Worthington Industries, Inc. (WOR) Q1 2013 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Worthington Industries First Quarter Earnings Results Conference Call. [Operator Instructions] This conference is being recorded at the request of Worthington Industries. If anyone objects, you may disconnect at this time. I'd like to introduce now, Ms. Cathy Lyttle, Vice President of Corporate Communications and Investor Relations. Ms. Lyttle, you may begin.

Thanks, John. Good morning, and welcome to our first quarter earnings conference call. Certain statements made on this call are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and could cause actual results to differ from those suggested. Please refer to our first quarter earnings release which we issued yesterday afternoon for more detail on those factors that could cause actual results to differ materially. For anyone interested in listening to this call again, a replay will be made available on our company website. On the call presenting today are John McConnell, Chairman and Chief Executive Officer; Mark Russell, President and Chief Operating Officer; and Andy Rose, Vice President and Chief Financial Officer. We will begin with John McConnell's opening comments.

Thank you, Cathy. Good morning, everybody, and thank you for joining us today. We had a very good first quarter producing solid year-over-year gains. All of our companies performed well as you'll hear in more detail in a minute from Andy Rose, our Chief Financial Officer; and Mark Russell, our recently appointed Chief Operating Officer and President. Now while this is Mark's first time reporting to you on our operating performance, many of you have met with Mark while he was leading our very successful steel transformation. Those who have, know his passion for excellence. Now beyond Mark's new responsibilities, over the past year, we have a new President in cylinders, Andy Billman and a new President in our steel company, Geoff Gilmore. Combined with Andy Rose as our Chief Financial Officer, we have a team in place to run this company well into the future. It's an exciting time here with passionate new leaders driving our performance. I'll turn the call over now to Andy and Mark. Andy?

Thank you, John, and good morning. The company's performance in the first quarter of fiscal 2013 was solid, aided by strong volume increases in cylinders, steady performance from our steel company and solid earnings from our newly acquired Engineered Cabs business. Quarterly earnings per share were up 40% from the prior year. During the first quarter, inventory holding losses in Steel Processing lowered earnings by approximately $0.06 per share. In the prior-year period, inventory holding losses were $0.05 per share. Volume growth was mixed in the first quarter. Cylinder volumes were very strong, up 47% for the quarter driven by acquisitions and improvement in both our domestic and European cylinder businesses. Steel Processing volumes were down 1%, but after excluding volumes from the MISA Metals acquisition, most of which was wound down or sold during the past year, volumes were up 4%. Equity income from our joint ventures during the quarter was down 8% over last year to $23 million, driven by lower income at ClarkDietrich and Serviacero. All of our major joint ventures operated at a profit during the quarter and we received dividends of $15 million. Free cash flow for the quarter was $46 million, which benefited from a $15 million reduction in working capital. The company invested $17 million in capital projects and distributed $8 million in dividends to shareholders. There were no repurchases of stock during the quarter, but we did invest $70 million to acquire Westerman shortly after quarter end on September 17. Debt decreased by $74 million during the quarter. Our balance sheet remains strong. Following the closing of Westerman on September 17, we had total debt of $531 million and over $440 million in available debt capacity. The macroeconomic and political outlook continues to be muddled and without a clear path to a stronger economy. That being said, we continue to drive performance via our transformation process, which is firmly embedded in the steel company, progressing well in the fourth plant in cylinders and is now underway in our first Engineered Cabs plant. To enhance organic growth, we have launched several new work streams to drive product development and innovation into our cylinder business. We expect these initiatives will accelerate the growth of some of our existing branded retail products and will lead to new product introductions. We are also adding to our family of businesses through systematic acquisition activity to drive us into new products and higher growth markets. Westerman is an excellent example of this type of activity, providing large storage and transportation tanks for the rapidly growing natural gas market, as well as products for the nuclear, marine and industrial markets. So while the economy has been less than robust, we are working hard to accelerate growth and drive higher returns for our shareholders. I will now pass the call to Mark Russell, who will discuss operations.

