milacron holdings\' (mcrn) ceo tom goeke on q4 2016 results - earnings call transcript
by：QY Precision 2019-12-17
Miralong Holdings (NYSE:MCRN) Etexecuesmac Jones-2016 earnings call at 8: 00 a. m. on February 23, 2017 Stom Goeke, vice president of Financial and Investor Relations- Executive Director Bruce Chalmers Sandquest, chief financial officer- Credit Suisse Michael\'s Oland-Robert W. Baird Brian Blanche Steve Barger-William Blair KeyBanc Capital congratulated and welcomed Milacron\'s financial performance in the fourth quarter of fiscal 2016. At this time, all the participants were listening. only mode. A question-and- An answer session will be held after the official speech. [ Operation instructions] As a reminder, the meeting is being recorded. I would now like to hand over the meeting to your Mr. moderator. Mac Jones, vice president of Financial and Investor Relations at Milacron. Thank you. You may begin. Thank you Melissa. Good morning, thank you for attending our earnings call for the fourth quarter of fiscal 2016. So far, everyone should receive a copy of the earnings press release distributed this morning. If you do not receive a copy, you can get it from our investor relations section on milacron\'s website. com. This phone is live webcast and a replay will be provided in the Investor Relations section of our website. During our conference call, we will refer to the earnings release supplementary slides posted on our website, which will also be part of the archive. On the phone today, my chief executive officer and chief financial officer Bruce Chalmers. Before we begin, I would like to point out that today\'s discussion will include According to the business environment we are currently seeing, the statements do include certain risks and uncertainties. Please refer to our press release and SEC documents for more information on specific risk factors that may lead to significant differences in our actual results with the projections described in today\'s discussion. Any forward- Our forward-looking statements made at this conference call are based on today\'s assumptions that we have no obligation to update them due to new information or future events. We will also discuss GAAP indicators at today\'s conference call. We believe that Measures recognized as accounting principles improve our understanding of our performance. Reconciliation of comparable GAAP financial indicators can be found in our earnings press release or as part of the presentation material posted on our website. With this in mind, I will transfer the call to Tom Gok, mirakon\'s chief executive. Thanks, Mike. Good morning, thank you for attending the Milacron 2016 earnings conference call for the fourth quarter. As mentioned by Mac, we have a slide show on our website to accompany the call, which includes other details of the comments made this morning. First, let me give a brief overview of our focus for the fourth quarter and throughout the year. I will then review the drivers of geography and the final market and make some comments on our portfolio before transferring the call to Bruce, bruce will perform on our financial position. Sales in the fourth quarter were $0. 289 billion. Annual sales are $1. 17 billion, in line with our expectations, represents 0. Growth of 4% year on year. We ended the year above the adjusted EBITDA guidelines cap with a price of about $0. 213 billion, which means that the EBITDA margin has increased by 10 basis points. Our adjusted net income for the year grew by 7. £ 6% for the whole year, our $0. Adjusted earnings per share for the quarter were $1. 51 year a 7. 9% increase. Our $60 million free cash flow generation has increased by $74 million over the previous year, proving our discipline in capital allocation and our company-wide focus on working capital Despite the weakness of the North American market in 2016, we performed strongly outside the US and experienced some real positive factors in our business. S. And some terminal markets and product lines. As industry recovers, we capture growth in North America very well. Go to page 4 to remind you that Milacron is the only plastic processing manufacturer with a major business in each of our core areas, also the only injection molding supplier with full manufacturing parts and service capabilities in the USS. We have experienced sustained monetary growth in three of the four regions, and most notably, India continues to maintain strong growth as we grow more than 20% compared to the previous year. As we expand our manufacturing capabilities this year, we continue to invest in the region. China and the rest of Asia have also achieved strong growth of more than 8%. This is largely driven by our hot business and we continue to be actively looking for new sales opportunities in the region. In Europe, our economy is growing more than GDP. 6%, because our equipment and hot runner business have achieved strong results this year. However, we have experienced a slow industrial market in North America, which continues to have a negative impact on our equipment business. However, our backlog is still serious, and we are carefully looking at whether there are signs of a sustained recovery in the North American industrial environment. From a terminal market perspective, the consumer goods, custom molds and construction industries have all performed strongly this year. over-year growth. This was offset by the decline in packaging and electronics. The auto industry grew in the first half of this year, but both before and after the U. S. economic crisis. S. election. The price of car orders for the first eight weeks of 2017 was stable, similar to the first half of last year. To