Don Duda - President and Chief Executive Officer John Hrudicka - Chief Financial Officer

David Leiker - Robert W. Baird Steve Dyer - Craig Hallum Jimmy Baker - B. Riley

Welcome to Methode Electronics Fiscal Year 2017 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. This conference call does contain forward-looking statements which reflects management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the Safe Harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in Methode's expectations on a quarterly basis or otherwise. Forward-looking statements in this conference call involve a number of risks and uncertainties. The factors that could cause these actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission such as our annual and quarterly reports. Such factors may include without limitation the following: dependence on a small number of large customers including two large automotive customers; dependence on the automotive, appliance, computer and communications industries; investment in programs prior to the recognition of revenue; timing, quality and cost of new program launches; ability to withstand price pressure, including pricing concessions, currency fluctuations, customary risks related to conducting global operations, ability to successfully market and sell Dabir Surfaces; dependence on our supply chain; income tax rate fluctuations; dependence on the availability and price of raw materials; fluctuations in our gross margins; location of a significant amount of cash outside of the U.S.; the effect of a catastrophic event or significant business interruption at one of our facilities; ability to keep pace with rapid technological changes; a breach of our information technology systems; ability to avoid design or manufacturing defects; ability to compete effectively; ability to protect our intellectual property; ability to successfully benefit from acquisitions and divestitures; the recognition of impairment charges and costs and expense due to regulations regarding conflict minerals. It’s now my pleasure to introduce your host, Don Duda, President and Chief Executive Officer of Methode Electronics.

