TriMas Corp (TRS) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TriMas fourth-quarter 2007 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

Now, ladies and gentlemen, your host for today's conference, Sherry Lauderback, VP of Investor Relations of TriMas.

Thank you. Thank you and welcome to the TriMas Corporation fourth-quarter and full-year 2007 earnings call. Our President and CEO, Grant Beard, and our CFO, Skip Autry, will review TriMas's fourth-quarter and year-end results, in addition to providing outlook for 2008. To facilitate this review, we have provided a press release and a PowerPoint presentation on our company website, trimascorp.com, under the Investor section. After our prepared remarks, we will have a question-and-answer session for the audience.

Also present with us today from TriMas is Bob Zalapski, Vice President of Finance and Treasurer, and Dave Mosteller, Director of Finance for Operations. A replay of this call will be available later today by calling 866-837-8032 with a reservation number of 1214550.

Before we get started, I would like to remind everyone that our comments today, which are intended to supplement your understanding of TriMas, may contain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of TriMas by referring to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements.

Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website, where considerably more information may be found.

At this point, I would like to turn the call over to Grant Beard, TriMas President and CEO.

Thank you, Sherry. Welcome, everyone, to the TriMas Corporation fourth-quarter and year-end earnings call. This morning Skip and I will review the financial highlights of our company, overview our segments, and provide our outlook into 2008. For those of you following along with our presentation deck, please turn to the slide titled 2007 Major Accomplishments.

2007 was a very significant year for TriMas Corporation. Our renewed focus on growth and business development supported revenue growth within each of our five reporting segments. TriMas Corporation had revenue growth in aggregate of 5.4% over fiscal year 2006. Our company launched new products across our entire portfolio of companies and saw increased market penetration in core strategic markets of aerospace, specialty packaging, energy, and medical products.

Our growth was moderated, however, by the end-market weakness of our RV and trailer and recreational accessory groups' served market segments. These were down approximately 10% in aggregate in North America. Both groups grew, however, in these markets in spite of demand weakness via new product introductions, cross-selling, and international expansion. This accomplishment is a further validation of our market leadership and product offering depth into these served end markets.

In addition, TriMas saw its total international and export sales grow 12% to over $300 million, which also validates our strategic goal of increasing our global diversification. Our company also continued to increase its buying of components and products from low-cost countries, and we further reduced our fixed cost footprint in North America during 2007. These initiatives not only supported margin expansion for TriMas, but continued to make our cost structure more variable.

With a great sense of pride, TriMas again became a proud member of the New York Stock Exchange, with our initial public offering in May of last year. This event in combination with continued operational performance, coupled with $65 million in cash flow from operations, drove our leverage ratio to a five-year low at December 31st of 4.08x. As Skip and I reflect back on 2007, it was a year of significant accomplishments, culminating with our becoming Sarbanes-Oxley compliant as a new public company.

Now, turning to the slide titled 2007 Special Items, TriMas did incur several special item charges that we believe mask the true operating performance of our company. First, as we have previously announced, TriMas incurred $30.6 million of pretax charges related to our IPO, debt extinguishment costs, and the closure of our Huntsville, Ontario manufacturing facility. We also incurred a $3.9 million pretax charge for the termination of a defined benefit program in Canada for a facility closed within our packaging group 10 years ago.

Finally, TriMas has taken a $171.2 million pretax, non-cash goodwill and indefinite-lived intangible asset-related impairment charge. This charge relates to our RV and Trailer and Recreational Accessory business groups and reflects a more cautious view of end-served markets and the impact of our decline in stock price. This charge, however, does not reflect the long-term value realization potential for these businesses that in 2007 significantly outperformed their respective end markets.

Turning to our slide 2007 full-year summary, reviewing our performance excluding special items, we were pleased that our company's growth initiatives supported a 5.4% revenue expansion, given the weakness in some of our served markets over 2006. Our adjusted EBITDA of $143.8 million increased 6.6% over 2006, and produced approximately $65 million in cash flow.

Our EBITDA margins also increased to 13.5% or 20 basis points when compared to the year-ago period. Our company reduced its leverage ratio to 4.0x. TriMas income in 2007 increased to $22.4 million or $0.79 per share, a significant increase over the levels of 2006. Our company had a solid year, performed within the established earnings guidance range as provided by management earlier in 2007.

