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Executives

Unknown Executive -

Robert B. Toth - Chairman of The Board, Chief Executive officer, President and Member of Executive Committee

Lynn K. Amos - Chief Financial Officer, Principal Accounting Officer, Secretary and Treasurer

Analysts

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Brian Drab - William Blair & Company L.L.C., Research Division

Kevin R. Maczka - BB&T Capital Markets, Research Division

Craig E. Irwin - Wedbush Securities Inc., Research Division

Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division

JinMing Liu - Ardour Capital Investments, LLC, Research Division

Michael Lew - Needham & Company, LLC, Research Division

Carter W. Driscoll - Capstone Investments, Research Division

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Avinash Kant - D.A. Davidson & Co., Research Division

Polypore International (PPO) Q1 2012 Earnings Call May 2, 2012 4:45 PM ET

Operator

Good day. Welcome to the Polypore International First Quarter 2012 Conference Call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Ms. Kathy Brosco [ph]. Please go ahead, ma'am.

Unknown Executive

Thank you. Hello, and thank you, everyone, for joining us today, and welcome to our conference call to discuss our first quarter 2012 financial results. As always, the results we discuss can be found in our earnings announcement that we released earlier today and furnished on Form 8-K with the SEC. And a copy of the release is also available on our website at polypore.net in the Investor Relations section.

In conjunction with the release, we also issued supplemental financial information, which we filed as an 8-K and also posted on our Investor Relations website.

Adjusted EBITDA, adjusted net income, and adjusted earnings per share are non-GAAP financial measures discussed in this call. We refer you to the reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP financial measure included in the earnings release.

Before we begin today, I'd like to remind you of some important considerations. This conference call and webcast might contain forward-looking statements within the meaning of federal securities laws. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and assumptions made by management about Polypore and the industry and environment in which we operate.

These forward-looking statements are not guarantees of future performance and may differ materially from actual events or results because they involve estimates, assumptions and uncertainties. You're cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made, which is Wednesday, May 2, 2012. Polypore undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You're also directed to consider the risks, uncertainties and other factors discussed in documents filed by us with the SEC, including those matters summarized under the caption Item 1A Risk Factors in our most recent 10-K filing with the SEC.

Today I'm joined by Bob Toth, President and Chief Executive Officer; Lynn Amos, Chief Financial Officer; and Rob Whitsett, Vice President of Finance. And at this point, I'll turn the call over to Bob for his opening remarks.

Robert B. Toth

Thank you, Kathy. First quarter results were consistent with the outlook we'd provided in February. There were specific items that impacted the quarter, and those transpired as we described. Based on updated customer forecasts and production schedules, we anticipate full year sales and earnings growth in 2012, with most of that occurring in the second half of the year. Before Lynn gets into the financial discussion, I'd like to take a step back and talk about where we are as a company.

If you've followed us over the past several years, you know that we have promptly, aggressively and successfully dealt with any major issues that have impacted the company, and you've seen us take methodical, strategic steps to position our company to capitalize on long-term global trends. We're at the front end of those trends, and with that, we're experiencing some near-term volatility, which is always possible in substantial, emerging applications.

Certainly, we appreciate the value of understanding what drives short-term results, and we also believe it's important to understand whether or not those factors, have any impact on the long-term prospects of our business. Though we are not satisfied with our near-term results, I want to emphasize that the short-term variables do not change the long-term outlook for the company nor do they change advantages of our global scale, our low-cost competitive position, our preferred technology, our relationships with the right customers, the growing demand for our products and the continued application development.

Polypore has a strong foundation with a portfolio of businesses that are well positioned to capture growth in the markets we serve, with a step change growth opportunity associated with Electric Drive Vehicles.

In our lead-acid separator business, Asia is the primary driver of growth. We're well positioned there as evidenced by our multiple expansions in China, India and Thailand and the majority-controlled joint venture with one of the largest lead-acid battery producers in China.

In health care, we see growth associated with increasing access to health care treatments in developing countries, especially in Asia. We're the world leader in membranes for blood oxygenation, and we have the clinically proven best-in-class hemodialysis membrane in PUREMA, where we'd expanded capacity to participate in global market growth.

In filtration and specialty, we have leading edge technology that allows us to participate at the highest end of filtration performance, and we continue to see a development of new applications. Growth here is expected to be in the high single to low double-digit range over the long-term.

And in the lithium business, our battery separators are well positioned to see ongoing market penetration. In the core applications of consumer electronics and power tools, industry growth projections range from 8% to 20% per year plus growth in new applications like lawn and garden.

In addition to that, as I just mentioned, we have substantial growth opportunity in our lithium business, associated with the large format cells and energy storage systems and Electric Drive Vehicles.

While we'd prefer for the growth in Electric Drive Vehicles to be perfectly straight-line quarter-to-quarter, we're at the beginning of the transformation of a huge global industry, one that's moving from being based purely on internal combustion engines to introducing some form of electrification, ranging from hybrids to full-battery electric vehicles. This transformation is being driven by long-term trends, and I'd also add that it's far more important to have a global view of Electric Drive Vehicles as opposed to only a U.S.-centric view. Electrification of vehicles is the answer for fuel efficiency, for meeting mileage standards, for reducing CO2 emissions, especially currently in Europe, as well as addressing many other increasing transportation needs in developing economies. All of these trends that drive demand for our products will only become more meaningful over time. And be reminded that even modest EDV penetration in the auto production could virtually double the size of the entire lithium separator market.

The takeaway for Polypore in EDV is that we have the preferred technology, we're working with the leading battery makers, we see ongoing development and introduction of new models and we have an early leadership position.

In summary, we remain confident in the long-term growth potential of our business. We'll control what we can control, and we'll continue to manage our business prudently to drive growth and deliver value creation over the long term.

At this point, I'll turn it over to Lynn, and then we'll be happy to take your questions.

Lynn K. Amos

Thanks, Bob. Recall back in February, we outlined a few items we expected to impact the first quarter: modest weakness in consumer electronics; changes to production schedules of 2 EDV customers; unseasonably mild winter weather conditions in North America and Europe, affecting replacement sales for lead-acid batteries; and minor order timing in healthcare. As Bob said, what we described to you in last quarter's call regarding these items is exactly what we experienced.

