Teledyne Technologies Inc (TDY) 2002 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Teledyne Technologies Earnings Release Teleconference. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session with instructions given at that time. If you should require assistance during the call, please press zero then star, and an operator will assist you. As a reminder, this teleconference is being recorded.

I would now like to turn the conference over to Mr. Jason Vanwees. Please go ahead, sir.

Good morning. This is Jason, Director of Corporate Development and Investor Relations at Teledyne. I'd like to welcome everyone to Teledyne Technologies' fourth quarter earnings release conference call. We released our earnings earlier this morning before the market opened.

Joining us today are Teledyne Technologies' Chairman, President, and Chief Executive Officer Robert Mehrabian; Senior Vice President and CFO Bob Naglieri; and Vice President, Associate General Counsel, and Assistant Secretary Melanie Cibik.

After remarks by Robert and Bob, we will answer your questions. However, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks, and caveats, as noted in the earnings release and our periodic SEC filings, and of course actual results may differ materially. In addition, in order to avoid potential selective disclosures, this call is simultaneously being web cast, and a replay both via web cast and dial-in will be available for about one month.

Here is Robert.

Thank you, Jason. Good morning, everyone. Before I elaborate on the details of the quarter, I'd like to make a few introductory remarks.

Even with the weak demand for a number of our commercial products throughout 2002, Teledyne had an outstanding fourth quarter and full year. Both revenues and earnings increased and we ended the year with a strong balance sheet. This is a result of our strategic focus on our electronics, instruments, and systems engineering businesses and our operational excellence initiative, including a flatter management structure and continued emphasis on cost reduction.

In the fourth quarter and full year 2002, our electronics and systems engineering segments collectively contributed over 75% of our revenues and accounted for approximately 90% of our earnings. While fourth quarter year-over-year revenue growth of 20% may not be sustainable, we were pleased with the strong performance this quarter and intend to maintain our focus on growing these businesses in 2003, both organically and through synergistic acquisitions.

We're also pleased that Chuck Noski, former Vice Chairman of AT&T joined our board and audit committee in the fourth quarter. In addition, as I have mentioned on previous calls, I want to emphasize that our management team is committed in continuing the high standards of corporate ethics and accurate financial disclosures.

Now turning to the fourth quarter and full year performance. For the fourth quarter, year-over-year revenue growth was over 13% compared to last year, and over 9% compared to third quarter of 2002. Even excluding the acquisition of Monitor Labs at the end of the third quarter, year-over-year revenue growth for the quarter was near its highest level since our spin-off in 1999. In addition to revenue gain, earnings per share excluding non-cash pension income, increased 31% compared to last year. For the full year 2002, revenue growth was more modest at 3.8%. However, despite the number of economic challenges in many of our business units, sales for each of our reporting segments were greater in 2002 than in 2001. In addition, full year 2002 earnings per share increased 11.6% compared to 2001, even when 2001 charges are excluded. Furthermore, when non-cash pension income is excluded for both periods, 2002 earnings per share increased 43% compared to 2001.

In the remainder of my comments I will elaborate on the operating performance of our business segment. Bob Naglieri, our CFO, will then discuss more details about our financial performance and comment on our outlook for 2003.

Turning to the business segments. Sales in the electronics and communications segments increased almost 20% relative to last year and the third quarter of 2002. In addition, excluding reduced pension income and $500,000 write down of opto-electronic equipment this quarter, operating profit compared to last year increased 31% in the fourth quarter. Finally, orders in our electronics and communications segment also increased over 30% compared to last year. As I further discuss our electronics and communications businesses, I will break up my comments into three separate categories; commercial short cycle electronics, commercial long cycle electronics and defense electronics. Each of these markets represents approximately one-third of our electronics and communications segments, which had a total revenue of $388 million in 2002.

First, in the short cycle electronics product line, we (indiscernible), semiconductor, and telecommunications market. Sales increased approximately 25%. Revenue growth was partially fuelled by the acquisition of Monitor Labs in the third quarter of 2002 and advanced solution instrumentation in November of 2001. However, even excluding these acquisitions, strong organic sales growth, primarily in the instruments, more than offset declines in other product lines, such as electronic relays sold to the semiconductor and telecommunication markets. Growth in our industrial instrumentation businesses, both organically and through acquisition, continues to be one of our key strategic focus areas. Our instrumentation businesses, which primarily serve short cycle industrial markets, as well as some long cycle markets such as energy production, have more than doubled in size in the last 15 months, and currently contribute approximately 100 million of annual revenue, and represent our largest commercial electronics and communication business.

