Commercial Vehicle Group, Inc. (CVGI) Q1 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Commercial Vehicle Group, Inc. First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Mr. Terry Hammett, Vice President of Investor Relations. Mr. Hammett, you may begin.

Thank you, Andrea, and welcome to the conference call. Patrick Miller, President and Chief Executive Officer of Commercial Vehicle Group, will provide a brief company update; and Joseph Saoud, President of our Global Construction and Agriculture segment will provide an overview of his segment. Following that, Tim Trenary, our Chief Financial Officer, will provide commentary regarding our first quarter 2016 financial results. We will then open the call up for questions. We would like to remind you that this conference call is being webcast. It may contain forward-looking statements including, but not limited to, expectations for future periods regarding market trends, cost saving initiatives and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, the economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risks associated with conducting business in foreign countries and currencies, and other risks detailed in our SEC filings. I will now turn the call over to Pat Miller.

Thank you, Terry. Good morning. Welcome everybody to our call. Our global end markets continue to present challenges as we progress through the early part of 2016. Continued softness in the construction and agriculture equipment markets, coupled with a transition to a more normalized production levels for heavy-duty trucks in North America continue to weigh on our top line. In anticipation and response to these conditions, you’ll recall that we initiated our restructuring and cost reduction actions in the fourth quarter of last year. These actions were undertaken to protect our margins and more efficiently match our manufacturing footprint to our customer needs. We continue to progress with our announced plans. As revealed this week, we intend to consolidate seat production in North America from three facilities down to two facilities. This was a difficult decision and not one taken lightly. However, this restructuring is necessary to rationalize our manufacturing footprint capacity and reduce overhead costs. Our major customers reward the [lowest landed] cost with growth opportunities. These changes put CVG in better position to remain competitive as marketplace trends shift. We estimate restructuring charges of $3 million to $4 million associated with these actions. Initiation of this footprint rationalization allows our overall restructuring and cost reduction plan to proceed as projected. If you recall, the overall restructuring and cost reduction actions are sized at $10 million to $14 million when fully implemented by late 2017. Cost reductions associated with these actions are estimated at $8 million to $12 million annually once fully implemented. And actions taken to date are in line with our expectations. We will continue to update the status of our restructuring as the year progresses. Turning now to our consolidated results for the first quarter 2016, revenues were down by 18% for the period as compared to the same period last year. Our global truck and bus segment revenues were down about 20% versus prior year, while our global construction and agriculture segment revenues were down almost 16%. First quarter 2016 North American Class 8 truck OEM build levels were down just under 20% as compared to the same period last year and will be more aligned with historical replacement levels on an annualized basis. It’s been well publicized that the inventory levels have been high and the truck makers are adjusting. Overall, our top line results for the quarter were negatively impacted by difficult market conditions in our major segments. Our results were generally in line with the combined downturn in these markets. Net income for the first quarter 2016 was $2.6 million as compared to $3.6 million in the prior year period as a result of lower sales volumes. Earnings per share as adjusted for special items were $0.10 in the first quarter 2016 as compared to $0.13 for the same period in 2015. In the fourth quarter last year, we announced restructuring and cost containment initiatives designed to protect and improve bottom line results. We have discussed the footprint changes and also other fixed cost improvements. Another major part of our plan includes our continued rollout of the operational excellence program across the globe, coupled with targeted productivity improvements. Our expectation is to have close to 400 of our employees trained in our black belt, green belt and yellow belt processes by the end of 2016. The training program includes hands-on live projects that require achieving a certain level of cost savings in order to graduate the class. We are encouraged not only by the quality of the results so far, but also the potential being generated by the increase of participants. In addition to productivity, the OpEx teams are delivering systemic inventory reductions, contributing to our improving cash position. Lastly, our purchasing and supply chain improvements are also driving improved profitability. We are consolidating our base and streamlining our logistics. We see ongoing opportunities on the supply side. The cost side focus continues to pay dividends and is evidenced by our improved gross margin results. We’re pleased to report that first quarter results are starting to reflect the impact of these actions with improved margins on lower sales. We believe this positions us well once our core markets begin to cycle up. As adjusted for special items, our operating income margin for the first quarter this year was 5.2%, up from 3.3% in the fourth quarter of 2015 and up from the full year 2015 adjusted operating income margin of 4.9%, in spite of the top line pressure. In our GCA segment, we are seeing improved operating income margins. Our focused efforts to improve profitability in this segment are generating good progress in the first quarter. Joseph Saoud, President of our global construction and agriculture segment, is with us today and will be discussing these efforts and market conditions affecting our GCA segment later in the call. Looking to 2016 in the global truck and bus segment, we’ve been on record stating our estimate for the 2016 Class 8 build would be in the 230,000 to 250,000 range and we are still projecting that range. Market forecasters such as ACT and FTR are projecting the heavy-duty truck build in North America to production levels in the range of 235,000 to 245,000 units, while the OEMs are projecting slightly higher. We are seeing steady production and sales levels in the medium-duty segment, where the fundamentals continue to look healthy. Industry experts are forecasting the Class 5 through 7 truck build in North America to be slightly up year over year. Outside of North America, we are seeing truck and bus builds rebounding in parts of Asia Pacific, which is benefiting us as we are growing our offerings and presence in this region. We have discussed more about the cost focus while we deal with some of the pressing market conditions. However, we are also actively supporting our growth strategies. We have dedicated resources that are in the process of launching next generation programs in the North American truck segment, Asia Pacific truck and bus, global construction and the global agriculture segment. We are expanding our operations in Mexico, increasing capabilities for seat, interior trim and wire harnesses. In India, we are investing in our seat business as well as our global engineering support center. Lastly, CVG is driving brand and product leadership in the aftermarket and dealer channels we serve. Next month, we’ll be rolling out a refreshed product line targeted at the construction and agriculture aftermarket in North America, as well as mid-sized OEMs. This line brings improved comfort levels to [occupants] and is branded under our KAB Seating brand. This new product line allows us to increase penetration in this segment. Next, Joseph Saoud, our Global GCA President, will provide updates on our construction, ag and military business. Joseph has been diligently working to drive the right focus for his area since mid last year when he joined CVG. Joseph?