Our fourth quarter saw record revenue levels and a very solid growth rate of 7.1%. Our adjusted EBITDA from operations decreased slightly to $24.5 million as a result of SOX compliance costs at corporate. Net income for the fourth quarter was approximately breakeven as compared to a loss of $2.1 million or $0.10 a share in the fourth quarter of 2006.

Turning now to our individual segments, first up Packaging Systems. For the year, sales increased 3.7% over 2006. The group did experience a softening in demand for its industrial closures and laminates for commercial construction. Growth in the group was driven by specialty dispensing and closure products being sold into food, beverage, pharmaceutical, and chemical markets. Packaging did re-establish year-over-year revenue growth in the fourth quarter. This group expects its future growth to be driven by its specialty design-to-application dispensing enclosure product lines.

Our second group, Energy Products, saw revenues grow 4.1% over 2006. Our MRO gasket product line sold into petrochemical refineries had a record year. This was driven by increased international sales and the high utilization rates at refineries worldwide. Our engine and compression product lines sold into the field were negatively impacted in the back half of 2007, as natural gas prices fell.

As we enter 2008, however, natural gas prices have risen considerably and are expected to remain up. This has re-established demand for capital in the field at the well site, and we are seeing our order backlogs grow for these products. This group is also expected to launch two additional service satellites internationally in 2008, one in Brazil and our third location into Southeast Asia.

Our third segment, Industrial Specialties group, had another outstanding year. The group saw its revenues expand by 16.7%, and adjusted EBITDA grew by 15.2%. We experienced strong market growth in both commercial and military aircraft applications. In addition, our product-line expansion initiatives are being well-received. Our migration into broader medical market exposure is progressing, and this strategy was augmented by our small acquisition of DEW Technologies in the fall of 2007. This investment provided TriMas with product access into the high-growth spinal and trauma component market segments.

Also, our international initiatives highlighted by our ISO cylinder export sales into South Africa, South America, and Europe have been very successful.

Our fourth group, RV and Trailer Products, saw its revenue expand 4.2% against end markets in North America that were down 10%. The group benefited from growth initiatives in Southeast Asia and Australia, as well as new product offerings in North America. This group continues to aggressively migrate manufacturing activity into its Mexican and Thailand facilities and purchase components globally. Gross margins improved in this group as a result of these initiatives.

Excluding special items, this group saw its adjusted EBITDA improve 6% over 2006 levels. The management within these businesses are to be commended for their leadership in 2007, and expect continued content expansion in 2008.

Our last group, Recreational Accessories, had modest sales growth of 1% in 2007, as compared to 2006. This group also had end-served markets that were down an estimated 10%. This group also continues to shrink its fixed cost footprint in North America and migrate activities to low-cost regions. This group's adjusted EBITDA, excluding special items, grew 5.7% as compared to 2006 levels.

Both RV and Trailer and Recreational Accessory business segments are the pre-eminent market leaders in their respective markets and product categories. Our brands stand for quality, durability. And the customer loyalty we have worked so hard to earn has allowed these groups to grow in their cyclical downturn. The pressures of consumer credit and housing valuations we believe will persist into 2008, however, and cause further deterioration to these markets.

We believe North America will be down another 10% volumetrically as compared to 2007. That said, we believe our initiatives of new product offerings, international expansion, and aggressive cross-selling of our products into our served channels will position these groups to again outperform their served markets in 2008.

Skip, I will now turn it over to you to profile our financials in detail.

Thank you, Grant. Before we get into the numbers, I would like to spend a few minutes describing the special items that impacted our GAAP results. In the second quarter upon going public, we paid onetime fees to terminate our advisor services agreement with Heartland of $10 million, and $4.2 million to early terminate operating leases.

Additionally, when we paid down $100 million of our senior sub debt with IPO proceeds, we paid a call premium of about $5 million and wrote off deferred debt issuance costs of about $2.6 million.

In the fourth quarter, we settled a Canadian pension obligation of just under $4 million with plan assets, not company cash, related to a packaging facility that had been closed in 1997. As you may remember, in early October we announced that we would be shutting down our hitch plant in Huntsville, Ontario. Q4 cash costs of $5.6 million to close the plant, primarily for severance, were recognized and included in SG&A. Also non-cash costs of $3.4 million were included in the P&L as an asset impairment.

