RBC Bearings Inc (RBC) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2013 RBC Bearings earnings conference call.

My name is Allison, and I will be your operator for today.

At this time, all participants are in listen-only mode.

We will conduct a question-and-answer session towards the end of this conference.

(Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Mr. Rory McClellan, Investor Relations.

Please proceed.

Good morning, and thank you for joining us today for RBC Bearings' fiscal 2013 third-quarter earnings conference 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, let me remind you that some of the statements 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 you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that it could impact the Company's future operating results and financial condition.

These factors are also described in greater detail in the press release and on the Company's website.

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'd like to turn the call over to Dr. Hartnett.

Thank you, Rory.

And good morning.

Net sales for the third quarter of fiscal 2013 were $96.3 million, an increase of 1.3% over the same period last year.

Our industrial markets were down 12.2% on a year-over-year basis.

Sales of aircraft and defense products were up 15.8% over the corresponding quarter last year.

For the nine-month period ended December 29, 2012, net sales were $300 million, an increase of 4.8% over the same nine-month period last year.

Our industrial markets were down 4.1% on a nine-month year-over-year basis, and our aerospace and defense products were up 15% over the corresponding period.

For nine-months, sales of industrial products represented 48% of our net sales, with aerospace and defense at 52%.

Gross margins for the period came in at 37.4% versus 34.7% in fiscal 2012 for the same nine-month period.

Demand for our products from industrial markets were more normal this quarter than last year, principally in the markets of mining and ground defense.

With regard to mining, as you know, this segment had a strong run over the past few years, and is now operating at a more normalized level.

We expect this rate healthy but not overheated to continue for at least the next few quarters.

Our ground defense business was impacted by the completion of some programs associated with the upgrading of MRAP vehicles.

We expect to see more activity in this sector later in the calendar year, once budgets and sequestration issues are more settled and the demand for foreign military sales is formalized.

Overall, industrial distribution sales were about even with last year, but up sequentially between 4% and 5%.

Sales to European distributors were equal to last year, but up sequentially over 20%.

We are definitely feeling an increase in business activity overseas, which is a little surprising, given the news reports on the economic activity in Europe.

To summarize the principal reasons for the year-to-year contraction in the industrial OEM volume can be directly attributed to moderation in demand from our mining customers and a completion of some ground defense programs.

Relative to our aerospace and defense business, these markets grew at 15.8% in the third quarter fiscal 2013 compared to the same period last year.

In calendar '12, the big four aircraft producers -- Boeing, Airbus, Embraer and Bombardier -- sold 1345 planes and booked 2433 aircraft.

Clearly, this market continues to expand, and we also continue to grow with it and expand our product offering as well.

Our bookings continue to be solid, and new program initiatives are growing healthy roots.

We expect several years of expansion ahead, as significant new airframe and engine programs come online for RBC.

There may be a quarter now and then where growth plateaus because of program delays or timing, but the trendline will be solidly up.

As I stated last time, we are in the best position ever to execute our business strategies today.

And this is demonstrated by our continued expansion of gross margins.

On the defense side, our activity has remained steady compared with the same period last year, and we look to Washington for further clarification.

We all know the US can't keep out of world politics for long, so we remain bullish on the defense long-term, and look forward to an inevitable catch-up phase of Washington's act.

So, in summary, we ended the quarter with $211 million in backlog compared to $216 million for the same period last year.

Gross margin was up almost 2 full percentage points for the same corresponding period.

And we are beating our internal targets on gross margin improvement.

So, at this point, I'll turn over to Dan Bergeron to give you some comments on the numbers.

Thanks, Mike.

Since Mike has already discussed sales and gross margin, I'll jump down to SG&A.

SG&A for the third-quarter fiscal 2013 increased by $1.6 million to $16.6 million, compared to $15 million for the same period last year.

As a percentage of net sales, SG&A was 17.2% for the third quarter of fiscal 2013, compared to 15.8% for the same period last year.

The increase in SG&A year-over-year was mainly due to an increase of $0.8 million in personnel-related expenses, $0.3 million in incentive stock compensation, $0.2 million in professional fees, and $0.3 million of miscellaneous.

Other net for the third quarter of fiscal 2013 was expense of $0.6 million compared to expense of $0.4 million for the same period last year.

