Twin Disc, Incorporated
Q2 2014 Earnings Call Transcript

Published: 29 Jan 2014

[Operator:]

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Twin Disc Incorporated Second Quarter Fiscal 2014 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) I would now like to turn the conference over to Mr. Stan Berger. Please go ahead, sir.

[Stan Berger:]

Thank you, Camille. On behalf of the management of Twin Disc, we are extremely pleased that you have taken the time to participate in our call. Thank you for joining us to discuss the company's fiscal 2014 second quarter and first half financial results and business outlook. Before I introduce management, I would like to remind everyone that certain statements made during the course of this conference call, especially those statements, I am sorry, especially those that states management's intention, hope, belief, expectations or predictions for the future are forward-looking statements. It is important to remember that the company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's annual report on Form 10-K, copies of which may be obtained by contacting either the company or the SEC. By now, you should have received a copy of the news release, which was issued this morning before the market opened. If you have not received the copy, please call Annette Mianecki, at 262-638-4000 and she will send a copy to you. Hosting the call today are John Batten, Twin Disc Chief Executive Officer, President and Chief Operating Officer; and Chris Eperjesy, the company's Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I will turn the call over to John Batten. John?

[John Batten:]

Thank you, Stan, and good afternoon, everyone. Welcome to our fiscal 2014 second quarter conference call. As usual, we will begin with the short summary statement and then Chris and I will be happy to take your questions. Looking at our second quarter results, sales for the 2014 fiscal second quarter were $63.2 million, down 12.5% from $72.3 million for the same period a year ago. The decline in sales was primary driven by lower demand in the North American and European markets. Continued record levels of sales into Asia partially offset this decline as demand for our pressure-pumping transmissions in China and commercial marine transmission throughout Asia remained at historically high levels in the quarter. Looking at our broader market, global sales for our industrial products and marine products were down slightly in the quarter versus last year, but sequentially flat when compared to the first quarter. Shipments through both marine and industrial were lower to both North America and Europe than year ago. Well, its hard to follow up in industrial can be explained by our shipping from both [Spain] and India during the start-up of our plant near Chennai, there was a notable -- noticeable drop in demand in North America for the first half of the fiscal year. Recent order trends may suggest that this may start to turn the next quarter or two. While our marine shipments are lower than year ago level, demand remains at high levels for the off-shore oil and gas market, especially in U.S. Gulf Coast and Southeast Asian markets. Recent improvement in new orders for our large commercial marine transmission is a good sign of these markets look healthy going forward. Gross margin for the quarter were 29.3% compared to the 30.8% a year ago and 31.1% the previous quarter. The slight decline in gross margin was primarily driven by lower sales compared to the previous year, but partially offset by a slightly better mix of products, year-to-date gross margins at 30.2% versus 29.6% a year ago. Second quarter spending and marketing, engineering and administrative or ME&A expenses rose slightly by $415,000 versus the same period last fiscal year from $16.7 million or 23.2% of sales to $17.2 million or 27.2% of sales. The higher ME&A spending for the quarter relates to resource additions in Asia as we continue to grow in the region and increase spending respect to patent and trademark protection, partially offset by reductions in ME&A spending at our North American and European operating facilities. Year-to-date, ME&A spending is down $688,000 when compared to year ago level or 25.2% of sales versus 23.7% of sales. As we have mentioned in that last few calls, we continue to rationalize our resources and overhead in our European and North American operations. Even with the opening of the plant near Chennai and the adds to the sales and service organization in Asia, our net employment is down versus fiscal 2012 and fiscal 2013 year end, as we are constantly evaluating each subsidiaries spending and overhead. Looking at the bottom line, fiscal 2014 second quarter net earnings were $518,000 or $0.05 per diluted share compared to $3.4 million or $0.29 per diluted share for the same period a year ago. EBITDA for the first quarter was $4 million versus $8.2 million a year ago and $6.6 million last quarter. Year-to-date, our EBITDA is at $10.6 million compared to $15.5 million for the same period a year ago. Turning to the balance sheet. We ended the second quarter with net cash of $6 million due to positive changes in our working capital, including generating $7.7 million of free cash flow in the second quarter and 16.6 year-to-date -- $16.6 million year-to-date. Inventory has remained essentially flat at $103 million for the last few quarters. The impact of foreign currency translation with increased net inventory by $1.5 million versus June 30, 2015. Adjusting for the impact of FX, inventory was down roughly $1.7 million, primarily at our domestic manufacturing operation. The $2 million decline in our six months backlog from $58 million to $56 million continues to reflect extremely soft North American oil and gas FX budget, general weakness in all European markets and reduced order Board for our legacy military transmission. Offsetting these slower markets were the incoming orders from South East Asia in the Gulf Coast for our commercial marine transmission and a continued demand for 8500 and 7500 oilfield transmissions in China. The 2014 second fiscal quarter continue to be influenced by the same dynamics that have affected our business during the past several quarters. We continue to see strong demand from our global commercial marine customers in international oil and gas market which is more than offset by continuing weak activity from the European global mega yacht and North American oil and gas market. While we feel very good about our backlog prospect with the Asian oil and gas and the global offshore oil and gas market, we are hopeful that the potential opening of the gas fields in Mexico and general increase in demand and price of natural gas during the U.S. will spur recovery in CapEx spending for the domestic pressure pumping fleet. We are all aware of the increased efficiency as being realized by the frac services company but I’m optimistic that in the next few quarters -- in the next few quarters, orders will be placed for near spread. Middle-to-long term, we are well positioned to take advantage of the global opportunities ahead of us. Our leading positions in the markets we serve are innovative product development and geographic diversity reflects a sound strategic plan for the future. That concludes our prepared remarks. And now, Chris and I will be happy to take your questions. Camille, please open the line for questions.