Additionally, we further impaired goodwill and intangibles in our aftermarket businesses. Let's turn the page and spend a little more time on this item. During our annual evaluation of goodwill, we conducted our process consistent with the process we have used in prior years. We also considered that our end-of-year and current market cap was below unadjusted book value of the Company. This difference was considered as an indicator of impairment.

Based upon inputs from our valuation experts, our auditors, and frankly from the marketplace, we took further non-cash write-downs of goodwill and intangibles in our RV and Trailer business of about $100 million, and our Recreational Accessories business of about $70 million. After this write-off, the carrying value of our aftermarket business approximates 6 times EBITDA. The write-off after-tax was $159 million or $5.61 a share.

Turning to page 19, for the fourth quarter, sales were up over 7% or about 6% organically. Packaging was up over 8% on the strength of our specialty dispensing products and new product introductions. Energy was up about 2% as our specialty gasket business was up over 10%, while our oil and gas pension business was down, as Grant has already mentioned.

Industrial Specialties was up about 10%, with about 7% of that being organic. DEW Technologies, our August medical products acquisition, continues to exceed our expectations. Our Monogram aerospace fastener business had another solid quarter.

Recreational Vehicle and Trailer was up almost 16% on the strength of our Australian business and the brake controller business here in North America. The Recreational Accessories sales were basically flat with prior years. As Grant has already mentioned for the year, sales grew at a 5.4% rate, which is more than double the 2006 rate.

Turning to page 20, before special items Q4 EBITDA was flat with year-ago levels. However, from the operating segments EBITDA was up about $2.4 million or about 8%. Packaging was up $1.7 million, which when compared to its incremental sales of $13 million converted at a very strong 45% rate.

Energies conversion stood at 50%. Industrial Specialties' lack of conversion resulted from temporary margin declines in Monogram and Norris Cylinder. RV and Trailer's major increase in EBITDA results from a sales increase at a conversion -- with a conversion of a respectable 25% rate. Rec Accessories' decline in EBITDA with flat sales is a result of a onetime favorable customer pricing adjustment in Q4 2006.

The $3 million increase in Q4 corporate expenses results primarily from a $2 million increase in Sarbanes-Oxley compliance costs and the timing of variable comp expense within the year, partially offset by the elimination of the Heartland monitoring fee.

Turning to page 21, in our statement of operations, I would just like to point out a few things. Gross profit in the quarter was up 20 basis points without the Huntsville charge, and 40 basis points for the full year. SG&A expenses in the quarter were also up. However, without Huntsville and the non-recurring corporate expenses for stocks compliance, the increase reduces to 18.8% of sales or about a 100 basis point increase, which was in support of our growth initiatives, as Grant has already reviewed.

For the year, SG&A was basically flat before Huntsville and Sarbanes costs. When I say basically flat, I mean on a percent of sales basis. The benefit plan liability settlement, impairment of assets and goodwill, and debt extinguishment costs have already been discussed. Interest expense reduces due to lower borrowings and interest rate levels. The tax benefit for the year results from reducing deferred tax liabilities only on intangibles, and amortizable goodwill being written off. Cash tax deductions are unaffected.

On page 23, to summarize our cash flow for 2007, let me point out a couple of items. Cash from operations totaled $65 million, which included additional borrowings under our AR securitization arrangement of approximately $22 million. It should also be noted that inventory increased $25 million, which is also an element of the $65 million.

CapEx at just under $35 million is consistent with our prior guidance. Leased asset acquisitions of $30 million was done primarily with IPO proceeds. And additionally with IPO proceeds, we reduced our senior sub debt by $100 million.

Turning to page 24, regarding our cap table, I wanted to point out that we reduced total debt about $97 million in 2007. We improved our bank LTM EBITDA, and our leverage ratio now stands at 4.08, and our availability and cash balances exceeded $120 million.

I would now like to turn it back over to Grant for a summary and outlook review.

Thank you, Skip. As we look across our portfolio and into 2008, the following drivers will define our respective groups. Within packaging, we expect continued growth in specialty dispensing and closure products sold into food, beverage, and pharmaceutical markets. We believe our product initiatives will outpace the modest growth expected within our industrial products sold primarily into North America and Europe.

The Packaging group is also beginning to aggressively sell its specialty product lines globally, with the focus on Western Europe and Southeast Asia. Our Energy Products group expects solid demand in 2008. Our gasket business is expanding globally, and our well site product lines are seeing backlogs grow.

