Zurn Elkay Water Solutions Corp (ZWS) 2008 Q2 法說會逐字稿

Good day, everyone, and welcome to today's Rexnord LLC conference call to report quarterly earnings results. Today's call is being recorded. With us today is Bob Hitt, Chief Executive Officer, and George Moore, Chief Financial Officer. Moderating the call will be Todd Adams, Controller and Treasurer. Mr. Adams, please begin.

Good morning and welcome to the Rexnord investor conference call to discuss our fiscal 2008 second-quarter financial results. My name is Todd Adams, Controller and Treasurer of Rexnord, and with me this morning are Bob Hitt, Chief Executive Officer, and George Moore, Chief Executive -- I'm sorry; Executive Vice President and Chief Financial Officer of Rexnord.

During today's call Bob will discuss the events of the quarter and also provide additional commentary about the industries and end markets we serve. George within discuss the financial results for the quarter. After this discussion we will open up the call to your questions.

A replay of this call will be available for the period of one week and the phone numbers and the replay can be found in the earnings release we filed in an 8-K with the SEC last week which is also posted on the Company's website at Rexnord.com.

Before we start I'll refer everyone to our earnings release and Form 10-Q filed last week regarding our view on forward-looking statements and risks. I'd also like to remind everyone that any forward-looking statements made on this call, including future market conditions, future operating results and other plans, represent management's best estimate as to what may occur in the future and are intended to fall within the meaning of the Private Securities Litigation Reform Act of 1995. Even though the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.

Finally, our business is subject to various risks and uncertainties, so please refer to the risk factors outlined in our reports filed with the Securities and Exchange Commission. Additionally within this call we may use some non-GAAP measures such as adjusted EBITDA as an indication of underlying operating performance.

The Rexnord definition of adjusted EBITDA starts with EBITDA as defined in the Company's credit agreement and is defined as earnings before interest, tax, depreciation and amortization with additional provisions for add backs of certain restructuring expenses, other income and expense, LIFO income or expense, stock option expense, charges and gains associated with the Canal Street accident exclusive of recoveries under our business interruption policies, and the impact of fair value accounting and the corresponding amortization of the step-up of inventory required under purchase accounting. Other companies in our industry may calculate adjusted EBITDA differently.

EBITDA is not a measurement of financial performance under Generally Accepted Accounting Principles and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with Generally Accepted Accounting Principles.

Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures, or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. With that introduction I'll turn the call over to Bob Hitt, Chief Executive Officer of Rexnord.

Thanks, Todd. Good morning and thank you for joining us on the call today. Last week we issued our press release outlining our second-quarter fiscal 2008 financial results which I'm hopeful everyone has had the opportunity to review. As we reviewed our performance in the second quarter and first half of fiscal 2008 there are a few key themes that I would like to draw everyone's attention to.

First, our core growth in operating performance across both platforms in the quarter as well as the half has been very solid. Consolidation, core growth in the second quarter was 8.6% and through the first six months of 2008 it was 8.9%. Core growth in the power transmission platform in the second quarter was 9.3% and 8.4% through the first six months. Core growth in the water management platform in the second quarter was 6.8% and 10.1% through the first six months of the fiscal year.

Our core growth has been driven by a combination of having market leadership positions in both platforms and our exposure to key still expanding end markets of mining, energy, aggregates and aerospace as well as by not having substantial exposure to residential housing in our water management platform which is approximately 75% non residential as we discussed before.

Secondly, we have fully recovered from the Canal Street blast which I'm very pleased to be able to say. Shipments and production from the Canal Street facility surpassed pre-blast levels. All the reconstruction efforts are substantially completed; our operating metrics related to productivity, on-time delivery and overall operating margins are in fact better than they were prior to the accident which is a true testament to our operating team's commitment, dedication, not just to recover but to recover stronger than we were before the blast.

I can't say enough about the excellent cooperation throughout the entire recovery process we've had from everyone -- from our employees in particular to our suppliers and customers as well as others, including consultants and our insurance carriers. The tremendous cooperation, determination and effort has truly been remarkable and I thank everyone for a job well done. And I will say that this is probably the last quarter that I'll bring up as far as the Canal street incident is concerned.

Finally, while the overall industrial economy is slowing we feel that Rexnord is well-positioned. As I first touched on earlier, our exposure to the key end markets of mining, aggregates, energy, cement and aerospace along with the addition of diversity of our water management platform leave us well-positioned as a company.