[Operator:]

(Operator Instructions) Our first question is from the line of Josh Chan with Robert W. Baird. Please go ahead.

[Josh Chan:]

Good afternoon, John and Chris.

[John Batten:]

Hi Josh. How are you?

[Chris Eperjesy:]

Hi Josh.

[Josh Chan:]

Hi. Good. Could I ask for more color on the sales decrease, the 13%, I was under the impression that North American oil and gas is no longer a comparison issue. And it sounds like industrial and marine were down slightly as described. So I guess, just wondering where the weakness was of that number?

[John Batten:]

Go ahead, Chris.

[Chris Eperjesy:]

Josh, I mean, you touched on it. I mean, part of it was North American oil and gas was very low last year but it actually did go down a little bit versus that compares to last year offset as John was describing by what’s going on in Asia. But then commercial marine in North America has been particularly in the Gulf Coast in the second quarter, industrial. And I think John also talked about legacy marine -- sorry, legacy military. It was a combination of all of those.

[John Batten:]

And in the industrial market, Josh, we do have some of our larger air clutches that go into the oil fields but industrial products and those were down versus year ago level. And I would just say outside of offshore oil and gas, some of the crew boats and supply boat, it was just general -- slight dip, I would say in our marine sales versus a year ago but are happy to say that the order, the incoming orders particularly in the fourth quarter, kind of reverse that trend.

[Josh Chan:]

Fourth calendar quarter?

[John Batten:]

Yeah, fourth calendar quarter. Correct.

[Josh Chan:]

Okay. I guess, maybe good segue to talk about different types of orders in different markets. Could you talk about, elaborate a little bit more on what you’re seeing in terms of the improvement in the industrial side and then also, I guess, what provides you the confidence that you are going to see the North American oil and gas orders in the next couple of quarters?

[Chris Eperjesy:]

Well, I’ll start with the industrial. We had a kind of our best month of incoming orders were late in second -- late in the quarter. And all of our products in industrial are within the three months window. So everything is booking and shipping rather quickly. I’m optimistic because in the last few days, there’s been some positives commentary from some of the larger OEMs that see improving business, so that generally translates to both our aftermarket and industrial business. And my confidence in the North American oil and gas, I think if there is going to be some more activity in floating on spreads going, North American producers looking for South America or potentially Mexico and I know that they have been operating the fleets pretty regularly and my sense is as we get late in the summer, there is a third calendar quarter that we should see some replacement activity going on.

[Josh Chan:]

Okay. That makes sense. And in the press release you talked about the second half results of the fiscal year being similar to the first half. I guess, historically, the second half has been fairly consistent, they have been stronger than the first half until the last two years and apparently this year it might be similar as well. So, I guess, how do you think about your business from a seasonal perspective first half versus second half and I guess what has changed relative to -- ?

