Dec 8, 2011
Executives
Dennis Bunday – Chief Financial Officer Pat Cavanagh – Chief Executive Officer
Analysts
John Nobile – Taglich Brothers Matthew Berry – Lane Five Capital
Operator
Good afternoon, ladies and gentlemen. My name is Martina, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Williams Controls Fourth Quarter and Fiscal Year End 2011 Conference Call. All lines have been placed on mute to prevent any background noise.
After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to Dennis Bunday, Chief Financial Officer of Williams Controls.
You may begin your conference.
Dennis Bunday
Good morning, everyone. Welcome to our fourth quarter and year end fiscal 2011 conference call.
Before we begin, you should note that the following discussions and responses to questions reflect management's views as of today, December 8, 2011, and may include forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements.
Information concerning risk factors and other factors that could cause actual results to differ materially is included in our filings with the SEC, including our 2010 annual report on Form 10-K, our fiscal 2011 quarterly reports on Form 10-Q, and our fiscal 2011 current reports on Form 8-K. Specific factors that may cause such a difference include, but are not limited to, availability of adequate working capital, domestic and international competitive pressures, increased governmental regulations, increased costs of materials and labor, and general economic conditions in the United States and abroad.
I will now turn the call over to our CEO, Pat Cavanagh, for his comments on the quarter.
Pat Cavanagh
Thank you, Dennis. Good morning, everyone.
And welcome to our fiscal fourth investor conference call. This morning we released our financial results for our 2011 fourth quarter and year end.
We are holding our call today from the New York Stock Exchange where we had the opportunity to ring the opening bell yesterday. We move from the NASDAQ to the NYSE Amex because we believe that for our stock the NYSE Amex platform may reduce spreads and increase trading volume making it easier for investors to own our stock.
Sales for the year ended September 30, 2011 increased $9.6 million or 18.4% to $61.9 million from $52.3 million for the comparable period last year. Net income for the year ended September 30, 2011 was $3.3 million or $0.45 per diluted share, compared to net income of $1.4 million or $0.19 per diluted share for the year ended September 30, 2010.
There were number of one-time costs in both fiscal ’10 and fiscal ’11, and Dennis will cover those later in his call, later in this call. Over the last five years we have made a conservative effort to broaden our product offering and expand our international footprint.
Overall, in fiscal ’11 55% of our products were sold in United States, 9% in Canada and Mexico, 22% in Europe and 14% in Asia. Also in fiscal ’11 over $3 million in sales came from new products introduced in the last year.
We expect to see similar results going forward based on over $18 million of new business that we won in the last two fiscal years. Many of these new products wins were for off-highway customers where sales were at a record level this year $14 million or 24% of our total sales.
In fiscal ’11, we were specially pleased with our new bulldozer pedal systems and power armrest adjusters, where those products contributed over a $1 million in new sales at the key off-highway OEM. We also launched another rocker pedal system for major agricultural OEM, which will contribute the meaningful sales in fiscal ’13.
We recently introduced our new state-of-the-art joystick systems and have them in the field under customer evaluation. So far we have received very good feedback from our existing customers and potential customers.
We expect to start selling these products in fiscal ’12, because of the sophistication and software contained in these products, the selling price is substantially higher than our existing throttle pedals. In fiscal ’11 20% of our business was tied directly to production of medium and heavy trucks in North America.
So I thought to make a couple of comments about the outlook in this market. In calendar 2012 the industry is projected to build 295,000 Class 8 trucks, up from approximately 250,000 in calendar year 2011.
I think there is some risk in this number, the kiosk in Europe continues, but the backlog of Class 8 trucks are strong, fleet profits are up, used truck prices are firm, exports are strong and the current fleet is old. Class 8 trucks are normally owned by fleets that transport goods for leaving.
While the Class 8 market gets a lot of attention, the North American Class 5 through 7 medium duty vehicle market is also very important player. In 2010, medium demand was made up of three components, medium trucks of about 68% of the market, school and buses at about 22% and recreational vehicles at 10%.
