NN, Inc. (NNBR) Q2 2014 Earnings Report, Transcript and Summary

Well, good day, ladies and gentlemen. Thank you for standing by, and welcome to the NN Incorporated Second Quarter 2014 Conference Call. [Operator Instructions] Today's conference is being recorded today, August 5, 2014. I will now turn the conference over to Ms. Marilyn Meek. Please go ahead, Ms. Meek.

Thank you, and good morning, and welcome again to NN's Conference Call. If anyone needs a copy of the press release, please call my office at (212) 837-3746, and we will be happy to send you a copy. Before we begin, we ask you to take note of the cautionary language regarding forward-looking statements contained in today's press releases. The same language applies to the comments made on today's conference call and live webcast available at www.earnings.com. With us this morning is Richard Holder, President and Chief Executive Officer, and members of NN's management team. First, management will give an update and an overview of the quarter. And then afterwards, we will open up the line for questions. With that said, I'll turn the call over to you.

Thanks, Marilyn. Good morning, and thanks for joining us. As we've seen for the last 5 quarters, we're gaining momentum in revenue growth and more importantly, margin expansion. As stated in the press release, our results for the second quarter and first half of the year were largely in line with our expectations as strong sales momentum -- as the strong sales momentum that began in 2013 has continued into the second quarter of this year. Once again, in Q2, we improved our operating margins of our base business over the comparable period last year. We've consistently stated as a company that we will remain laser-focused on additional incremental dollars for sales and I think we've done so. While the investments in nonreoccurring and acquisition integration costs tempered our game somewhat in the quarter, our base business continues to improve as the acquired businesses add further avenues for growth and opportunities for operational improvement. In Europe and Asia, we continue to see year-over-year sales growth exceeding end market growth. We've gained shares in both locations, in addition to benefiting from overall auto and industrial growth in those geographies. Our sales in North America -- in the North American automotive market continued to grow over the prior year and is generally in line with the U.S. automotive growth rates. I want to continue to highlight that our European sales levels are still off the historical highs. The European automotive and industrial markets are still performing well below 2011 prerecession levels. As these markets begin to return to normalized levels, we continue to be in a great position to bring strong incremental profits to the bottom line. Additionally, we will continue to benefit from the current trend of growth in exports of the premium brands from Europe to Asia. During the first 7 months of 2014, we've been extremely busy executing our strategic plan. And as you're aware, acquisitions are a fundamental tenant of that plan. To that end, we've closed 3 acquisitions, V-S Industries, RFK and Chelsea Grinding and announced another, which I'll speak to shortly. These 3 acquisitions combined represent approximately $30 million in increased full year revenues to our top line. Each of these acquisitions actions a key element of our strategic plan, in addition to strengthening our product offering, providing us entry into adjacent markets, increasing our global manufacturing footprint and driving further penetration into the industrial and rail markets. Now for a little further detail on the numbers, I'll turn it over to Jim now

Thanks, Rich, and good morning, everyone. Sales in the second quarter were up 10.8% over the same period of the last year and earnings from normal operations were up 30%. This is including the loss at V-S that I'll discuss in a moment. As Rich mentioned, we have continued to increase profitability at a higher rate than our sales growth, by improving our operating efficiency. Sales growth in the quarter totaled $10.4 million. $1.4 million of that was due to the V-S acquisition, with the remainder coming from higher sales in Europe and Asia. The higher European sales are very much in line with our beginning of the year forecast based on slowly improving European auto sales. The higher sales in Asia are resulting from increasing sales programs serving the Chinese and Korean markets. The acquisition of V-S added $4.1 million in sales, as I mentioned, but the operation is not yet profitable, so it was a drag on growth -- gross profit margins. Gross profits, excluding depreciation, in total, were 21.0%, which was about flat with last year. However, without V-S, gross margins would have improved to 22%. We excluded $1.3 million pretax or $818,000 after-tax in acquisition and integration costs from normal operations in the quarter. During the second quarter, we incurred expenses for 4 announced acquisitions, V-S, RFK, Chelsea and Autocam. The expenses included legal, due diligence consulting and integration costs with by far the largest amount being for legal expense. These costs impacted total earnings per share by $0.05. And going forward, we expect to have additional acquisition and integration costs in the third quarter, as well, as we work to complete the Autocam acquisition and continued integration of the earlier acquisitions. SG&A from normal operations, combined with depreciation, declined as a percent of sales from 13.1% last year to 12.4% this year, due to high -- higher sales providing better absorption of these expenses. The average tax rate for the quarter was favorable at 31.2%, which was in line with our plan for the year and quite a bit lower than the 35.8% rate last year, and this is due to higher profits in Europe and Asia where the average tax rate is lower. Moving on briefly to the balance sheet. Working capital is up versus year-end due to higher sales, longer terms with some U.S. customers and an increase in Asian sales, which have structurally longer terms. DSO is up several days due to these reasons. Inventory and payable are at normal levels for our current operating rate. Debt was up by $7.7 million in the second quarter versus the first quarter due to the $10 million we spent on RFK and offset by higher operating earnings. Capital spending totaled $3.6 million during the quarter and $5.8 million year-to-date. And this is versus our stated plan for the year of $23 million. As usual, capital spending tends to be more heavily weighted through the second half of the year, but it is likely that we will adjust our plan -- our spending plan, by substituting some new projects based on the new acquisitions and the fact that we've had a relatively slow start to spending this year. But because of the coming adjustments, we're keeping our CapEx guidance unchanged at this time. Now back to Rich.