For the third quarter of fiscal 2013, other net consisted of $0.4 million of amortization of intangibles, and $0.2 million in costs associated with asset disposals and some restructuring costs.

Operating income was $19.2 million for the third quarter of fiscal 2013, an increase of 5.2% compared to operating income of $18.2 million for the same period in fiscal 2012.

As a percentage of net sales, operating income was 19.9% for the third quarter of fiscal 2013 compared to 19.1% for the same period last year.

Income tax expense for the third quarter fiscal 2013 was $6.5 million compared to $5.8 million for the same period last year.

Our effective income tax rate for the third quarter fiscal 2013 was 35.1% compared to 32.1% for the same period last year.

The effective income tax rate for the third quarter fiscal 2013 and 2012 includes $0.1 million and $0.4 million, respectively, of benefits due to the reversal of unrecognized tax benefits associated with the conclusion of federal and state income tax audits.

The effective income tax rate without these discrete items would have been 35.6% for the third quarter of fiscal 2013 compared to 34.5% for the same period last year.

For the third quarter fiscal 2013, the Company reported net income of $12.1 million compared to net income of $12.2 million for the same period last year.

Excluding the discrete tax benefits in both periods, net income would have been $12 million for fiscal year 2013, an increase of 2.3% compared to $11.7 million for the same period last year.

Diluted earnings per share was $0.53 per share for the third quarter fiscal 2013 compared to $0.54 per share for the same period last year.

Excluding the discrete tax benefits, diluted EPS for the third quarter fiscal 2013 would have been $0.53 per share compared to $0.52 for the same period last year -- an increase of 1.9%.

Turning to cash flow.

The Company generated $19.5 million in cash from operations in the third quarter fiscal 2013, compared to $14.8 million for the same period last year.

On a year-to-date basis, the Company generated $49.2 million in cash from operating activities compared to $32 million for the same nine-month period last year.

Capital expenditures were $19.2 million in the third quarter of fiscal 2013, compared to $3.9 million for the same period last year.

On a year-to-date basis, capital expenditures were $30.8 million compared to $11.3 million for the same nine-month period last year.

We expect our capital expenditures to be approximately $39 million to $40 million in fiscal 2013.

A large part of the nine-month capital number of $30.8 million was associated with the acquisition of the land and building that our Swiss company was leasing for -- which we acquired for $15 million, and $1.6 million for the purchase of two new properties, one in South Carolina and one in Georgia, which are increasing our aerospace capacity.

Excluding these three projects, our capital expenditures would have been $14.1 million, right in line with our normal capital expenditure rate of 3.5% to 4.5% of sales.

The Company ended the third quarter of fiscal 2013 with $113.2 million of cash and short-term investments, and $10.9 million of debt on the balance sheet.

I'd like now to turn the call over to the operator for our Q&A session.

(Operator Instructions).

Edward Marshall, Sidoti & Company.

So ground offense, you said that was the end of the program for you for now.

What's the size of that program for you?

Maybe how I should look at it -- is it a quarterly run rate, a yearly run rate, how should I look at that business?

Let's see, I think the quarterly run rate in the past three quarters is probably about $2 million.

$2 million a year?

Yes -- no, $2 million a quarter.

A quarter, rather, yes.

Okay.

And so let's go down the gross margins then.

Sequentially, you were up on the gross margin despite being down pretty heftily on, say, sales on a sequential basis.

What's that attributable -- I mean, I know aerospace is a little bit higher-margin, and it had a good quarter.

Are you getting any pricing?

Or is there operational (technical difficulty) efficiencies there that are helping with the gross margin expansion?

Because it's kind of impressive and rare to see the margin expansion in a declining revenue environment, at least sequentially.

Well, the pricing environment for some markets has been favorable.

I can't say it's all done with pricing, but it has been favorable.

And we do have an active operating mode where we look at the margins of each one of the products that we produce, and we look at the methods by which we produce them, and try to invent better methods to reduce the amount of touch time that go into the product, or -- or/and we look at what the purchase material cost or the purchase vending supply cost would be, and set tighter budgets.

And every one of our operations has these kinds of (technical difficulty).

And I would say that, lately, we've made some really good progress in a number of separate businesses at improving our operational execution.

Okay, so you're saying it's -- you're pretty much saying it's a blend, is what I understand?

It's a blend, yes.

It's a blend.

