NN, Inc. (NNBR) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the NN Incorporated Fourth Quarter Full Year 2015 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] This conference is being recorded today, March 10, 2016. I would now like to turn the conference over to Mr. Robbie Atkinson. Please go ahead, Mr. Atkinson.

Thank you, operator, and good morning, everyone, and thanks for joining us. I am Robbie Atkinson, Corporate Treasurer and Investor Relations Manager. On behalf of our team, I would like to welcome you to NN’s fourth quarter 2015 earnings conference call. Our presenters this morning are President and Chief Executive Officer, Richard Holder, and Senior Vice President and Chief Financial Officer, James Dorton. Also here is Tom Burwell, Vice President and Chief Accounting Officer. If anyone needs a copy of the press release or the supplemental presentation, please call the Financial Relations Board at 212-827-3773 and they will be happy to send you a copy. Before we begin, I would ask that you take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation and in the risk factor section of the Company's 10-K for the year ended December 31, 2014. This same language applies to the comments made on today's conference call, including the Q&A, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, foreign exchange rates, cash flow, tax rate, acquisition synergies, future operating results, performance of our world lot markets and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of the Company's control. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and supplemental presentation. Finally, before we begin, I'd like to invite you all to our Annual Investor Day on March 24 in New York. If you need additional information, please contact the Financial Relations Board. First, we will give an update and overview of the quarter. And then afterwards, we will open up the line for questions. With that said, Rich, I will turn the call over to you.

