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Carlisle Companies, Inc. (NYSE:CSL)

Q3 2012 Earnings Conference Call

October 23, 2012 08:00 a.m. ET

Executives

David Roberts – Chairman, President & CEO

Steven Ford – CFO

Analysts

Pete Lisnic – Robert W Baird

Glenn Wortman – Sidoti & Company

Ivan Marcuse – KeyBanc Capital Markets

Matthew McConnell – Citigroup

Neil Frohnapple – Northcoast Research

James Kawai – SunTrust Robinson

Operator

Good morning and I would like to welcome, everyone, to the Carlisle Companies Incorporated Third Quarter Earnings Conference Call. (Operator Instructions) After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you, Mr. David Roberts, Chairman, President and CEO of Carlisle Companies, you may begin your conference.

David Roberts

Thank you, Bradley. Good morning, and welcome to Carlisle’s Third Quarter 2012 Conference Call. On the telephone with me is our CFO, Steven Ford; our Chief Accounting Officer, Kevin Zdimal; and Julia Chandler, our Treasurer.

On our website, you will find slides for today’s conference call. Those slides detail our performance in the third quarter. Before I go through a detailed review, I want to mention that we had a record-breaking quarter, both in sales and earnings. Our overall sales growth was 5%. We were able to generate 5% growth, despite many of our breaking customers adjusting their distribution channel inventory downward.

On 5% revenue growth, we generated record earnings with our earnings growing at 35%, producing third quarter EBIT margins of 12.2%. Included in our $111 million of EBIT is a $7 million charge that we took, as we began lean down our FoodService manufacturing and distribution center footprint.

Cash flow was also a highlight in the third quarter. We generated $136 million in free cash flow, converting our earnings into cash at a rate of 195%, enabling us to reduce our debt by $125 million. We’re obviously very pleased with our performance in the third quarter and in the face of a few markets that were slowing, we thought it was very good performance.

Let’s now turn to the presentation and as we do, please review Slide 3 titled Forward-looking Statements. The slide details the risk associated with making an investment in Carlisle. I encourage everyone considering an investment to read the information contained on that slide and refer to our SEC filings before making any investment decisions.

Let’s now turn to Slide 3, where we find a summary of the companies’ overall third quarter performance. Quarterly sales were $910 million, up 5% over 2011. Four percent, or 34% of our growth, came from acquisitions of PDT, Tri-Star and Hertalan. Our PDT acquisition anniversaried in August. Going forward, we will have a PDT apples-to-apples revenue and profit comparisons on a year-over-year basis. As a reminder, we’ll also anniversary the sales and profits of Tri-Star at the end of November.

Organic sales of CIT remain strong, growing at 21%. FoodService grew 3% organically, Construction Materials and Transportation Products grew 1% organically. Brake & Friction saw a negative growth, as our customers leaned out their inventory in their distribution channels.

FX had a small negative impact of 60 basis points on our sales. On those sales, we generated tremendous leverage growth, with EBIT growing 35% to $111 million. Our EBIT margins were up 280 basis points to 12.2%, as a result of CLS savings and price realization. The $111 million in EBIT is inclusive of a $7 million restructuring charge we took to reduce the cost structure at FoodService.

As I mentioned earlier, quarterly cash flow was outstanding. Cash flow was $136 million, up 50% or $45 million over 2011. Our year-to-date cash flow conversion rate is 103%. Third quarter EPS was up 27%. EPS didn’t grow at the same rate as EBIT, due to an increase in our tax rate.

Slide 4 is a sales bridge for the quarter. As you can see, acquisitions contributed 3.9% to our growth, price contributed 2.8%, while volume was negative 1.5%. FX had a 60 basis point negative impact.

Looking at organic growth by segment, Interconnect Technologies was up 21%, as the aerospace markets continue to be strong. FoodService was up 3%, as we implemented much needed price increases matching the price to cost curve. While Construction Materials and Transportation Products were up 1%, as both businesses experienced lower growth as a result of the drought conditions many regions of the U.S. encountered in the summer months. The Brake & Friction business was down 10%. As I said earlier, our customers worldwide are adjusting their inventory levels.

Turning to Slide 5, which details our margin bridge for the quarter. As shown on slide, EBIT margins grew 430 basis points through net price of raw materials, 80 basis points from COS savings, while volume was negative 40 basis points. The restructuring in FoodService, plus the other costs, negatively impacted profit margin by 190 basis points. Summing these items, margins improved 200 basis points over the third quarter of 2011.

