泰利福醫療 (TFX) 2002 Q3 法說會逐字稿

Good morning my name is Elizabeth and I will be your conference facilitator today. At this point I would like to welcome everyone to the third quarter conference call. All lines have been placed on mute to prevent any background noise. If you would like to ask a question during the Q&A period press star 1 on your telephone keypad. Thank you Ms. Dusossoit you may now begin your conference.

Thank you, just in case there's any conference, this is the Teleflex 3rd quarter conference call. Good morning to everybody. We released our third quarter results yesterday after the close. The news release is available on First Call as well as our website. Today's call is being webcast and will be archived and available for a limited time on our website an the phone and the number is 1800-642-1687 with a reservation number of 566-4135.

This morning, Hal Zuber, our chief financial officer will start off with a review of the 3rd quarter and Jeff Black our CEO will share his comments. After their formal comments we will take your questions. Before we begin, I want to remind you that our comments may contain some forward looking statements concerning earnings, condition in the markets we served, economic assumptions and the like. These statement it is reflect current conditions and are subject to various factors which could cause actual future results to differ materially from those that may be contemplated in today's statement. With that I will turn it over to Hal Zuber.

Thanks, Janine. Good morning to all and thanks for joining us. Sales increased 9 percent in the 3rd quarter to 508 million. Net income was 19 percent higher than a year ago and earnings per share was up 18 percent to 66 cents. I wish it were that straightforward and simple.

. Before we go further, let me touch on 2 items. The first is a gift from the accounting profession, the sensation of goodwill amortization. This expense reduction added 6 cents to the quarterly results when compared to last year. To facilitate segment operating comparisons in the press release and today's discussion, the '01 goodwill amortization has been reclassified from the segments to the corporate expense category. The second item is an 8-cent or $3.1 million tax benefit from settlements with tax authorities both in the U.S. and U K. We received cash for approximately one half of the amount and adjusted the tax accrual for the remainder. This in my mind is better characterized as a one time rather than recurring effect although we do have subsequent audits and audits occur every year.

The income tax expense in any year is a number of estimates that are ultimately trued up through audit years down the line. And in a conservative accounting environment, one would expect, without certainty, for the true-up to result in a minor benefit. This time of course it was somewhat more than minor, hence the disclosure. Going forward, the normalized effective tax rate will continue to hover around 30 percent for the foreseeable future.

Foreign operations represented approximately 40 percent of sales and profit in the quarter. Currency translation after years of detracting has added 3 percent to sales and 2 percent to operating profits. In these tough times, it's nice to have a currency tail wind. Core growth in the 3rd quarter was 1 percent positive. I believe that would be in these current economic times a respectable result. And acquisitions, net of dispositions added 5 percent to the top line. As we shift operations it was a typical Teleflex quarter as 2 segments performed better while the third declined. It was however, atypical, as the decliner more than offset the winners, and operating profit declined by 7 percent.

The aerospace segment continues to operate in dual doom and gloom markets of commercial aviation and power generation. More specifically, jet turbine engine production rates declined 20 percent. Industrial gas turbine build rates are down north of 30 percent. Flight engine hours were down 20 percent. And the deferred maintenance and little construction in the power generation market. In this environment our aerospace sales were down a not that bad, 7 percent, although the bottom line performance was unable to keep pace. It was virtually cut in half. Sales, operating profit and margin declined in all four aerospace product lines: cargo, repairs, manufacturing and industrial gas turbine or IGT. Generally, volume declines coupled with pricing pressures were the main contributors to the decline in operating profit.

