still sort of robust construction and mining and doing well, we don't see any effects there. The after market is sort of a GDP influenced market. So there's a -- if there's a GDP slowdown there may be some effect there in our after market. But it's usually not very big.

Okay. And in the news recently is the Airbus and delays with the A380, I wonder if you could talk about what your content per plane and if there would be any disruption in '07 as a result of that?

Well the A380 is -- right now our content per plane is not really passing through any of our revenue lines in a significant way and it's still a small revenue generator because of their volumes. And so if the A380 is pushed out a year or two I don't think we're going to see much of an effect on that. We did see by the way -- we heard yesterday that Boeing was increasing its 737 schedules from 28 to 31 a month and -- in the supply base, sort of got that news yesterday.

Okay.

So that's sort of an -- that's a much more material effect on us than the A380.

Okay. All right thanks for the commentary.

And our next question comes from the line of John Haushalter of Robert W. Baird. Please proceed.

Good morning. Just a couple of questions for you guys. Good quarter. I guess just kind of focusing on the cost side first; we've heard a lot of news recently about kind of stainless steel getting some pass throughs on really short notice to people. How do you guys deal with that as because I understand stainless steel is a large kind of cost effective tool for you guys?

Yes. Well the -- we monitor that every month in all of our divisions. Stainless steel is -- although it's an important material for us, it's not a big cost driver for us. It's something we have to pay attention to but if there's an adjustment in the stainless steel price we normally just pass it through in our pricing. Obviously there is a delay if it occurs quickly before we can respond and pass it through to the market. But it's not a major factor and it's not a major cost driver for us.

Okay. And then kind of turning to your comments on acquisitions I mean what are you kind of seeing in terms of multiples that people are looking for on the acquisitions deals right now, and kind of your ability to do deals in this environment, kind of given the uncertainties, the overall economic uncertainties?

Well, I think the -- the big acquisitions where the $100 million-$200 million and you have all the equity funds chasing them, and all those multiples are just crazy. And so -- we don't normally do acquisitions of that size. Our acquisitions are normally more in the total revenue size of maybe $15 million to $50 million. And we are seeing realistic asking prices or expectations in that sector. And it's not like the private equity sector.

Okay. And then kind of -- one thing you guys had commented on when you were doing your recent equity deal was kind of redoing the credit agreement shortly thereafter and kind of lowering your interest rate. Is that still something on the horizon?

Yes we are well down the road on that, and we should be releasing some news to the market in the next two weeks.

Okay. And then kind of follow-up to that, when will we expect the 10-K to be filed?

Friday.

This Friday.

The [16th], yes.

Okay thank you.

[OPERATOR INSTRUCTIONS]

And our next question comes from the line of Steve Barger of KeyBanc Capital Markets. Please proceed.

Good morning.

Good morning.

Just to sort of go back to the end market question, can all the revenue declines in roller, [ball] and other in the fourth quarter be attributed to the demand cadence you talked about or is there anything else we should be thinking about?

It's just the tapered roller bearings sector. What we're seeing in tapered roller bearings is that the OEM's are sort of steady in terms of their consumption rate and the distributors are soft. And so that entire difference can be explained there.

Okay. And when you think about gross margin expansion, you talked about some of the opportunities, cost control, product line expansion and pricing, can you maybe rank those in terms of the opportunities that are in front of you and then talk about magnitude and timing maybe?

Can you ask that maybe again, or a different way, Steve?

Yes, you had talked about gross margin expansion as being a function of cost control, product line expansion and pricing. And I'm just wondering if you could rank those in the order of the benefit that you can achieve from them?

Sure. Well I think in bearings, cost control is really important because bearings are a -- you can make money in bearings if you understand the methods and you use the appropriate methods to produce these products. And it takes a lot of expertise and a lot of engineering capability and years of experience to understand all these methods. So making money in these products particularly with such a diverse line, it's really important to have good methods and methods that you can continue to improve.

So I'd say that's the number one factor in the line-up. I'd say that price is also important, particularly when you understand the value that you're bringing to your customer. And where cost is a science, price is an art. And so, you can -- you approach cost scientifically and pricing artistically.

Right.

And finally product line expansion, that's a matter of -- if you can innovate and develop your products and develop proprietary positions in your products, obviously you can benefit from that greatly. So it's important to have a lot of good ideas, a certain amount of innovation and understand the proprietary nature of what you're selling.

Right. Okay thanks. And just one kind of housekeeping, going forward do you have [done] some at debt level -- I'm sorry the interest expense next year?

[That's] -- yes, Dan has always got a bet on that. I'll turn that to Dan.

Yes, but what exactly are you looking for Steve?

What should we expect for interest expense going forward?

Just look real quick.

You give us LIBOR and we'll give you the add back.

Yes.

I don't have it in front of me. Sorry.

Yes, it's probably LIBOR plus -- what is it?

Yes, I think our goal is to be at about LIBOR plus one.

Okay. Thanks a lot gentlemen.

Okay. Thank you.

And I'm currently showing we have no further questions at this time.

All right. Well, I'd like to thank everybody again for participating in this quarter's conference call. And obviously we are pleased with our results, and pretty happy with where we are at this point in our development. We believe we have a very nice year lined up ahead of us, and we will be looking forward to talking to you again in a few months. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference call. This does conclude your presentation, and you may now disconnect. Have a great day.