Standard Motor Products Inc (SMP) 2017 Q4 法說會逐字稿

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  • Operator

  • Good day, and welcome to the Standard Motor Products Fourth Quarter Earnings Release.

  • (Operator Instructions) Please note, today's call may be recorded, and I will be standing by if you should need any assistance.

  • It is now my pleasure to turn the conference over to Mr. Larry Sills, Executive Chairman.

  • Please go ahead, sir.

  • Lawrence I. Sills - Executive Chairman

  • Okay.

  • Thank you, and good morning, everyone, and welcome to Standard Motor Products Fourth Quarter Conference Call.

  • And we thank you all for taking the time to attend.

  • Here for the company is Eric Sills, President and CEO; Jim Burke, Executive Vice President and Chief Financial Officer; and myself, Larry Sills, Executive Chairman.

  • Agenda for today: Jim will review our financial results both for the fourth quarter and for the year as a whole, and then Eric will review some of the key events and developments, and then we'll open it for questions.

  • So with that, thank you for attending, and let's get started.

  • James J. Burke - CFO and EVP of Finance

  • Okay, thank you, Larry.

  • As a preliminary note, I would like to point out that some of the material we will be discussing today may include forward-looking statements regarding our business and expected financial results.

  • When we use words like anticipate, believe, estimate or expect, these are generally forward-looking statements.

  • Although we believe that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available to us and certain assumptions made by us, and we cannot assure you that they will prove correct.

  • You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements.

  • All right.

  • To begin, overall, 2017 was a transition year with various facility moves, some completed and 2 still underway, establishment of a new JV in China and the recording of the impact of the Tax Cuts and Jobs Act tax law changes.

  • Eric and I will discuss these points further in our prepared comments.

  • Consolidated net sales in Q4 '17 were $240 million, up $10.2 million or 4.4%.

  • And full year 2017 net sales were $1,116,100,000, up $57.7 million or 5.4%.

  • Excluding the General Cable incremental sales from our acquisition at the end of May 2016 of $38.4 million, our full year 2017 net sales increased $19.3 million or 1.8%.

  • Engine Management net sales in Q4 '17 were $198 million, up $12.8 million or 6.9%, and for the full year were $829.4 million, up $63.9 million or 8.3%.

  • Excluding the General Cable incremental wire sales, Engine Management full year net sales were up $25.5 million or 3.3%, which is within our expectation of low to mid-single-digit growth.

  • Temperature Control net sales in Q4 '17 were $40.3 million, down $2.4 million or 5.5%.

  • And for the full year 2017 were $279.1 million, down $4.6 million or 1.6%.

  • Eric will elaborate further on our customer POS sales in 2017 and projected impacts on the first half 2018 Temperature Control sales.

  • Consolidated gross margin dollars in Q4 '17 were ahead $2.6 million at 28.9% but down 0.2 points, and for the 12 months were ahead $4.2 million at 29.3%, but down 1.2 points.

  • By segment, Engine Management gross margin in Q4 '17 was 28.4%, up 0.5 points, and for the full year was 29.4%, down 1.9 points.

  • As previously stated, our Engine Management margins were impacted by plant moves, incurring additional costs for ramp-up inefficiencies, duplication of overheads and costs associated with hiring and training new employees.

  • Eric will go into additional detail on our timing to complete these moves and improve margins.

  • Temperature Control gross margin in Q4 '17 was 26.6%, down 1.8 points, and for the 12-months, '17 was 26.2%, up 0.6 points.

  • The 2017 summer season was very mild, with first half sales up 9.3% but second half sales down 12.9%.

  • Production levels were reduced late in the second half 2017, which will have a negative effect on gross margins in Q1 2018.

  • We anticipate Temp gross margin dollars and percentage to be down in Q1 2018.

  • However, if we get an average summer season, we expect margins in the 26% range and to exceed 2017 levels.

  • Consolidated SG&A expenses were down $1.3 million in Q4 '17 versus last year at 21.4% of net sales versus 22.9% or 0.5 points reduction.

  • Full year 2017 SG&A expenses were up $1.9 million at 20% of net sales versus 20.9% or 0.9 points reduction.

  • Full year 2017 included 12 months of General Cable SG&A expenses as opposed to only 7 months expenses in 2016.

  • SG&A expenses in both the fourth quarter and full year 2017 were reduced for incentive compensation expenses versus 2016.

