TriMas Corp (TRS) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TriMas Corporation's second-quarter 2011 earnings conference 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 call is being recorded.

I would now like to introduce your host for today's presentation, the Sherry Lauderback, Vice President of Investor Relations. Ms. Lauderback, you may begin, ma'am.

Thank you, and welcome to the TriMas Corporation's second-quarter 2011 earnings call. Participating on the call today are Dave Watson, TriMas's President and CEO, and Mark Zeffiro, our Chief Financial Officer. Dave and Mark will review TriMas's second-quarter results as well as provide some additional details on our enhanced 2011 outlook. After our prepared remarks, we'll then open the call up to your questions.

In order to assist you with the review of our results, we have included a press release and PowerPoint presentation on our company website, www.TriMasCorp.com, under the Investors section. In addition, a replay of this call will be available later today by calling 888-211-2648 with an access code of 1542923.

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 a number of risks and uncertainties. Please refer to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statements. Also, we undertake no obligation to publicly update or revise any forward-looking statement 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 Dave Wathen, TriMas President and CEO.

Thanks, Sherry, and good morning, and thanks to all of you listening for your interest in TriMas. We certainly appreciate it. Our agenda today is that I will provide my review of the second quarter, then Mark will discuss financial metrics and some details by segment, and I'll finish by discussing our outlook. And then we will gladly take your questions.

We are sharing the results of another quarter that I believe reinforces the message that TriMas is well on the road to being a sustained growth company despite the headwinds of a bumpy, uncertain economy. If you are following our charts, I will start on slide 4 with my overview.

During second quarter 2011, our combination of TriMas businesses set a quarterly record of almost $300 million in sales with all segments attaining growth. In previous calls, I have discussed our intent to implement programs focused on new products and activities to grow our revenues despite whatever is happening in the economies we serve.

Our businesses are successfully executing these actions, required to capture new and incremental revenues. In particular, our decision a year ago to get serious about selling more of our products in non-US markets is proving to be effort well spent, with very encouraging customer interest. There is much more opportunity for us in the future in these faster-growing markets.

We are willing to carefully spend our resources for these sales gains, so we've been making some decisions, including putting some inventory into new markets, spending to launch new products, making sure we are the fastest to respond to what our customers need, and of course, capitalizing on the upsides of our acquisitions completed in 2010.

We also intend to hold onto these revenue gains, so we are paying close attention to our customer service metrics like response times and fill rates.

My final comment on the topic of increased revenue -- growth is expensive, and we are capturing business in some new markets where our costs are still too high and with new products that require some expensive outsourcing. But we know full well how to bring these costs down over time so we continue to have margin upside.

In addition to our quarterly sales levels, second-quarter EPS, excluding special items, was also a record at $0.56 per share, up 27% versus last year. We did spend $0.07 per share to refinance some of our debt, and we believe this will pay back next year.

During the quarter, we've also made some upgrades in our ongoing pursuit of the productivity needed to fund growth initiatives and enhance margins. We have hired a handful of great operating people in several of our businesses to accelerate our lean initiatives. And we continue to carefully invest, including making the bolt-on acquisition that we announced this morning for our packaging business that I will describe in more detail in the next slide.

Innovative Molding fits our strategy in packaging perfectly -- Unique solutions, strong intellectual property protection, a track record of continuous growth, and people who are innovative, dedicated, and good at their jobs.

For Rieke, it increases the content in food applications, which is a growing end market, and we have the ability to leverage Rieke's global footprint and manufacturing costs. We are very happy to have these folks joining us.

We believe this acquisition will be neutral to EPS in 2011 and accretive for 2012. Overall, you can tell that I'm encouraged by our second-quarter results and our potential going forward.

Now I will ask Mark to share our financial highlights with you. Mark?

Thank you, David, and good morning. Let's start with a summary of our second-quarter results on slide 7.

Our second-quarter sales were almost $300 million, a record quarter for TriMas and our sixth consecutive quarter of sales growth. Net sales increased 19% compared to second quarter of 2010, led by 39% sales growth in energy, 24% sales growth in aerospace and defense, and 51% sales growth in Engineered Components. This growth was a result of gains in market share, new products, new markets, the successful integration of our 2010 acquisitions, and continued demand improvement across our businesses. Our strategies are working and our investments are paying off.

