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Methode Electronics (NYSE:MEI)

Q1 2012 Earnings Call

September 01, 2011 11:00 am ET

Executives

Douglas Koman - Chief Financial Officer, Principal Accounting Officer and Vice President of Corporate Finance

Donald Duda - Chief Executive Officer, President and Director

Analysts

Jeremy Hellman - Singular Research

David Leiker - Robert W. Baird & Co. Incorporated

Operator

Welcome to the Methode Electronics Fiscal 2012 First Quarter Earnings Presentation. [Operator Instructions] As a reminder, this conference is being recorded. This conference call does contain certain forward-looking statements, which reflect management's expectations regarding future events and operating performances and speak only as of the date hereof. These forward-looking statements are subject to the Safe Harbor protection provided under the Securities Laws. Methode undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this conference call involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly report. Such factors may include, without limitations, the following: dependence on a small number of large customers, including 2 large Automotive customers; dependence on the Automotive, appliance, computer and communications industries; further downturns in the Automotive industry or the bankruptcy of certain Automotive customers; Automotive program launches may be delayed or have lower than anticipated volumes; ability to compete effectively, customary risks related to conducting in global operations; dependence on the availability and price of raw materials; dependence on our supply chain; ability to keep pace with rapid technological changes; ability to avoid design or manufacturing defects; ability to protect our intellectual property; ability to withstand price pressure; the usage of a significant amount of our cash and resources to launch new North American Automotive programs; location of a significant amount of cash outside of the U.S.; currency fluctuation; ability to successfully benefit from acquisitions and divestitures; ability to withstand business interruptions; unfavorable tax laws; ability to implement and profit from newly acquired technology; and the future trading price of our stock.

It is now my pleasure to introduce your host, Don Duda, President and CEO of Methode Electronics. Thank you. Mr. Duda, you may begin.

Donald Duda

Thank you, Christine, and good morning, everyone. Thank you for joining us today for our fiscal 2012 first quarter financial results conference call. I am joined today by Doug Koman, Chief Financial Officer; and Ron Tsoumas, Controller. Both Doug and I have comments and afterwards, we will be pleased to take your questions.

Our 2 business segments have showed year-over-year higher sales in fourth quarter of 2011, namely Automotive and Power Products, continue to experience revenue improvement in the first quarter of fiscal 2012. These results reflect the impact of our new product introductions and higher market penetration. On a consolidated basis, net sales grew nearly 12% to $111 million, driven by organic growth in our North American and Asian Automotive businesses, improved safety rating remote control sales in both Europe and Asia and increased power product demand in North America as well as Asia. We continue to rebuild Methode's revenue from a 6-year low of $378 million in fiscal 2010 despite the reduction of legacy Automotive products and the unplanned loss of the Delphi business.

On the earnings front, we posted net income of $1.5 million or $0.04 per share compared to $4.1 million or $0.11 per share in the first quarter of fiscal 2011. As we detailed in the press release this morning, there were a number of items which negatively affected our net income, Doug will address each of these in more details in a few minutes. However, I'd like to discuss the 2 major items that have impacted our results. First, costs related to the vendor production delivery issues, as well as cost related to the design, development and launch of 2 large Automotive programs; and secondly, the new product development expenses in our Power Products segment. In total, these costs lowered our first quarter net income by approximately $2.4 million or $0.06 per share. Let me address these items.

As we announced in our release this morning, we intend to acquire an injection molding and painting operation. This acquisition will be a key step in mitigating the vendor production and delivery issues. As we discussed last quarter, the vertical integration of this critical process is expected to reduce costs, improve quality and mitigate certain supply risks experienced during the past few quarters. We intend to close the acquisition in September and complete the integration of the operation by the end of fiscal 2012.

That being said, we anticipate the vendor production and delivery issues will impact net income by approximately $2 million for the remainder of fiscal 2012. The $1.2 million costs related to the design, development and launch of 2 large Automotive programs are for the additional T-76 business in North America, which will launch in the second half of this fiscal year and represents about half of the cost and for the General Motors center console program, which will launch in the fourth quarter of fiscal 2013 and represent the other half of the expense in the quarter. We anticipate the design, development and launch costs for these Automotive programs will be approximately $1.8 million for the balance of fiscal 2012.