Thanks, Andy. Since this is my first call, I want to talk for a minute about something I've been fired up about for a number of years, which is our transformation and Centers of Excellence. What we call transformation is based on data and the discipline of the scientific method. We sometimes call this "science in a hurry" or urgent science. The intent of this work across all of our businesses, and the justification of our investment in our Centers of Excellence resources is not just incremental continuous improvement. We're looking for dramatic and sustainable increases in performance. We've seen substantial improvement in several areas over the last few years, but as in science, we learn from both failure and success. And our failures, so far, have taught us that sustainable transformation requires a cultural change. The culture we're talking about is where every person in the company has metrics. Metrics that are focused, aligned, stretched and regularly reported for accountability. We've learned that when you measure people's performance, performance improves. And when performance is measured and reported for accountability against stretch goals on a date certain, the rate of improvement accelerates. This is what we call the zone. When the zone is cultural, by which we mean it becomes the working and life habit of a critical mass of the individuals on a team, the net results over time can be dramatically transformative. I'll keep you updated on this in future quarters. The results of the transformation of Steel Processing continue to show in the numbers. Overall reported volume and margins, as Andy said, for the quarter don't appear stronger than last year but when adjusted for temporarily acquired MISA volume we had last year and inventory holding gains and losses, the picture's different. In fact, even unadjusted, direct volume for the quarter was actually up by 4%, driven by continued strength in automotive, which still accounts for about half of our shipments in the segment. However, our nonautomotive markets were flat at best and some are weaker. In all markets, including automotive, the volume appeared to weaken as the quarter progressed. What we saw appears to align with today's revised government stats for the quarter. Angus has just kicked off their transformation work, starting with our South Carolina facility. And we see significant opportunities for transformational improvements in this business as we move the process through the 4 Angus facilities. All of our JVs are profitable, led by WAVE's continued outstanding performance. Our Serviacero JV commissioned Mexico's first independent pickling and processing operation during the quarter in Monterey, and we look forward to continue the aggressive expansion and growth of our Mexican business, which has already approximately doubled over the last 4 years. Cylinders had an outstanding quarter and it is rapidly gaining what I would call basic transformation traction. On top of that they're leading the way as we add innovation to the scope of our transformation playbook. They have a pipeline of very exciting new products. Alternative fuels is a market we're very excited about. It's by far, our fastest-growing business with attractive margins. Our alternative fuel revenues for the quarter of $19 million were up 179% over last year, and our plants in California, Poland, India and Austria are actively involved in LPG and CNG for vehicles. And we're working hard to add liquefied natural gas to the product offering. Our acquisition of Westerman, which is the clear leader in the separator and production tank market east of the Mississippi, takes us upstream in alternative fuels. Westerman should only accelerate our growth trend in this strategic and fast-growing market. Back to John McConnell.

Well, thank you both. And while it was a solid quarter in which we continued to see year-over-year improvements, we clearly saw a general slowing across the company throughout the period with the notable exception of cylinders. For the sake of clarity, let me say that a different way. We are seeing a slowing in the rate of year-over-year growth, not year-over-year retraction. That said, looking forward, it remains very difficult to predict direction of the economy, let alone the world's. In the short term, I believe the economy will remain suspended in what I just call a state of uncertainty until following the November elections. Regardless of which way the economy goes and whether it's gradual or severe, we will continue to position Worthington for growth. We remain focused on growing both organically and through acquisitions. We remain focused on growth that meets our strategic criteria of expanding our margins, while decreasing the volatility of our earnings. At this point, we'll be happy to take any questions that you have.

[Operator Instructions] And first, we go to the line of Luke Folta with Jefferies.

