Lydall, Inc.
Q3 2016 Earnings Call Transcript

Published: 2 Nov 2016

[Operator:]

Good morning, everyone, and welcome to the Lydall Announces Third Quarter 2016 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Jim Laughlan, Vice President, Chief Accounting Officer and Treasurer. Please go ahead, sir.

[James V. Laughlan:]

Thank you, [Ron] [ph]. Good morning, everyone, and welcome to Lydall's third quarter 2016 earnings conference call. Joining me today are Dale Barnhart, President and Chief Executive Officer, and Scott Deakin, Executive Vice President and Chief Financial Officer. Dale will start the call and discuss the continued progress we are making in executing our long-term strategy and provide an overview of current business conditions. Scott will follow with a review of our financial performance and discuss the key drivers by business segment. At the end of our remarks, we'll open the line for questions. As you may be aware, our quarterly earnings release and Form 10-Q were released yesterday, so that you can follow along with today's call. Please reference the Q3 2016 earnings conference call presentation, which can be found at lydall.com in the Investor Relations section. As noted on Slide 2 of this presentation, any comments made on this conference call that may constitute forward-looking statements are made available pursuing to the Safe Harbor provision as defined in securities laws. Please also refer to the cautionary note concerning forward-looking statements within Lydall's reports on Form 10-K and 10-Q for further information. In addition, during this conference call, we will be making reference to non-GAAP financial measures, including adjustments related to acquisition related expenses, purchase accounting and discrete tax items. A reconciliation to GAAP financials can be found in the appendix of the presentation I just referenced. With that, I'll now like to turn the call over to Dale.

[Dale G. Barnhart:]

Thank you, Jim. Good morning, everyone, and thanks for joining us today. I am pleased to report that we had another excellent quarter. We continue to remain on track to deliver a solid 2016 and progress toward our 2018 long-term vision for profitable growth that includes a target of $800 million in revenue and 15% in operating margin. Slide 3 outlines our recently published financial results for the third quarter of 2016 and provides comparison versus the third quarter of 2015. Total net sales increased 18.7% to $155.7 million. This increase was primarily driven by our recent acquisition of Texel which we closed on July 7, 2016. With respect to profitability, gross margin expanded by 40 basis points to 24.5% and adjusted gross margin expanded 150 basis points to 25.6%. Operating margin increased by 40 basis points to 11.7% and adjusted operating margin increased by 180 basis points to 13.1%. Adjusted EBITDA margin for the quarter was 16.8%, up 210 basis points from the same period in 2015. Overall, our very strong performance reflects the benefits of favorable product mix, cost absorption on incremental sales and favorable material pricing and productivity. Diluted earnings per share of $0.75, an increase of 13.6% from third quarter of 2015, and adjusted earnings per share were up nearly 50% to a Company-record of $0.86 per share. With respect to the ongoing investigation related to the possible violations of German anti-trust laws, we continue to communicate with the German Federal Cartel Office. While we anticipate bringing this matter to conclusion sometime in fourth quarter of 2016, we're unfortunately still unable to estimate the specific timing or quantify the liability. Turning to Slide 4, this is an overview of our long-term growth strategy which includes four drivers, new product development, Lean Six Sigma, geographic expansion and M&A. First, with respect to M&A, our recent acquisition of Texel is an exciting addition to our portfolio. Leveraging traditional strong seasonal demand, the business had an excellent quarter contributing $23.2 million in revenue and adjusted operating margin of approximately 15%. Integration of the business into our newly renamed Technical Nonwovens segment is on track and I am confident that we will continue to deliver on our plans. As I have mentioned before, even with the acquisition and ongoing integration of Texel, both from a financial and organizational resource perspective, we continue to have the means, the wherewithal and the desire to execute on additional acquisitions and to continue to actively pursue new opportunities. With respect to Lydall Lean Six Sigma, we are continually focusing on driving operational efficiency and ways to better serve our customers. During the third quarter of 2016, we continued to make progress in resolving the previously mentioned platform launch inefficiencies in our Thermal/Acoustical Metals segment that had a significant impact on our second quarter 2016 results. The team is taking a disciplined approach to understanding the root cause and implement corrective actions through kaizen activity. We expect this work to continue into early 2017. In terms of international growth, ramp-up of our Thermal/Acoustical Metals facility in China continues to progress and we anticipate achieving breakeven in operating income for the full year of 2016. The third quarter was the second period in a row in which the operation delivered positive operating income, and we continue to be encouraged by the outlook into early 2017. Finally, with respect to new product development, all of our segments are focused on developing solutions to better serve our customers. For example, while it is still too early to judge the ultimate long-term success, we are encouraged by increasing demand for our premium vehicle cabin air filtration product in our Performance Materials segment. This composite product provides ultra-high efficiency filtration using our proprietary Arioso Membrane technology. Turning to Slide 4 with respect to business conditions, we believe the underlying fundamentals of our business remain solid and expect to have another great year as pockets of strength are expected to offset the few pockets of softness that we are seeing. Within our automotive businesses, current visibility suggests that overall global demand remains stable. Despite flat industry forecasts for light vehicle production in North America and Europe, we anticipate that we will grow in excess of the market, primarily driven by share gains within our Thermal/Acoustical Metals segment. For those of you who follow us closely, your are aware that Ford is a key customer in our Thermal/Acoustical Fibers segment, where we primarily serve SUV and pickup truck platforms. In mid-October, Ford publicly announced that they would be reducing production at some of their facilities producing the platforms we serve. While we have seen our forecasted demand from this customer soften marginally, we expect the fourth quarter for this segment to increase both year-over-year and sequentially from the last quarter, given our increased content and share gains. In Performance Materials segment, while we have lapped the decline that began last year from a reporting perspective, we anticipate demand for cryogenic insulation products to remain weak due to continued softness in the liquid natural gas markets. In the Life Sciences Filtration, we have largely concluded the termination buys that have benefited us year-to-date and as such anticipate the demand on these high-margin products returning to a normalized level. On the filtration side of the business, we remain encouraged. We continue to see signs of improving demand in North American filtration market, and in particular successes in fluid power applications given new product introductions. Finally, our Technical Nonwovens segment, while we continue to benefit from stable demand in non-filtration products, we continue to face weakness from domestic power generation customers and experience general softness in China for filtration related products. While we have seen a modest increase in bid activity and have won awards recently, we don't anticipate significant change in these markets in the fourth quarter from prior periods. With regard to Texel, we expect demand in the fourth quarter to moderate sequentially given normal seasonality. To wrap up my comments, we have had an excellent performance in both our third quarter and year-to-date. We look forward to turning it into another exceptional year and delivering solid financial performance for all of 2016. With that, I will now turn the call over to Scott.

