Altra Industrial Motion Corp.
Q2 2015 Earnings Call Transcript

Published: 23 Jul 2015

[Operator:]

Greetings and welcome to the Altra Industrial Motion Second Quarter 2015 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to Andrew Blazier, with Sharon Merrill. Thank you, you may begin.

[Andrew Blazier:]

Thank you, Rob. Good morning, everyone and welcome to the call. With me today are Chief Executive Officer, Carl Christenson; and Chief Financial Officer, Christian Storch. To help you follow management's discussion on this call they'll be referencing slides that are posted to the altramotion.com website under Events and Presentations in the Investor Relations section. Please turn to Slide 1. During the call, management will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from management's expectations. Please refer to the risks, uncertainties and other factors described in the Company's Quarterly Reports on Form 10-Q and Annual Report on Form 10-K and in the Company's other filings with the U.S. Securities and Exchange Commission. Except as required by applicable law, Altra Industrial Motion Corp., does not intend to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. On today's call, management will refer to non-GAAP diluted earnings per share, non-GAAP income from operations, non-GAAP net income, non-GAAP operating working capital. And non-GAAP free cash flow. These metrics exclude certain items discussed in our slide presentation and in our press release under the heading, Discussion of Non-GAAP Financial Measures, and any other items that management believes should be excluded when reviewing continuing operations. The reconciliations of Altra's non-GAAP measures to the comparable GAAP measures are available on the financial tables of the Q2 2015 financial results press release on Altra's website. I will now turn the call over to Altra's CEO, Carl Christenson.

[Carl Christenson:]

Thank you Andrew and please turn to Slide 2. On today’s call I will go through a brief overview of our performance during the quarter and the major drivers of that performance and then I’ll walk you the next steps of our business simplification plan as we announced in our press release this morning. Then Christian will go over the financial results and I will close with my usual review of our end markets and short summary of the quarter. Ultra delivered a solid performance during the second quarter particularly given the challenging, global industrial, economic environment and ongoing weakness in several of our key end markets. We continue to navigate the strong U.S. dollar contraction in the price of oil and global weakness that began in the second half of last year. Revenues declined 8.6% from the second quarter of 2014 to $196.6 million. As has been true since last fall, the decline in net sales was driven by the unfavorable impact of foreign exchange, global economic weakness and lower demand in our oil and gas agriculture, mining and metals end markets. Although gross margin compressed slightly from a year ago, we saw some sequential improvement from the first quarter. Excluding the impact of foreign exchange, operating expenses declined from last year primarily because of cost reduction initiatives as well as the decline in healthcare costs. However, operating income also declined from a year ago due to the lower topline. As a result, non-GAAP earnings declined 12% year-over-year to $11.5 million or $0.43 per share. During the quarter, we purchased the remaining 15% interest of Lamiflex in Brazil. And we are in the process of installing capacity to assemble Svendborg Brakes in Brazil. Now please turn to slide three. We said on our first quarter call that we would be taking aggressive actions to reduce cost and align our operations according to current levels of demand. These actions are in addition to the headcount reduction and restructurings that are in process at Bauer and Svendborg. And keeping with that intent, today we announced the next steps of our multiyear business simplification plan, the primary goals of this plan are to improve business effectiveness, reduce the number of facilities, streamline the company’s cost structure, increase margins and enhance shareholder value. We built Altra through a series of acquisitions during the past ten years, performing basic integrations with each new acquisition; however we have a tremendous opportunity to streamline our cost structure and truly unify the company. The next step of the plan has two parts, which we outlined in our earnings release this morning. The first part is a broader facility consolidation and reducing the number of legal entities. Altra currently has 34 manufacturing assembly facilities around the world. We expect to reduce that number by at least 20% by the end of 2018. This includes three consolidations that were initiated during the second quarter in Illinois, France and South Africa. We are now reviewing a number of facility candidates for further consolidation and we plan to announce and complete consolidations in stages in a disciplined, orderly manner. The intent of the consolidations is to streamline overhead cost but not reduce capacity. We intend to maintain capacity with fewer rooflines. We will also be able to tuck small acquisitions in to floor space in the existing facilities. As a result of the consolidations Altra will run fewer but larger facilities, this will enable the company to attract skilled individuals and develop the management talent necessary to drive continuous improvement and develop more efficient operations. The second part of the plan is to take advantage of economy to scale and optimize our supply chain to better leverage our global spend. This will enable us to centralize certain aspects of our supply chain and reduce the number of suppliers. As we execute this plan, we will benefit from the investments made in our global IT system. In total, we expect these actions to be completed by the end of 2018. We expect to begin realizing savings from our actions during the second half of 2015 and to complete these actions by the end of 2018. We ultimately expect to achieve annual savings of approximately $15 million. As many of you know for the past several years our top priorities have been focused on top line growth, both organic and acquisition as well as margin improvement. The next steps in our business simplification efforts will take approximately 3.5 years to complete and will be a significant contributor towards achieving our 15% operating margin goal. That is a significant goal for our company and will require a unified effort across and at every level of our organization. We’ll still pursue growth through acquisitions, we’re refining our acquisition process to improve the quality of the pipeline and develop standard work for the integration process. Now I will turn the call over to Christian, then close with the discussion of our end markets and a brief summary. Christian?