But you are getting some pricing.

And is there a way to quantify the pricing increase that you're getting or --?

If I looked at maybe your sales, could you talk about maybe sales on a -- increase year-over-year?

How much is attributable volumes, how much is attributable to price?

Yes, we argue that internally how to do that correctly all the time.

And I don't think we've ever really successful -- been successful in winning any argument on how the best way to look at the impact of price.

I would say that we are seeing in certain markets an ability to price the product better.

We are seeing -- because we've acquired a number of companies over the years, in some cases, we've ended up with companies that have certain contracts which we completed, which we didn't believe were properly priced.

So we priced them appropriately and retained the contract.

So there's plenty of that going on.

I've got to believe, though, that the majority of it is just good operational discipline.

If I could touch on the industrial side for just a second, we've heard a lot this quarter about weakness in December, and maybe a little bit of trickling into the January month and back-half loaded, so to speak, for 2013 on a calendar basis.

As we talk about the pricing and some of the pricing benefits you get, I assume as that volume comes back, we could see an upward bias to the margin as we move forward.

Is that the right way to think about the business as we progress through 2013?

Yes, I think -- I don't know how much upward bias on the gross margin there would be, but certainly, there would be better absorption for the sales and administrative costs.

The sales and administrative costs are running a little bit of a fever right now, because of that -- some of that industrial volume is down, but that will reverse itself.

Well, I guess -- and that leads into my next question, the SG&A.

And you say it's running a bit of a fever, but I mean, on an absolute value, it's up as well and probably the highest it's been.

I'm curious if there's any kind of due diligence cost in there?

Or what's the attributable -- I mean, it's $800,000 more than it was on a sequential basis.

Is it compensation?

Is it something other than that?

What's going on, on the SG&A?

I'll turn that over to Dan.

Okay.

Yes.

On a quarter-over-quarter basis, I mean, we ended Q2 at $15.8 million, and we ended Q3 at $16.6 million.

So about $300,000 of that is just incentive comp -- compensation.

And then we have some professional fees that were kicking in, both legal and other, and some other miscellaneous expenses.

But this is always our tough quarter, because it's always our tough quarter on the top line.

And just because the top line comes down doesn't mean the SG&A gets adjusted down from a dollar value quarter-over-quarter.

I think for the full year, we've always been -- tried to stay in between that 15 -- close to that 15.5% range.

So I think we'll be closer to that 15.5% to 16% range, depending on how the industrial is during the fourth quarter.

Because we have made an investment this year in human capital for organic growth.

And the benefits of that will come in 2014 and '15 and beyond.

When -- lastly, you have an awful lot of cash here.

We ask you this constantly and we're not being impatient, so bear with us, but -- I assume acquisitions are still on the burner?

And can you comment on what you think about acquisitions or just reiterate maybe what you said about it before?

Yes, I mean, I think acquisitions, we're active on a few acquisitions right now in terms of diligence.

And I would be surprised if we don't have something to announce.

It may be a little small, but in the next few months.

Sure.

Fair enough.

Thanks, guys.

Samuel Eisner, William Blair.

Had a couple of questions.

I guess, first, on orders.

I think your implied orders were about $91 million in the quarter.

Any way to break out what you're seeing from an order standpoint, from both an aerospace as well as an industrial side?

Is the decline in orders on both a sequential and year-over-year basis principally because of the industrial business?

Maybe just some additional color that you're seeing there?

I would say that we -- for that quarter, we saw it in both sectors.

And I think it's just timing, because as we turned into a new year, we had a very strong January.

And it's lumpy and it's based upon program.

And so I just thought it was timing combined with a weaker than we'd like industrial environment.

Great.

And then you made some comments on the industrial distribution market.

In particular, it sounds like the European business is doing much better.

Is there any particular -- is that standard, kind of general manufacturing?

Or are there any particular end markets there that you're seeing better-than-expected growth out of on a sequential basis?

Well, there's a few things happening in industrial distribution which are favorable.

First of all, if you look at the European market, the European market was very -- much stronger than we had anticipated.

And there's a few key drivers there that, when you peel it back, you try to understand it.

Number one, one important market for those products are high end Swiss watches.

And if you look at the unemployment in Switzerland right now, it's less than 3%.

It's even hard to hire talent in our factories over there.

So, that economy is doing extraordinarily well.