Thanks, Jim. Regarding the 2014 outlook, we now expect the 2014 revenues to be in the range of $425 million, including the $23 million in incremental revenues from the closed acquisitions of V-S, RFK and Chelsea. These sales levels would equate to approximately a 7% core growth and 5% growth from acquisitions. Our core growth is made up of approximately 4% in market and an additional 3% of penetration. So I think you can see from those numbers, we are -- I think, we have a fairly healthy business and we're feeling pretty good about our markets right now. On July 21, 2014, we announced the signing of a definitive agreement to acquire Autocam Corporation. Autocam is a global leader in engineering, manufacturing and assembly of high complex systems; critical components for fuel systems, engines, transmissions, power steering and electrical motors. This transaction will contribute approximately $250 million to our top line revenues and will leverage NN's and Autocam's complementary core strengths and values. Further, this transaction will position the combined organization to outgrow its end markets by taking advantage of the current global market and regulatory trends in fuel-efficient technologies, such as: gas-directed injection systems, high-pressure diesel injection systems and variable valve and variable cam timing systems. I don't think we could have found a better company to fit our strategic plans than Autocam. The addition of Autocam to the NN family is a transformative event, creating a much stronger company with a greater opportunity to drive future growth and bring sustainable value to our shareholders. Subject to normal customary -- normal and customary closing conditions, as well as regulatory approval, we expect to close this transition in the third quarter of this year and we're looking forward to sharing a more -- more detailed information regarding the transition at that time. We will be adjusting our outlook once the transaction is closed and we'll be able to provide you with a lot more detail. Let me turn it over to Jim to give you some color around the financials of the deal.

Yes, I thought I'd just spend a minute on the pro forma capital structure of the company, post-acquisition. Following the combination with Autocam, NN will have a 2015 annual sales run rate of over $700 million with estimated 2015 EBITDA of over $125 million. At closing, the combined company should have debt of approximately $375 million and cash of $15 million to $20 million. Our opening net debt-to-EBITDA ratio should be approximately 3.3x, using LTM or last 12 months pro forma EBITDA. Both organizations are expected to be cash flow positive, so we believe that our debt-to-EBITDA ratio will be reduced to more normal levels within 12 to 24 months, even assuming further tuck-in acquisitions. We expect to fund the acquisition of Autocam and to repay all existing NN debt with a $350 million term loan and assumption of some existing debt from Autocam. In addition, we plan to have an unused $100 million revolving credit agreement to provide liquidity for working capital fluctuations. Both of these debt agreements are expected to be covenant-lite structures. To obtain the term loan, we have received debt ratings from Moody's and Standard & Poor's of B2 and B+ -- single B2 and single B+, respectively, which is the rating level we expected given our size and credit profile. Also in the transaction, as we previously have said, we will be issuing approximately $25 million in NN common stock, as part of the purchase to the primary owner, John Kennedy. And we believe that Mr. Kennedy will join the NN board following our normal nomination and election process. That concludes my comments. Rich?

Great. Thanks, Jim. That concludes our comments for Q2 2014, and the 2014 outlook. Now I'd like to take any questions that you might have.

[Operator Instructions] We'll go to Steve Barger with KeyBanc Capital Markets.