Within our Industrial Specialties group, we see continued strengthening of demand for both aerospace and medical product lines. Our more traditional industrial products we expect to be flat in the U.S., but we do see export opportunities driven by increasingly weak dollar in our great product brands.

Our final two groups, RV and Trailer and Recreational Accessories, are expecting continued end-market weakness in North America. We are forecasting volume demand to be down another 10% in 2008. We do see growth in Australia and Southeast Asia. Our companies in these groups have significant new product initiatives and should be positioned to outperform the market as they did in 2007.

Our outlook for 2008 is as follows. Diluted EPS in the range of $0.85 to $0.95 per share; this compares to $0.79 per share in 2007. Net income for 2008 of $28.5 million to $31.9 million, as compared to the $22.4 million in 2007, excluding special items. Our outlook for the first quarter of 2008 is an EPS range of $0.21 to $0.24 per share. This compares to $0.37 per share in the first quarter of 2008 -- or 2007. This EPS range will have net income of $6.9 million to $8.1 million for the quarter, which is relatively flat with 2007 levels.

The first-quarter earnings are directly impacted by lower RV and Trailer and Recreational Accessory group earnings, and the Company's increased share count. This performance for Q1 of '08 is consistent with our full-year guidance previously stated.

As TriMas moves through 2008, our strategic initiatives are as follows. We will focus on organic growth. We will use our free cash flow to reduce debt. We will take advantage of small product-line acquisitions that support future growth, but do not further burden our balance sheet. And we will focus on operational efficiencies.

Our view of 2008 is one of balance. We have great opportunities in front of our portfolio. We are keeping a very close eye on our RV and Trailer and Recreational Accessory business segments, which we call Cequent. We will be prudent and disciplined in how we manage.

I want to thank you for your attention, and I would now ask the moderator to open the forum up for questions and answers. Thank you.

(OPERATOR INSTRUCTIONS) Albert Kabili, Goldman Sachs.

I guess first question will be on the outlook for '08. If we just look at the first quarter, $0.21 to $0.24 of EPS, that assumes a 10% to 15% decline in EBITDA. The full-year guidance implies that trends get better in the second through fourth quarters. I guess if you could just talk through where you see the improvements coming.

Sure, Al. I think that first and foremost within our Energy group, we are seeing a reestablishment and a building of our order backlogs predominately in our aeroengine business that we sell engines and compressors out into the field. As you know, we saw some weakness in the back half of the year when natural gas prices cooled down. Those prices have come up and the outlook looks fairly bullish that they will stay up, and people now -- companies, rather now are redeploying capital out into the field, and we will be the benefactor of that. The remaining part of our Energy segment continues to see strong demand and is seeing great opportunities globally.

Within ISG, it is really a great demand strength in our new initiatives around medical products. We see our Aerospace business building strength and not pulling back at all. In our Industrial businesses, or products rather, while we expect fairly flat or more modest sales in North America or U.S. specifically, we are seeing great opportunities for export sales. We had great growth in '07 outside of the U.S., and we expect that to continue into '08. A weakening dollar certainly has been a benefactor to us, and I would like to think that our great brand names and product stand on their own, but a weakening dollar certainly has allowed us to be much more aggressive globally.

Then I think in our Cequent businesses, while the first quarter was a little bit weaker than the first quarter of last year, it was really as we had expected. And we saw our intermediaries, the big wholesale distributors, not pull as much inventory onto their shelves, and we don't see that declining. We see that broader inventory levels in the field are actually in pretty good shape; they're not overbuilt. We just see a tremendous amount of support for the new product initiatives we have, and we think that that will drive the Cequent side of our business to be able to perform in 2008 as it did in 2007.

Okay. Just to follow up then, if you could just talk about the first quarter is the decline primarily all Cequent? Are you expecting continued growth in the other segments? Is there some color that you can give by segment and how you see the first quarter shaping up?

Sure, Al, this is Skip. I'll take that one and give Grant a little break. As we look into the first quarter, our businesses are going to be up except for our aftermarket businesses. We kind of -- this deep in the quarter, we have a pretty good view to the top line of our aftermarket businesses and the impact that will have on our earnings.

But also I think it is worth pointing out at this point that we're taking down inventory and production levels to kind of match customer demand. And as you know, Al, when we do that we have absorption issues which are pretty much going to be locked into the first quarter. So that I think may be the essence of why the first quarter is down disproportionately in your mind in the rest of the year. We will be taking the inventories down in Q1 and we will have the absorption effect of that. But across the rest of the businesses, yes, we are expecting top line and performance to be up across the board.

