TriMas Corp (TRS) 2005 Q4 法說會逐字稿

Welcome to the TriMas Corporation fourth quarter earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded Wednesday, March 29, 2006. I would now like to turn the conference over to Skip Autry, Chief Financial Officer. Please go ahead, sir.

Thank you. And welcome to our fourth quarter 2005 conference call. Our President and CEO, Grant Beard, and I will review TriMas' fourth quarter and full-year results. To facilitate the review we have provided a press release and PowerPoint presentation on our company website, TriMascorp.com. After our prepared remarks we will have a Q&A session for the audience. Also present with us today from TriMas is Bob Zalupski, our Vice President of Finance and Treasurer, and David Mosteller, our Director of Finance for Operations. A replay of this call will be available later today by calling 800-633-8284, with reservation number 21287856.

Please note that certain information on this call may be forward-looking and contain statements based on our current plans, expectations, assumptions, and environmental trends which may affect the Company's future operating results and financial position. Such statements involve risks and uncertainties which cannot be predicted or quantified and may cause future activities and operating results to differ materially from those discussed. These risks are more fully discussed in our filings with the SEC. At this point I would like to turn the call over Grant Beard, our President and CEO. Grant.

Thank you, skip, and welcome to the TriMas 2005 fourth quarter earnings call. Today we will cover both fourth quarter financial and operating performance, summarize our 2005 fiscal year and define the 2006 priorities for TriMas. For those following along in our slide deck, I would ask that you turn to the slide titled opening comments. As most of you know, TriMas is a diversified engineered products company. Our diversity, product innovation, and leading brands are key defining attributes of our company. In 2005 we saw tremendous pressure on our earnings from material prices, over $40 million in impact. This temporarily slowed down our performance momentum and did mass the many numerous and positive things happening within TriMas. That said, our initiatives of driving costs down while embracing new product innovation drove us through our challenges and reestablished our earnings performance in the fourth quarter of 2005.

We saw in TriMas strong earnings performance in 11 of the 14 of our business units, and we had revenue growth in 12 of them. TriMas' business future has been and is defined by strong organic growth, increased earnings, and return to free cash flow. Frankly, our outlook has never been brighter. Let's discuss the fourth quarter of 2005.

Next slide, please. As more fully discussed in our earnings release, we have reported our industrial fasteners business as a discontinued operation due to our decision to sell this business. The data herein reflects performance from continuing operations unless otherwise indicated. TriMas had sales of 227.4 million for the fourth quarter of 2005. This represented an increase of 13.5 million, or a 6.3% increase over the levels of the fourth quarter of 2004. Cequent's revenue was essentially flat in the quarter as compared to Q4 of '04.

Packaging systems was slightly down 2.2% as compared to the fourth quarter of '04 due to demand shifts within the period. Within our fastening systems group, revenue increased by 31.1% and this was driven by strong market demand for our aerospace products. And within our industrial specialties group, revenues increased some 16.9% in the quarter, reflecting the benefits of new product introductions, market share gains, and the continued strength of the overall industrial economy. Adjusted EBITDA for TriMas within the quarter was $19.7 million. This represented an increase of $3 million or an 18% increase over the same defined earnings in the fourth quarter of 2004. The increase in adjusted EBITDA was mainly due to across the board earnings expansion within our industrial specialties and fastening systems group, improved conversion within our packaging group driven by pricing. These earnings improvements were reduced slightly by Cequent's performance, which narrowed its performance gap in the quarter by continuing its profit improvement initiatives.

Turning to the next slide, TriMas reported in the fourth quarter operating profit of 8.8 million. This was an increase of 4.1 million or an 86% improvement as compared to the operating profit of 4.7 million in the fourth quarter of 2004. The reestablishment of year-over-year earnings performance within our company was driven broadly by our industrial specialties fastening systems, and packaging group companies. Cequent in aggregate did not overperform in the quarter but four of its five SVUs did post earnings improvements, those known as Australia, trailer, electrical, and consumer, as compared to those levels in the fourth quarter of 2004.