[Christian Storch:]

Thank you, Carl and good morning everyone. Please turn to slide four. Our second quarter results reflect the continued weakness in some of our largest end markets as well as deteriorating sentiment within our distribution channel. For the second quarter of 2015, non- GAAP EPS was $0.43 versus $0.48 a share a year ago. I am pleased with our Q4 performance. When compared to our first quarter of 2015 sales and gross profit margins were up slightly while operating expenses were down slightly. Looking at the topline, foreign exchange rates had a negative impact of approximately 590 basis points, driven by continued strength in the U.S. dollar, while price added 90 basis points. Volume declined 360 basis points as a result of the weakness in oil and gas, AG, mining and metals. Net of foreign exchange, sales declined 2.7% year-over-year. Geographically excluding acquisitions and the effect of foreign exchange, North American revenues declined 7.9% year-over-year while European revenues increased by 2%. Sales to Asia Pacific and all other geographies increased 2%. Interest expense was essentially unchanged at $3 million. During the quarter, the average price of the company’s common stock did exceed the current per share conversion price of the company’s convertible notes by a small amount as a result and those were only slightly dilutive to earnings. We recorded a tax rate of 31.2% during the quarter compared with the tax rate of 31.7% in the second quarter of 2014. Please turn to Slide five for discussion of our segment performance. For the second quarter of 2015 net sales in clutches and brakes were $105.5 million compared with $111 million in the year ago quarter. The decrease was primarily the result of declines in agriculture oil and gas as well as mining. Segment operating income was $30.3 million versus $40.3 million a year ago. Net sales in gearing and power transmission component segment were $60.6 million compared with $70.1 million in the second quarter of 2014. As a reminder, Bauer is the primary driver in this segment and we’ve seen some nice results from our Bauer improvement efforts recently. The decline was primarily of the result of unfavorable foreign exchange translation, which was partially offset by improved markets for our Bauer business segment. Segment operating income declined $1.4 million as a result of the aforementioned items. Net sales in the coupling segment were $31.7 million, compared with $35 million in the year ago quarter, segment operating income declined $800,000 [ph]. Slide six, is a reconciliation of our non-GAAP measures. Please turn to Slide seven. Book equity was 252 million and our cash balance was 42 million. During the quarter we repurchased 123, 000 of Altra stock for total of $3.4 million under our $50 million stock buyback program that expires at the end of 2016. Since the program’s inception last year we have purchased approximately $25.6 million, or 839,000 shares. We are active in the market and will continue to repurchase Altra shares from time to time as market conditions warrant. We also increased our quarterly cash dividend by 25% during the quarter, boosting returns to our shareholders. Slide 8, reviews our working capital performance, our working capital improvement efforts contributed to the company’s operating and free cash flow year-to-date Altra generated free cash flow of $16.6 million. Capital investments during the quarter totaled $5.8 million and depreciation and amortization was $7.6 million. Also during the quarter we purchased the remaining 15% of our Lamiflex subsidiary in Brazil for $870,000. We now have 100% ownership of Lamiflex. Please turn to Slide 9 and our guidance for 2015. Our guidance for the full year remains unchanged. We expect sales in the range of $760 million to $780 million in non-GAAP diluted EPS in the range of $1.60 to $1.75. This guidance includes savings from the restructuring actions taken to date. We expect continued weakness in agriculture, metals, mining, oil and gas. The Company expects its tax rate for the full year to be approximately 30% to 32% before discrete tax items. Altra also expect its capital expenditures in the range of $24 to $26 million and depreciation and amortization in the range of $30 million to $32 million. With that, I will turn the discussion back to Carl.