conclude our review of 2016, we continue to build and invest in the consumables section of our portfolio. We have made solid progress in the consumables business. We grew 4%. over- Annual and consumables now account for 63% of the total investment portfolio. We have developed hot runner business in all regions. We continue to invest in our on-site service organization, which is a drag on revenue in 2016, but will pay dividends in 2017. As we expand our capabilities through e-commerce, we continue to work better with our customers Access Storage for 24/7 customers of all consumer goods. To the fifth page, we continue to push forward the transfer of European manufacturing to the Czech Republic. On 2016, we reached an agreement with the German engineering commission and started working hard in the second phase of the relocation. The first phase, if you remember, includes the relocation of our Belgian warehouse, our blow molding facilities, and A substantial reduction in SG &. We are currently planning to transition our German injection business to the same facility in the Czech Republic. So far, in 2016, our accumulated savings were $17 million. The total cost of $35 million is on track and by the end of 2018 we will continue to have 20% of our profits plus EBITDA profits. I am now transferring the call to Bruce for a more detailed review of our financial performance. Thank you, Tom. good morning. I will show you our financial performance in the fourth quarter and throughout the year, and then transfer the call to Tom to make his concluding remarks. As Tom mentioned, we are satisfied with the results that meet our expectations. For the sake of brevity, I will mention our fourth quarter and full The constant annual growth rate of the monetary base was 2015. With respect to our consolidated results on page 6, net sales for the fourth quarter were $0. 289 billion. This quarter fell 1% month on month, down 0 month on month. Growth was 4% for the whole year. Organic growth in the fourth quarter 9. In our MDCS sections 3% and 5. 9% of our fluid technology is offset by a reduction in APPT. The full- Annual sales are affected by foreign exchange headwinds. 5% and acquisition growth 1. 7%. The adjusted EBIT is $53. This quarter was $6 million and $212. £ 8 million for the year exceeded our expectations. Our balanced geographic and end-market mix provides good stability in an economic environment with headwinds throughout the year. Offset the weakness in North America, Europe, China and India, remained strong throughout 2016, in the fourth quarter and throughoutyear. From a terminal market perspective, consumer goods, construction and industrial machinery and custom molds achieved positive growth in the fourth quarteryear. Now, let me use APPT to take you through the three sections we started on page 7. APPT fourth quarter and full Annual sales fell by $12. 5% and 1. The 4% was driven largely by weak North American markets, partly offset by strong growth in Europe, India and Asia. From the end market point of view, consumer goods and buildings have performed very well in the current quarter and throughout the quarteryear. Cars dropped slightly throughout the year, but twice as much The digital growth that affected our fourth-quarter profit margin. APPT generates an Adjusted EBITDA for $20. This quarter was $2 million, $81. Full 6 million-year. In the fourth quarter, EBITDA was affected by a decline in revenue and a mix of cars. To our MDCS section on page 8, sales increased by 9. 3% and 3. For the fourth quarter and 4% for the whole year, respectivelyyear. Strong sales in the fourth quarter and throughout the quarter The year has been driven by the growing hot runner business in all major regions. Terminal market growth in packaging and consumer goods. This part of the adjusted EBITDA increased by 2. Quarter 5% and quarter 4. Full 9%- A good combination of core hot runner and related parts products has driven this year. Finally, in our fluid technology section on page 9, sales increased by 5. 9% and 0. For the fourth quarter and 8% for the whole year, respectivelyyear. Regional sales were driven by strong quarters in North America and China, which also provided growth for the region as a wholeyear. From the point of view of the terminal market, the growth of automobiles, consumer products and electronic products has been achieved. The adjusted EBITDA is $5. The fourth quarter was $9 million, $24. 4 million throughout the year. Cash Flow to page 10 The annual free cash flow is $59. 8 million. An increase of $74 million last year was driven mainly by working capital. Free cash flow before the restructuring was $0. 107 billion. As of this quarter, we had $0. 13 billion in cash and $0. 823 billion in net debt. Adjust EBITDA 9 times. Turning to page 11, as you can see in your recent announcement, we refinance our debt at the beginning of this year, which will significantly strengthen our capital structure and improve our future cash flow. We paid 7. 75% of the senior notes and reduced the interest rate on our regular loans from LIBOR plus 3. 25% from LIBOR plus. 00% and step down to 2. 75% when we achieve a net debt ratio of 3. 5x. Formally, this leads to an annual savings of $19 million in cash interest after tax. In addition, we extend our term of office until 2023. All expenses related to this refinancing are funded by operating cash flow. In order to hedge interest rate risk, we have revised the LIBOR of $ 2% of debt to about 0. 4 billion from 2018. Speaking of our outlook on page 2017, we recognize the recent momentum of North American industry and are optimistic that it will have a positive impact on our industry. However, we remain cautious as we expect this momentum to take some time to translate into orders Organic sales grew by 0 to 2% throughout the year. With the recent appreciation of the dollar, we expect about $27 million in foreign exchange headwinds this year, of which about 60% in the first half. When we make progress on low-cost planning, The end of our growth range will result in an EBITDA of $0. 219 billion, a high end of $0. 225 billion, and $212. 8 million a 2 in the previous year. 9% to 5. 7% increase. Free cash flow before restructuring is expected to be between $95 million and $0. 105 billion. As we look at the stage of the year, we expect sales and EBITDA in the first half to be flat compared to the previous year. I turned the phone back to Tom to hear his conclusion. Thanks Bruce. Page 2016 summed up a challenging year, but we achieved sales growth in three regions. We have created a lot of free cash flow. We have increased the backlog and made progress in manufacturing optimization plans. We look forward to the challenges ahead of us in 2017 and are confident that our diverse portfolio and geographic scope will continue to provide stable and growth opportunities for our business. We are optimistic about the industrial market and we believe that we will benefit from the slowdown in US economic growth. S. Sustained economic recovery. So you can give it to Q &. Thank you. Question-and- Thank you. [ Operation instructions] Our first question came from Julian Mitchell of the Credit Suisse Group. Please continue with your question. This is actually Lee sandquest from Julian Mitchell. Li. Good morning. Good morning, Tom. Lee SandquistAPPT ended this year\'s work with a slightly weaker margin in anticipation of the third-quarter conference call. However, many industrial peers noted that there was an improvement in potential trends in December. So, how is the APPT trend going throughout the quarter and January? As we described earlier on the phone, Tom GoekeAPPT has an choppy shipping pattern. So even though I would like to say that when we look into our pipeline, the business team says the demand is correct and we expect to convert from the pipeline to the order, despite the timing of these shipments, but we didn\'t start right until we partially updated the guidance this year. So we can see that the fourth quarter will really be similar to the third quarter, which we talked about in the previous earnings release. When we entered the quarter, something happened that affected the quarter. The first one is FX. The dollar has gradually appreciated, which has an impact on the entire business of about $3 million, and the dollar is appreciating after the election. Then the other is the pricing pressure we have predicted, and there is a lot of car shipments. If you look at the quarteron- The quarter car rose 30%, which is a very strong quarter for APPT, but it is one of the most competitive areas in terms of pricing, and it has had a significant impact on the quarter. Bruce chammerso at least a few weeks before the end of the fourth quarter, eight weeks in 2017, we saw an order pattern similar to the one in the first half of last year in APPT. Lee SandquistUnderstood understands that based on the company as a whole, does this order progress give you confidence that you can drop from 5 points in the fourth quarter to flat organic sales in the first half? Bruce in on silent Sith I mean, I think what we\'re saying is that a lot of the parts of these businesses are flat, the first half is basically flat, and the second half is picking up. I will pass it on to you. Thank you very much. You\'re welcome, Tom. Thank you. Our next question comes from the lines of Mike haroran and Robert W. Baird. Please continue with your question. Michael HalloranHey. Mike, Tom. Good morning, Mike. Michael HalloranSo just started, you know you guys are well aware when we listen to the prepared reviews that you guys don\'t expect any real improvement in the underlying environment, but in terms of sales, you expect some improvement in the second half of this year --over- Compared to what you saw in the first half, this is the foundation of the year. Can you talk from your point of view about why rhythm is so effective this year? I know you may get more restructuring benefits. So I understand on the basis of EBITDA why there are some slopes, but as you follow this year, may talk about the basis of sales and EBITDA? I think this is a residual effect in the United States. S. Mike slowed a little before the election and then a little after the election, which meant the first half. I would say, it\'s one of the customers in the United States. S. I want to say that the mood is better than that time, and if you look at business, the three regions have been well established and can go on, then in the after-sales market we discussed last year and last year about our investment in on-site services, we really lost productivity, which is a drag, Bruce, I don\'t know, $2. The cost of the sales reps we hire is more or less 5 million, they will become productive, we have started to see some of this productivity through the second quarter, q3 we are starting to accelerate, because every on-site service representative who has paid time on site is selling parts. I mean, basically they do the installation on site, which is related to our business. So we see this shift, we see this shift happening, but we won\'t be completely successful in the first half. This makes sense. So, why not stick to the second question, maybe point out something, why you are so confident in the after-sales market, what is your plan, just highlight some of the victories and confidence you \'ve achieved on this track, why do you see positive results continue to exist? The first is time management, billing hours. We can see from the perspective of how we allocate time and how we manage our sales field service staff, we get more sales time, and sales time is a drag along with parts. Second, we know that our ability will increase as we go out for a year. The other is that we have talked a lot about our parts indicators. We are like every fulfillment business ABCDE section, looking back last year, what we see is that in a category we call class C, class C is not very common, there are no parts on the shelf, we missed some business. The last part is that in terms of refurbishment and refilling, we have accepted quite a few orders, and the actual work will be completed in the first quarter from the fourth quarter to the first quarter, delivery began in the second and third quarters. Therefore, in the case of after-sales market business and equipment, all product lines are a little momentum. Michael HalloranAnd, then the last one, sounds generally stable, I was thinking about having some car reviews in the aftermarket, very stable and starting the new year, can you expand a little bit, how long have other terminal markets started tracking this year? If we were, Tom GoekeSo. Take a look and I will say that in terms of the equipment we are doing very well, our packaging is a bit soaring, which is high with product release and subsequent Speed packaging in the United StatesS. When repositioning our product line, Europe is a market where we are a bit sitting outside, consumer goods are doing well and continue to do well. India, I think we have solved almost any monetization issues and the order is really good. So I want to say that the last part is actually related to extrusion, and in the injection molding industry, the construction industry, this part is a little less. We \'ve been talking about this last year, and you know the donors of the building are the material guys, and at some point they have to go back to the market to expand capacity. You can only eat up for such a long time, and we see this happening in terms of renovation and reconstruction and new building installation. So it shows up to a large extent. What I\'m trying to say is that there\'s nothing better than that, so to speak, keep doing that in areas where tracking is very good. Thank you Tom, Michael HalloranVery has helped a lot. You\'re welcome, Tom. Thanks Mike. Thank you. The next question comes from the lines of Brian Blanche and William Blair. Please continue with your question. Good morning Tom, good morning Bruce. Good morning, Tom. Good morning, Bruce. Brian DrabHey, in terms of price, what do you embed in your forecast of 2017? Bruce Chalmers flat we have, you know we started this year and look at something similar to what we went through, about 1. Over the past two years, the price against the wind is 5%. As we enter the end of the year, we can see some incremental pricing in the fourth quarter, and the other one is worth about $3 million, and we really think that it is very similar to seeing the level of activity in the pipeline. So we have embedded the incremental pricing pressure we saw in the fourth quarter into 2017 assumptions. Brian de la Bush [indiscernible] That\'s why? About 18? Bruce chalmersey had about 18 people in the 18 th and 19 th quarters. Brian DrabOkay and the $3 million you just mentioned is an incremental headwind of $3 million? Bruce Chalmers Corey Brian drabok, just wanted to clarify, okay. Bruce ChalmersYes in our fourth quarter, given that we see a similar order model next year, we assume we will go through this situation again, so we have incorporated it into our assumptions Brian drabok was great and then just to clarify the interest expense, what was the cost of the interest rate swap, which offset the annual savings of $19 million? Bruce chammersin 2018 we didn\'t really participate in the exchange until 2018. So in the current period we run at a floating rate and in 18 years we lock LIBOR above 2%, so it runs just under 1%. The cost is 2%. The cost of Bruce Chalmers is also included. . . There is no extra cash out of Tom goesso . . . . . . Bruce chammerso, this is a simple mathematical equation, and we are going to pay an incremental interest cost of $4 million to $5 million in order to have a debt of 0. 4 billion. Is Brian DrabThat an increase of $4 million to $5 million? Bruce in on silent Sith Brian DrabOkay, so will the $19 million savings include that or $19 million of $2017, and then I should see it as an increase in interest spending in 2018? Bruce in on silent Sith Thank you, Brian Delak. What\'s in your forecast, so when you\'re going to reach 3 points. 5 times the lever? Bruce chalmersey will say that by the end of this year, we will deleverage in about half a year. So we will reach that goal sometime at the end of 2017. Brian drabok is great, and finally, I don\'t know if you can provide any updates to some of the new products we \'ve been talking about over the last few years? Tom GoekeYes, so in the case of a toe injection, according to the new toe injection, the system will start this month. This is for K- The Cup app, then we will see how much penetration we have on the entire product line, and I believe that will be evaluated based on our performance and cost, so it\'s all good. The application field attached to Klear Can. I know we \'ve been talking about it for a long time but actually, by the end of the first quarter, it\'s going to be put on the shelf, once it\'s put on the shelf, we will expect some reaction from it. I think there is another competitive product that has just been launched, which is actually good for the industry as people consider changing from traditional metal cans to transparent containers. So we should have some. In the case of q1 I think there will be some new information throughout the quarter once it\'s on the shelves. We get a promise from the brand that once it\'s on the shelves we can do it and they really don\'t want to leave before they go public. Brian drabget, okay. Thank you. You\'re welcome, Tom. Thank you. [ Operation instructions] Our next question comes from Steve bagel of capanke capital markets. Please continue with your question. Good morning, guys. Good morning, Tom. Steve BargerYou mentioned industry several times in your prepared comments, how much do you think your weaknesses in North America are caused by industry, what are your predictions for this year in this area Bruce chameswell, the industry we mentioned in our prepared comments. We are talking about the broader industrial market in the United States. S. Not any particular child. The department we serve. We have now assumed that the North American market will repeat, basically flat, 2016. We can see optimism, we can see momentum growing, but our assumption is that it will take some time to convert to actual orders, and we will start to see these orders at the end of the year, but they will really affect shipments by 2018. If we see time moving on you, we will definitely let you know on the next phone. Tom GoekeI will actually bid for confidence in capital expenditures. We mentioned on a previous issue that we have begun to see the version of the transformation and reconstruction, which is part of the confidence and ability to start spending to expand capacity. We also see that although the income has decreased, the number of machines has actually increased, but the smaller machines have increased the capacity, so in general, I would say this is a question of confidence in capital expenditure. Steve BargerSo industrial is more of a derivative for you, should we consider a wide range of capacity utilization as the right way to track how this can affect you? Tom GoekeIn plastic conversion Steve baglet. Can you remind us of the percentage of the installation base you have a service relationship now? I would like to talk about your efforts and progress in the sales or service being forced out and re-acquiring some of the services other companies may offer after-sales market opportunities? Tom GoekeSure, so we did everything, which is a repetition of the discussion, but just to get a benchmark, we did a study with Dean & Company last year. When CCMP acquired Milacron, they did their due diligence and had a very, very good understanding of the space. We went back to an interview that really targeted our industry in the injection, blow molding, extrusion and hard runner industries. In fact, what we want to accomplish is, what is the penetration rate, what is the barrier, what is stopping us, what we need to grow to reconfirm some of the things we are doing, and see how we move forward. One of the bases is that we have a penetration rate of just over 30% for our customers, so let\'s say that there is a third of the customers we serve. Then in the extrusion business, you will see that in the whole business, we have less than 5% penetration in Brand X, which will be our competitors. So when you think about this, it\'s a very big opportunity to come back and, as I mentioned, we \'ve been implementing it for a year and have the on-site service, the representative come back, the market capacity is larger because of the travel parts with this capacity. The second issue is that we talked about a number of issues concerning reconstruction and reconstruction. Therefore, in the case of customer choice, we will realize something and gain confidence. We have already started along this road. So this is the availability of parts, I mean when you talk about what is the key to our customers, the availability of parts, the pricing of parts, it has the ability to serve, where we don\'t, it is active rather than passive maintenance. This means that we have to gain a foothold in the streets that serve the after-sales market, and even this year, we are revising the Commission plan for the sales staff in order to pay the commission in the after-sales market. Traditionally, we paid for the sale of new equipment when bundling the equipment, and our current goal is actually to compensate not only the external team, but also the internal team, and the customer service team won the compensation. So we measure the amount of rfq, RFPs, and our winning rate, and as we can see from where we are, we are gaining momentum. It doesn\'t happen overnight, you take it out a week at a time, but that\'s where we are. So our competitors, our independent internet service providers, I don\'t know the percentage, but more than 50% of people may be the ones who are written, they may have been the original Milacron field service personnel who ended up doing their own work on site as independent contractors. In many cases, we actually subcontracted them because we couldn\'t do everything we wanted to do. But that\'s what our competitors are. They are independent service contractors. They are regional, for example, their relationship with suppliers and our customers, so this is our proactive goal. I\'m not sure if I answered your question. I think this is a good detail. Are there any of these independent contractors or competitors that are large in multiple locations or are they really scattered? Tom Gok has some renovation and rebuilding companies around the United States. S. They are in the range of $20 million and $30 million. As far as M & A is concerned, they are interesting because, as I mentioned, you are buying a customer base, your area. So you can buy positions in the transformation and reconstruction. As far as internet service providers are concerned, they are small groups and many independent people are actually more difficult to obtain. So what we\'re looking at right now is part supply, remodel, rebuild and regional business, because that\'s actually the way you start building relationships, and then we will have to work with more regional business technicians. We find that we actually have to develop our own, which takes time and we are trained in trade schools, junior colleges, community colleges. We have a relationship in North America and the United States. S. The University of Cincinnati that you see on campus, we actually start with the machine store and are trained in CNC programming and machine operators, and expanded that because we need to push the service text through it, because we also got them, like the pizza delivery guy, and the car mechanics, who have to be trained in the end. So we are creating a pipeline, and the problem with the pipeline takes about nine months to convert, however, if you can find someone in a certain area as you pointed out, they may be up and running in three months, but we\'re really cannibalizing competitors or Internet service providers The best luck we see is to train ourselves. Steve BargerRight also has a related issue, with the recent slide show platform saying that 35% of the installation bases are online for more technology-based diagnostics and parts ordering, do you have-do you think this is a very strong advantage, do you have a timeline to determine how to increase the percentage of the installation base online? Tom GoekeYes, I think we can report this in 2017. At the event in 2016, we really got everything up and running and a lot of old devices have to be updated to access. On the new side, we sell preventive maintenance packages throughout the life cycle. We have several important accounts but on a broad basis we are really in the early stages of it, and when we talk about the third device, it means that our third device is accessible online. We continue to put more and more equipment online as we reinvent the equipment on site, but what I want to say is quarterlyto- We can give you an update. I want to say that we have this platform now. We have a large number of big customers and I don\'t know if I can talk about it freely because there are good examples of their lack of internal technicians, they are moving from passive maintenance to preventive maintenance. Then from passive to preventive, they monitor using online equipment and arrange for our employees to enter their factory to work as planned. At the same time, they put their employees in training, but our customers are basically affected, which is the same as the industry. There is a lack of service in the industry, and the passive model is the most popular for internal technicians and real contacts. I would say that those who are a little progressive are moving towards PM mode and remote monitoring. So you\'re really retraining an industry. So that\'s where the challenge is, you have to get out of the passive, and I used to do the same, and under our online monitoring, I\'m arranging technicians, this is proactive or preventive. It\'s even a hard-to-understand sock for our sales staff, because they \'ve been through passive patterns for so many years, so it\'s really a good point, we will track this in the quarterly update. This is a very good point. Steve BargerYes, because in the end this should allow you to separate from some of the independent contractors you think, because they don\'t have access to the kind of data feed you\'ll get in preventive maintenance. Tom GoekeCorrect, that\'s right. those guys are not very responsive, right. So that\'s what we see. Steve BargerSo\'s last question is that from a bigger point of view, you have a long-term goal of 5% organic growth, and it is clear that, including the forecast of 2017, has been flat for the past few years. In fact, to what extent do you think you can drive yourself and within what time frame, and how much time do you think it will only take a loop to get to the polls? You have to be careful, Tom GoekeWhile, because it\'s all about time. So if you look at our regional growth, it\'s not too shabby and running well, it\'s actually a split between melting, delivery and equipment, so it\'s not really sitting on the shoulders of both. You will see the real start to gain traction and after-sales market and learn the motivation to drive it. So I would say, this is really the missing part of the whole thing, the missing part is the confidence in the United States. S. Sustained or sustained capital expenditure. As I said, this really drives the equipment business. It\'s in India, it\'s in China, it\'s in Europe. Europe\'s GDP is about twice that of North America or the United States. S. Especially the whole back. So, it\'s a bit, but on the other hand, it\'s 52%- We make 53% of our income, so it makes a lot of sense. But I think we will make some improvements as the after-sales market develops, I think we really just need to have a little confidence in the equipment, but the rest feel good. Steve Bagus is amazing. Thank you. I appreciate this time. You\'re welcome, Tom. Thank you. Mr. Jones, there\'s no other problem. For the final statement, I would like to call back on you. Thank you for joining us. We look forward to responding to you by phone for our first quarter earnings at the end of April. Have a good day. Thank you, Tom. Thank you. This is the end of today\'s conference call. At this point, you may disconnect the line. Thank you for your participation.