To peal back the onion one more layer the weakest area this quarter were narrow body cargo systems and cargo containers. Both of these products are capital items to the airlines in a capital constrained time. Additionally in the IGT market, maintenance on industrial gas turbines, which has been deferred since last spring has yet to materialize. In response we reduced employ count within aerospace by 12 percent from a year ago and have closed 3 small plants. Needless to say cost reductions are continuing into the 4th quarter. Quarter was not without its bright spots. We continued to ship widebody to Boeing for new 747s and are on track to ship about 10 this year, having delivered 5 this year. Additionally, we have a launch customer and received an order for approximately 700 ultralight cargo containers. This product has a great price value equation as a fuel saver and hopeful this is the first of many orders to come. Stay tuned as evaluate its performance in the field.

Medical had a great quarter. Sales increased 7 percent and profits 1 percent. Hospital supply sales accounted for most of the increase as core growth supplemented by new products and currency also contributed to the increase. Margins declined slightly as production was curtailed in hospital supply to reduce inventories. This has been a long awaited event. On the surgical device side of the segment, sales were virtually flat, but profits declined as a result of lower volume in metal ligating clips. It is timely that we are launching the new polymer in the fourth quarter which should boost sales and margins.

Now to the commercial segment, a stellar performer in the third quarter. Sales increased 20 percent, profits grew 27 percent. All three product lines, automotive, industrial and marine, contributed to the increases. In marine the strength was attributable primarily to volume increases to the solid OEM build rate as well as in the aftermarket. Margins improved not open on higher volume but also because we continued to squeeze out benefits from the Morse (ph) acquisition. It's always easier the second time around to produce the Morse (ph) parts. In automotive, sales grew with a strong market. But primarily grew as a result of higher adjustable peddle volumes as well as sales from our Japanese acquisition. Despite pricing pressure in the industry, automotive margins improved as we received the benefits of curtailment of the plant that we curtailed in Q2 and the better results from electronic throttle (ph) and adjustable peddle product lines. We also launched the gen 2 (ph) adjustable peddle during the 3rd quarter and launched 1st and launch the first Asian customer Nissan. All in all a most productive quarter for Orsby (ph) Wastick (ph) and his automotive team.

The improving margins and penetration of the Asian market bode well for the future of Teleflex Automotive. And now on to the financial statements.

Both our cashflow and balance sheet continue to improve. Cashflow from operations for the three months was 65 million compared to 55 million the prior year. Ironically, a 19 percent increase along with net income. For the 9 months we had a 151 million in cash flow from operations and are on target for reaching estimated 200 million for the full year. Working capital as a percent of sales was 25 percent, identical to Q3 of 2001. As one would expect, the 9 month capex slowed from 73 million a year ago to 67 million in '02. total debt as a percent of total cap decreased to 34 percent, down from 36 percent at year end and 39 percent a year ago. We revised earnings guidance for 2002 to approximately 3.10 per share, down slightly from where we were last quarter as we continue to work through the aerospace industry quagmire. That's all I have. Thank you. Janine?

Thanks. In the 3rd quarter we faced a more challenging economic and operating environment than anyone anticipated. While we planned for a recovering economy we found only a sluggish environment at best. Yet, Teleflex managed through the obstacles and was able to deliver reasonable results as a whole. It was encouraging to see our operating businesses to show core sales growth, despite the tough economy and plenty of price pressure pressures. Sales in both commercial and medical group increased in the quarter. Core growth, acquisitions, and productivity improvements will drive results for the foreseeable future. In aerospace, we had plan a soft market in 2002 and 2003 but the decline has been more severe than anticipated and the aerospace industry has not recovered. During the quarter we continue to a just to market condition through work force reductions and cut back. We will absolutely monitor the segment through the process and the 4th quarter to insure improved profitability.

At that point alternate hard to say when things will pick up again given the financial status of the domestic airlines and the expected decline in new aircraft deliveries in 2003 and 2004. It is important to note that when the market turns, aerospace after market will respond 1st and the after market represents 45 percent of Teleflex aerospace segment sales. We make and repair components used the overhaul turbine engines. In the industrial gas turbine market, we offer a variety of service and support the universe of older gas turbines. And as a lot of maintenance has been deferred this year, the need for our services should increase. The industrial gas turbine market, however, is in the throws of reduced capital spending at least in North America, due to the economy.