[Carl Christenson:]

Thank you, Christian. And please turn to Slide 10 for review of our end market. Let’s begin with distribution which is predominantly made up of sales of aftermarket parts and original equipment parts for small OEMs. In the second quarter distribution revenues continue to weaken from the first and were down year-over-year on further erosion of our oil and gas and metals markets. In addition to weakness in some specific end markets we believe that the decline in distribution is an indication that the industrial economy is not healthy. Turf and Garden was again a bright spot for this quarter and sales were up strongly from a year ago. We already have a significant share of this market and we’re adding to that in the second quarter on the strength of sales to both new and existing customers. We continue to expect this market to do well on a solid housing and increased household disposable income in the U.S. Agriculture continues to be down sharply this year as a result of low commodity prices and the negative impact of the strong dollar on U.S. exports. Ag was actually up slightly from the second quarter 2014 on an easier comp as we have now reach the anniversary, the beginning of the decline in this market. Transportation was up modestly, strengthen sales to marine and rail. Automotive sales continue to be soft, but this was primarily related to timing issues at a major automotive customer. In materials handling sales were up slightly year-over-year, demand in forklifts and elevators was essentially unchanged while conveyors were up modestly. Crane and hoist demand was down. Turning to the energy market, energy overall was not down significantly from a year ago. Our projection at the start of the year was that Altra's revenues from oil and gas would be down 25% in 2015. In fact oil and gas deteriorated in Q2 and is now off more than we expected year to-date. Alternative energy which has propped up the overall energy market thus far declined modestly from the second quarter of 2014. The decline in demand in renewable energy market was driven by timing issues for our wind related products. Power generation revenue was similarly down from a year ago. Demand in the metals market worsened during the quarter and was off substantially from a year ago. In addition to the sluggishness in oil and gas we’ve discussed previously, slower growth in China has had a twofold effect on metals. China represents half the world’s steel consumption, so lower demand in China has a profound effect on this market moreover with ideal capacity of Chinese steel mills China is exporting more steel which is further eroding steel prices and consequently investment in European and North American operations. Mining continue to be weak and was down year-over-year but grew sequentially from Q1. The sequential increase in mining was largely due to two large shipments. We continue to receive a number of proposal requests in this market, however the outlook for mining for this market continue to be challenging. Finally, sales in aerospace and defense continues to up strongly for the year, but decline slightly during the quarter. The increase year to-date has been led by solid demand in commercial aerospace and some land based defense projects. Overall we expect this market to be up slightly in 2015. In terms of geography excluding the effect of foreign exchange North America was down from a year ago, while sales in Europe were up and Asia was up slightly. The outlook for global economy is mixed and we remain cautious. We continue to make progress on our other strategic initiatives, strategic pricing contributed to the Q2 results and we continue to roll it out to additional businesses. In addition, the Bauer business took further actions to reduced cost and the performance Bauer continues to improve. In summary, while our end market and the global economy continue to be sluggish, we continue to drive improvement and cost containment across our organization. Now it’s a time to elevate our efforts so that when the economic and end market conditions eventually improved Altra will be a much more efficient company generating profits at a substantially higher pace. We look forward to providing additional insight on our progress when we speak again on our third quarter call. Thank you for your continued support of Altra. And we will now open the call to your questions. Operator?

[Operator:]

[Operator Instructions] Our first question is from Matt Duncan with Stephens. Please proceed with your question.

[Matt Duncan:]

Hey, good morning, guys.

[Carl Christenson:]

Good morning, Matt.

[Christian Storch:]

Good morning.

[Matt Duncan:]

So Carl, can you maybe talk a little bit about the order trends that you guys are seeing especially from the oil and gas market. Rig count seems to hit bottom, is that starting to show up and maybe a bottoming of the down trend in the sales to that market or you still seeing things get worst sequentially?

[Carl Christenson:]

Well, I think we’ve seen a flattening out. We lived off of some of the backlog earlier in the year and so reached [ph] into the backlog, but there is certainly some replacement parts orders coming in and it seems to have flatten out Matt.