Thanks, Robbie. Good morning and thank you, everyone for joining us on this conference call. Our intense is to maintain the process that we began in Q3 - on the Q3 call, so we’ll be using the deck, I’ll walk through Q4 full year, we’ll go through some guidance and then we’ll just move straight into Q&A. We move over to which should be Slide 4 in your deck the highlights of fourth quarter. We closed the acquisition of PEP on October 19th, which I think was a significant moment for us as an organization. Sales for the fourth quarter was 183.9 million in line with our guidance from - that we gave you in Q3. Acquisitions contributed 42.2 million during the quarter. Of note, Autocam’s margins continue to expand driven by our continuous adoption of the CAFE products as we expected and as we had been telling you often quite some time. Adjusted earnings per share of $0.25, again in line with our guidance. Adjusted EBITDA of 30.4. Our adjusted operating margins improved 290 basis points which we’re pretty proud of but I will tell you a little later on that it could have been a little bit better. Foreign currency impact in Q4 about 11.7 million in the quarter on the net sales line and that’s somewhere around 2 a little north $0.02 of EPS for the translation effect. Last but not least, the acquisition of PEP brings us closer to our diversified end markets as we’ve been talking about strategically for quite some times. And we’ll talk about this in great length and great detail at our upcoming Investor Meeting later on this month and so I would encourage everyone to either attend or at least dial-in. Moving on to adjusted earnings per share for the fourth quarter was again $0.25. Let me remind everyone that we issued 7.6 million shares in the third quarter, so we’re down from 2014 by $0.10. Adjusted net income is up year-over-year. So again we continue to trend in the appropriate direction. On the net sales line 183.9 million, up from a 153. Acquisitions contributed 42.2 in the quarter. We saw an $11.7 million currency headwind. When you think about the base business and I’ll define it as pre-PEP, the Autocam business was down about 5.7 million driven primarily by currency and sort of cleaning up Brazil. The Bearing group also was down about - right around 5.5 million as well. They had a headwind of 7.1 million in currency. So if you adjust out on the Bearing - for the Bearing group, while sales were down, volume was up because candidly we’re taking share. Now we’ll talk about some execution issues on that a little later on but again the story continues to fall in the place much like we’d hope. Moving on to Page 6, adjusted gross margin, Q4 last year were 21.4, were up 23.1, so 1.5 improvement. As you can probably surmise in your modal as we go through this year, adjusted gross margin will climb a little bit more; so again as expected. On the adjusted operating margin front, we continue to improve sequentially and we’re up year-to-year to 10.6 from 7.1. So again this story continues to sort of play out the way we’d hope. Moving on to Page 7, adjusted EBITDA from 20.5 to 30.4, up around 50% [ph] I guess. SG&A up about a $1 million as we continue to invest in the business primarily around the execution of our integration plans. If some of you remember, we talked a lot about bringing all in more application engineers, moving into different verticals and so on and so we continue to invest on SG&A front. Moving on to Page 8, as we dive into the businesses a little bit, the Autocam Precision group, they were down as I said earlier 5.7 million, again driven by currency and some of the headwinds in Brazil. But with that said, adjusted operating margins were up, so 12.7%. The core business was at an 11.5 also up, it just still a job, I think this year. And then the JV contributed - the China JV contributed 1.2 point of margin. Now one of the things we talked about continuously in the Autocam group is that as the adoption of the CAFE products increase, our margins will decline. So if you deep dive into the group, what you’d see is, is our dense sale going up which is all GVI [ph] and so our margins are climbing in line with those sales as well. So again the story is as we’ve been saying and feeling pretty good about the performance of the Autocam group you know ex-Brazil I suppose. Moving on to Page 9, the Precision Bearing group, again sales were down about 5.7 million. Again we had some issues in the quarter. We had somewhat expected push outs. We had a little bit of a poor mix. But as we can see in the next slide over, operating margins are down significantly. You know in spite of the mix and in spite of the push outs; I will tell you we just simply had the execution issues. We are pretty confident we have them fixed but candidly we did not flex the way we should have and we carry through some labor costs and some material costs that we otherwise should not have. We thought we had the whole plug, clearly we didn’t until we’ve gone back and adjusted the process and we had an operating system and we think we had it fixed now. There is good and bad I think associated with this story. I think the good is you know we’re able to see it, fix it and have the diversification of businesses to be able to overcome it. And the bad is we thought the plan was - descriptive plan was relatively tight and so we found we have an ability to do a little bit more adjustment. So all in all, we were able to compensate and we now have the problem fix going forward. Moving on to Page 10, Precision Engineered Products group, keep in mind that this was the acquisition of PEP and we’ve taken the Plastics group that was out of the legacy business and rolled it into PEP. I’ll combine it with the PEP acquisition to create the PEP group just like we did with the Autocam group and the worldwide acquisition. So when you look at net sales, 7.7 up to 49.1. So I mean I think this chart is probably more entertainment than substance given the comparison. And the same goes for operating margins from 5.3 to 20.6. But I think that then you can take away from this chart is that the acquisition performed as expected. And so again the plan and the expectations are holding together. Moving on to 11, fourth quarter summary, again we rolled the legacy plastics business into the PEP organization creating the PEP group. And as you well aware, we sold off the Rubber piece of the business. We rebranded our Bearing Components group to be now called the Precision Bearing Components group. That is impart because had carved out some pieces out of the acquisition of PEP that were Bearing related and move those into what was our Metal Bearing group, but it’s not only metal anymore, we are now in the plastic side and some potentially ceramic side, so we rebranded it to Precision Bearing instead of Metal Bearing because we’ve expanded outside of the metal move. Continued improvement in overall operating performance driven by the NN operating system. Again we continue to expand margins and the plan continues to hold together, so we think that’s incredible results in terms of expanding margins. PEP, continues to diversify our end markets segments and again we’ll talk a lot more about that later on in the month. Negative currency translation continues to skew our year-to-year comparison. So any point in time if someone want to kind of walk through the bridge, feel free to give Robbie a call and he will happy to give you all the ins and outs of translation and currency effects. And again we experienced a bump in the road in terms of execution inside of our Precision Bearing Components group. We have that rectified and I feel quite certain that we won’t see that issue again. Let’s move over to full year 2015, let’s go straight to Slide 13. I am not going to cover the entire deck; I am just going to cover the summary slide, so we can get the guidance in Q&A. So in terms of summary, sales were 667.3 million for the year. Acquisitions contributed 212.5. We completed the $182 million follow-on equity offering in Q3 in order to prepare for the PEP acquisition. We in fact made the PEP acquisition and completed it in Q4 2015. For the year, adjusted earnings per share of $1.53, adjusted EBITDA of 102.7 million, adjusted operating margins improved 140 basis points compared to 2014. All in, foreign currency impact of about 39.1 million compared to 2014 which rounds out to about $0.09 per share on the translation effect for EPS. And last but not least, our cost of debt and this is probably important for you guys doing the model, are down 29 basis points based on the movement of the 50 million from the high yield cut in the quarter high yield over to the much lower term loan B. As we move to - jump all the way to Page 22, first quarter guidance. As we look at the quarter, we think quarter will be between 205 million and 212 million. I want everyone to take note of the profile of the business, it’s a little different than it was sort of way back when we build through the year. So our stronger quarters are quarter two and three. We are pretty sure first quarter will be our low score. So the profile is a little bit different than we once had. So again, net sales 205 to 212, adjusted operated margin between 10 and 10.5, adjusted EBITDA 30 million to 35 million and adjusted EPS between 23 and 28. As we go to full year on Page 23, there are no changes, we are forming the guidance the plan we laid out to you in Q3. And I think that’s it. I think with that we can open the line for questions.