The medium duty market in North America this year is showing a 40% year-over-year increase compared to 2010 at 165,000 vehicles. The next year’s production is expected to increase to 176,000 vehicles.
The Class 5 through 7 truck market is still affected however by the deeply depressed residential housing and construction markets. Typically the customers that buy these vehicles do something else for leaving and they have the luxury of delaying purchases of these trucks.
I think it’s significant to note that in comparison to the last NAFTA truck market peak in 2007 -- 2006, which saw production of 650,000 units of the Class 5 through 8 vehicles, market projections this calendar year are ending up at 416,000 units or down 36% compared to calendar year 2006. I’d like to make a few comments about the regions we serve also.
The North American market grew 13% in fiscal ’11 and was driven by a rebound in the truck market where our sales improved 36%, that was primarily because of the Class 8 heavy truck sales. Also contributing to growth in the North American market was off-highway sales which reached a record level in fiscal ’11 for us, we expect to see continued growth in the North American market in ’12, fiscal ’12, as heavy truck sales will continue to grow, fuel by strong backlog, increasing fleet profitability, stronger used-truck pricing and increasing demand by the fleets to upgrade their vehicles.
We also expect continued growth in off-highway market in fiscal ’12 with the introduction of new products and improving worldwide demand. The European market for us grew by 35% in fiscal ’11 as a result of a 59% improvement in sales to the heavy truck customers in Europe.
This was largely a result of the market finally working off the heavy truck inventory over hang as the result of the core 2009 and the sales to new truck customers in Russia and Turkey. We expect sales in Europe will be flat next year as a result of the present economic turmoil offset however by the grow -- our growing sales in Russia and Turkey.
Our Asian sale grew by 19% in fiscal ’11, off-highway sales increased by 31% primarily in China as a result of the further penetration of electronic engine in the off-highway market applications and two new Chinese customers. Asian truck sales increased primarily as a result of improving market conditions and new platform wins in Korea and Japan.
In fiscal ’12 we expect to see continued growth as a new Japanese truck OEM ramps up volumes on the newly introduced vehicle in late -- that we introduce NAFTA in fiscal ’11 and to lesser extent two new customers in China. In China truck sales were down 22% from last year as a result of large inventory overhang and the slowing economy.
We expect the economy in China to remain sluggish through March of next year. Firstly, I’m somewhat frustrated that Chinese does not move faster in implementing mission regulations for heavy trucks that would drive increase use of our electronic films.
The OEMs are telling us that because of the difficulty in changing over the low sulfur -- low sulfur diesel fuel that are used in these engines, it’s likely -- it’s unlikely that the government mandate change over in mid-2012 will be met. It’s more likely to be delayed another six months, but there is no official word at this point.
This is potentially one of the biggest growth drivers for us in China. I’m sure it’s going to happen, but it just a question of when.
In the meantime, we are introducing a couple of new products in the first calendar quarter design specifically for that market, which will improve our penetration. I’m so much surprise that in fiscal ’11 our off-highway sales exceeded our truck sales.
However to a large extent a portion of this is driven by exports of off-highway equipment out of China. I thought I would talk about India separately and as you know we opened the factory there in January of 2011.
We currently have over 40 people in the plant and we began serial production in late fiscal ’11. By the end of December we’ll be producing over 170 pieces a day, six days a week.
We have a customer plant ramp up to over 300 a day by the end of the first quarter of 2012 as we replace the competitor on the light vehicle programs of a major truck OEM and another customer light duty programs starts ramping up. Our sales this year grew to over $1 million in India from $600,000 last year and we expected to more than double this level in fiscal ’12.
The Indian operation has been a bit of a drag on our earnings due to our startup strategy which I should explain. We are very, very careful and conservative when it comes to the quality and the reliability of our products, and we try to eliminate as many of the variable as possible in new plant startup like this.