Thank you, Brenda, and good morning, everyone. Thank you for joining us today for our fiscal 2017 fourth quarter financial results conference call. I am joined today by John Hrudicka, our Chief Financial Officer; and Ron Tsoumas, our Controller and Treasurer. Both John and I have comments and afterwards we will take your questions. As you saw in our press release this morning, we were very active on the acquisition front during the fourth quarter and thus far into this fiscal year. On Monday, Methode and Procoplast, an independent manufacturer of automotive assemblies, entered into a stock purchase agreement for the acquisition of Procoplast. Located close to the Belgium German border, Procoplast is in proximity to several key automotive customers. Its brand new facility includes automated assembly equipment, injection molding, and test and measurement equipment. The company produces high volume products for BOSCH, Kiekert, ZF, TRW, and others. The acquisition is expected to augment our highly successful transmission lead-frame business. The transaction is expected to close in the second quarter of our fiscal 2018 and is subject to customary conditions including but not limited to regulatory approvals. In the guidance section of our release, we indicated that if the acquisition closes as expected in our second quarter, we anticipate approximately $17 million in revenue, which represents approximately 7 months of Procoplast’s revenue. The agreement to acquire Procoplast is a transaction with a private company and the selling stockholders have requested that the purchase price not be discussed publicly, but I can tell you that Methode is paying at approximately 8 times EBITDA multiple and further information regarding the pending transaction is available in our financial statements released this morning. Additionally, we incurred $1.5 million of expense related to an acquisition we chose not to make in Asia. The company’s end markets were primarily in automotive, but also in medical, with revenue of approximately $100 million. We also announced in this morning's release that in the fourth quarter we exited connectivity and active energy solutions. In fiscal 2017 combined they represented approximately $20 million revenue. In connection with the exit of these two reporting units, we incurred $2.3 million of expense in the fourth quarter. Now, moving on to review our financial results, year-over-year fiscal 2017 sales increased 3% in the fourth quarter and just under 1% for the full year. Net income increased 1.8% in the fourth quarter and 9.8% for the full year due mainly in both periods to higher sales in the automotive and power products segment, a favorable currency impact on material and labor expenses, an international government grant, as well as lower income tax expenses. Partly offsetting these factors in both periods were lower sales volumes and an unfavorable sales mix of data solutions product in the interface segment, the exit costs I just mentioned, as well as M&A expense of $1.5 million from the potential acquisition, which I just mentioned, that we elected not to undertake. In the fourth quarter, net income also benefitted from lower compensation, legal and professional and selling expenses. For the full year, net income benefited from lower sales and travel expenses as well as one-time commodity pricing adjustments and the reversal of accruals related to a customer issue in the automotive segment. These benefits were partially offset by higher stock award amortization expense and increased legal and professional fees. Compared to last year's fourth quarter, consolidated gross margins declined 350 basis points driven mainly by the exit costs, sales mix in interface and automotive, partially offset by favorable currency impact on material and labor. For the full year, consolidated gross margins improved slightly by 40 basis points year-over-year. Gross margins benefited from one-time commodity pricing adjustments and the reversal of accruals related to a customer issue in the automotive segment, favorable currency impact on materials and labor, as well as overhead costs reductions in the power products segment. However, these were mostly offset by the exit costs. Year-over-year, fourth quarter selling and administrative expenses decrease slightly in fiscal 2017 fourth quarter. We did experience lower compensation, legal and professional and selling expenses, but these were mostly offset by the M&A expense. For the full year, selling and administrative expenses increased 4.4% driven by higher stock award amortization expense, increased legal and professional fees, and the M&A expense partially offset by lower travel and sales expenses. Year-over-year, fiscal 2017 fourth quarter operating income was $25.9 million, compared to $31.4 million last year. For the year, operating income was $110.8 million, compared to $109.7 million last year. Fourth quarter operating margin was 11.8% this year, compared to 14.8% in the fiscal 2016 fourth quarter. For the year, operating margin remained consistent with fiscal 2016 at 13.6%. Moving on to review of our segment results. Automotive segment sales increased 5.6% in the fourth quarter and 2.9% for the year compared to last year. In both periods, we experienced higher sales of the General Motors' center console and our linear position sensor product partially offset by lower Ford center console program volume, pricing concessions, and an unfavorable currency impact in Asia. Year-over-year, automotive gross margins declined to 27.4% from 28.7% in the fourth quarter, but increased for the year to 28.9% from 27.8%. Both periods benefit from a favorable currency impact on material and labor. The fourth quarter was negatively affected by sales mix and price reductions. For the year, gross margins benefited from one-time commodity pricing adjustments and the reversal of accruals related to a customer issue as well as favorable commodity pricing of raw materials we’ve received through the first six months. For fiscal 2018, we're still targeting automotive gross margins in the mid-20% range. Moving to Interface. Year-over-year segment sales decreased 11% in the fourth quarter and 9.5% for the full-year driven mainly by lower data solution product sales and to a lesser extent reduced appliances and electronic sales volume. Compared to last year, interface gross margins declined to 18.8% from 22.2% in the fourth quarter and to 20.9% from 23.4% for the year. In both periods, margins were negatively impacted by lower sales specifically in data solutions as well as the exit costs. Excluding the exit costs, fourth quarter gross margins would have been 22.2% and full year margins would have been 21.7%. For fiscal 2018, we are targeting interface gross margins in the high teens to low-20% range. Hetronic litigation costs were $2 million in the fourth quarter versus $3 million last year. For the year, these costs were $11 million in fiscal 2017 versus $9.9 million last year. The bulk of these expenses were related to discovery costs, depositions, and document review with respect to litigation with the former distributor. Discovery in the case is actively progressing, and we expect discovery to be concluded by the end of October. We anticipate Hetronic litigation costs to be $6 million in fiscal 2018, but depending on events may approach last year's level. To reiterate, we believe it is critical that we protect the Hetronic brand, prevent unfair competition, and protect our path to market in the industrial space, which is a key component to our five-year growth plan. Power product sales increased year-over-year by 13.9% in the fourth quarter and 5.2% for the year due mainly to higher PowerRail and busbar volumes. Year-over-year segment gross margins in the fourth quarter declined to 28% from 43% due to a onetime adjustment, which favorably impacted the fiscal 2016 period. Excluding these adjustments gross margins would have remained the same year-over-year. Gross margins for the full year increased to 26.8% from 24.3% positively impacted by a favorable currency impact and material and labor as well as overhead cost reductions. For 2018, we are targeting power products gross margins in the mid-20% range. As we announced in the release this morning, Methode anticipates fiscal 2018 sales in the range of $807 million to $827 million, income from operations in the range of $114 million to $127 million and earnings per share in the range of $2.43 to $2.63. Fiscal 2018 guidance considers the exit of Connectivity and AES representing revenue of approximately $20 million, approximately $6.5 million in price reductions for which at this juncture, we've been able to offset via cost reductions with approximately $2 million to $3 million occurring in the first quarter, no anticipated international grant money from a foreign government whereas $4.5 million was received in fiscal 2017, the expected closing of the Procoplast acquisition in the second quarter and associated deal costs, anticipated increased 10 Gig copper transceiver sales in the latter half of fiscal 2018, anticipated successful commercialization of the Dabir in the latter half of fiscal 2018. The guidance ranges for fiscal 2018 are based upon management's expectation regarding a variety of factors and involve a number of risk and uncertainties, which have been detailed in this morning’s release and Form 10-K. While we don't provide quarterly guidance, it is important to note that in Methode’s first quarter, we anticipate less tooling profit, the accelerated price reductions I just discussed, lower sales and related profit from our PowerRail customer who modified their releases based on a recent inventory review and acquisition costs for an overall potential impact in net income of approximately $4 million to $6 million. Methode’s first quarter can also be affected by automotive plant shutdowns in July and our first quarter is typically a weaker quarter. Moving to new business wins. In our automotive segment, we were awarded overhead console program with a North American OEM for their SUV platform. The 5-year program begins in our fiscal 2020 and represents average annual revenue of $20 million. As with the two previous overhead console awards with another major North American OEM, this OEM wanted to enhance its overhead console with additional electronics content and styling. We were also awarded an integrated center console program with a major North American OEM for three years with average annual revenue of $6 million beginning in fiscal 2020. Moreover, we received three additional integrated center console programs through our relationship with Harmon for Subaru with average annual revenue of $6 million over three years beginning in fiscal 2018. In Europe, we were awarded various programs for Jaguar, Land Rover, Renault and Ford with average annual revenue of $8 million combined beginning in fiscal 2020. Combined all these programs represent new average annual revenue of $40 million in our automotive segment in fiscal 2020. In interface, we are awarded an extension on one of our programs with Whirlpool for a Maytag branded front-load laundry program. With an expected six-year program life, this new award represents approximately $13 million in annual revenue beginning in fiscal 2019. Now let’s move on with an update on Dabir. Over 8,500 surgical procedures have been completed with no reported tissue injury. Patient outcomes remain positive in every instance where Dabir has been implemented. As we’ve discussed on previous calls nearly half of the surgical procedures currently utilizing our Dabir service relate to a cardiovascular research study being conducted at a major Midwest teaching hospital. Initial public disclosure of their preliminary findings is expected to take place at a respected Wound Care Conference in early fall. Very notably the same teaching hospital has also informed us they intend to initiate a separate Blue Ribbon clinical trial with intent to publish in medical journals upon successful completion. Again all this research is being conducted independently of Dabir. Of the hospitals currently evaluating Dabir, two are moving to commercialization. Also notable is that these two opportunities went from initial phone contact to pending purchase orders in just six months. In addition, we are working with these two hospitals to sell product not only to the specific departments, which originally evaluated Dabir, but also to other departments where pressure injury and patient discomfort are a concern. In addition to the long duration cardiovascular surgeries, this would include head and neck neurovascular radiology and electro physiology. It would also include bed and gurney applications such as intensive care units, long-term care dialysis oncology and emergency departments of these institutions. This level of interest also confirms that the Dabir continuity of care, marketing and sales has recognized value. Switching to product development, our next generation system to support nonsurgical market expansion is on track for rollout in the first quarter of next fiscal year. As we mentioned last quarter, we retained a notable medical marketing firm to assist us with evaluating the Dabir opportunity. Boston Strategic Partners was originally brought in to verify the business plan assumptions of the Dabir surgical solution. Importantly, Boston Strategic concluded the following: The market value of Dabir is likely much larger than originally expected due to its continuum of care approach and its significant potential beyond the operating room, that Dabir addresses a significant patient safety risk and has the potential for meaningful financial benefit for hospitals and other care providers alike, slow hospital adoption rate of new technology and speed to market of next generation products will be our primary challenges. We're now working with Boston Strategic to develop an app-based business value calculator that will have the ability to predict the financial impact for hospitals in advance of adapting Dabir. The app will utilize real-time publicly available data from third-party hospital quality and safety transparency sources to predict savings and outcomes for individual institution when using Dabir and Boston Strategic will create marketing materials, refine sales tools and assist with sales and training events for the Dabir team. Now, I will turn the call over to John, who will give further details regarding our financials. John?