Now I will elaborate on the company's long cycle commercial electronics businesses. In the fourth quarter, sales of commercial avionics decreased 25% compared to last year. Sales of both new and replacement products were impacted by the very weak performance of domestic airlines. Our strategy to keep our business healthy is threefold; gain market share, introduce new products, and enter new defense markets. We continue to increase market share and introduce new products. For example, we expect that our share of data acquisition systems in new Airbus A320, A330, A340 aircraft will increase from less than 10% in the year 2000 to 30% this year and up to 50% in 2005. In addition, we recently formed a strategic alliance with Airbus to jointly develop and market the next generation of flight data analysis software to be sold under the brand name Air Phase. We also recently began working with (indiscernible) Air, the fastest-growing airline in Europe, to expand our current status as sole source data acquisition supplier with additional wireless ground [link] products and ground data analysis software to provide an end-to-end flight data services capability.

In the area of new markets, Teledyne continues to expand its historically commercial-only avionics businesses into new military markets. We recently were awarded a contract for our communications management unit software for the U.S. Air Force's C130 Avionics Modernization Program, as well as for potential new Boeing 767 tanker transport aircraft. Over the last 18 months we've been selected to supply three different products for use on four separate military aircraft platforms: the C17, the P3, the C130, and the potential new B767 tanker transport.

Moving to the medical arena, we provide manufacturing services for medical systems manufacturers for products like MRIs, CAT scans, and positron emission tomography systems, and we also manufacture microelectronic modules for implantable medical devices, such as pacemakers and defibrillators. Sales to the medical customers increased almost 50% in the fourth quarter, driven by significantly higher sales of high mix low volume electronic manufacturing services. Given the long-term growth prospects of medical instrumentation and medical electronics manufacturing services, we continue to look for ways to expand our presence in this market.

Third, turning to the defense electronics businesses, sales of defense electronics products and defense-related electronic manufacturing services in the fourth quarter of 2002 increased by approximately 25%, compared to the fourth quarter of 2001. Full year 2002 sales of defense electronics were approximately 10% higher compared to 2001, and we currently expect that organic sales of defense electronics will grow at high single digit levels throughout 2003. Sales of microelectronic modules that are employed in military aviation and secure communication applications are continuing to increase. In addition to sales of microelectronic modules for the F22 and Comanche, we recently received orders for the development of similar modules for the joint (indiscernible). During 2002, production of secure communication modules and printed circuit (indiscernible) assemblies for the enhanced position locating reporting system a modern U.S. Army battlefield communication system also increased.

Turning now to our systems engineering segment. In the fourth quarter revenues in this segment increased almost 22% compared to last year, primarily from growth in our core defense programs, including national missile defense and our space programs such as the International Space Station and NASA's Marshall Space Flight Center and certain classified programs. Furthermore, year over year sales for environmental programs increased for the first time in seven quarters.

Finally, orders in our systems engineering segment also increased 38% in the fourth quarter and 28% in the full year compared to 2001.

Although 2002 performance was very strong for systems engineering, we are being cautious on the outlook for this segment in 2003. First there is no assurance that the level of recent government's award and incentive fees will continue. We also participate as a significant subcontractor to the Ground-based Midcourse Defense, referred to as the GMD Missile Defense Program, and over the last few years this program has represented an increasingly larger portion of our total government services business. Besides the uncertainty associated with success based award fees on this program, we're also cautious regarding 2003 revenue outlook due to shift of emphasis in the program product from R&D to deployment. Also, the [defunding] for the overall GMD program we'd be lowering 2003 down 2002. Nevertheless, given our current national priorities and the intent to begin deployment of missile defense networks, we are quite optimistic about the long-term demand for our core capabilities in missile defense systems, engineering, and test services.

Turning to our aerospace engines and component segment, sales during the fourth quarter and full year 2002 for our aircraft system engine business increased approximately 5%, relative to 2001. While after market sales increased very modestly, sales of engines for new OEM piston engine aircraft increased for the sixth consecutive year.

In the turbine engine business, fourth quarter sales and operating profit decreased in comparison with an exceptionally strong fourth quarter in 2001. Low rate initial production of turbine engines for the (indiscernible) cruise missile program began in the last few months and we expect this to contribute to revenue growth in 2003.