  • We anticipate SG&A spending to increase in 2018 for normalized incentives comp expenses and higher accounts receivable factoring expenses due to the rise in interest rates.

  • Our SG&A expenses are quasi-fixed, estimating roughly 75% to 80% fixed and 20% to 25% variable.

  • Our 2018 estimated SG&A spend is to be in the $59 million to $62 million range per quarter.

  • Consolidated operating income before restructuring and integration expenses and other income net in Q4 '17 was $18 million at 7.5% of net sales versus Q4 '16 of $14.1 million and 6.2% of sales.

  • For the full year '17, operating income was $103.1 million, 9.2% of sales versus '16 at $100.8 million, 9.5% of net sales.

  • We anticipate improving operating margins once our moves are complete and achieve operating efficiencies.

  • Of the non-operating income expense net included a noncash impairment charge of $1.8 million for the quarter and full year related to our minority interest investment in Orange Electronics, our TPMS supplier.

  • Our 2017 tax provision included a charge for $17.5 million due to the enactment of the Tax Cuts and Jobs Act related to the write-down of deferred tax assets and the tax on deemed, repatriated earnings of our foreign subsidiaries.

  • Excluding the onetime charge, our 2017 effective tax rate would have been 36.6% versus 36.7% last year.

  • We are currently estimating a 26% effective tax rate for 2018.

  • The net effect of our operational performance as reported on our non-GAAP reconciliation was diluted earnings per share of $0.54 in Q4 '17 versus $0.42 in the fourth quarter last year and full year at $2.83 in '17 versus $2.77 in 2016.

  • Turning to the balance sheet.

  • Accounts receivable increased $5.4 million against December levels.

  • Inventories increased $13.9 million related to the facility moves.

  • Deferred income taxes decreased $18.7 million, primarily related to the Tax Cuts and Jobs Act.

  • Other assets increased $12.7 million, primarily related to our new FGD joint venture in China.

  • Eric will discuss this new venture shortly.

  • Total debt increased $6.8 million from $55 million to $61.8 million.

  • Our 2017 cash flow reflects cash provided from operations of $64.6 million.

  • This $64.6 million, along with the $6.8 million increase in debt funded our capital expenditures of $24.4 million, the partial investment in FGD JV of $6.8 million, dividends of $17.3 million and share repurchases of $24.4 million.

  • In 2018 to date, we spent an additional $2.1 million on share repurchases and have approximately $3.5 million remaining open against our $30 million authorization.

  • In total, we have repurchased 575,516 shares at an average price of $45.95 per share.

  • In summary, 2017 was a transition year due to our strategic facility moves.

  • Despite these plant moves and the associated incremental costs and inefficiencies, 2017 reflected increasing sales and higher non-GAAP earnings from continuing operations.

  • We look forward to completing these moves in 2018 with improved operating results.

  • Thank you for your attention.

  • I'll turn the call over to Eric.

  • Eric Philip Sills - CEO, President and Director

  • Well, thank you, Jim, and good morning, everybody.

  • So overall, we are basically pleased with the quarter and for the year as a whole, though there were certain challenges, however, which will continue to create some headwinds in the near term.

  • With that said, once we get past these temporary issues, we're confident that we'll be stronger than ever.

  • Each of our 2 divisions had different dynamics so it's best to review them separately.

  • Let's start with Engine Management.

  • Sales in the quarter were quite strong, up 6.9%.

  • But as we've said many times, there will tend to be variations quarter-to-quarter depending on our customer's ordering patterns, and therefore, it's much better to look at it over a longer period.

  • So our full year was up 3.3% once you adjust for the full year of General Cable not present the prior year.

  • And this 3.3% is in line with the low single-digit growth we have seen as the division's organic trend.

  • From a gross margin standpoint, we did have another difficult quarter in Engine Management as we continue to incur costs from the various plant moves.

  • We've made great progress with the physical aspects of the moves, but there's more to be done before we see the financial benefits.

  • The biggest is in the integration of General Cable.

  • To remind you, we acquired this in May of 2016 and are very pleased with the business so far.

  • We spent the first year consolidating distribution and certain back office and sales functions, all of which are working quite well.

  • But the heavy lifting of the consolidation didn't really begin until 2017 as we began combining the 2 manufacturing operations by relocating all of their production from Nogales, Mexico to our plant in Reynosa.