Thank you, Don. I have just a few brief comments on the quarter and fiscal year. Good morning, everyone. The effective tax rate for the fiscal year was 19.8% just slightly below our guidance range of low-to-mid-20s. The lower tax rate when compared to prior year is due to a $4 million tax benefit recorded in Q4 for foreign investment tax credits, $1.2 million related to more income and lower tax jurisdictions and $1 million representing the change in other deferred tax assets in part offset by a tax expense of $1.7 million recorded in Q4 on a dividend between foreign entities. For fiscal year 2018, we expect the effective tax rate to be in the range of low-to-mid-20s. Turning our attention to SG&A, you will note that in the fourth quarter SG&A as a percent of sales was 13.4% compared to 13.9% the prior year basically flat in terms of dollars spent, but on higher sales. We incurred an increase of $1.5 million related to M&A expense from an acquisition we elected not to undertake neutralized by lower compensation, legal and professional fees and selling expenses. For the full year, SG&A as a percent of sales was 13.2% compared to 12.8% to prior year or $4.3 million higher. This is primarily due to $5 million in higher stock award amortization, $1.6 million increase in legal and other professional fees and $1.5 million in M&A expenses mentioned previously. Offset in part by $2.3 million in lower selling expenses and $1.5 million in lower travel. Moving to capital expenditures, in fiscal 2017 we invested $21.8 million. For the fiscal year 2018, we expect capital investments to be between $20 million and $24 million. Expense for depreciation and amortization for fiscal 2017 was $22 million. For fiscal year 2018, we expect depreciation and amortization to be between $20 million and $24 million. Shifting to EBITDA, for fiscal 2017 it was $139.5 million or 17.1% of sales. We expect EBITDA to be in the 16.5% to 18.5% range or between $135 million and $150 million for the full year. In terms of free cash flow for fiscal 2017 was $95.4 million. Based on our guidance and capital spending estimate, we expect fiscal 2018 free cash flow to be between $90 million and $100 million. Lastly I just want to bring everybody current on both our share repurchase program and credit facility. For our share repurchase program inception to-date we have purchased 2.3 million shares for a total of $71.8 million, leaving $28.2 million outstanding. Our credit facility outstanding balance is $27 million. During fiscal 2017, we had no borrowing but had principal payments of $30 million. We have $123 million available to borrow on this credit facility, which does not include the option to increase the principal amount by $100 million. Don that concludes my comments.