As a result, as we reported today, first quarter sales were $173.7 million. Adjusted EPS was $0.47 in the quarter. Segment operating income was $42 million. Adjusted EBITDA was $55.7 million for the quarter and $244 million for the trailing 12 months. CapEx was $45 million in the quarter, and all of our projects remain on schedule.

As you know, we've announced $334 million of capital associated with the lithium business since late 2009. We have under $100 million of that remaining to be spent as of today.

Now, moving onto the segment results, beginning with the Transportation and Industrial segment. The unseasonably mild winter weather impacted sales in the quarter, and as expected, revenues were approximately $86 million. We expect to be back in the $90 million to $95 million of quarterly revenue range for the second quarter. The decline in segment operating income compared to the prior year quarter was due to the lower sales and the costs associated with our capacity investments in China and Thailand.

In the electronics and EDV segment, sales were $42.4 million, slightly ahead of the prior year. Segment operating income was 40% of sales, primarily reflecting the costs associated with our growth investments. Obviously, as sales improve, we expect to realize operating leverage in this business.

We're in close contact with our customers, and the information we now have indicates more clarity and plans for the remainder of the year. And given their updated forecasts and production schedules, we expect sales of lithium separators to be fairly consistent in the second quarter relative to the first, with growth expected in the second half of the year.

Moving on now to the Separations Media segment. Sales were down compared to the first quarter of 2011 due primarily to timing and currency. Recall that the customers with production timing differences are contractually bound, and these sales will be made up in the remainder of the year. Segment operating income at Separations Media was 31% of sales, compared with 33% in the prior year quarter, due to the cost of added PUREMA hemodialysis membrane capacity in late 2011.

In summary, we understand that performance drives valuation. While we're not satisfied with current results, the long-term trends in all our businesses remain positive, and based on updated customer forecasts and production schedules, we expect full year growth in 2012, with momentum carrying into 2013.

While it would be ideal to have straight-line growth, especially in EDV, that's not likely in a substantial high-growth market in its infancy. The fact remains that we have the products and technologies that are in demand, we are well positioned with the leading battery makers and our capacity investments mirror customer expectations.

Polypore is a unique asset. We're the only company in the world focused exclusively on microporous membranes. We have a strong foundation of 4 core businesses in our portfolio, with the added opportunities associated with the global transformation occurring in Electric Drive Vehicles, and we believe our long-term investors will be rewarded.

At this point, we'll open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We will take our first question from Richard Eastman with Robert W. Baird.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Lynn or Bob, could you just kind of address -- in the lead-acid side of the business, I think you had commented that business should return to that $90 million, $95 million. Just -- could you just give us a feel for how Asia, China did in the quarter, if the market dynamics there have kind of smoothened out a little bit, and also the timing of that capacity ramp in China?

Robert B. Toth

Sure. I think Asia was fine. I mean, the impact was really 2 things, right? One was the mild winter weather and the lack of restocking of the chain here. Now that will be made up over the year, of course. When exactly those batteries fail is hard to say, but they'll fail. And then you also had currency, but there was no impact, negative impact from Asia. In fact, I think we said, mid-80s, it was 86, and that's even with the negative currency. And I think Lynn said that we'll certainly expect to be back up in the range here in the second quarter. As to the capacity coming online, we've got the smaller line in Thailand that's in the midst of kind of ramping up now into the middle part of the year, and then the joint venture, the one line, the initial line with Camel, in China, which will be ramping up kind of second quarter and the third quarter.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then, just on the lithium comment about the second quarter maybe being flat with the first. Just optically, where the market’s kind of watching what's going on with Volt production? And just curious, that one would expect production rates to be somewhat better in the second than they were in the first quarter? And curious as to being flat sequentially, could you just kind of walk us through that a little bit? Is it just a supply chain issue in timing?

Robert B. Toth

Yes, I think what you've got is -- Lynn said it well, and the fact of the matter is we're very close to the customers. And what you see is you see the car companies becoming a little more optimistic about what they see in the back half of the year and their expectations. You see that translating into the battery makers, having a little more clarity and a little more information on their production plans. And as these plans ramp up, as you'd expect in the automotive industry in particular, you're moving to closer to just-in-time type supply. So the way to think about that is, there was an impact in the first quarter, and that's kind of playing out here over the second quarter with their production plans. And we see robust activity in the back half of the year. Could there be a little uptick in the second quarter, that's possible. But again, we're not going to try to get into gaming this, kind of month-by-month, right? What we’re trying to do is be very transparent about what we're seeing and sharing what we can share to be transparent in that regard.

Operator

And we'll now go to Brian Drab with William Blair.

Brian Drab - William Blair & Company L.L.C., Research Division

So first, just kind of building on that last question. One of the things that we talked about or you talked about at the end of the first quarter was that the demand for cells in the consumer electronics market was probably going be a little bit stronger in the second quarter than the first quarter. Are you still seeing that playing out that way?

Robert B. Toth

Well, keep in mind, we've got to talk about the total market. And keep in mind, we walked away from some business so we've got that impact on us, right? So in the total market, we would fully expect the cell production to ramp up through the course of the year. I can't tell you I've got the second quarter numbers right on my fingertip. I think first and second quarter were a little bit softer with ramp up for the balance of the year. So we fully expect to see that. I think what we're describing and what we've described near-term is more of a function of us last year consciously allocating some capacity to the needs for Electric Drive Vehicle. And we still fundamentally believe that's absolutely the right decision, and we just kind of shared with you what we're seeing in terms of customer forecasts and production plans. So yes, I would expect continued growth in consumer electronics in the core applications over time. I can't tell you that I've got a better crystal ball on exactly what's going on quarter-to-quarter than what kind of what the industry projections are. But we also see very robust activity picking up associated with Electric Drive Vehicles, especially in the back half of the year.

Brian Drab - William Blair & Company L.L.C., Research Division

Okay. And then on that last comment. When -- you said in the press release, you said in the call that you expect growth in the lithium business in the back half of the year. Can you be more specific and just clarify, do you mean year-over-year growth in that business or growth in the second half from the first half?

Lynn K. Amos

Yes.

Robert B. Toth

I mean, we very specifically said we expect full year growth in sales and earnings, and you can kind of back into then that has to be the case in lithium.