[Michael Batten:]

Well, I would say I think that there is potential for upside in the second half. Anything that we can potentially and we have we can book and ship the oil and gas transmissions. They could book right in January and could be out of the door by March. So we see some opportunistic orders coming in, particularly for Asia in oil and gas. And if more of those come in, it’s certainly brightens the outlook for the second half of the year. And also if natural gas stays up a little bit in price, that’s also a positive impact. Certainly reading some of the conference calls scripts in the last couple days, I see more optimism than I maybe did last quarter. So we certainly have the capacity to have a second half that is better than the first half. We just eat some of the orders in the projects that are in the pipeline to be brought up and we can certainly respond.

[Josh Chan:]

Okay. Great. Thank you for your time and best of wishes for the second half.

[Michael Batten:]

Thanks, Josh.

[Chris Eperjesy:]

Thanks, Josh.

[Operator:]

Our next question is from the line of Walt Liptak with Global Hunter Securities. Please go ahead.

[Walt Liptak:]

Hi. Thanks. I wanted to just another follow-on on the comments you are making about the orders picking up for oil and gas in the next couple of quarters. I just want to make sure I understand a little bit more. Is this specific to some basins where you are seeing demand for pressure-pumping, or is it related to certain projects that are going on? I wonder if you could provide a little bit more color there.

[Michael Batten:]

Sure. I would say that one of the things that is giving us the most optimism is maybe some orders for the Eagle Ford, south of the U.S.-Mexico border. That would be a very near-term plus. We have received orders from North American suppliers that supply down to Argentina and I know of some domestic builders quoting for some projects that are maybe specific to North American shale field. I don’t know if there is anyone play that for us that’s going to bring the orders first over another one. I wouldn’t know with confidence right now, which one and where they would be going. But certainly we have the upside potential even in Asia from the second half of the year.

[Walt Liptak:]

Okay. Okay. Great. Leaving out Asia for a second, it sounds like that it’s being weak for some time and it sounds like this may even build the order. The backlog was down but at some point it sounds that we maybe seeing the beginnings of what might be a firm. Is that how you want us to view the market?

[Michael Batten:]

I wouldn’t -- yeah. And it’s not just -- I’m trying not to operate in a vacuum. I have been reading some of the larger oilfield service companies and how they are looking particularly at dry gas where I think they would probably put the investments first with some higher horsepower transmission. But my guess, having read some of the recent transcripts that it’s still two quarter out and they are really focusing on efficiencies and making sure that they can do everything can with the existing fleets that they have.

[Walt Liptak:]

Okay. And then just switching over to the 7,500 and 8,500 in China and I wondered, we have spend a lot of time last conference call talking about those and the progress. I wonder if we could get just an update on how that market is progressing and what the trajectory looks like.

[John Batten:]

Well, I still think that they are systematically adding kind of the annual horsepower kind of in the $250,000 range. In terms of towards the higher horsepower, we have a good order board for 8,500. We have an order board now for 7,500. So it’s a project by project. Thankfully, it hasn’t been kind of a boom or bust but steady progression. Certainly, depending upon the order, our shipments may differ, go up, go down but the overall trend has been very good and increasing.

[Walt Liptak:]

Okay. And then if I can switch gears just to a couple of the negatives like the military. I don’t have it in mind, like what the percentage of revenue is but help us on. I am just trying to understand how big of a headwind was that in the quarter, I don’t know if you can quantify it?

[John Batten:]

I would say it’s not a very big percentage on the revenue side. These transmissions are fairly complex. So when the volume goes down, it hurts kind of on the absorption and affects the gross margin. And the question I have got is this part of sequester, it’s really not -- it's just that this fleet has been used heavily in Iraq and Afghanistan. And I think the realization now that everyone is coming home, they just don’t need as much as they did before. So, I guess it’s not going to zero but I see the volume in this series of vehicles coming down in the order of 50% going forward.

[Chris Eperjesy:]

In recent years, Walt, this business has been 5% or less. Yeah.

[Walt Liptak:]

Okay. And then the last one just on Europe, I wonder what the -- obviously, Europe has been weak for a while but I wonder what product categories are weak and the pleasure vessels, the luxury vessels, there is -- w have been hearing a little bit better going out of Europe, is there any pick up that might be flowing on there eventually?