So when we developed our manufacturing plant for India, similar to what we did in China, we decided to startup production with parts supply from existing suppliers that have a proven track record. These vendors are outside of India.
So the costs of application and the freight add approximately 25% to the costs of those components. Over the last several months since we launch production we’ve been working diligently at identifying and validating suppliers using our focus sourcing methodology for the majority of the components that we’ll be using in India.
It also includes a plan to manufacture our sensors in Indian plant. In India, our strategy has worked and our production startup has been very, very smooth and our reputation as a premier supplier in that market is building rapidly.
So far in India, we have won light vehicle programs with major Indian manufacturers and one large European manufacturer, in addition to the heavy truck programs at the two largest Indian manufacturers. I’ll now turn the call over to Dennis to discuss our financial performance in the quarter and the year.
Dennis?
Dennis Bunday
Thank you, Pat. Net income for the fourth quarter was $1 million or $0.13 per diluted share, compared to $510,000 or $0.07 per share in last year's fourth quarter.
On a pre-tax basis fourth quarter net income improved $553,000 last year to $1.3 million this year. Looking at the full results, net income was $3.3 million or $0.45 per share, compared to $1.4 million or $0.19 per share last year.
There were several one-time unusual items in fiscal 2010, which largely offset each other. However, included in this years results were after-tax charges of approximately $395,000 or $0.05 per share related to a potential acquisition that we decided to determinate during the second quarter, while in due diligence and a legal settlement in the second quarter of a long outstanding claim against the company.
Looking at a sequential comparison of the third and fourth fiscal quarters of this year, sales were essentially unchanged. However pre-tax operating income was down $780,000 or $0.07 per share after-tax, an unfavorable sales mix accounted for $200,000 of the difference.
The third quarter sales mix was better than normal and the fourth quarter was worst than normal. We had a one-time unfavorable inventory adjustment of $165,000 in the fourth quarter.
Labor and overhead were higher as we continue to ramp-up India and incurred over time to respond the inconsistent customer delivery requirements in the U.S. and Europe.
Finally, component purchase prices were approximately $100,000 higher in the fourth quarter than the third quarter. For the current quarter the basic EPS share count was 7,302,339 and the fully diluted share count was 7,480,222.
For the full year the basic EPS share count was 7,296,490 and fully diluted EPS share count was 7,471,215. At year end we had 7,302,339 shares outstanding.
Gross profits for the quarter were $4.9 million or 29% of sales, compared to $3.8 million or 27% of sales in last year's fourth quarter. For the full year, gross profits were $19.2 million or 31% of sales, compared to $14.8 million or 28% of sales in fiscal 2010.
Although, in the reported results gross margin percentages improved for both the quarter and full year, the comparative fiscal 2010 gross profit were depressed by costs associated with higher than normal freight charges and settlement of the long outstanding warranty issue of one customer. Excluding those charges of 2010, gross margin percentages were about even at 30% in both years fourth quarters and 31% for both full years.
This years gross margins in both the quarter and year-to-date were helped by the higher sales volumes to distribute fixed cost over were negatively impacted by higher material costs and the startup in India combined with the currently high component source of costs in that region. We are starting to see some pricing pressures on raw materials, the most significant price increase in the rare earth magnets.
The pricing for these magnets increased rapidly and significantly during the year, as we anticipated this was an overheated market and during the spring we purchased inventory of these critical components of oil prices to insulate us from the price spikes. In the last quarter we saw some improvement in supply and moderate prices for these magnets.
We feel that alternatively pricing will return to more normal levels, although likely at somewhat higher ranges. Additionally, we have seen some pricing pressures in plastic, die caps and other material costs.
Overhead increased for both the fourth quarter and for the full year on dollar basis compared to last year but when lower in each period on the percentage of sales basis. In addition to the India start-up costs, directly durable overhead items such as shipping and production supply and volume related business interruption and insurance premiums increased but that increase was generally in line with sales.