In the commercial area we are pleased with our commercial segment delivering a strong performance in the quarter. Most of this group has worked long and hard to get position for the growth they've achieved in the quarter. The growth reflects increased volume created by new products and market expansion in all three segments as Hal identified. Each of these groups has made substantial investment in our market share outside of the United States. We are beginning to see the fruits of the labor as we provide a strong array of systems offerings and global service. In Europe our industrial and automotive businesses are making endroads. Whether it is in providing components or subsystems, we are becoming well positioned.

Our industrial peddle systems and electronic throttle (ph) control system design continue to evolve to meet the every changes requirements of automotive market. Our gen 2 and gen 3 designs of adjustable peddle systems provide greater flexibility in the design stage as well as our ability to manufacture efficiently with less capital outlay. This strategy is critical to obtain marketshare due to the diversity of vehicles offered throughout Europe.

In medical we continue to like our medical segment as a balance to our other cyclical business in aerospace and automotive. The acquisition of Byrie (ph) precision medical late in the quarter strengthened our product portfolio of surgical instruments and extended our offering the fast growing orthopedic specialty market. This market is growing annually in the mid to high teens. Our surgical instrument product line now consists of pillin (ph), Wek (ph), caymedic (ph) and weery (ph), all strong brand names in the medical instrument market.

We are aligning our medical group for great are productivity by consolidating smaller facilities and focusing on three distinct market sectors: urology, anesthesia and surgical devices. This structure should enhance growth at the revenue and profit line in the near future. From an M&A stand point we continue to work the market from both the corporate and field level to identify products and technologies that will better position Teleflex for future growth. If the economy continues to stag mate, we are optimistic that more opportunities will arise and the valuations will become more realistic. Teleflex has a strong balance sheet, experience in rapidly integrating acquisitions and a corporate history of investing successfully for the long term.

As I mentioned earlier, core growth acquisitions and continued productivity improvements will drive results in the coming quarters. While we have always focused on cost reduction and operational excellence we have recently introduced a new strategic development initiative to increase productivity and opportunities for core growth. With the challenging dynamics of most of our markets, the launching of strategic development provides a means to enhance our bottom line contributions in near term. The strategic development initiative implements a greater structure across the back end of businesses while allowing the entrepreneurs who have always flourished at Teleflex to manage market development and interface with customers. We have focused our employees on driving operational excellence throughout the organization by implementing standard processes and measurement criteria. The goal of this effort is to leverage the power of Teleflex business and technologies and create new opportunities for core growth.

There is no doubt that the current economic conditions, have created a challenge for us and we see these conditions going on into the fourth quarter. This is why we have adjusted our guidance for earnings in the year to be in the range of 3,10. We remain focused on investing and positioning our and positioning our company for the long term, even as we address the difficulties of the current market place. Janine?

Okay we are ready for the questions and answers.

At this time I would like to remind everybody if you would like to ask a question, please press star then it the number 1 on your telephone keypad. Your first question come from Dean Tray from Goldman Sachs.

Could you give us an update on the adjustable peddle platform, how many platforms, approximate revenues for the quarter, where you are in profitability. and the extent that you can talk about the Ford recall. Thank you.

Deans at this point we are approximately 12 platforms both domestically and internationally. We anticipate revenues coming in at around $75 million we still see this as a breakeven proposition as we're continuing to go through the gen 2 and even gen 3 engineering aspect. In regards to the Ford recall, Janine, I'll turn that one over to you.

Okay. Dean, the recall was just for Taurus and Sable models. No other models. The peddles that are in those models are Teleflex of course. But the solution for the owners of those vehicle system is to take them to their local Mercury or Ford dealer and have an adjustment made. We had produced our peddles in line with the specs that we were given and we've not been asked to -- make any changes or to change our production at all and again it does not effect any other models and no impact on Teleflex.