Brian Drab - William Blair & Company L.L.C., Research Division

Yes, sure. Okay. And then the last question, then I'll let you go. But on February 23, the last call, you made it very clear that your production schedules that you were seeing -- the production schedule that you've been given from the EDV customers had been modified for the first quarter and not for the balance of the year. At this point, it looks like it was clearly modified. And in the second quarter, it looks like it was clearly modified downwards somewhat from what the original plan was. Is that true, first of all? And in the back half of the year, was it modified? And if so, in which direction did it go?

Robert B. Toth

Well, Brian, yes, you're correct to the change. We were absolutely close our customers. A lot was occurring at the time of the February 23. You had kind of a start and a stop of the production site. You had some currency things going on. And all that had changed at that point in time. Very specifically, we said it was first quarter forecast. Since then, I could tell you by the day we've been in contact with our customers, and in many cases, their customers have been in contact with them, too. And we've gotten a lot of clarity around what their production plans are for the balance of the year. And that's what we're trying to be explicitly transparent about here. Now could they be wrong? Sure. But the fact of the matter is, we've leaned pretty hard on our organization and their customers to get a lot of clarity on what expect to happen for the balance of the year so that we could provide some clarity, and that's what we've done here.

Operator

And we'll now go to Kevin Maczka with BB&T Capital Markets.

Kevin R. Maczka - BB&T Capital Markets, Research Division

Bob, again, going back to the consumer electronics and the business that you talked about last quarter that you walked away from, are you in a position yet to try to win that business back or win similar business from other customers back? Are you in a position to do that at this point?

Robert B. Toth

I think I'd ask you to think about that just a little differently, right? We're always assessing how we allocate our resources, how we allocate our production capacity with customers and who we work with. And if we saw any fundamental changes in the long-term trends associated with what we see the demand being for Electric Drive Vehicles, we'd obviously refocused our efforts and reallocate some of our resources in that capacity. It wouldn't come back immediately, but you do it in a meaningful sort of way. Now over time, don't forget the other variable you've got is we're adding capacity. So inherently, within adding capacity, you have the dynamic of, as we scale that capacity up, you'd start to basically have some ability to address that over time, anyway. So without a shadow of a doubt, we're keenly focused on all the applications, and if we saw anything dramatically different in terms of Electric Drive Vehicle demand, we'd reallocate some resources and reallocate some capacity. That's not the message I'm giving you today, though.

Lynn K. Amos

Yes, I think I would just add on to that. When we talked last quarter, we talked about that when you walk away from business, the way you do that is when the customer comes to you would that excel of that increased forecast and we told we didn't have the capacity for it. We told them they were going to have to find another source for that. The only worse answer than that is to tell them we’ll have capacity and we won't be there. And so, while we told them that we didn't have the capacity to get involved in the programs that were coming out at that time, we never intended not to have business with those customers as we added incremental capacity back into our business. So it was all about getting this capacity ramped up and having the ability to go back and serve customers. We want to be there for all our customers.

Robert B. Toth

Yes, I think it’s important. Many of you have heard me talk about this. You can't flip-flop. You can't just walk in and say, "Hey, I'm here for you today, but I'm not going to be in 30 or 60 days," right? I mean, these -- the product has to be qualified. Each and every product is unique. And so when we talk about walking away from business, let's just paint the mental model of that, right? The mental model of that is as Lynn said, last year, you picked your core customers and your development partners. Keep in mind, we've been -- we're sold out for, what, 18-plus months, right? So you say, okay, we really want to work with this customer. I'm just going to make this number up. You carve out the 6 million square meters they think they're going to need or whatever the number is. And you say, "Okay, we're there for you, customer. We've got the 6 million square meters." And then, because your products are in demand, because you've got the preferred product and they're having success, they come along the way, let's just say, February, March or April of last year and say, "Hey, great news. We're getting traction on some new projects we're working with you on and a couple of things we're working on are selling pretty well. And by the way, now we need 10 million square meters." And we say, "That's great, but we only have 6 million," because we can't make capacity appear overnight. So in those particular cases, you really kind of ask them to qualify somebody else. Now our product was in demand, and those are customers we want to serve. So over time, as you remedy that, by bringing on capacity, you work more closely with them, and you can allocate them more capacity. But we can't walk in first quarter and go, "Hey, things are a little slow. We've got capacity for you." It's not that kind of an industry. We couldn't probably give it away free if we wanted to, right? You've got to have it qualified into the product, and we'll certainly work with those customers back over time to earn their business in that regard.

Kevin R. Maczka - BB&T Capital Markets, Research Division

Got it. Very helpful. Bob, if I could just transition and ask a different question as it relates to Energy Storage margins. Lithium revenues were flat. Profit was down slightly. I think that's understandable based on the investments you're making. But can you give a little more color around the Transportation space? Revenues down 8% but profit down 6%. It was a little bit more than I might have thought.

Robert B. Toth

Sure. Do you want to comment on that, Lynn? No, you can go ahead.

Lynn K. Amos

Sure, well, certainly, there was the aspect of the sales and the operating leverage impact. In addition to that, we've got costs associated with growing our business in Asia, particularly around the capacity and the infrastructure we're adding in our new site in China and incremental in Thailand. We're also adding some resources in India to drive growth. I mean, that's the future of the lead-acid battery separator business in Asia. But we're continuing to make investments there. And with the -- so what you're seeing is a combination of investments going in to drive that growth in the future, as well as the short-term impact from the revenue shortfall, primarily due to the letter.

Robert B. Toth

And even a little, you can throw in a little FX as well, yes.

Kevin R. Maczka - BB&T Capital Markets, Research Division

FX, too. Okay. Did those investments, Lynn, did they ramp? Were they incremental at all in the quarter?

Lynn K. Amos

Well, just like in the lithium business, Kevin, the closer you get to starting up the production line, the more costs you're building into your system.

Robert B. Toth

Yes, so there are some there. Yes, you're training people to run the lines and those kind of things. So you have some costs there.

Lynn K. Amos

Yes. I mean, it is the incremental from the fourth quarter to the first, if that was your question.

Operator

And we'll take the next question from Craig Irwin with Wedbush Securities.

Craig E. Irwin - Wedbush Securities Inc., Research Division

In your outlook statement, you clearly indicated that you expect full year growth in sales and earnings. I was hoping if you could clarify for us the earnings comment whether or not this indicates GAAP or non-GAAP earnings?

Robert B. Toth

Well, I tend to refer personally to adjusted because we've got the noncash stock comps, the biggest driver between those 2, right? And that's the vast majority of the difference.

Craig E. Irwin - Wedbush Securities Inc., Research Division

Understood. Understood. Great. Then looking at the capital program, is there any opportunities to maybe adjust your investment plan? And is that something you have put under consideration, given the lag on follow-on orders out of some of your important customers?

Robert B. Toth

Craig, that's a great question. There are several questions there, right? Even though you asked us just kind of one. Can we pace it? Of course, we can always pace it. Are we better to have capacity than not have capacity? Boy, I'll take the "have capacity" any day of the week after what we've lived through the last 2 years or we wouldn't be explaining why we walked away from some consumer electronics business. The good news is, we've got the low-cost position, we believe, in the world. We've got the preferred technology in the world. We're dealing with the right customers. We've been tied on capacity for 18 months to 20. You'd probably ask me -- I know other people have. They always say, what's the biggest issue you're dealing with? The last 2 years I’ve said growth. And then people immediately go, "It's a high class problem." And I said, "You know what, it's still a problem," right? Because you've got -- at the end of the day, it's tough to make your customers happy when you're telling them how much they can have at a month. So if your question is, can we pace this capacity coming online? You bet. But if you're asking, are we doing that and do we see a need to do that at this point? No. I mean, we need the capacity, as Lynn said, out of the -- what was it -- $334 million of capital associated with the lithium business, we have under $100 million to be spent. And so the costs are embedded in our financials. People always ask me what's kind of the worst case? The worst case is you'd pace it and you'd shed a little bit across. But at this point in time, we see our customers' forecasts, and unless they're wrong, that's not going to be a problem.

Lynn K. Amos

Yes, the incremental carrying cost of having that capacity is not that substantial. But we'd live through the downside of not, and so having a little extra for us is a better place to be.

Robert B. Toth

Yes.

Craig E. Irwin - Wedbush Securities Inc., Research Division

Great. And the last question, if I may. Given the other global chemicals conglomerates have had trouble entering the lithium separator market and found it a lot more tricky than they anticipated upfront. It's public information that one of your very important customers is going to take about 50% of its separator manufacturing in-house. With the very important status of this customer on the EDV side and the significant capacity that you have coming online, would you consider bidding for their consumer demand if they were to encounter trouble bringing online capacity internally?

Robert B. Toth

Okay. You asked a lot of questions there, too. So first of all, the customer -- everybody knows, right? The customer that you're referring to was LG, made of kind of an innocuous statement in a presentation a while back that some people tried to run with misinformation on and blew it out of proportion. What they've said -- I don't want to speak for them, and I'd encourage any of you to call them. But I can tell you what they've said to people, and as we said at the point -- at that point in time, that wasn't new news, right? They have a large consumer electronics business, and they use the wet process product technology primarily in consumer electronics. And as we've said all along, even people who use the wet process -- you can use both, wet and dry, don't forget that consumer electronics, largely based on how you design the battery and your preference. You can't kind use them interchangeably. You've got to design it that way. And we've said even people who use wet in consumer electronics are selecting dry in the large format cells because of the distinct advantages of that process technology in the large format cells for Electric Drive Vehicles and energy storage systems. They're kind of a model of that, right? In consumer electronics, they're very large. They use the wet process, and they get about half of their supply from someone else in Korea, who they're suing. And what they said was -- again, I don't want to put words in their month. I'm playing back what they've said. What they said was they're hoping to produce or intending to try to produce half -- up to half of their needs by 2015. So let's just qualify what was kind of said. They haven't said anything about that on the Electric Drive Vehicles side or on the dry side. In fact, someone else has told us that they've said that we supply them and they have no plans there. So that's kind of that dynamic. Now in terms of bidding, you don't really -- this isn't a bidding industry. I know some people have tried to suggest that, which clearly indicates their lack of understanding of this business. And if it was clearly a bidding industry, a, we'd win, right? We're the low-cost producer. So at the end of the day, we'd probably have won already, completely in the market. And b, we wouldn't be talking to you about having some capacity here in the short term, right? You'd go out and place that. That's not how this industry works. This industry works because you can make a very technical system inside a battery, with each and every battery being unique in the form of the separator and the ion, with the electrolyte and the ion flow to release the electrons. So you can manage that particular device the way you want to manage it from an energy flow perspective. So at the end of the day, you don't really bid on business, right? We've said all along, that the industry is basically formed on kind of volume incentives. I shouldn't say the industry. We've certainly followed a model since before I got with the company over 7 years ago. The bigger your customers get, the lower price they achieve based on incentives, whether you call it discounts or rebates or whatever. And you're delighted to do that because you want to grow with your customers. And as you grow, you have tremendous operating leverage in this business. But bidding is kind of a misunderstanding of the industry.

Lynn K. Amos

Yes, the volumes -- the business is won in the R&D lab, not in the procurement office.

Robert B. Toth

Yes.

Lynn K. Amos

[indiscernible] have tried it...

Craig E. Irwin - Wedbush Securities Inc., Research Division

Understood. Understood. Now just a follow-on there. So the dry process is clearly our premium product, and it's something that is well recognized out there. Would you look to offer that to them even though they were using a less expensive alternative? Is that something that you think the capacity you have might be fungible to serve? Or do you see the opportunity?

Robert B. Toth

Well, I would clarify. Craig, I'd clarify something there. The dry process product has cost advantages and has distinct performance advantages in the large format cells, right? And we're the world leader in that. So that's good news. In the consumer electronics area, I wouldn't position that as a premium product. It's just a low-cost product. We don't sell on costs, as we've said, right? You sell based on value in the application, and so I wouldn't suggest it's placed in the market as a "premium priced product." You have to be competitive to be in the ballpark, to be designed into those new applications. So I just think there's a little misunderstanding there. I think when you look across the industry, the products are priced in a range, and it's not -- like I said, it's a low-cost product. It's not necessarily a premium-priced product.

Operator

And we'll now go to Jeff Osborne with Stifel, Nicolaus.

Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division

I just had 2 questions. One, the inventory seemed to be up about 19%, 20% sequentially. I was just wondering if you can talk about what's going on there and what you’re gearing up for.

Robert B. Toth

Well a couple of things. We haven't had an -- in terms of where we wanted it. So we had some desire to increase inventory in the first place. And needless to say, we think where we're at is appropriate, given our customer projections and forecasts. So Lynn, do you want to build on that?

Lynn K. Amos

No, that was the last part that I was just going to add. I mean, we're very comfortable with our level of inventory, based upon where we see the customers' orders and forecasts.

Robert B. Toth

Yes. We've been airfreighting a lot, for instance, over the last couple of years. You don't really like to do that. You'd rather have a little inventory and put in on a boat.

Lynn K. Amos

Yes, I would think that where we're at now is pretty reflective of where our inventory should be relative to the size business we have, whereas I would've said for the last 18 months to 2 years, we were running hand to mouth much more so than we had like to.

Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division

Got you. Just so I can better appreciate that, what would you say the average lead time is that you're giving your customers from when they're giving you a longer-term or mid-term forecast from they say go until you do shipping?

Robert B. Toth

I've got to say, we've got so many products. I don't know how to get to an average that would be meaningful. It's very different by product and by grade and...

Lynn K. Amos

By business.

Robert B. Toth

And by business, yes. I mean, each business I could talk for 15 minutes on how we think we've got service advantages. In the lead-acid business, right, we're the only major player with facilities in Asia. So we're probably the most responsive, and we'll continue to be in terms of servicing our customers there. In the lithium business...

Lynn K. Amos

Yes, but I would say, having said that, we still export a lot of product from the U.S. and Europe to Asia.

Robert B. Toth

That's right. That's right. Because [indiscernible].

Lynn K. Amos

And given the preference, as we have capacity up in China and in Thailand, we'll be able to have -- we'll be able to service those businesses more locally.

Robert B. Toth

Yes. And in the lithium business, every product, every battery is unique, so you can't kind of game or guess inventory at a large extent. So you basically make the feeder rolls, if you will, or kind of the feedstock rolls, and that's what you need to have to be able to make the finished goods. So you still have to be very responsive at the end of the day. But each business is just very, very different in that regard.

Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division

Great. And then just the last question. It sounds like, or at least investor expectations are that you've quite a bit of revenue concentration with the 2 vehicle platforms that you talked about with the issue impacting this quarter. And can you talk about what that concentration is? But more probably, how that kind of dissolves itself as the 25 new vehicle platforms that you've talked about being designed into ramp up over this year?

Robert B. Toth

Well, yes. I mean, you almost answered it within that question, right? In the short term, those 2 vehicles are impactful for a couple of reasons. One is they have high content, right? They're -- one is plug-in, and one is full battery electric, which is by default, has more content than a mild hybrid or hybrid. And they're pretty decent numbers, right? In terms of volume builds. So in the short term, they're pretty impactful. In the long term, they're really not a proxy for Electric Drive Vehicles. And what I mean by that very explicitly when I say that, is, use the Volt, for instance. You can't look at the Volt and go, well that, from that, I can tell how the BMW 3 Series hybrid is going to sell. Or, “From that, I can tell how the Hyundai Sonata Hybrid is going to sell or is selling around the world.” And over time, what you'll see is those vehicles become diluted. They're impactful at some degree today to a lesser degree next year, to an even lesser degree the following year. But make no mistake, they're impactful now and that's what we're living with, right? And what you see, as we've said, is you see the -- I don't want to speak for the automakers, but you've seen them making statements about expectations for the back half of the year. And I'd encourage you to, not you, but everyone, to read past the headlines and read what they've actually said. And our customers have more information about production schedules and, therefore, have adjusted their forecasts and production schedules. And that's what we're reflecting and what we're passing along today.

Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division

That makes sense. We just had a hard time finding 25 vehicles that were ramping up. So I mean, do you have a kind of a rough ballpark of what your market share is of the EDV market that you've been designing [ph]?

Robert B. Toth

Yes, we do. But all I'll say, is we have an early leadership position. And a lot of vehicles aren't announced. But to be fair, I mean, a lot of vehicles aren't announced. We know when they'll be coming out, but they may not have been announced. But there are more out than most people think. Most people think there are 2, and there aren't. There are a lot. I mean, yes, I can rattle off just top of mind. You've got the Mercedes S-Class, you've got the BMW 7 Series. They've announced the 5 Series and the 3 Series, and the Hyundai Sonata, and the Kia Optima and the Nissan Fuga, the LEAF, of course, the Infiniti M, some Renaults. I mean, you can go on and on and on, yes. And so the Mercedes E, some GMs. The point is -- yes.

Operator

And we'll now go to JinMing Liu with Ardour Capital.

JinMing Liu - Ardour Capital Investments, LLC, Research Division

First of all, can you share with us what's the EDV sales for the quarter, what percentage of EDV sales in the lithium separator business?

Lynn K. Amos

We're not going to get into disclosing it specifically, but it was approximately half.

JinMing Liu - Ardour Capital Investments, LLC, Research Division

Okay. Secondly, as lithium battery price has been decreasing, and new car [ph] with some temporary pressure, are you seeing -- have you seen any pricing pressure on your lithium separators?

Robert B. Toth

No. We disclosed that in the K's and the Qs. And what we said all along is exactly, what's transpiring. As your customers get bigger, they can achieve lower prices based on discounts, but you don't see anything in price. Well, I think -- I think there's a real misperception around, and pardon me, this is part the -- the part engineer here, but you've got to think about all the dynamics in terms of impact on costs, right? Raw materials for a battery are pretty far down the list. Sure, they're important. Don't hear that as they're not important, but you've got to think about energy density, driving cost to batteries. You've got to think about scale. I mean, you're just in the infancy of these large format cells ramping up. And I wish we had a tape recording of when consumer electronics started and then power tools started because I can tell you, I sat in meetings 5 years ago, where people said, "You're not going to get this in --- This isn't going to go into power tools: They're 2x to 3X the cost of nickel batteries. Well, they're not anymore, right? Because you were just getting that size format cell to scale up. And the same thing was true if you go back further in consumer electronics. It's a very repeatable pattern here, right? You don't have any large format manufacturing out there and then you do and then it starts to scale up and they start to drive efficiencies. So you'll get scale efficiencies at the battery maker. You'll get energy density efficiencies over time. You'll get design efficiencies in the vehicle. You're just starting to scratch the surface on that. With a smaller engine, you have less need for managing the heat because combustion engines are 70% inefficient. So you can have a smaller radiator with a smaller engine. You can have a smaller transmission. You can have a smaller differential, smaller suspension. You go on and on and on. And then I'd continue to layer in, and you're just starting to see it. In fact, I think Nissan just started to talk about it. One of the single biggest impacts will be the reuse of these cells in energy storage systems. Today, you're amortizing the cost of a large format cell in a car out over 8 or 10 years. Well, when they come off that car, they're going to have 70% to 80% of their useful life left. When you take that and repackage it and put in an energy storage application, now you can amortize it out over a lot longer period of time, and that's going to dramatically change the cost impact and, therefore, the viability of this in automotive. That's why we talked about we're just at the start of all this stuff.

Lynn K. Amos

I mean, 2 other things I want to add or maybe emphasize. One is that make no mistake. I mean, I've never met a customer that comes in and wants to pay a higher price, so they ask and they ask every day. But pricing these EDV programs isn't determined today for tomorrow, right? When they started developing these programs 4 or 5 years ago, there were price volume curves put in place and they just didn't wait till the car was on the road to decide what's my price is going to be on a separator if this scales up, right? That was all kind of designed in front. And the pricing model that's always existed in this industry, and I expect to exist going forward, has been that volume price rebate tier, as people's volumes grow, that's how we're going to achieve the price points that they want, and which is for us, is a good trade. And historically, that's resulted in 2% to 3% average price down per year.

Robert B. Toth

Yes. I mean, when we look back over 10, 12 years and that's what transpired.

Operator

We'll go next to Michael Lew with Needham & Company.

Michael Lew - Needham & Company, LLC, Research Division

In lithium, you provided a rough split. And I may have missed this, but based on the new projections from customers, are you still expecting 50 platforms on the road by year end?

Robert B. Toth

Yes.

Michael Lew - Needham & Company, LLC, Research Division

Okay. And also, can you talk about dry layer demand a little bit? I mean, is quotation activity increasing for that product? And how much material consumption does account for? Is it over 50% versus single lines [ph] for that way?

Robert B. Toth

We're not going to break out grades. I mean, we make hundreds and hundreds of grades, and as we've said, there's all kind of different things you can do in a battery to design in safety features. And that certainly is a desirable one for many people, and people know we've got advantages in that. And that's one of our core products, but we're not going to get into the breaking that out, though.

Michael Lew - Needham & Company, LLC, Research Division

Okay. Is there -- without breaking out, but is there more of an inclination, let's say, for hybrids versus all electrics to utilize that product?

Robert B. Toth

No. It's more a function of the design of the total system and just how they want to layer in safety features. Some people believe you absolutely need it. Some people don't. Some people use both. Some people use coatings. Some people -- you can go on and on. Some people manage it with the circuitry. Some people manage it with all. It's just so many layers of added safety features you want to have in it.

Michael Lew - Needham & Company, LLC, Research Division

Okay. And also in healthcare, is the most recent expansion in 4Q ‘11, has that been qualified and now producing commercial products?

Robert B. Toth

Well, it's up and running, yes. And as we've said, that will fill up over time, right? That's one of those, the market in that space kind of grows 6% plus a year. And until we have that capacity, we're really prevented from keeping up with market growth because we're tapped out with our existing capacity until then. So now we can start to work with customers to be able to meet their growth needs. So in effect, that's qualified doesn't mean there's a big -- there's no pent-up demand, right? I mean, this is an industry that grows pretty methodically over time.

Operator

And we'll go to Carter Driscoll with Capstone Investments.

Carter W. Driscoll - Capstone Investments, Research Division

First question is, has any customer hit any of those thresholds on EDV side in terms of volume discounts? And would that be an aggregate or a monthly or quarterly basis? Maybe shed a little light there.

Robert B. Toth

No, we won't really shed any light there. I mean, we're not going to get into customer and customer pricing. I mean, what happens is -- how this works is, it's a little different in every case, and I'm speaking in generalities, which never work. But you have a customer, let's just say that buys X, right? And they say over the next 4 or 5 years, here's what our growth trajectory is, because you're working with them way in advance, right, they don't decide today, "Oh, we just got some new award. What are we going to do?" You've been working with them through the development of this. And as part of figuring out who their development partner is, you have a price curve with them. And you go, well if your price -- or if your volume does this, your price will do that, right? And you achieve these discounts. And so that's how that generally works.

Carter W. Driscoll - Capstone Investments, Research Division

Would you at least qualify whether you -- anyone has fallen off from those amounts?

Robert B. Toth

Well, I mean, what are the amounts? I mean, yes, yes...

Lynn K. Amos

There are multiple points on the price curve. So yes, they've moved for their multiples...

Robert B. Toth

Yes, you don't have big step changes. I mean, what you do is, as the volume goes up, they hit rebate tiers, right? So that's what transpires.

Carter W. Driscoll - Capstone Investments, Research Division

Fair enough. And then maybe if I could just ask just a question a little differently. Looking at the platforms you're hoping to add by year end, could you -- and I realized that to try to draw some type of linear movement from the battery to the separators is very difficult, a lot of moving parts. But if you had to, say, give us a rough estimate of what you think the battery size across those platforms might be, could you put a range out there?

Robert B. Toth

No. I mean, actually you can't. I mean, they're all over the map. You're going to have far more hybrids early on than anything else, right? And that's why, the plug-in and the battery electric are kind of impactful in the early days because over time, you get more and more hybrids rolling out, starts to dilute that. But you'll have more hybrids, fewer plug-ins, fewer battery electric vehicles. Over time, that will all start to change but it's not going to change overnight.