Okay. And if you could, Skip, could you help us quantify just how much of first-quarter impact is due to the inventory reduction, more of an --?

Al, just to throw a number out there, I know you won't hold me to it, but it's going to be $0.04 to $0.05, I would say.

Okay, and that is irrespective of -- that is beyond just a lower level of volumes; that's taking inventory down?

You know, as we have talked a lot, we variablize this business a lot, but we still have manufacturing facilities here in North America. As we throttle those back, you just have absorption issues.

We just want to be very prudent, Al. Our outlook is our outlook, but we just want to make sure that our cash deployment is being moderated, and we just want be very disciplined about how we are managing our inventory.

Okay, great. Then Grant, if you could talk about the priority of the free cash flow, given a weakening economy and your bonds where they're at today, does it make sense to shift more of the priority to repaying debt, or how do you see that versus bolt-on acquisitions?

I think first and foremost, Al, we have to be prudent. I think that is why we want to focus on organic growth, and we have got great organic growth opportunities across our portfolio and those are the best investments with the most immediate returns.

We want to be aware of our balance sheet, and we have committed to the investment public that we would in time drive our relative debt down. So we are committed to doing that. There are going to be, and we have already seen great opportunities. So if we were to deploy capital, it would only be in a very -- to very small product lines where we get immediate strategic benefit and we really don't add any burden to our balance sheet. So we have to manage for tomorrow, but we have to be absolutely aware of today.

Right. I guess, Grant, in the past you talked about deleveraging at least half a turn a year of debt. I mean in the near term, is it still that goal, or new term do you see even a greater emphasis on deleveraging, again just given where the economy is at?

I think given our free cash flow attributes, that is still a realistic goal and a goal we are committed to.

Okay, thanks. Final housekeeping questions, one is just on the corporate line item. It went up just with the Sarbanes-Oxley costs. Is that something, the $8.3 million of corporate in the EBITDA section, is that -- what is the run rate we should be using for 2008?

I think that should be in the $23 million, $24 million range for the year.

Okay. Then if you could talk about the sale of businesses in NI Industries, if you could just give us a sense for the revenue and EBITDA impact?

Skip, you can do the numerics. We sold a product line that was a component, a set of components that went into the LAW's rocket launcher. We were a party to a product line that was going to be designed out, and our contract ran out in about a 30-month period. And we decided to sell to our customer our assets in the remaining activity level that were represented in that contract. We basically got the net present value over the future cash flow, but that was an activity that was going to go to zero.

Skip, you can sort of fill in the numbers.

Right. Both the businesses that we discontinued kind of on a run rate basis would normally have $2 million to $3 million in EBITDA. So the rocket launcher business was kind of at the end of its run, and we sold it to the strategic right partner to have the business. And the amount we got was basically the present value of what we're going to get through the end of the program.

Now, on the property management side which is the other business we discontinued, we have not sold it yet. We are actively in the sale process. And when we complete that sale and you look at the proceeds from both sales of both businesses relative to the EBITDA stream associated with them, it will be a very reasonable and rational amount.

There's just two assets that have been sort of disentangled from one another because it was more to our advantage to sell them separately. The land in Southern California is very valuable, and we are in the process of trying to get it sold as we speak.

Okay, so when you're saying reasonable, should we assume 5 to 6 times EBITDA around where you're --?

Yes, that is a good estimate, Al.

Then final question if I may. On the raw material front, we continue to see escalation in steel prices and oil continues to march. How do you feel you are in terms of price increases relative to raw materials? Should we be expecting some headwinds in '08, or do you feel you've got the pricing to account for it?

Sure. I think you know, Al, for a long look-back we've been able to get pass-throughs on material movement. And when we look forward into '08, we are assuming that if we do incur material movement, we can pass it through. We need to date have not seen a great deal of current period movement, but we are expecting steel and resin to move, and we will price accordingly.

We have some preemptive pricing that will happen at the beginning of the second quarter, but that is sort of the basic view. We are assuming that we will stay neutral because we will be able to pass through as we always have been the impact of any material movement.

Okay, when you say the preemptive pricing, is that across all -- which segments would that be?

It is a little bit by product line, a little bit in Packaging, and a little bit in our Industrial Specialties group.