Thank you, Pat. Good morning, everyone. With respect to our first quarter 2016 top line for our global construction and agriculture segment, we continue to operate in an overall challenging environment. As Tim will cover more in a minute, although we experienced a decline in sales of about 16% in the first quarter as compared to the prior year period, operating income was relatively flat as a result of roughly 150 basis point improvement in gross profit margin and reduced selling, general and administrative expenses. Certain areas of strength exist in our construction and agriculture business as seen by recent improvements in excavator sales and incremental business wins announced in wire harness. But these trends are currently overshadowed by the continued softness in overall global equipment sales, exacerbating the weak demand for new equipment in our core markets, the reallocation of used oil and gas industry equipment to the construction industry. In Europe and Asia where our seating business is mostly on construction vehicles, we have been impacted by the demand slowdown for several years now. We believe the industry [indiscernible] and there is an opportunity for growth moving forward. I’ve been at CVG for about 10 months now. Throughout this time, my focus has been on sustainably improving our seat and harness businesses and supply chain, refreshing our seat product line and capitalizing on our strength in the wire harness business to accelerate growth. In our supply chain, we announced late last year the consolidation of our wire harness production in North America and I’m pleased to inform you that the consolidation is ahead of plan. We also announced groundbreaking on a new wire harness assembly plant in Mexico to keep up with the growth, improve conversion cost and enable plant consolidation. In China, we consolidated the Shanghai head office into our manufacturing facility in [Beijing]. And in Europe, we are working diligently to improve the supply base and to increase the utilization of our seat production capabilities. Throughout this journey, our product line managers have been working diligently with all functions to design and launch new and improved seat into the construction and agriculture markets later this year. During the first quarter of 2016, we also visited a number of agriculture OEMs that expressed interest in our new seat designs and followed up with RFQs. These business opportunities from our new seat design, if awarded, would be a significant step in growing our agriculture seating business as new projects and platforms come online. And just in case if you’ve not seen the public announcement we made a couple of months ago, I’m pleased to share with you that our wire harness teams in North America and Europe have been awarded over $12 million of new business in the first four months of the year, with production ramping up starting in 2016 through 2018. We are confident we are taking market share in the wire harness business and our product development, lean manufacturing, supply chain initiatives and our focus on providing the best customer support possible is fortifying our position to win over the long term. We have been making the needed changes in all areas to ensure we are offering the best value product or the right solution at the right price. Our objective as we move forward is to build up on our core customer relationships, expand our reach and develop new relationships that will drive profitable growth over the long term. Although there is a mixed bag of strength and weakness contributing to GCA’s top line performance, we are pleased to be making good progress at operating income level, primarily driven by focused cost reduction and sustainable operational improvement efforts, we are continuously positioning for further improvement and the potential to fully leverage our strength in an improved market environment. Over to you, Tim.