[John Batten:]

I would say -- I will start with the market that’s been relatively stable and that’s the industrial market that we serve out of our plant in Italy. But all of the marine markets have been extremely weak, historically, the Pleasure craft being number one since really 2009 and never really recovered. What goes up and down depending upon the quarter are some of the European yards that are supplying international offshore oil vessels or patrol boats to the Mid East. But really in the first half of the fiscal year, first and second quarter, really none of those projects have originated in Europe. So sales into Europe from a European subs, particularly in the marine market and they don’t really have a transmission market. So really the marine market was what suffered in the European market in the first half of the year.

[Walt Liptak:]

Okay. Thank you very much guys

[John Batten:]

Thanks, Walt.

[Operator:]

The next question is from the line Jon Braatz with Kansas City Capital. Please go ahead.

[Jon Braatz:]

Good afternoon, gentlemen.

[John Batten:]

Hi, Jon.

[Chris Eperjesy:]

Hey, Jon.

[Jon Braatz:]

Couple of questions. Returning to China, obviously China has been in news recently, things slowing down apparently over there. Anything that you see over there and what you are seeing in oil rates and so on that would suggest that maybe things might be moderating a little bit, or is energy getting its more than its fair share of investment in China?

[John Batten:]

Hey Jon, my gut says that it is the latter not the former. I don’t -- maybe there is not the upside that there was two or three quarters ago and we see the same thing. The overall economy moderating, but they do see -- there is oil and gas shows and our guys are there everyday if there is a definite plan for domestic energy production and natural gas and oil and pressure-pumping is part of the mix. Where we have seen, where it has affected us are some of the orders for the Indonesian coal tugs, but we do see some of the imports of coal into China coming down a little bit. So that’s the one area I would say where we have seen, I guess, I should say, a drop-off or some weakness is tugs being built in Indonesia for coal transportation.

[Jon Braatz:]

Okay. Is there any, you probably won’t answer this, but maybe give me a general answer, any -- make sense you can give me the size of your Asia and China revenues versus sort of domestic pressure-pumping revenues, any quantification that might be helpful?

[John Batten:]

No. We don’t really disclose it, Jon, but I mean, obviously, last year China became a 10% for us for the first time, so I mean, you have…

[Jon Braatz:]

Okay.

[John Batten:]

… nation, they were over $34 million -- right around $30 million last yea and Asia we have talked about is just under a third of our overall business in fiscal ’13. We disclose that in our Investors Relations presentation. So Asia is the second largest market after the U.S for us now…

[Jon Braatz:]

Is that…

[John Batten:]

Or China I should say.

[Jon Braatz:]

Is that principally pressure-pumping?

[John Batten:]

No. Its equal parts pressure-pumping customer.

[Jon Braatz:]

Okay.

[Chris Eperjesy:]

Yeah.

[Jon Braatz:]

Okay. Okay. You also mentioned that in terms of Gulf Coast activity, I guess, you’re selling systems to -- transmission systems to the boating industry in the Gulf Coast area…

[John Batten:]

Right.

[Jon Braatz:]

… and you’re seeing that pick-up. What -- can you tell me a little bit more about what kind of boats and how much of a pick-up you’re seeing in there -- in that area?

[John Batten:]

Well, I would say its, truly the orders picked-up. I think a lot of it has to do with timing.

[Jon Braatz:]

Okay.

[John Batten:]

General activity of building is primarily crew boats, supply boats for the oil and gas, at least they are going out from Oregon City, New Orleans out to the off-shore rig. Those typically take four to five, well, crew boats, five boats, four to five of our large transmissions supply boats, two of our much larger transmission. That activity has been very high for calendar of 2013. Looks like it should be more or less the same in 2014. So it really is the timing of the orders that been extremely strong. Same types of vessels built in the Southeast Asia for Southeast Asian offshore and the gas rigs. The Gulf Coast has also been very strong recently in re-powering a lot of fleet after push boats and tugs boats along the river and so that’s been a very big component. Again all going through, so when we say the Gulf Coast, its tend toward the hub of the marine activity.

[Jon Braatz:]

Okay.

[John Batten:]

New Orleans and Louisiana in general. So that has been particularly strong. Same in Southeast Asia for us, I mentioned the coal tug for the last two years those have been very successful, again building tugs and push boats for moving the coal from Indonesia back up towards China.