  • This has been a major undertaking requiring the hiring of hundreds of employees, which comes with significant onetime costs in terms of training expense, lower productivity, duplicate functions and so on.

  • Frankly, it's proven to be more challenging than expected, which has been impacted by a tightening labor market in Reynosa.

  • This has caused higher turnover and therefore continuous hiring and training costs.

  • It's also caused us to slow things down a bit as our #1 priority is always to make sure the customers feel no pain, which they haven't.

  • We've now transferred the majority of the manufacturing lines and will have the rest moved by early in the second quarter, which will allow us to exit the Nogales facility and the duplicate costs associated with it.

  • But it will then take a few more months to come up to full productivity in Reynosa.

  • And until then, we expect costs to continue but at a reduced rate.

  • The second move underway is the relocation of our electronics plant into Independence, Kansas which will be complete in the second quarter of this year.

  • We've moved most of the production already and the transition is going quite well.

  • But the savings don't really begin until the second half of the year when we close Orlando and eliminate all the duplicate overhead.

  • The other trend having an impact on our Engine Management margins, although to a much lesser extent than the plant moves, has to do with a sales mix shift.

  • We've recently seen an increase in our original equipment business.

  • A part of this is the result of the General Cable acquisition, of which a full 1/3 of the business was OE, and the other big piece is the success we are having of our compressed natural gas injector program, which is sold to heavy-duty vehicles largely in the Far East.

  • These are all good programs, but OE does tend to have lower gross margins.

  • It also has lower SG&A, so net profit remains healthy.

  • We're also seeing sales increases in some of our new aftermarket product categories.

  • And in the long run, this is a positive as it shows that demand is materializing and that we're gaining in traction.

  • But in the near-term, we do have some margin pressure as new products tend to have higher costs until we're able tool more of them and get them in our plants or seek low-cost sources overseas.

  • We have a solid track record in these types of cost-reduction activities, so I'm confident that we will be able to achieve our typical margins in these newer product lines in the future.

  • Okay.

  • Let's move to Temperature Control.

  • The heart of our temp control business is air conditioning, which is obviously weather-dependent and can vary up or down year-to-year depending on how hot it gets.

  • Additionally, there tends to be a timing offset between when our customers order from us and their sell-through experience as they seek to manage their inventory throughout the year.

  • So to explain recent events, you really need to go back 2 years.

  • 2016 saw record heat, therefore our customers ended that year light on inventory.

  • They then spent the first half of 2017 restocking their shelves, placing record preseason orders, and were up 24% in the first quarter and 9% through the half.

  • But then the summer of 2017 never materialized.

  • As we told you on our last call, our customers sales out for the third quarter were down approximately 10%, but their purchases from us were down 16%, reflecting their sell-down of that preseason build.

  • This sell-down continued into the fourth quarter as they reduced their purchases from us by 5.5%.

  • So the combined result is that we were down 1.6% for the year.

  • However, customer sales out were down about 4%, so as mentioned in the press release, we expect a difficult first half not only because they are still sitting with above-typical inventory but also because the strong first half of 2017 will make for some difficult comps.

  • Now all that being said, it still comes down to how hot it gets this summer, which is anyone's guess.

  • Meanwhile, we're very pleased with our improvement in profitability within the temp control business, which is the result of the benefits of some major cost reduction activities.

  • We are now complete with the move of production from Grapevine to Reynosa.

  • And we're also seeing some very nice improvements from Gwo Yng, which is our joint venture in China.

  • If you recall, we acquired half of one of our main suppliers back in 2014 and have been working hard with them on significant operational improvements to make them more effective.

  • We've now just taken another important step in this area.

  • In November of last year, we added to our low-cost footprint with the formation of another joint venture in China.

  • We acquired 50% of a well-established, high-quality, low-cost Chinese compressor manufacturer known as FGD.

  • FGD was a long-standing supplier to us and a great fit for us.

  • It will provide excellent synergies with our compressor plant in Mexico.

  • I should also note that FGD has begun to make some inroads to selling to the Chinese OEMs, so we are excited about the potential they provide for entering the fast-growing Chinese market, especially when you combine them with the complementary product categories coming out of Gwo Yng.

  • Now this is very much still in its early days, but we're pleased to now have a foothold in the region.

  • So in closing, we continue to have a strong place in a strong and stable market.

  • And while there are some short-term issues we are dealing with, the fundamentals haven't changed.

