Rogers Corp (ROG) 2013 Q1 法說會逐字稿

My name is Joanne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corp., 2013 first quarter conference call. (Operator Instructions). I would now like to hand today's call over to President and CEO, Mr. Bruce, Hoechner. Sir, you may begin your conference.

Thanks Joanne. Good morning everyone. Thank you for joining us, today. Slides for today's call can be found on our website in the investor section, along with the news release that was issued yesterday. With me today are Dennis Loughran, VP Finance and CFO, and Bob Daigle, SVP and Chief Technology Officer. I will now turn it over to Dennis to dispense with the formalities.

Thank you, Bruce. I would like to point out to all our listeners that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual result to differ materially from those in any forward-looking statement.

Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principals. Reconciliation of those Non-GAAP measures to the most directly comparable GAAP measures can be found in the slide deck for today's call can be found on our website's investor section. During the first quarter, I will now turn it back over to Bruce.

Thank you, Dennis. During the first quarter, Rogers' continued to see positive impacts from our transforming initiatives that began in 2012. Building off of our streamlining results from 2012, we expect to achieve an annualized cost savings in 2013, of approximately $20 million, and we continue to seek further opportunities for cost savings.

A portion of these savings are being reinvested in growth enabling initiatives in sales, marketing, research and development, as well as into improving our capabilities and information technology and operations. A key indicator of our progress is the improvement in our Non-GAAP Goss margins in Q1 2013 to 33%, from 30.3% in Q1 in 2012, reflecting our improved operating discipline.

Looking forward, we expect that as sales increase through the rest of the year, our streamlining savings will hold, and our gross margins will continue to improve. We have a very positive outlook for Rogers' full year both in the top and bottom line.

Moving to slide 4, you will see an overview of our first quarter performance by market and megatrend. Our megatrend focus areas of internet growth, clean technology, and mass transit drove 55% of net sales in the quarter with applications in automotive and industrial also adding to our growth engine. We are seeing robust growth in wireless Telecom infrastructure.

Sales for our printed circuit materials in this market were up about 12% for the quarter verses Q1 2012. We believe we are seeing that much anticipated ramping of 4G installations around the world. This is good news for Rogers, where in this segment, we have greater than 90% market share in high frequency circuit board technology used in 4G base station applications.

In mobile internet devices sales were essentially flat in the category due to seasonal inventory adjustments specifically, in tablets growth was moderated by a market shift in the quarter to smaller format tablets and continued supply chain yield improvements. We continue to be confident in our leadership position in sealing and impact protection for hand held electronics, and are developing and launching new innovative materials to address the needs of next generation platforms.

In clean technology markets, sales were up 4% over Q1 of 2012, and up 14% over last quarter. We generated strong growth in power electronic solutions and hybrid electric vehicles and modest gains in solar and smart grid applications. Offsetting lower growth for industrial variable speed frequency drives.

However, we have seen a significant increase in back orders and are ramping up production to meet what we believe is increased sustainable demand as industrial capital spending increases. In mass transit, with sales 6% below Q1 of last year, we anticipate improvement in demand when the Chinese government implements it announced investments in rail infrastructure. Based upon our assessment of the Chinese rail authorities plans we expect to see demand in this sector increase as we move through 2013.

In addition to our opportunities in the megatrends, growing adoption of automotive safety sensors continues to be a bright spot for Rogers. For these radar based safety applications, Rogers generated significant year over year growth of 79%, and quarter over quarter of 51% in high frequency printed circuit materials. We continue to be the leading provider of circuit materials technology to support both the 24 GHz and 77 GHz designs.

Across our markets, particularly in Asia and North America, growing consumer confidence is helping to drive demand for Rogers products in a wide variety of consumer and industrial applications from sports protective gear to automotive and industrial gasketting and sealing applications. Moving to slide 5, we grew our pipeline of design opportunities by 10% for the quarter verses Q1 2012. Diversified across our markets.

At the end of the first quarter, we were tracking accumulative total of 749 major design opportunities, of which 425 have already been designed in. At the same time, we moved more than twice the number of opportunities from design into production, verses the same quarter of last year, 37 in Q1-2013, versus 16 in Q1 - 2012. We believe this is a strong indicator of our future growth opportunities.

Turning to slide 6. Our net sales were $126 million. Up 5% over last year's first quarter. Overall, our printed circuit materials business generated approximately 11% growth due to the strong performance in wireless infrastructure and auto safety sensor applications.