Good morning. Our margins, gross profit margin and operating income margin have responded well to our centrally led global procurement and logistics organization, and our lean manufacturing and Six Sigma initiatives, what we call, operational excellence is really getting some traction. And the facility restructuring and cost reduction actions we triggered late last year are also supporting our margins. Consolidated first quarter 2016 sixteen revenues were $180.3 million compared to $220.3 million in the prior year period, a decrease at 18.2%, primarily resulting from the aforementioned market conditions. The strength of the US dollar remains a burden on our sales, but when measured on a period over period basis, this burden has diminished. Foreign currency translation negatively impacted first quarter revenues by only $1.9 million. We are pleased with our operating income in the first quarter compared with the prior year. Before giving effect to the special items resulting from our facility restructuring and cost reduction actions, operating income in the first quarter was $9.5 million compared to operating income of $11.9 million in the prior year period. Accordingly, the operating income margin was flat year over year at 5.2%, notwithstanding the decline in sales of about 18%. This is attributable to two things. First, the gross profit margin was 14.3% or almost 100 basis points better than the prior year period. Secondly, SG&A for the quarter at $16.1 million, before giving effect to the asset impairment, was about $1.5 million lower than the prior year. The $1.5 million less SG&A spend contributed about 80 basis points to the operating income margin. As adjusted for special items, net income for the first quarter was $3 million or $0.10 per diluted share compared to net income of $4 million or $0.13 per diluted share in the prior year period. Net income in the first quarter of 2016 benefited from a lower effective tax rate period over period. Depreciation expense for the first quarter of 2016 was $4.1 million; amortization expense $0.3 million; and capital expenditures were $2.3 million. Our business plan this year contemplates capital expenditures on the order of $15 million to $18 million for new business, maintenance of existing capital assets and facility restructuring. Even as we increase investment in our facilities, equipment and technology for sales growth, operational excellence and expenditures associated with the facility restructuring and cost reduction initiatives, we anticipate being cash accretive in 2016. In the first quarter, we generated $5.6 million of cash, thereby bringing our cash balance to $98 million. Taken together with the availability from the ABL facility, liquidity at quarter end was $135 million. As regards our segment financial results, revenues for the global truck and bus segment for the first quarter of 2016 were $116.5 million, compared to $145.9 million for the prior year period. That’s a decrease of 20.2%, primarily resulting from the return North American heavy-duty truck production to more normal levels. Operating income for the first quarter was $11 million compared operating income of $14.1 million the prior year period. This decrease in operating income period over period resulted from the decrease in revenues, somewhat offset by operational improvements and the benefit of facility restructuring and other cost reduction actions. Accordingly, considering the 20% decline in sales, GTB operating income margin for the first quarter of 2016 compares favorably to the prior year period. Operating income margin in the first quarter of 2016 was 9.5% compared to 9.7% in 2015. Operating income in the first quarter of 2016 and 2015 was impacted by restructuring charges of $0.1 million and $0.7 million, respectively. Revenues for global construction and agriculture segment in the first quarter of 2016 were $65.8 million compared to $78 million in the prior year period. And that’s a decrease of 15.7%, primarily as a result of the challenging marketplace in this segment. Operating income in the first quarter was $3.8 million compared to an operating income of $3.6 million in the prior year period. As Joseph mentioned just a moment ago, we’re pleased with the flat operating income in our GCA segment on lower sales as a result of gross profit margin improvement, 150 basis points period over period and reduced SG&A spend in this segment. Facility restructuring costs associated with the GVA segment in the first quarter of 2016 were $0.1 million. That concludes my comments regarding our first quarter 2016 financial results. All things considered, admirable cost management and margin protection in the quarter. Andrea, we’ll now open the call to questions.

[Operator Instructions] Our first question comes from the line of Mike Shlisky with Seaport Global.