Our gross profit and operating profit both improved approximately 16% compared to Q2 2010. Our productivity savings continue to fund our growth initiatives and offset commodity inflation. We experienced a slight margin decline, primarily as a result of sales mix of our segments, as two of our lower-margin segments once again experienced significant sales growth during the quarter. Continuous productivity remains a priority, and our lower cost structure will leverage well with expected margin expansion for the year.

Second-quarter 2011 income from continuing operations was $17.1 million or $0.49 per diluted share, including a $0.07 per-share impact related to debt extinguishment costs associated with our recent refinancing.

Excluding the special item, our income from continuing operations would've been $19.6 million or $0.56 a share, a 27% increase compared to the second quarter of 2010, and another quarterly record for us.

While increased sales volumes contributed to this increase, our interest expense reduction of approximately $1.5 million also contributed during the quarter. We generated $15 million worth of free cash flow during the quarter compared to $33 million during Q2 2010 while funding new CapEx and working capital needs to support our current and future growth. We believe we have strong cash flow businesses, even in periods of significant growth, and we plan to generate $50 million to $60 million in free cash flow for the full year.

Moving on to slide 8, during the quarter, we made the decision to increase inventory in a couple of our businesses to ensure increased customer satisfaction, enhanced fill rates, and incremental business, as well as serve our customers in new markets. As you can see by our growth figures, we were successful in securing this additional business. As a result of these decisions, we did see a temporary increase in working capital as a percentage of sales with a Q2 2011 ratio of 16.9% compared to 15% in Q2 2010.

Our long-term working capital target remains at approximately 13% of sales at year end, although we do recognize that significant growth and global expansion does add complexity to our supply chain. Improvement here continues to be a focus for the company.

On slide 9, we ended the quarter with approximately $478 million in total debt, a decrease of almost $22 million compared to a year ago and a reduction of $16 million compared to year end.

During the second quarter, our strong financial performance afforded us the opportunity to continue to proactively manage our capital structure and reduce our future interest costs by refinancing our term loan and revolving credit. Under the transaction, we reduced the amount outstanding on the term loan from $233 million to $225 million; lowered our interest margin and LIBOR core by 175 basis points, respectively; and extended our maturity to June 2017. In addition, we were able to increase the revolver commitments from $75 million to $110 million; lower the interest margin by 75 basis points; and extend the revolver maturity from December 2013 to June 2016.

Overall, we believe this refinance will save us approximately $4 million annually in future interest costs. We're pleased by our strong support from both existing and new lenders. We believe our new facilities provide us with the operational and financial flexibility to continue executing on our long-term growth objectives and strategies.

As a result, we ended the quarter with a leverage ratio of 2.82 times, the lowest level we have experienced here at TriMas. In addition, TriMas ended the quarter with $162 million of cash and aggregate availability under our revolving credit and accounts receivables facilities.

At this point, I would like to shift gears and review our performance by reportable segment, beginning with packaging on slide 11.

Packaging sales grew 5.2% compared to the second quarter of 2010 as a result of increased industrial closure sales and favorable currency exchange, partially offset by lower sales of our specialty dispensing products.

Gross profit margin increased 250 basis points as a result of capital, productivity, and lean initiatives, as well as our ability to capture price to cover increased commodity costs.

Operating profit increased nearly 12% with operating margin increasing 190 basis points. We are excited about the growth prospects for this segment as we continue to launch new dispensing products into growing end markets, such as medical, pharma, food, and beverage, and personal care, as well as our initiatives to focus on geographic expansion and product extension.

We continue to invest in packaging, demonstrated by our increases in SG&A as we supported their growth initiatives. We're all excited about our acquisition of Innovative Molding with its proprietary products and customer base that complements Rieke's growth strategies.

Moving on to slide 12, Energy. Energy sales increased 39% for the second quarter compared to the year-ago period resulting from multiple initiatives, including increased demand for gaskets and bolts in our fourth quarter 2010 acquisition of South Texas Bolt & Fitting.

This acquisition contributed $5.2 million in sales for the quarter and its performance continues to exceed our expectations. Energy is also continuing to benefit from our newer Lamons branches open in Rotterdam, Salt Lake City, Edmonton in the United Kingdom, as well as a new branch open in Midland, Michigan, during the quarter.