John, I think you may have just answered my question, but I wanted to talk about auto for a second. You've noted some slowing in the press release and auto was one of the included markets and it still seems like we have pretty good momentum on sales. Is this -- was there some sequential weakening within your auto shipments or order book? Or is it more of a factor, as you said, that it's just slowing year-over-year growth?

Automotive is still the strongest market for us in Steel Processing, Luke. I mean it's the only solid performer in that group. Everything else, as I said, is either flat or down. And it's not, as John said, it's just the rate of slowing in the growth and impossible to tell at this point whether that's going to lead to a general slowdown in that market or whether that's just people being cautious because they see it going all around them. I think that's all we can say about that.

Okay. But at this point, the only thing you're seeing is maybe some more cautious inventory management, no actual decline in order levels?

I'd say right now, nobody is adding inventory just for safety's sake right now. Everybody is sitting on the sideline to wait. And no comment [indiscernible].

Okay. And then just on the steel business, average selling prices were up in the first quarter and we've seen stock prices decline, kind of, modestly starting in March and then through July. How do you expect the declines to kind of factor into your business? I mean, was the increase in selling prices resulting from mix issue or is it timing? How should we think about that?

Now, Luke, we're not sure, is the short answer. Obviously, you know that steel pricing, generally, is in decline. So it's hard to see through the mix of steel pricing decline, what's happening more specifically at this point.

No, I just meant that some of your -- you have contracts that are tied to spot indices, and those spot indices have declined. And I understand a lot of them have a one quarter lag built-in, and I'm just trying to understand when you'll feel the impact of the lower spot prices? Or are you finding a way to kind of mitigate that, or are you moving around it in some way?

It's generally, Luke, about a quarter lag. I mean, we have, the easy way to think about our business is roughly 1/3, sometimes as high as 40%, it's quarterly contract, another 1/3 is monthly contracts and the rest is spot. And depending on the timing of when those contracts reset and what prices do in there will -- that's what flows through our income statement. But generally speaking, a good proxy is the quarter.

Right. Another thing I'd point out, Luke, there is that we do everything now, that's not spot, everything we do is back-to-back. We don't take any price risk, and we have -- we run a balanced price disposition out everyday. So that mutes that affect.

And Luke, back to your automotive question, and I'll let Mark make sure this is correct. But when he talked about unadjusted direct volumes are actually up 4%, automotive would be a good piece of pushing that up 4%.

In fact, it was --well, like I said, it was the only one that was up. So overall, up 4%. Automotive is up significantly more than that. So...

Okay. That make sense. All right. And then just on the Westerman acquisition, it looks like an interesting deal. Are you able to give us any -- some sense of what the historical earnings or margins in that business were?

The margins in that business are very consistent with cylinders' overall margin. In fact, they're probably modestly above cylinders' average.

Okay. And I don't if you've put in the press release, can you -- I mean, can you give us some sense of what the trailing 12 months revenues were or last year's revenues?

$70 million revenue.

Okay, okay. All right. And then just lastly, on Angus, you were seeing some, I think everyone kind of understands that there's some slowing in the mining space, and in equipment space going on, but can you talk to what the backlogs are doing in that business? And what are your thoughts as we move into next year?

I think you saw an announcement a couple of days ago from Caterpillar saying exactly what you just said and our backlogs are starting to decline somewhat. But we'll just have to watch that business and see where it goes. The most important thing we have underlying that is, is we have launched the transformational work in Florence, as Mark mentioned, and one of the first exercises we took on, we increased some proof up by 70%. So I said, there's some good things we can do down through their locations to help them get better and if it slows down some, they'll still be performing better than they would have like they are now [ph] .

Okay. And any effort to diversify the business there at all? Is there new accounts that you're close to breaking into or..?

Can't speak to new accounts. I can tell you that we look at adjacencies of product all the time and started that process, that's part of a transformation work stream. So we are looking for ways to push their product envelope and certainly, I'm, sure they're looking for new customers all the time through the [ph] prospecting.