We expect this momentum to carry forward throughout the year, as service providers particularly in North America and Asia continue to invest in additional 4G capacity. The high frequently phones business achieved record Q1 sales up 5%, supported by growth in consumer and industrial applications which offset flat demand in mobile internet devices for the quarter.

Our power electronic solutions segment was down slightly verses Q1 of last year, but up 5% over last quarter with hybrid electric vehicle applications driving our growth. Although demand was still below Q1 2012, for variable frequency drives, and rail propulsion system applications, both segments showed modest sequential improvement over Q4 of 2012.

While European markets remain soft, we continue to see indications of growing customer confidence in the power electronics arena as infrastructure and capitol spending starts to make a come back in Asia and North America. I'll now turn it over to Dennis to report our financial highlights.

Thank you, Bruce. And good morning, again, to everyone. As reported in the press release we achieved earnings from continued operations of $0.39 per diluted share, which includes net special charges of $0.05 per diluted share. A majority of that special charge was related to our previously announced move of certain ceramic inspection operations to Hungary.

We expect this move to generate an additional $.5 million of charges over the second and third quarters of 2013, and expect to begin realizing financial benefits by the fourth quarter of this year, building to an annualized total savings of $2 million in 2014. Our non-GAAP result of $0.44 per diluted share, matches the recently restated Q1 guidance, although it did represent a short fall to our original expectations for the quarter.

This short fall was related primarily to lost contribution on lower sales. In addition, we are also impacted by negative absorption, related to proactively reducing inventory to align with first quarter sales levels, as well as certain production issues that are being addressed.

Despite those issues, we were successful in improving profitability levels, from 6% in Q1, 2012, to 10%, in Q1, 2013. On a 5.8 million, or 5% increase in sales compared to the first quarter of 2012, we delivered $4.9 million in pre taxed income, or an 87% pre tax contribution level on the strength of both manufacturing and SG&A improvements made during 2012.

Slide eight, our gross margins. Our gross margins for the last five quarters are depicted on this slide. With the first quarter of 2013 at 32.8% on a GAAP basis, and 33% on a Non-GAAP basis, after removing a portion of the costs associated with the start up of inspection operations at ceramics Hungary location.

That Non-GAAP resulted represents a 270 basis point improvement as compared to the 30.3% reported in the first quarter of 2012. Approximately 240 basis points of this improvement is a result of the $3 million in streamlining benefits realized in the quarter as compared to prior years first quarter.

The remaining net improvement of 30 basis points is primarily a result of three factors which include a favorable incremental contribution on higher sales of 90 basis points, and other favorable cost improvements of 35 basis points, offset by negative absorption impacts of 95 basis points, due to inventory reductions in the first quarter of 2013.

Turning to commercial expenses on slide 9. Excluding special charges that totalled $1 million during the quarter, selling & administrative expenses as a percent of sales for the first quarter of 2013 and 2012, were 19.2%, and 20.2%, respectively.

The net improvement was related to approximately $2 million in benefits from our streamlining initiatives, offset by higher intangible amortization, related to ceramics purchased accounting as unincreased in incentive compensation, as we did not accrue any such costs in 2012, and the cumulative impact of other increases at about 5% over last year's first quarter.

All of these net roughly to flat gross SG&A spending compared to last year. Research and development expenses were 4.2% of sales in the first quarter of 2013, and have ramped up each quarter since last year's initial streamlining. In the near term, we expect our R&D spending rate to remain in the range of 4.0%, to 4.5% of sales.

Turning to slide 10. Rogers ended the fourth quarter with a cash and cash equivalence position of $126.4 million as compared to $114.9 million at December 31, 2012. As represented in the slide, we have continued to manage cash in a manner to maintain sufficient liquid reserves for our current and future needs and have improved our net debt metric to a positive $30.9 million representing on almost $60 million improvement verses the first quarter of last year.

In the first quarter of 2013, the net increase in cash was primarily attributable to strong cash generated from operations of approximately $19.1 million, including an over $10 million in working capital primarily represented to reductions of inventory, and increases in short term accruals.

These amounts were offset by capital expenditures of $7.7 million, andlong term debt repayments totaling $2.5 million representing a schedule repayment against our term loan facility. We currently have $95.5 million of outstanding debt, down from $121.3 million at the end of the first quarter of 2012.

Turning to slide 11. For the second quarter of 2013, we forecasted net sales between $129 million and $134 million and earnings from continuing operations on a Non-GAAP basis excluding any special charges, between $0.47 and $0.58 per diluted share.