Fourth quarter operating expenses, which include engineering, selling and administrative costs were $3.4 million, up slightly over last years fourth quarter of $3.3 million. Operating expenses for the full year were $14.2 million, compared to $12.8 in 2010, a significant portion of the increase for the year-to-year was due to the terminated acquisition costs and legal settlement.
Costs were also higher due to the start-up of our Indian facility and increase headcounts for new engineering positions filled late in 2010 to address the higher number of projects and to fill some open positions that were vacated during the economic downturn of 2009 and 2010. Now turning to the balance sheet and cash flow.
We are at slight net borrowing position at year end with cash of $1.3 million and borrowing on our revolving credit facility $1.6 million. EBITDA which consist of operating income, depreciation and the non-cash charge for stock option expenses $8.1 million for the year almost doubled fiscal 2010 EBITDA of $4.2 million.
At year end we had borrowing availability under our revolver of $5.5 million, which we believe when combined with our cash balance is adequate for our foreseeable needs. On a net cash flow basis we used approximately $3.3 million of cash in the year, cash uses include increase in account receivable and inventory, payments to our pension plans, capital expenditures and the payment of the two quarterly cash dividend of $0.12 per share each.
During the year receivables grew by $2 million which is directly in line with the higher sales levels. Day sales outstanding have remained constant since last year.
Inventories increase $3.8 million during the year. In addition to inventories increase in line with the increase sales we also increase crucial inventory items to ensure continuity of deliveries to our customers and to protect again some rapid price escalation in certain components such as the rare earth magnets.
Inventories also increased due to some logistics challenges by one of our principal customer. Lastly, inventories in India have increased approximately $650,000 as part of the start-up of that facility.
Overall, however, inventories are too high and we are focused on reducing inventory levels. Our target is to get inventories down about $1.5 million in the first half of 2012.
Depreciation and amortization for the third quarter was $556,000 and non-cash stock option expense was $184,000. CapEx for the quarter was $560,000 and $2.8 million for the year.
We anticipate our capital spending to be approximately $2.5 million in fiscal 2012. We paid our second quarterly dividend of $0.12 per share in July and to-date we announced the third regular quarterly dividend $0.12 per share payable on December 28th to shareholders of record as of December 19th.
Although, we were hurt by some one-time costs and mix issues during the quarter, we still believe we have an excellent long-term platform to support growth. We are well-positioned globally with key customers worldwide.
We have a solid product line and joystick have the potential to expand that offering significantly. Our costs today in India are higher than it will be on a longer term basis, but that is to ensure safe successful launch of products in that market.
Also keep in mind our first fiscal quarter is traditionally a slowest of the year with fewer shipping days as many of our customers are on reduce shipping -- on reduce schedule during the holidays. I would expect sales to be slightly down from our fourth quarter to the mid $60 million range in our first fiscal quarter next year.
Taxes will be higher in fiscal 2012 of the tax holiday we have enjoyed for the last five years in China expires this year and we go to the normal tax rate of 25% in that country. This concludes our formal comments.
We would now like to turn the meeting over to questions.
Operator
(Operator Instructions) Your first question comes from the line of John Nobile from Taglich Brothers. Your line is open.
John Nobile – Taglich Brothers
Hi. Good morning, fellows.
Pat Cavanagh
Thank you. How are you, John today?
John Nobile – Taglich Brothers
Pretty good. Thank you.
First question on the NAFTA market, I know, for the quarter you mentioned it was up 43%? And I’m just curious now, if you give an idea, what even on the quarterly basis not for the full year, what the NAFTA sales make up of the total sales margin?
Pat Cavanagh
Well, I think, what I said in my comments, John, was that last year the NAFTA production, this doesn’t go into spare parts and all that, but the actual NAFTA production was about 20% of our sales.