Additionally, inventories in the industrial distribution channel are in good shape and within water management our exposure, as I mentioned earlier, to residential construction is minimal. However, the overall tone and feeling we're getting from customers is that the industrial economy is slowing somewhat. It's difficult to determine to what extent all of the disruption in the credit markets will have on our customers and end markets, but we are truly closely monitoring all of our businesses and do not expect to be caught flat footed should economic conditions deteriorate.

I'll further discuss our feelings regarding the economy as well as our overall operating performance in the quarter as I go on in this call, but first let me go through a quick summary of our sales and order performance in the quarter.

So if you look at the second quarter, as I indicated before, consolidated sales grew 52% from last year second quarter to almost $454 million. Within that power transmission, as I just mentioned, grew 8.6% to almost $326 million. In the second quarter there was only minimal impact as a result of business interruption at Canal Street which adversely impacted sales by about $2.5 million to $3.5 million.

If you look at water management, our second-quarter sales were $128 million. On a pro forma basis water management sales grew almost 7% in the current year September quarter compared to the prior year September quarter. And as we exit quarter two our consolidated order backlog sits at approximately $474 million which is about $50 million or 12% up from March. Our power transmission backlog at the end of the quarter was approximately $453 million which is an increase of around 12% from March and is up from 20% a year ago from September. So you can see we're still having those long-term visibility businesses in particular, some good backlog and backlog growth there.

As far as the economic environment and its effect on Rexnord, we continue to see decent market conditions throughout both platforms in the second quarter. In the power transmission platform we're well diversified with both customers and markets and many of the markets where we have strong leadership positions, as I mentioned earlier, energy, mining, aggregates and aerospace, continue to grow as solid outlook.

Within water management, overall spending and commercial construction continues to be solid and our exposure to residential construction is relatively small. However when you dig a little deeper as far as what's going on in commercial construction market growth, you'll see that new construction put in place is flat, a much more relevant statistic in which to measure the underlying demand for the water management products we sell. So the 10% year-to-date core sales growth truly demonstrates the ability of the Zurn team to continue to outperform the market by developing innovative new products as well as penetrate the municipal and civil markets.

Additionally, we're seeing the benefits of the price increases that we've implemented over the past six months. As we exit the second quarter and look ahead to the second half of the fiscal year I would characterize the majority of our end markets as relatively healthy and the overall industrial economy as still growing but at lower rates than the past year. This is where our strong backlog (technical difficulty) replacement and repair nature of our products, and the highly engineered and specification driven nature of our product portfolios should be a competitive advantage for Rexnord.

Now let me turn my comments to the broader economic indicators, particularly in the power transmission side. As we know, the Institute of Supply Manufacturers, the PMA data continues to show the economy is expanding, but clearly growth has been slower throughout the second quarter. After posting 56 in June the index continued to dip slipping to 50.9 in October. In September U.S. industrial output, as we know, grew by 1.9% year-over-year and 1.6% after adjusting for manufactured output only. In September capacity utilization was 80.4% which was relatively flat from June down only 0.5% from a year ago.

Additionally, from a power transmission industry perspective, as you all know, we do follow the Power Transmission Distributor information PTDA members sales which are up 6.2% through September with manufacturers up 4% through September. Also the industrial distribution channel as far as inventory remains very healthy as sales inventory ratios ended September at 8.9 times.

As we look to Zurn in particular, as I mentioned, overall construction spending for the quarter showed some signs of slowing with overall non residential building construction starts down 6% in September. But institutional construction, including schools and hospitals, showed some strengthening toward the end of the quarter after a lackluster start earlier in the quarter.

As you know, school and hospital construction are important categories for our water management business as the entire package of Zurn products are typically specified at these structure types. Everyone is well aware of the weak residential construction situation, but given that we're primarily focused on nonresidential with greater than 75% of our sales, it continues to have limited impact on our overall business.

We have been very diligent and disciplined on pricing and we'll continue to be so as raw materials such as copper, natural gas and oil continue to fluctuate. An important movement in construction continues to be leadership in energy and environment design, or green building as they would say, and as there are communities throughout the U.S. that are literally running out of water, our Zurn EcoVantage productline continues to provide great solutions.

Zurn has just recently received recognition for an 8 gallon urinal system called the Pint as the best new green product at a recent trade show. We expect to see growth in the green building category which should help offset any overall market softness and allow the water management group to continue to outperform the market.