[Scott M. Deakin:]

Thank you, Dale, and good morning. Today I'll briefly cover our consolidated results and then provide an overview of our operating segment results. Turning to Slide 6, in our third quarter of 2016, the Company achieved net sales of $155.7 million, an increase of 18.7% over the third quarter of 2015. This increase was primarily driven by Texel. Organic growth for the quarter was 1.8%. This was primarily the result of strength in two of our segments, Thermal/Acoustical Metals and Performance Materials, up 11.3% and 8.9% respectively, being offset by a 10.6% decline in our Technical Nonwovens segment. The organic growth in our Thermal/Acoustical Metals segment was driven by platform share gains on products launched earlier this year. Performance Materials organic growth was primarily due to continued recovery in filtration markets, share gains and termination buys in Life Sciences. Our Technical Nonwovens segment experienced continued weakness from domestic power generation customers and general softness in China. In addition to the organic sales decline of 10.6%, this segment experienced headwind of 4.2% due to unfavorable foreign currency translation. Consolidated gross margin in the quarter increased 40 basis points to 24.5% versus the third quarter of 2015, driven primarily by favorable mix, lower raw material cost and cost absorption on the incremental sales. Adjusted gross margin improved 150 basis points to 25.6%. Consolidated operating margin increased 40 basis points to 11.7%, with adjusted operating margin of 13.1%, an increase of 180 basis points over the prior year. The effective tax rate for the quarter was 29.7% compared to 24.4% in the third quarter of 2015. We anticipate that our effective rate going forward will fall in low 30s. Third quarter 2016 diluted earnings per share were $0.75, an increase of 13.6% versus the third quarter of 2015. Adjusted earnings per share were up nearly 50% to a Company-record of $0.86 a share. Moving to the balance sheet, our liquidity continues to remain very strong. At the end of the third quarter, cash was $77.1 million, which is net of the $18.2 million used in the beginning of the third quarter to partially funding acquisition of Texel. Our leverage ratio was 1.2x and we have availability for additional borrowings of approximately $75 million from our credit facility. Finally, as it relates to capital expenditures, we spent approximately $19 million through the first nine months of the year compared to $15.5 million in the prior year. For the full-year 2016, we expect total capital expenditures to be in the range of $25 million to $30 million. Turning to Slide 7, I'll note the progress we have made year-to-date. Through the first nine months, sales of $422.7 million were up organically by 1.7%. Excluding Technical Nonwovens, the remaining segments have experienced nearly 9% organic growth. The year-to-date organic sales decline of 12.8% in the Technical Nonwovens segment offset this growth, a result of marked weakness from power generation customers and general softness in China. With respect to operating margin, we continue to make progress on improving profitability. Adjusted operating margin increased 150 basis points to 12.2% versus the adjusted operating margin for the same period of 2015. The continued improvements of the consolidated level are driven primarily by favorable mix and lower raw material costs across the business. Moving to Slide 8, I'll discuss our segment results. I'll start with our Thermal/Acoustical Metals business. This is our global automotive segment that specializes in providing under-hood and underbody engineered thermal solutions for vehicles. This business delivered strong organic sales growth of 11.3% during the quarter. Part sales increased $4.4 million to $39.8 million or 12.6% compared to the same period in the prior year. This increase in part sales was driven by platform share wins in North America as well as China. Tooling sales were up slightly in the third quarter of 2016, given the timing of product launches. Operating margin increased 250 basis points quarter-on-quarter to 12.2% driven by favorable product mix and lower raw material cost. During the quarter, we made progress in addressing the previously mentioned platform launch inefficiencies in North America and Europe, but expect them to continue into early 2017. On increased scale, our China facility generated favorable operational efficiencies and delivered positive operating margin for the second quarter in a row. We expect to achieve at least break-even in operating income in this operation for the full year 