And also, when US auto manufacturing is running at the level it's been running, it's been reasonably healthy, there's a lot of consumables in -- of European machine tool products that go into that industry.

So, that pulls a certain amount of demand through for our products.

So that's one factor that's favorably impacting our volume there.

And the second factor in industrial distribution is that sales of our large bearings, high value-added new products has been -- it's successful and is increasing nicely.

So, those two factors have really helped our industrial distribution numbers.

That's -- no, that's great color.

And the investment that you're making, not in Switzerland, but I guess the aerospace capacity investments?

Yes.

What are those expected to yield in terms of growth of current capacity?

Do you get an extra 10%, 15%?

I believe a couple of quarters ago, I think you were talking about how you needed to make some investments to reach kind of peak demand, if Boeing and Airbus would get to their high levels of production.

Is this, I guess, a continuation of those comments?

Yes, I mean, I would say, since we made those comments, things have accelerated for us.

And now -- and so we had to construct a new facility in South Carolina to encompass one of our smaller businesses that's going to be -- that's going to grow considerably as a result of some of the programs that they've landed.

But it's across the board in our aerospace business.

I mean, both the airframe and the engine in the US and in Europe, there's just a lot of things going on, on the 737, the 737 MAX, the A320neo, the A350, the 787 -- there's just a lot of programs that are going through beyond engineering and into low initial rate production right now.

And we have a very substantial position in several of our businesses, both the engines and the airframes, for these programs, which is really going to drive volumes a few years from now.

And for the next couple of years, we'll be expanding modestly plant capacity in order to accommodate these volumes.

So it's really a very good situation.

Great.

And then just one last question.

I guess you guys upped your -- or the Board increased your authorization for share buybacks by about $40 million to $50 million.

Should I read into that anything about what's going on in the acquisition market?

You mentioned that you have maybe some small acquisitions in the pipeline.

Does this kind of table any larger acquisition capabilities?

And kind of how should I read into the new authorization?

Well, you know, I think there's nothing to read into it, Sam.

I mean, it's a $50 million program at -- which is a little over 1 million shares, which we put in place to make sure that we don't put on the back of our shareholders our incentive stock programs.

But as Mike stated in his quote in the press release, our main use of cash is growth, organic growth and acquisitions.

And we'll continue pushing hard on both of those fronts from an investment standpoint.

Great.

I'll hop back in line.

Thanks.

Peter Lisnic, Robert W. Baird.

First question, if I could just ask the order question a little bit differently.

If I look at that number, the implied order number, can you give us a feel for what the orders might be ex-mining and ex-military?

I don't think so, Pete.

(laughter)

Well, let me ask it this way then.

If you look at that -- the comment on the January order strength, were there particular verticals there that you saw that, were they more broad-based?

And I assume, or at least I thought I heard, that you were talking just about industrial when you were talking about the January order rates?

Yes, I think the order situation for January, the industrial orders were normal, I mean, in terms of the rate that we expected.

And the aircraft orders were very strong.

And that was pretty much sort of across the board.

And so, we had been expecting those aircraft orders in the fourth calendar quarter, but they didn't come.

So we wondered what's going on.

But as soon as we turned the year, orders started to flow.

Okay, that's on the aerospace side?

Right.

Is it safe to say that that was also true on the industrial side -- ex-mining and ex-military vehicle?

Yes, industrial was pretty good for January.

Yes.

Okay, all right.

And then you alluded to it a little bit, just wondering if there's any more clarity that you might have on what sequestration impact might mean for the business, as you kind of look past this fiscal year into 2014?

You know, I think we don't have any idea.

Okay, you're not alone.

(laughter)

To be frank.

I could give you a more sophisticated answer, but I think that's our answer.

No, that's -- yes, that's fine.

Like I said, you're not alone, I don't think.

And then, Dan, you gave us the bridge on the SG&A side.

The thing I'm wondering there is, you've had a little lumpiness, so I guess I'd classify it as lumpiness on the personal expense side.

In the last quarter, I think the bridge amount for personal expense was zero.

Now you've got -- whatever it was -- $800,000 of incremental costs.

Can you just give us a feel for how much more incremental cost we might see over the next few to several quarters?

Just wondering whether that SG&A continues to creep up a bit.