[Jon Braatz:]

Okay.

[John Batten:]

Those markets have been strong and recent orders definitely that’s going to again be strong throughout calendar ’14.

[Jon Braatz:]

Yeah. We’ve reading a lot about -- a lot of oil moving up and down the river, exactly in barges. Would you have any role to play in barge construction if you want to call it that?

[John Batten:]

Not barge construction, barge movement.

[Jon Braatz:]

Barge movement, yeah…

[John Batten:]

Yes. Absolutely.

[Jon Braatz:]

… that what I mean.

[John Batten:]

Absolutely. Each one of the vessels moving one of those barges and probably has two of our transmissions on it.

[Jon Braatz:]

Okay. But you didn’t really mention that, are you not seeing that?

[John Batten:]

That has remain steady. No, I am -- I neglected, yes, that has been a very strong market.

[Jon Braatz:]

Okay. Okay. All right. Thank you very much.

[John Batten:]

Yeah. You’re welcome.

[Operator:]

Our next question is from the line of Peter van Roden with Spitfire Capital. Please go ahead.

[Peter van Roden:]

Hey guys.

[John Batten:]

Hey Peter.

[Peter van Roden:]

Can you spend a couple of minutes talking about the size of pressure-pumping opportunity in the replacement demand versus guys ordering news spreads?

[John Batten:]

Sure. I would say -- and I mentioned this in one of the last call, we’re on the height of the boom several operators that they wanted to replace up to 30% of their fleet annually. And I think -- I don’t -- it’s safe to say in several industry, we never reach that. I would hope once they work through the inventory -- access inventory and our more normalized that somewhere between 5% to 10% maybe more, could be expected to be a replacement every year. It’s just when do we get to that normalized level?

[Peter van Roden:]

Got it. And generally how many hours could you took put on a rig just to have to put a branded new transmission in?

[John Batten:]

They are measuring kind of two hours, the engine operating hours and then the hours on pumping. And certainly we want to see well above 3,000 hours in operating as far as pumping. Engine hours that typically has been I think a higher number of hours but I think their narrowing the spread. So when the engines are running I think I believe the hours now are close to the -- the pumping hours are close to the overall engine hours. So engine hours probably I would say 6,000 hours.

[Peter van Roden:]

Okay. That’s helpful. And then moving kind of back up to more macro companywide sense. How would you kind of describe as you work through your different end markets and where you think we are in the cycle of each one of them. I don’t know if its appropriate to kind give a utilization rate. I guess I’m looking to you guys just to help me understand with right measure there?

[Chris Eperjesy:]

Sure. I’d say I would say we just came of the discussion on marine commercial gulf coast, work boat, off shore oil, I would say that is -- that is the one market globally that’s doing well. So I think there is still continued growth there. I would say industrial, our broader industrial market are probably near the bottom. And I think there’s enough growth ahead of it. Certainly North America oil and gas for CapEx for building frac rigs at the bottom and just -- I would hope for people supplying the new factory construction. There is no where to go but up. And I still thinking in Asian oil and gas, it’s still on the growth phase. So Europe, I would say every market has an opportunity to grow, certainly for us that is by far -- as far as the geography, the broadest weakest market.

[Peter van Roden:]

Okay. That’s all I had things. Thanks for taking my question.

[John Batten:]

Thank you.

[Chris Eperjesy:]

Thank you.

[Operator:]

(Operator Instructions) Our next question is from the line of Robert Vermillion with F/64 Capital. Please go ahead.

[Robert Vermillion:]

Hi. Good afternoon.

[John Batten:]

Hi Robert.

[Robert Vermillion:]

Couple of questions. One was, could you provide the breakdown of gross revenue between manufacturing and distribution segment?

[John Batten:]

During the Q, we don’t disclose it. We didn’t disclose it in the press release.

[Robert Vermillion:]

Okay. If you know -- one moment to keep your mouth?

[John Batten:]

It will be filed next -- I believe it’s next Wednesday.

[Robert Vermillion:]

Okay. Got it. And then, I believe in your prepared remarks, you made a reference to trademark to patent protection spending on the corporate side. Could you provide more detail there?