We are however, anticipating revenue of $5 million to $7 million from the North American T-76 program in the second half of this fiscal year, ramping to $18 million to $20 million in fiscal 2013. The launch of this program was delayed about 6 months by our customer. As with the General Motors program, we anticipate revenue of $5 million to $8 million in fourth quarter fiscal 2013, ramping to approximately $100 million in fiscal 2014. Together, these 2 programs will improve our North American Automotive sales fourfold by fiscal 2014.

In our Power Products segment, the development costs for the Eetrex on board integrator power unit was approximately $0.6 million for the first quarter and is estimated to be $1.4 million for the remainder of fiscal 2012. You may recall that this unit is for a fuel electric truck and is anticipated to launch in the fourth quarter of this fiscal year with revenue of approximately $500,000. This launch was also delayed. More importantly, this investment will result in a suite of products applicable to a wide variety of applications ranging from e-vans to stationary power systems.

For the first quarter, consolidated gross margins were 18.1% compared to 19.7% a year ago. As I just discussed, vendor production and delivery issues, as well as the higher design development engineering costs negatively impacted the results. As I stated in the past, we see the opportunity for meaningful improvement in our margins once the vertical integration project is complete and we reach full launch of the aforementioned programs.

Turning to a review of our individual segments. In the first quarter, Automotive segment net sales increased over 25% due to higher sales from the MyFord Touch center console program as well as in our transmission lead frame and steering angle sensor products. Automotive segment gross margins decreased in the first quarter impacted by the vendor issues and costs related to the launch of the 2 large Automotive programs. Additionally, the majority of the increase in sales is from the Ford center console program, which is not only experiencing its prior issue but currently carries a higher prime costs, which reduces the program's overall margin. The higher prime is due to the higher purchase content, which will be negated by the vertical integration of the molding and painting process that I discussed earlier. Again, our target gross margins for Automotive is in the low to mid-20s.

Interconnect sales decreased over 6% in the first quarter compared to last year, attributable mainly to lower appliance sales in North America as well as the sale of Optokon, the small fiber-optic business in the Czech Republic. These lower sales were partially offset by increased sales of safety remote control products in Europe and in Asia. As we mentioned last quarter, we anticipate reduced appliance sales will continue through fiscal 2012. Despite lower business levels, Interconnect margins for the first quarter improved over the first quarter of last year due primarily to a favorable sales mix.

Our Power Products segment also improved sales, up 11% in the first quarter. Our products gross margin decreased from the first quarter mainly due to product development costs for the on board integrator power unit as well as business mix, which consisted of more telecom business, which has lower margin and less military and aerospace business, which has higher margins.

On the design wins and business development fronts, we booked several smaller programs utilizing our core technologies for approximately $6.5 million in average annual revenue, which shores up our ongoing base business and as such, should not be added to our projections.

Finally, as we mentioned in our press release this morning, during the first quarter, we saw the beginning of a slowdown in our European Automotive segment, likely the effect of the European debt crisis. In line with these economic conditions, we have implemented actions to reduce our selling, general and administrative expenses in Europe. We believe we will see a positive effect of about $500,000 of income from these actions on our results beginning the fourth quarter of this fiscal year.

As I've mentioned in previous calls, on our way to record revenue in fiscal 2014, some of our quarters are going to be choppy. However, we are moving closer to the launch of two significant Automotive programs, with one launching in the second half of this fiscal year. Additionally, we are close to resolving our vendor issue, which will not only eliminate those costs, but also improve margins on our Ford product. While we anticipate volatility in our short-term margins and earnings through fiscal 2012, we will continue to take the necessary actions to meet or exceed our margin targets.

Now I'll turn the call over to Doug who will provide further detail on our financial results. Doug?

Douglas Koman

Good morning, everyone. Let me briefly review the results of our reporting segments. In Automotive, we had first quarter sales of $62.7 million, up from $50 million last year. North American sales were up 123%, primarily due to the launch of the Ford center console program. We also saw a 19% increase in sales in Asia as primarily related to increased sales of the transmission lead-frame and steering angle sensor products. The increase in Europe was primarily due to the strengthening of the euro versus the USD. In the quarter, the currency translation increased foreign sales by approximately $2.6 million. In the first quarter, Automotive gross margins were $9.3 million compared to $10.1 million last year. As a percentage of sales, gross margins decreased to 14.8% this quarter compared to 20.2% last year. Gross margin percentage was negatively impacted by $1.2 million for the cost related to design, development and launch of programs in North America, also, $600,000 for costs related to vendor production and delivery issues. We also had increased sales of product that currently has high prime costs due to the high purchased content. And lastly, we are starting to see a higher utility cost in Malta due to increased caused of fuel used to generate electricity.