Okay, thanks. I will turn it over.

Tom Klamka, Credit Suisse.

Can you talk about ISG for a minute? Your sales actually improved quite nicely in the quarter; EBITDA was flat. You make reference to some additional expenses. What is -- how does the product line profitability look there?

Tom, basically what we had in Q4 was kind of a mix change in Monogram that was pretty significant, and that took basically their profits down to flat year-over-year. We also had a fairly significant mix change in the cylinder. We sell more and more cylinders abroad. We export those, and we tend not to make as much money on those as we do the ones we sell in North America. So it is mix primarily for the ISG business.

Does that mean margins in the quarter will represent -- are more representative of margins going forward?

No, no, I would say the margins in the quarter were unusually low.

Yes, the experience in Monogram was simply backlog management and letting guys take longer runs on families of product to satisfy customer demand. So absolutely not, Tom.

To this mix issue is more of a onetime mix issue as opposed to the business --?

Sure, when you look at it over multiple quarters, you will not see the impact.

Tom, that is why I was careful to say in my script that it was temporary.

Okay, on RVT and Rec Accessories, can you talk about -- I guess inventories in general, looks like your own inventories for TriMas altogether were up substantially year-over-year, and also inventories in the field. How do they look?

I think our inventories in TriMas were up a little bit coming across the year as we have changed our supply lines and become more global a buyer of components. Frankly, we bought some product into our Energy group and got the timing wrong a little bit. In the back half of the year, our engine and compression product, which we buy all of those components outside of the U.S. or the majority outside of the U.S., ultimately had to sit for little bit. So we think our relative working capital will come down back into more traditional levels going forward.

Specifically in RVT and RAG, we have spoke about it. We have started to moderate those inventory investments. It has caused a little bit of an absorption issue in the first quarter, but it is the prudent thing to do.

Then I think the last part of your question, Tom, when we look out at our wholesale distributors or trailer manufacturers, RV, whatever the end dealership or OE may be, inventory levels really are quite good shape. So there was a real pushdown in '07, and the OEMs have not sort of built up of unsold inventories. So when demand comes, it will come through the system fairly efficiently.

Okay, and year-over-year, it looks like inventories are up $26 million. How much of that is excess because of RVT and these other issues you mentioned versus how much is just because you are outsourcing and importing; is this part of the business now? How much can that come down, basically? I think you went at 165 to 190.

Yes, Tom, the inventory increase in the main was not in our Recreational Accessories business. It is pretty much -- if you look, it is spread across Energy, it is spread across ISG, and it is spread across Recreational Vehicle and Trailer. The reason for RV&T's inventory increase has a lot to do with the work we've done in Australia in terms of rationalizing plants. So I would say Rec Accessories had very little of the increase, and with the increase being spread across the other segments in support of growth initiatives in Energy and ISG and in support of rationalization efforts in Australia.

But our expectation is not to further invest in expansion of inventory. We see it coming back the other way, Tom.

Then on the discontinued ops, I think on your press release you said that $6.4 million would have been the EBITDA associated with that in '07, on a comparable basis with '06, correct?

Yes.

Okay, how much of that -- that includes the rocket launcher business and this, you say, property management. What was that?

The property management business, Tom, is we have property and facilities on the West Coast. And basically, that business has been -- included in Industrial Specialties -- has been generating circa $1 million of EBITDA. And we believe we can sell it for a very, very nice multiple and then redeploy that capital into other businesses. It is a business that has always been inside of TriMas, and it has always been in Industrial Specialties.

The value is the land, not the earnings stream. In the rocket launcher business, which would be the remainder, it is a little bit of a misnomer, Tom, because there was an acceleration to build out finished goods so we could complete a multiyear product at the back half of the year, and then in a sense hand over to our buyer a completed set of inventories. So it is not really a representation of a run rate. It was the completion of the remainder of a contract.

Okay. But the earnings or the EBITDA for that business would have been 5.4, and net proceeds for both of these, I guess in total and how much --? It looks like your asset sale proceeds were around $3 million in the quarter. How much is left to come on that?

Tom, we really -- we're in the process now and we are really leery to draw numbers around that, but what I said makes sense. If you look at our normal run rate EBITDA from these businesses with '07 not being a normal run rate, $2 million to $3 million is more of a normal run rate. If you look at what we sell the property and the rocket launcher business for in relation to the EBITDA, the normal run rate, you'll see a very reasonable return.