John Nobile – Taglich Brothers
Last year, meaning, ’11 or 2010.
Pat Cavanagh
2011.
John Nobile – Taglich Brothers
20, okay, so 20% of sales. Okay.
Pat Cavanagh
Production, now there is always parts and spares, and all that kind of thing that add, additionally to that, but about 20% is the production.
John Nobile – Taglich Brothers
Okay. But basically over the last few years, you would say…
Pat Cavanagh
That’s the one, yeah, that’s the one that variable with the Class 5 through 8 production.
John Nobile – Taglich Brothers
Okay. And approximately 30% of the fiscal 2011 growth was from new product introductions.
So I could back out of that that existing product sales…
Pat Cavanagh
What did you say John, you said 30…
John Nobile – Taglich Brothers
30%, the press release says approximately 30% of our fiscal 2011 sales growth came from…
Pat Cavanagh
I think, it’s a $3 million, isn’t it?
Dennis Bunday
Yeah.
John Nobile – Taglich Brothers
The question is, actually, I got…
Pat Cavanagh
…quarter, okay, okay.
John Nobile – Taglich Brothers
Fiscal 2011, 30% of that growth, so at least fiscal year was from new product introductions. So if I back out of that, looking at…
Pat Cavanagh
Yeah.
John Nobile – Taglich Brothers
… existing product sales up about 30%, okay, back out of the 18.% growth, which 30% was from new product introductions, so 30%. I’m just curious, if you see pent-up demand as a reason for existing product sales that possibly grow at greater rate in fiscal 2013?
Pat Cavanagh
Well, I don’t know, John, I mean, that’s pretty hard predict. I mean, it depends, I mean, you see some fluctuation that with the difference between aftermarket products and production products.
But, there is a very significant backlog at this point, especially in the Class 8 market and the customers, our customers are going to be working that off going forward. So, I guess, the answer is, I don’t see a big pent-up demand there, that’s going to change kind of our outlook.
John Nobile – Taglich Brothers
Okay. But, I mean, there is a significant backlog, I would imagine, looking at say existing product sales, your electronic hand controls up 13%, with that kind of significant backlog I would assume maybe even greater than it was last year, that these sales would be had a greater rate in 2013, I just kind of make…
Pat Cavanagh
There is, the backlog, that mean typically look at, pretty clear evidence of it, the one in the truck market. And the customers have been very reluctant to expand capacity to any significant extent, right.
They don’t want to, so what they are trying to do is they managing the backlog, let say, yeah, they are trying to schedule things in as close as possible, and they are working that backlog off a little bit, but it also a function of what the new orders are. So I don’t see any -- to any extent I don’t see a larger, much larger rate of production, there’s going to be some fine tuning, but like, the production they have ramped up over the last year and to the extent that we’re going to take, we are going to build some more product, they are already in pretty good run rate to reach that level.
John Nobile – Taglich Brothers
Okay. And just one final question, I can pack up, actually you have time in the short fall, which, if there is anything new that with regard to the forced feedback title, I’m just curious, if it still not track the launch in 2012, I think, you might have mentioned this on the previous call but you…
Pat Cavanagh
Yeah. I have John and that’s an exciting new product.
We are still working on it. We’re introducing a number of different customers.
We are scheduling very selective meetings at OEMs to introduce that technology. And generally this is kind of on the leading edge and we are excited we think that it’s a technology that is going to be well adopted in the future by some of these OEMS.
John Nobile – Taglich Brothers
Okay. And regard to the full fiscal year, first half, second half, so we pin-point one, this might be introduced?
Pat Cavanagh
I would look into later half of the year and it’s one of those kinds of things, John, this is a longer term program and it’s not likely that I’m going to go into high serial production in 2012, it’s likely that we’ll build units, they will be on some test with OEMs, it’s a real system kind of product where the customer actually have to come up with some electronics and software that work with that pedal to meet the results. Now these units are up, so we have some units on test now.