As we previously mentioned, given our primary focus on electronics, instruments, and systems engineering, we continue to explore strategic alternatives for the aerospace engines and components segment. However, given Teledyne's already strong balance sheet and free cash flow, we will balance the timing of these alternatives with the very weak market fundamentals in the aerospace industry.

Finally, in our engine energy system segment, revenues in the fourth quarter of 2002 decreased slightly compared to the fourth quarter of last year due to the timing of some of our government contracts. We've said in previous calls our goal is to operate this segment near breakeven profitability as we continue to focus on our government contracts and sales of tangible energy technology products such as fuel celled test stations and hydrogen refueling systems. Historically, we've been one of the very few companies to supply hydrogen generators to the commercial marketplace. Matter of fact, we've just been selected for award by the DOE for development of our hydrogen generators for automotive refueling. In the fourth quarter of 2002 we recorded our first small operating profit in the last four quarters in this segment.

Moving to the present, we are likely to continue facing economic challenges in 2003 as we did in 2002. However, we hope that our strong performance in 2002, with consistent quarterly improvement in almost all of our categories of our strategic focus, which include electronics, instruments, and systems engineering, gives our investors continued confidence in the health and vitality of our underlying businesses.

I will now turn the call over to Bob, our CFO, for further comment.

Thanks, Robert, and good morning again. Let me start with some additional financials for the quarter not covered by Robert, plus add some full year highlights when it's warranted. Then I'll talk about our pension plan assets and related impact on future earnings. And finally, I'll address our outlook for 2003.

In the full year 2002, cash from operating activities totaled $73.3 million, compared with $17.7 million in 2001. We ended the year debt free and with about $19 million of cash in the bank. The strong free cash flow was driven by our net income performance, strong management of working capital in relation to sales, and lower capital expenditures compared to prior years.

Net inventories increased year over year due to our third quarter acquisition of Monitor Labs plus some specific purchases for long lead time items in our defense electronics business.

Capital expenditures for 2002 were $15.4 million, compared to capital expenditures of $26.4 million in 2001. By the way, 2002 depreciation is $21.8 million. Going forward, our 2003 plan will be approximately the same as 2002, plus an incremental $6 million for capacity expansion in our traveling wave tube business. In total, approximately $21 million for the full year 2001, which is slightly below planned depreciation of $23.5 million.

Although operating margins were impacted by reduced pension income in 2002, we've made steady progress throughout the year. In the fourth quarter, operating margins for our electronics and communications segment were reduced by about 40 basis points due to the write down of long lived assets made to some of our opto-electronics capital equipment. Also in the fourth quarter, in our systems engineering segment, operating margin returned closer to normalized levels. As you recall, record operating margins in the third quarter of '02 were driven by the receipt of government awards and incentive fees based upon collective performance achievements.

In our aerospace engines and components segment, there were a number of differences in the fourth quarter of 2002 versus the fourth quarter of '01. Cutting through the year over year changes and product liability reserves, insurance premiums, pension income, as well as the LIFO adjustments mentioned in the press release, year-over-year operating profit increased approximately 50%. Additionally, a partial write down of $0.5 million relating to our minority interest in a private company engaged in manufacturing and development of micro optics and micro electrical mechanical devices decreased overall margins slightly. That was a $0.5 million write down.

Before I talk about our 2003 outlook, let me discuss pension and its related impact on our future results. In the past few years, declines in the capital market have resulted in the following: (1) We now forecast a pension expense of approximately $7 million or negative $0.13 EPS in 2003, compared to pension income of $2.3 million or positive $0.04 EPS in 2002. (2) Assuming the capital markets do not materially improve throughout 2003, we anticipate making a cash contribution in late 2004 for the '03 and '04 time periods. This cumulative after tax cash impact is anticipated to be in the mid to high teens. The third consequence, as you may well know, FAS 87 requires that a minimum pension liability be reported if the value of pension assets is less than the accumulated benefit obligation, sometimes referred to as the ABO. The ABO is today's value of Teledyne's pension liability. This condition did exist at year-end and consequently, we recorded a liability as a reduction of our book equity. The amount was $23.2 million. This charge does not affect net income, and as mentioned in the earnings release, will be reversed should the value of pension assets exceed the ABO as of a future measurement date.