On Slide 6, we begin reviewing the individual business segments. Starting with Construction Materials. Sales growth at CCM was 3%, with three months of Hertalan and one month of PDT contributing 2% of that growth. Price added 4% and lower volume negatively impacted sales by 3%. The volume was down in roofing membranes, while our polyiso insulation was flat with 2011. This business is still feeling the effects of the mild first quarter and the drought in the second and third quarters. Despite slower sales growth, EBIT was up 32%. We earned $80 million, compared to $60 million last year. EBIT margin increased 380 basis points to 17.4%.

In Slide 7, you will see continued progress being made in the Transportation Products segment. In aggregate, our sales grew 1% in the quarter. We continue to see strength in our High Speed Trailer and Power Sports businesses growing at 18% and 9% respectively. Power Transmission and Ag and Construction grew 3%, while Outdoor Power Equipment continues to be impacted by the drought, where sales were down 22%.

What is selling at a very good rate, are our semi-pneumatic tires that are used on planters and seeders and this is in the Ag segment. Despite the fact that crop yields are down in many regions of the country, grain prices are up. Recent grain prices are offsetting yield declines, affording the opportunity for farmers to continue to invest in new equipment and that’s what we’re seeing with our tire sales.

EBIT in the quarter was up 164%, from a $10 million loss in 2011, to a profit of $7 million this year. Driving this increase are higher manufacturing efficiencies at Jackson and lower material cost. As I look forward to the fourth quarter, we do expect a small charge of approximately $500,000 to flow through the Transportation Products income statement, as we complete the shutdown of our Buji, China, power transmission plant. The products that are currently being manufactured in Buji will be transferred back to our Springfield, Missouri and our Fort Scott power transmission facilities.

Slide 8 details the results of Brake & Friction business. Sales were lower by 12%. When FX is excluded, sales declined by 10%. Of the 10% decline, 2 percentage points of the decline related to sales of non-profitable businesses that we exited last year.

In the Construction Equipment braking business, sales declined 20%. Offsetting those declines, was a 4% increase in Mining and a 10% increase in Ag. All regions of the world show signs of weakness. EBIT was down 22%, but we still generated EBIT margins of 16.8%. I do think braking margins will decline in the fourth quarter proportionally to volume declines.

Interconnect Technologies is detailed on Slide 9. Sales grew 52%, with Tri-Star adding $23.2 million, or 31%, to our growth. Organic sales remain very strong, growing 21%. The aerospace market continues to enjoy very good demand, growing at 25%. We did see some slowing in military and test and measurement markets, down 2% and 15% respectively.

As you may recall, military sales were down 20% in the first quarter, 8% in the second quarter and 2% now in the third quarter. I think we’re seeing a leveling off of military spending at this rate of decline, as it’s slowed over the last three quarters.

EBIT increased 72% from $11 million to $19 million in the quarter. The acquisition of Tri-Star contributed $4 million in EBIT earnings. EBIT margins in this business were16.4%, putting us well ahead of our 15% target.

Slide 10 provides color in the FoodService segment’s performance in the third quarter. Sales were up organically 2% and without the impact of FX, sales were up 3%, driving that growth was selling price increases of 6%. Demand for the products were lower in the U.S. and Europe in the quarter, forcing volume down 3%. Our focus in FoodService over the next 12 months, is on margin improvement. While revenue generation remains extremely important, we are not looking to sales volume growth to drive margin improvement. We plan to accomplish margin growth in the low to mid teens by streamlining the operations of FoodService.

Our FoodService restructuring got underway late in the third quarter, with a $7 million charge taken as we prepare to exit three facilities, in a new product development project that we determined could not hit our profit targets, once introduced into the marketplace. We feel more comfortable daily that this business will reach double-digit EBIT margins over the next 12 months.

This concludes my review of the business segments and I’ll now turn the meeting over to Steve, who will review our balance sheet, cash flow statements and working capital slides. Steve?

Steven Ford

Thanks, Dave. Good morning. Please turn to Slide 11 of the presentation. We currently have $430 million of availability under our credit facility, an increase of $125 million from our availability at the end of the second quarter, as we generated cash and reduced our borrowings in the quarter. Our balance sheet remains strong with debt-to-capital ratio of 25% and a debt-to-EBITDA ratio of 1.1. We remain well positioned for future growth.