[Matt Duncan:]

Okay. So you said you originally thought it was going to be down 25% this year. How much is it actually down year to-date so far?

[Carl Christenson:]

It’s down around 30%, and...

[Matt Duncan:]

So not too...

[Carl Christenson:]

Yeah, around 30%.

[Carl Christenson:]

No, with the ballpark but worst than effected.

[Matt Duncan:]

Fair enough. On the business improvement actions so it sounds like we’re going to get $15 million in annual saving out of these once they’re fully rolled out by the end of 2018. Christian, is there any help you can give us on how that $15 million stays this and especially just this year and next how should we think about the cost savings benefit from those actions than 2015 versus 2014 and then 2016 versus 2015?

[Christian Storch:]

I can you some help as it relates to this year. We plan on subsequent calls to provide some guarantors to how this will affect 2016, 2017, 2018, we expect that by the time we exit 2018 we had the full $15 million run rate.

[Matt Duncan:]

Right.

[Christian Storch:]

So far this year we have realized about $600,000 of savings with another $1.5 million to $2 million to go in this second half. And that relates primarily to the actions that we have taken, plus the headcount reductions early on in the year at Bauer and Svendborg and some of the other European operations. On top of that these three facilities that are – that were currently in the process of closing, the yield and annual savings somewhere between $1.5 million and $2 million. We think that we’re going to complete those three by January or February of next year.

[Matt Duncan:]

Okay. Very helpful. Thanks. And then last thing I’ve got just on the strategic price initiative, Carl, it sounds like you are still have some success with that, is it still helping gross margin by the roughly 50 basis points that you thought it would. And as you go to customers with these strategic pricing actions right now you finding any more difficult to get them to accept those as it is getting any harder or you still having the sort of same success rate that you expected.

[Carl Christenson:]

On the strategic pricing initiative we’re still having the same effect that we expected and it was about 50 basis points in the quarter where it is more difficult is on the general price increases and certainly at the OEM side. So I would – so I’m really happy that we’re implementing the strategic pricing because it – we saw nice improvement from pricing and more of it this time was due to the strategic pricing in our general price increases.

[Matt Duncan:]

Yes. I mean, it seems like its definitely dampening what would be happening with gross margins right now, but not for those actions so. Well timed right.

[Carl Christenson:]

Yes. And it surgical, so it’s something that we can do even in the bad times if there is good reasons to do it.

[Matt Duncan:]

Sure. Okay, guys. Thanks for all the [Indiscernible]. Appreciate it.

[Carl Christenson:]

Thank you.

[Operator:]

Our next question is from Rupinder Bora with Jefferies. Please proceed with your question.

[RupinderBora:]

Hey, good morning guys. How are you?

[Carl Christenson:]

Good morning, Rupinder, how are you?

[Rupinder Bora:]

Good. So, first question around you talked about Bauer and you mentioned about some improved market for Bauer in the quarter actually if you can just expand on that which particular end markets you saw, because Europe actually grew about like 2% in the quarter, so if you can give some color on that?

[Carl Christenson:]

We saw a strong sale at Bauer into Russia, into North America and certain markets like Germany we did well, but the best performing markets I think were North America and Russia, surprisingly Russia for Bauer.

[Rupinder Bora:]

Okay. And how do you see the trend actually going into the second half, any change from what you’re seeing in the second quarter?

[Carl Christenson:]

At Bauer we get about three months visibility and the bookings rate over the last two months has been very good and we would expect that topline trend to continue at least into the third quarter less visibility as it relates to the fourth quarter.

[Rupinder Bora:]

Okay. And the other geographic market I wanted to touch was China which has been in the news recently. If you can just give us some color on that what do you see and what you’re hearing about like the industrial economy over there especially with where we see the steel consumptions like Chris talked about, its down and some other commodities are down over there?

[Carl Christenson:]

Yes. So certainly in the steel industry, even in our energy business there it’s been significantly weaker than we expected. Now the outlook there is not good. But we do have some segments that have done well. Our electric clutch brake business is doing very well there this year. So there’s been some pockets of success. But overall I think the general sentiment for China is the industrial economy is not as expected.

[Rupinder Bora:]

Okay. And the last question on savings, I just wanted to clarify something. On your first quarter you mentioned by the end of 2015 you have savings of about $3 million and the new saving, you know the plan which you have right now until 2018, the $15 million, is that inclusive of that $3 million or would that be something?

[Christian Storch:]

That’s inclusive of the [Indiscernible] million.

[Rupinder Bora:]

Okay. Thanks. Thank you.

[Carl Christenson:]

Okay. Thank you.

[Operator:]

The next question comes from the line of John Franzreb with Sidoti & Company. Please state your question.

[John Franzreb:]

Sure. Just sticking with the restructuring program, how much the actions that you’re putting in place today were on a table say year ago and you just getting to them, versus how much of it are you reacting to weaker than expected operating conditions?

[Carl Christenson:]

I’ll start, Christian can follow on. I don’t know if you’ve recall, but back when we did the restructuring in 2009 and 2010 we said that this is step that we’re taking and we’ve known since we were making the acquisitions. We had too many facilities that we need to do some consolidation work. And so this has been a plan that we’ve had for a long, long time. And some of it is – would have been executed regardless of the economic conditions. Some of it you’re better off doing it when facilities are slow than you are doing it when they’re really busy and trying to service customers. The biggest risk in doing something like this is that you disappoint a customer. And so doing it while the demand is down a little bit is certainly a most better.

[John Franzreb:]

Anything to add, Christian.

[Christian Storch:]

You know, I think what Carl says is right. There’s a couple of consolidations that relate to Svendborg and to the integration of Svendborg that might be one is two facilities that are under review. But for the other facilities I think Carl is right on that. We’ve been looking at this for the last six months. We think timing is right, because we don’t want to lose sales when you do this and therefore doing this during a slower time I think is well time.

[Carl Christenson:]

I also like to emphasize John that we’ve done facility consolidations before. We’ve got excellent plans led out for the ones that are in progress. We are going to do this in a disciplined sequential approach, not try to do it all at one time and perhaps a tremendous amount of risk. We have taken one of our senior executive who is our best operating guy and he is going to head up this plan for us. So its – we’ve put a lot of work into the over the last six months to a year in laying out this plan and I’m very confident that its absolutely the right thing to do for the company and its going to have a significant impact.

[Christian Storch:]

And we’ve seen that when we did it in 2008, 2009 that an idea of size well in fact we were around $40 million to $50 million in revenues, 200 to 250 employees and that you can really achieve higher operating performance and facilities of that size. And that’s we were striving for and that’s what we’re trying to do. We won’t be able to do this in all cases. We still have smaller facilities in certain geographies, but ultimately that’s where we’re heading.

[John Franzreb:]

So, relative to your long term EBIT margin goals would this be an incremental benefit to those goals if you achieved with your original revenue targets that were associated with those goals or is it just helping you get there in the step function?

[Carl Christenson:]

I think you cannot – its part of our goal to get to 15%. You cannot add this. This is doubling down on gaining to 15%, showing and we’re serious about getting to 15%. I think we all would be happy. We all will be happy when we get to 15% operating income and that’s a big step, that’s 200 basis points in that direction if this works out as planned and we’re going to work hard on making it happen.

[John Franzreb:]

Okay. Go ahead.

[Carl Christenson:]

The reason we have some tremendous economic recovery then we will see some very good operating leverage in the business. I can assure you that.

[John Franzreb:]

I suspect so. And regarding the quarter, Christian you pointed out that the SG&A was low year-over-year due to the combination of restructuring actions and healthcare cost, healthcare was such an issues last year, can you just kind of bring us up to-date on how much of the benefit was healthcare related and what your expectations are for the balance of the year?

[Carl Christenson:]

Yes. So, first quarter you recall was flattish, a year-over-year we really saw the impact lat year in the second quarter. This was about $650,000 below second quarter of last year, so a meaningful number. We’ve seen the severity of the large claims that we talked about decline significantly, the frequency is still about the same, but the severity has come down very significantly. So we hope that this trend will continue to the third quarter and into the fourth quarter.

[John Franzreb:]

Okay. And one last question. What’s baked into your guidance as far as currency right now?

[Carl Christenson:]

$10 for the euro and as it relates to the British Pound which also is a meaningful impact on us upon 53.