Our fourth quarter 2005 loss from continuing operations was 9.4 million or $0.47 per share, versus a loss from continuing operations of 6.8 million, or $0.34 per share in the year-ago period. This decline was driven by the following items which more than offset the strong improvement in operating profits. Those are increased borrowing costs, some $1.8 million due to higher interest rates, even though we had lower average borrowing levels within the quarter. Securitization related costs, akin to interest, were up $300,000 within the quarter, and the income tax benefit recorded in the quarter was proportionally 3.6 million lower this year as compared to 2004. Related to our decision to classify our industrial fastener business as a discontinued operation, we recorded a 41.6 million after tax charge to reduce the carrying value of the assets to their estimated fair value.

Turning to the next page. Again, TriMas operationally as measured by operating profits and adjusted EBITDA from continuing operations did return earnings to solid growth in the fourth quarter of 2005, and we are very pleased that our initiatives are showing progress. We expect this earnings momentum to continue as we move through and into fiscal 2006. Total debt and securitization at the end of 2005 was 765 million this was a decrease of approximately 21 million as compared to the year end of 2004. This was due principally to the normalized CapEx spending in the year and the improved working capital management that our team had in place. TriMas finished the quarter with 161.2 million of net operating working capital or 14.5% of sales. This compares to 171.6 million or 16.4% of sales as compared to the year ago period.

The Company's LTM EBITDA was 143.8 million, which supported the following lending ratios. Our leverage ratio at year end was 5.32, versus a covenant of 5.65, and our coverage ratio was 1.94 versus a covenant of 1.8. TriMas finished the year with 3.7 million of cash at the end of the year and with $51 million of available liquidity under our revolving credit agreement.

Turning to the next slide let's look at the operating highlights within each of our groups. First Cequent. Fourth quarter sales decreased by $0.5 million to 105.5 million or down 0.5%. Cequent did experience lower demand in its towing products within its wholesale distributor and installer channels versus a year ago. That said, these channels have expressed cautious optimism coming into the 2006 pre buy season. We are being conservative in our outlook, however, due to rising interest rates and uncertain gas prices and their impact, or potential impact, on consumer spending. Within the group, our trailer, electrical, consumer, and Australian businesses all reported increased earnings in the fourth quarter of 2005, driven by new products and market share gains. The group's adjusted EBITDA in the fourth quarter decreased $1.3 million to 5.3 million from the $6.6 million level in the fourth quarter of 2004.

Operating profit declined $4 million from 2.2 in the fourth quarter of '04, as compared to the operating loss of 1.8 million in the fourth quarter of 2005. Our earnings deterioration is a direct result of the write-off of two planned facility closures, some $3 million, and a modest volume decline. While overall margins were still down within Cequent as compared to the fourth quarter of '04, principally due to material margin decline, the impact of our reductions in variable and fixed costs are closing the gap and you can see sequential improvement. The competitive pricing pressures that impacted the margins within our consumer or retail business in 2005 are being and have been addressed via pricing reviews with customers and sourcing directives. Our initiatives are on plan and margin expansion within this business is expected coming into 2006.

Turning to the next slide. Operating working capital levels within Cequent improved as inventory levels were reduced approximately $17.9 million and receivables were essentially flat at 65.5 million. Working capital as a percent of sales was 16.1% at year end as compared to the hefty 21.4% at the end of '04. The Cequent businesses continue to move aggressively to streamline operations, product SKUs and distribution costs while driving innovation, customer service, and our multiple brand strategies. Our companies in aggregate will continue to manufacture highly customized low volume short delivery products in our North American facilities, but we will augment these activities with over 100 million of purchase standard components and products from low cost countries in fiscal 2006.

The group is launching a facility in Thailand in 2006 to manufacture and support the product lines of towing and weight distribution. We believe strongly that the combination of our make versus buy strategies along with our engineered branded product strategies is the foundation for this group to have long-term earnings performance. Our outlook for this group again is conservative as we look into 2006 due to its exposure with consumer spending for products such as RVs, boat, and horse trailers, and a variety of the lifestyle products that we produce. That said, we strongly believe that this group's focus and its initiatives will drive earnings expansion as we work our way through fiscal 2006.