I'm going to start with a couple of Autocam questions. Can you talk about the market share they have in their primary product lines and just broadly talk about the competitive advantage that Autocam has that allowed the company to grow the way it did?

Yes, sure. I think you have to look at Autocam in sort of 2 different ways. When you think about the machining market, it's a very disaggregated market. And so when you look at the entire machining market, Autocam would be somewhere around, let's call it 4% to 5% market share. However, where we actually compete is in the upper end of the market, right, the extremely, the ultrahigh precision end. And when you look at that, you're only talking about maybe a handful of competitors. So maybe as many as 10 competitors. So from that perspective, they would be somewhere in the high 20s to low 30s kind of market share in the high precision space. The competitors would be primarily European family-owned businesses, a little bit bigger than Autocam as a stand-alone entity, but about the size of the combination of Autocam and NN, somewhere around $450-ish million is the size of the competitors. So when you look at our newly combined machining group, we would be right in that area with the other 2 big competitors.

Got it. And when you think about how you're going go-to-market with the combined entity, is this driven by an R&D process to get into more of these fuel-efficient technologies? Is it reaching down into the disaggregated market to take over programs to grow? What's the growth outlook?

Yes. The growth outlook really is around the high-end technologies of which Autocam has already done the lion's share of work, right? We are already in the gas-directed injection, in the diesel part of the market, in the variable valve, variable cam timing part of the market. If you think about these technologies relative to fuel efficiency, the way it really pans out is, in order for the automotive to meet the CAPA standards going forward, they have to adopt all of these technologies. And so with the exception of the start/stop technology, the combination of Autocam and what was the PMC business of NN, we've surrounded all of those technologies. And so we don't really have an awful lot of R&D to put into the -- into this piece of the market because I think we've done it. We sort of paved the entry fee into the market. We are aligned with all the blue chip customers that have the fuel systems. And so I think the organizations combined are very well-positioned for the next kind of 5 years if this market grows a lot faster because of adoption rates than the normal automotive markets.

Any -- can you put a number on what you think the growth rate is for some of these fuel efficiency technologies over the next 5 years?

Yes. We've kind of modeled, I'll say, a couple to 3 points a year better than market. And we also understand that even if we get sort of a bump in the normal market, the adoption still has to continue in order to meet the CAPA standard. So a couple of points higher than the normal market.

Got you. I'll just ask a couple of more and then get back in line. How many facilities will you -- will NN have once the Autocam deal closes and if you project forward a year or 2, what's the right footprint going to look like?

Yes, we'll have 25 -- let's call it 25 facilities. We're looking at our manufacturing footprint. There's a lot of opportunities. It's a competitive weapon for us to be close to our customers. So we're not floating anything out there around rationalizing facilities or anything like that, at least not at this point.

Got it. What's the combined D&A for the 2 companies?

We don't have that handy.

I can only guess about 30.

About 30.

30? Okay.

Yes.

Okay. And last one. Just how should we think about the interest rate on the $375 million and then on the revolver?

Term Loan B's, right now, are about 4 or 5 over LIBOR and our deal is being priced over the next 2 weeks. So -- been a little bit of an upturn in rights in that market over the last few days, which hopefully will reverse before we get the deal done. But -- so we should end up in the 5%-or-so range.

[Operator Instructions] We'll move onto Keith Maher with Singular Research.

On the Autocam acquisition, I just was hoping you could maybe talk about how you're going to integrate that in to NN -- to what extent? I know you run some of your divisions somewhat more independently just want to understand that. And also you talked before about, I think -- I'm trying to think of the number, $15 million to $25 million, I think in potential savings, just what the nature of that would be?