Operating profits increased 23% as a result of higher sales volumes with margins declining due to a less favorable sales mix related to increasing sales at newer branches, which have initially lower margins due to aggressive market pricing and additional launch costs and selling and general and administrative costs in the support of branch expansion. We expect that these margins will improve over time. We will continue to expand our footprint as we remain committed to supporting our global customers and new markets.

On slide 13, Aerospace & Defense -- sales increased nearly 24% in Q2 2011 compared to Q2 2010 due to improved demand for our blind bolts and temporary fasteners from aerospace distribution customers, marking Q2 as the fourth quarter in a row of higher order activity and increasing backlog.

Our small defense business continues to be negatively impacted by decreased activity associated with managing the relocation of the establishment of the US Army's new defense facility.

Second-quarter operating profit increased 28% compared to the prior-year quarter, and related margin improved 70 basis points as the higher sales volume and more profitable sales mix in Q2 2011 more than offset higher levels of SG&A. As we move forward, we feel we are well-positioned to take advantage of the trend to build composite aircraft and our planned support increase in our content per aircraft. We expect this business to show revenue growth and margin expansion as aircraft build rates increase and our expanded geographic coverage generates results.

Moving on to slide 14, Engineered Components -- second-quarter 2011 sales increased 51% compared to a year-ago period, primarily due to improved demand for industrial cylinders, engines, and other well site products and compressors. Of the sales increase, $3.5 million was due to the Cylinder acquisition completing during second quarter of 2010. The specialty fittings and precision cutting tools businesses also experienced improved demand, primarily resulting from new product offerings and an upturn in the domestic economy.

Second-quarter operating profit increased 60%, and the operating profit margin improved 80 basis points compared to the prior-year period due to higher sales level; increased absorption of fixed costs; productivity initiatives, partially offset by higher SG&A supporting our growth initiatives. The company continues to develop new products and expand its international sales efforts in this segment.

On slide 15, we show the performance of Cequent split into two segments to provide more transparency. Cequent North America sales increased 7% for the quarter as a result of increased demand from OEM, retail, and aftermarket channels. Market share gains and new product launches and improved end markets all drove the sales increase. Cequent North America's operating profit increased 13% with margins up 60 basis points when compared to Q2 2010.

Cequent Asia Pacific sales increased nearly 17% when compared to Q2 2010 due to favorable currency exchange and new business awards in Thailand. This increase was partially offset by continued lower sales in Australia, mainly as a result of reduced vehicle availability due to the Japanese tsunami and continued impact of the first-quarter flooding of Queensland.

We see the effects of these events as temporary in nature and expect the business to rebound as the distribution chain normalizes. Cequent Asia Pacific's operating profit and related margin level declined due to start-up costs incurred during the quarter due to a new customer award, for which production has not yet begun.

As a result of the effects of lower volume in Australia, we also saw some lower levels of absorption. We will continue to focus on productivity, product leverage, and regional expansion in the Cequent segments.

In summary, on page 16, we are extremely pleased with our first-half results driven by our ongoing strategic initiatives. We had record quarterly sales driven by strong organic growth and successful integration of bolt-on acquisitions. And even with our investments in growth and future growth during the quarter, we also had record earnings levels from continuing operations.

Our strong performance afforded us the opportunity to refinance in the second quarter, and we've demonstrated our ongoing commitment to lower our interest expense and reduce our debt level to a TriMas low during the second quarter. We expect improvements in working capital efficiency, driven by lean projects across the company, which focus on improving supply chain processes. Continuous productivity in every functional area every year will remain a focused priority. As we proceed, we will continue to pursue opportunities to drive long-term earnings growth and enhance shareholder value for the future.

That concludes my comments. Now Dave will discuss our enhanced expectations for 2011. Dave?

Thanks, Mark. Now I will look forward and provide you with an update to TriMas's outlook.

Turning to slide 18, we are updating and increasing our full-year 2011 outlook. We now expect sales growth of 13% to 16% for the year despite the slow growth of the US economy. We see our growth programs working well. We have over 125 major programs underway in our businesses focused on new products, geographic growth, and share gains at existing customers. We have added some people and invested money in these programs and expect ongoing revenue growth.

Our update to our EPS guidance is now a tighter range and has been increased to $1.60 to $1.70 per share, excluding special items, compared to our previous guidance of $1.45 to $1.60 per share. As a reminder, the midpoint of this 2011 outlook is a 49% increase in EPS compared to the 2010 EPS of $1.11, which would exclude the benefit of a one-time tax adjustment in 2010.