Turning to the next slide and Rieke packaging. Net sales for the quarter were 30.4 million this was a decline of 2.2% compared to the fourth quarter of 2004. In the quarter, core products did decrease while sales of new specialty dispensing products did increase by some $2 million when compared to the year-ago period. Core industrial products were directly impacted by buying patterns driven by our pricing of products in the third quarter of 2005, and we strongly believe that no market share loss has been incurred. This group's adjusted EBITDA in the fourth quarter increased to 8.4 million from the $8.3 million levels of the fourth quarter of '04, a modest increase of 1%. Operating profit for the fourth quarter improved 4.3% to 6.1 million or 20.2% of sales from a level of 5.9 million in the fourth quarter of '04.

The increase in both operating profit and adjusted EBITDA between years is due to higher material margins, pricing, which were partially offset by higher operating costs, those being freight, energy, and employee benefits. Resin costs in the back end of 2005 did increase dramatically and within the quarter some 15%, as we walk into 2006 it does seem at least for the moment that these have stabilized. Rieke expects positive earnings momentum to continue throughout 2006 with strong demand for both its industrial and consumer based products.

Turning to the next slide and fastening systems. Its fourth quarter sales were 16 million, an increase of 3.8 million or 31.1% as compared to the fourth quarter of 2004. Sales of our aerospace fasteners continue to be strong due to the overall increase in commercial and business jet builds in 2005 and the projected strength of those builds coming into 2006. Our order backlog for our aerospace fasteners at quarter end was 16 million. This compares to $12 million level at the end of '04. Our adjusted EBITDA in the quarter was 4.3 million, this compares to 3.2 million in the year ago period, or a healthy increase of 35.1%. Operating profit improved 1.1 million to 3.8 million from the 2.7 million level of the fourth quarter of '04. This segment expects continued earnings momentum as we come into 2006 driven by strong market demand to support build rates at both Boeing and Airbus, stable military spend, and new product introductions such as our OSI and composi-lock III fastener lines and we believe we'll continue to see market share gains.

Turning to the next slide and our ISG businesses. Net sales for the fourth quarter were 75.5 million this represented a 16.9% increase as compared to the year ago period. This increase was driven by new product introductions, market share gains, and overall economic expansion. Sales within our aero engine group increased 40% as compared to the year ago period, and aero benefited directly from high levels of drilling activity in the U.S. and Canada which are supported by high oil and natural gas prices. Our Norris cylinder SVU saw sales increase some 21% over fourth quarter '04 levels with continued strong order backlog and what we believe is the continuation of market share gains.

Sales within our layman specialty gasket business increased 29% compared to the fourth quarter of '04 as a result of significant oil refinery turnaround activity at several major customers and frankly the positive impact of the hurricanes in the Gulf region and the southeastern United States that drove increased MRO spending. Our compact business saw sales in the quarter increase 4.9% as compared to a year ago period due to the strength of residential building and improved recovery from customers for material cost increases. Our precision tool company continues to grow into the specialty medical equipment market and finally our NI industries company continues to see strong demand for military shows. The group's adjusted EBITDA for the quarter was 8.7 million. This compares to 4. million in the period a year ago, or an increase of 106%.

Operating profit for the quarter increased to 6.8 million or 9.2% of sales from the $200,000 level a year ago as the group benefited from higher sales and the leverage that came with those sales. This group of companies expects continued earnings as we come into 2006. With all that said I would now like to turn the podium over to Skip for a financial performance review.

Thank you, Grant. I'm on the slide that is titled 2005 fourth quarter results. I'd like you to note that this slide excludes the operating results of our industrial fastener business which has now been considered a discontinued operation.

Adjusted EBITDA from continuing operations was up $3 million on the backs of our industrial specialties businesses and smaller fastening system business. We look at the business before securitization, restructuring, and asbestos costs and if you add back those cost elements to EBITDA the quarterly amount this year, Q4 was $27.7 million versus 21.1 million in a year ago period, and that represents a solid 8% increase. Operating profit for Cequent in the quarter as Grant noted was negatively impacted by a $3 million impairment loss for two facilities which were closed. Our operation in Elkhart, Indiana was moved to our Goshen, Indiana facility, and the Sheffield, Pennsylvania operation was consolidated into our distribution center in South Bend, Indiana, and our manufacturing plant in Reynosa, Mexico.

Turning to adjusted EBITDA Cequent lost about 3 million material margins in the quarter due to a less rich mix of product sales. That means more consumer, less installer and WD sales. This loss was partially offset by cost reductions of about $2 million in the quarter.