I know you mentioned the 15.5% to 16% for the year, but just wondering what '14 might look like if, indeed, you need to add more personnel to the mix?

Yes, I think it should be, from a percentage standpoint, we should see some give-back, some leverage on SG&A going into 2014.

Okay.

So if we end this year in that 15.5% to 16% range, we should be close to 15% to 15.5% in 2014.

Okay, all right.

And then just last question on the CapEx forecast.

You were somewhere in that $32 million to $36 million or $37 million range, I think when you talked about it last quarter; now at $39 million to $40 million.

Is that increment just the South Carolina facility?

Or is there something else that you've added?

Yes, well, in there is the -- for this year, so far, is the acquisition of our manufacturing facility in Switzerland.

We've also purchased a new building in Georgia for one of our aerospace and defense businesses.

And we purchased a new property and building that we're working on now in South Carolina that Mike talked about a little earlier.

And we actually -- our Lubron business that we acquired two years ago, we actually moved into a new lease building and spent a little bit of money there.

So, all three of those or four of those projects are tied to growth expectation and expansion.

But I think we're going to -- you know, we'll start getting back to our normal -- so if you took those out, we're at our normal CapEx rate of 3.5% to 4.5% of sales.

And I think that's where we'll be going into 2014.

Okay.

All right, perfect.

And I appreciate the help.

I will jump back in queue.

Steve Barger, KeyBanc Capital Markets.

The way you talked about the blend of gross margin initiatives, it sounds like that performance is at a minimum sustainable.

But as you look at the manufacturing processes, do you still see a lot of opportunities for efficiency gains and margin expansion?

Oh, yes.

Absolutely.

There's no end.

It's -- I think that's one of the things that RBC does very well, is once it organizes a program and understands what the manufacturing requirements are for certain products.

And then everybody goes to work on optimizing the routing, the amount of touch time, the capitalization of the line, in order to produce these products.

So there's really -- I mean, that's sort of our bread and butter.

And that's what we come to work every day to do.

So our engineering and manufacturing engineering staffs in every one of our facilities has their top objectives, in terms of methods improvements for these products.

Are there certain product lines or certain facilities where you really see the opportunities to go in and make a step function change that will be recognizable in results?

Or is it just of a broad-based program that's always happening?

No, it's both.

It's broad-based; it's by the part number on every facility.

But I think some of the things that you -- we've seen in the margins this year were the result of specific agendas against certain product lines, maybe 24 months ago, that were very effective in terms of moving the needle on some product lines as much as 40%.

And I'm not going to talk about which product line it was or anything like that, but we have several major initiatives like that underway.

Initiatives that may have that same order of magnitude benefit -- when you get done?

Yes.

Absolutely.

Wow.

That's great.

And same question on the purchasing programs.

What's going on with raw material outlook?

And do you see room for improvement in terms of how your sourcing material and ability to get the cost down?

Yes, we see a -- there will be a fairly significant future benefit to our margins based upon some of our purchasing activities that have been completed this quarter.

It's hard to say in a consolidated basis it's going to move the needle a full percentage point, but it's significant.

Okay.

(multiple speakers) And will that start to flow through next quarter?

Or is that kind of two or three quarters out?

Any timing help?

That's probably two quarters out.

Okay.

For the quarter -- sorry if I missed this -- did you say pricing was positive on the industrial side, even though you had the 12% decline?

Pricing wasn't either -- neither negative or positive.

It was normal.

So it was just all volume?

Yes.

Okay.

And I guess, same question on the aerospace side pricing, how much did that contribute to the 16% increase?

It's a good question.

I think you have to call Dan back for that number.

I can't do it in my head.

Okay, I will -- I'll follow-up.

And you've got a tough comp for the industrial business in your fourth quarter.

Do you expect industrial volume will be down double-digit again?

Or does it seem like it's stabilizing, based on some of the things you talked about in those end markets?

You know, no, I think it's definitely stabilized.

And our fourth quarter is pretty much cooked right now, because lead-time and raw material and production schedules and all that sort of thing.

We pretty much know within a pretty tight band what our sales are going to be in, unless we get some big buys of material -- of products that we don't forecast; that's what we can't forecast.

But we're going to be in the $100 million to $105 million range in the fourth quarter.

That's just what life is going to be like.

Okay, good.

And my last question, the way you report operating income, it's obviously tough for us to back into aerospace versus industrial.