We expect to put more units on test. But I’m thinking this is going to be year so out before we reached the point where we going to do introductions with that product.
So we are going to, we have capability of building it and we are going to build it and we are going start these programs with our customers.
John Nobile – Taglich Brothers
Okay. So, I could safely say by 2013, fiscal 2013, we should see…
Pat Cavanagh
You’ll see…
John Nobile – Taglich Brothers
… topline accretion…
Pat Cavanagh
Yeah.
John Nobile – Taglich Brothers
… from this?
Pat Cavanagh
Yeah. In ’13 you will see.
John Nobile – Taglich Brothers
Okay. Thank you very much.
Pat Cavanagh
Okay.
Operator
(Operator Instructions) Your next question comes from the line of Matthew Berry from Lane Five Capital. Matthew, your line is open.
Matthew Berry – Lane Five Capital
Hello, gentlemen. How are you?
Pat Cavanagh
I’m good. How are you?
Dennis Bunday
Hi, Matthew.
Matthew Berry – Lane Five Capital
Good. Good.
And good fun yesterday. Thanks for inviting us.
It’s a great day.
Pat Cavanagh
Okay. Lots of fun.
Matthew Berry – Lane Five Capital
Yeah. Okay.
So, guys, couple of things, I -- as I was sort of little bit, trying to get a sense of the mix that in truck and off-road and I have to make sneaking suspicion that that’s not by accident. Is there a way you could break down roughly NAFTA, Europe and Asia, in terms of truck and off-road the mix?
Pat Cavanagh
Well, we have that data, I don’t know, we could do it on the phone.
Matthew Berry – Lane Five Capital
Okay.
Pat Cavanagh
I mean, some of my -- if you go back in some of my comments, I kind of talk about the North American off-road. I don’t know that we talked about the European off-road, but we do talk about the Asian off-road and I think, there are in my comments.
I’ll tell you what I can talk to you afterwards about that.
Matthew Berry – Lane Five Capital
Yeah. Yeah.
Okay.
Dennis Bunday
And I might just add.
Pat Cavanagh
You have it Dennis.
Dennis Bunday
Well, I have something, but that I might add that, of our off-road, I think I understood what you are getting that, but of our off-road business, the NAFTA is still the preponderance of that and Asia, it has grown and it’s probably 20% plus minus of our total off-road business, still the largest portion of the NAFTA but and NAFTA is only growing nicely but, we’ve also seen the growth in Asia and Europe is probably about 10% of that.
Matthew Berry – Lane Five Capital
Yeah.
Dennis Bunday
Off-road, is that what you are getting at?
Matthew Berry – Lane Five Capital
That is what I’m getting at.
Pat Cavanagh
Okay.
Dennis Bunday
Okay. Yeah.
Matthew Berry – Lane Five Capital
So, the other question guys, when I look back we were, I was little bit surprise and by the gross margin number that we got this time, I know gross margin can jump around a little bit?
Pat Cavanagh
Yeah.
Matthew Berry – Lane Five Capital
But I was expecting some a little bit higher and obviously, it’s not entirely predictable, but is, obviously, there’s thing going to go on in terms of India and China in the Cuesta. Is there, when I look back, let say, 2004, 2005, when you guys were growing quite rapidly and you’re getting up to similar levels yourselves you are at now, you were putting at 32% to 33%, 34% gross margins, and so I was, but obviously the product mix was different and India and China wasn’t really there.
So what was the, and can you give me a sense of on the underlying basis now sort of excluding India and China, where your gross margin at?
Pat Cavanagh
Yeah. Now, I’m going to give you some approximation, so we don’t have exactly with India out of here, but I would say that without India, we are in the low 30s on our margin.
Matthew Berry – Lane Five Capital
Okay.