Turning to the next slide, our capitalization, as Grant pointed out debt did decline $21 million on a year-over-year basis due to lower capital investment, better working capital management, lower investment and restructuring costs, and unfortunately a lower EBITDA. It did increase $12 million in the quarter. As you know Q1 is typically our highest debt quarter due to the seasonal nature of the Cequent business. We knew that our debt would increase in Q1. As a result we did not extend the trades at year end and we did little to incent customers to pay us early.

I think you will be pleased to note that our Q1 end debt level will be 35 to 40 million lower than prior year before the one-time $17 million receivable sale that we did in the first quarter of 2005. That's to say our quarter end debt levels will be around 790. I think today we were at 792. Our Q1 2005 debt level was 813 or 830 without the AR sale. Our Q1 debt will come in around 790. You should also note the change in the composition of our cap table. We borrowed money in Australia, England, and Italy and used the funds to pay down U.S. turn debt. This was part of our homeland activities. Offshore interest rates have proven to be lower and as you know, we'll be able to deduct the foreign interest much quicker than bumping it up against our U.S. NOL of over $60 million. Now let me turn it back over to Grant for a summary before we open up for the Q&A session.

Thanks, Skip. Turning to the TriMas 2005 summary page, sort of our year-end summary as we've discussed our team has reestablished earnings performance for the aggregate company in the fourth quarter of '05. We feel very good about that. As we reflect back over the full year our full earnings were impacted as we've stated by some $41 million of negative material margin decline. That impact was partially offset by $24 million of margin on incremental revenue, $7 million of variable and fixed costs flex outs, and lower spending related to consolidation and restructuring activities of approximately of $5 million. All said that left with us a year that was essentially flat year-over-year on the operational level. As we've talked often, our focus within TriMas has dramatically switched from that of a fixed cost structuring initiative oriented company to back to being focused on organic growth, driving our energies into product innovation, market expansion, and customer service. Seven of our businesses as we look back over 2005 recorded record years. We're very proud of that.

That said 2005 was a tough year but we always learn from our challenges and it did make our entire company and our team all the stronger. And the momentum reestablished in the fourth quarter will certainly and will continue to drive our performance as we come into 2006. Our TriMas management system is working. We drove debt down by $21 million year-over-year and as Skip has just indicated that trend will continue. Working capital was reduced down by $10 million. Sales per employee was up $16,000 ahead. And compensation per revenue, the cost of making something, improved by almost 150 basis points. We have solid growth initiatives within all of our SVUs with 2005 having year-over-year revenue growth of 7.5% and our three-year average trekking at almost 16%.

As we come into 2006, we will have a new look, turning to the next slide. We will modify our reporting segments effective a the beginning of our reporting obligations in 2006. We will split Cequent into two and form an RV trailer products group and a transportation group. We will introduce a new energy group and the former fastening systems group will now be incorporated into industrial specialties. We think this structure will provide better clarity into our performance and into the core activities of TriMas.

Finally, our focus and priorities for 2006 are driving down debt. We've got a great company, we've got great initiatives, we have a balance sheet that needs to get stronger. We want to focus on earnings expansion because earnings expansion will let us fund both our strategic alternatives and continue to fund our tactical initiatives. And we want to focus on organic growth. Our priorities to drive those focuses are free cash flow generation. You can see that we've already made the decision to liquidate one property. We will continue to rationalize our portfolio and make sure that our focus is on those businesses that have long term earnings and value creation attributes. We will continue to lower working capital. We will continue to rationalize our fixed cost footprint, but I can promise you this, we will have no big restructuring plans in 2006. We will continue to increase use of low-cost purchasing, manufacturing, and support options. And drive profitable growth via product innovation and market expansion.

Perhaps most importantly we will continue to drive our TriMas management system and embrace the guiding principles of TriMas which are market leadership in the products that we participate in, financial discipline defined by integrity, operational excellence, and probably most important of all great people. So thank you for listening. I know we covered a lot of material. That concludes our formal remarks. Now I would ask the operator to open up the mic and allow the audience to ask questions. Thank you.

[OPERATOR INSTRUCTIONS] Our first question comes from the line of Philip Volpicelli of CIBC World Markets.