I think this issue is indicative of a new technology into the market where they are trying to refine the specifications as we continue to go through the learning curve. So I think we feel that we're working with the OEMs on the continuing to refine these specifications and we think this is potentially a great barrier to keep some of the competitors out of the market as well.

In terms of profitability or the breakeven, how much in engineering R&D costs are being flowed through that would impact that and what's the profit expectation for this product line over the next 12 months.

Dean, there's probably over 10 percent of sales that we're now currently on this product line - incurring in engineering costs and and we expect that will go down as we continue to get more platforms and see greater volume on the platforms we have. So I would anticipate profitability next year in this line. Of course, I've said that enough times that I say it with great caution. But it certainly looks to be that way as the volume continues to ramp-up.

Last question. Give us guidance if you could on the 4th quarter tax rate. There's a true up that you went through last you and it looks like you did it the year before too. What kind of a true up should we be expecting?

If I new there would be a lower rate I would have booked it in the third quarter. So I still say right around the 30 range.

With a plus or minus how much, in your experience?

That all depends on a lot of different things. Depends on where we make money in the 4th quarter.

Thank you.

Your next question Mark Healer from CL King and Associates (ph).

Healer (ph): Good morning everyone, just a quick couple of questions on aerospace. I think everyone's got good guidance and you ran through numbers how much it was down but as far as '03 goes and even into 04 commercial aerospace is going to be down and IGT looks like its really going to be down. Given all those cost reductions that you've done to date plus what you see being completed by the end of Q4, do you think that business is going to be pretty much in line with demand going?

We have just starting the planning process for 03 and I guess the answer to your question is yes I would expect it to be in line but we haven't gone through those details so that would be a preliminary comment.

Healer (ph): Okay and then Hal, if you could give us an idea. You commented to maintenance both in IGT and at the commercial air lines. And that should certainly come back 1st as you suggest said. But, can you give us an idea ever what percent that was business is.

Yeah, I think what we said is the repairs in our API (ph) joint venture and our industrial gas turbine business and cargo and the manufacturing all vary at around 25 percent of that segment. And so, I think what we're going to hold. So that's about the size that you can expect out of them.

Healer (ph): Okay sure. Just 1 quick questions on commercial. It seems like the auto guys need 0 percent financing to sell anything these days and even though they are running at a North American build rate around 16 million, is pricing pressure getting worse there?

I would think that is probably beginning to subside.

I wouldn't -- it isn't going away but I think as we been positioned with new product and technology, I think we're in as good position to grow that business and fight off some of the pricing pressure because of the technology we bring forward.

Healer (ph): All right and final question Jeff. You know I heard a few comments recently that the acquisition environment has actually gotten better. Are you seeing that?

Well, I think talk is cheap. It's improved over the summer but the valuations are still fairly elevated compared to the out look.

I might add in some of our markets it would be the proverbial catching a falling knight.

Healer (ph): I would agree thank.

Next question from Jim Lucas from Janey Montgomery Scott (ph)

Good morning, housekeeping question.COGS for the quarter?

Well, I'll give you gross profit as a percent of sales, 6.102.

Jeff, could you talk a little bit more about medical and what -- where you see those margins going over the next several quarters clearly the trend has been in the a different direction but can you give us more color on what's going on there.

You know, obviously on the ligating (ph) clips, we have seen some pricing pressure. Throughout we also had some new products that were in the pipe line that have been a little a delay in getting out in terms hospital supply as well as in the instrumentation side. As all a know development is always a little slower than you anticipate but I think we feel with some of the new alignment from a structural stand point that we believe will be more effective on the front end ever our business that will also help us get or back end more aligned as opposed to being a group of islands will be more interlocked by bridges so we can get some synergies on the front and back end.

Okay. And following up on that last point, you talk about the new strategic development, new process measurement initiative. Will there be a change to the incentive compensation process?