Turning to Slide 12, our cash flow from operations for the quarter was $169 million, a $64 million improvement from the third quarter 2011. As Dave noted, we generated $136 million of free cash flow in the quarter, for a conversion rate of just under 200%. For the nine months ended September 30, we have generated $230 million of free cash flow, for a conversion rate of 103%, a very strong performance in light of our seasonality. We expect our strong cash generation to continue in the fourth quarter.

Turning to Slide 13, our average working capital as a percentage of sales for the quarter, was 22.1%, as compared to 21.5% for the third quarter 2011. We remain committed to improving our management of working capital and achieving our long-term goal of 15% of sales, with a particular focus on inventory turns.

And with those remarks, I’ll turn the call back over to Dave.

David Roberts

Thank you, Steve. Bradley, would you open the floor for questions now, please?

Question-and-Answer Session

Operator

Yes, sir. (Operator Instructions) Your first question comes from the line of Pete.

Pete Lisnic – Robert W Baird

Good morning, gentlemen. I assume it’s me.

David Roberts

You’re up, buddy.

Pete Lisnic – Robert W Baird

Thanks. I guess, Dave, first question. As you look to the quarter and some of the slowing we’ve seen here in the third quarter rolling into fourth, can you give us a view on how this evolves into the fourth quarter? You’ve given us some guidance in that last slide of the presentation, but as we roll into 2013, what’s your view on how this plays out for each of the businesses?

David Roberts

Sure. Pete, we just got a preliminary look at the plans for next year and every business is forecasting growth. I think what you’ll see, is the braking business, I think, will be off in the fourth quarter and probably the first quarter, but I think they feel a little more optimistic once they get through the first quarter, that they’ll start to grow again.

Honestly, the Construction Materials business, we’re, I guess, semi-guarded by the start in October. We had a pretty good start to the quarter in October. So I don’t know if we’ve had a little bit of rain and we’re starting to see roof leaks, people are getting ready for winter, but there appears to be some activity that we weren’t seeing during the summer months in the Construction Materials business.

Transportation, I think Ag will still drive growth there. I think Power Sports will do very well. I think the one down market that we have is in our Outdoor Power Equipment. And my guess, is that will continue to be soft. We’re through the season for basically riding lawn mowers and I think what we’ll have to do, is wait and see what happens next season now. But I think that all in all, all those segments, with the exception of Outdoor Power Equipment, looks okay.

Pete Lisnic – Robert W Baird

Okay. That is very helpful. And then, I guess more short term, how you feel about your own inventory levels in each of the businesses? Are there significant production cuts that we should be thinking about here in the short term, to match what you’re seeing from some of your OEM customers, for example, in the Brake & Friction business?

David Roberts

Yeah. We have – over the last three months, we’ve taken about 600 employees out of the operation, primarily temps, to try to adjust our inventory levels. We have had, even during the third quarter, we had some, what we call plant outages. So we’d end up shutting down a plant for a week or take overtime out, or whatever it might be, to reduce the inventory and we’ve been working the inventory down. I don’t see us having a dramatic shift in what we end up doing, perhaps other than the braking business, than what we did in the third quarter.

Braking business, I think, we’ll still – we’ll probably end up taking a week out of November and perhaps a week out of December around the holidays, to try to reduce our inventory there. I would expect that margins in the braking business will – they’re not going to be in the 16% range, but I think they’ll certainly be above 10% in the fourth quarter, unless volumes really just fall off a cliff, but we haven’t seen that at this point.

Pete Lisnic – Robert W Baird

Okay. And then, last question, just on margins again. The Construction Material is strong in the third quarter, strong in the second as well. Can you maybe comment on sustainability of that margin, as fourth quarter is seasonably slow, but as we look at 2013?

David Roberts

Right. The best thing that we’ve seen coming out of the Construction Materials business, is that all the competitors remain very disciplined. We’ve had a little bit of margin degradation in the TPO area. EPM seems to be holding up and insulation seems to be holding up. So we’re again, cautiously optimistic about being able to maintain those margins going into next year.

Pete Lisnic – Robert W Baird

Okay. Perfect. Thanks for your time and help. I appreciate it.

David Roberts

You’re welcome.

Operator

Your next question comes from the line of Glenn Wortman.

Glenn Wortman – Sidoti & Company

Good morning.

David Roberts

Good morning, Glenn.

Glenn Wortman – Sidoti & Company

Yeah. Can you just give us the latest breakdown in your Construction Materials business between new construction and replacement? And how do you see the new construction piece of the business playing out over, say, the next six months to 12 months?

David Roberts

Yeah. Glenn it’s about the same as it’s been, anywhere from 80% to 85% reroofing. But we’ve seen increased activity in new construction over the last quarter. I think we’re feeling a little more optimistic about new construction next year. Now, I don’t think it’s going to get to a point where it’s 50/50, but I think we’ll see growth in new construction. And I would expect that once we get through this winter, depending on how wet the winter is, certainly, the reroofing business will remain relatively strong.

Glenn Wortman – Sidoti & Company

Okay. And then, just on pricing, you talked about Construction Materials, can you talk about maybe the pricing environment for your other businesses?

David Roberts

Yeah. We have had no issues with pricing in any of the businesses. Like I said, we raised prices in FoodService. I think we were behind the curve with our price increases there over the last couple of years. We had a 6% price increase there. I think effective price out of that is probably going to be, like every business, maybe half of it. But I think that all in all, the pricing environment still remains rational I guess.

Glenn Wortman – Sidoti & Company

Okay. And then, the last, I’m sorry if I missed it, but why the strong – I understand maybe the fourth quarter is seasonably weaker, but why the strong sequential margin degradation in Brake & Friction? So you’re talking about maybe somewhere closer to 10% in the fourth quarter. Can you just maybe go over that?

David Roberts

Yeah. I think it might be a little better than 10%, but probably – 10% is probably a good number to use just from modeling. I think there’ll be less volume in the fourth quarter. Fourth quarter is – well, traditionally we had one year with the Hawk acquisition, but it’s traditionally a lower volume quarter for us, primarily because as you get into the, particularly, the December holiday period, most of our customers will close down for a week for maintenance and other things that they perform. So we just generally have less volume that we ship. And then, I think this year, they’ll probably do the same and it might occur in November and December. So I think it’s just the volume that’s flowing through to – our customers are asking for.

Glenn Wortman – Sidoti & Company

Okay. Okay. Thanks for taking my questions.

David Roberts

You’re welcome.

Operator

Your next question comes from the line of Ivan Marcuse.

Ivan Marcuse – KeyBanc Capital Markets

Hey, guys. Thanks for taking my questions.

David Roberts

Good morning, Ivan.

Ivan Marcuse – KeyBanc Capital Markets

Hey. In the Transportation business, is this is – are the operations and everything as good as it gets right now? Or is there still room for improvement, meaning like there’s lots of scrap? And really what you need to see margins improved from going forward from here is just more volume? Or do you think that continued operating improvements will continue to roll through and you should see, on an annual basis at least, some uptick?

David Roberts

Yeah. I think that we’re never done with improving operating margins in the business. I think it can get better than what it is. It will – we’ve got some plans in place that will address some of the distribution issues that we have, some of the cost issues that we have and I think margins will just improve as we go. Now, with that said, I’ve said in the past, you’re never going to see this business that it’s going to be a mid-teens margin business, but it certainly, during the season, it should be pushing up nearest 10% operating margins.

In fact, if you look at the second quarter, it’s probably a good proxy for what the season should look like and I think we were 9.2% or 9.1% margin and we had a charge that flowed through. We would have been about 10% margins there. So I would think that on an ongoing basis, you would expect in the season this will be a – upwards of a 10% margin business and then, in the off-season probably half of that.

Ivan Marcuse – KeyBanc Capital Markets

Got it. And then, in Construction Materials you mentioned that – is there any cost associated with the iso plants that you’re bringing on and the consolidation of Georgia facility? And how much was that, if there was any?

David Roberts

Yeah. There were no charges for the factories at this point, they’re just being built. So there’s no cost associated with that. Did we have a – I’m – ask Steve here at the end.

Steven Ford

Toward $1 million, but not until the fourth quarter.

David Roberts

Yeah. The Georgia cost will occur in the fourth quarter and it’s about $1 million.

Ivan Marcuse – KeyBanc Capital Markets

Got you. And then, you mentioned in your release that there were some manufacturing adsorption, how much was that? And what business does that flow through? Is that in the Brake & Friction?

Steven Ford

Yeah. That was primarily in the Brake & Friction, Ivan. In light of the slowing there.

Ivan Marcuse – KeyBanc Capital Markets

Any idea of how much that would be? $1 million or $2 million?

Steven Ford

Yeah. It probably contributed to about between 100 basis points and 200 of the basis points decline.

Ivan Marcuse – KeyBanc Capital Markets

Got you. Great. Thank you for taking my questions.

David Roberts

You’re welcome.

Operator

(Operator Instructions) Your next question comes from the line of Matt McConnell.

Matt McConnell – Citigroup

Hi. Thanks for taking my question. Could you quantify the price cost in Construction Materials? How much did that contribute to the margin? And then, maybe give us a sense of whether that’s anything recent on the price side? Or whether that’s all from prior increases?

David Roberts

Yeah. It’s – and I’ll let Steve talk to you about what the impact was, but there had been no price increases that have flowed through over the last quarter. So what we’re seeing is really the effect of price increases that we implemented, actually in 2011, a little bit in early 2012, but prices have been relatively stable since that point. You want to...

Steven Ford

Yeah. It was about a $25 million net benefit.

Matt McConnell – Citigroup

Okay. Great. Thanks. And with the droughts pushing out the reroofing, I would imagine that doesn’t eliminate the need to do reroofing? So is there any way that you can talk about pent-up demand there? Is that something that you expect to see released, if we do get some weather?

David Roberts

Yeah. And I don’t think there’s any question – I don’t what the dollar volume is. We were up 41% in the first quarter and 14% in the second and I think that set a really high expectation, both internally and externally. I don’t think we can grow at those rates consistently, but certainly, as the weather becomes wet, it will drive roofing demand and we’re planning on growth in the 5% to 7% range in that business over the next year or so.

Matt McConnell – Citigroup

Okay. Great. That’s helpful. And then, on Brake & Friction, you mentioned expectations for probably two tough quarters and then, increases after the first quarter of 2013. Is that based on order schedules from your customers? Or what kind of visibility do you have there? And what’s the basis of that outlook?

David Roberts

It’s primarily conversation with the customer. What they’re saying, is that the inventory, or their channels got bloated with inventory as they were pumping inventory in the channel. They thought that it would take anywhere from three months to six months to work that inventory off and then, the order patterns would begin again. And this is not just with one of our customers, with a number of our customers, have said the same. So that’s why we’re talking probably first quarter next year and then, we’ll start to see some activity, or upward activity, in the business.

Matt McConnell – Citigroup

Okay. Great. Thanks very much.

Operator

Your next question comes from the line of Neal Frohnapple.

Neil Frohnapple – Northcoast Research Partners

Hi. Good morning, guys.

David Roberts

Hey. Good morning.

Neil Frohnapple – Northcoast Research Partners

Dave, you just mentioned 5% to 7% growth in Construction Materials next year. Are you – is this driven by increased quoting activity that you’re currently seeing? Maybe just some puts and takes there? A little bit more granularity?

David Roberts

Yeah. It’s, like I said, we’re starting to see some new construction activity that is quoted and frankly, we think re-roofing will come back. And with re-roofing back and a little bit of new construction, we should be pushing in that 5% to 7% range.

Neil Frohnapple – Northcoast Research Partners

Okay. And I see one of your competitors announced a 5% increase for polyiso for January 1. Are you guys seeing raw material costs rise for your polyiso products? And will you plan to try to get price early next year? And also, could you just give us a sense of any plans to get additional pricing for membranes in 2013?

David Roberts

Yeah. Well, Steve just said, benzene continues to go up, which is one of the components of polyiso. But yes, as raw materials increase, we’ll have to increase the, certainly the price to our customer and we will do that as raw materials flow through. We do that consistently anyway.

Neil Frohnapple – Northcoast Research Partners

And then, finally, pertaining to FoodService Products, will you realize the full $5 million of annualized saving in 2013? Or should we look for a smaller amount for the year and expect you to run rate the $5 million number as we exit 2013?

David Roberts

No. I think that what you’ll end up seeing, is those facilities will be closed by the end of the year. I think all the costs will be flowing through by then and we should start to realize the savings almost immediately as we get into 2013.

Neil Frohnapple – Northcoast Research Partners

Great. Thank you very much.

David Roberts

You’re welcome.

Operator

Your next question comes from the line of James Kawai.

James Kawai – SunTrust Robinson

Good morning. Thanks for taking my question. Also, as a follow-up on FoodServices, 3% price, if we get half of that and then, you throw in maybe 1 percentage point from restructuring and it sounds like we may be getting to maybe 11%, 12% operating margins in 2013. Is that the ballpark? And then, what would be the next steps to hopefully get it up to that 15% that you guys have been targeting?

David Roberts

Yeah. I think that your number is probably good for early part of the year. I think you will see it grow as the year continues. I think overall, you might see 12% to 13% margins for the full year, with them starting in the 10% range, 9% to 10% range, at the first of the year and growing to the mid teens at the latter part of the year.

James Kawai – SunTrust Robinson

Great. That’s helpful. And then, Brake & Friction, I guess Caterpillar was out there saying, they’re going to take their inventories down by $3 billion throughout their supply chain. And then, that’s up from $2 million just a month ago. That sounds like a very dynamic situation. Can you maybe help us get some color around what areas they’re cutting back on? And any geographies or any further colors, so we know what to look for to make sure that the channel’s clearing?

David Roberts

Sure. It – what they’ve said is that, well Cat and other manufacturers have said, worldwide inventories were high and they’re taking it out of their worldwide inventory. I don’t know how else I describe it. We’re seeing the effect now, we saw it in the third quarter, we’ll see it in the fourth and we’ll probably see it in the first. But that’s about all I can tell you, relative to the inventory reduction.

James Kawai – SunTrust Robinson

Great. Thank you.

David Roberts

You’re welcome.

Operator

And there are no further questions at this time.

David Roberts

Okay. Well let me go ahead and close the call here. As our third quarter conference call draws to a close, let’s turn to Slide 15. The information contained on this slide will provide everyone of you an idea of what we see – how the fourth quarter is playing out. We project low double-digit sales growth for the full year. This is a slight change from our comments in the third quarter. We were talking about mid double-digit growth at the end of the second quarter call. We see braking business will continue to slow, as we’ve mentioned on this call. About half of our overall growth will be organic, the other half will come from acquisitions that we made over the past year. We are also planning for a year-over-year margin improvement in the fourth quarter, which I think will be comparable to the improvements that we had seen in the first three quarters.

Corporate expense will be approximately $49 million. D&A will be approximately $105 million, interest expense about $24 million and our tax planning rate for the year is 33.3%. Cash conversion is expected to exceed 100%, even though we’ll continue to spend the $135 million to $140 million of capital that we’ve talked about throughout the year. The capital investments we discussed during previous conference calls, as I said, will continue. The expansions at our CIT, St. Augustine aerospace wiring plant and our CBF Italian braking plant are basically complete.

Our polyiso plants in New York State and Washington State are well underway and should come online mid-2013, as we originally planned. Construction of our PVC plant in Greenville, Illinois, continues to be targeted as a startup date for the first half of 2014. So capital spending in 2013 will be higher than our normalized rate as well, which is normally about $75 million. We’re planning, at this point, to spend approximately $90 million, as we complete the projects we started as we get into 2013.

Wrapping up the third quarter, our performance in the quarter puts us squarely within reach of two of our strategic financial goals, our 15% EBIT margin goal and our 15% return on invested capital. We’ve got work in front of us to achieve our 15% of sales tied up in working capital, but we’ve got plans to move below the 22% level that we’re running at today. Strategic revenue goals are our biggest challenge as the economy softens, particularly in most of our markets globally. While revenue growth is important, we feel we can create shareholder value through EBIT margin growth, improvement of ROIC and a reduction of working capital.

While we saw a softness in a few of our markets in the third quarter, I don’t think this is a long-term issue. I think once the election is behind us, we’ll start to see the economy grow again. The softness we see in the assembly of construction equipment will take a bit longer to recover and that obviously, has an impact on our Brake & Friction business.

As we continue to lower our operating cost at FoodService, I think we all feel more comfortable that low to mid teen EBIT margins are very attainable in this business. And as we plan for 2013, we’re planning for growth in all of our businesses. As I said in the second quarter conference call, I expect 2013 to show single-digit revenue growth and allowing us to leverage that growth into strong earnings growth. Frankly, my view has not changed on that.

We have taken a number of steps over the past three years to improve our profitability and that was evident in our 14.2% second quarter margins and our 12.2% third quarter margins. I see this trend of double-digit margins continue into 2013.

With that, I’ll now close the third quarter conference call. I want to thank, everybody, for attending. I look forward to reviewing our fourth quarter and full year results in February of next year.

Bradley, you may now end the call.

Operator

This concludes the conference call and you may now disconnect.

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