Just wanted to drill further into Cequent and into Rieke. Starting with Rieke, you passed, or you attempted to raise prices in the fourth quarter. Just wanted to get a sense of how that had gone through. Then when we look at the cost side, natural gas has come up and it seems that hose prices have stabilized. Any chance that your margins will expand as your costs go down faster than possibly your selling prices?

I think with regards to Rieke you sort of have to split the business into two. Our steel-based product we went to market with pricing and we think we on our core industrial closures really drove some demand into the third quarter because of our pricing, that pricing did hold be we do think we've pushed some orders into the third quarter versus the fourth quarter. On our sort of newer consumer oriented plastic products, we have a little bit of a lag, and we have as we got to the back end of the fourth quarter come into the first quarter of '06, we have put pricing out there, we believe our pricing will stick and you saw modest expansion in margins in the fourth quarter and we expect Rieke's performance to continue.

And all of that pulls forward into the third quarter as you go into the first quarter now are you seeing levels return to more normalized levels?

Yes. We're seeing pretty good strength out there in the industrial markets.

Then on Cequent, if you could just touch a little bit, I know you mentioned cautious optimism. What is it out there that you've heard or seen that gives you that cautious optimism? Is there any kind of data you can point us to? Then with regard to the cost there of steel and products from overseas are you seeing any benefit there from steel prices being a little bit more -- or less volatile than they have been?

Sure. You've got a couple of questions there Philip. I would say that if we look at our early order activities across the aftermarket group, I mean, they are either even with or slightly in front of 2005 levels. So the dealer bodies, the wholesale distributors, and the independent installers are coming into the season voting with their dollars and they have a belief that the market will behave as it did last year or be up a little bit.

I have as Skip and others in our management team have been to just about every show and industry forum in the last 120 days that you can think of and I think the dealer bodies don't have an unnatural level of inventory out there. Boat sales, which have been really in a three-year decline, are projected to flatten out, towable RVs, as projected by the RVIA, are expected to be up a little bit. The big expense of motor coaches are expected to be down. But we'll see.

The first quarter for us is really a stocking quarter and the sell-through happens as we march through the second quarter where the consumer, the end user really votes with his dollar and that's why we just want to be cautious so we're keeping a tight lid on costs and are assuming that the world will be flat and planning accordingly. Interest rates are going up and in the world of towable RVs and boats that need our products on their trailers and whatnot, all that stuff is financed, so that potentially could have some impact to the end guy buying. On the industrial side of our business, the commercial side of Cequent, which is probably 30 to 40% of our revenue we don't expect anything but it to follow the economy and it looks like it will be fine.

Great. Just last question before I pass the ball here. Skip, you mentioned 790 of debt at the end of the first quarter. Do you guys have a sense of either how much debt you want to reduce by the end of '06 or a target for debt at the end of the year?

Well, Phil, we have not traditionally given that kind of forward-looking information. I would tell you though that we expect to comply with all of our covenants through the year and we haven't mentioned anything about an IPO yet on the call, but we're currently assuming that later in the year we'll be in front of the public markets and we won't need them to have an amendment for our covenants related to 2007.

Okay. Great. I'll stick to my promise and not ask any other questions.

Thanks a lot.

Thank you.

Our next question, comes from the line of Tom Klamka of Credit Suisse.

Can you update us on the status of the fastener sale? How far along is that? And when should we expect to hear something about it?

Hi, Tom. We are in the middle of a formal process where we have been provided with indications of interest and we're happy with the interest that the property is garnering and that's sort of the process we're in, Tom. We're not in a position, because we've not locked down with anybody yet to go any more specific, but we are in a very formal process. We have multiple parties that have expressed interest. Now we're going through those options and we will pick one shortly and move forward.

And how does that business do -- industrial fasteners on the -- in the fourth quarter? What's the trend there?

I'm sorry, say again.

How did that business perform in the fourth quarter on a revenue and earnings basis?

Tom, the industrial fastener business that has been discontinued basically in the quarter was flat compared to last year in terms of EBITDA. It was basically a break even business. Sales were down slightly because of -- you may recall, last year we were working through a pretty substantial backlog at the end of the year at which we've worked through. So sales in ta business on a quarter over quarter basis were actually down about $6 million in the fourth quarter.