Selling and administrative expense for Automotive in the quarter was $7.1 million compared to $7.2 million in last year's quarter. As a percentage of sales, selling and administrative was 11.3% compared to 14.4% last year. The current quarter, we had lower Delphi legal expense by $600,000. However, this was offset by higher non-executive performance-based compensation.

In the Interconnect segment, we had sales of $32.4 million in the first quarter, which is down from $34.6 million last year. In North America, the decrease is due to weaker sales in the white goods market, partially offset by higher sales of data and safety radio remote control products. In Europe, we had higher sales of data and remote control products, partially offset by no optical sales due to the sale of Optokon in the fourth quarter of last year. Optokon was our Czech Republic optical business. The increase in Asia was due primarily to sales of remote control devices. In the quarter, there was negligible currency translation effect on Interconnect segment sales. Gross margins for the Interconnect segment were $9.2 million both this quarter and last quarter -- last year's quarter. As a percentage of sales, gross margin improved to 28.4% from 26.6% last year. The increase in gross margins, as a percentage of sales, is due primarily to a favorable change in the sales mix to a higher margin products.

Selling and administrative expense was $4.9 million this quarter compared to $5.4 million in last year's quarter. As a percentage of sales, selling and administrative was 15.1% compared to 15.6% last year. The decrease is due to the selling and administrative expense for Optokon. This was partially offset by a higher net debt expense in the segment.

Power Products segment sales were $12.8 million this year compared to $11.5 million in last year's quarter. We saw an increase in demand for bus part products in North America and Asia. And in Asia, we saw increase for telecom business. Gross margins in the Power Products segment were $2 million in the current quarter compared to $2.3 million last year. As a percentage of sales, gross margins decreased to 15.6% in the quarter compared to 20% last year. The percentage decrease is due to higher telecom sales, which has lower gross margins and the other industrial and aerospace business as I mentioned earlier. Also included in the gross margins, we had about $600,000 for design, development and engineering of the on board charger for the electric truck.

Selling and administrative expense is $1.8 million both this quarter and last year. As a percentage of sales, it was 14.1% this year compared to 15.7% last year. We had increased product development expense in North America, which was offset by lower non-executive performance-based compensation. The other segment had first quarter sales of $2.9 million. This is up slightly from $2.8 million last year. The increase is due to higher sales of the magnetic sensing products. The testing labs, which are also in this segment, were flat. Gross margin was about $300,000 in the current quarter compared to $100,000 last year. The increase is due to the higher sales and also a favorable mix of business in our Magnetic Sensing business. Selling and administrative expense is $1.3 million in the quarter for the other segment compared to $700,000 last year. The increase is primarily due to a higher performance-based compensation and severance expense.

Before I turn it back to Don, I'd like to comment on the cash flow statement. You'll note that the increase in cash and cash equivalents are due to the $27 million borrowed under our credit facility. Over the last few years, we've seen a shift in earnings and cash generation shifting from the U.S. to our foreign operations. While we expect this trend to ship back as we launch new programs in the U.S., we will need to continue to borrow against the credit facility, especially for the vertical integration of a paint and laser etch processes. In the meantime, we will continue to evaluate tax efficient ways to repatriate cash back to the U.S.

Donald, that concludes my remarks.

Donald Duda

Thank you very much. Christine, we are ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from David Leiker with Robert W. Baird.

David Leiker - Robert W. Baird & Co. Incorporated

I wanted to start to just put something in perspective and know the seasonality in the business going from here, fourth quarter versus first quarter. Will you look at that and the margins? Can you adjust for some of these extra costs that you're incurring right now? How would you say the performance of that sequentially was relative to what we've seen in past years?

Donald Duda

In general, the fourth quarter is a better revenue quarter than the first, really July. I would say that sales, probably, the past 2 years have been -- not as impacted by the seasonality as in the past. I mean, we're still doing changeovers in July but it's not as significant, I think.

David Leiker - Robert W. Baird & Co. Incorporated

Okay. And then the European slowdown, that sounds a little different than what we've been seeing and the production rates has been pretty strong. What exposure do you have? What OEs are you primarily shipping to in the European market today? I know Ford is fairly large.