Now let's turn to 2003 outlook. Management believes 2003 earnings per share, excluding pension expense, will be in the range of approximately $0.75 to $0.85 earnings per share compared to $0.73 in 2002. This guidance is identical to that given at the end of last quarter. Including pension costs, we are raising our full year 2003 guidance slightly to $0.62 to $0.72 earnings per share since we now estimate pension expense in '03 to be $0.13 per share compared with our previous estimate of $0.15. For the first quarter of 2003, we are projecting earnings per share including pension costs of $0.14 to $0.16. Our first quarter 2003 guidance range implies a year-over-year increase in earnings if you strip out pension costs of approximately 15% to 25%.

I'll now pass it back to Robert for any of your questions.

We would like now to take your questions. Bill, if you're ready to proceed with questions and answers, please go ahead.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press the one on your touch-tone phone. You will hear a tone indicating you've been placed in queue and you may remove yourself from queue at any time by pressing the pound key. If you're using a speakerphone, please pick up your handset before pressing the number. Once again, if you do have a question or a comment, please press the one on your touch-tone phone at this time.

One moment for our first question.

First line we'll open is the line of Mark Jordan at AG Edwards. Please go ahead.

Good morning, gentlemen. First of all, Robert, you talk about a fairly significant investment in the traveling wave tube business. Could you talk about what the catalyst is for that investment and what you see in terms of incremental revenue and profit generation as a result of that investment?

Good morning, Mark. Our traveling wave tube business in Northern California is very healthy and it's growing in the high single digits. It has exceeded our capacity to produce these tubes. We have, for example, been sole source supplier of these tubes for the U.S. Army fire finder and sentinel radars, which are used in battlefields to detect weapon projectiles or aircraft, and we expect this volume production to increase in 2004. We're also getting strong orders for our traveling wave tubes for various military satellite communication systems associated with homeland defense. We've delivered 900 of these tubes so far this year. We are currently leasing a second facility to accommodate this increase and we've decided that modest investments and increasing our own facility is warranted at this time.

All right. Going back to the pension issue, Robert, you've mentioned that you foresaw, assuming no major improvement in markets, a cash contribution to the plan in, I believe, it was late '04 and said that it could be in the order magnitudes of sort of a mid-teens numbers of mid $17, $18 million. The question would be if you were to make a contribution at that time of that size, again all things being equal, would that materially lower then the run rate non-cash expense that's being reflected in the PNL?

I'll let Bob answer that but the short answer is if nothing changes and our assumptions stay the same recalling that we lowered both our discount rate, as well as our anticipated rate of return, I think the pension expense would stay about the same, might even go a little higher.

Mark, that's essentially correct. The mid to high teens, it's between $15 and $18 million right now is the contribution in '04 and that's the cumulative effect for the '03 and '04 payment. And as Robert mentioned, the pension expense will change a little bit, but again, that's based upon today's assets and today's assumptions on a discount rate and rate of return growth and so forth.

Now, Mark, we'll just add one thing. Most of our employees are in a defined pension plan, yet when we do make acquisitions like our last acquisition, usually the new employees go into a 401K type of defined contribution plan and that is going to be kind of our strategy moving forward to kind of keep the former plan for the employees that we have and hopefully change to more of 401K type plans as we move forward for new employees or employees that come to acquisition.

Okay. A final question, you mentioned a DOE award in the fuel cell area. Could you size that and could you make some commentary as to how that might impact the group in terms of its ability to be closer to breakeven than losing the money that it did in '02?

Yeah, Mark, as I mentioned, we were selected recently by DOE for the development of our hydrogen generators for automotive refueling. That contract is being negotiated so I don't want to comment much on it because we just awarded and we haven't signed the contract, but it's a couple or $3 million. We do have other government contracts also in that business already and as you know, we've always said we've tried to break even. The business has always been cash neutral, and even though the year shows a negative comp in terms of earnings in that segment, the fourth quarter we broke even and we anticipate going forward that we be close to breakeven, both in our operating income bind, as well as in our cash line.

Okay. I guess one more question on the acquisition front. You've obviously stated that you're focusing on your systems and electronics area. Could you comment as to what the pipeline looks like on the acquisition front?

At any one time, Mark, we're looking at somewhere between five to ten different companies, private and otherwise, or segments of large companies that are slated for divestitures-ph We're always busy in that front and expect to be continuing to make acquisitions in those areas. I think we've probably we had a couple of those as a minimum before the end of the year.