Okay. I think first part of your question was around acquisition integration. I think the best way to think about this is sort of a 3-way integration. What will happen is largely Autocam -- the Autocam business will become what's called the Autocam Group of NN Corporation. So they will be sort of the lead dog, if you will, in our precision machining space. So essentially, they will absorb what was our Whirlaway product line into their business and that will become one segment of NN Corporation. So the Wellington, Ohio plant, the V-S acquisition with Juarez and Wheeling, Illinois, all those pieces will roll up into the Autocam Group of NN. We don't have -- although we competed in the market, we don't have very much, if any, overlap. We have been fortunate enough to win programs that are sort of distinctive to one another. So what happens with this integration is a sort of a beautiful combination of the portfolio that requires no real rationalization of -- at least product. Relative to synergies, the way we need to think about these synergies are -- it's sort of bilateral. There are synergies that will come as we do things within the Autocam organization that we think we can bring to the table within that organization. There are also synergies that we think Autocam can bring to NN, some things that they do very well. So when you look at those synergy numbers, they are all-encompassing corporate numbers, and a great example of that is Autocam has done some wonderful work relative to systems, and that's work that we had not yet started inside of NN and it was part of our strategic plan. We now have a complete base around those systems to simply extend into NN, which will divert what would have been a substantive number around spending for those systems. So it's a whole corporation kind of numbers is the way to think about it. It's not the typical integration where yanking ridiculous amounts of cost out of the acquired business. It is a transformation of sorts relative to the entire corporation.

Okay. It sounds like you're going to integrate on their -- when you say systems, you're talking mainly about information technology systems like ERP and financials and that sort of thing?

Correct, correct.

And you're going to kind of adopt theirs?

Correct, correct.

Okay. Do you know what the plan would be -- that could be a pretty kind of lengthy process. What -- be like over the next year or so are you doing that?

Well, we've laid out effectively a 5-year plan and we've kind of modeled what will be there each year. I think the way to think about next year is a $6 million to $8 million kind of number. And then we're modeled out the rest of the time.

Okay. And your goal had been, you had to get to $800 million in revenue, you were going to get there with $260 million in acquisitions by 2018. And it looks like you're probably already past that, or will be, with Autocam. So how does that change or when would you be giving us any kind of update on kind of the future vision in terms of how much -- how many more acquisitions you'd be planning to do over the next few years?

Yes, I think we'll certainly try to get you an update on that as soon as possible. Certainly, the beginning of the year, we'll be as detailed as we can be. But I think the way to think about that in general is we're not coming off our strategic plan. While we're ahead of the plan, we're not coming off of it. So a couple of points to keep in mind. We were pretty open that we were going to run this business somewhere between 2.5x, something less than 3x debt-to-EBITDA. So a priority for us will be to get ourselves back to that position, right? We said we'd only leverage up for a great deal. We found a phenomenal deal. So now we need to concentrate on getting ourselves back into our normal operating level. So that's one. Number two, I think also is the way think about it is, we now will be about 70% automotive and we know enough about the markets to see strength in the markets for about the next 3, maybe as much as 5 years as the market floats up to somewhere around $170 million sort of globally. So that gives us enough cushion, if you will, to balance the business, which is to say we have to grow the other side of the business in an contracyclical manner to balance the automotive cycle, right? Which is what we continue to say is the significant part of our strategic plan. So the focus around the industrial space, around the aerospace base, around the medical space, are all going to be areas of focus as we go forward with the intent being at the end of 20 -- somewhere around 2018, we are a 50% auto, 50% Other sort of business.

Okay. That was helpful. One other question on the debt that you'll refinance, I guess -- or you'll pay off the existing debt and just have this new revolver. Is that correct?

That's correct.

Yes, the term loan...

Sorry. And then how long do you think you can -- would it take you? I mean, it sounds like once it closes and you integrate, paying down this debt is going to, once again, become a goal of the company. So how long does it take you to get down back to that target, that EBITDA ratio of 2x?

To get all the way to 2x would take 2 full years of positive cash flow. As I said, both operations are positive cash and if that all goes to debt repayment, we would be -- and plus, we have EBITDA growth over that time period. I think it will be maybe less than 2 years.

Okay. I'll ask one more and then I'll get back in line. But do you know what, in terms of Autocam, kind of what they were planning on spending in CapEx this year?

We do, and we will simply say that it's -- we continue to forecast something in line with what they had in the plan.

[Operator Instructions] And we'll take a follow-up from Steve Barger.

So you just said 50% auto, 50% Other in that future state. Just using rough math, it seems like you need to add $200 million to $250 million in revenue from those other segments depending on the base that you use. Will that primarily come from future acquisitions, or do you feel like the deals you've already done plus your efforts to get deeper penetration into existing customers can take you a large part of the way there? How do you kind of think about getting there?

Yes, I think, the latter is appropriate, Steve. I think we feel that it's about half-and-half. We've made some moves to get us into some great markets that we can now stake a claim and begin to grow those markets, primarily the industrial and the fluid power spaces. So we're pretty bullish about that. But we also think that there will be a piece of this that continues to be acquisitions. I think it's fair to say that, let's call it $75-ish kind of million, and this will probably come from acquisitions partially because we need to create some scale inside of one of these other segments.