Pat Cavanagh
India is sitting us from two ways, first of all, we have the overhead in there, because we are starting up and that’s quite frankly the overhead has spread relatively smaller sales volume, because we were startup. The second thing is Pat talked about, is we are still searching components with our reliable established clients until we give that use of product base establish and that was not by accident, we really mention that, we could have a good solid launch and we did want to just do start-up and localization at the same and that costs us 25 percentage points, let say, plus minus in higher material costs.
So the India is a relatively, I guess, I would say, significant drag on earnings this year.
Dennis Bunday
One thing I want to point out about that, Matt, I don’t know if I made this very clear in my comments. We are in a very, we understand how to do this kind of sourcing out, and we’ve done this in China and we are doing exactly the same thing in India and kind of the real focus sourcing strategy and once we get our plan established, we got up in production, then we put a conservative effort on finding the right kinds of vendors that can produce products day in and day out for us.
Matthew Berry – Lane Five Capital
Yeah.
Dennis Bunday
We have identified those guys, we actually have, we’ve actually two of the number of them, and we are in the process of validating their components right now, and this also includes our sensors for this specific at least the high volume products in India that we are going to be manufacturing there, and the components that go into those sensors. We expect to have this all done by May of 2012, at that point it takes 25% out of the costs of the components that we use in the product, which is going to make a big difference in our margins in India, but we are willing to take that risk to start that up with the, we just did not want to have with this major OEMs over there and the high volumes that we’re in with this light commercial vehicle we didn’t want to take higher chance of having a vendor give us a problem, shall we one with establish vendor which costs us 25% of sales.
Matthew Berry – Lane Five Capital
Yeah.
Dennis Bunday
And one other things that we found in India that, we actually surprise that we’re binding cost in India in source there lower than some of the costs that we had in China, so and then you take out the shipping as the 20% import duty, it make us very competitive in the country in India, and it makes it more difficult for our competitors who are trying to ship product into India.
Matthew Berry – Lane Five Capital
Yeah. In the mature, and so, I can say, in mature business, what sort of percent your costs of good of sold tends to be as I had labor and materials?
Pat Cavanagh
Matt, we don’t disclose that for competitive reasons.
Matthew Berry – Lane Five Capital
Okay. Okay.
All right. And…
Pat Cavanagh
And one other thing I want to, Matt, is we just did a real competition in the (inaudible) low 30 is a fair number and also the number also had a point in there because of that inventory pricing adjustment, we had about a $165,000, if we put that on a $160 million or so, that’s about one-third on your margin, right there in the fourth quarter.
Matthew Berry – Lane Five Capital
Okay.
Pat Cavanagh
That’s the one-time deal.
Matthew Berry – Lane Five Capital
Okay. So when you say like these does not include the 16…
Pat Cavanagh
Yeah. Maybe, we look to give you an idea, if you pull just India out, we have heavy overhead in China too, because that market has ramped up, but if you pull here India out we were just north of 32%, we add another percent on to this inventory adjustment here, 33% and these are approximation.
Matthew Berry – Lane Five Capital
Yeah.
Pat Cavanagh
I mean, kind of get up in those ranges.
Dennis Bunday
Yeah. I think, one other thing I should point out is that we alternatively going forward expect higher margins with our joystick plant.
Matthew Berry – Lane Five Capital
Okay. Like six miscalled and then that all.
Dennis Bunday
That makes quarter dissuasive.
Pat Cavanagh
Higher.
Dennis Bunday
Higher. I got you little careful, Matt.
I’m – they are all listening here on the call.
Matthew Berry – Lane Five Capital
Okay. All right.
That’s it from me for now. Thank you.
Pat Cavanagh
Thanks, Matt.
Operator
There are no further questions in the queue. I turn the call back over to Mr.
Bunday.
Dennis Bunday
This concludes our fourth quarter and year end conference call. We would like to thank everyone for attending today.
Have a good day.
Pat Cavanagh
Goodbye.
Dennis Bunday
Bye now.
Operator
This concludes today’s conference call. You may now disconnect.