Thomas & Betts Corp. Q4 2007 Earnings Call Transcript

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Thomas & Betts Corporation (TNB) Q4 FY07 Earnings Call February 11, 2008 ET

Executives

Patricia Bergeron - VP, Investor & Corporate Relations

Dominic J. Pileggi - Chairman & CEO

Kenneth W. Fluke - Sr. VP & CFO

Analysts

Amit Daryanani - RBC Capital Markets

Christopher Glynn - Oppenheimer & Co.

Meredith Taylor - Lehman Brothers

Jeff Rosenbaum - DE Shaw & Co.

Jeffrey Beach - Stifel, Nicolaus & Co.

Sandy Goldman - Hartline Investment Corp.

Steven Gambuzza - Longbow Research Partners

Alex Rygiel - FBR

Mario Gabelli - Gabelli & Company

Operator

Greetings ladies and gentlemen and welcome to the Thomas & Betts Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Tricia Bergeron, Vice President of Investor and Corporate Relations for Thomas & Betts. Thank you Ms. Bergeron, you may begin.

Patricia Bergeron - Vice President, Investor & Corporate Relations

Thank you Folia. Good morning and thank you for joining the Thomas & Betts Corporation fourth quarter and full-year 2007 conference call. Our comments today contain time sensitive information that is accurate only as of today's live broadcast. These comments may also include forward-looking statements, which make assumptions about our operations, business, economic, and political environment, including without limitation, customer demand, government regulation, terrorist act, and acts of war. These forward-looking statements are subjected to risk and uncertainties detailed in the risk factor section of our Form 10-K for the 2006 fiscal year.

Dominic Pileggi, Thomas & Betts’ Chairman and Chief Executive Officer will begin our formal remarks with the review of business highlights. Kenneth Fluke, Senior Vice President and Chief Financial Officer will then review the financial results. We will then take questions from the investment community.

I'll now turn the call over to Dominic for a review of our business highlights.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Good morning and thank you for joining us today. 2007 was another exceptional year for Thomas & Betts with great execution across the entire company. We delivered excellent financial performance improving both gross margin and operating earnings as a present of sales. For the full year, we've reported record net earnings. We continue to also drive shareholder value by effectively using our strong cash flow in capital resources to repurchase 2.5 million shares of stock and closed $750 million worth of strategic acquisitions during 2007.

Looking at the specifics of our consolidated full-year results. Sales grew by 14% with growth in our underlying business accounting for the majority or approximately 8% of the increase. Acquisition contributed about 6% to the sales increase. Each of our segments delivered strong and improved earnings performance for the year 2007, resulting in a nearly 20% increase versus the prior year. As a percentage of sales, segment earnings were 16.9% of sales, up nicely from 16.3% in 2006. I am also happy to note that EPS of $3.13 per share came in at the high-end of the guidance we gave at the beginning of the year. We achieved this result despite the impact of $14 million of additional legal and environmental charges that were not contemplated when we originally issued our guidance.

In short, 2007 was an outstanding year where we again demonstrated the value of our balance product portfolio and balance customer base, as well as our ability to manage changes in underlying market trends. Looking now at our business segment’s fourth quarter performance.

Each of our segments closed the year on every strong note. In our Electrical segment, year-over-year sales increased 10% before the impact of acquisition. Sales growth was driven by solid demand for industrial products as well as a positive impact from foreign currency. As expected, price was not a factor in the quarter. While the downturn in residential markets has generated uncertainty about the future health of the economy, activity underway on large commercial construction projects remained solid for the fourth quarter. As expected this health compensate for the decline in residential related markets. We also saw continued strength in demand for industrial maintenance and repair products in growing markets such as food processing, oil and gas, power generation and wastewater treatment. Demand for utility products came in as expected with sales again weighted more heavily toward power distribution products used for maintenance rather than new construction.

Year-over-year, Electrical segment earnings increased slightly more than 30% in the quarter and were a healthy 16.1% of sales despite the dampening impact of acquisitions. Looking closer at the acquisitions completed in 2007. The integration process of Joslyn Hi-Voltage Power Solutions, BPs, and Lamson & Sessions is well underway and progressing as planned. We have begun to consolidate Lamson & Sessions four distribution centers into our centralized distribution model, realign the manufacturing of certain carline [ph] product lines and consolidate certain administrative and back-office functions into the Thomas & Betts infrastructure.

Most activities on all our acquisition should be completed by the end of the second quarter 2008, while these activities require a significant upfront investment, we are confident that they will greatly enhance both our competitive and financial profile over the long-term. For example, those of you who follow Thomas & Betts know that our unique centralized distribution and a fast-cycle logistics model is a key component of our value proposition. With the inclusion of the high-quality products and leading brand names we have acquired, our one order, one shipment, one invoice capability will prove even more valuable to our customers.

You may have also seen that we continue to expand our utility products portfolio with the January 28 acquisition of Homac, a leader in the market for secondary underground power distribution connectors. Homac's portfolio of products and technology is highly complementary to significantly expands our position in the important utility distribution market. We also acquired a small Canadian manufacturer of high-quality flexible braided power and grounding connectors used in switchgear, transformers, grounding applications and windmill tower construction and maintenance. These niche products are a great fit and expand our offering for alternative energy customers.

Both of these acquisitions meet our strategic criteria of enhancing our leadership position in existing markets, while creating value for our shareholders. Lastly you may know, that we have decided to divest the plastic pipe business of Lamson & Sessions including PVC and HDPE conduit, duct and pressure pipe used in construction, industrial, municipal and utility, and telecommunication markets. These products accounted for approximately $230 million in sales. While this business shares some of the same end markets and customers as traditional electrical components, it has significantly different manufacturing, distribution and profitability profile with very limited opportunities for synergy. A wide variety of buyers have expressed interest in this business and as appropriate, we will keep you informed as progress is made.

Turning now to our other businesses. Our Steel Structures segment again turned in a very impressive earnings performance in the fourth quarter, with segment earnings increasing to 18.1% of sales. As expected, Steel Structure sales were down in the quarter as a result of significantly lower sales of lattice towers that were... that we sourced from a third party. The earnings improvement as a percentage of sales reflects improved project mix and higher sales of internally produced structures. This excellent performance is at the high end of what we consider normal earning range for this segment.

We continue to remain extremely positive about the long-term outlook for this business, as the need for a more reliable and efficient U.S. transmission grid remains a key priority in utility capital spending programs. In anticipation of continued growth, we added steel pole capacity to an existing facility last year. This investment will add up to $20 million of additional sales capacity for the full year 2008.

As we have noted on previous calls, the timing of projects can vary quarter-to-quarter, resulting in bumpiness in both sales and earnings. For 2008, we expect sales and earnings growth in this segment to be more significant in the second half of the year. Our HVAC segment also turned in an outstanding performance for the quarter, with sales up 11.5%, and earnings up 26%. While the fourth quarter is typically the strongest for this business, we believe the 20.8% operating margin achieved this quarter is a record for this segment, and it clearly reflects the significant improvements in operating efficiency achieved over the past couple of years.

In summary, Thomas & Betts had another outstanding year in 2007, and is well positioned for continued positive performance in 2008. Our success would not be possible without the hard work of all of our employees worldwide. They are the cornerstone of every thing we do, and I want to personally thank them for their commitment to excellence and continued growth.

As we enter 2008, the economy is clearly influx. The residential construction market continues to be depressed and the spill over effect is a general dampening on residential related markets such as light commercial construction, and utility distribution markets. We see continued growth in non-residential construction and industrial MRO markets, although at a slower rate than in 2007. Recent actions by the Fed and the outlook for a significant additional stimulus to the economy leave room for optimism. Thomas & Betts is well positioned to capitalize on improved market conditions when the stimulus initiatives do their job.

Looking forward, you can be assured that the fundamental foundation of what has made us successful in the past will not change. Our vision to be the brand of choice for the end user and the supplier of choice for customers will not change. Our value proposition will also not change. We will continue to deliver a broad, a deep one-stop shop of essential products and leading brands, quantifiably lower transaction cost and working capital needs for our customers, fast-cycle logistics and order driven flexible manufacturing, a well trained and well equipped sales team focused on pulling through sales and tailored marketing and customer training programs. As our customer seek out every advantage to maintain and improve productivity and efficiency, we believe that the value of doing Thomas & Betts will be even more apparent.

Our recent acquisitions further enhance our offering, our capabilities and our growth prospects. So what does this mean for our 2008 financial performance? As we noted in our release, we expect sales growth in the mid-single digit range for the full year 2008 with volume gains being a key driver in our base business. Acquisition should contribute an additional 20% to the top line. We also expect to again deliver strong earnings in our underlying businesses, as well as to benefit from the successful integration of the acquisition.

We are targeting earnings per diluted share of $3.80 to $3.95 for the full-year 2008. The biggest risk to achieving these results are risk facing every company in our sector. The potential negative impact of market uncertainty and tightening credit markets and volatility in commodities.

In summary, 2007 was a tremendous year for Thomas & Betts and we fully expect to build on this success in 2008. We have the products, the people and the focus we need to continue to create sustainable value for our shareholders.

Thank you very much for your continued interest and support of Thomas & Betts. I will now turn the call over to Ken Fluke to review our financials in more detail.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thank you Dominic, and good morning. 2007 was an excellent year for us with continued improvements in many key financial metrics. As Dominic mentioned, all of our businesses improved their profitability year-over-year, which allowed us to post record net earnings. Our consistently strong cash generation also improved in 2007, driven by the record earnings and continued excellent working capital management.

Before I go to more specifics about our performance, I want to remind you that we decided to divest the Lamson PVC and HDPE pipe operations and have accounted for these on a discontinued operations basis. This means that the results of these operations are reported on a net basis in the consolidated financial statements and are excluded from segment results. Unless specifically noted, all of my comments today will relate to continuing operations including our 2008 guidance.

Let me now turn to the financial highlights of the fourth quarter. Sales increased 24% on a year-over-year basis in the quarter; this increase breaks down as follows. 16 points from acquisitions, 4 points from foreign currency, 3 points from net volume and 1 point from price. In our key Electrical segment, which includes all of the acquisitions completed during 2007, sales increased 31% with 21 points from acquisitions, 5 points from foreign currency and 5 points from net volume.

The net 5 points of volume growth in Electrical segment was mainly due to growth in demand for industrial MRO products. As expected, commodity related price increases played a less important role in overall sales growth. Acquisitions contributed nearly $5 million to earnings from continuing operations in the quarter, but had a dampening effect on the company's gross margin, SG&A, earnings from operations and segment earnings when expressed as a percent of sales. Not having Lamson & Sessions for the full quarter, and acquisition related expenses of approximately $6 million were major factors to the low profitability when expressed as a percent of sales.

Integration activity was a lesser factor. Gross margin improved by 2 percentage points in the quarter to 31.7%. The improvement reflects the drop through of the higher sales volume and a more favorable mix. SG&A as a percent of sales was 18.4% versus 17% in the fourth quarter 2006. The increase reflects a $5 million charge for revised estimates for certain environmental site remediation as well as the impact of the acquisitions.

As a percentage of sales, earnings from operations improved to 13.3% in the quarter, despite the impact of the acquisitions and the $5 million environmental charge. The improved gross margin drove the increase. Net interest expense in the quarter increased $7 million over 2006, due in large part to the acquisition activity during 2007, which was funded by cash and increased debt borrowings. The effective tax rate was approximately 29% for the quarter compared to 13% last year. 2006 included positive net tax adjustments of $4.6 million or $0.08 per share. Net earnings from continuing operations were $0.84 per diluted share compared to $0.84 last year. This year's fourth quarter included charges of $0.05 for revised environmental site remediation, while last year included the benefit of $0.08 per share for the favorable net tax adjustments mentioned earlier.

Turning now to our full-year results. 2007 was an outstanding year for Thomas & Betts. Sales increased 14% to $2.1 billion; the 14% increase breaks down approximately as follows. Six points from acquisitions, four points of net volume, two points of price and two points from foreign currency. In our Electrical Segment, sales increased 17% with eight points from acquisitions, four points of net volume, three points of foreign currency and two points of price. The acquisitions contributed $5 million to earnings from operations with nearly all of it in the fourth quarter and nearly all of it coming from the acquisitions completed in the third quarter of last year.

When expressed as a percentage of sales, the acquisitions had a damping effect on total company results for the full year similar to that seen in the fourth quarter. Again acquisition related expenses and not having Lamson & Sessions for a full quarter were again factors. Gross margin improved for the total company year-over-year to 30.9% reflecting a favorable impact of higher sales volumes and improved mix. As a percentage of sales, SG&A was 17.4% roughly flat with 2006. 2007, and included $7 million of legal charge in the first quarter and an additional $7 million of expense incurred for revised estimates for a certain environmental site remediation, as well as $7 million of acquisition related amortization.

Net interest expense increased by approximately $9 million in 2007, primarily as a result of funding the acquisitions completed during the year. Net earnings from continuing operations were $3.13 per diluted share, including the legal, environment and acquisition related charges mentioned previously. Net earnings from discontinued operations were over a loss of $0.01 per diluted share, for both the fourth quarter and the full year.

Now, I would like to make a few comments about cash flow and the balance sheet. We again did an excellent job in cash generation. Net cash flow from operations increased 18% to $261 million for 2007, despite additional cash outlays related to acquisition activity. Strong operating earnings and improvements in our underlying inventory management drove the improvement. Major uses of cash in 2007 included $753 million of acquisitions, $133 million for the repurchase of 2.5 million shares of common stock and $41 million for capital expenditures used primarily to sustain and improve our manufacturing facilities.

Company ended 2007 with $811 million in total debt, a net increase of $423 million over the close of the third quarter. This net increase is the result of net funding required for Lamson & Sessions acquisition. As I mentioned during our October conference call, this funding was secured through an amendment to our existing credit facility. We also fixed the interest rate on a significant portion of this debt at approximately 5% via swapped agreements. Total debt-to-total capital was just under 40% at year-end, and we ended the year with $167 million in cash, which is not reflected in the above capitalization ratio.

Finally, a few comments on over 2008 guidance. First, we expect sales growth of approximately 25% for 2008, when compared with 2007. Acquisitions are expected to contribute roughly 20% to the sales increase, including the two deals completed in January 2008 that Dominic discussed earlier. Generally speaking, the absolute sales dollars from the 2007 and 2008 acquisitions are split evenly between all four quarters. The remainder of sales growth is roughly split between net volume improvements and foreign currency. Foreign currency will be more of a factor in the first half of the year, while net volume improvements are estimated to be more of a factor in the second half. Our EPS guidance of $3.80 to $3.95 is for continuing operations only. We have not provided an EPS forecast for discontinued operations, but we do not believe it will be significant, either favorably or unfavorably.

Also, we have assumed no impact from the sale of the pipe business in our guidance. EPS guidance assumes the following. Average shares outstanding of approximately 59 million shares and the effective tax rate of approximately 33%, this is up from the 30% in 2007 as anticipated higher U.S. income will put upward pressure on our overall tax rate. Net interest expense of approximately $45 million reflecting the impact of higher average net debt levels when compared with 2007. Corporate expense of approximately $50 million a quarter with the first quarter being a few million dollars higher due to the impact of recording share-based compensation expense. Acquisition related amortization of approximately $30 million split evenly through the quarters. Depreciation of approximately $60 million, and a similar amount of capital expenditures. Share-based compensation expense of approximately $15 million.

Also our guidance reflect the significant improvement in earnings from operations of approximately 30% to 35%. The dollar value of the improvement is roughly split 60% from acquisitions, 40% from the other businesses and corporate activities. The improvement in profitability for the acquisitions is heavily weighted towards the second half of the year, as most of the integration activity will have been completed by that time. Inclusive of amortization of intangible assets, the acquisition profitability as a percent of sales should be more in line with the total company's performance in the last half of the year.

And looking at the first quarter of 2008, we anticipate additional expenses of approximately $3 million to $5 million for acquisition integration activity, which will negatively impact first quarter earnings. Coupled with a higher effective tax rate and significantly higher net interest expense compared to the first quarter of 2007, we expect year-over-year EPS growth of less than 10%.

We fully expect to see the benefit from all the acquisition integration activity in the first half materialize as the year progresses. In closing, we are very pleased with our performance in 2007 and our outlook for the future. We are looking forward to another exceptional year in 2008. Thank you for your continued interest in Thomas & Betts.

I will now turn the call back to Tricia.

Patricia Bergeron - Vice President, Investor & Corporate Relations

This call is the property of Thomas & Betts Corporation, any re-distribution, re-transmission, or re-broadcast of this call in any form without the expressed written consent of Thomas & Betts Corporation is strictly prohibited. The telephone replay of today's call will be available through 12 o'clock midnight on Thursday, February 21, 2008. The numbers to access the replay is 201-612-7415. The account number is 9517 and the pass code 269488.

In addition, as always the recorded webcast is available on our corporate website www.tnb.com. Thank you. We will now open the call up for questions.

Question and Answer

Operator

Thank you. [Operator instructions]. Our first question is coming from Amit Daryanani with RBC Capital Markets.

Amit Daryanani - RBC Capital Markets

Thanks, good morning guys.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Good morning, Amit.

Amit Daryanani - RBC Capital Markets

Just had a quick question on the calendar '08 organic guidance of mid single-digit. A, do you have any pricing impact built into it, and also if you could just talk about what you expect across the three segments in terms of organic growth that will be helpful.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

The organic growth overall, is ahead of my comments, it is pretty well split between foreign currency and volume; there is no pricing assumptions in there whatsoever. The key thing there is that we don't expect commodity cost to also rise. Obviously, if they do, we will make the appropriate adjustments going forward, but in the guidance we don't have anything there. Looking at the overall underlying guidance as far as volume improvements across the businesses, I would say they are pretty similar between HVAC business and Electrical, that kind low single digits that we are taking about and they are probably a little bit higher though with the steel structures that really reflects more of the market dynamics for the distribution going forward.

Amit Daryanani - RBC Capital Markets

All right. And then one of the things, I think you have to talk about was, you expect continued strength on non-residential side, at least at this point. [inaudible] what you think in terms of your quotation activity, your sampling activity and the inventory of the distribution level? I mean are there any signs of concerns on those segments for us?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

As we mentioned, obviously the residential market is really bad and there is some spill over into the light commercial, but the activity in the larger project business or heavy construction is still pretty robust, particularly in areas like institutional, construction and the infrastructure projects as I mentioned in my comments of wastewater treatment, oil and gas, things like that.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Residential is not a huge component of what we do. So, it's more of a dampening impact at the overall growth rate assumptions that we have for '08.

Amit Daryanani - RBC Capital Markets

Al right. And then in terms of integration and severance charges, I think quantified $3 million to $5 million for Q1. Is there anything that would flow through the model in Q2 as well?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Nothing substantial. I mean the big activity really is in the first quarter, wrapped around the significant activity in closing of the four Lamson & Sessions distribution centers. Really that starts to dissipate quite dramatically after that.

Amit Daryanani - RBC Capital Markets

My last question, then I will hop off the queue after this. Could you just give me a little bit more details on the environmental charge and if you expect any follow-through charges in the next few quarters?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

No. I don't thing so. If there was anything substantial I would have highlighted them in our 2008 guidance. It's just in that first quarter.

Amit Daryanani - RBC Capital Markets

All right. Thank you.

Operator

Thank you. Our next question is coming from Christopher Glynn with Oppenheimer & Co.

Christopher Glynn - Oppenheimer & Co.

Hi. Good morning. Good afternoon.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Hi, Chris.

Christopher Glynn - Oppenheimer & Co.

Couple of questions. Obviously some concerns about the economy out there and may be some lumpiness in the different end markets. One thing, I noticed, particularly the third quarter you had 7% unit volume growth in the Electrical and non-resins really the strongest market there and in this quarter only the industrial is really called out… is driving that. So that seems like quite a little bit of [inaudible] anticipating a lot of lumpiness within the end markets and may be a different one showing strength from time-to-time in the quarters?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I really wouldn't say we are going to see a lot of lumpiness. I think you are going to see, as I mentioned in the previous... in Amit's question the growth will come out of the industrial, which we said is growing just not as quickly as 2007, but also the heavy construction is still pretty robust. So, I don't think you are going to see any lumpiness there. I mean it's hard to show a significant amount of lumpiness when our guidance is showing a pretty small net volume growth assumption for 2008.

Christopher Glynn - Oppenheimer & Co.

All right. Okay. And you kind of qualified where you stand in the price cost a lot right now. But several competitors have been talking about really resurgent impressive levels of commodity cost inflation. Could you just kind of react to that?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well I think we have a pretty good history of pricing according to commodities, I wouldn't expect anything to change there and of course, we have a real watchful eye on commodities, which for us as you are aware Chris is primarily steel price is the big one for us. So, we keep an eye on it and as it fluctuates or moves, we react appropriately, I think we have always done that, I would anticipate no change of that in the future.

Christopher Glynn - Oppenheimer & Co.

Okay. And then with respect to the trends throughout the year. What's behind the assumption that… I mean, I understand currency be a little stronger in the second half… in the first half from where we sit right now, what is the assumption behind sort of a pick up in the unit volume strength as the year goes on?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I think it's probably more a reflection of the seasonality that goes along with those businesses, more volume growth in the periods of time where they actually do most of their building out of projects, but again you are talking a relatively... you like, you highlighted earlier was a relatively small amount of net volume improvement, so we're not talking huge swings between the quarters.

Christopher Glynn - Oppenheimer & Co.

Got you. And then finally gross margin really looked excellent. Any moving pieces there, any benefits from the timing of the Lamson close or is that just...

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

It's more reflection of the net volume improvement that we had in the quarter and the mix for the businesses overall. I mean acquisitions themselves, we just didn't have, particularly the biggest one being Lamson, we just didn't have enough of it in the quarter to really make it to be a factor at all.

Christopher Glynn - Oppenheimer & Co.

Okay. So that presumably helped a little bit relative to the first half coming up?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I don't think so, I mean overall, you could see the whole acquisitions, the gross margin are dampening impact on the quarter for the company.

Christopher Glynn - Oppenheimer & Co.

All right. Okay. Thanks a lot.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thank you.

Operator

Our next question is coming from Meredith Taylor with Lehman Brothers.

Meredith Taylor - Lehman Brothers

Hi good morning. First have some questions about the contribution from acquisitions. In the quarter, it looks like it was closer to $0.06 versus what I've been expecting, which is around $0.02 and I think that you had indicated that it was going to be closer $0.02. Could you give us a little color on where specifically the contribution came from, the source of upside there?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

The key things, I guess Meredith, if you look at it, as I mentioned in my prepared remarks is that significant amount of the profitability that happened in the quarter were really from the acquisitions we did in the third. I mean, Lamson really didn't contribute anything at all of significance in the fourth quarter. And as I said that should obviously change as we go forward here into 2008. But it was pleasing to see that acquisitions in the fourth quarter, the ones we did in the third contributed in the fourth and it was in line with what our expectations were.

Meredith Taylor - Lehman Brothers

Okay. You talked a better mix in the Electrical business, were these newly integrated product lines contributed to the mix or was that more of the core business.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I would say that the new products were a tiny bit of the mix, but nothing major there Meredith.

Dominic J. Pileggi - Chairman & Chief Executive Officer

It should be around of a round [ph].

Meredith Taylor - Lehman Brothers

Okay. What would then core then, can you give us a little color on what's contributing to the mix?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well, we do have a pretty broad line of products, but as we mentioned, it was primarily the industrial and heavy construction projects that we are driving it. So it is the products used in those product lines. And remember also as Dominic mentioned that, if you look at steel structures, it was on the high end of what we see as a normal range for profitability. So had a… from a year-over-year perspective, that help too and you can even see the performance in HVAC was quite strong in the quarter and that obviously was helpful too. So those will be part of the mix kind of just mentioning that we had was cost not just electrical but also in all the businesses.

Meredith Taylor - Lehman Brothers

Okay, great. Just closing down on acquisitions, how should we think about the appetite for acquisitions in '08, you have a lot in your plate in terms of integrating the ones you’ve already done, [inaudible] more?

Dominic J. Pileggi - Chairman & Chief Executive Officer

I'm sorry; I didn't get the first part of your question.

Meredith Taylor - Lehman Brothers

The outlook for additional acquisitions in '08?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

There is a lot of things to look at right now, but the valuations are a bit high right now, and I wouldn't expect anything significant in 2008.

Meredith Taylor - Lehman Brothers

Okay. Then just one last question on the utility business. You didn't... you've not been citing this last few quarters [inaudible]. I guess if you could just give us a sense of how things trended through the quarter in that end market, as well as giving us a sense of what the distribution versus transmission mixes that you have?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I don't have the split. I mean it's hard to actually say because some of the products go into both market. So it's really hard to say which one went to distribution versus the other side of the house for us per se. But I guess the key thing is some of the products that their utility that are more residential in type nature, they do have a dampening on their growth aspects because of what we saw on residential. But on the distribution side, as Dominic mentioned, is going to be very healthy for quite sometime and I expect we will see that as time goes on.

Dominic J. Pileggi - Chairman & Chief Executive Officer

One other thing we are... Meredith we are excited about company like acquiring Homac because our outlook for that utility distribution market is really going... we believe is going to be a good market for the long-term in spite of its temporary dampening from the residential market.

Meredith Taylor - Lehman Brothers

So what's Homac mix then between industrial and to more residential exposure?

Dominic J. Pileggi - Chairman & Chief Executive Officer

I don't know an exact number there. But I really couldn’t eventually guess on that umber at this point.

Meredith Taylor - Lehman Brothers

Okay. Well, that's helpful. Thank you very much.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Thanks.

Operator

Our next question is coming from Jeff Rosenbaum with DE Shaw & Co.

Jeff Rosenbaum - DE Shaw & Co.

Hi. I just had a couple of clarification questions on some comments you made. Did you say that you had $6 million of acquisition related integration charges in the fourth quarter?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Those are primarily on the chart that you will see that is attached to the press release that those are mostly amortization charges... acquisitions amortization charges. And there was a few million dollars roughly of step up inventory charges that hit the gross margin, but you would see that detailed on the bottom of that one chart that we attached.

Jeff Rosenbaum - DE Shaw & Co.

Okay. And also on your guidance for '08, the mid point is like $0.75 north of '07, you said 40% of that is organic and 60% of that is acquisition related, is that correct?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yeah, 60% of that improvement we expect to be coming from the acquisitions, the 40% is from the underlying businesses plus the corporate activities.

Jeff Rosenbaum - DE Shaw & Co.

Yeah, so just quick math. You reported $3.12 or $3.13 of earnings and if you add back sort of one-time related stuff not the acquisition and amortization, but most of the one time related stuff throughout the year, the $3.13 is really little bit north of $3.30. And then if you do that same math and you add $0.40... 40% of that $0.75 increment which is $0.30. You are basically guiding for organic EPS in 2008 of $3.45. So basically you're saying ... I don't want to [inaudible] I just want understand. You're basically saying that you expect organic EPS to grow ... $0.10 plus 3% or 4% in '08. Is that right?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I don't have all those. You've done more math there than I have in front of me, but potentially the 40% to clarify that would be inclusive of not having the charges that we ended up... that were more one-time in nature hopefully in the year, not repeating, you won't get to 2008 and then also looking at the underlying operating improvements from that point. Now, the other key thing about that is as a reminder, we're looking for relatively modest overall volume growth and, I think, if you look at the earnings drop through from that, it's more in line with what we've been seeing in the past from that similar type of volume improvement. So, I don't see anything different in the operating performance along those lines and the key thing for us is getting the acquisitions done as far the timeliness around the integration and then getting the performance where we believe that there will be here primarily in the second half of the year. Now those are the key things for us going into this year.

Jeff Rosenbaum - DE Shaw & Co.

Okay. And then just lastly, $30 million of acquisition amortization, there is no offsetting casual items. So that's just completely book related, nothing cash related?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yes. That's true.

Jeff Rosenbaum - DE Shaw & Co.

Okay. Perfect. Thank you.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thanks Jeff.

Operator

Our next question is coming from Jeff Beach with Stifel Nicolaus.

Jeffrey Beach - Stifel, Nicolaus & Co.

Good morning and congratulations on a great quarter.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Thanks Jeff.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thank you.

Jeffrey Beach - Stifel, Nicolaus & Co.

Can you discuss what you've been doing in the series of acquisitions you've made over the last six months in terms of integrating the Joslyn and the other Danaher acquisitions and whatever? Are you still going through integration where beyond what you are pointing out in the fourth quarter numbers that there is underlying integration charges and the other thing still occurring there? And then with the Lamson, there is amortization and it's sounds like a lot of integration charges in the first quarter but is… again outside of the non-cash charges is there integration that will go on past the first quarter next year?

Dominic J. Pileggi - Chairman & Chief Executive Officer

Jeff, if you recall with Joslyn and the other acquisitions you referred to is, we've integrated those basically as product lines into our company and we said they were... that would be minimal upfront, that's pretty much we've seen exactly what we thought we would get. The Lamson is the big acquisition. Now it's going to require some integration and as Ken said the biggest part of that is the integration of their four distribution centers into our logistics model going forward.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I mean Jeff, I think what you see more is... this is not per se, any integration one time charge to point out from what we've done in there. You'll see a little bit of flux in the business as it tries to get integrated into our culture, you see a little bit of... we like inventories being lower rather than higher and we're trying to get them on the same type of understanding of how we handle inventory. And I think you will just see more of that is just a general transition type activity happening here in the last quarter or so around those acquisitions. But there is nothing substantial to highlight as charges per se to go through all this. And quite frankly, even with the Lamson when they are relatively minor, like I said, we'll see the significance of that into the first quarter here of 2008, and after that, I mean, lot of that significant activity is pretty well behind us. So, we are going to come out of there and hopefully ramp up to these type of levels that we are expecting the ramp up should happen during the second quarter and hopefully we will exit the second quarter at the levels we expect that we'll see in the whole second half of the year.

Jeffrey Beach - Stifel, Nicolaus & Co.

Just as a follow-up, the environmental charges, can you tell us where they were in terms of segment, and as well as on the SG&A and cost of goods. And on Lamson, does that mean most of the corporate has gone that it was quickly eliminated here in the fourth quarter so that there is not a big bump in corporate going into the 2008?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yeah, that's probably a fair comment to say about the corporate type expenses. Those are relatively easy to address and they were addressed. To your other comment about environmental is pretty well from left over stuff that we have that's more not in operations, in other words, it's not in one of our existing current running operations, It's more of a legacy type site, and that's more just a reflection of when you have some better information available to you. In this case, we actually have some work done at a particular site that gave us better information thus far, we believe the requirements were to handle the site and we have to obviously make our best estimate and revise those accordingly and that's what's happened here.

Jeffrey Beach - Stifel, Nicolaus & Co.

And so the... that charge sounds like it's SG&A?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

It's SG&A, and it's in the corporate expense line and doesn't run to the segments.

Jeffrey Beach - Stifel, Nicolaus & Co.

Right, thank you very much.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thank you.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Thanks Jeff.

Operator

Our next question is coming from Sandy Goldman with Hartline Investment Corporation.

Sandy Goldman - Hartline Investment Corp.

Thanks [ph], in terms of the acquisitions, if we go out running 12 months, this is roughly approximately, from say mid '08, what kind of incremental volume in total would you pick up from these last acquisitions?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Sandy, the best way I can answer, this is Ken here, is that if you look at the acquisitions and I'm talking now the ones in '07 as well as the ones in '08 combined. If you take all of them, absolute dollar wise, the sales would be essentially flat per quarter, okay. So, look at the 20% year-over-year increase that will probably reflect somewhere just north of $130 million or so a quarter from acquisitions is what the sales should...

Sandy Goldman - Hartline Investment Corp.

Right.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Got it?

Sandy Goldman - Hartline Investment Corp.

Yeah. Dominic. If we go out again, I say… say 12 or so months from mid-year, what kind of incremental margin do you pick up from all the work you are entertaining now?

Dominic J. Pileggi - Chairman & Chief Executive Officer

That's hard to tell you right now Sandy, but we think, if you look at the products that we bought and where they fit in our businesses, we would assume that they should perform as well as Thomas & Betts product lines have performed historically. They are very good products, they are essential products in all the markets they serve. So our expectations are very positive.

Sandy Goldman - Hartline Investment Corp.

Then where are they now?

Dominic J. Pileggi - Chairman & Chief Executive Officer

Well, if you look at it Sandy, the charge [inaudible] only like 6% all in if remember right. And what we are saying is even with the amortization they will have to live with for sometime. We expect in the second half of the year to have margins that are more in line with the rest of the companies been performing well.

Sandy Goldman - Hartline Investment Corp.

Okay. Then lastly, would a slowing economy taking on the characteristics that you've described have any impact on the cleaning of any improvement in the acquisitions?

Dominic J. Pileggi - Chairman & Chief Executive Officer

If I understand your question, you are asking if the economy were to... put it down...

Sandy Goldman - Hartline Investment Corp.

A good bit more than you are projecting, would that have any adverse impact on the integration?

Dominic J. Pileggi - Chairman & Chief Executive Officer

I would say, no. As Ken said, the integrations, a lot of it are going right as planned and we said that they should be completed, especially major, should be completed by the second quarter of 2008. So, I would say no.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I would echo on that Sandy that they should perform as the underlying business will perform if there were some substantially different about the actual environment. In other words those acquisitions all play in the same markets that we do currently so...

Sandy Goldman - Hartline Investment Corp.

Right. So, then really just... the real leverage over and above which you discussed is, one there is a next economic upturn and you have a broader product mix, much more to offer your customer in a one-stop shopping.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Exactly, Sandy. When you look at, as I mentioned before, when you look at those brands and to our product line, if there is a downturn... an upturn as I said in my prepared comments that we believe that it will make us... we being a better supplier to our distributors offering them a broader line and they will realize better transaction costs because they will be able to get these additional products from the same supplier saving them.

Sandy Goldman - Hartline Investment Corp.

All right.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Significant [ph], as we said quantifiably significant better savings as well as get Thomas & Betts service levels which helps them with their working capital and the way we market full thing through, I think as distributors look more and more to save money and build efficiencies, we become much more... we look much better to them. And the other thing, we have gone for is as we exit the year '08 is we will be at a much... well most of the... hopefully the synergies will be running at a annualized run rate hopefully in the fourth quarter and then you've got a whole year of '09...

Sandy Goldman - Hartline Investment Corp.

So that's what I was... that's essentially the leverage I was talking about. The last quick, you made the comment that you didn't expect anything big in the acquisition front this year, clearly something happens with Leviton then you would amend your comment, correct?

Dominic J. Pileggi - Chairman & Chief Executive Officer

That correct, but there is nothing… there is nothing eminent with… noting changed.

Sandy Goldman - Hartline Investment Corp.

Right. Okay thanks very much.

Operator

Our next question is coming from Steven Gambuzza with Longbow Research Partners.

Steven Gambuzza - Longbow Research Partners

Good morning.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Morning.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Good morning, Steve.

Steven Gambuzza - Longbow Research Partners

I just had a couple of questions around some of the acquisition issues. What is the total amount of integration charges you referenced for Q1?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

$3 million to $5 million.

Steven Gambuzza - Longbow Research Partners

And those were cash charges?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yeah, mostly they would be, yes.

Steven Gambuzza - Longbow Research Partners

Okay. And then did you mention that… that you would, based on your current plans, you would expect the integration efforts would be substantially complete by the second, by the end of the second quarter of 2008?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yeah, that's correct.

Steven Gambuzza - Longbow Research Partners

Okay. So there will be another... there will be some amount of cash charges in that quarter as well?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

No, I don't think so. If there is… in our expectations, it should be relatively minor.

Steven Gambuzza - Longbow Research Partners

Okay. And then presumably in the second half of the year there will no longer be cash integration charges?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I mean, I am quite frankly expecting this first quarter and that's it.

Steven Gambuzza - Longbow Research Partners

Okay. What would you say would be the approximate amount of cost synergies you expect to achieve through these initiatives at Lamson?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well, maybe not just in Lamson, but overall the average, I mean the annualized savings rate probably just a little over $20 million a year and if you look at the year overall, we have probably about... we'll have about a third of them that showing up in our forecast for '08.

Steven Gambuzza - Longbow Research Partners

Okay. So this kind of investment will yield about $20 million of synergies. On an annualized basis, a third of which will be... are embedded in your guidance?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

That's correct.

Steven Gambuzza - Longbow Research Partners

And so there'll be kind of another $13 million, 14 million pickup in '09.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

As we move into '09.

Steven Gambuzza - Longbow Research Partners

As you move into '09. And what are the sources of these synergies. Is it primarily through consolidation of the distribution channel?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yes. That’s the primary driver. There's a lot of potential savings there.

Steven Gambuzza - Longbow Research Partners

So. It is like mainly reduced shipping costs or is the fixed costs associated with just having additional centers.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

It's all the above.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Yes. It's all of the above. The shipping costs from the plants to the facilities, the shipping costs from the facilities to the customer, it's the overhead rates, it's everything.

Steven Gambuzza - Longbow Research Partners

Okay. And would you expect then that the Lamson... I think you mentioned that Lamson and the other acquired businesses... when you exclude the purchase accounting charges should be operating close to segment margins by the end of the year?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

No. The key point there is inclusive of them, they should be.

Steven Gambuzza - Longbow Research Partners

Inclusive. They will be actually on an operating basis... will be operating above segment margins.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Yes. Well, I am not saying above segment margins, but they should be in that type of ballpark inclusive of those amortization.

Steven Gambuzza - Longbow Research Partners

Okay. $30 million of amortizations, so that means that excluding those, they're actually substantially more profitable?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

It's correct.

Steven Gambuzza - Longbow Research Partners

Okay. Your experience in operating Lamson in the fourth quarter of '07. How did that compare to your expectations in terms of the profitability and the gross margins?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Just as we've thought it would, pretty good.

Dominic J. Pileggi - Chairman & Chief Executive Officer

I think the key thing there, remember we only had them about six weeks so it's kind of hard to take anything away from that.

Steven Gambuzza - Longbow Research Partners

Okay. Thank you very much for your time.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Thank you.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Thanks.

Operator

Our next question is coming from Alex Rygiel with FBR Capital Markets.

Alex Rygiel - FBR

Thank you. Good morning gentlemen.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Hi, Alex.

Alex Rygiel - FBR

Two questions. First, maybe I missed this somehow. But did you quantify or could you quantify the one-time cash expense associated with achieving an overall savings of about $20 million per year with the LMS acquisition?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well, I mean the key think that's going to hit the income statement per se is only the $3 million to $5 million that I called out in the first quarter.

Alex Rygiel - FBR

Okay. And then... I think couple of different times in the conference call you were referring to power distribution. I always think of transmission, distribution and then the residential market being a subcomponent of distribution. Can you comment on just the transmission category and your outlook for that over the next year or so?

Dominic J. Pileggi - Chairman & Chief Executive Officer

The transmission category, we're talking about is our steel pole activity, our Steel Structure group, and as I said in my comments, we think that that's just an outstanding outlook for that business, going in a decade or two, should be extremely strong. So, and we said, we added capacity in that sector, so that... we think that... we have a very positive outlook on that market.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Alex I mean that... there's a tremendous amount of activity that would either and I would say in some fashion be ramping up in that particular market and echoing what Dominic said they should be very strong for sometime.

Alex Rygiel - FBR

And just on one of your recent acquisitions, the Homac acquisition. I think it's very wise to put capital back to work. But my understanding is that… that is an underground distribution connector that has pretty meaningful exposure to the residential market. Could you expand upon the Homac acquisition a little bit more?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Sure. I think it was Meredith who asked the question about the percentage there, which as I said I don't have in front of me, but it is underground, they are the industry leader in the underground connector segment and we believe that the utility market you have to look at that in a longer-term. That's a company that has an outstanding reputation. It's one that would meets our criteria and one we have looked at for a long time and when the opportunity came to acquire it, we took advantage of it. I think that's going to pave long-term... real long-term benefits to our company.

Dominic J. Pileggi - Chairman & Chief Executive Officer

And Alex, you are right. It does have some of that too but it is built into our 2008 guidance, there is significant opportunities putting that together with our other utility package, significant one. That was going to be a pretty good acquisition for us here as we go forward.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

And the trend in the future Alex is, as you know, is toward underground.

Alex Rygiel – FBR

Right. That's great, thank you.

Operator

Our next question is coming from Mario Gabelli with Gabelli & Company.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Hi, Mario.

Mario Gabelli - Gabelli & Company

Hi, Dominic. How are you and Ken?

Dominic J. Pileggi - Chairman & Chief Executive Officer

Good.

Steven Gambuzza - Longbow Research Partners

Just a filling a couple of this [ph] like everyone else is doing. How much of your $811 million of debt is floating?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

The significant portion actually is all fixed because we did some interest rate swaps agreement. Those are actually fixed for various periods somewhere between three and five years.

Mario Gabelli - Gabelli & Company

Yes, no problem. Thank you. The second part of this in looking at financial engineering, besides from... can you kind of prioritize your use of cash flow in '08 which you think would be like if you want to kind of... you got CapEx, dividends, stock buyback and acquisitions and reduction of debt?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

I think Mario. I don't think we are going to behave any differently than we have. I think we are obviously great cash generators and I think we are pretty good cash managers. Our debt is a little higher than we use to, obviously, because of the acquisitions we've made.

Mario Gabelli - Gabelli & Company

Yes, by it is only one and half turns.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

That's right. And we also says we don't see anything significant on the horizon in acquisitions in 2008. So if we don't find an opportunity to put that cash to good work, I think we will find a prudent way to return it.

Mario Gabelli - Gabelli & Company

Yes. Looking at financial engineering [ph] reverse, everybody talked about acquisitions, but at some point of the time in the past, you talked about taking your structured business putting Leviton it into that structured business and spinning that up for shareholders. Is there anything that precludes Leviton from being put into another asset and monetized in that fashion?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well, we really don't know. Lot of legal opinions due there, but we really don't know.

Dominic J. Pileggi - Chairman & Chief Executive Officer

I would thing not to [ph] not preclude us from doing that.

Mario Gabelli - Gabelli & Company

Yes, Okay. I just always had to ask my Leviton question. Watch Philips buying Genlyte, and I see a lot of non U.S. companies coming into the U.S. and there is a great deal of pressure on building owners like everywhere to go green, what happens if you accelerate the green movement interior to buildings? Does that add more value per square foot on what your products are sold at for, whatever installation?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Well, we are not in the... if you think of lighting companies and things like that, but we are very...

Mario Gabelli - Gabelli & Company

The whole electronics infrastructure, the reduced energy down the road in terms of stuff that leverage--.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Any time a building is upgraded or rearranged or reconfigured that's opportunity for most of our core products whether they are the construction or maintenance products, Mario. So the answer is it would have an overall positive impact on our products. But it is not our core business.

Dominic J. Pileggi - Chairman & Chief Executive Officer

On HVAC too, probably a little bit benefit and I guess, you can almost weave some of the steel structures, what they're trying to do there... they are using some of that to optimize their energy outputs I guess.

Mario Gabelli - Gabelli & Company

Yes, that's great and I'll dig up who still owns the last, [inaudible] follow up on your acquisitions comments earlier, thanks.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Okay. Thanks.

Operator

Our next question is coming from Satish Afavel [ph] with AFA Capital.

Unidentified Analyst

Good morning.

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Good morning Satish.

Unidentified Analyst

How are you?

Kenneth W. Fluke - Senior Vice President & Chief Financial Officer

Good.

Unidentified Analyst

I was wondering if you can comment little bit more on the commercial construction market. I believe you said that the current pace of activity seems okay as far as you can tell, but my question is more related to what you are seeing on the ground in terms of your sales force gearing about new projects that are either on the drawing board or that are being proposed. How do they look now?

Dominic J. Pileggi - Chairman & Chief Executive Officer

Okay, well you're correct, I did say that the current situation is still healthy for the non-residential, particularly in infrastructure projects and institutional projects and we have seeing nothing that would dissuade us from thinking that should continue. We haven't seen any kind of cancellations or pullback or anything like that so our current visibility would tell us that that should remain strong, those projects as you know Satish have pretty long tales to them and we haven't seen anyone pullback on any new projects as of yet.

Unidentified Analyst

Okay. That's good to know, thank you.

Operator

We have no further questions at this time, I would like to turn the floor back over to management for any closing comments.

Patricia Bergeron - Vice President, Investor & Corporate Relations

Thank you for joining us today. Bye.

Dominic J. Pileggi - Chairman & Chief Executive Officer

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen this does concludes today's teleconference. You may disconnect your lines and this time, we thank you for your participation.

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