Thank you.

Thank you, Mark.

Thank you. The next question will come from the line of Chris Quilty at Raymond James. Please go ahead.

Good morning, gentlemen. I was hoping you could give a little bit of color on the medical products area where it seems like that was a pretty steep year-over-year increase in the revenue there and do you feel at these revenue levels is it sustainable or is there forward growth and was most of that derived through picking up new product lines or just good performance of the existing products that you're already supplying?

Thank you, Chris. There are two different sets of product lines and services that we provide. As I mentioned, the first one is that we support all OEM manufacturers of medical instruments such as MRIs, CAT scans, PETs, Positron Emission Tomography through our manufacturing facilities in Lewisburg, Tennessee, as well as our Mexico facilities for low-cost manufacturing. We are seeing strong demand for current customers in this area, especially in PET and some X-ray medical instruments. We are therefore locating additional work in our Mexico facilities.

Is that primarily the EMS services aspect of the business?

Exactly. That's high mix low volume. But we also, Chris, do work, produce microelectronic modules for pacemakers and defibrillators, and we have set up a work flow for one our major customers and expect some increases also in that area. Overall, just to be more specific, the total contribution of the medical products is about $45 million. We expect it to grow in the future, perhaps not at the 50% rate that we've experienced in this quarter.

So is more of the strength on EMS services than the microelectronics component side?

Yes. I would agree with that.

Okay. And shifting gears over to the aircraft engines, you said that the JASSM was going into LRIP, and I know there had been some articles about the Air Force putting that program on hold with Lockheed. Have all those issues been resolved?

I believe so. It started in October and we don't really see any delays in the order or production at this time.

Can you kind of quantify for us to a degree how significant that could be for you either in '03 or if you push it out further on the time horizon?

I think in '03 it would be approximately $5 million in revenue growing from there as the production gears up. It could go as high as $15 million to 20 million in (indiscernible) years.

Okay. And does that primarily at this point serve as an offset to the declines in the Harpoon Missile Program, or is it going to provide organic growth beyond that?

It's primarily an offset to the decline in our supply of component parts to the J69, which powers the C37 trainer for the Air Force. We still make harpoon missile engines, perhaps not at the very high level that we made in the early, mid '90s, but we expect that to remain fairly steady.

Okay. And also you mentioned in the press release that the product liability expires come November. I assume, without forcing you to divulge to your carriers here on a conference call what you're baking into your numbers, but I'm assuming you programmed in market rates that are, I assume, significantly higher than your existing policy?

Yeah, Chris, that's come due not in November but in May timeframe. We have obviously made some allowance in our forward-looking guidance for increases in our insurance, but that's kind of an unknown for us, but if it becomes excessive we would have to increase prices on our products in some form of an insurance surcharge to make those unanticipated increases.

Okay. And finally on the data acquisition side, you've talked in the past about going down market a little bit into some of the general aviation and the military community, and have you been able to make any tangible progress in picking up new business?

Yeah, as I mentioned in the military--let me start from the back end--in the military we picked up three major programs for us.

That's right. You mentioned--

Right, the P3, the C130, C17 and possibly the B767 tanker aircraft if it goes into production. We have additional stuff that we're doing there. In the lower end what we call lower end being the business jet market we have two entries there. First, we may get Mini Data Acquisition System, which is specifically designed for that market, and (2) you may recall we already enjoy 80% of the air-to-ground telephony in that market with our telephone systems, and we have enhanced that now into a SmartCabin Office suite product, which now provides 128 kilobits high speed data connectivity for Internet access in the business jet and permits corporate executives to network with their businesses. So those are two examples of new products that we're introducing in the business jet market.

And does the Boeing connection, I guess the rollout on that there were some announcements within the last week, does that preclude any pickup in some of your sales in that area, or is most of your in-flight data transfer currently using that EMS technology system?

There's a little difference between ours and Boeing's connection. Ours is really something that's here and now with the system that you mentioned. The other thing is that the Boeing connection is more geared toward their transport and it is, in our view, it's going to be much more expensive than the system that we offer.

Okay. And a final question, I guess this is for Bob. You didn't mention much in terms of changes on the balance sheet as we look out into '03. It looks like most of the working capital accounts stayed relatively within the range of where they had been. Is there anything we should be programming in to our model that's going to change in '03?