Lynn K. Amos

I mean, if you said all hybrid batteries were the same, which they're not -- there's a big range even on hybrid batteries -- and you said they were like 1X the amount of separator. Between a plug-in hybrid and a full electric, and again, depending on the design of the particular vehicle, it's probably 5x to 10x the amount of separator in that plug-in to full electric. Again, totally dependent on the design, and there's multiple of each type in each category. So I can't just give you a general. But order-of-magnitude-wise, you'd probably need 5 to 10 hybrids to make up for one plug-in or battery electric vehicle.

Robert B. Toth

Yes. I mean, there's a lot of complexity here. It's even way more complex than saying what size of engines are in cars, right? It's all over the map. And that's exactly how this works. And it even gives the ability for the manufacturer to segment or differentiate more, right? Because you've got power density, how fast do you want to go from 0 to 62 or whatever, you've got range considerations. You’ve got energy density, how long do you want to be able to drive on electric power, and what size combustion engine do you want to couple with that, if one at all. So you've got tremendous number of variables, and that's why we've always talked in ranges.

Carter W. Driscoll - Capstone Investments, Research Division

That's helpful. I think it wouldn't be easy to guess. Was there a specific category in consumer electronics that may have surprised either the upside or the downside other than this quarter or what you're seeing for 2Q?

Robert B. Toth

No, hardly see anything there. I mean...

Lynn K. Amos

Flat tops [indiscernible]

Robert B. Toth

Flat tops were a little off, maybe. Yes, that might be true.

Operator

And we'll now go to Jeff Zekauskas with JPMorgan.

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

When I look at the consultancy literature on EDVs, it seems that the industry structure for providing separators has changed somewhat in that in the old days, there was Polypore and Toray and Asahi and Ube. And now, there are new companies like Zhongshan and Zhenshang and Jinshan. And have these companies made inroads into the EDV market? And how do you see the competitive structure of the separator providers to the EDV market changing over time as these new entrants come in?

Robert B. Toth

Well, I think I said it once. Our business unit leader says it quite well. There's -- you've really got to differentiate between claims and qualified claims on what you can make in qualified products, right? If you go back in time, all of these people would've been out there. It's just that everybody's kind of writing reports now, wanting to get paid to write reports now, right? So our Korean facility, if you went back in time, you would have found that before we acquired it, you would've found that to have some big claim on capacity, you would've found it to have whether it was nameplate capacity or something. But the fact of the matter is, what people say doesn't much matter. You have to look at what drives the dynamic here? Who's proven in the industry and what would the advantages of any of those names be that you just cited, right? This is a very low-labor-cost product. It's a very low variable cost product. We've got global scale, we've got all the products. We've got a proven technology, and we've got the low-cost position. So coming from a mental model of why the Chinese company or an Asian company can out -- backward engineer this and lower their costs or something, well that's just not going to happen in this business. So I can't really tell you that someone might not have some limited success, but I think you have to look at who the major players are and who's getting traction. The only people -- there have always been a number of people playing around the edges here, and they're usually in the secondary applications, the non-OEM-certified type applications. If you buy a battery on the Internet, it might look like one. But if it fails 30 days, there's no recourse. So no doubt about it, though. A lot of people would love to be in this industry and would love to make claims to be in this industry and might even try to go public on making claims to be in this industry. That's very different than actually being in the industry and being a proven supplier with a high-quality product that people are willing to risk their brands on and their customers' brands on.

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Okay. And do these new players play both in the EDV markets and in the consumer electronics market? Or if you play in the EDV, does that mean that you don't necessarily participate in consumer electronics? Or once you can do the one, you can do the other?

Robert B. Toth

Well there's an implication that they're playing, which I won't necessarily comment on. But where we have seen people is in the secondary consumer electronics markets, where there's no recourse. When you go to EDV, when you go into automotive, believe it or not, as demanding as consumer electronics is and power tools is, automotive is a step change more demanding. And you're introducing added complexity because these are large format cells, which means much bigger, and you've got to know how to handle the product and be able to make the product that's again, thinner than a human hair at a very precise way to go into these large format cells.

Lynn K. Amos

And I’d just fill in there that there's a certain risk propensity for a battery producer to sell a battery that ends up in Western China or in Africa with no recourse relative to a global automotive supplier who's got their entire reputation built on it.

Robert B. Toth

And the battery maker.

Lynn K. Amos

And the battery maker, yes.

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Okay. And then just a quick point of clarification. You said that you thought that your electronics and EDV revenues in the second quarter would be similar to the first. Do you expect both pieces to not grow or electronics to grow and EDV to shrink sequentially, or EDV to grow and electronics to shrink?

Robert B. Toth

We're not going to get into splitting hairs on kind of quarterly forecast or guidance. What we have are distinct forecasts, and there can always be some pluses and minuses to those, so just like there always has been in this business. It's just function in the industry. So I think we've provided a pretty clear outlook around. It's going to be pretty comparable, and we expect pretty robust growth in the back half of the year.

Lynn K. Amos

Yes, I mean, I think the important takeaway on this comment is that we have updated customer forecasts and plans based upon what we've seen post first quarter. We certainly see a lot more robust activity in production and plans for the second half of the year. So could there be some upside late in the quarter? That's always possible, but at this point, that's really not what we're playing for as whether we get an extra million or $2 million of sales in the second quarter or not, right? We're seeing momentum into the back half and into 2013 and I think people have gone through a pretty good scrubbing of what their expectations are and their production plans are for 2012. So I think that's a more important takeaway from the tone.

Operator

And we'll now go to Avinash Kant with D.A. Davidson & Company.

Avinash Kant - D.A. Davidson & Co., Research Division

A few questions. The first one is about the healthcare business. Do you expect it to rebound in Q2? But should it come up to that Q4 kind of level or the average of 2011 kind of level?

Robert B. Toth

We're not going to go business by business, Avinash, sorry. I mean, we've given, I think, pretty clear corporate guidance in terms of certainly very good qualitative guidance that you can back in to some numbers, and so, we're not going to kind of go business by business, though.

Lynn K. Amos

Look, what we said, we -- here's what we said on healthcare, alright? We said, and in fact, we said we expect sequential growth in our other businesses. The healthcare business in general, you have that growth -- it kind of grows mid-single digits or better to help -- the hemodialysis, kind of grows 6% to 7% a year on an annual basis. The blood oxygenation business is kind of a lower single-digit business. We have some new applications. But if you kind of talk mid-single digits are little better in that industry, you take out the effects of currency, which can always be a positive or a negative in any given year. That's kind of what you'll expect on an annual basis. And all we've said that's impacted our health care business is timing of order patterns. So that kind is going to get you on the zip code.