Donald Duda

In the part of Europe, we've got Volkswagen, Fiat, a little bit of Peugeot. Those would -- and then a couple of the premiums, Aston. I would say that would be the largest premium there.

David Leiker - Robert W. Baird & Co. Incorporated

But BMW and Mercedes were just really driving the upside volume.

Donald Duda

There's nothing to Mercedes.

David Leiker - Robert W. Baird & Co. Incorporated

Okay. So the mix, the -- your customer mix there...

Donald Duda

It's enough for us to take note and take some string of actions. We know that Malta has a number of launches coming up next fiscal year, so the revenues will increase. I just -- I don't want to be caught offguard there.

David Leiker - Robert W. Baird & Co. Incorporated

I understand. I mean, we've been cautious in Europe and have been surprised by the export volumes and the books you're listing there, other than Volkswagen, really don't have a lot of export business, so you're not benefiting from that. And then as we look at these items that you've listed in terms of impacting the numbers and can you give us some insights for the balance of the year as it relates to the launch costs of vendor production problems and the Ford products. The other items, those presumably are the same roughly at those levels or is there some characterization we should look at in terms of what those numbers are going to look like going forward.

Donald Duda

In particular, David, which...

David Leiker - Robert W. Baird & Co. Incorporated

The compensation related ones, the non-executive performance bonuses on the stock awards.

Donald Duda

Yes. I think going forward you want to see the -- it was just a -- converting year-over-year, we have some anomalies that we don't expect to continue the rest of the year. I think also if you look at the -- we commented on the higher stock award amortization expense, it was Q2 of last year the new long-term incentive Plan as awarded so as we start looking at the second quarter, year-over-year, you shouldn't see that delta. So that one goes away. And obviously, the other item that we mentioned that doesn't reoccur is in last year's quarter. We benefited from some life insurance gain, so.

David Leiker - Robert W. Baird & Co. Incorporated

And then the last item, and I'll circle back here. As we look at from the onboard charger investment costs here in terms of engineering lab. I mean, those numbers seem to be running higher than what I believe you were talking about last quarter on that. It's the scale of that, it's getting larger that the investment is becoming larger or do we just misunderstand that?

Donald Duda

The overall opportunity is getting larger. I don't -- one particular one that we announced, I don't think that is getting larger from what we've announced in previous calls. That launch has been delayed. So I think what you're -- we are shipping product not at the rate that we expected so we're not absorbing those costs into costs of goods sold the way we had planned on, so the costs are up, but I think more importantly, that's a one-time product that will result of the suite of products that's applicable to a number of applications. So we're not pleased that we're not at the full launch yet and we're still incurring cost but we are pleased with the progress we've made technically.

David Leiker - Robert W. Baird & Co. Incorporated

What does that pipeline look for new awards on that charter going forward?

Donald Duda

I really don't want to say yet. We've had a lot of, I'd say, preliminary conversations with other OEs. So right now that's the only 10 kilowatt charger out there that is Automotive grade. But all of those, I would say -- are I won't say embryonic but enough that I don't really want to trend up. David, just go back on the expense. Keep in mind that our investment in key tracks is now at 80% so it started much lower than we were only picking up a lower percentage from prior quarters.

David Leiker - Robert W. Baird & Co. Incorporated

And then, Don, you said 10-kilowatt charger here. What are the other charges? What's the size of the other chargers?

Donald Duda

6 kilowatt, we've seen.

David Leiker - Robert W. Baird & Co. Incorporated

Does that cut that charge time in half?

Donald Duda

Theoretically, yes. And this is going on an E-van, so the battery bank is also larger.

Operator

Our next question comes from Jeremy Hellman with Divine Capital Markets.

Jeremy Hellman - Singular Research

First question for me about the business that you're acquiring on the vertical integration, couple questions on that. First off, is that a completely independent company where you're acquiring the totality of it or is that a division from someone or is it altogether? And then, secondly on that, you mentioned the need to add some additional equipment. Is that a function of increasing the capacity of that operation or just filling in some missing pieces?