Got it. And back to the prior question about the footprint. Do you feel like you've got enough global capacity right now? Or I guess to say it another way. When you think about the global capacity that you'll have, where are you going to be running from a utilization standpoint and will you be able to put -- how much more volume can you run through the footprint after you have the 25 under your control?

Yes, I think we have a model that says we'll be somewhere around 75 to 77 utilization. And so it gives us a little bit of cushion, right? You think about -- you get to 80, 85, that's when you start to see diminishing returns. So our model is telling us, let's call it 75. We have some space for sure.

So if I just use $725 million as the base there, then you can grow organically into maybe $850 million in sales, plus or minus, before you would need to add from a footprint?

Yes, I would think that's a fair assumption.

Okay. The -- Jim, tax rate for the combined company, just so we can do some pro forma modeling. Does it change dramatically?

No, it doesn't. They -- Autocam has a slightly lower tax rate than us right now. Again, it's all mix of where the profits are. So I would say 32%, 33%, it would be in that range.

And how should we account for the minority interest?

Well, that will be a good question going forward but the way the banks look at it is they like to count the EBITDA -- they like to count as EBITDA the dividend that is paid in cash into the U.S. and so that does add cash into the U.S. From a lenders point of view, from an earnings point of view, of course, our expectation is that we would account for it on an equity method and just show 49% of their profit -- and that operation is very profitable.

It is. Is it margin accretive to consolidated NNBR? Just that 49%?

Absolutely.

Yes.

Okay. The equity component of the deal, is that a fixed number of shares or does it flow based on the share price?

It's a fixed number of shares and we haven't disclosed the details yet on that.

Okay. And I guess, just one last conceptual question for you, Rich. You're acquiring new product lines. Are you getting new manufacturing processes or is this complementary to what PMC already does? And I guess, just you've already addressed this to some degree, but your vision for how the combined entity becomes greater than the sum of the parts, how long does that take and what do you envision this company will be?

Yes, I think, the answer around the manufacturing process is I think we are definitely picking up manufacturing processes. And it's a nice mix because there are certainly things that we have that can assist the Autocam Group and a great example is we do a lot of specialty machinery build in the Wellington plant that we can now bring to -- bring into this deal. Autocam does some really, really good work around specialty tooling up in Michigan, much beyond what we're doing. So they can bring that. We are doing some work on robotics, so there's a lot of pieces that the combined organization has -- has just a wonderful manufacturing process portfolio, I would argue, one of the strongest out there, when we bring them together. After that, the pickup of RFK, which gives us a low-cost country tooling build facility. That's one of those things that was part of RFK. We didn't talk about it a lot, but they do their own tooling. And so if you get into the factory, a lot of folks are pushing their toolings to low-cost country but unfortunately, they're getting a quality of tooling that is commensurate with where they're pushing that tooling to. In our case, we'll be able to push it to a low-cost country and control the quality of our tooling, which should give us a further competitive weapon. So that's kind of how I think about the manufacturing processes. When you talk about the sum of the whole being greater than -- of the value of the whole being greater than the sum of the parts, when you look at -- if you take the markets that Autocam is playing in today, a little bit of transmission, they're starting to get into that, we now have a scenario where in the next-generation CVT transmission, a combination of what would be the Whirlaway product line, the new Autocam business and our ball business that are now working on an assembly that will be a core assembly in the next-generation CVT transmission. So when you think about it, we're working through 8, 10, 12-speed transmissions and we're already on the bleeding edge of the next-generation CVTs, which would be 3 to 5 years beyond the 15-speed kind of transmission. We're going to start to integrate the plastics business into this so we can make assemblies that go into the oil and gas space. We think we have about 12 or 13 nice projects that we can work cross business that can bring customer solutions to bear in primarily sectors that we're not in today, like oil and gas.

And -- I mean, that sounds great. Is -- between NN and Autocam, is the bench there or do you need to hire a lot of people to really pursue these dozen initiatives that you have?