Okay, and was any of that received in the fourth quarter?

Yes, we did sell the rocket launcher business in the fourth quarter.

Okay, so it's just the property that is remaining.

Yes, the property is what is the value.

Obviously, Tom, that is where the value is.

And the rocket launcher business, maybe for accounting purposes it is a discontinued operation, but it is really just a wind-down of a program.

Yes, essentially that's right, but it has been a program that we've had for a long time.

Okay. Just last question, what do you see for capital spending going forward?

Tom, we are not changing our view. I mean 3% of top line turns out to be a pretty good proxy for our CapEx spending.

So that should continue?

Yes, and I think the way to look at that is about one-third of that is maintenance and the other two-thirds is fairly discretionary, and it is really around growth initiatives. So it is fairly manageable.

Thanks, guys.

John Inch, Merrill Lynch.

I didn't realize this was like 25 questions per person here, but anyway --.

Well, at least you are early in the line, John.

Well, I am only going to, in contrast to those first two, ask a couple. So huge write-downs. What, if anything, is the impact toward your interest costs, your debt ratings, and what -- if you look at the rest of these businesses, because a lot of people don't think these consumer markets are getting better possibly for years -- what is the risk of further impairments?

Yes, in terms of the write-off affecting any of our bank agreements or borrowing arrangements, there is no impact. As I said, we wrote down those businesses to about a 6 times multiple, which we think is a very reasonable write-down. So we would not expect future write-downs necessarily for these businesses. Now, that all depends, obviously, on how the economy does and how these businesses do.

This $0.21 to $0.24, the first quarter is basically over. So in theory, you should be providing guidance for the June quarter, but maybe you could help me a little bit. I'm going to assume that with the quarter over, you're going to do $0.21 to $0.24. Should all things equal in terms of the trajectory of your businesses. Should your second quarter be up or down versus the first quarter on an EPS basis?

Oh, it should be up.

Is that because of seasonality or is that based on what you see going on in terms of end-market demand currently?

It is seasonality.

Last question, did any businesses in the December -- excuse me, the December quarter and what you've seen to date, have any businesses gotten better? If so, what do you think is going on there?

Sure, I think that a number have gotten meaningfully better. We are seeing again in energy, our trajectory on our MRO business, our gasket business remains. It had a record year in '07. The difference in energy is our well site products of engines and compression really have a substantial backlog being built as we come through the first quarter. That is being directly driven by the reestablishment of natural gas prices.

So, the Western Canada, Western U.S. fields are now starting to redeploy capital. So that has been very positive, and I think our new product initiatives in support and aerospace we just continued to see acceptance, and we are getting products into all sorts of new applications. And Monogram continues to see its opportunities and demand strengthen. While medical is a small but growing part of TriMas, it is seeing strengthening demand, and we expect overachievement in those areas.

I think, John, the industrial packaging portion of Packaging, which had some volatility in the sort of third quarter of '07, really regained its footing in the fourth quarter, as we said it would. And we're seeing order demand really remain quite consistent in our new product initiatives. In that group, we believe full drive future growth. So I mean that is sort of a long answer, but that's it.

Okay, I mean, I'm just trying to understand. So the businesses that are getting better would represent what portion of the Company versus -- I am assuming these businesses that are getting worse are all these consumer facing -- some of these other industrial types of businesses in sort of sympathy with the economy. Is that fair? What sort of the -- how much is getting better versus how much is getting worse?

Well, we believe all of our portfolio is going to get better in '08, John. I think that where we see end-market exposure, the only place we see it deteriorating or having the opportunity to be tougher is, to your point, where there's discretion spend that's consumer oriented, what we call our aftermarket. It was down 10% last year in aggregate; volumetrically, we were up 2%.

We think that our business initiatives give us a chance to outperform the market again. But at the macrolevel, that is where we see weakness. Everywhere else, our served markets are either flat or growing.

Okay, thank you.

Walt Liptak, Barrington.

Good morning, guys. I will try and keep it under 25 questions, too. I wanted to ask a few on cash flow. 2008, what does your guidance equate to on an EBITDA basis?

Our guidance, Walt, is kind of -- not to pin a number, but I would say the high 140s to kind of the low to mid -- mid 140s to low to mid 150s.

Okay, and how about cash flow from operations for '08?