Donald Duda

I can probably can answer the second one. But your I think -- the first question, let us get that closed and we will do a release on and then answer those questions. I'm uncomfortable giving too much information. We wanted to put it in the release because it's significant and that we are on our way to solving that problem. Anyway, we're anticipating closing it very shortly here. I really can't provide too much detail until we close it but to answer your second question, there is some additional capital that we're going to put in mainly because of the type of painting we're going to be doing, it certainly makes our capital expenditure less and helps us with our timing but there is some equipment that still needs to be put and that would be on the painting side.

Jeremy Hellman - Singular Research

And so that $27 million you drew on the revolver, is that going to be sufficient to close the transaction and also provide for the working capital needs you're anticipating or is that just a first tranche, if you will?

Douglas Koman

Yes, Jeremy, that should be sufficient. But again, as we roll out and it requires some new equipment to supplement the acquired equipment, we may have increased the revolver. The revolver though, will really be more of a function of our ability to bring back cash from offshore and we do have some vehicles that are in place right now to bring in some of that cash. So it will really be a borrowing where we really just depend on our ability to get cash back offshore, and if that's sufficient there. I want to bring it back and use up our NOL or pay taxes. So that's driving that otherwise. Otherwise, this is something that if cash were all in the U.S., we'd be able to handle that capital in, without our borrowing.

Jeremy Hellman - Singular Research

Just going back to the fiscal 2014 trajectory, I just want to make sure I've got all the moving pieces coming and going correctly. You said, once you get to fiscal '14, the GM program should add an incremental $100 million in revenue and then T-76, so that's $18 million to $20 million annually. So if I kind of lump those 2 together, take the high side, that's $120 million fiscal '14 relative to fiscal '13. I want to make sure I'm right on that. And then second or kind of a second part of that, are there any other programs that are going to be rolling off that will have a negative effect as we go from '13 to '14?

Donald Duda

Okay. On the -- you're correct on the General Motors, that's a significant add to '14. If you subtract what we had in the fourth quarter of '13, which was around $8 million to $10 million in GM business. But T-76 is a full launch in '13, so I wouldn't add that to '14. I think '14 is incremental to put today, that incremental to '14. And I would refer back to the revenue model that we put out last fall that we will ultimately update here. And that's where -- when we're talking about these launches, that's really what we're referring back to.

Jeremy Hellman - Singular Research

I mean, there's a bigger thing that I wanted to make sure I understood whether or not there were any other substantively sized platforms that essentially would be terminating or running down the end of '13. So if I say, okay, there's $100 million delta from '13 to '14, roughly, maybe subside that, I would call it $90 for a more conservative number. If there's a $90 million positive delta, are there any other negative deltas of $10 million or 20 million due to an existing platform that is due to roll off there?

Douglas Koman

Good question. In those projections that we put out, we took all that into account, so the number that we show for '14, which is over $500 million. That takes into account anything that's rolling off.

Operator

[Operator Instructions] Our next question is a follow-up question from David Leiker with Robert W. Baird.

David Leiker - Robert W. Baird & Co. Incorporated

Don, as we look at the MyFord Touch launch, you've got a couple of vehicles in production today. I don't think that, that competes with that award is in production yet. Is that correct?

Donald Duda

No, it's not.

David Leiker - Robert W. Baird & Co. Incorporated

And is the scale of that relative to the first one? Are those relatively equal in terms of revenue or is one larger than the other?

Donald Duda

I would say they're close to being equal.

David Leiker - Robert W. Baird & Co. Incorporated

And are you, if you look at what your engineering costs are to bring that to market other than supplier issues they're dealing with, just the engineering piece of it, did that pretty much flow the way that you expected it to?

Donald Duda

The engineering?

David Leiker - Robert W. Baird & Co. Incorporated

Yes.

Donald Duda

Absolutely. That was we had an issue with the vendor but the technology went exactly where we wanted it.

David Leiker - Robert W. Baird & Co. Incorporated

And then my sense is that, that the take rates that Ford is seeing on that are pretty good. It would imply that your revenue off of that is running higher than what you originally thought, is that accurate?

Donald Duda

Yes, it is, and normally that's good news but when you got a supplier issue, that works other way. But it's running higher than the plan.

David Leiker - Robert W. Baird & Co. Incorporated

And are there -- is there any insight you can share as it relates to additional follow-on awards beyond those two?

Donald Duda

Nothing yet. I don't think there's anything we could talk about.

David Leiker - Robert W. Baird & Co. Incorporated

Are you aware of them awarding similar type technology to other suppliers at this stage yet?