I want to maybe touch briefly on your margins. Obviously, great job in Q1. Throughout the past few years, you guys have been talking about getting your [detrimental] to about 25%. In a down market, clearly you beat up by quite a wide margin here. I was wondering if anything has changed in how you’ve structurally brought down your cost structure. Has it come down enough here to keep those detrimental well ahead of 25% from this point on.

I would answer that with this and then I’ll let Tim to add some opinions as well. So we have made systemic changes in our infrastructure. We’ve been talking about those somewhat openly. We talked about the SG&A reductions, which will continue through the year. I think in the first quarter we achieved what we had talked about in the previous call. And in addition to that, as we continue to beat this drum on operational excellence and some of the supply side improvements that we’re making, those things are going to continue to help us. So the top line still has an impact on us, but we’re reducing our breakeven costs in our fixed cost and that’s going to continue to help us.

Mike, I might just supplement, this is Tim, supplement Pat’s points. So if you go back over the last, let’s say, four to six quarters and look at the year over year gross profit margin behavior and also operating income margin behavior, for all the reasons that Pat articulated earlier today, the facility restructuring, cost reduction actions, operational excellence et cetera, actually what you will generally see is as we’ve incremented sales up, we’ve actually generally been at the upper end of that 20% to 25% band and when the sales have incremented down, we’ve been at the lower end of that band. That’s in large part because of the benefits we’re getting from all of the actions that we’ve been taking. As we go forward and certainly with respect to the facility restructuring continue to take those actions, I would very much expect and we still model here internally being able to maintain that 20% to 25% range.

I would like to add one other thing to that same concept. We talked about some of these cost reduction initiatives, but really it is part of our long term strategy to continue to focus on what we call improving the core. And that includes some of the investments we’re making in process technology, it includes some of the lower cost capacity that we are expanding around the globe and I think those things are going to continue to contribute to our margin production.

I might go to just a couple of seasonality questions, in general looking back, your Q2 is typically equal to or better than your Q1 most years. Should we expect that this year or is there anything unusual happening in your customers’ build schedules or potential effects of any plant closures or changeovers in production that might make that different this time around?

I don’t – as we sit here today and I don’t think we see anything unusual in the second quarter in the truck here primarily in North America and Joseph I think the same would be said of construction and agriculture. So we don’t anticipate any large aberrations in Q2.

And further down the road on the seasonality, just so I have a clear example, do you expect Q4 on the truck and bus side to have a little easier comps given that things kind of tailed off in 2015 in Q4. Can you guys confirm that at least?

Well, your point is well taken with respect to the fourth quarter of 2015 definitely and I want to say in early November we started to see a pullback on production as the OEMs adjusted their schedules for inventory and orders et cetera. The problem answering your question, Mike, is I can’t say definitively where the market will be in the fourth quarter of 2016. So it’s really – it’s difficult to say.

Perhaps I could also ask about your new business and new contracts, I don’t think I want to get into any individual contract or win that you had recently, could you maybe perhaps ballpark for us in total just how much new white space or conquest business is in 2016 that might make your growth really different than the overall market?

I don’t think we’re prepared to go public with that number just yet. We are trying to find some ways that we can communicate to the public about our activities in the white space. When you mentioned contracts, I think I can say this. There are, let’s talk about the core business, not necessarily the incremental growth or what we call incremental growth, but we’ve been very actively pursuing increasing content so therefore we’ll have some contribution to the incremental side, but ensuring that our core business is protected throughout the next several years. And we’ve been doing that by winning next gen programs. We can’t get into specifics and details, but I think we will probably be able to announce something in the near future that lines that out a little bit better on the core business. On the incremental side, I can tell you we are actively working in those spaces that we’ve talked about and we are having some progress. We’ve not to find a way yet that we can communicate that. And as you can probably understand when you’re talking about conquest business, our customers are very sensitive about us talking about it when there is incumbents that are affected. So it’s a challenge we’ve not overcome yet, Mike. So I apologize for not being able to give you a clear answer. We feel very good about the progress that we’re making on the development side. And Joseph mentioned some of the wins which tend to be shorter cycle horizons in the wire harness business, which we were able to talk about because they’re impacting already in 2016. And we’ve released a few other wins in past press releases. But we’ll try to scope that for you in the near future and give some way that you can evaluate it.