2016. Slide 9 refers to our Thermal/Acoustical Fibers business. This business also serves the automotive industry and provides molded polyester acoustical solutions primarily for underbody applications for vehicles in North America. Sales in the third quarter were $36.4 million, up 2.1% versus the same period in the prior year, with the timing of tooling sales driving most of this growth. Part sales were essentially flat quarter-on-quarter as we saw the ramp-up of our one-piece molded flooring product line offset by otherwise lower demand. This lower demand was primarily due to planned summer shutdowns at key OEMs returning to lengths more consistent with prior experience versus the shortened levels we experienced in the third quarter of 2015. Operating margin in this segment decreased 80 basis points quarter-on-quarter to 27.5%. This was primarily due to unfavorable product mix, particularly as it relates to a greater amount of lower margin tooling sales, with slightly higher labor and overhead costs for the third quarter of 2016 compared to the same period in the prior year. Moving to Slide 10, I'll cover our Performance Materials segment that provides specialty filtration and insulation products to a variety of end markets globally. Sales in the third quarter were $28.8 million or a 9% increase organically versus the same period last year. The business continues to realize strong market demand and was further able to increase share, primarily in filtration which grew 8.7% in the third quarter particularly with our fluid power and transport hydraulic filtration products. Thermal Insulation overall grew 2.3% despite our continuing to see softness in energy-related application as our cryogenic insulation products are sold into liquid natural gas infrastructure markets. Life Sciences Filtration increased by 26.7%, primarily due to the conclusion of the termination buys by certain customers which were driven by a discontinuation of certain raw materials used in the production process. Third quarter sales include $0.9 million of termination buys and on a year-to-date basis these buys totaled $2.4 million. Segment-level operating margin in the third quarter improved by 190 basis points to 11.4%. This improvement was driven by leverage on the increased sales, absorption benefit from the life sciences buys, favorable mix, offset by unfavorable material productivity. Slide 11 covers our Technical Nonwovens segment. As we have previously communicated, this is the first quarter in which we are reporting our results under this segment name which now reflects the combined performance for both our legacy Industrial Filtration business as well as our recent acquisition of Texel. Sales of the combined business are now reflected in two product groupings. First, Industrial Filtration, which includes the air and liquid filtration sales from both businesses. And second, Advanced Materials, which includes all other products for use in the various commercial applications such as geosynthetics, automotive, industrial and medical among others. In the third quarter of 2016, sales of $52.3 million were up over 50%, primarily due to $23.2 million of sales contributed by Texel. Unfavorable foreign currency translation, primarily associated with weakening of the British pound, impacted sales by 4.2%. Net of these items, on an organic basis sales were down 10.6%, primarily due to continued weakness from domestic power generation customers and general softness in China. From a profitability perspective, the Technical Nonwovens adjusted operating margin for the third quarter of 2016 increased by 410 basis points to 13.9% compared to the same period in 2015. Included in these results is $0.5 million or 100 basis points of acquisition related intangible amortization expense. The increase in adjusted operating margin was due to favorable product mix as lower raw material costs were offset by customer pricing reductions. As Dale mentioned earlier, the performance of Texel in the third quarter was strong, fully meeting our expectations to date. The adjusted operating results for Texel were accretive to the overall performance of the segment as the third quarter is one of the strongest periods for that business given normal seasonality. That concludes our review of Lydall's third quarter results. To wrap up our comments, I will reiterate Dale's earlier remarks. Lydall has delivered excellent performance in the third quarter as well as year-to-date. We continue to look forward to turning in another exceptional year. With that, I will turn the call back to the operator to begin our question-and-answer session.