Thank you. [Operator Instructions] Our first question will be from Justin Long from Stephens. Please go ahead.

Thanks and good morning. So to start, I was wondering if you could provide some more detail on what’s included within the restructuring charges for both the Bearings and the Autocam segment. And as we look into 2016, what were you assuming for any incremental restructuring charges this year?

Let me let James answer that.

Hi Justin. The restructuring charges were in four big buckets. Acquisition costs and integration costs related to PEP acquisition primarily. The second bucket is the financing - the write-off of our previous financing cost that was a large amount that was $19 million since we rebid our financing for the new acquisition. We wrote off the previous deferred financing charges. And then we have a - the next bucket is the restructuring charges. We made a number of changes in the business, which before we announced last quarter that we’re going to close our plant and consolidate it which was part of our original plan with the acquisition. And we made some restructuring issue - made some restructuring changes within the Bearing Components group related to what Rich just talked about. And the final category was really just the category of foreign exchange that we normal - foreign exchange are company loans that we normally exclude in few small packs issues. In 2016, we’ve - I wanted to point out to our that in the reconciliation tables in the back of the deck, there is a non-GAAP to GAAP reconciliation of the forecast. And it’s on the page - the pages aren’t numbered but it’s next to our last page. So I won’t go up with that but you can see the categories of the non-operating changes that we expect in ‘16.

Okay, got you. I can look at that, I appreciate that color. And maybe to follow-up on that line of questioning, you know we’re not 2.5 months into the quarter, so could you speak how you’ve seen margins in the Bearing segment progress year-to-date, you know Rich, you said you are kind of back on the right track now. Are we back to the point where margins for that segment are back in the double digits, or we half way there, could you just give an update on the progression you’ve seen?

Yeah, I think we fix the issue, so the Bearing margin should perform as they have impact. Actually they have a pretty strong first quarter number and right now I think we feel confident that we’ll see that - we’ll see that come through the quarter. So we feel that the issue has been fixed.

Okay, great.

And then we all know the rest of the business is performing as expected. So yeah, we feel pretty good about it.

Perfect and I’ll just ask one more and pass it along, but obviously the CAFE related technologies represent a nice long term growth opportunity as we run the math on that projected adoption rates the next few years but I wanted to get a better sense for the near term demand you see from these products. How should we think about the revenue growth in your CAFE related products revenue in 2016 and could you just speak to your level of visibility in that piece of your business?

Well you know I think within certainly the Autocam group, the CAFE adoption is one of the - is not the shining stock, we continue to be top fairly regularly on new or extended programs. In some cases, we’re pulling some adoptions forward. I think what we had was about a 4% growth rate built into the plan. I think we’re going to do a little bit better than that based on what we’re seeing right now. Things could be a little bit more excitement in the market than we expected, so we think we’ll probably do a little bit better than the 4%. I am not sure I am willing to give you a number right now that early in the year, but certainly based on what we are seeing, we’re tracking better than we originally thought. The other thing that’s playing into this a little bit is what is peers that clearly automotives are looking at either doing a mid-cycle upgrade or pulling the platform upgrade forward to take advantage of the market. With a lot of discussion out there about that certainly we’ve seen at least one of our customers increase their demand because of the ability to provide into another platform. So that’s probably going to be another wildcard for this year.

Okay, great, that’s very helpful. I appreciate the time today.

Okay, thank you.

[Operator Instructions] Our next question will be from Stanley Elliott from Stifel. Please go ahead.

Hi, good morning, guys. Thanks for talking my question. Rich, could you just talk a little more about the issues that happened in the Bearings business and maybe a little more specifics about which you did to kind of correct the margin impact because you talked about the volume piece being up and some share gains in there, I am just trying to square it all together?