If I can squeeze in one last one here, you have mentioned some potential new ag business, I think it was on the seating side, I think you said. I was curious are those do you think broad product refreshes from the OEMs or are they again the conquest through the existing platforms that are able to put your seats and displace somebody else?

The global construction business, the medium and heavy-duty part of it is about [$370 million]. This is how much we assess the value of this business. And we barely compete in it. So most of our seating product line – in ag, construction is probably a little bit less than half of that. So we are a strong participant in the medium/heavy construction seating business and we are a very small player in the ag market. So we’ve been working diligently on improving our product line and we’ve met with OEMs that have really expressed interest in our new products we’re working on. And we’ve received RFQs from them. So we have to go through the process. Some of them, we could win; some of them, we might not win. But at least it’s a good start into ag business and we’ve heard from OEMs that they’re very interested in what we’re working on.

So Joseph was speaking predominantly in seats I think in some of the numbers he shared. I think there’s another thing that we announced in the most recent press release, included things like interior trim as well as wire harness. So it’s not just the seating product opportunity that we see in the agriculture market and we have been gaining some wins in other product lines as well. So we continue to explore what the magnitude of that could be, but we’re making headway.

I just started asking are these brand new machines that the ag guys are putting out or are you just displacing somebody else with better pricing or something like that? That’s kind of the main to me in that question I was asking.

Is it takeover business or is it next gen? This is Pat again. And I think it’s a mixed answer. I think the bulk of the larger opportunities are going to be on next generation product. But we have had some success with a few takeover programs. Those are some of the recent announcements that we talked about.

[Operator Instructions] Our next question comes from the line of Alan Weber with Robotti & Company.

When you talk about the GCA business, when you look out several years, can that business have similar margins to your other segment? Was it just structurally different?

I’ll take a first stab at that and then will let Joseph or Tim chime in. Certainly, we expect those margins to be better. I think our GCA business has been suffering from some issues with some underperforming areas inside that business and Joseph alluded to some of that in his discussion earlier today. We’re getting our handle on those areas and we’re starting to see improved margins as a result. On the business as it is today, as we’re evaluating these other opportunities in the growth segments, I think we easily see margins along the line that we see in our truck segment. That would be the way I would respond to that. Joseph, maybe you want to add or Tim?

Highway seats in general are much more expensive than truck seats as it stands today. And they have usually better margin from what we’ve been able to test in the market.

You say that off-highway seats are more expensive than the traditional...

Yes, the medium/heavy duty, so the high medium/heavy duty range, they are more expensive, yes.

When you start cutting that market up into some pieces, you’ll see a broad range, especially in construction you’ll see a broad range. The smaller machines have less content, the larger machines tend to have higher content. But when you into agriculture, you’ve got a lot of complexity and performance requirements in the seating product.

And then I guess the other question is, thanks to the internet, the other question is when you talk about the capital spending this year, maybe I missed this, how much of that is going to be, I think, you said $17 million for the year or so, how much of that will be restructuring and when will the bulk of that take place?

So we think our CapEx all-in, Alan, this is Tim, will be, let’s say $15 million to $18 million for 2016. I don’t have the precise piece of that CapEx here at this very moment that’s restructuring. I will tell you this, it’s not a real large piece of it. Most of the CapEx is for maintenance and growth of our facilities, existing facilities and growth of our new business. So $15 million to $18 million, some piece of which is restructuring and our restructuring CapEx will occur starting a little bit now throughout 2016 and into 2017.

And I guess then a follow up on the restructuring between this year and next year, when is the bulk of that, is that starting now in the second quarter, will be kind of even, or how do you expect that to kind of go through the income statement?

We started it late last year. We are continuing it now here in the first quarter and there’s more to come. I would say that we expect that as we move through the year the spend to ramp up as we move through 2016 and then start to tail off as we move into 2017. And as we sit here today, we expect it to be substantially complete by the end of 2017.

And I think you said you expect to be cash flow positive after capital spending, was that correct?

Yes, sir. We expect to be cash accretive in 2016.

Given the end markets, it’s quite an accomplishment if you can do that.

And we have a follow up question from Mike Shlisky with Seaport Global.