So based on what you see in the business and what you're hearing from the potential buyers, is there any change in what you are expecting, either better or worse as far as proceeds from the sale?

No, I think our expectations most likely will be realized.

Now on Cequent, I guess for the quarter overall they were down slightly with some disparity between the different groups. Can you give us an order of magnitude, I guess if you look at install and wholesale you said were down. How far down were those businesses and how far up were the consumer and some of the other businesses?

In terms of sales? Or in terms of profit? In terms of sales we don't actually cut it that way, but if you looked at our year-over-year change at our tolling products business we were down 4 or 5 million in that business and if you were to look at our consumer business we were up $4 million in the quarter. So basically as I said it becomes a mix issue. We make more money when we sell through towing than we do when we sell through consumer.

And at what point in the consumer business will we see the earning's impact of product being imported as opposed to manufactured? Would it be Q1 or we have to wait until Q2?

I think you'll see it in Q1, Tom.

All right. Thank you.

Yes, Tom, our plans relative to sourcing of those products are right on plan and as Grant said will you start to see the benefit in Q1 and it will continue on through the year.

Okay. And Skip just as far as putting EBITDA on an apples to apples basis, when you start with the 16.7 and then 19.7 as far as the restructuring charges in both years, is 1.1 the number from last year?

No, the number from last year Tom was actually higher because we had about $1million bucks of restructuring activities in our industrial fastener business. So as you recall our total number last year, after you considered securitization was 20.5. And we had about 1 million of nonrecurring for fasteners, and that's about what their EBITDA was. They had an EBITDA loss of about 1 million and they had restructuring of about 1 million so Q4 last year was flat. That's why this chart comes right back to the 20.5 that we had last year because the industrial fastener business broke even on a recurring adjusted EBITDA basis last year.

Okay. Thanks.

Our next question comes from the line of Manish Somaiya Banc of America. Please go ahead, sir.

Hi, it's Manish Somaiya from Banc of America. A couple of questions. One, on the industrial fastener business. I think when we had put out our piece back in December we had talked about net proceeds of around 35 to 40 million. Is that still sort of the ballpark that we should be assuming for modeling purposes?

Manish, I would tell you that our value expectations for that business hasn't really changed. And it's probably worthy to point out that when you say net, maybe we could describe this a little differently for you. We've got inside of that business assets that have been sold and leased back which we would expect to buy in connection with the sale. That number would be approximately in the high teens, and the gross amount that we expect to get for the business is around what you were talking about.

So basically, under your definition, we're probably talking around 20 million or so.

Yes.

Second question is, I think you mentioned on the IPO that obviously that's still in the cards and that your budget assumes not going back to the banks, and I just wanted a bit of clarification on that. Is that independent of IPO, or is that assuming that the IPO goes through that you wouldn't have to go back to the banks?

Well, we're assuming at this point, Manish, that we will go public and then we will go back to the banks with a completely different position than we have now.

So basically you're saying that your budget assumes an IPO and therefore with that -- with those proceeds and the benefits to the capital structure you don't anticipate going back to the banks.

Right.

And I would say maybe augment the comment a little bit, our number one priority is to strengthen our balance sheet. We believe as we reestablish earnings momentum in our business that we will position our company to have the choice to enter into the capital market. If for some reason that market, we do everything we want to do and it's not available, I suppose those things could happen. The other thing that we will do, Manish, is we will continue to look at our portfolio. There is a wonderful, as you know, buoyant market out there in the leverage buyout world, very high multiples for businesses. So one way or another we will continue to look through our portfolio and our capital market options to drive strength into our balance sheet.

Okay. Just one more follow-up on sort of the public offering. I guess in its current state you're going to have one, two, three-- five segments with lot of different companies. Do you feel comfortable that the business is not complicated to understand, once you do pursue the IPO option?

Well, we are a diversified products business, TriMas and the guys that we get concurred against at some level are complicated. That's a tough question for you to ask us. We live it every day so it doesn't seem so complicated any more. I think the idea of having more clarity into our segmentation was done for the precise reason to give more clarity and to give more access to financial audiences to see what's driving our businesses and where we want to put our energy and capital.

Then just lastly--.

We don't think that it's an issue that is going to deter us I guess is another way of saying it.