Yes, I think that's a great question. I think one of the things we certainly got with the Autocam business is an outstanding management team. And I think, when you looked at the 2 organizations separately, we were light in the bench. I think when you bring us together, we have a solid team. We have some depth. We're going to continue to bring depth into the organization because we have to now sort of create a corporate structure that will support an $800 million business and one of the questions people always ask is, "Why do you have SG&A going up?" That's why. We've got to create that structure. So when you put these things together, I think we have depth, we have bench today and we're going to continue to build it over the next probably 1.5 years.

We'll hear again from Keith Maher.

I was going to ask about -- just the RFK and Chelsea acquisitions, maybe just some more color there in terms of what led you to make those acquisitions, if you could talk about multiples you paid, that would be great. And if we could expect to see more in the bearing -- more acquisition in the bearing components -- I'm sorry...

I -- let me give you the -- kind of some of the strategy behind Chelsea and RFK. I'll let Jim talk to some of the numbers. When you think about Chelsea, what Chelsea does for us is it gives us a wider portfolio of customers. Customers that we didn't -- we hadn't penetrated prior. And it also took us -- take us deeper into the fluid power space. So we were in a scenario where we started to penetrate the fluid power control space through our Erwin facility inside the ball business. We were doing a nice job there. With the addition of Chelsea, that makes us a key player in that space and it gives us now a portfolio of all the top fluid power customers in the marketplace. And I'm sure you know who they are. RFK, they were arguably our leading competitor in the taper roller space. If you have listened to us over the years, you know that kind of 20% of the taper roller manufacturing is outsourced and we were -- we had a substantive share of that outsourced piece. RFK essentially had the other part of that and so they had share, they had capacity and candidly, they were the price leaders in the marketplace. So when we acquired them, it -- obviously, we picked up quite a bit of share. We picked up the ability to assist in putting the right product where it should be relative to the cost, so we think we'll be able to pass along cost reductions to the customers while increasing margins. And we picked up a low-cost manufacturing facility in Eastern Europe, which is where quite a bit of our customers continue to set up shop. So we're also close to the customer. So we think those pieces all work really well for us. I'll let Jim talk to the numbers but I'll tell you, I feel pretty confident saying we didn't -- we did a nice job in acquiring these businesses, as well. Jim, you want to?

Yes, I'll just say that we paid on average, roughly 5x EBITDA for these businesses. In the case of Chelsea, that's a very high margin business, so we got a really good deal there. In the case of RFK, that is -- in Bosnia, export business has a 0 tax rate, corporate tax rate. And so we got good EBITDA, a profitable and stable operation and it comes through at 0 tax. So I mean, these are really -- in addition to being strategic deals, these were deals that were at very reasonable prices and very good additions to our...

Okay. I mean, are you looking -- I mean, obviously with Autocam, I was thinking maybe you'd take a pause but you did mention potential tuck-in acquisitions earlier. What does the pipeline look like? I mean, how active do you think you'll be in the next year or so from smaller acquisitions?

Well, I think you never say never. We have a big elephant to begin to eat. So we're mindful of that. With that said, we are always looking, studying and aware of what's going on in the marketplace. So if the opportunity presents itself and we get ourselves to the debt level that we want to be, we'd certainly be willing to look at something.

Okay. And one question to Jim, just on the DFF [ph] picking up. Is that somewhat related to normal seasonality? Does that always happen or is this just -- I mean, you mentioned some better potential payment terms for your customers or is this something a little bit different?

Yes. I should have mentioned, there is a seasonality component in there but the bigger impact was the fact that our sales in China are growing and those terms tend to be overall -- average about 90 days. And we're lucky in that we don't have any credit. We don't have any collection issues with any place but there, you sort of have the structurally higher terms. And some of the bigger customers in the U.S. are pushing towards longer terms. That's a supply chain mantra now that you -- everybody has to deal with. And so we're dealing with that in selected cases, where it makes sense for us and maybe we might get some other benefits in the negotiation. But longer terms are being pushed out there by the bigger supply -- bigger -- our bigger customers.

We have no further questions. I'll turn the conference back to management for closing or additional remarks.

Okay. Thank you. Thanks for joining us. As you can see, we had a fairly busy second quarter. We're pretty pleased with our progress. We know we have an awful lot of work to do to integrate these organizations, to continue to improve our base business. I'll continue to bang on the mantra of expanding our margins and being ready for the return of the growth in Europe to bring strong incrementals to us. We think we're on track and we'll continue to climb that hill. With that said, really appreciate you joining us and look forward to chatting with you again next quarter.