I do want to follow up on the last question, actually on the cash balance, your cash on the books was up 20% versus the prior year and if you model out obviously some liquidation of your capital and of course your cost – you look to be pretty close to getting to your cost structure, I mean there’s a good chance you could be up 20% again at the end of it year perhaps in your cash balance. I was wondering if you could, A, give us sort of a sense of if and when you might want to pay down some more debt and are there any restrictions around that in cost? And secondly, if that’s not the case, what else would you do with the excess cash going forward?

If you’ll forgive me for the benefit of somebody on the phone that might not be familiar with the company’s capital allocation strategy, let me just provide some context for what I’m about to say. The company’s first objective with respect to capital allocation is to provide for adequate liquidity for operations. Secondly, capital for growth, both our CapEx for our organic sales and potentially for M&A activity. Third, we look then to deleverage the balance sheet. And finally, to return capital to the shareholders. So having accomplished the first objective, the liquidity, with respect to number two and number three, growth and deleveraging the balance sheet, you might recall that late last year in the absence of any opportunities, M&A opportunities that were attractive for the company, we took our first step in deleveraging the balance sheet and brought in $15 million of bonds. We took a breather in the fourth quarter because of the sort of uncertainties at that point in time in the global economies and to some extent a little less clear idea of where the truck and agricultural markets might be going because of the global economies. But having said that, as we sit here today, first, because we have a little clearer picture about, we think we do at least, about the global economies and our end markets, but also frankly because of the demonstrated ability that we’ve shown in the first quarter to manage our margins in the face of movements in the cycle and also our operating working capital management, I can tell you that we are giving very serious consideration to what the next step might be. Certainly, if an M&A opportunity presents itself in the foreseeable future here, we would, and it was at acceptable rates that would add to our growth, we would take that opportunity. Absent that, we will likely continue to deleverage the balance sheet. And if there’s not – there is a scenario out there where we could perhaps participate in both of those activities, M&A and deleveraging the balance sheet to bringing in the bonds. The bonds, right now, can be brought in at [102], of course, the company has the option of going into the open market and participate in open market purchases. So that would be the mechanics, either of those two mechanics by which we might bring in some of the bonds.

And then lastly for Pat, you had mentioned in the past that you were considering to make some changes to the CVG 2020 plan. I was wondering if you can update us on your progress as to your thought process, have you made any early changes, other than of course what you really announced here, but as far as what markets you want to grow in and how big you think you can get over the next couple of years? That’s kind of the point I want to get an update on.

As far as our longer term strategy, as I’ve mentioned, right now we’re tracking on really two parallel paths. One of those is what I mentioned earlier about improving the core which includes our cost actions, our operational improvements, productivity changes as well as some of these purchasing or supply of these things we’ve hit several times. That is part of our long term strategy. In our business, in order to grow the business, we’ve got to be cost competitive. It’s just inherent in the process that our customers use to source business. The second part of that parallel path is really focused on increasing our reach and the types of products and markets and regions that we participate in. As we’ve spelled out originally in that strategic presentation that we gave publicly, there’s a lot of white space around the areas that we have skills and abilities and we are still tracking down the same tenants that we had discussed previously. The agriculture things that we’re talking about, those are opportunities for us. Taking our truck and bus capabilities and moving those outside of North America into some of the other regions in the Asia Pacific in particular and our growth – we are still funding, actively funding our growth actions, which tends to be mostly around product development, in some cases it’s product tooling, we’re in the middle of the launch of some things. And so as we launch those things, we’ve got lots of resources, project managers, tooling managers that type of thing. So those investments and those directions, those are continuing. What we will probably do, what we’re planning to do is mid-year, third quarter, we’re going to go through and refresh exactly where we stand and if we want to make any substantive or material changes to those directions. But right now I don’t have any of those things to report. We are still tracking in that same trajectory.

This concludes today’s Q&A session. I would now like to turn the call back over to Pat Miller, CEO, for any closing remarks.

I want to just thank everybody for joining the call. A lot of good things going on at CVG. We are dealing; I think we’ve demonstrated our ability to – last year in 2015 we demonstrated our ability to ramp up relatively quickly in a cost effective and margin producing manner. In the fourth quarter and then into the first quarter, we’ve demonstrated our ability to manage our variable costs and also change systemically our fixed costs in light of some of the challenges that we’ve discussed in our end markets. So I think you will see that we’re going to continue to do that and our direction is to continue to earn credibility with our investors that we’re working in there. So I thank everybody for the call and have a good afternoon.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.