I guess I was just trying to find out if there are more noncore businesses in your product portfolio that we should be kind of looking out for, and it seemed to me that you're I think pretty comfortable with the portfolio that you have right now.

I think we have the business that really is a negative EVA business is the one that we're dealing with first, which I think is appropriate. I think we have a wonderful portfolio of businesses that all have very interested parties in them and I think that as any portfolio manager should, we will continue to look at short, medium, and long-term value options for all these properties. We think that the basket as we've defined as current operation is a basket that we and our underwriters believe could be, given the return for earnings performance, something that would be a very prideful IPO. That's not to say that at some point in time we wouldn't look at our portfolio of that for some reason was delayed or on the other side of that to continue to pair our holdings so -- because one of the things we want to make sure we have is adequate capital to focus on where our growth is.

Yes, Manish, let me just make another comment. We can't guarantee an IPO. A lot of things need to happen. We're working towards making it happen but we can't guarantee it. But we do want to delever the Company and we have some wonderful companies that may be close to the end of their run, if you will. We also have a substantial NOL in the Company which allows us to maybe sell a company and not pay any taxes on the transactions. So with a lot of things out in the marketplace, namely high demand for companies, high multiples being paid, the fact that we are in a favorable tax position, and the fact that be want to delever the Company, all of those kind of line up and point to the fact that we have options.

Okay. And then just lastly, on Q1 I think you said expect ending debt balance of around 790. Would you comment -- would you be able to comment on EBITDA? How should we be thinking about EBITDA year-over-year?

Well, we, as we've profiled today, we believe that we've made a nice improvement in the fourth quarter. Our goal would be to improve the first quarter. And on the back of that improvement we would start the process. We believe our advisors have indicated to us that we probably will need to have the second quarter in the bag, so -- before we do an IPO. So all indications right now, Manish, point to an improving Q1, but we're not in a position to give you a number or a range at this point.

Great. Thank you so much.

You're welcome.

Our next question comes from the line of Lauren Jellon from Lehman Brothers.

Good afternoon. This is Lawrence in for Sarah. Just wanted to go back to the -- good afternoon. Wanted to go back to the debt balance you expect at the end of first quarter '06. Again, you said 790?

Yes.

Is that just the seasonal nature of the business, working capital or?

Yes, Lawrence, our Cequent business is seasonal. Q1 is kind of an inventory build quarter, Q2, Q3 become the sales quarter. We also, when we sell product in that channel, we offer terms early in the year to our larger customers. So what happens is, is receivables build in Q1 in that business, and that's why if you were to go back over time you'd see that Q1 is typically our high watermark for debt. But I can tell you I looked at it today, at 792, and I think it's going to go down even further between now and the end of the quarter which is a couple days away. So if you were to compare that with a year ago, it was at 813 and we had just done a $17 million one-time receivable sale. So on an apples to apples basis that goes up to 830 versus 790, we're pretty happy with that reduction.

Okay. The reason I ask is it looks like, if you assume flat sequential bank debt EBITDA of, say, 144 million, that's getting you to about a 5.5 times leverage ratio versus your 5.65 times covenant, so it just seams like you're getting a little closer there.

Yes, we think we'll be as close in the first quarter as we will be all year.

Okay. And then the second question just relates to that bank debt calculation. You'd think given the flat to slight improvement in the fourth quarter that things would have improved in terms of your coverage ratios. I assume it's just because the bank debt calculation includes the discontinued operations. Is that the reason why?

That's part of it. And you know that our interest expense, our absolute number, is going up. So that's what's giving us trouble with the coverage.

Thanks very much.

Thank you.

[OPERATOR INSTRUCTIONS] Our next question comes from the line of Stewart Brown from EBS. and Associates. Please go ahead.

I had just a few questions. One, are you expecting to have any cash restructuring costs in 2006?

Very little.

You're pretty much through the consolidation?

Pretty much through the restructuring activities over the last couple of years.

And what are your plans with respect to CapEx in '06? .

You're going do it for me, aren't you, Stewart, right on the phone call here. CapEx, it's kind of early in the year to predict that. Our businesses always ask for more than they seem to spend. I think conservatively around 30 million is probably a good number but it will likely be less than that.

And on working capital, I realize until you know what your sales are it's kind of hard to know what that number will be for the full year, but if you think about it in terms of a the percentage of sales, a target--?