There's no question. We recently had discussions with our senior management as to how do we get more of a sharing environment and it absolutely will be involved in the compensation scheme going forward.

Okay and in the aerospace decline, you talked about head count reduction in a few facilities. Two questions in there that -- how much of those of costs flow through the P&L and what kind of impact this the 3rd quarter and secondarily, Teleflex does not have a track record of - or doesn't do the larger structuring charges. But do you come to a point where you will have a need to take a charge where you have too many facilities to bring your costs more in line?

Well let he start with the 1st question in the aerospace Jim. It's very difficult across all the facility to collect cost reductions but the one thing we can track of course is what we believe will be salary savings, not indirect.

We think that should be managed in conjunction with volume. So, at this point in time, we probably reduced the annual salary payrol by nearly $10 million in the aerospace area over this year. And so some of the savings are flowing through as we speak in the 3rd quarter and then we're also incurring some 3rd quarter severance. As near as we can tell, it's half a million down at that point in time.

Okay. And so the bigger picture question Jeff.

Would you just repeat your question.

If you look at the cyclicality of the margins, there's no arguing with the track record that the company has been able to put together. But when you look at that kind ever nickel and dimming of these restructuring costs flowing through looking at demand continuing to trail off, at what point do you begin to evaluate do we need to take a hard look at the cost structure and would some sort of charge be in order.

Jim, let me ake a slot at that. Of course we are spread all over and if we even wanted to take a charge in aerospace its only 25 percent of our business. So.

I'm talking the company in general here.

Well, medical has up volume and the commercial has up volume.

But margins have been flat for the past 4 years.

But that's a function of pricing more than anything. It's not as though we aren't putting out as many units for instance in automotive as we have been. So I would think of course that the - while there are charges and while we can anticipate going through more charges, none would significant that we would end up with a restructuring charge at this point in time.

Even if we did a restructuring charge it wouldn't be that significant. We don't have large unfunded pension, retiree benefits and those kinds of things that multiply those numbers.

Okay thanks.

Next question is from Harriet Baldwin of Deutsche Bank.

Good morning employ wondering on auto and looking out to next year and we talking about the new products giving you more visibility in a down market some north America. What are you using as your baseline assumption for North America production. Given the development cost to engineer costs are higher what does that mean for profit ability in auto in this stage.

It's to0 early. When we get into planning automotive we typically will have a scale which we go to from 16.5 down to 16.3 and build our business according. We tried to get away from what is the build rate in north America and we tried to become more scientific on what is our content on certain product lines. As you know, most of the growth in our automotive is being taken by the transplants who have come over. So we still believe that we can pin that business down within a half million units and feel fairly comfortable and I we will adjust our expenses accordingly to that.

And in terms of margin outlook, given the importance of new product next year, is that going to be a headwind in terms of profitability or can you address that in other ways.

I think we can address it in other ways. We have been working diligently on purchasing initiatives. Getting those initiatives through to the OEM's a little more difficult with their lack engineering resources, but we feel that again whether it be through the plant curtailment or become for efficient with peddles with our new design that we can improve profitability going forward.

Great. On the medical side taking some of the inventory out much channel is that was completed during the 3rd quarter or is there holdover into Q4.

Well, I think that they've taken out enough inventory now they're not going to have to study their levels. They have thousands of products. So we have to be careful that we don't end up short in the market place and have service issues but I think that it will continue and maybe in a more efficient fashion. They have continued to reduce their indirects in line so maybe the absorption over the next quarter wouldn't be noticeable.

So it sounds like most of the adjustment to the new environment is done but there is fine tuning.

Yeah, at that point in time.

Okay. And then finely at aerospace, does this 310 range for the year, does that anticipate further cost in Q4 for head count reduction and plant consolidation activities or shut downs or is that assuming what is in place September 30 is good for 4th quarter.