Avinash Kant - D.A. Davidson & Co., Research Division

Yes. I know there's a bigger fluctuation on a sequential basis, that's why I was trying to figure that out. Another question, though, more on a longer-term kind of. You talked about the fleet, 25 different vehicles coming along on the EDV side. Could you give us some idea as clearly, you have been in a part of each and every of those wins or design wins. What percentage of those have dry technology in them and what percentage have wet?

Robert B. Toth

Well, in the ones we're in, I could say with pretty much certainty that everybody would like dry. What we've said all along is that that's the clear preference in the large format cells. Now if you can't get that and your choice is to not make a battery, you'll try to design around the wet process product. But without a shadow of a doubt, we're not pushing this on our customers. It's got distinct advantages, you can see it. I mean, you could see it. It's very, very clear what the advantages are. And without a shadow a doubt, that's the product in demand.

Avinash Kant - D.A. Davidson & Co., Research Division

So then when you say that all the customers who are buying from you are clearly or at least buying dry, none of them is buying wet technology from you for EDV?

Robert B. Toth

For EDV, everybody gets dry. That's right. And we have...

Avinash Kant - D.A. Davidson & Co., Research Division

Right. But then you say that people are still using wet technology or are they kind of being forced to use wet technology until they get dry technology?

Robert B. Toth

Well, what we've said is, we're not building capacity to cover the entire industry or application space. We're not building it to cover every vehicle. We're not building it to cover every customer 100%, right? And we've been sold out for a long period of time until now. So when you do that, and you say, you've got more demand than you have supply, you can't supply certain people. And so you just try to give them as much -- as Lynn said earlier, you try to give them as much notice as possible on that. You don't like to do that, but you just say, "Look, I can't get you those samples because I can't be there for you. I don't have capacity." And then you go into -- what are they going to do? They're not going to not make a battery, right? They're building a plant, which is in most cases, at least high hundreds of millions of dollars. So then you go, "Well, okay, what will I do?" Well, I'll design around the shortcomings of the wet process products. You've got shrinkage issues especially in the transverse direction. And you've got...

Lynn K. Amos

Oxidation.

Robert B. Toth

Oxidation issues which you could try to design around by either maybe coating the product or just adding cost to the process or going to a lower voltage charge because that's the environment that creates that high oxidizing environment. But that's going to limit the universe to where you can play. But if your choice is, I can't make a battery or I'm not going to make a battery or do that, that's what you'll do, right? You'll suffer yields. You'll suffer some of the quality or cost implications, and you'll use a wet process product.

Operator

And we have time for one more question. We'll take that question from Richard Eastman with Robert W. Baird.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Just as a follow-up. On the lithium side of the business, 2 things. Just to maybe underscore the global nature of the marketplace for you guys, of these 25 incremental vehicles that you expect to be on, how many of those are planned and scheduled to be introduced outside the U.S.? And also, does it include any commercial vehicle introductions?

Robert B. Toth

No, when we're talking about the models, and we're going to try not to get -- the message on the models is how many are being designed and coming out less so to kind of get in the -- let's project each one and build a matrix, right? And so when we're talking about the models that are coming out, we're talking about the mainstream automotive brands you would recognize, not the niche vehicles or commercial vehicles or buses or things like that. All that stuff's going on; don't get me wrong. And we hope everybody is wildly successful. But that's not the stuff that we're counting on, that we're talking about here, right? We're talking about brands you'd recognize. Now some of those brands could be outside the U.S. I don't have the precise number, but you've got companies like Peugeot and Renault that you don't see a lot of running around in the U.S. You've got certain Asian brands you'll only see in Asia, but you'd recognize the brands. And recall that the first Hyundai out was a brand, a model that they only sold in Asia.

Lynn K. Amos

The Nissan Fuga.

Robert B. Toth

The Nissan Fuga was only sold in Asia. And so -- but you'll recognize the brands, right? They're the big car companies.

Lynn K. Amos

Yes. I really haven't done a geography count U.S. versus outside of the U.S.

Robert B. Toth

Yes.

Lynn K. Amos

My initial reaction is that there are as many outside the U.S. as there are inside the U.S.

Robert B. Toth

Yes, and some of those models will make their way here in the form of imports but some may not.

Lynn K. Amos

And some of the models here will make their way out.

Robert B. Toth

Yes, that's right.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then, Lynn, just when I look at the operating profit in the Separations Media business and given the dynamics in healthcare, these are kind of customer commitments. You talked about those being pushed out. We've added PUREMA capacity. Did you produce in the quarter to inventory? In other words, is that 31% segment margin loaded with PUREMA capacity cost?

Lynn K. Amos

Well, I'd frame that a little bit differently. We didn't just run assets, PUREMA assets to stock up a bunch of inventory. What we had is a very firm order schedule that when the customers' production plans changed, we didn't radically change our production plans because these were committed to orders.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Yes, I understand. You produced -- you built some inventory with that added capacity because you have commitments for it, right? So it's...

Lynn K. Amos

We knew these -- the products were going to be sold. As we said, there was a timing issue in the customers' forecast this year, relative to last year. So when we put in place our production plans, notified our employees last year before that timing change occurred, we didn't change our production plans, we just built to our anticipated plan.

Robert B. Toth

But we didn't run. You don't run the new assets flat out with a bunch of inventory.

Lynn K. Amos

That's right. We're not stockpiling. If that's the case...

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

No, I'm not implying that, but that's a very good gross -- our good operating margin relative to the capacity brought on and the push of shipments, so in...

Lynn K. Amos

Yes. Yes, that's a fair point, Rick, that we did balance our production, or keep our production plans to their kind of original time frame so we probably produced a little more in Q1 relative to the sales trajectory than maybe we might do otherwise.

Robert B. Toth

Well, thank you, everyone. Lisa, I think we're going to wrap up. I know we've run a little bit over. And we certainly appreciate everyone's interests and look forward to reporting progress again next quarter. Thank you, very much.

Operator

And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation.

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