At the midpoint, this guidance represents a $6 million, or 5% sales improvement verses Q2, 2012 net sales. At our normal contribution margins we would expect this increase to generate an EPS improvement of approximately $0.11. However, we are forecasting an improvement of only $0.06. As shown in the table in the bottom of the slide, in this projection we are delivering significant margin improvement with contribution on the increased sales at 121%.

That contribution is being offset primarily by the incurrence of an incremental $2.3 millions in costs related to incentive and equity compensation plans in the second quarter of 2013, as compared to 2012, which results in a $0.09 negative impact on EPS.

By way of explanation, we did not accrue any incentive compensation in the second quarter of 2012, while we are accruing $1.5 million in the second quarter 2013. We also did not record as much expense in the second quarter of 2012 for equity compensation as we reduced projections on pay outs for performance based restricted stock due to decline in business during 2012.

This expense increased in the second quarter of 2013 as we are forecasting a bonus pay out for 2013, and just issued our 2013 incentive awards to our employees. Excluding these amounts we would be earning $0.15more than we would have in 2012 on these sales. Which is better than our normal 50% contribution due to the impact of streamlining savings being maintained.

You will also see we are increasing investment in marketing related and R&D initiatives as explained by Bruce and his comments. Overall, the midpoint of our guidance will deliver a 24% improvement in operating income compared to Q2, 2012.

In relation to our Q2 guidance compared Q1 of 2013, the same fact pattern holds. As we would have expected to achieve an incremental $0.10 EPSimprovement based on a $5 million sales improvement, but are only forecasting an $0.08 improvement.

In the second quarter of 2013, we are again incurring an additional $2.1 million in incentive and equity compensation costs as compared to the first quarter 2013 which resulted in a $0.09 impact on earnings.

All of these programs underline the incremental incentive based cost increases are performance based, and as such are self-funding. If we do not achieve targeted sales and profitability increases expected for 2013, the expenses will be recaptured later in the year, similar to 2012 when we did not meet targets and incurred no material incentive compensation costs related to these plans. That concludes my remarks and I will now turn the call back over to Bruce.

Thanks, Dennis. That concludes the prepared remarks and we will now open up the call for questions, Joanne?

(Operator Instructions) Your first question comes from the line of Daniel Moore, from CJS Securities,your line is now open.

Thank you. Bruce, focusing on ceramic, it's starting to show signs of improvement, talk about the backlog in more detail there, and what type of contribution margins we should think about over the coming quarters.

So, in terms of the backlog, we are tracking about six weeks now of backlog and we are very hopeful, let's say, that this will be sustained. We are ramping up production. As a matter of fact, we had moved from about 400,000 cards a month, we are now up to the 500,00/525,000 cards a month. So we are seeing real pick up there. And I'll have Dennis talk.

In terms of ceramic as a business, I stated in my presentation, about 50% is our average. Currently depending on whatever mix they have between 30% and 40% on incremental sales, Dan.

30% to 40% on ceramic, okay, perfect.

Verses the 50 average.

Got it, very helpful. And, looking at high performance phones, Apple doesn't look like they'll have new product launches for a quarter or two, and Samsung has some constraints in terms of inventories. Do you expect tablet smart phones to be flattish for the next one to two quarters, or are you seeing some potential improvement there?

What we believe is that whole segment, if you look at the industry data particularly on phones in general, was relatively flat year-on-year, and we're tracking that. We believe as units increase, we should track along with that. We're maintaining our market share, which is about 60% to 65% across all of the smart phones, tablets, as well as feature phone. We'll see how things go. Seems somewhat volatile, particularly on the tablets side as market shares are moving, smaller formats are becoming more popular, and that certainly does impact us, because there's a volume associated difference between a larger format and a smaller format, but like we said, we are maintaining our share, and it will be driven by units.

Helpful, and one follow up and I will jump back in cue. Looking at the balance sheet, it continues to improve net cash position, cash continues to build on the balance sheet, have you given a thought to flexing the balance sheet? Perhaps pursuing more aggressive share repurchases now before your stock reflects the full benefit of the higher levels of revenue and cash flow that you're contemplating over the coming quarters?

It would be a little bit longer term view than the coming quarters. We do look at it annually with our board, and every year we do our strategic review of business and opportunities, both organic and non-organic. We will again look at it this summerand make that determination like we do every year with the board. Certainly, I mentioned, it is dry powder reserves. We stated that we like to be inquisitive in the marketplace and as long as we have that as the tenor of our strategy, we probably wouldn't consider it this year, but certainly if that changes and our cash keeps building it is always up for consideration.