I would say, Stewart, that we've improved our working capital position. And as it will continue to be a goal we will continue to work on it but as our business grows I think we'll need a little more. I really don't see working capital being much of a source for us in 2006.

Then taxes on your non-U.S. entities, are you going to be paying any?

Yes, we pay around 10 million of cash taxes, which is primarily foreign and we do have some state taxes here in the state.

Great. Thanks, guys.

Thank you, Stewart.

Our next question comes from the line of Joseph VonMeister from Jefferies & Company.

Hi, guys. The discontinued operations, does that -- are you carving out the SG&A in the cost of sales of associated with that business for the full year?

Stewart, everything related to that business in terms of the P&L and the balance sheet have been carved out.

Any way we can get individual line items for the fourth quarter, like cost of sales and SG&A? Because I don't think it will be possible to subtract out the nine months.

Yes, I prefer not to do it on the call, but perhaps we could publish something that would help you.

Okay. That's basically all I had.

Okay. Thank you, Joe.

And our next question comes from the line of Bob Franklin, Prudential Financial. Please go ahead, sir.

Hi, Bob.

Hi, how are you both. With respect to the industrial fastener sale, first, if you could give us some guidance, as you just said you would to carve that out that would great, but I think you said it was a break-even business, is that right?

yes, if you looked in the quarter, in the fourth quarter and you looked at the adjusted EBITDA and you added back the nonrecurring spending you'd find that it's pretty much break even in both quarters, '05 Q4 and '04 Q4.

Will there be any savings beyond that at the corporate level that are worth measuring?

Probably not, Bob. We won't spend as much time on that property but we'll be spending it on other properties.

What I'm trying to get at is, if it's really break even, then that numbers that Manish and you discussed, when Manish asked that question suggest that, I guess somebody sees a lot more value it than you do.

Yes. That's right. If you were to look at-.

I think the simplest way to look at this business is we have some very good, profitable product lines and we have some product lines that are a little bit more challenged. It is our belief that this business really to move forward needs to have significant investment and be a much broader business than it is today and frankly have infrastructure and lower cost environments than we currently have. So the investment and the trail for us to try to become a broader based participant in the industrial fastener world, we just don't see that as our top choice against the other opportunities in the Company. For others that are participating in that world, other guys could see other guys and this is a wonderful old line business with a great brand name and a class A customer list that wants it to grow and to have more capabilities.

Given where you are with your indications of interest, do you have a sense of when you might be thinking this might happen?

Certainly within the year, but -- and we'd like to get it done sooner than later. I'm not trying to be dodgy.

That's fine. I understand.

Just needs to define itself a little bit more.

Thank you very much. Good luck.

You're welcome.

[OPERATOR INSTRUCTIONS] Our next question comes from the line of Andrew Hains from Bank of New York.

Hi, gentlemen. Just a quick question on Rieke. I guess I was a little bit surprised at the year-over-year top-line revenue growth, I think it was down a little bit. How should we think about Rieke going forward, maybe out not just a year but the next couple of years in terms of growth and do you think you can maintain profitability there at those levels? At current levels, I should say.

I would say that from Rieke's perspective, it has been over the last three or four years a great organic engine within the Company, and I would expect it to continue to do so. The industrial business for us in Europe was a little soft in '05, and some of our initiatives, new product applications and our specialty dispensing have taken a little bit longer to launch, but this is always the downside of looking at short periods. We're really bullish about the Company, its relationships with its customer base, its initiatives to sort of move into southeast Asia not as a producer but also a seller, and we're really bullish on the business.

Okay. So the 3.5 to 4% top-line growth we saw in the current year, you'd expect it to be greater than that going out?

Yes, Andrew. We just did the calculation. Going back to 2002, Rieke had sales of about 109 million in 2002 growing to this year's level, and that's well over 7%. Rieke has historically grown very nicely.

Thanks, guys.

[OPERATOR INSTRUCTIONS] There are no further questions at this time.

Okay. If there are no further questions, we would like to thank everybody for your interest and your support, and with that we will conclude our TriMas session. Thank you, everybody.

Ladies and gentlemen, that does conclude the conference call for today. We thank for your participation and ask that you please disconnect your lines.