You know, cash flow from operations will continue to be strong. It is an attribute of the Company, and while we are not putting specific guidance out there, I don't think it will be 65, but I think it will be very solid; your know, $40 million to $50 million.

Okay, why wouldn't -- if you are drawing down inventory, why wouldn't your cash flow be higher in '08 versus '07?

I tried to point that out in the prepared comments. Part of the operating cash flow includes incremental borrowing on the receivables arrangements. We basically take the receivables borrowing up to kind of the high level, so we won't expect to incrementally borrow more on that. So that takes about $20 million out of that number.

So that is kind of on the downside. On the upside, we don't nearly expect to spend incrementally on inventory like we did in '07.

Okay, how about D&A for 2008?

You know, I would say without giving a specific number, it is going to be up a little bit over last year.

Okay. On the last question, you talked about financing. So the write-down, the charges, if you were to take -- I know you are not going to, but if you were to -- at what point does that impact your covenants or financing?

We don't see it affecting our bank agreement ever, and I don't believe it has any impact on our bond borrowing as well. So these are just non-cash. From a bank perspective, they are add-backs, so there is no effect on our borrowing. Our borrowing is cash flow-based.

Okay, and your next refinancing is in 2012.

Yes, it's out there a ways.

Okay, so you've got the balance sheet to ride this out, and hopefully, the cash flow too.

Right, and the only real refinancing we do inside of that is we have our annual renewal of our receivables securitization facility, which we just completed at favorable rates, and we certainly do not expect that to be a problem in the future either.

Okay, and it looks like with these recreation businesses, that's obviously the weakest link in a consumer session. What is -- if I am looking at this right, you are about two-thirds U.S., one-third international; is that right, or is it more of a mix towards U.S.?

It's about 20% non-North American.

You know, Walt, when you look at our 10-K, which we hope to either have filed this afternoon or tomorrow, you'll see in our footnote that our international business is about 20%. But in addition to that, we export a large amount of product outside of the states. So as Grant said, our international footprint went up 12%. The number that goes with that is circa $300 million.

Okay. The growth rate all in for the total TriMas, or are you talking about recreation?

That's all in.

That is all in; that's all TriMas.

And I think, Walt, the remaining revenue in what we will call North America for our aftermarket businesses is broadly 65% or thereabouts sort of consumer-oriented, and the remainder would be sort of industrial or agricultural -- yes, 60/40 I mean. So it's sort of in that range. I think what we will expect to see in '08 is really what we saw in '07, loss of new products, loss of content on the products served. But probably more accessories sold than high-end engineered weight distribution, which regretfully is our more profitable line.

So we are assuming the market is going to be down 10%. The RVIA is assuming a number less than that. I just think that is prudent, but I do think we will sell more of the bike racks and the cargo management and tiedowns and things that are point-of-purchase, things that people will buy to augment existing products than new product applications, which regretfully have our more engineered product content and have higher margins. But that is exactly what we saw in '07.

Okay, how much were your consumer businesses down in '07, in North America?

They were up.

No, excluding international. Just in North America.

They were up. We outperformed the market by a lot.

Okay. So you're saying the RVIA numbers are too conservative, and even though you outperformed last year, you're taking the big cut to down 10%? Okay, fine.

I think that is our view to be prudent, and we want to be conservative.

Okay, thanks, guys.

Todd Miranowski, Silver Point.

Just one quick follow-up. Most of my questions have been answered, but I was still a little bit confused about this discontinued operations cash flow. So it sounds like the proceeds around the rocket launcher business were circa $3 million. Is that correct based on the cash flows received in the fourth quarter?

That is right, Todd.

Okay. Then previously someone had said could we expect sort of 5 to 6 times in aggregate on the stuff that is being sold? I think you guys said that's not unreasonable, but I was unclear as to what number I multiply that 5 to 6 times by. Is it the full $6 million or is it something smaller?

No, Todd, the $6 million of EBITDA for '07 is unusually high due to the kind of windup of the program and buildout of the program. The more appropriate number would be $2 million to $3 million.

$2 million to $3 million combined for the two?

Right.

Okay. So I might say $2 million to $3 million times 5 to 6 less the $3 million you've already received, and that would be sort of future proceeds.

You guys continue to narrow it down.

All right, that's very helpful. That's the only question I have, thank you.

Thank you. There are no further questions at this time.

We thank everybody for your attention and your participation in today's call, and this will conclude our call. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect, and everyone have a wonderful day.