  • And once these short-term issues are behind us, we'll be stronger than ever.

  • So as such, we remain very excited about the future.

  • I must note, it couldn't happen without our dedicated and talented people all helping to make it happen, so I want to thank them for all they do.

  • So with that, I will turn it back over to the moderator, and we'll open it up for questions.

  • Operator

  • (Operator Instructions) We'll go first to the line of Scott Stember from CL King.

  • Scott Lewis Stember - Senior VP & Senior Research Analyst

  • Eric, can you maybe talk about what the sell-through for Engine Management was in the quarter and maybe for the full year?

  • And I know that you need to look at things for the full year, but just trying to get a sense of how your customers were thinking.

  • Notably later in the quarter, particularly as some of the colder weather came in, it maybe sparked some additional demand.

  • Eric Philip Sills - CEO, President and Director

  • In the fourth quarter, our customer sell-through was basically flat, slightly down to flat.

  • But again, anything can happen in a quarter.

  • Their purchases from us for the entire year was slightly higher than their sell-through.

  • This was really intentional on their part.

  • We had several of our customers intentionally broaden their inventory assortment, still a little bit of an arms race out there as all of our major accounts are trying to have the best inventory forward deployed.

  • So we saw a broadening of their inventory to help them position themselves for the future.

  • So it's kind of a long-winded answer.

  • Their sell-through was a little bit less than their purchases, but we hope that, that is positioning them for future sales growth.

  • Scott Lewis Stember - Senior VP & Senior Research Analyst

  • Okay.

  • And just as far as like later in the quarter, just with the weather coming back, I know that your product isn't particularly, at least in Engine Management, weather-sensitive.

  • But what are you seeing in the attitudes later in the quarter?

  • Anything different heading into the new year?

  • Eric Philip Sills - CEO, President and Director

  • Really, towards the end of the year, it was pretty consistent throughout the quarter, roughly flat to slightly down.

  • Really, there's typically a bit of a lag between what our customers sell and what they purchase from us.

  • So the cold December should parlay itself, perhaps, into some restocking in this quarter.

  • But it's really too soon to see the impact of that.

  • Scott Lewis Stember - Senior VP & Senior Research Analyst

  • Got it.

  • And you talked about the margins being a little bit lower for some of these newer products, like the CNG product in Engine Management and a few other items, at least on the gross side.

  • But you said the SG&A is lower.

  • Is this a wash?

  • Or is it still net-net negative or net-net (inaudible)?

  • Eric Philip Sills - CEO, President and Director

  • I just want to make sure we don't combine 2 things.

  • Part of what I was saying is that the OE business is typically lower gross margin, lower SG&A.

  • And so that's kind of an ongoing, kind of different market profile.

  • And I would say that that's pretty consistent.

  • On the aftermarket side, this is where we have newer product categories that are starting to take off.

  • And these are areas where they start out with lower margins as we work things through our product development cycle.

  • So we're always confident we're able to correct the costs going forward.

  • But that's more of a temporary margin initiative.

  • Scott Lewis Stember - Senior VP & Senior Research Analyst

  • Okay.

  • And just a last question and then I'll jump back in the queue.

  • Maybe just talk about the CNG opportunity.

  • I know last quarter, you had said that there was some building momentum there, notably obviously, in the Far East.

  • Can you maybe talk about how that's changed in your outlook for '18 for that?

  • Eric Philip Sills - CEO, President and Director

  • Sure, Scott.

  • It's -- yes, it really -- this is a program that we've had for several years, but it took a little while for the market to adopt it over there.

  • This really started to pick up in the second half of last year and it's continuing into this year.

  • It's very difficult to predict what it's going to look like going forward.

  • The order book -- we have -- we sell to a system integrator, who then sells to the actual vehicle manufacturers, so we're relying on them for future outlook.

  • A lot depends on what happens in China with regulations over there, but we're pretty bullish on this program.

  • Operator

  • And we'll go next to the line of Christopher Van Horn with B. Riley FBR.

  • Daniel Lemont Drawbaugh - Former Associate

  • This is Dan Drawbaugh on the line for Chris.

  • Just to start on the new Chinese joint venture, I was curious if you can lay out for us how the impact on margin is going to look over the near term, over the medium term.

  • What should we be looking for in terms of cadence of how that rolls in?

  • And maybe if you could help us with the magnitude of that impact.