Nothing right now. Our cash flow goals have been this current year '02 and going forward to have cash flow somewhat equates in net income. And that's what our goal is right now. We don't see any major changes in working capital. And you saw the major change this year in '02 was the impact of the accounting for the ABO, which is really non-cash. So at that point in time we don't see anything ongoing.

I mean, realistically you're going to have a harder time getting to that cash flow equals net income this year given some of what you've already squeezed out of the working capital last year. Last year was a bit of an anomaly in terms of the cash flow.

This year in '02, well, we had a very good year in cash flow. Our operating cash was in the 70s, you're right. Net cash flow even after acquisition, free cash flow was $35 million. You're right it is, but it's all going to depend on the net income. And our net income we believe will be pretty good continuing after this year. As I said, working capital should be relatively flat. So it is reduced from the pretty good level in '02.

Okay, very good. Thank you.

Okay.

Thank you, Chris.

Thank you, the next question will come from the line of [David Druey] of Blackbird Research. Please go ahead.

Hi, guys. Thanks. Great quarter. Just a quick question back on the possibly divesture of the aerospace engine segment. what's really driving that decision? Obviously the rates on insurance coverage, but how long have you considered the possible divesture? What's your thought process? Excuse me if that's already been answered. I got disconnected there.

No, it wasn't answered, David. It wasn't asked or answered. First, let me note that we've consistently said that in the whole engine businesses, which includes piston engine, turbine engine, electronics controls, we also make some battery products for aviation, that we're looking at strategic alternatives. It may involve sale of one or more of these components I mentioned. But there are other options in terms of strategies we can have and ventures we may have with other people. Having said that, what is driving us in that direction of reducing our exposure to that segment? It's partially the insurance business, but partially is that we don't see a significant growth opportunity in that market first for us. Second, we would like our strategies to kind of focus the company a little more in electronics instruments and systems engineering it becomes more manageable, more focused, and the market fundamentals are such that we have significant opportunities to grow in those areas if we can focus our resources and our management time on those segments.

Okay, just a quick follow-up on that. Can you give us some sense of value that you place on the aerospace business?

Chris, that I can't do. Sorry.

Okay, thank you.

Thank you. David I said.

And once again, ladies and gentleman, if you do have a question or a comment please press the one on your touchtone phone at this time.

The next line we'll open is the line of [Carl Osleger] at Bank of America. Please go ahead.

Hi, guys. I had a question for you. One of the focuses that you're looking at going forward is entering the defense market I guess to a greater degree. And maybe you can give us an idea for '02 how much percentage of your revenues were defense related, and then kind of after that the total commercial aerospace revenues percentage for 2002 and kind of which percentage is aftermarket? And a little bit of color on the aftermarket outlook. Thanks.

Sure. I would say in total when you add all of our activities in the defense arena in our electronics and communication and our systems engineering, and you put in our turbine engines we're somewhere between 45% and 50% in defense. Let me leave that there. The second part of your question had to do with?

The commercial aerospace market.

In the commercial aerospace market if you look at avionics, which would be our data acquisition systems, the communication systems, and those suite of products that we offer, that market is in the $70 to $75 million range for us. As we said, some of that market has declined because of the decline in the airlines, domestic airlines specifically. But in some ways we only have now less than 10% exposure to domestic airlines in that area. We supply about 20% of our product to international airlines and the remainder of our products going to businesses and various other areas. So that's about our exposure and we hope to remain relatively flat in 2003 because of the introduction of the new products that I mentioned earlier.

How about the general aftermarket? How is that looking going forward do you think?

The aftermarket specifically for the data acquisition systems or aftermarket for aerospace in general?

I would say in general.

I think in data acquisition systems the aftermarket will remain relatively flat. On the other hand, because we are offering new products in the aftermarket, as I mentioned, before like enhancement to our MagnaStar Telephony to put this SmartCabin office in the aftermarket of the business jet, then we should see some increases.

Okay.

Thank you.

Thank you.

There are no additional questions queued up at this time, please continue with your presentation.

Thank you, Bill. I would like now to conclude our conference and ask Jason to do that. Jason?

Thanks Robert, again everyone thanks for joining us this morning. If you've got follow up questions do feel free to call me on the number on the Earnings Release. And always all the news releases are available on our website Teledyne.com. Operator, if you conclude today's call we'd appreciate it.