All right, I'll jump back, thank you.

Thanks.

(Operator Instructions). And your next question comes from the line of Avinash Kant. Your line is now open.

A few questions actually. I think you did give us some idea about the charges looks like it's going to be a $0.02 impact in Q2, that's what you are talking about. Should we expect more charges in Q3 and Q4 this year?

The ceramic is about $250,000 in each of the quarters,I think it is a slightly higher number. They have moving costs as well as severances related to bringing down the work force. That plan is on track, they had a little bit more accelerated expense in the first quarter then they had originally planned but they will finish it off by the end of the third quarter and hopefully ramped up by the fourth quarter. So, second and third quarter, Avinash.

Okay, and roughly in the $250,000 range?

Yes.

Okay. And if you talk about the high performance forms business right now, can you give us some idea, what percentage of this business, on a quarterly basis, on a full year basis. at this point, seems to be tracking that is related to the smart phones and the tablets and what is the rest?

It's approximately 20% to 25% of the total sales. It is interesting, we talk a lot in these kinds of calls about the smart phones and tablets and so forth. What has been interesting is that we have seen very good growth on the industrial side of the market. And that is really not only maybe a little bit of recovery on industrial, but also our share gains because of our net worth throughout the world particularly here in North America and in Asia. So, while The M.I.D. segment, the phone segment is about 20% to 25%. There's other areas that are growing well in addition to the industrial, the consumer side also saw very strong growth over the last six to eight months and we can continue to anticipate that.

So Bruce, if I were to try to understand, if the smart phones and the cell phones and the iPads and all close to 20% to 25% of the high performance phone sales, what do we attribute the sequential decline in this segment to? There was roughly more than 10% to 11% declines sequentially. What was that coming from?

Part of that is inventory, inventory movement. We saw over the course of the quarter some pretty substantial swings in demand and that affected the quarterly results. The other thing, and we have alluded to this in the past, is the more efficient use of our foam sheets so the converters find ways of nesting, more efficiently nesting, some of the gaskets and so forth, and so they get a little bit more output than they normally would. That's had some effect.

We are also looking at, and launching, actually we just launched yesterday, some new technology to address the new designs that are coming out. Some of the gasket listsmart phones and so on, and we believe, based on our analysis and the work with the OEM's that there is a big demand here for this, so we are very positive on that outlook that as designs are changing we are addressing from a technology perspective and applications perspective, and we believe we have identified some very good performance benefits of our new materials for impact. It's a very dynamic market, and as you know, the design cycles are now getting down to six to eight months and so that means that we're moving very quickly on new applications, new technologies in that sector.

And on the revenue guidance that you're providing, qualitatively if you could give us some idea, how should we think of the various segments? Which are going to be up, which are going to be down, flattish? How should we think of that on a sequential basis?

Specifically to phones?

Overall, June quarter guidance in revenues.

Avinash, this is Dennis. The guidance we have aligns with how Bruce described the segments year over year. So the certain materials business is in a strong growth mode and sequentially they would follow that pattern. The power of electronics led by the ceramic piece of the world, growing. And with HPF. being in that flattish kind of state in the projection, and we roll up our forecast and try to always be on a conservative basis with that projection, so we hope the world will look favorably upon us in the second quarter and we can beat that guidance. But bottom line is we put out what we think is a decent conservative expectation for these businesses.

And given what you have talked about margins should we expect a meaningful ramp in Q4? Is that how we should think about?

I'll refer back to Bruce's comments that we expect improvements sequentially through the year. With our businesses and available capacity in the manufacturing, when sales go up, we typically get improvement in margin on a contribution bases. It comes at 50%, compared to 33% average. So absolutely we get a nice bump when we increase our sales.

And did you give out the depreciation and amortization number for the quarter?

I didn't, but I expected you to ask. $6.6 million for the quarter.

Perfect, thank you so much.

Thank you.

(Operator Instructions). Your next question comes from the line of Dana Walker, from Kalmar Investments. Your line is open.

Good morning, everyone.

Good morning.

Bruce, can you talk about what in your judgement is driving the improvement and tone for ceramic and marketwise, and how you folks have reassessed the outlook for that business?

Well, what is driving it is we have seen, particularly I would say in some of the industrial speed drive applications, some improvement there. I'm also going to ask Bob to comment a little bit more detail on this.