[Operator:]

[Operator Instructions] The first question today comes from Robert Majek from CJS Securities. Please go ahead.

[Robert Majek:]

It's great to see auto parts revenue up 7% year-over-year with industry auto sales flat to down in the quarter. I guess going forward over the next few quarters, can you just give us a little more color on the number or magnitude of new platform and product launches that may result in further incremental growth?

[Dale G. Barnhart:]

Some of the key ones that we have mentioned earlier in the year is the flooring product that we have that actually launched in September and will be ramping up while on the Ford Super Duty line of pickup trucks. In addition to that, there's several products in the Metals business that we are going through the ramp-up process right now that will continue into 2017.

[Robert Majek:]

Thank you. And on Texel, could you just give us an update on your synergy expectations there in 2017 or 2018 and what it will take to get there?

[Scott M. Deakin:]

As we talked about when we first did the acquisition, a lot of those synergy impacts are ones that you won't see in 2016. We're really just focusing on integration activities there. As we start to go forward in that business, we're really starting to leverage our global footprint. So, the sales that that business is experiencing, we'll be able to really utilize the assets across all of the Technical Nonwovens business. We're already seeing encouraging conversations between Texel business and our Performance Materials business in terms of extending some of the products of their respective businesses into their respective markets. And then we're starting to explore the opportunities that we see on the purchasing side in terms of leveraging consolidated buy throughout the operations. So I would say, clearly the integration in terms of just the base integration kind of activities are going very well and all of the synergy related kind of things that we talked about when we first did the acquisition back in July are right on track.

[Robert Majek:]

Thank you. And then on Performance Materials filtration, can you just give us a little more color on the share gains you've been experiencing there, what's driving that and is that due to new products?

[Dale G. Barnhart:]

We look at their two different market segments or areas, geographic regions. In Europe we had an exceptional year last year. We've continued to experience that this year. And a lot of that is share of wallet we have gained with our major customers in Europe. In North America, again some share gains with our existing air filtration customers, and then we've been successful in introducing some new product lines in our fluid power area for liquid filtration. So those are the primary drivers in filtration.

[Robert Majek:]

And lastly from me, how should we think about normal seasonality in the Texel business going forward?

[Scott M. Deakin:]

I'd say, clearly the third quarter, somewhat the second quarter but the third quarter is clearly the strongest. As we said in our introductory remarks, you'll definitely see some tempering of that market, particularly on the geosynthetic side of the business which you can kind of understand is really product that is focused on outdoor applications, which soften in the winter and colder months. So, we'll see dampening in the ballpark of 20% or so in the fourth quarter versus what we saw in the third quarter.

[Robert Majek:]

Thank you. I'll hop back in the queue.

[Operator:]

[Operator Instructions] Our next questioner today is Edward Marshall from Sidoti & Company. Please go ahead.

[Edward Marshall:]

So you hit on all cylinders, looks like all the business segments performed pretty well. Let me ask you a question. The Texel business, did you say that adjusted 15% operating margin for that business in the quarter?

[Dale G. Barnhart:]

Yes.

[Edward Marshall:]

For just Texel?

[Dale G. Barnhart:]

Correct.

[Edward Marshall:]

Right. So if I do the math, first of all it's like $0.15 of earnings or so I think from that business, and if I think about the $3.5 million in EBIT produced from that business, and I go back to the outlook from the quarter, it was about $8.6 million worth of EBITDA business. So you've actually gotten some cost synergies it looks like unless the other three quarters are extremely seasonally weak relative to 3Q from that business already. Can you kind of talk about maybe what you were able to flush out of that to get such great performance in the quarter?