Well, there were additional reductions necessary in the quarter but we think at that point in time they would be a slight net positive to the aerospace group. So if we get -- if we don't get surprised on the volume particularly on the IGT service and repairs area, we will be slightly better in term of margin and don't forget, 3rd quarter is always seasonally our weakest quarter in Ro (ph) and pretty much throughout Teleflex. So we well all these issues on what is traditionally our weakest quarter and they tend to get magnified.

So it sounds like you taken additional actions since October but from where you're at today you don't expect anything additional unless something changes

I wouldn't say that. I think there would not be a significant impact on the P&L going forward.

Okay thank you.

Next question from David Gerew of T.Rowe Price.

Gerew (ph): Hi guys. Just a couple quick questions. Can you walk through the 3 business segment and core growth, f x, revenues growths from acquisition.

In the aerospace segment, currency contributed 2 percent to growth and core growth was down 9 core growth was down 9. In medical -- some of these are rounded, but in medical currency was plus 4 and real growth of plus 3. And in commercial, acquisition were 12, currency contributed 3, and real growth of 6 and that was primarily in adjustable peddle and light duty cables.

OK. Can we take 1 step further and walk through aerospace and those 4 pieces [inaudible] could you just help us understand the rate of revenue decline in each of those on a core basis.

Yeah, I would say Telair (ph) overall even though the wide body piece of up the others were down so substantially that both that and IGT had approximate 10 percent decline and the others, manufacturing repair were in the small single digits.

Okay. The reason why manufacturing was only down in low single digits is because the defense kicked in a little stronger there off setting the big drop in Boeing.

They've done a pretty good job of maintaining some market share. The other thing is they are on this more popular GE engines so the over all build rate is down, but I don't know the CFM and the models are down as much.

Gerew (ph): Okay that's fine. I think that's everything I had thank you.

Your next question comes from Carl Merganthaler (ph) of Banc of America Securities.

Merganthaler (ph): Just a follow up on aerospace. Do you have the back log number for the quarter and I thought at the end of the last quarter cargo bag log was trending up. Can you characterize what's in the bag lock that the point.

Sure the bag lock is about 260 million and cargo trends slight lie down. I believe there's a few orders on top. We're looking primarily at the wide body and in that vain we done about or hope to do about 10 systems this year and expect to do about the same next year so when we start to add these nearly in the back log items, you get a lumpy picture. But it looks in the wide body area, it constitutes most of this bag log, it will be about the same as next year.

Merganthaler (ph): Okay and then just a quickly on the balance sheet, debt/cap is at low levels and has been trending down over the past several quarters and doesn't sound like your too enthused about pricing on acquisition son can you characterize what the use of cash is going to be going forward. Should you think about a share buy back and where are dividend in the equation?

We still have considerable debt, so that being said, I think that would probably be our 1st use to keep the capacity to continue to grow this corporation. We historically hesitated and really haven't done too many share buy backs. I wouldn't say that's out the picture but where our multiples have been of late it doesn't make a lot of sense. It's more efficient to keep the cash in the company.

Merganthaler (ph): Thank you

Again I the like to remind if you would like to ask a question please star and the number 1 on 10 key pad. Next question from Eric Sayle (ph) of Taza (ph).

Sayle (ph): Just comment on the tax rate and where it of so low this quarter and if you expect that to be what you expected tax rate to be going forward.

There was a 1 time tax settlement of 3 million I think we expect the tax rate to be in the 30 percent range going forward.

Sayle (ph): Thanks.

Your neck question is from Harriett Baldwin (ph) of Deutsche Bank.

Jeff I was wondering if you could address some of the strategic development initiatives. Conceptually it sounds interesting, but what are some of concrete steps that makes this different from what the units would have been doing previously to identify and execute some of their growth opportunities.