Dana, a couple of things are going on. What we talked about last year is part of the depressed volumes last year was inventory corrections so it's pretty clear from the order patterns that we are seeing from our customers that there are short lead times that they are expecting from us that inventory is logged down. You're seeing partly a bump because of that. The other thing you can read about is even markets are quite strong. We are starting to see the increased supply that had been created in places like China are being consumed, there's heavy activity in Asia.

Also, if you read about what is going on in China, and the investment levels, even in the wind market, have picked up. So we are seeing there is a pretty broad recovery, and as Bruce refers to it as CAPEX spend, that is driving demand and because everyone had worked down inventory we are seeing pretty quick impact on our volume demand.

Do you have some impression that solar and wind account for a larger part of the demand profile for that business compared to what you had earlier thought?

No, I think it is still very similar to what we have talked about in the past, 10% or so, not a huge part of the business.

Once upon a time, this was viewed as being a pretty important part of the secular growth business. Do you have some reason to back off of that view today?

Not at all. Again, the industry reports, and projections, CAPEX spend, and how that is translating the demand for us continue to be very positive and just a couple of things that we have talked about in the past that are key growth drivers are automotive electrification, and what you are seeing and electrical power steering, you are continuing even though hybrid electric vehicles are still a relatively small part of the market, they are growing at very nice rates. So, we continue to feel very optimistic about that this is a double digit demand business for us.

Can you gentlemen talk about some of the drivers to industrial and consumer demand for your phone business?

So I would say in the industrial side, this is just a general increase in demand, and it goes into automotive, it goes into appliances, it goes into industrial equipment. And so our belief is that this is a return of spend, it is also as I mentioned in my comments, based upon our very extensive network where we have converters that have their tentacles out everywhere, and so as new opportunities come, they bring them to us. And so that's a growth area, and it continues to be. So it is a share plus just up tick. On the consumer side, this is the protective cases for smart phones, for tables, and also apparel and sporting equipment padding.

And that is very much predicated on getting those applications, those designing wins and we have been very very aggressive and been able to do that. We added a new machine, started up a new machine, molding machine, here in Connecticut this past quarter. We are running it pretty hard right now. So we are looking for the next one. And so there's a lot of pull in the marketplace. We are getting what we want on our pricing and it is pretty unique stuff. So that's really driving that consumer side for us.

Within Rogers you do make a distinction between an OEsource gasket or seal that goes into a hand-held verses the external, well, through a different channel protective case.

Oh, yes. Yes. So two protective cases we would call consumer and not lump it with MID.

On Bloomberg yesterday, I think it was yesterday, there was a piece about the fact that Samsung hand-held seemed to experience higher breakage in part because of the larger screen. I don't know if this would trespass upon some type of internal discussion, but do you see that type of sensitivity going on as these larger screens are becoming more pervasive in the way that your products will be used?

This is exactly where we are playing. So, on two fronts, one is the protective covers and cases and so forth, so we've got a lot of that work on going. And a lot of the designs that we are working on are specifically for some of these types MID's. On the other side of it we just yesterday introduced new phone technology that is really targeted for the A.M.O. L.E. D. screens. These larger screens. Samsung clearly is one of those folks who use those type of screens.

Based on feedback from OEM's,this is an area of real opportunity that they're looking for a lot of help on. The technology that we've introduced we believe really has a lot of legs to it, so we will see over the next two or three quarters how we track on design ins and so forth. But this is a problem. As you pointed out it was on Bloomberg yesterday. So we think we are at the right place in the market right now for that introduction.

So you would like to believe that even if you are going through a flattish moment, that you ought to begin to grow again as you address the M.I.D. market.

Yes. We are very excited about the potential on that side. With the new foam materials. Yep.

Dennis, as you laid out the numbers that will present some operating drag, comparing Q2 to Q1 and compared to last year within the SG&A categories, would some of those incentive comp drags on further incremental revenue moderate in the back half of the year compared to the starting point in Q2?

Based on our current expectations the Q2 accrual would represent a one quarter worth of that and if we started exceeding our expectations we might ramp it up a little bit, but it wouldn't be as significant a drag as comparing to zero in the previous quarter. In terms of earning a bonus, we are basically in that 10%, to double digit growth rate for target, and double that in terms of income improvement. We have pretty substantial targets to get to target and achieve above that, they go much higher. So a little bit of drag if we start really booming in the third and fourth quarter, but it won't offset the contribution coming in for the much higher sales.

Bob, is there any update on FETA?