And I'd add to that. We're also looking for new geographies for them. They're a North American businesses and we're looking at additional geographies around the globe.

The next question is from Joe Krawczak with Longbow Research.

First question on the cylinders business. Could you talk a little bit about what you're seeing in terms of pricing. We saw things pull back quite a bit on a year-over-year and quarter-over-quarter basis, is that primarily just a reflection of like a lower value mix from some of the recent acquisitions?

Are you talking about average selling price?

Yes.

The problem with that metric is we have certain product lines that, I'll give you an example, in the 16-ounce camping cylinder, we sell tens of millions of those a year. So if we have a big quarter there -- and they're at a very's low price point -- so a big quarter there will skew that number pretty substantially. And then we have some very high margin businesses that are very low volume like in alternative fuels. So using that metric is not a great barometer for the kind of business activity in the cylinder business.

It is really tough. You're talking -- just a few bucks for the -- at the bottom end, and you're talking a lot of money for the CNG cylinder that goes in a Honda Civic, for example.

Sure. Okay. That makes sense. Then secondly, in terms of Engineered Cabs, saw fairly stable sales on a quarterly run-rate basis. But in terms of the margins, pulled back just a little bit. I'm wondering if this is kind of an appropriate run rate to use moving forward. Kind of just looking for your expectations for the remainder of '13 here.

I would suggest that this quarter in terms of the margins, it's a pretty good proxy for what we expect the business to do. Last quarter was high. There were a couple of reasons for that. But I think at the end of the day, as I look out, I think this quarter is probably a pretty good proxy.

Our next question is from Kevin Money with from Cleveland Research.

I was wondering if you could give any color to the competitive landscape. Just wondering, in terms of the smaller mom and pops in the steel business, is there any chance to take share there with the volatility of steel prices going forward?

Well, the only way I can answer that is we really concentrate on the higher value-added space. We are always looking for new business, not necessarily targeting any particular group of competitors, but looking for where we can profitably grow the business. So I'm sure that as an outcome of that, some volume may come from that source but again, we don't specifically target it, we're just after increasing our business in the most profitable ways and areas -- financial.

Kevin, I'd just add to that one of the advantages we have against the competition in processing is for customers who need a fixed price. We have the ability to offer that with some creativity. I don't think anybody is better than us at that and there's only a few of us who are able to do that. And that does give us a selling advantage against some of the players in the market that don't have that ability. And the only thing they could do is just buy a bunch of inventory and hold it.

Great. And just last question, I was wondering if you can provide more color on the construction businesses that you're in, particularly in WAVE and Metal Framing, kind of, what are customers are saying and how's the landscape there?

Things are, I think, pretty much as you would read. They remain kind of stuck, not moving up much at this point. You saw the ABI [ph] move up a little bit. It has done that before and retracted. It has moved up slightly, but I would say, the business is still at fairly low levels. So that is all upside out in the future at some point when that market does start to rebound.

And next go to the line of Richard Garchitorena with Credit Suisse.

Yes, just one thing I wanted to touch on, on the just steel industry in general, obviously you've seen steel prices come back. Can you talk a little bit about lead times from the mills, where they are today versus a month ago?

Well they're extremely short at the moment because demand is not very strong right now. So they are -- it varies by which miller you're talking about, obviously all the time, but they are very short at the moment. I can tell you that.

Okay. So a couple of weeks, I guess, is probably fair to say?

Processing time only, unless you're asking for something special.

Okay, great. And then just looking at the business in general, the Pressure Cylinders, the Westerman acquisition, how should we think about volumes, I guess, trying to just work on modeling going forward?

In terms of what types of volumes are they producing?

Yes.

They're a large tank business. So the volume numbers, I can't give you an exact number right now, but they're going to be low relative to the numbers that are in there already.

Okay. So yes, within [ph] the margins you already talked a little earlier. Okay, and then I guess on the Engineered Cabs, you talked a little bit already in terms of where you expect margins to remain going forward. But I guess in terms of lead times on the -- do you have -- how long is your order book, I guess, on the Engineered Cabs business?