[John Franzreb:]

Okay. Thank you very much. I’ll get back to queue.

[Christian Storch:]

All right. Thanks John.

[Operator:]

[Operator Instructions] Our next question comes from James Pickerel with KeyBanc Capital Markets. Please proceed with your questions.

[James Pickerel:]

Hey, guys. Just to stick with the simplification plan. Can you help bucket or just sort of breakout the savings that will generated from facility consolidations versus the supply chain IT efficiencies?

[Carl Christenson:]

Facility consolidations about $8 million, the balance would be on the supply chain/IT side.

[James Pickerel:]

And both should run at a fairly similar cadence or is the supply chain more backend loaded front end, how should we think about that over the next three years?

[Carl Christenson:]

Yes. You will see the – supply chain is little bit more in 2017, starting in 2017 and 2018 as we set the organizational with the organizational infrastructure in place about the facility consolidations those savings have started and will start to see that begin in the second quarter.

[James Pickerel:]

Okay. Got it. And then regarding your outlook for the full year and maybe just what’s implied on organic basis by region, can you talk about how you thinking about the second half by region?

[Carl Christenson:]

I think we anticipate some of the trends to what we’ve seen in the second quarter, Europe slightly up and North America down year-over-year and Asia up flattish, up a couple of points.

[James Pickerel:]

Got it. And you mentioned the share gains in lawn and garden, what is driving that, is it something, is it a new go-to-market approach, just some color there?

[Carl Christenson:]

While we are the market leader in that and we spend a lot of effort in product development, and I think the technology that we’ve developed is being well received in the marketplace and we’ve taken some share as a result of that. And the other issue is really delivery and lead time, so we’ve done an outstanding job, the new plant we put together in Indiana, the lead time and on time deliver performance is unparallel. So it’s really customer satisfaction.

[James Pickerel:]

Got it. That’s good color. And then just a last thing I might have missed this at the beginning. You mentioned Svendborg and Brazil, little bit of comment there?

[Carl Christenson:]

Also we bought the balance of the equity of the Lamiflex business in Brazil and there is a new plant in Brazil and we are moving in order to local content we are starting to assemble Svendborg brakes in Brazil.

[James Pickerel:]

Got it.

[Carl Christenson:]

So we’ve moved into a new plant. We’re bringing new products. The intent when we bought that business was to bring additional Altra products into the Brazilian market by having local content and this is one big step into that.

[James Pickerel:]

All right. Thank you. I’ll get back in queue.

[Carl Christenson:]

Thank you.

[James Pickerel:]

Thanks.

[Operator:]

Our next question comes from John Franzreb with Sidoti & Company. Please proceed with your question.

[John Franzreb:]

Yes. Somebody has said earlier about what end markets were doing better in Europe, I didn’t quite catch the answer, which sectors are doing better in Europe?

[Carl Christenson:]

Well, I think the one that really excelled was Russia for us geographically and in Russia it was cranes and hoists that did well.

[John Franzreb:]

Okay. Any other one similar cranes and hoists like to call out?

[Carl Christenson:]

I think that was….

[John Franzreb:]

Okay. And secondly you mentioned that distribution have been relatively weak. I wondering there’s a change in mix in as far as aftermarket versus OE sales that are helping you in any way?

[Carl Christenson:]

Well, I think the aftermarket for mining in for oil and gas has really stems some of the difficulties we’ve seen on the OE side there. So the aftermarket is particularly profitable. So that’s helped minimize the impact of those two markets being substantially down.

[Carl Christenson:]

And that’s why so typically what happens is in downturn in oil and gas we do see a mix change where sales to OEM drop a bit to aftermarket sales and aftermarket sale is a significantly more profitable so that mitigate the topline decrease in those top lines.

[John Franzreb:]

And which total aftermarket running is percentage of sales right now, Christian?

[Christian Storch:]

Looking at around 39%.

[John Franzreb:]

Okay. Perfect. Thank you very much guys.

[Carl Christenson:]

Thank you, John.

[Operator:]

There are no further at this time. At this point I’d like to turn the call back over to Carl Christenson for closing remarks.

[Carl Christenson:]

Thank you, Operator. And thank you to everyone for joining us this morning. We look forward to speaking with many of you at the Jefferies Industrial Conference in New York on August, 12. Thank you.

[Operator:]

This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.