[Scott M. Deakin:]

I'd actually tell you, from my other remarks, looking at other question I had, it's too early for us to be driving those kind of operational improvements from a synergy standpoint. So it was really around strength in the business. We had higher sales than what we expected, at least in the third quarter, and timing across quarters is always tough on a new acquisition, but it was strong performance and the drop-through on those sales was very strong. So it really I think was driven by just that strength of the geosynthetics market in that third quarter as the business was meeting the objectives of a number of contracts that they got over that period. So, it really tied to base business performance.

[Edward Marshall:]

So I mean if I go back and I look at the $8.6 million in EBITDA that the business did before you acquired it and the $3.5 million in EBIT that you received this quarter, I mean should I assume that the other three quarters of the year are that materially slower or…? I just kind of want to put that in perspective in kind of how do I think about that.

[Scott M. Deakin:]

Again, I talked about what our initial expectations at this point are in terms of the revenue dampening into the fourth quarter, it's in the ballpark of 20%, maybe 25%, but again, a big part of that business is these geosynthetic products which goes into applications that are infrastructure related and are really driven and can only be done sort of in normal weather. So there's kind of really a big seasonal adjustment in the fourth and first quarter relative to second and third.

[Edward Marshall:]

Okay. If I switch gears a little bit and I look at Performance Materials, I'm curious if you can give me or give us rather the information regarding the termination buys, maybe revenue and the profit boost that you received from that? And I guess secondarily, is that termination buy, I think it's the second consecutive quarter of that and I think it was expected to be done, is it now done?

[Scott M. Deakin:]

Yes, you can assume it's done and I think we'll have a little bit of overhang in the fourth quarter, but it's largely done. Year-to-date we've had about 2.4 million in total buy related to those termination factors. I think we've told you before, the drop-through on that was very solid. Those particular products are very high margin. So, drop-through is in the ballpark of 50%.

[Edward Marshall:]

50, right?

[Scott M. Deakin:]

Yes. We'll have a little bit in the fourth quarter but we should all be thinking about it as largely complete.

[Edward Marshall:]

Okay. And with the Metals, and I think we talked about some new products coming through and I'm curious, was that double wall stuff kicking in or is that just China recovery?

[Dale G. Barnhart:]

Predominantly double wall. I mean we are seeing China, it's actually growing, and as we said in the last two quarters, it's been positive from an operating income standpoint, but the real magnitude of growth and margin enhancement is dual-wall products that we are running on the new line in Hamptonville both for Honda and for Chrysler on their Pacifica minivan.

[Edward Marshall:]

Got it. And so, absent seasonality regarding maybe fourth quarter shutdowns, et cetera, I mean this is the kind of run rate from an operating perspective that you would anticipate receiving as we switch that double wall?

[Scott M. Deakin:]

From a margin standpoint?

[Dale G. Barnhart:]

Yes.

[Edward Marshall:]

Okay. By the way, what percent of your sales was related to double wall in the quarter?

[Dale G. Barnhart:]

I'm not sure in the quarter. Year-to-date it's slightly over 50% now in the total Thermal/Acoustical Metals segment.

[Edward Marshall:]

And predominately that was in 3Q?

[Dale G. Barnhart:]

No, I would say Q3 was probably maybe a little higher than that as we ramped up the Chrysler Pacifica business, but it's not 60% versus 50%.

[Edward Marshall:]

Okay. What was the – I mean there was a meaningful step change in the margin profile of the business in 3Q…

[Dale G. Barnhart:]

Two things, we benefited from a very high margin prototype build which we supplied in the third quarter, and secondly, as we mentioned in the second quarter, the drag on the business was the start-up of – it wasn't just the volume or product coming in on the Pacifica and Honda but we are also learning to operate the new line that we've put in place. So, our OEE was low on that line and we've been using our Lean principles and through kaizen events to look at how we may improve that OEE, and we saw significant improvement in the OEE in that line in the third quarter this year. It's not at optimum performance yet. As we mentioned in the call, we continue to expect further enhancement in the operation of that line going into 2017.

[Edward Marshall:]

Got it. That's good to hear. What was the benefit of the margin prototype?

[Scott M. Deakin:]

[Indiscernible] piece of business, with margins on those kinds of prototypes, it was a good 30 points higher than what we would normally get. So think about it as $300,000 relative impact to the bottom line versus what traditional prototype activity that we have from time to time is.