Relatively short. I mean, we sort of produce these cabs for the OEM manufacturers as part of their just-in-time process. So they're sending us POs as they need cabs and we sort of make-to-order, so the lead time is not very long.

One of our selling points there is our flexibility. So they move those around very quickly, and as John mentioned, if you look at that Caterpillar release, that tells you what our largest customer's doing at the moment.

Okay, great. And last question, just overall, the transformation plan you said you've been working to get that through the cylinders business. How should we think about the potential benefits over the next 6 to 12 months for that, as well as working it through the Engineered Cabs as well?

Yes, we're in the 4th plant in cylinders. I think we have 14 or 15 plants now, 10 domestically and 5 internationally. We're in the early innings of realizing the benefits in that business. But I will tell you, you heard in Mark's comments, the cylinders team is very engaged and we see a lot of good work happening. So I would expect, they're starting to trickle in, in terms of the benefits that we'll see. But as it happened in steel, this process is sort of a multiyear process in terms of getting it fully implemented and starting to realize the full benefit.

Richard, I will say that when we first started in cylinders, we thought maybe the upside there was less than in steel because it's such a well-run company. But I'm changing my mind on that. I think there is plenty of upside in cylinders as well.

And next, we go to the line of Mark Parr with KeyBanc.

Yes, I was wondering, Mark or John, if you could just give us an update on CapEx needs and growth projects for '13 and '14? And maybe highlight a few of the most important projects in each one of your reporting segments?

Mark, this is Andy because you picked them, I'm going to answer the question for them. Anyway, well, I'm kind of tight with the money, so I know a lot about this question. The answer is CapEx for the year right now is forecast somewhere between $60 million and $65 million, which is a higher number than we've had over the past several years. The main reason is that we've increased our growth CapEx. And just a couple of areas, as an example in cylinders, we're investing a fair amount of money to expand capacity in our alternative fuels business. We're also spending some money to generate some efficiencies from some of the acquisitions that we've done. So we've done a little bit of plant consolidation there. On the Steel Processing side, we're actually making some investments to expand some capabilities so that we can produce much of the Angus or the Engineered Cabs volume. So they buy about 25,000 tons of flat-rolled a year and we'd obviously like to supply as much of that as we can. And so we're adding some capabilities there that will enable us to bring that business in-house and capture that margin.

Is that like -- are you putting in a stamping line, or..?

No, Mark, what he's talking about is laser cutting. We don't have any laser -- we haven't had laser cutting, but we do now. We -- we're adding that. There's obviously a fair amount of capital being spent in the JVs that you don't see directly. I mentioned the new facility in Monterey, which we've now much more than doubled, so we put a lot of money into Mexico in the last couple of 3 years. And WAVE also is in the process of expanding on that basis as well internationally.

Okay. Can you tell us what the increase in the pressure cylinders capacity is going to look like when you've finished with these projects?

Meaning how much capacity have we added?

Yes, how much do you intend to add? I mean can you put a revenue number on it? Or how much do you plan on spending on cylinders' expansion?

I think in Cylinders, it's probably around $18 million or $20 million of the total. You really have to look at it, Mark, on a product line by product line basis. So as an example, you heard in Mark's comments, alternative fuel revenue was up almost 200%. That market is growing very quickly. We have several plants that produce various products, but we have some constraints in at least one of those plants and we're also bringing on some new lines over in Poland at the acquisition that we made there. So it's really investment in -- but I don't have a good answer for you just in terms of what that translates into [indiscernible].

I don't think you can put that in your model, but we are going to be spending some money there. And we're working on a cryogenic product -- products and we'll be spending some money there. But it's too early to put in the model.

And next, we'll go to Michelle Applebaum with the Steel Market Intelligence.

Automotive, I don't think any of us like hearing that, and appreciate that you're giving us an early read. Just hoping that it's overly cautious. Is there any chance that the automotive demand that you're seeing less growth, is timing? Maybe they're seeing all the collapse in the iron ore price? And the decline in scrap prices, so they're pushing off purchasing like everybody else, is that possible?

Michelle, don't misinterpret what we're saying. We're not saying that automotive is necessarily slowing down. What we see so far could just be inventory adjustment or people being cautious.

That's what I'm asking. So I'm asking is it possible that they're just responding to the headlines on raw material prices. Because so many buyers right now are putting off buying steel because they see -- the mills have trained people to think that raw material prices drive steel prices, so you see 24% decline in August, iron ore price. So that could be inventory adjustment.

Well, I think that's a plausible, possible explanation. And you watch so many darn things that your opinion on that is probably better than ours.

Oh no, oh no, no, no. Okay. Any other things why they might be adjusting inventories?

Not that I can think of.

Okay. Second question, you talked a little bit about some of your global projects. Last quarter, and slowing and delay -- some delays in some of that stuff, just wondering where some of those things stood.

If you help us -- a bit more specific -- oh, the Global Group? I'm sorry.

The Global Group, sorry.

I can hit that real quick. The China joint venture is moving slower than expected. They're having all kinds of problems which, based on my previous experience in China, is actually was my expectation, but -- and the work in Africa, the project that we have going on in Central Africa right now is actually construction of single-family homes now. There's a large development that we're working on there and that's still in early stages. So I don't what we have in terms of updates.

Okay, and then, I'm sorry, I laughed about the China, but I think low expectations and you guys get a lot of credit for even trying to do something there. Then forgive me if you addressed this, but the cabs business, I would swear that I thought you said the margins in the May quarter will be representative of what you will be doing in the future, but then it was lower this quarter. So I was wondering if I just misunderstood that?

No. Michelle, what we're saying is that, that the gross margins would probably be consistent with what we expect going forward, those are contractual. What we're -- I think we've seen, and what we're saying is, is that's not a high unit volume business. And if the volume falls there, then the unit cost goes up. So that's what you'd would be seeing there. If the volume falls, then the unit costs will go up and the net margins will turn...

Okay. What I was referring specifically to, and I didn't hear anybody else ask this, so if they did and I missed it, I apologize. You know my issues with ADD here sometimes. So last quarter, you guys said that the margins in that business would be representative of future margins in that business. And the margins this quarter were lower. So are you saying that your revenue was lower than what you expected at the time of the conference call in June?

We're saying that the volumes were softer than we anticipated on the last conference call.

Okay. And that hit the margin?

Yes.

And we're also saying that relationship will continue if the volumes get softer.

Okay, that's not terrific. Okay, and you expect the volumes to get softer?

We're saying that Caterpillar is our largest customer and you saw what they released.

The only thing I'd throw in there, and we just launched transformation, we've talked about it probably enough already, with the Engineered Cabs business. But we expect, over time, to improve their cost position from where it stands today, as well as the other things that are moving around there. So just a reminder on that.

Just some color on that, I think the transformation results we saw in steel, like I said, we were expecting less dramatic results out of cylinders. But now I'm starting to see that a little bit differently. But we do see dramatic upside, significant upside, I'd say, in Angus. They have a lot of opportunity for improvement.

[Operator Instructions] And we'll go to the John Tumazos, with John Tumazos Very Independent Research.

I have 2 questions and a comment. First, could you elaborate on your comments concerning poor steel demand. Is it a situation where the U.S. economy is pausing alone? Or is there a combination of higher import penetration because U.S. prices are significantly higher than overseas prices, $150 a ton or some number like that?

John, you're much more expert than we are on the dynamic here globally, probably. But I think more than the actual imports coming, I think, is the threat. And with China slowing down, that's the huge -- that's the 800-pound gorilla in the market. And with that growth slowing, and the threat of that, I think is a very strong discipline on pricing.

And I think as we were talking about just a couple of callers ago, that everybody is in a bit of a cautious mode at the moment and there are some expectations that steel prices will fall and I think there's some people are putting off current purchasing. So there could be a bit of a backlog building up and we'll see which way things go here.

And scrap is certainly declining and, as you know, that pulls the foundation down.

Second question. Thank you for the $0.01 quarterly dividend increase to $0.52. And could you tell us why the increase was $0.52? The $0.49 earnings in the seasonally soft August quarter is great. Is your target dividend payout under 1/4? Are you concerned about all these macro uncertainties and funny things we read about in the paper that may not apply to your specific businesses?

No, I don't think it's -- you're giving us more credit for deep, deep thought. We do have a range that we like the dividend in. We are probably slightly below it at the moment. But not much, not appreciably. Our main goal here is to make sure we're in a position to continue to increase the dividend over time. We are being cautious on the amount we're raising it, for any economic reasons other than that thought in mind. We want to take small steps back and make sure we continue to increase. I think that's an important part of our future with the stock and with our shareholders, and that really is as simple as it was.

John, I know a lot of companies did things in 2009 when they got scared. Some of them issued stock at terrible low prices and did irreparable damage. Where you got a little nervous and cut the dividend from $0.68 to $0.40 and you're working it back up slow. Is it unreasonable to think the business is better now than it was in 2008? Not the economy, but WOR, Worthington, your business because you guys are smart and run it good? And that the $0.68 dividend could be surpassed just around the corner?

Albeit for the smart comment, I won't take that one on. But the answer to your question is, I think we're significantly a better company. I don't even think it's close. When you look at where the steel company is today versus where it was. Look at the leadership, the environment that George Stoe helped me create, that these guys all blossomed in, it's remarkable, the difference. So -- and how that impacts, and we won't always probably be a $0.01 increase, there might be somewhere we increase it a little bit more. But I don't think $0.68 is just around the corner, depending on how you define that. But we're going to keep moving it up as long as we feel we have the ability to pay it on a sustained basis.

I just wanted to offer a comment concerning the business outlook for the cab business. There is a controversy in the mining business about capital spending being too much, too high, too wasteful. Barrick Gold and Kinross Gold fired their CEOs, Goldcorp and Agnico-Eagle COOs are departed, and I was an investor in a company that hired the head of project management and the head of metallurgy of a $25 billion mining company and they're gone and the shareholders fired the management and are running the company ourselves. There's 4 small mining companies where this year have kicked out the managements. And these -- the concern is whether these capital budgets are outright fraudulent, not just wasteful. And Caterpillar and your customers don't know how much their customers are going to cut back capital spending. So you should plan that business cautiously.

Well, thank you for your comments.

And to the presenters, there are no further questions in queue.

Thank you very much, again, for joining us today. I can't emphasize enough when we talk about, we're not -- we don't have a great deal of clarity on where the economy is going. We're also not saying that everything's horrible out there. We're saying we have some reason to be cautious. Personally, I think things are going to continue to go along pretty much as they have been with small incremental gains on a year-over-year basis, both in the economy and in this company, to take advantage of that. So we are prepared for whatever comes down the pike, but our expectation is things will remain pretty darn good. Again, we have a great team of people here to drive things, we have a lot of enthusiasm and energy in the company and we're going to continue to drive things forward and a lot of really good things that we're focused on here. So I hope all of you are able to make it in -- to our Chicago Investor Day on Tuesday, October 9, and we look forward to giving you another update as to what the state of the company and where we're headed at that time. Thanks for joining us.

Ladies and gentlemen, this conference is available for replay. It starts today at 12:30 p.m. Eastern, will last until October 4 at midnight. You may access the replay at any time by dialing (800) 475-6701 or (320) 365-3844. The access code is 259283. That does conclude your conference for today. Thank you for your participation. You may now disconnect.