Donald Duda

No. There's been center console business that's been -- led to other competitors but not that I know of with Touch. It would be in capacitance. We do know that keyless entry is capacitance and that was actually quite a while ago.

David Leiker - Robert W. Baird & Co. Incorporated

And then as we look at the capital spending, we would have been thinking your capital spending would run $15 million, $20 million a year or so. It sound like that number is going to step up. Can you give us some insight on where that number might end up this running this year?

Douglas Koman

Sure, David. Just leaving the protocol integration separate. We're at a run rate right now of $4.5 million. That's probably a good run rate for the full year because we are, in addition to our normal capital run rate, we're looking at bringing in a plating process into the Power Products group in North America. And we're also looking at bringing in some stamping/plating in Asia and bring some product that's currently outsourced.

Donald Duda

That's with the T-76 business that I think you saw. So with those, we'll probably be close to -- closer to $19 million.

David Leiker - Robert W. Baird & Co. Incorporated

And than the vertical integration. I don't think -- have you put a number on -- what that's going to cost you?

Donald Duda

I think roughly we might have mentioned a range. I mean, it depends on if we close a deal versus the transaction that Don talked about or we don't. I mean, that could be anywhere from an additional, let's say, $12 million to $17 million depending on whether we are able to acquire this business or not.

David Leiker - Robert W. Baird & Co. Incorporated

And the business you are looking at, could you talk about what kind of products they're doing or what kind of business they're in today? You said you want the process, but it sounds like there's a revenue stream that comes along with that as well.

Douglas Koman

Yes. We really just can't talk about it now. And first of all, the deal is not done, so if doesn't close, it doesn't close. And so it would be premature to give any detail. And as Don said, we will put out a release when we do close it and provide some information at that time.

David Leiker - Robert W. Baird & Co. Incorporated

And then the last item here. You've been running margins other than this quarter and I think maybe it's up to the numbers probably in that 4% to 6% EBIT range, and I think when this is all up and running, it should be running closer to a 10% EBIT margin. Is there some trajectory you can get us in terms of how we step up there, a couple of small steps and then it's a larger step in 2014 when all of this is launched? Is there any thoughts you can give us in that regard?

Douglas Koman

Well, as we go through '13, we should see some meaningful improvement, but '14 is really the larger year because of the GM launch. But if you...

David Leiker - Robert W. Baird & Co. Incorporated

I'm looking qualitatively, I'm not trying to pull numbers from you.

Douglas Koman

It is not a straight line to our margin projections. As I said, we're going to have some choppy quarters. We're going to have some issues. These programs are large Automotive programs. The T-76 goes into transmission. You saw the line in Shanghai. So we're going to have some issues as we go forward. But once you get to launch, you're absorbing a lot of the costs that we're detailing here. So if you overlay the launch with our numbers and so on, you'll see the trajectory. Do we solve the vendor issue by the end of the fourth quarter of this year or is it still over in the first quarter? We want to get it behind us before we enter '13 but that impact first quarter of '13, it could. We're not planning on that. This acquisition would certainly make that more likely because we don't have the greenfield.

David Leiker - Robert W. Baird & Co. Incorporated

But it sounds like some of these choppiness as you go through some of these issues and launches and investments, that the choppiness in the numbers probably continues into the first half of calendar '12. Do you think it carries into the second half of calendar '12?

Douglas Koman

I know of nothing that would cause that, but I'm cautiously optimistic because of the significant revenue ramp, which is, that's all good news but it's what I don't know that concerns me. But again, I mean, we know how to launch product. We know we're meeting the General Motors deliverables. Our teams are doing an excellent job. The T-76 launch in Mexico has gone really ahead of schedule. The problem there is that our customer who's also brining up a plant has been behind. So we certainly know how to launch these programs. They're just big programs that can take some twists and turns. But once they're launched, they are launched.

David Leiker - Robert W. Baird & Co. Incorporated

And then the last item here is the balance of the -- I think, your legacy products are pretty much rolled off because there's still some programs that go into play. You're not really expecting any unusual cost as they go to end-of-life here, are you over the next 18, 12 -- 18 months?

Douglas Koman

No. We've got some service business left and I think some Honda Clock-Spring business. That's not notable.

Operator

Mr. Duda, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Donald Duda

Okay. Well, Christine, we'll thank everyone for joining us this morning and wish everyone a safe holiday.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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