[John Batten:]

Sure. We have -- you try not going to be surprised, it has to do with company in China. One we have just more patents in general that were bringing us new technology and we’re filing patents on it. So that has increased our legal expense but one issue we have is a trademark. The company in China trying to use Twin Disc in our red oval basically for their use. So that was kind of -- I would say the delta year-over-year was legal expenses both here in the U.S. and in Hong Kong to stop that activity.

[Robert Vermillion:]

So that’s a competitive transmission product that they are trying to pass off as yours?

[John Batten:]

No, just trying to use a trading house, using our name and trying to sell our products, all the competitors products. We have more of a spare part.

[Chris Eperjesy:]

Mostly unrelated products.

[John Batten:]

Unrelated.

[Chris Eperjesy:]

Completely unrelated.

[John Batten:]

Basically, we are trying to buy spare parts in the U.S. and sell them into China but using our name to do it.

[Chris Eperjesy:]

It’s more using domain name, using our company logo, using our Twin Disc but we were not talking about significant or recurring cost at this point.

[Robert Vermillion:]

Okay. Got it. Great. Thank you.

[Operator:]

Our next question is from the line of Rand Gesing with Neuberger Berman. Please go ahead.

[Rand Gesing:]

Hey guys.

[John Batten:]

Hey Rand.

[Rand Gesing:]

Do we have to do the call at 3 o’clock every quarter or ….

[John Batten:]

No. Typically as you may recall, we’ve been doing it earlier.

[Rand Gesing:]

Yeah.

[John Batten:]

We originally had a conflict this morning.

[Rand Gesing:]

Okay.

[John Batten:]

(Inaudible)

[Chris Eperjesy:]

You can blame me. It’s my fault.

[Rand Gesing:]

Okay. No, it’s just a little long in the day to wait…

[John Batten:]

Yeah.

[Rand Gesing:]

… for you guys talk about what’s going on. In Europe it sounds like you have little bit of incremental weakness versus year ago, can you just sort of size it, I mean, are your revenues in Europe were down 5% from last December quarter?

[John Batten:]

I would say that, Chris, has a sheet in front of him, basically mirrored the percentage of what we were down.

[Rand Gesing:]

Okay. And I guess, I am just going to -- I mean you went through the end markets and it’s probably out there, but I didn’t just sort of for me Europe, what’s really sort of materially weaker?

[John Batten:]

We have basically a lot of our European operations rely on the marine horsepower segment of let say 100 horsepower up to 1,500 horsepower and that is the market globally that is still the weakest and particularly in Europe.

[Rand Gesing:]

Okay.

[John Batten:]

So that’s the market that has affected them the most.

[Rand Gesing:]

Okay. So that’s still pleasure.

[John Batten:]

It’s pleasure, it pleasure craft, small work force.

[Rand Gesing:]

Okay.

[John Batten:]

Just that if it’s the whole bunch of market but that’s kind of the horsepower range that where they produce.

[Rand Gesing:]

Okay. So you said that’s a bulk of it is, just a pleasure side.

[John Batten:]

Yeah.

[Rand Gesing:]

Excuse me, that horsepower range.

[John Batten:]

Within marine, correct.

[Rand Gesing:]

Okay. Any sense for what your market share is in China, in oil and gas, or is sort of, it’s still rapidly developing?

[John Batten:]

It’s rapidly developing, we have a pretty good market share, I think.

[Rand Gesing:]

Is it different than what you would see in other oil and gas markets?

[John Batten:]

Yes. I would say, overall, overall, our market share in China is higher than it is in North America, just recognizing that we came in from the high horsepower here in the U.S. when the main part of the market was 2,300 horsepower and below.

[Rand Gesing:]

Right.

[John Batten:]

And China has been focusing on the higher horsepower frac rate.

[Rand Gesing:]

Right. Okay. Great. Thanks. That’s all for me.

[John Batten:]

All right. Thanks, Rand.

[Operator:]

Thank you. I am showing no further questions at this time, I’d now like to turn the call back over to Mr. Batten for closing remarks.

[John Batten:]

Thank you, Camille, and thank you for joining our conference call today. We appreciate your continuing interest in Twin Disc and hope that we have answered all of your questions. If not, please feel free to call Chris and myself. We look forward to speaking to you again in April following the close of our third quarter. Camille, now I’ll turn it back to you.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude the Twin Disc Incorporated second quarter fiscal 2014 financial results. Thank you for your participation. You may now disconnect.