  • James J. Burke - CFO and EVP of Finance

  • Right.

  • Well, first on -- and this is Jim Burke.

  • On the results of the JV, we'll record that down in the non-operating income that's there.

  • It will have a -- as a source of supply to us, it will have a benefit where we control the costs and drive improvements in there.

  • And we recognize that benefit in our gross margins.

  • But again, it's a competitive environment that's there.

  • We look to offset and make continuous improvements in there, but I don't think you would look to see something substantial change in our gross margins.

  • If you look back, our gross margins over the last couple of years, we improved from the low 20s, 21%, 22% upward to what we said was 25%, 26%, and stated that 2018, expecting an average season, we look to be in the 26% range.

  • Daniel Lemont Drawbaugh - Former Associate

  • And then I think you recently announced an expansion in your ADAS component offering.

  • I was curious to know how large you see that market getting sort of over the medium term, where you play right now and what drove that expansion in your offering.

  • Eric Philip Sills - CEO, President and Director

  • Well, it's -- as we look at our overall Engine Management offering, we believe we need to be much more than things that touch the engine, and so we see a lot of opportunities in safety-related systems and other sensor-driven systems within the vehicle.

  • So yes, you're correct, we did recently announce the launch of several different ADAS-type products, blind spot detection, lane departure systems and so on.

  • Still very much early days on these.

  • They're on late-model vehicles, and so the replacement rates really -- the replacements have not really begun.

  • So this is positioning ourselves more for the future.

  • It's hard to tell what kind of failure rates these items are going to have, so we'll just have to wait and see.

  • But we think these products fall within kind of our bailiwick, what our customers would expect us to carry.

  • So we wanted to get out there and be first-to-market and have a good successful program.

  • Operator

  • And we'll go next to the line of Matthew Paige from Gabelli.

  • Matthew T. Paige - Research Analyst

  • Just to talk about Temperature Control quickly, is there a replacement cycle for those products that could lead to higher demand even without warmer temperatures, like a failure kind of cycle?

  • Eric Philip Sills - CEO, President and Director

  • Well, yes.

  • These parts can fail even if it doesn't get hot.

  • And there's, of course, certain parts of the country that are always hot, so it's not binary.

  • It's just that warm weather tends to see higher utilization of the systems and also less of a tolerance for the driver to deal with an air conditioner that's not performing well.

  • So I don't know if that answers your question.

  • These compressors, a lot of them, are running on serpentine belt systems that the vehicle is turning and so too is the compressor.

  • And so if it seizes up, it needs to be replaced.

  • So you are seeing some technology shifts that will allow these things to get worked even if the air conditioning is not on.

  • But it is still going to be something that has a significant weather overlay in the demand.

  • Matthew T. Paige - Research Analyst

  • Okay.

  • And then kind of along those lines, are there different products on newer vehicles?

  • So as later-model vehicles move into their replacement sweet spot, is there going to be a demand for a different kind of Temperature Control product that your customers may not have already stocked?

  • Eric Philip Sills - CEO, President and Director

  • It's really -- you're having minor modifications to different types of compressors, but it's really a fairly stable technology.

  • It doesn't have the same level of innovation as you'd have on the Engine Management side.

  • Operator

  • (Operator Instructions) And we'll go to Bret Jordan from Jefferies.

  • Mark David Jordan - Equity Associate

  • This is Mark Jordan on for Bret.

  • Thinking about the remaining plant moves and associated costs, what should we expect for Engine Management margins going forward?

  • I think it sounds like Q3 is more the inflection point, but I think you also said the majority of the Reynosa move is expected to be done in early Q2.

  • So could we see some benefit there in Q2 or is it all in Q3?

  • James J. Burke - CFO and EVP of Finance

  • This is Jim Burke.

  • So again, we really flattened out our margins in Engine Management in that 28%, 29% range and project it to get back up into the 31%, 32%.

  • But we feel we purposely have slowed it down to be able to make sure we maintain our fill levels with the customers.

  • So we're projecting that the moves will be completed in the second half of 2018 as opposed to completed by the end of Q2.

  • And at that point, we still need to be able to get the efficiencies back up to where we believe they should be.

  • So to be cautious, I would be targeting the margin improvement for late 2018, that's in there, and getting the full benefits of it then starting in 2019.

  • Mark David Jordan - Equity Associate

  • Okay, great.