The difference with this is that getting everyone to have comment definition of what we are trying to accomplish, whether that be on time delivery, reduction in working capital. I think that we have always gone at and allowed our operating managers to manage in their local environment through a variety of different means. What we haven't been able to generate that is best practices, more sharing. If you look across our businesses, we have a lot of people in the cable business. Getting them to agree on common definitions has not been easy process so therefore by doing the facilitation on strategic development, we believe there are greater opportunities for collaboration which should hopefully drive some growth opportunity. I think we're also tried to do an analysis of what do we have for technology in what markets and it's become fairly obvious that we do have a wide range of technology and some market opportunities outside much what I would consider to be our known core businesses.

And that's basically applying the technology that you already have to new applications or some more chairing among the unit what they're doing in 1 area on another.

It's actually both. Again, it's almost like purchasing. If you want to have all divisions go out and purchase by themselves verses pulling some of the purchase commonality components together, there's no question we can make purchasing improvement. But I think it's the same. We have facilities around the globe. How do we get people more people to work whether it be aerospace or medical, and I think that we announced at our meeting in August that we have a facility that will be an automotive facility and a medical facility in Mexico which is in the midst of being built now. So I than is the kind of things again shared service as well as practices is something they believe we can generate from bottom line without having to focus on continued topline but there will be growth opportunities that will come out of this as well.

Just getting everybody to use same metrics and encouraging collaboration would be the two keys.

Yes and as you know our organization, we do run a fairly independent and autonomous group but I think a lot of people see the on going price pressures in all of off market and we have seen small victories to how we can share and generate and improve bottom line or growth opportunity.

Great. Thank you.

Next question from Dan Dinbal (ph) of USAA Investment Management (ph).

Dinbal (ph): Hi. Thanks for taking my questions. In term of planning for 03, when do you think you will be able to elaborate more on the outlook. 2ndly, can you talk about capex and depreciation for this year and how that might change for next year. And then lastly in terms of the gas turbine business it appears that there has been a more rapid decommissioning of older turbines that appears to be more of your business, I guess for efficiency and things. So is that putting further pressure on that business look into 2003.

Let me, your first question was when do you believe you will be at liberty or in a position to talk about 2003. I thought we did that in our February call, year end. So that would be the question number 1. In terms of -- did you ask for what the outlook was for this year on depreciation and capex.

Dinbal (ph): This year and next year.

Okay this year we think it is, depreciation will be in the 85 million range and capex would be hopefully something just south of 90 million. As we indicated, the planning process is not complete for next year. However, given what I consider to be at this juncture slower growth our industry, I can say that historically, depreciation and capex have run about 4 percent of sales. So that is something if you just look over the history, that's where we run. I don't anticipate that will change to any degree. In terms of decommissioning, I know there is a lot of new plants that aren't being built. More so than the decommission are of old. But I have no information on the number of plans that have been decommissioned. I might also say that while there are considerable problems and issues here domestically, a piece of our work and in fact the largest piece of this industry is global and we have sites that have held up rather well this year in the UK and Germany and Korea doing work for the rest of the globe. So there is a bit of a cushion there where demand is still growing at fairly increased rate. Does that get you about as close as you want to go.

Dinbal (ph): Now if we do see an acceleration of the older plant being taken off line for the newer plant that they can't stop production are they too far down the line. That would have an impact?

It would probably -- but I think the most notable thing going out the G E the past 6 months is cancellation of new plants. Production at Siemens (ph) is down to a dribble. So I think most of the people who are so capital constrained are going to the old plans. And that would be -- part of our services is to up grade these. So I don't have the answer to your question other than what I've said thus far.

Dinbal (ph): Thank you.

At this time there are no further questions.

Okay then I guess that sums up our call for today. The 3rd quarter commercial strong. Medical up, Arrow as expected, coping with the industry challenges. Balance sheet is in healthy shape, cash flow is solid. Core growth and guidance for this year again $3.10 per share. Our next call is scheduled for mid-February and again there's a replay of the call at the website and also by phone. Thank you.