As we look at our business over the next several months we believe we are well positioned in both platforms. We have a solid backlog and coupled with reasonable fundamental growth characteristics in a number of our key end markets. As I mentioned with the energy, mining, waterworks and civil water management, cement, aggregates as well as aerospace, we expect to continue to post positive results in the next quarter.

So in conclusion, we've had a strong start to fiscal '08. We've delivered strong organic sales growth of 8.6% in the quarter and almost 8.9 in the first half. And the EBITDA margins of both of our operating segments are greater than 20%. Our leverage continues to decline and our liquidity is excellent. We've completed the recovery from the Canal Street accidentally and we're a more resilient company for having dealt with that adversity.

As we look forward our diversity and our leadership positions and platforms with attractive growth profiles coupled with the Rexnord business system establishes Rexnord as a premier, multiplatform industrial company. As we have discussed throughout the call, the underlying economy has a degree of uncertainty in it. Our priorities for the rest of the year remain the same -- focus on the customer and drive world-class performance on quality, delivery and cost. And as we do those things right we'll continue to grow, drive margin expansion and generate cash to reduce our debt.

So with that I'll turn it over to George to provide some more in-depth financial information regarding our second-quarter performance. George?

Thanks, Bob. As Bob mentioned earlier, our second-quarter 2008 reported results were minimally impacted by the accident at Canal Street on December 6th of last year. We estimate that sales were adversely impacted by $2.5 million to $3.5 million in the second quarter with the corresponding decrease in operating income of approximately $1.5 million. As we outlined in the press release last week in the second quarter, we recorded $5.8 million of recoveries under our business interruption insurance in the quarter and as of the end of September we have settled all the business interruption claims for fiscal year 2007.

We have ultimately recorded $18.3 million of business interruption recoveries relating to the period from December 6, 2007 through March 31, 2007. We anticipate settling the claims relating to the business interruption impacts from April 1st to the present sometime in the coming months. Now I would like to provide you with a financial overview of the second quarter and some insight into our operating results. Let's start with sales.

For the quarter sales were $453.9 million or 52.3% higher than in the second quarter of last year. $128 million or 82% of the total growth was attributable to having the acquired Zurn water management business included in the current quarter without being included in the prior year. The remaining increase is a result of 9.3% organic growth in our power transmission segment. As Bob mentioned earlier, our end markets of energy, mining, aggregates and aerospace remain strong, only slightly offset by the unfavorable impact from the Canal Street accident.

Additionally, favorable foreign currency translation added approximately 2% to the growth compared to the prior year quarter. First profit in the quarter was $149.2 million or 32.9% of sales compared to 30.5% in the second quarter of a year ago. Gross profit margins in the second quarter of fiscal 2008 include approximately 20 basis points of LIFO expense or as last year's second-quarter gross profit margin of 30.5% included the adverse impact of approximately 160 basis points as a result of the net impact of the amortization of inventory, fair value purchase accounting adjustments related to the Apollo acquisition.

SG&A in the second quarter was $75.3 million or 16.6% of sales compared to $55 million or 18.5% of sales in the second quarter of last year. The inclusion of the acquired Zurn business from the acquisition date added $21.7 million of SG&A expense compared to the prior year second quarter. After adjusting for the acquired Zurn business the reduction in SG&A dollars of the prior year's second quarter was $1.4 million primarily driven by lower overall compensation expense of $2.6 million offset by higher non-cash stock option expense of $800,000 and additional severance cost of $1 million related to an organizational realignment within the power transmission segment.

In the second quarter we recorded a gain on the Canal Street explosion net of $3.7 million. This net gain in the quarter is comprised of expenses associated with the cleanup and restoration expenses totaling $2.1 million. Offsetting the $2.1 million of expenses is the allocation of $5.8 million of insurance proceeds reported in the quarter under our business interruption policy for items through March 31, 2007.

Income from operations in the quarter was $65.1 million compared to $18.7 million operating loss in the second quarter of last year. This year's operating income includes the acquired Zurn businesses which was $23 million in the second quarter. Operating income in the prior year's second quarter included $46.1 million of seller-related transaction costs associated with the sale of the Company to Apollo. Adjusted EBITDA in the second quarter increased 71% to $93.7 million or 20.6% of sales.

When you look at it by platform power transmission adjusted EBITDA in the second quarter was $66.4 million or 20.4% of sales as margins expanded by 80 basis points compared to the prior year second quarter. Our water management platform generated $29.6 million of adjusted EBITDA in the quarter which equates to 23.1% of sales, up 100 basis points sequentially from the first quarter and up almost 180 basis points from the prior year on a pro forma basis.

In the second quarter we've modified the presentation of our segments to break out various general and administrative costs not discreetly associated with the power transmission or water management segments as corporate expenses. Corporate expenses in the second quarter were $2.3 million compared to $3.6 million in the prior year's second quarter.

Adjusted EBITDA in the second quarter includes the adverse impact of $1.3 million of severance costs associated with an organizational realignment within the power transmission segment and the benefit of $5.8 million of business interruption recoveries. Adjusted EBITDA in the second quarter excludes the approximately $1.5 million adverse profit impact from lower sales in the quarter as a result of the Canal Street accident.

Interest expense in the quarter was $48.5 million reflecting the additional interest on the increased indebtedness arising from the Apollo acquisition as well as the Zurn acquisition compared to the prior year second quarter. And income tax expense of $7 million was recorded in the quarter. The effective tax rate in the second quarter of 50% exclude the accrual of interest expense related to unrecognized tax benefits in accordance with FIN 48 as well as an increase in the valuation allowance related to certain tax credits or which future utilization is deemed not to meet the more likely than not threshold.

We now expect a net tax refund -- a net cash tax refund in fiscal 2008 in the range of $1 million to $8 million as a result of current year estimated tax payments being more than offset by an anticipated refund relating to the settlement of a Zurn IRS audit.

Let's take a look at our balance sheet. Our cash balance as of September 29, 2007 was $75.2 million, an increase of $19.1 million from March 31, 2007 and an increase of $14.4 million from the end of June. From a trade working capital perspective at the end of the second quarter receivables were $266 million, inventories were $374 million and accounts payable were $138 million for a net of $502 million of trade working capital. Included within the inventory balance is a non-cash fair value step up of approximately $35.1 million.

As a percentage of annualized sales trade working capital was 27.7% on a consolidated basis in the second quarter compared to 28.7% at the end of the first quarter and 31.4% in the fourth quarter of fiscal 2007. Second-quarter trade working capital as a percent of annualized sales excluding the inventory step up was 25.7% which compares to 26.6% in the first quarter and 28.7% in the fourth quarter of 2007 excluding the inventory step up.

We continue to see working capital as a cash opportunity, particularly inventory within both the power transmission and water management businesses. Our goal remains to drive down working capital as a percent of sales and we believe that the majority of the opportunity will come from improving the velocity of our inventory turns.

Additionally in the second-quarter we finalized purchase price allocation associated with the Apollo acquisition resulting in a net $35.2 million adjustment to reduce goodwill. Finally, we expect to finalize the purchase price allocation associated with the Zurn acquisition in our (technical difficulty) quarter and to make the appropriate adjustments to the balance sheet in future quarters.

Capital spending in the second quarter was $14.4 million or 3.2% of sales. Through the first six months of fiscal 2008 capital spending was $22.7 million or 2.5% of sales which compares to $21.5 million or 3.6% through the first six months of last year. Consistent with what we have communicated during prior calls, we anticipate that the full fiscal year capital spending will be in the 2.6 to 2.9% range as a percent of sales.

Our total debt at the end of the quarter was $2.025 million after reducing debt by $1.6 million in the quarter. After incurring $669 million of additional indebtedness to finance the Zurn acquisition we have reduced our total debt by approximately $82 million. Our liquidity at the end of September remains strong as we had cash balances of $75.2 million and had no borrowings outstanding on our $150 million revolving credit facility. However, $34.8 million of facilities considered utilized from letters of credit leaving approximately $115 million of borrowings available under the revolver as of September 29th.

Additionally in the second quarter we entered into an accounts receivable securitization program that provides us an additional $100 million of borrowing availability. As of the end of the second quarter we had $767 million of term loan B borrowings, $803 million of 9.5% senior unsecured notes, $150 million of 8-7/8 senior unsecured notes, $300 million of 11.75% senior subordinated and $5.2 million of other debt.

Finally, we continue to delever. Through the second quarter of fiscal 2008 we have reduced our debt by $21.9 million driving our leverage ratio to 5.9 times at the end of September compared to 6.2 times at the end of March and down from 6.8 times at the time of the Apollo acquisition.

As we've previously disclosed and discussed, we continue to expect to recover the majority of the non-recurring expenses associated with the Canal Street accident as well as the business interruption impact. We expect to continue to make progress with our insurance carriers in the coming quarters to finalize and settle out our total insurance claims. Consistent with what we have communicated since the accident, we do not expect this accident to have any material impact on our overall financial position or liquidity.

With that financial overview, I'll turn it back over to the operator to open up for any questions.

(OPERATOR INSTRUCTIONS). Lionel Jolivot, Banc of America.

Good morning. First, can you talk a little bit about what you're seeing in your distribution channels? We heard from a few of your competitors that (inaudible) in August and September it was a little bit slow from the distributor's perspective. Are you seeing any slowdown at this point? And have some of your distributors started to tighten a little bit their supply chain?

We haven't seen much of a change through the August/September time frame. Plus any conversations I've had with the distributors to date haven't shown much of a change either. I think it depends on market and market segments I think they're overall -- they may be down with their residential in particular and some other segments, but if we look at the segments we serve and the industrial -- and the heavy industrial, as I mentioned, we haven't seen much of a change.

Okay. And then on the pricing front, it seems that you've still been able to pass quite a bit of pricing this quarter that helped offset increasing raw material costs. Are you seeing -- what are you seeing on the pricing front and on the competitive front? Are you still able to raise your prices at this point?

The focus to what you've seen through the quarter has been on water management in particular. As you know with copper prices being up, yes, we have been able to do that. Traditionally power transmission, about this time of the year there are price reviews that take place, but the impact so far has been on the water management side. And yes, we have had that ability and consider us to be a leader in that area.

And the last thing for me, just the new AR securitization line. I'm wondering, are you currently using it and are you going to move some of the term debt some of the debt that was in the term loan under the new AR securitization line?

The AR securitization line is currently unused and it's really there for flexibility and liquidity.

So you're not going to pay down a big chunk of the term loan at this point?

We're not planning that at this time.

Okay, great. Thank you very much.

Tom Klamka, Credit Suisse.

Good morning. Can you guys talk a bit more about some of your end markets, especially in PT I guess. If you look at aggregates and cement, there seems to be a lot of softness out there. In other companies, because of their residential exposure, you kind of noted it as one of your strong sectors I guess.

Yes, I would say if you look at it -- you've got to realize, too, Tom, that we support from an international basis as well some of these markets and end markets. Clearly we see residential impacts in pulp paper for us. In those kinds of areas we do see an impact. But we're clearly seeing an offset based on the energy and I would say natural resource areas. We continue to see some pretty good growth.

We also, as you know in aerospace, (inaudible) a segment from the industrial side, but within power transmission that continues to perform very well. But clearly yes, there is and, as you talk to people on the residential side, as I said pulp paper for us, it is -- and then you see these tile companies and roofing companies and those things. But as a total percentage of our market it's not a big, big impact to us -- today.

Okay. And you gave some backlog numbers for power transmission. Is that impacted somewhat by Canal Street orders that are not being able to ship yet?

No, it's purely market-driven.

Early on last year, Tom, it was right after the blast, we saw backlog go up (multiple speakers) current orders.

I think you said, if I caught you right, up 12% year-over-year was the PT backlog or up 12% from March?

From March. If you look at our delivery percentages, Tom, they're up in that 95 range% -- so percent range. So it's (inaudible) backlog.

And when you look at commercial construction, I guess it's square footage which is the way you guys look at it being flat, the Zurn year-over-year increase I think you show pro forma around 7% if you strip out the pricing is that running basically flat then or how much is the pricing impact in the Zurn numbers?

If you look at the growth level it would be us 2 to 3 to balance on price.

2 to 3% excluding pricing?

Correct.

Okay, great. Thank you.

(OPERATOR INSTRUCTIONS). Yilme Abebe, JPMorgan.

A couple questions from me. A bit of a general question, but as you look at your end markets, both for the PT business and the water management business, what's their visibility like going forward? What I'm trying to get at is how far ahead can you actually see a weakness in any of your end markets via looking at your backlogs and orders and so forth?

It's not a question you can answer direct because it depends on the end markets in terms of what they are. We typically have more backlog when you look at our aerospace business and in particular at our gear business due to the lead-times of that product base. But then we have other products that range from weeks. Our total range is between two weeks and two years depending on product base.

Okay. I guess --

I think the thing you have to look at is if you look at the amount of visibility, if you look at -- I think we said there's about $454 million in backlog -- so clearly we have more visibility with the makeup of our company than we did prior to the acquisitions that we've made over the last couple years. So there's that type of thing. But like on the water management side, the nature of that business is there's not really backlog. You sell day to day, contractor to contractor and that business -- the nature of it is that it's not atypical for them to order for the job site 2 hours before they need them.

Thanks, that's helpful. Then I guess as we look forward, if the slowdown is I guess more than expected, can you talk to I guess your ability to flex down your cost structure in terms of what you're thinking on that side if I guess this slowdown is somewhat more than expected?

We have traditionally -- if you look at a couple of things. First and foremost, on our distribution side because of the nature of our business a lot of it repair and replacement, if you take out in the past big inventory corrections have taken place which now we see a better inventory position, we've seen numbers that would average 2% to 3% in a big downturn and that.

We're really cushioned by the fact too that we're in a lot of repair and replacement business and a lot of engineer driven specifications where cost of failure is pretty high. But we have and have done flexing in the past through the obvious things that anybody would do from an overhead perspective to an SG&A to a labor flexing. But a couple of things that, as I say, helps us is -- one is we've got some very good long cycle businesses that we have, but on the flip side of that, if you look at our distribution, it's ups and downs are not typically very significant.

I guess on the SG&A side, I imagine (inaudible) let's say next quarter you do see a slowdown more than you expect. Would we expect to see within that quarter I guess a reduction on the SG&A side or does it typically take at least one quarter or so?

Part of what we do, part of the RTS system continues to look at our cost structures and I think you see that we have the -- in power transmission a slight reorganization or restructuring (inaudible) we constantly look at calls. There are certain calls within SG&A that (inaudible) because there are variables (inaudible) and we will continue to look at what the length of the downturn we would expect to reason. Or the overall SG&A, once you strip out and adjust pro forma for water management it was actually down year on year this year as we continue to focus on that. I think as Bob mentioned earlier, we're not going to sit idly by and watch what happens to the economy. We want to deal with that on an ongoing basis.

Thanks. That's it for me.

(OPERATOR INSTRUCTIONS). Lionel Jolivot, Banc of America.

Thank you. I just wanted to confirm one thing. The Canal Street incident, basically all the impact is behind you at this point. You should not see a -- I mean, it seems that your production levels are back to where you were initially. And so revenues should not be impacted in the future and I think in terms of business recoveries or insurance recoveries you don't expect to get anything else at this point. Is that right?

Partially right. For all intents and purposes the Canal Street incident is behind us. We do expect to finalize the overall insurance claim. We don't expect there to be significant impact on a go forward basis. As Bob mentioned, we're pretty much through talking about Canal Street. We are back up and running okay at pre-blast levels, on-time delivery is better than pre-blast levels and costs are in line. It's wrapping up the insurance claim at this point so we don't expect that to have a significant impact in this next quarter or future quarters.

Thank you.

Edward [Shaugus], [Tenet] Park.

Good morning, guys. I just had a technical question. Can you just comment on the amount of actual interest paid this quarter and year-to-date and the same thing as the actual taxes to this quarter and year-to-date?

Edward, the cash interest is about $190 million on an annual basis, and from a cash tax perspective we're a little less than $10 million through the first six months of the year.

So you only paid $10 million of taxes I guess this quarter or is it --?

Through the first six months.

$10 million actual cash interest paid?

You said cash tax.

No, no. Okay, $10 million of cash taxes year-to-date, and in the last quarter?

I don't have that number in front of me.

Okay. And for the interest it's about $190 million you said for the first six months?

Full year, on an annual basis it's $190 million.

Okay. So it's about I guess $95 million?

Correct.

Great, thank you.

It doesn't appear that we have any further questions. Mr. Hitt, I'll turn the call over to you for any closing remarks.

Thanks to everyone for listening, for your attention on our call today. As you can see, we had a relatively strong quarter, solid core growth in both platforms with adjusted EBITDA margin expansion. We reduced our leverage and our liquidity is stronger than it has ever been.

Additionally, we've completely recovered, as I mentioned, from the Canal Street accident and the integration work associated with the Zurn acquisition is complete. Again, thank you. Again, we look forward to speaking with you again as we announce our next quarter's results.