So can you just help us out broadly with what operating margins in aerospace look like, relative to industrial or maybe a variance between the two?

You know, we just don't cast the numbers that way, Steve.

So, I think sometimes industrial subsidizes the aerospace business and sometimes the aerospace subsidizes the industrial business.

And it depends upon -- these markets normally cycle differently.

And it's nice to have sort of a position in both sectors.

Got it, understood.

Thanks very much for the time.

Okay.

Samuel Eisner, William Blair.

Just wanted to hop back on.

Thanks for taking my call.

Just two quick questions here.

One on the underabsorption in the quarter, on the SG&A lines, do you have an actual number that you guys can give, in terms of how much overhead was underabsorbed?

Or how much that affected you?

I'm not sure what you mean, Steven, in SG&A -- I mean Sam.

I'm just trying to get what was -- underabsorption about $1 million headwind to your SG&A in the quarter?

Yes, we're calculating here, Sam.

I mean, if --

I can take it offline, if necessary.

Yes, why don't you just give me a ring, and we can walk through it.

But I think what you have to look at is -- yes, it's -- this quarter is always the lowest on sales, due to production days.

And doesn't mean every time that quarter comes around, the dollar value of SG&A changes with it.

Right?

So if you have the human capital and the people in the structure in place, it continues through.

And I think this is normally an expensive quarter from a compensation standpoint, right?

Yes.

And it's a -- there was a little bit of extra expense in there because of some legal activities.

But Dan can run you through that.

Yes.

And then -- and I said in my -- if you read back the transcript, I also said there's a little -- about $200,000 there in restructuring on some things that we did to -- on the industrial side.

So.

Got you.

And then just on this -- on your guidepost for the fourth quarter, I think at the high end, you're basically implying that revenue will be down about 5.5%, 6%.

So I'm just -- can we maybe just parse out what are the moving parts in that kind of $100 million to $105 million level?

And how should we think about, I guess, the declines continuing into 2014?

Well, it's the -- it goes right back to mining in the complete -- we don't have a ground military component in that to any extent at all.

So that's missing.

And if you added that back.

And really, the mining sector for the last 24 months has been -- it's just been crazy.

We knew it was crazy.

And you can listen to their conference calls and they knew it was crazy.

But so -- so, now, that whole thing is just normalized.

And so if you add a component back for the mining sector, $2 million, and you add a component for -- or not mining, but ground defense of $2 million and -- I don't know -- $4 million for mining or something like that -- you're sort of back to -- you're sort of back in the game.

But I think when you look at the ground defense side, just to speak to that for a minute, there was -- the completion of this MRAP program, there's MRAP's in the future.

And so you're just sort of between programs right now in the US.

And there's a great deal of interest in this technology in Europe and in Russia.

And those programs are just beginning.

And we're in a very good position over the next 24 months to participate nicely through our European operations in the -- in that technology as it's absorbed into those European and Asian countries.

So there's still a lot of activity worldwide on ground defense.

And we're just in between programs right now.

Great, thanks so much.

Thank you.

Ladies and gentlemen, you have no further questions at this time.

(Operator Instructions).

We do have another question that's just come through from Steve Barger of KeyBanc Capital Markets.

Please proceed.

So just -- you alluded to what the revenue might look like in 4Q.

Should we still think that the gross margin expansion of the magnitude that you saw in 3Q on a year-over-year basis could happen in 4Q, which would give us a 38% -- 39% range?

Or is that too high, given where that revenue is going to come in?

That's too high.

I think we'll end the year in that 37.5% type range.

Okay.

And like we said in previous calls, we'll give you more clarity on the Q4 call.

But we think, on top of that, we can get another -- at least another 1% in 2014.

But we're just going through our planning cycle now.

So in our Q4 call at the end of May, we'll give you more clarity on 2014.

Very good.

Thanks a lot.

Thanks, Steve.

Thank you.

I'd now like to turn the call over to Dr. Hartnett for closing remarks.

Okay, thank you.

Well, in closing, I'd like to thank everyone for their continued interest and support of RBC.

And we'll try to go back to work and deliver the shareholder value that you hold us accountable for.

Thank you very much.

Thank you.

Thank you, ladies and gentlemen, for joining today's conference.

This concludes the presentation.

You may now disconnect and good day.