Let me take that. A couple of things that have gone on over the past quarter in that area. Our relationship with Hitachi Chemical, we have decided to part ways. Early in our development here was a very good relationship. We learned a lot about the market that we had not had access to, but what we discovered as we went through our diligence, and our greater understanding of the market needs is that the ultra low loss area is one where we thought we can compete. And so we've decided to really put our efforts into that area, and R&D is working very diligently with OEM's and so forth to understand and to develop materials that can compete there. We think it's a market that is going to be growing substantially over the next three to five years. It moves away from commodity low loss area. So that's where we are headed in that.

Final question, can you update us on where you think you stand on various auto programs including the auto sensors that seem to be growing so nicely.

Yeah, that's been a huge growth opportunity for us, continues to be. There's adoption that's going on down into the mid market, and lower end cars across both Europe, North America, as well as Asia. And what we are seeing is more and more demand for sensors not only just a side, but front, back, and so forth, that's being required in Europe for example, to get the five star safety rating, authorities are saying you need to have these type of sensors. That's driving up and down the product lines for many of the car manufacturers. So we continue to see ourselves having very significant market share, certainly north of 50% to 60%. Higher than that, actually. As I mentioned in my comments, both the 24 GHz and 77 GHz we have very good designs in both of those technologies so as car companies make their choices we are right with them.

Thank you for the update.

Your next question comes from the line of Daniel Moore, from CJS Securities. You line is now open.

Bob, you started to talk about it a little bit, but maybe you can elaborate on what you're seeing in the alternative energy markets?Specifically in China, just break out wind and solar what the outlook looks for the coming quarters and in 2014?

So basically, I will start with wind, particularly in China. What you are seeing is the Chinese government is implementing what was in their five year plan in terms of adding capacity to wind, pretty much on target. I was reading an article just a couple of days ago, that when the flood of capacity came in for China, it had hit the European market pretty hard in terms of pricing for PV, and I thought well, it is very encouraging is the fact that excess capacity has been consumed now by market demand, and you are seeing pricing firming up in the PV cell side of things. Now for us we have been pretty insolated from that.

And then in the large scale solar farms we are playing with power distribution systems. We haven't seen that kind of pressure because of where we play, but I view the fact that they have consumed this capacity, is showing pretty strong fundamental demand in the marketplace that at least what I'm reading suggests that it should continue into 2014.

And that five year plan in wind? What sort of growth rate in 2014 would that translate into for Rogers?

There was double digit growth year over year kind of numbers what I recall reading in their plan. Working out to about something like 100 gigawatt's of capacity over a five year period. And the other opportunity that's creating that we have talked about is really on the smart grid side as well. We are seeing fairly nice activity that's creating some opportunities and some business for us and power distribution. Both in Europe and now to a pretty significant degree in China, as they upgrade the grid. They are putting in these power systems that would utilize our power distribution systems and we are seeing good activity there.

And lastly, maybe a little bit more detail, whether it is you or Bruce around the pick up in rail infrastructures spend. How much of that have you seen in the back half this year verses 2014?

Yeah. So what you read, what's being published from the ministry of rail is they are basically saying that there should be stronger demand in the second half of 2013, into 2014. It's been relatively stable for us over the past several quarters. Our plan was based on a relatively stable outlook for rail. But we're encouraged by what we are hearing out of China right now about the second half and into 2014.

Okay. Appreciate it gentlemen, and look forward to the conference in July.

All right, great, thanks.

I would now like to hand today's call back over to Mr. Bruce Hoechner for closing remarks.

Thanks Joanne. We entered 2013 in an environment of continued global economic uncertainty. We cannot control the external environment but we are aggressively managing Rogers to ensure we perform well in the short term, and build a foundation that provides sustainable top line and bottom line growth for years to come. We are encouraged by our continued progress in cost streamlining and our Q1 improvements in gross margin. We are confident in our strategies and our ability to execute, and believe that as 2013 unfolds, we will see our markets improve.

We believe that the long anticipated build out in 4G infrastructure is here, and it will help drive strong results for our printed circuit materials business. We see positive signs of recovery for our power electronics materials and are confident in the continued market leadership of our High Performance Foams business. With our portfolio diversified across many markets, we have demonstrated our ability to perform well in the face of changing economic and market dynamics.

As global economies get moving again, demand is increasing for better ways to power, protect, and connect our world, and Rogers is a leader in unique, innovative material solutions to address those challenges. We see many opportunities for growth ahead in 2013, and beyond, and remain focused on delivering value to our customers and consistent results for our shareholders. Thank you for joining us today on the call. Have a good day.

This concludes today's conference call, you may now disconnect.