  • Very helpful there.

  • And then switching gears over to the Temperature Control segment, I know there's some expected sales pressure in the first half of '18.

  • I think the press release this morning used the term significantly lower preseason orders from customers.

  • Would you be able to quantify the expected sales pressure there?

  • I think the biggest hurdle there is in Q1.

  • James J. Burke - CFO and EVP of Finance

  • Yes.

  • Again, Jim Burke.

  • The orders that we have really within -- and again, we always purposely say you can't look quarter-to-quarter that's there.

  • But even preseason orders can show up between the last 2 weeks of March versus flipping over into April, and we don't know how it plays out.

  • What we do know is that we expect, and what we've seen so far that preseason ordering will be much lighter than it was because they have the inventories.

  • But it's too early to even attempt to say what the full impact of it will be.

  • Operator

  • And we'll go next to the line of Robert Smith with the Center for Performance Investing.

  • Robert Smith

  • With respect to Foshan and the opportunity to develop the Temperature Control business in China, could you give me some kind of yardsticks.

  • What is the opportunity?

  • How large of a market is this in China?

  • Eric Philip Sills - CEO, President and Director

  • Well, seeing as we're starting from 0, there's only upside.

  • Just kidding.

  • The -- where we are seeing our near-term opportunities in the China market is selling OEM as opposed to the aftermarket.

  • The aftermarket may also be a potential, but the vehicle park is so much younger there that really the market growth has to do with new car sales.

  • FGD had begun to get some contracts with vehicle manufacturers in the region, and so they've begun to sell compressors into that market.

  • We hope to be able to capitalize on what they've already established, potentially also getting some of the product categories coming out of our other joint venture there, because they are complementary, related categories, and continue to pursue that local market.

  • We think it could be a very big market, but I just don't want to set expectations too high because it is so new and it is competitive and it is an area that we're just learning.

  • Robert Smith

  • And from the point of view of the industry, the auto industry for many years was kind of a staid place to be.

  • And now, there's so much excitement about what the future might hold and is unfolding and so many things happening.

  • Where do you guys see the company as far as further OE opportunities?

  • Eric Philip Sills - CEO, President and Director

  • We have -- our OE business has really improved over the last many years partly in terms of sales growth but more in terms of the attractiveness of what we're pursuing, where we've really tried to get much more focused in areas where we think we have a competitive advantage, so that we're not just playing on price and finding ourselves in commoditized categories.

  • And so the areas that we've been focusing on, one, has to do with fuel injection because it happens to be an area where there are very few players and getting into alternative fuels seems to be a nice niche, especially overseas, where they are adopting it much faster than they are here in the U.S. We're going to continue to pursue that.

  • Out of our Poland operation, we've been in Poland now since 2006.

  • We took it from being a 50-person plant to being a 700-person plant.

  • And while a lot of what they do ends up in our aftermarket boxes here in the U.S., a good chunk of what they do is also in OE as they enjoy 2 benefits that really help you with OE.

  • It's a very good cost structure but it's also very technically capable.

  • They have over 50 engineers there.

  • It's very easy to hire capable, skilled engineers there.

  • So products coming out of Poland is another area where we see growth opportunities.

  • This tends to be Engine Management sensors, Temperature Control sensors, exhaust gas temperature sensors and the like, so.

  • And then, the last area where we've seen some nice OE potential is on the Temperature Control side, really coming out of our past few acquisitions, this FGD one.

  • And also what came with the Gwo Yng deal back in 2014 was a company called Annex Manufacturing, which was a U.S.-based company that really sold to heavy-duty -- it was mostly the sales arm for Gwo Yng and some other suppliers in Asia, but it was pursuing heavy-duty OE Temperature Control products.

  • So we think that there is nice upside to OE.

  • I don't expect it to ever be the majority of our business.

  • But we do invest in it and we improve it, and so we see some nice potential there.

  • Operator

  • (Operator Instructions) And it does not appear we have any further questions at this time, gentlemen.

  • Lawrence I. Sills - Executive Chairman

  • Okay.

  • That concludes our fourth quarter conference call, and thank you all for attending.

  • Thank you.

  • Eric Philip Sills - CEO, President and Director

  • Thank you.

  • James J. Burke - CFO and EVP of Finance

  • Bye.

  • Operator

  • We'd like to thank everybody for their participation.

  • Please feel free to disconnect your line at any time.