Yeah, so we certainly - we probably understood our demand pattern going into Q4 as we normally do. And you hear me took a lot about flex productivity, we always have plans in place that is that demand pattern should shift anything greater than 5%, there the series of activity that we immediately and automatically do as an organization. I will tell you that we experience some mix changes that we unexpected and we experience some push outs that were unexpected. And our scrip if you will did take that we take a certain amount of actions immediately. One other thing is the reason for the script is so we don’t sit there and wait to believe the market. And in fact what we did was we sat and we waited to believe the market, consequently we carried a substantial amount of labor and material inventory that we should not have deep into the quarter before we reacted. So the fix obviously is let’s just say driving a little more awareness around the speed of adjusting the enterprise and you know that direct reaction to the market. And candidly just making sure the organization is appropriately trained right so it’s no systemic that just may be a bad way to put it, it’s kind of old school versus new school, right. We used to wait and see. You don’t wait and see now right, we react what the market is telling us. It’s too hard to - and this is - it’s too hard to chase it down, right, you just got to go, it’s a lot easier to chase it up.

Fair enough. And just switching gear, I don’t know how much you want to talk about the PEP integration or wait for two weeks but you kind of initially - does that 6.5 million synergy target look in line maybe conservative, how should we think about that?

Yeah, well, we certainly - we certainly feel comfortable with that 6.5 million. The integration is going extremely well. We’ve got a great team over there and I think you know I’ve got say we have an extremely open and welcoming team. And so a normal something discussions that you have around, why should you give us within an acquisition, we don’t have that. And so we’re moving at a pace that is a lot faster than expected. And I think at the conference later on this month, you’ll see that, right. We thought we would take the better part of you know the first quarter to figure out what the arch structure would look like, we are done with the arch structure, I am going to show you that later on this month. So we feel pretty good about how that acquisition integration is going especially on what we’re seeing here, I am going to talk on the top five.

Great, and last one from me, you know leverage target getting down three times I guess is two years, two and a half years from now, is that still in the cards because that would imply a pretty significant ramp in free cash flow looks into 2017?

Yeah that is still the plan. Obviously as we sit around the table we are confident in looking at ways to accelerate that. We are laser focused on free cash and debt pay down. And candidly I think we’ll do a little bit better but right now the plan is still that 20 or 25 months kind of timeframe. And if you look at the fourth quarter, we spit out roughly 30 million in free cash. And you know if you got Robbie or Jim behind the scene, they can kind of walk you through that. So I think everything is going right now as expected, right.

Great and one more if I could, what are the expectations for foreign exchange as an impact into 2015 numbers?

Yeah, right now we are staying flat, we are not seeing anything or hearing anything out of Europe especially or Brazil at this point that making us think anything other than flat. I am sure it will be lumpy, right you know especially in Brazil. But I think over the course of the year, we are thinking it’s just - it’s all flat.

Perfect. Thanks guys, best of luck in a couple of weeks.

Thanks.

[Operator Instructions] Our next question will be from Steve Barger from Keybanc Capital Markets. Please go ahead.

Hey good morning, guys.

Good morning, Steve.

Good morning, Steve.

Going back to your old school versus new school comment, how could you have adjusted more quickly, is there enough temp labor built in to make that change and for inventory, would have there been a simple as just stopping vendor shipments?

Yeah, the answer to both those question is unequivocally yes. This one Steve - this is just is mostly that is real, right. I mean the mechanisms that we built in place where there. We waited to see if the orders would come through and impart because of history, right, certain customers behave the certain way and we said you know, hey these guys always do that kind of things, so let’s wait. And that’s not the way the system is designed. The way the system is designed us to react immediately. So I think the defense of urgency around that now is well understood.

Okay, going back to the 1Q guidance, you said that will be lowest in ramping into the middle quarters, can you talk through the seasonality of the business and any specific whether it’s end market headwinds or characteristics of the portfolio, just explain why you have confidence in the full year guide if you are staring 1Q in a whole?

Yeah, well, I mean just in general when you look at our order patterns, especially when you tackle on the acquired businesses, when you look at their normal order quarter patterns, they get extremely strong second and third quarter. When you look at our core business, our core business naturally got stronger second and third quarter, we actually would build a lot in first quarter to - we’ll build a lot in first quarter to facilitate shipments in second, sometimes third. So it’s just a nature of the end market. I don’t think we’re seeing any particular headwinds in any particular end markets that outside of our plan. Now whether or not they are down you know relative to their normal industry indexes is a little different. We could probably talk about those by individual end markets. But as a whole compared to our plans, today, we’re not seeing anything in the demand stream in our end markets that’s giving us any pause or well making us think that you know there is going to be any headwinds, right. So I think we have enough visibility to feel comfortable with what we think we’ll see in first quarter. We probably have half the visibility through second quarter. You know - and so there is no fundamentals that make you think third or fourth quarter will perform any differently than we think it would. And I think maybe lastly I’ll say, I am not sure I agree with you with the comment about starting out in the whole. Again, we are building through the year and there is kind of the order pattern and the rate of the business goes. In fact it’s not too dissimilar from the old business where you know first quarter was low, we use a little work in caption and we came out of the year screaming. So we think we are right where we should be.

Okay, so as we build out the out years this will be a normal cadence that we can expect even layering in PEP, that’s just going to be how the business works?

Yeah, I think we’ll build through the year. I think if anything be laying in the business in the out years, I am taking ‘16, I am talking potentially ‘17 may shift Q4 a little bit, but I think Q1, Q2 and Q3 profiles and we’re not seeing anything that makes us think it’s going to be any different.

Okay, and now just kind of more of a philosophical question, you know you look at the portfolio, PEP has higher margins and lower capital intensity, so an incremental dollar of revenue there generates more EBIT and cash flow than it in the other parts of the business, so can you talk about internal asset allocation to growth programs, how are you going to approach that from a resource standpoint and do you feel like you are constrained anywhere?

Yeah, so let me take the last part first. We don’t think we have any constraints. We think you know we are going after very strategic growth program. We understand the investments on across the board whether it’ll be in the Autocam group or in the Bearing group or in the PEP group. So I don’t think any of the groups will tell you they are struggling for any capital or that where we’re squeezing and pinching. I think obviously the differences between you know the profitability or the margin in PEP and the capital investment versus that of the Bearing business is significant. But I’ll you to keep in mind that part of how you need to think about the Bearing business is in terms of long term stability and a fundamental architecture of the company. So we jump on a program in the Bearing business, we make a capital investment and we ride that horse for the next 100 years, right. And we hold on to these programs for a long time, right. It’s a little bit shorter, we can get into the Autocam group, it’s the lift of the platform so it’s five to seven years. And then when you get the PEP, it’s three to five years. And so I think when you think about the mix in the balance of the business and I know I probably speak this to depth is balance issue, I think it’s critical you know that we keep our eyes on all portions of it and make sure we keep the core business strong because it throws off an awful lot of cash and we do well so older the program.

Got it. And last question from me. Toward working capital to revenue was around 26% for 2015, any comment on where that can go in a modest growth environment. Do you feel like there is a lot of working cap that can come out?

Yeah, look we actually have a program this year around looking that our working cap, we feel pretty confident that working capital will get a little bit better. I want to say we said we thought we could take somewhere between three and five days out of working cap for the year without you know as part of the plan are help things to go in. So yeah, I mean we think we’ll continue to improve working cap, that’s you know certainly something we’re pretty confident about.

Okay, thanks for the time.

Our next question is from Larry Pfeffer from Avondale Partners. Please go ahead.

Good morning, gentlemen.

Good morning.

Good morning.

So, could you just walk us through a little bit the seasonality that the business now that differs from the historical mix and specifically the electrical piece?

Okay, so the seasonality of PEP - you asked a couple of questions, you asked PEP and then you asked electrical. So PEP in general, there is seasonality is kind of flat I would say through the year as an entire organization but it ends up happening is when you get through the electrical side, it’s all about the bill season, right. And so generally on the electrical side, you are low in the winter and as you get into the spring, the heavy bill season, you get - something get more demand so that’s when all the houses are being built, so call it April-ish through September-ish, so you get a really strong Q2, you get a fairly strong Q3. And then depending on what the weather looks like you know you see which you see in Q4.

Got it. And so that, is that a big piece of your kind of sequential walk from Q1 to Q2 is the electrical end markets?

It absolutely yes, that’s also as you’ll see when you come to the conference, it’s a big portion. So as you think about it throughout the years to come, that’s a big focus area for us.

Right and I know you’ll probably touch on this a lot at the Investor Day, but just curious you know how you’ve been doing in the medical and electrical markets you now both existing customers and new customers in terms of wining new business in the last few months?

I will tell you, surprisingly well. We have more opportunities in the offer today than we thought we would. This is proving itself to be a good move on our parts. We have much more quotations both in medical and in electrical than we expected to have at this stage of the game. I think in the medical side, we’re a little bit of with fortunate in what’s going on that you know there is a few big customers that are going through their own integration and they are looking for their own wins and to take off that, in point of doing that is looking at us as a much bigger partner. So for that reason I think we’ve been extremely flexion in the quotes that we are seeing and at least one of them we’ve already won. So we’re feeling pretty good about that. We’re feeling really good about the electrical side, obviously because we as you all know the markets coming back so the residential sector is it’s kind of hard to say it’s strong at a million two, but relative to past year, it’s great, relatively to where it should be is probably still a little lagging. But we have gone to couple of major customers with the entire portfolio. And of course it’s definitely impressive to them and so we’re working through the engineering of it now. So I think - I think we are feeling pretty good about the plans we put in place and the things that are happing. And certainly if the quotations are any indication of success we would feel it really good.

Got you. And then just on the acquisition integration, how much of the SG&A build, do you think you’ve already put in place for PEP both in the fourth quarter and the first quarter?

I would tell you, on the - probably less than half.

Okay. And just one last question - sorry, go head.

Okay, go ahead.

So just one last question and maybe difficult to comment, but just curious on what you guys are hearing out there. You know I know you have the opportunity to reprice the term loan in April, any commentary from the banks and just the market in general that you are hearing in terms of what you think you could have done there?

Hey Larry, this is Robbie. I think when you look at the debt markets, they are still pretty choppy. We’re going to be patient and make sure we do the right thing. And obviously starting in April, we’ll be evaluating the debt market sort of constantly to make sure that if there is an opportunity to materially improve our position that we’re ready to take it.

Got you. Thanks guys, best of luck in the quarter.

Thanks.

Our next question is from Daniel Moore from CJS Securities. Please go ahead.

Thank you. Good morning.

Good morning.

Rich, can you remind us on the organic growth either in volume or revenue embedded in your fiscal ‘16 guidance for each of the three segments the Autocam, Bearings and PEP?

Well, just to be clear, we didn’t give any guidance by segments but you know we’re in the mid to high single digits. We’re saying about 5% growth as an organization. I will tell this fortunately it will come from some of our high growth segments obviously some of which I just refer to. But we didn’t get into a lot of detail about growth by segment.

Okay, so obviously you feel pretty good about PEP, would you may be willing to rank order those three?

Yeah, you know we - it’s interesting, we have a little internal friendly contest here and trying to figure out if we think the electrical business will grow faster than the medical business or vice versa. I am just telling you I got my money on the electoral business but we’ll see. But I think if we rank order and we’ll say growth will come electrical, medical, Autocam Precision and Autocam Precision in two places not only I think some volume increases at the CAFE but keep mind that inside of the Autocam Precision group, we also have - we have Precision shafts for residential compressors. So as new home builds go, those get go - those climb with it. And so we think that shows up. And candidly, look we’ve got a lot of opportunity in terms of taking share in the Bearing business especially in our New Mexico plant. There is a lot going on there. We are shipping production now and we are ramping up faster, faster and getting more and more demand every day given all the move of the automotives to Mexico and the requirement for the Mexican content.

Okay, that’s helpful. And then, give us a sense of what organic grow look like overall in January and February?

I don’t - my best guess feel from the number, you about in line of what we thought it would be. We’ve not seen anything in January, February that makes us think that you know we are spiking way up but I think we are in line would about what we thought organically.

Okay. Go ahead, I am sorry.

Yeah, I am just trying to do a quick interpolation here, in Q4 and first quarter, looks like we’re up about 5%.

Okay and then what amortization expense is embedded in fiscal ‘16 guide, just trying to get a sense of what GAAP EPS is embedded in your or kind of an adjusted EPS including amortization is embedded in your $1.60 to $1.80 guide for the full year?

Larry, it’s Bobbie. We use the midpoint of our guidance from a revenue perspective to and on the EPS front. On a pretax basis, amortization of intangibles about 24 million.

Okay, that’s fine, I’ll come back in. And lastly, I know SG&A was touched on maybe just on specifically, what is a good run rate look like for SG&A in Q1 and what are your expectations for the full year?

Yeah, I don’t think Q1 is going to climb much more than where it is today, maybe a couple a hunger thousand, but I think the year will probably climb another as much as the million and a half probably.

Okay. I think that’s it. Thank you.

It’s interesting. Okay, no problem.

It appears that there are no further questions at this time. Mr. Atkinson, I would like to turn the conference back to you for any additional or closing remarks.

All right, great. Thank you, operator, and everyone. I appreciate joining the call. That concludes it. Thanks.