[Edward Marshall:]

Got it. And then Fibers, the new product, I'm assuming you're referring to it as the floor liners, and it's offsetting if not fully offsetting maybe slowing production. I'm wondering if you can kind of talk about the anticipated growth rates that you have from that, the expectation maybe as what it is as a percent of your business today what you anticipate it will be over the next say 12 months?

[Dale G. Barnhart:]

The Ford product line as it ramps up through 2017, on an annual basis anywhere from $10 million to $13 million a year on the Super Duty platform that we've won. We are looking at opportunities in other vehicles now. The new product has created that interest, but again, nothing has been awarded. So, we have that one primary platform on that product line.

[Edward Marshall:]

And did you receive that run rate in 3Q from that business?

[Dale G. Barnhart:]

No, they are still ramping up and in fact they had some challenges. In Q3, they were retooling the Super Duty to the aluminum body as they did with the F-150 last year, and they had some normal hiccups in ramping that up. So no, it's not at full run rate yet.

[Edward Marshall:]

So, how do I think about 4Q, because you talked about revenue being up year-over-year and sequentially, and I'm trying to kind of parse that together with being first of all driven by new products, which I think you talked about, and then I guess a portion of that, the floor liners, but then when I think about kind of the legacy products say to the F-150 and maybe other Ford products being higher-margin you've done it for a while and you're still having some hiccups around the margin, how I think about the margin profile for Fibers in 4Q?

[Dale G. Barnhart:]

We're really not having any margin hiccups in Fibers. We talked about the challenges in ramp-up, that's all in the Metals business. Fibers business is running very well. Some of the margin erosion that we saw in the third quarter was contributed to mix, which we had higher tooling mix which as you know is basically a pass-through for us, so very little. The flooring project is the major growth product that's coming in versus our core business in the third quarter. We have others going in with a new line next year for another Ford vehicle that will be ramping up. So, for the balance of this year, principally driven by the flooring project in Fibers. In Metals, again it's the Pacifica and the Honda applications that we have. They are still ramping up along with the various business we won at GM and all the other OEMs as it relates to the Metals business.

[Edward Marshall:]

So when you said challenges regarding the floor liners, I'm assuming – I guess what I think I heard was did you say that Ford was having some challenges with the…?

[Dale G. Barnhart:]

That was Ford.

[Edward Marshall:]

Okay, I just wanted to be clear on that.

[Dale G. Barnhart:]

Yes, Ford is retooling that Super Duty vehicle platform to the aluminum body as they did with the F-150 last year.

[Edward Marshall:]

Got it. I think I misunderstood you initially. That's where the hiccup came in. Okay.

[Scott M. Deakin:]

To give you a little color to you to the question about the sequentials versus prior year, I mean we're not talking huge growth but there is going to be improvement relative to both of those.

[Edward Marshall:]

Okay. And did you originally give guidance around Texel and what you expect aside from you expect to be accretive in the first year?

[Scott M. Deakin:]

No, we just talked about the relative size of the business in the initial release when we talked about it, some of the size of the business, but we didn't talk about our expectations for the year.

[Edward Marshall:]

Having the business under your belt for a quarter, seeing the performance in 3Q, and knowing that there's some seasonality in kind of looking at the historic measures, I think it could be helpful. Do you have a forecast for the first 12 months of that acquisition and what it would contribute to a bottom line performance of Lydall?

[Scott M. Deakin:]

I understand your question. We're not disclosing that at this point, but we'll give it some further thoughts.

[Dale G. Barnhart:]

Yes, we do have, we do have a forecast and we have a plan on what we're going to achieve, but again, as you know we don't give that type of information. I can say this. It's still early on and a lot has to be done but we have seen nothing that says we are not extremely happy with that acquisition, both from the business that it's in, how it conducts it. And as we stated when we made the acquisition, the quality of the management team that came with that business has been a significant plus for us. And so we've got an excellent management team that's operating in very healthy market.

[Edward Marshall:]

Got it. All right, guys. Thanks very much.

[Operator:]

[Operator Instructions] There look to be no further questions. So this will conclude our question-and-answer session. I would now like to turn the conference back over to Dale Barnhart, President and CEO, for any closing remarks.

[Dale G. Barnhart:]

Again, I want to thank everybody for joining the call today. We had an exceptional third quarter and year-to-date performance and there's no reason why we won't deliver an excellent 2016, and we're on the right trajectory to achieve our 2018 vision for profitable growth. Thank you very much.

[Operator:]

The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines.