Brady Corporation (BRC) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Quarter 3 2013 Brady Corporation's Earnings Conference Call. My name is Angela, and I will be your operator today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Aaron Pearce, Director of Investor Relations. Please proceed, sir.

Thank you, Angela. Good morning, and welcome to the Brady Corporation Fiscal 2013 Third Quarter Earnings Conference Call. During the call this morning, you'll hear from Frank Jaehnert, Brady's CEO; and Tom Felmer, Brady's CFO; as well as Stephen Millar, President of the Asia Pacific Region; and Matt Williamson, President of the Americas Region. After the prepared remarks by the team, we'll open up the call to questions. The slides for this morning's call are located on our website at www.bradycorp.com. Please note that during this call, we may make comments about forward-looking information. Words such as expect, believe, forecast and anticipate are a few examples of words identifying a forward-looking statement. It's important to note that forward-looking information is subject to various risk factors and uncertainties which could significantly impact expected results. Risk factors were noted in our news release this morning and in Brady's latest Form 10-K which was filed with the SEC in September of 2012. Also please note that this teleconference is copyrighted by Brady and may not be rebroadcast without the consent of Brady. We will be recording this call and broadcasting it on the Internet. Your participation in the Q&A session will constitute your consent to being recorded. Thank you. And now I'll turn the call over to Brady's CEO, Frank Jaehnert. Frank?

Thanks, Aaron. Good morning, and thank you for joining us. This morning, with the announcement that we intend to sell our Asia-based Die-Cut business, we took the latest step in the shifting of our portfolio business into the less volatile industry, supported by macroeconomic trends. Over the last 12 months, we have sold 3 other companies and we acquired Precision Dynamics Corporation, which is a leader in the health care identification space. Our Die-Cut business primarily consists of the state of high performance products, such as gaskets, measures, heat dissipation materials, antennae, dampers, filters and similar products sold into the consumer electronics industries, including the mobile handset and hard disk drive industries. This business has shown many signs of improvement and has recently secured several meaningful new orders. However, we no longer consider this business core to our strategy, and believe that our customers and our employees will be better served by being at a company that Die-Cut is a core product offering. As such, we are actively marketing this business through an investment advisor. We will continue to operate this business as an ongoing business and execute our plans to grow revenues and improve its profitability while engaged in the divestiture process. Our Die-Cut business had annual revenues of approximately USD 179 million and adjusted EBITDA of approximately $30 million during the fiscal year ended July 31, 2012. But as you can see from the income statement in our press release this morning, during the quarter ended April 30, 2013, our Die-Cut business incurred a net loss of approximately $7.6 million, which included a $15.7 million noncash asset write-down. As you see in our financials, the Die-Cut business, along with the 3 businesses we divested over the last year, are shown as a one line item net of tax…

Thanks, Frank, and good morning, everyone. Starting on Slide 3, in connection with our business reorganization, we incurred restructuring charges of approximately $8.5 million with $0.13 per share on our third quarter. Approximately 1/3 of these charges are noncash and relate to the write-down of certain trade names as we consolidate brands as part of our simplification efforts. The remainder of the restructuring charges are primarily severance-related charges. Excluding restructuring charges from Q3, Q3 of F '13 and F '12, EPS from continuing operations was $0.55 in the current year compared to $0.56 in the prior year. Moving on to Slide #4. Sales were up 11% to $305.7 million in the third quarter. Acquisitions, net of divestitures, added 16.8% to sales, foreign currency translation decreased sales by 1.1% and organic revenues were down 4.7%. By region, organic revenues were down 2.9% in the Americas, 4.8% in EMEA and 11.6% in the Asia Pacific region. Our third quarter gross profit margin finished at 52.2%, down from the 55.1% gross profit margin in last year's third quarter. SG&A was $112.1 million in the third quarter this year compared to $98.6 million in the third quarter of last year. EPS from continuing operations was $0.42 per share in the quarter. After adjusting for restructuring charges, EPS from continuing operations was $0.55 in the third quarter compared to $0.56 from last year's third quarter. During the third quarter ended April 30, 2013, reduced bonus compensation compared to the prior year benefited EPS and continuing operations by $0.06. Slide #5 summarizes our EPS from continuing operations guidance for the fourth quarter of fiscal 2013. We expect EPS from continuing operations to range from $0.45 to $0.55 during the fourth quarter ending July 31, 2013, exclusive of restructuring charges and certain other items. As Frank mentioned,…

Thanks, Tom, and good morning, everyone. Please refer to Slide #13 for the Americans review. Sales in the America's increased 24.8% to $178.6 million in the third quarter. Acquisition of PDC contributed 28.4% of sales. Foreign currency translation provided a modest revenue decline of 0.7%, and organic sales were down 2.9%. Looking deeper into our third quarter results, our Identification Solutions business in North America had slight organic sales declines as we saw contractions of inventories at some of our major distributors, thus, resulting in reduced orders. We continue to focus on launching innovative new products and improving our presence on the Internet. Our sales in North America over the Internet continue to accelerate as we had a very strong quarter with sales in our bradyid.com website. We are getting positive responses in the market from our recently launched BBP85 printer for making safety and facility identification products. We launched, as Tom mentioned, the continuous sleeving wire identification system for the aerospace and mass transit markets. This is for high volume applications. Our ID solutions business in Brazil was lower than expected as sales to our OEM customers were softer than planned, including sales in the automotive industry. Our MRO business has been growing but not enough to offset the declining sales to our OEM customers. Brazil is a key emerging economy for both our OEM and MRO businesses, and we expect to see improvement as we have installed new printing capabilities and are beginning to see increased orders as a result of these capabilities. Although we expect improvements in the fourth quarter, we do not anticipate seeing organic growth in Brazil until the first quarter of next year. In our America's Workplace Safety businesses, organic sales in the third quarter were down approximately 6%. We continue to see a…

Thanks, Matt. Before I continue on Slide 14, I would repeat Frank's comments that our Die-Cut business has shown many signs of improvement and has recently secured several meaningful new orders. However, we no longer consider this business core to our strategy, and believe that our Die-Cut customers and our employees will be better served by being with a company where Die-Cut is a core product offering. As such, we are marketing this business for sales through an investment advisor. We will continue to operate this business as an ongoing business and execute our plans to grow revenues and improve its profitability while engaged in the divestiture process. The information on Slide 14 is for our continuing businesses in Asia, which consist of our Identification Solutions business in Asia and our business in Australia. Sales in the Asia Pacific region were $33.1 million in the third quarter, organic sales decreased 11.6% and foreign currency translation decreased revenues by 1.6%. The business trends that we discussed in our last 2 conference calls continued this quarter. Customer demand has not yet rebounded, and our Australian business, as the slowdown that started in the fourth quarter of last year, continues. Overall, organic sales in Australia were down approximately 17%. Our sales in Australia include sales into many different end markets, but have a high concentration in markets that tie to manufacturing, nonresidential construction and mining, all of which have been down over the last 12 months. Although we anticipate ongoing economic softness, we also anticipate that we will see improved results in Australia due to normal seasonality, as well as weaker prior year comparables. Switching to our Identification Solutions business, key geographies such as China are maturing, and our strategy of strengthening and expanding our distribution network is providing increased channels for our…

Thanks, Stephen. Before moving on to questions, let me share some concluding thoughts. Robust organic sales growth is not easy to come by in today's macroeconomic environment. As such, we are taking 3 major actions to improve organic sales growth and increase profitability. First, we are actively transforming our portfolio of businesses. We have sold 3 underperforming businesses in the last 12 months. We have just announced that our Die-Cut business is for sale. About the same time, we acquired PDC, which was the largest acquisition in the history of the company. This acquisition moves Brady into the more stable health care industry, which is a long-term macro tailwind and the plan to sell our Die-Cut business moves Brady away from the more volatile consumer electronics end market. Once the sale of the Die-Cut business is complete, Brady will be a very different company than it was just 1 year ago. Second, we are taking aggressive actions to drive organic sales growth in our continuing business platforms of Identification Solutions and Workplace Safety. We are reorganizing around global business platforms to sharpen focus and better align resources required to deliver increasing levels of organic sales. We're expanding our business in emerging geographies and in certain focused market sectors, such as aerospace and mass transit, chemical, oil and gas, and food and beverage and, of course, health care. We are also expanding on new product development efforts and are rapidly improving our digital capabilities. Along with these sales growth initiatives, we are also changing our cost structure. As I mentioned, I expect the business reorganization process to yield annual cost savings of $25 million to $30 million, with approximately half of these cost savings will be invested into the organic growth initiatives I just mentioned. We also continue to view our facility footprint and believe that we have further opportunities for facility consolidation and rationalization. The changes we are undertaking are some of the most significant changes we have made in the company's 99-plus year history. Once complete, Brady will emerge as a company with a portfolio of businesses that are much more stable and more supported by long-term macroeconomic trends. We will have global businesses focused on driving organic sales, and we will have a leaner cost structure which will enable strong incremental margins in every dollar of organic increased sales. Even though we are fighting through a tough macroeconomic environment, I'm convinced that the strategies and initiatives mentioned before are positioning us well even in a continued weak economy and will pay off substantially once the economy recovers. Let's now start the Q&A. Angela, can you please provide instructions for our listeners?

[Operator Instructions] And the first question comes from Jason Ursaner from CJS Securities.

For the acquisition growth in the Americas, was there no negative offset from the U.S. medical Die-Cut business that you guys sold?

Not in the quarter.

Okay. And the $15 million of SG&A for Precision...

[indiscernible] operated, yes.

How much of that is being credited to the Americas segment versus just general administrative?

I don't know, but I'd say the majority.

Jason, sort of a clarification. Your question regarding the medical Die-Cut offset, that -- in the continuing operations, that is pulled out. So any impact of the medical Die-Cut was pulled out and shows up in our disc ops line. So on our continuing operations, there is no impact.

Okay. So I guess, I'm just trying to back into the $7 million of segment operating profit, because it looks like you guys are attributing $24 million of cost of goods sold to it. And on $41 million of sales, I'm just -- I guess, I'm not quite getting to where the rest of the SG&A is going, if it was kind of in line with that $15 million or so a quarter?

Yes, maybe that's a question for off the call. As you know, we take it closely with our financials to answer this question. I don't think we have all the numbers here handy.

Okay. And just moving on to the Asia Die-Cut piece, what's the expected profit from discontinued operations next quarter? I'm just trying to reconcile the current guidance with our previous estimates that would have had it in there, since it's a seasonally important quarter?

Yes, it's minimal. There really is no -- as you can see year-to-date, there's not much of an impact and we wouldn't expect much even next quarter either.

Okay. And generally from the advisors you've hired, what level of proceeds do you might expect to realize from a sale?

That's something we're really not prepared to talk about.

Let me put it this way, as much as possible.

Next question comes from Allison Poliniak from Wells Fargo.

Frank, you used to talk about the business longer term with the Die-Cut. We've always talked about sort of 5% organic growth through a cycle. Are we thinking about that differently now that Die-Cut's not going to be a part of that, or is it still pretty consistent there?

I would say, first of all, it's very difficult in these economic times to talk about organic growth and what a reasonable number might be. But I think the biggest impact of having no longer Die-Cut in our portfolio is much less volatility, because this used to be a very volatile business, can grow more than 10% and it can go negative. So I think it will provide a more stable, more predictable organic growth trajectory. But at this point of time, with the economy the way it is, I'm really not ready to make any predictions as to how big this number, the organic growth number should be.

Okay. But we're still thinking about the sort of the MRO side of things, is that sort of like GDP plus or minus -- plus 1 or 2 points for Brady?

Yes.

Okay. And then you're left with the ID Solutions, Workplace Safety. Obviously, ID solutions is a bit bigger. But when we think of sort of acquisition targets as we go forward over the next few years, is there a preference for either/or, or are they both equally attractive to you at this point?

I would say they're both equally attractive, but I'd also like to point out, it just made the last acquisition history of Brady for about $300 million in purchase price and $180 -- $380 million in sales. Our #1 priority is to make sure we integrate this acquisition above the previous 3 acquisitions we made in Europe. We are still looking, but it's not our #1 priority. Our #1 priority is to focus on organic growth, expand into emerging geographies, going to focus markets, improving our digital capabilities. I would say, that's what we're working on full steam, not so much on acquisitions. But of course, we are not shutting the acquisition pipeline off. We are still talking to people, but just not as intense as we used to.

Great. And then, last question. On Asia, I guess, Asia proper, you're obviously increasing your investments there to build out sort of your platform there. Is there any sense -- obviously, profitability is going to be impacted by that. I mean, is it sort of a 3-year, 5-year sort of growth projection at this point before we can sort of reap the benefits there?

Yes. I'll let Stephen answer this, but maybe I'll just try to preface this with, I think it was about a year ago, when we took one of our -- laid off one of our largest businesses in the company and put him over to Asia, primarily to grow China, and of course, it takes a while for this to take hold, but we are really encouraged by what we are seeing. So from a sales point of view, certainly, we're already seeing indications that we might increase our organic sales growth. But I'll let Stephen maybe give you a little bit more flavor on this one. How do you see it, Stephen?

Yes. Allison, I think the way to answer that is by saying, what we've been focusing on doing the last 12 to 18 months is putting more rigor around how we approach the growth. So it's very easy when you first go into China, particularly to get some opportunistic wins, and we've had those. But now we're putting a lot more structure around sustainability in terms of the types of customers we have, the distribution channels and those sort of things, all with a view, I think, to study the 3 to 5-year time frame having a very sustainable business there. I think China is a sort of place where it's not going to grow quickly overnight. But I think, certainly, in the 3-year horizon, we would expect to see the scale would start to get to a point, I think, where the segment profit would be looking more like what we're used to.

Next question comes from Charley Brady from BMO Capital Markets.

This is Andrew Dunham on for Charley Brady. I was just wondering, if you could kind of go through -- maybe if you have any sense of a timeline for the divestiture of the Asia-based Die-Cut business? And also remind us of the timeline for your reorganizational efforts?

Yes. So from the reorganizational efforts, I mean, May 1, we put the new organization structure in place and the new leaders. So we're going to have 3 global platforms, Identification Solutions led by Matt Williamson, Workplace Safety led by Scott Hoffman and Die-Cut led by Stephen. Stephen is also responsible for all of APAC. And this is effective May 1, so basically 2 weeks in all. And at the same time, we are going through a business implication project where we said we're going to -- think we're going to have about $25 million to $30 million of cost savings. We're about, I would say, 1/3 to halfway into this project. We have already seen some impact, but the same is not going to come more or less in fiscal 2014. As far as timing for the divestiture process is concerned, of course, we would like to sell this business soon because we have decided it's no longer core to our strategy, but, of course, we want to make sure that we go through all the process that interested parties look at this business and, typically, negotiations take a couple of months. So we'll see how fast this goes, but we are in the middle of the process.

Okay, great. Did you mention most of savings? Is that going to be coming from facility rationalization? Or where do you see that like $25 million to $30 million of pretax savings coming from? And then, I know you mentioned growth initiatives in the press release and you've been mentioning growth -- different various growth initiatives throughout the call, but I was just wondering if there was anything -- any specific area where this will be funding or if it's just kind of being spread around to all the different segments?

Yes. So these are 2 great questions. First of all, the $25 million to $30 million cost savings is not from facility consolidations. There might be a little bit of it, but the majority is reduction of people, primarily severance, I would say, to a very, very large portion. We are just going through the organization layer by layer, trying to reduce the amount of hierarchical layers we have in the company, increase spend of control and do this in combination with the reorganization of the company. So that we are -- in the end, if you remove layers in the organization, we are closer to the customer. And that's why I said earlier, the cost reduction was not the main driver. We want to be close to the customer, we want to increase the speed in decision-making and simplify all processes. So the majority here is savings. When we talk about people and when we talk about facility consolidation, this will be something which will be expected on top of it. But at this point of time, we have not made any decisions, but we are analyzing and we think there is opportunity. As far as growth initiatives that we kind of spread it equally, I think there are a couple of areas where we are going to invest more. Digital e-commerce is certainly an area which will get the bulk of the investment over the next 1 or 2 years. And the rest of it, I would say, might participate partly [ph] equally, but the bulk goes to digital online. And this is true especially for Workplace Safety business, where we still sell the majority of our products through catalogs, but it's increasingly moving to the Internet. And -- but even in our Identification Solutions business, customers more and more come to us, to our website, they want to learn about our product, they educate themselves. This is important -- more important component as well. And of course, as you know, we have bradyid.com, which is a transaction website, where our customers can buy directly from us and invest in this area as well. So digital is a big, important initiative for us going forward.

Okay, great. Just one more quick kind of follow-up here. With the facility rationalizations, you mentioned, you're kind of, like, you're evaluating it right now. Do you see a high-end level of facility rationalizations within like the next 6 months?

Well, as soon as we have finished our analysis, we will communicate this to the public. At this point of time, we are not ready to talk about it.

The next question comes from Joe Mondillo from Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: First question, just related to the Americas business, x PDC, it seems like those odd margins are holding up pretty well, considering the organic declines on the top line that you're seeing. Just wondering how you're able to do that? And also if you could address the Direct Marketing piece of the business, I know that's been a potential challenge, talk about your Internet sales and the pricing challenges there?

Okay. With regard to the margins, we've focused on margins from a couple of perspectives over the years. We've really done a lot of work with LEAN, which has enabled us to have more efficient operations. That's been a big part of it. Overall, facility rationalizations, we've been fairly active in this over the past few years, and we've also been little smarter how we've looked at our pricing, particularly on the ID Solutions part of the business, and all of those things, I would say, have contributed positively over the last couple of years. With regard to the Workplace Safety business, the biggest thing that we're seeing, which I emphasized in my comments, is this business has been traditionally a business based on circulation plan of mailing catalogs. And the response to the catalogs is simply not as strong as it was before, it's still a significant part of the business. And our focus, as Frank has mentioned, is to shift that balance. And the other part of this, of course, is the exposure that you see to pricing and the ability to shop on the Internet. And so we continue to look at ways to better represent our products and to test our pricing strategy on the Internet as a way to look to grow the business.

This business is not too different, except that it's transaction from the Internet coming from our Catalog business, because our Catalog business is heavy analytics. We have a lot of people analyzing response rates, how different offers and different prices impact the business. It's just that we're now shifting the different skill sets needed there, how fast is your website, what -- how easy can people find their products on the website and so forth. So there are a lot of investment needed to do this. But there are certainly more price sensitivity online than we see in the Catalog, and so we have to find a lower-cost business model for the online business, and we are working very hard on it and we're also investing a lot of money. So I think you have 2 impacts. You have, on the one side, you have pricing, more price sensitivity; on the other hand, you have a lot of investment going into the transformation to digital, which is depressing the operating profit. And that's basically what you're referring to. Joseph Mondillo - Sidoti & Company, LLC: So when you're looking at the lower cost model versus maybe the lower margin that you're getting because of the pricing challenges, how does that business compare -- in terms of gross margin, compare to the traditional Catalog business?

I mean, at this point of -- how this -- well, the gross margin are going to be lower, and the question is how much lower is the SG&A going to be, because a lot of money right now is spending catalogs, mailing out catalogs, postage, paper and so forth. We think this is going to come down, of course, but we think also our gross margin might come down. So if we are successful in executing our next couple of years, we think we can have a lower gross margin, lower SG&A business model. Joseph Mondillo - Sidoti & Company, LLC: Okay, great. And then also looking at the Asia Pacific business, the sort of guidance that you gave for the fourth quarter, do you expect that slight improvement or the modest decline compared to the double-digit decline that you saw in third quarter? Is that more so related to just the easy comp that we see year-over-year? Or is there a sequential improvement?

I think there's 2 things there. I mean, the comp gates [ph] are easier because Australia, being the biggest part of the decline, that started in Q4 last year or the end of Q3. But it's also the seasonality, particularly in the Australian business. So sequentially, quarter 4 is always better than Q3 and it's the best of the year, so it's both of those.

And then, I just want to make sure -- you remember, Die-Cut was pretty weak in the last year's fourth quarter, but we are no longer comparing Die-Cut because Die-Cut is in our discontinued operation. So we're only looking at Identification, Workplace Solution business, and the biggest impact here is, compared to prior year, is how the Australian economy is going to perform because it's a substantial part. And of course, how well we are doing in growing organically in our identification MRO space in China and the rest of Asia. I just want to make sure that this is clear because last year, Die-Cut was really weak in the fourth quarter, but we're not going to benefit from this because it's no longer in our comparisons. Joseph Mondillo - Sidoti & Company, LLC: Right. And then, just my last question, regarding the reinvestments of the $10 million to $15 million or whatever it's going to be in terms of the restructuring savings, what kind of payback or what kind of annual contribution do you expect to receive from that? And what exactly is it going into?

Yes. Again, I think the majority is going to go to digital, and we are -- we just started recently our annual operating plan, putting this together where we can determine where exactly we're going to invest it, where are we going see the return and when are we going to see the return. I think it's too early to talk about this. I just want to make one correction. We said in the last conference call that some of the $25 million to $30 million of savings are going to be reinvested. We are now saying about half, so we have ramped up our investments, primarily in the digital, and then this is in response to organic growth we are testing because of the weak macro economy and because of organic growth, which is not where we want it to be, that we want to ramp up our spending our investments for organic growth. So we're now saying about half of the $25 million to $30 million we can reinvest.

Just as follow-up, Joe. You started your question asking about the Americas results, and I'm going to answer exactly in response to a question Jason asked earlier. But we've given information on the Americas segment and commented on PDC's impact. And PDC delivered $41 million of sales in the quarter, and the 2 other pieces of information just trying to reconcile. As we said, the segment profit was $7 million, but SG&A was $15 million for that business. I just want to clarify that only $10 million of the SG&A for PDC shows up in segment profit. $5 million of it is in SG&A and that drills into the corporate number. So I think those 2 pieces of information will help Jason reconcile the profit impact on the Americas.

[Operator Instructions] Next question comes from Mig Dobre from Robert W. Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: It's Mig Dobre. A lot of ground has been covered here already, but I guess, maybe a couple of clarification questions. First on EMEA. I'm trying to understand exactly how big your exposure to Western Europe is as a percentage of total revenue, because this has been a geography that has been called out for quite a few quarters now, it's being weak, and you called out growth in emerging areas, so I'm wondering how that mix has changed, maybe.

Do we have the numbers available? Okay. We have [indiscernible] talked about, but I mean, you can assume that the majority of causes -- I mean you look at the GDPs of those countries, even if you had equal penetration in emerging geographies, Middle East, Africa, Eastern Europe. Even if we had the same penetration, which we don't have, same market share as a percent of GDP, GDP in Germany, France, U.K., Italy, Spain, is so much bigger than in emerging geographies. So I think it's -- I mean, Western Europe determines where we go organically, and so I think I'd leave it there at this. But we still think there's opportunity because we see customers asking for our product and we have ramped up our investment in safety and so forth in those geographies and we are growing. But there is no way that they can offset what's going on in Germany, which is, I think, still the fourth largest economy in the world or something, like to what's happening in Dubai or in South Africa or in Czech Republic.

Mig, we have talked in the past about when you look at France, Germany and U.K., we see each of those are roughly 1/4 of Europe's business, and the balance is the Benelux, Scandinavia and all that we're doing in Central Europe, Middle East and Africa. So as you can imagine, those emerging markets are still a pretty small percentage of our European sales. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Sure. Okay, that's helpful. And I guess, I'm trying to understand where we are maybe now versus where we were, say, in 2011 in Western Europe revenues, or maybe even compared to the prior peak because we've had, I think, 6 consecutive quarters of negative organic growth in Western Europe. And obviously, this recession that they're dealing with perhaps is not going to last forever. So what is the opportunity for the rebound here? How should we think about that?

Yes. We are wondering the same thing. And when you look at many industrial companies who reported earnings for the first quarter, we are not alone in this. I mean, many companies have double-digit declines in Western Europe. And I think Western Europe is officially in -- or the EU is officially in recession, has been now for quite some time. And [indiscernible] longest lasting recession ever in Europe in modern history. So we are not alone in this. I wish I could answer this question, when is this going to turn around? I'm sure it's going to turn around at some point of time, but we are not counting on it to happen anytime in the next 1 or 2 quarters. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: No, I understand that. I'm not asking you to call for a turnaround. I'm trying to understand how far below the prior peak, or maybe, I should say, even the recent peak, if you would in '11, your businesses in Western Europe?

We are looking at it.

I don't know how far back that shows just for Europe, so we'll have to get that for you. And then we clearly talked about it, so we'll get that to you later.

Yes, I'm sure we might have talked about this before, but maybe we can take this offline. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then, if I may move to Asia Pac. The margin performance there was really solid in spite of the quite a bit of organic decline in Australia. So I guess I'm wondering, if you're talking about your comps and maybe even some potential improvement eventually, how should we think about margin here beyond the next quarter?

Stephen?

Yes. Well, I think, I mean, our Australian business, as we've indicated, our Australian business overall, the EBIT returns are more in line with what we would expect out of Europe and North America. They are more mature economies. And obviously, that tanks off the back of some high gross margins as well. I think as we move forward, I think in the medium term, we'd expect to see overall as the China and the rest of Asia grows, that we'll pull the margin, the blended margin down slightly because those markets are not generating the same margins as Australia. But I wouldn't like to put a number on where it would hit up, to say the long-term trend wouldn't be for significantly increased margins, just as the mix changes. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: I see. Okay. And then, I guess, my last question is on PDC. And I'm looking at the top line performance there, and it seems to be pretty much in line with the revenue run rate when you acquired the business. And I'm wondering, what are your expectations for growth in PDC over the next, say, 12 to 18 months? How should we think about that when we model?

I would say, you could expect to see things in line with hospital admission rates right now, so you'd see something in flat to slightly down, and that's what we are seeing right now, right? And the question is, what do hospital admission rates do? Because a big portion of what we sell, like wristband labels, and every time somebody walks in the hospital, they get a wristband. And so hospital admissions is a big, big contributor to growth, and they have been down recently 1% to 1.5%, and of course our business has been down a little bit as well. But over the next 12 to 18 months, we actually expect this to rebound because I think it is now 2 years in a row that admissions has been down. And if I recall it correctly, don't lock [ph] me on this, but if I recall it correctly, from our due diligence in 20 years admissions have always been up except for 2 years, and I think it was the last 2 years. So at one point of time, I think people have to go back and see a doctor. Now they can only push out this hip replacement for so long, but certainly, the economy seems to be impacting people's appetite to go into the hospital. But we -- for the next 12 to 18 months, which was a question, we expect this to pick back up.

Next question comes from Joe Mondillo from Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: I just have to quick follow-up questions. One, excluding the restructuring charges, did you see sort of any benefits in the third quarter?

You mean like savings? Joseph Mondillo - Sidoti & Company, LLC: Yes.

Negligible. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then second, what are the annual D&A Die-Cut?

Well, do we have this number? D&A Die-Cut?

No, we don't have that broken out for you right now.

We have it, but we just don't have it right now.

Ladies and gentlemen, I'd now like to turn the call back to Aaron Pearce for closing remarks.

Thank you for your participation today. As a reminder, the audio and slides from this morning's call are also available on our website at www.bradycorp.com. And the replay of this conference call will also be available via the phone beginning today at 11:30 Central Time. The phone number to access the call is 1 (888) 286-8010 or (617) 801-6888, and the passcode is 39579283, and the replay will be available for approximately one week. As always, if you have questions, please contact us. Thank you and have a great day. Angela, can you please disconnect the call?

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.