We like the returns we are seeing on our growth initiatives, so we will continue to make these investments throughout our businesses. We are maintaining our cash flow outlook at $50 million to $60 million, reflecting those ongoing investments.

I will close with a reminder of our consistent ongoing strategic aspirations on slide 19. These aren't new, of course, but these are the priorities we keep returning to as we make decisions at TriMas.

Every quarter, each of our businesses does a six-quarter rolling forecast, laying out programs, revenues, productivity, and risks and opportunities in a nicely structured process.

So we have now had our first look at how we're looking for 2012. The good news is we are on track to meet or exceed these strategic aspirations in 2012. At TriMas, we are all committed to taking the actions to continue growing shareholder value. And we sure appreciate all of your support in this ongoing endeavor.

Now we will gladly take your questions.

(Operator Instructions). Rick Hoss, ROTH Capital.

A question first with packaging, it looks like you captured a majority of the input inflation, maybe through price increases. Is this accurate?

Yes, there were price increases in the quarter. There were price increases in the first half that impacted the quarter.

Right, so -- but I think the operating margin where it is today, it looks like you -- would you characterize it as you have captured the majority if not all of the input inflation at this point or is there still more to go?

Essentially, yes. There's always a little lag on some price increase affecting this, but essentially, yes.

Okay. And then the growth as it compares to the historical growth as a segment, which if I recall is a above 30% type of CAGR, it's been lagging the last couple of quarters. I know we had the difficult H1N1 comparison. Is there anything else? Can you share some additional insight into why it seems to be lower than it should be?

Rick, let me add a point of clarity to your question. The 30% growth that we saw was in really the specialty dispensing side of the business, not for the holistic view of that packaging enterprise. But I would say is that growth with some of our bigger customers has been longer in terms of implementation. The business continues to work through those opportunities, but it takes longer to implement some of these larger initiatives that we have in front of us. Dave, would you want to add any additional color there?

No, I would add that we -- in our operating reviews, we have looked -- we have sorted through the lists of the big programs we want to go after. And as Mark says, a few of them are taking a little longer on the customer side than we might have anticipated, but it's us shifting towards trying to capture some bigger programs, a lot of them in nontraditional countries for us. So I'm not concerned about the business over the long haul. Great programs, but you learn how to -- as you really get intense about growth, you learn sometimes that the offset is a little longer than you thought. I am real happy with the business and the way they are running it, obviously supported by a decision to do an acquisition that they will do a great job with.

Sure. I think it is interesting that the two segments -- the Packaging and Arrow were kind of positioned as more of the growthy segments and Cequent Engineered Components were more of the slower growth, and in the last call at 12 months that that has completely flip-flopped.

Well, good point. It winds up being a mix between the businesses. Some of it is those are attractive market segments with high margins, and they are tougher to grow in for sure.

On the other hand -- I mean I give the credit -- I give credit to the managers of all the businesses for really embracing our turn towards growth. And I have had some pleasant surprises by the opportunities we have seen in some of the other segments, and I'm all for it. We are about growing revenues and growing EPS, and it's working.

On the aerospace business, the sequential uptick, is this something that continues? You talked about the backlog is very strong right now. And I know it's a lagging type of growth trajectory. So are we starting to tick up on this as we have been more in the trough, say, in 2010?

What I would say, Rick, is that first quarter actually represented kind of the first quarter in a while that we saw orders in-house to be able to deliver the first-quarter results. Second quarter was only amplified in that respect.

What I would tell you is we are starting to see the pull or the demand that would naturally happen as framing activity increases in its velocity through the sales of temporary fasteners, which are a little lower margin for us, but that anticipates what's going to happen with the rest of the product set. And we expect to see continued growth and continued margin expansion through the rest of the year.

Okay, that makes sense. And then last question for me, on the Asia-Pacific Cequent, how much did this new startup program you talked about, how much did that dilute operating margin as well as if you can somehow normalize the impact of the Australian flooding and back out these headwinds and kind of give us an appreciation for where the operating profit would have been?

Pretty complex three-part question -- let me try with the startup costs were about $700,000, and you can see how much volume was done in this business. It's, let's call it a circa $20 million business for the quarter. So you can obviously complete the math there in terms of the implication on a bps basis.

I would also tell you that if you look at the absorption effects in that business, let's call it about a 10% fixed cost business. So with pretty sizable declines in the Australian market, we are seeing that negative effect hit. So, that's about as close as I can get you, Rick, off the top of my head.

Okay. Nice job. Okay, that does it for me. Thanks, guys.

Robert Kosowsky, Sidoti & Capital.

Good morning, Mark, Dave and Sherry. How are you guys doing? I was just wondering if you had any read-through on any potential economic weakness that you might be seeing in your old line packaging business?

You know, the -- it still feels flat. I mean we're still operating under the same mode. I mean there's no tailwind out there, but watching order rates and activity levels and that sort of thing, they're okay. We are all desperately watching for either an up or a down, but it just feels flat, which in a way is encouraging given all the press stuff.

Okay. And then I guess on the new specialty dispenser side, is it just that the customers are taking longer to bring these new products to market? Is that kind of the crux of the delay right now?

Yes. It's approval times. It's -- yes, it's approval times. It's us taking product into new markets and having to set up stocking warehouses and that kind of thing. It's all good stuff, but it's taking a while.

Okay. When do you think there could be like a meaningful increase in revenue? Just kind of like late in the second half or does it get pushed into like 2012 where you might see a little bit of a better growth rate in 2012?

Call it late second half.

Okay.

It's not in our control, but that's what it feels like.

Okay. Can you give us a little bit more detail on Innovative, like their -- you can comment on their margin profile, but is it kind of similar specialty product like you have in the dispensing side? And are you guys going to have to do a substantial increase in accounting write-up just based upon the acquisition that is going to kind of dilute the margin profile for a little while?

Well, that's a good question. If you think about the Rieke business being high 20% operating profits, this business is going to be a bit lower than that in its nature. And there's synergies that obviously we're going to work on over time to improve its overall profile.

But I would tell you this, is that of course you're going to have a step up in assets. You're going to have a step up in inventory in terms of your normal purchase accounting activities, and that will depress the profits here that come out of that business out of Q3 and possibly into a bit of Q4. Hence, what Dave's comment around it's not going to be dilutive, but it's also not going to be accretive in the back half of the year.

So you will see incremental revenues. I think press release said it was about a $28 million business in top line. You can annualize that. It's a fairly normalize business to get a sense as to what kind of volume uptick you'd expect in the back half.

Okay. And then just one last question -- the interest expense -- I guess good job getting that refinancing done. Does that $4 million in annual interest expense -- do we look at that off of say like 1Q's interest expense rate and kind of a $4 million savings versus 1Q? Is that kind of the right way of looking at it?

Yes, you also have to put in our normal seasonality, Rob, as you think through when we borrow most. So, it's probably more heavily weighted towards the front half of the year by let's call it 55/45 in terms of front half, back half.

Okay, but if you're running say first quarter like $12 million of interest expense, you know --?

You should expect to see a little more than $1 million downtick.

All right, cool. Thank you very much.

You bet.

Steve Barger, KeyBanc Capital.

Hi, it's actually Alex Walsh sitting in for Steve. We just had a couple of quick questions. Some might have been asked -- covered. But I was kind of curious -- I know you guys have talked about increasing content per plane. I was wondering if you could provide a little bit more detail on the difference between the content on some of the more composite oriented planes versus what's being produced right now.

Well, we are up 3 to 5 times on the composite aircraft -- I mean I get -- if we look through a list of where it's at. So call it -- use 3 or 4, and a couple of them where our content goes way up.

We also tend to -- the new redesigns like this -- the A320 we designed where they are doing wing changes and engine mounting changes, those tend to drive our content up too because they go to composite structures in the aircraft.

We know we have a content increase going on, plus the line rate increases going on at Boeing and Airbus over time. And as you can imagine -- I've said it before, that all is good for us. It means we're going to be adding capacity, and we have added to the team and the business to make sure we've got the horsepower to get it done. But I am quite bullish on that business.

Okay. That's really helpful. I guess sticking with the same segment, any update on the relocation and munitions facility, and I guess the timing on what the outlook is there?

It's -- the equipment is moved. We're at the stage that we are actually starting to quote on some new orders for the shells and their equipment that can be produced there. I'm in a stay-tuned mode on that on what will come from it. Like I have said before though, we've -- it's not like we are facing any kind of problem in the future. It's just would be upside if we got orders.

And so we're at the stage that we are starting to quote. We did a small technical JV with a company called Solidica that could go into the same facility if that, but it's a pure development thing right now. So there's a variety of things that could click in that, but I would call them all -- it's going to feel like upside to me if any of them do click.

Okay, so it doesn't seem like it's kind of built-in at this point, but if that were to be an upside, I mean likely to fall in 2012, I guess?

Yes, it would be 2012.

Got it. And then I guess coming over to the Packaging segment, I think those have been covered pretty extensively. I was just curious on the order progression through the quarter within the industrial closures business and I guess what you guys have been seeing thus far in 3Q?

Again, the order rates are feeling flat, which is kind of the new normal -- is okay with me. We do -- I preach this, but it feels to me like every bit of revenue -- upside we get is because we have to earn it with new products and programs, and all that because the economy is just not there; the tailwind is just not there. But, I know everybody is desperately watching for a downturn and I'm not seeing it.

Okay, that's helpful. And I guess just from a housekeeping perspective, I know you guys have talked about a higher tax rate in the back half or I guess in 2011. I was just kind of curious what your update was there, or what you guys are using.

If you look at full-year tax rate, we're probably a little north of 36%, but less than 37.5%, is kind of our outlook right now.

Got it. All right, I appreciate the time, guys.

(Operator Instructions). Robert Kosowsky.

Just two follow-on questions -- first off, could you give us some more detail as to how Arrow Engine performed in the quarter and how some of those new products are -- I guess if they are gaining traction?

Yes, well you can tell within Engineered Components with a 50% revenue increase, Arrow is a big piece of that; so is Norris.

The compressors that go to what you would call shale applications, where we are taking our compressors and putting them into systems, are going very well. We did some capacity adds and a new assembly building in Tulsa and it's full, which is mighty encouraging.

And there is, as you can imagine, lots of turnover in the new products, new ideas. Last time I was in Tulsa, they were shipping a -- what you would call a portable compressor system where it had jacks on it, where it could be parked someplace, used for a while, then moved someplace else and re-leveled.

And number one, the folks in Tulsa are very good at that kind of thing, fast, new designs, new applications.

And then the base business of engines and parts and that sort of thing is also real strong. The activity in the oil and gas fields is mighty high, as you can imagine. So, yes, pretty encouraged at Arrow.

Okay. And then just another question on Lamons, just kind of the outlook that you see for kind of refinery capacity utilization or maybe just turnaround activity; and then secondly, how are you finding the returns on some of those new facilities that you have out there?

Well the activity levels are high. There's some markets that are -- we've talked about Brazil. Brazil, really going strong. We are full blast on making sure we capture our share or more of the business in Brazil. So, I'm --- there is -- we will be busy for several years building out the footprint yet because of the -- all the -- either the new or the places we are underserved on refineries and petrochem plants.

I think the second half of your question is how do the margins look. It's exactly what we expect. When we go someplace, we tend to sell more standard product to start until we get the local plants used to the fact we really can deliver special product really fast. And then the margins start coming up as we get more or we bring in more of the -- the specialty bolts are proving to be good margins too.

And again, it's a matter of walking the line between how fast can we build out and get the revenue, and -- but recognizing the margins are going to be low for the first year.

Okay. And do you find when you go into new territory that you might have like a -- do you compete on kind of like a lower-cost -- low-cost advantage or is it more you just -- you have product breadth that you can offer?

No, it's all -- our whole model is about service and teaching and really convincing the local facility managers that we can deliver special product in ours. And they are skeptics at first.

Okay.

Rob, I would add, I think you also said something about product breadth. If you look at our typical competitive set, it's either A, they provide gaskets or B, they provide bolts. Our positioning there is obviously a broader positioning, which, if you remember our conversations and things that we've said publicly is, the standards, as Dave talks to them, those are obviously a lower profitability -- items for us in the initial phase, but where you get the real margin expansion is, as you earn credibility locally to deliver on those specialty items. And this is the normal integration process that you expect of any new branch.

Okay, thanks. That's really helpful. Good luck with the second half.

I'm showing no additional audio questions at this time.

Okay, well, thanks, everybody. We appreciate your continuing support. We are, as you can tell, intensely focused on growth and earnings per share growth. And so we will keep at it, and we appreciate your inputs and thoughts. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.