Thank you very much. Brenda, we are ready to take questions.

Great. [Operator Instructions] Our first questions come from the line of David Leiker with Robert W. Baird. Please go ahead with your questions.

Good morning, everyone.

Good morning, David.

Don, on Procoplast, I guess, a question here in terms of the mode of the acquisition, how much of it was a function of the product and product line extension as opposed to – sometimes you make acquisitions that is effective way of expanding the capital base for capacity, what are your thoughts on that?

Sure. Some background, our European operation has, for quite a while, felt they needed a base of operations in mainland Europe particularly in the area where Procoplast is located. We're operating in Malta, we are operating in Egypt, and larger components such as the active stability control where we’re magnetizing a portion of the steering arms or stability arm. That while logistically we can handle it, it really doesn't make a lot of sense to ship it out of Germany into one of the other plants and then back, so we were looking for where can we have a facility to handle larger product, maybe we're making some of the components in Egypt or Malta, but final assembly from a logistic standpoint, we felt in certain instances needed to be done mainland Europe, and we felt this for quite a while and have been looking maybe greenfielding a plant, which we've done in the past. Egypt was a greenfield operation, but that takes three years or so to do that, so we also started to look at potential acquisitions. What Procoplast does for us and the reason we are excited about is, one, it has a brand new plant that they moved into less than a year ago, well equipped, I’ve been there, again, good location. So, it – and it is capable of doing the magnetization that we need to do as magnetoelastic starts to expand; we think we will be able to handle that. They also do complex insert molding, which we do some of that in Malta, but they do that for the customers we mentioned. And if you look at the customer base, the competitor to Continental is BOSCH on transmission controllers.

Okay.

So, with Procoplast we pick up those customers. So for a variety of reasons it made sense to do the acquisition. We did not need – if we wanted to add capacity, we could add it in Malta or Egypt. Regionally, it made sense to us and then also a customer base. So it was a very – it’s a smaller acquisition, but it really fit into our plant.

Great. That sounds like a great addition. And then just – the only other question I have right now is just on exit of the two business units, just some of your thoughts behind exiting those operations.

We do a review of all our units at least once a year, and we’ve been talking about that – we felt that particularly in the connectivity business area that because of cloud computing that model probably didn't make sense anymore. We had very slight loss last year because we were able to curtail expenses, but going into this year revenues were going to be further down and we were going to be in the red. So that just – us doing what – expected to do is to look at those even as – and make the appropriate adjustments. Now on active energy, that market was just developing slower than we like. We bookshelf the technology and we're very aware that managing businesses like that take management time. So where should we be putting that management time and we elected to again bookshelf the technology and close the operation.

So, the comments you made on connectivity somewhat arguer to – as we look at your 10 gigabit transceiver and why do you view that as being a different opportunity situation?

Very good question. Whether it's in cloud computing or data centers, the need to go from 1 gig to 10 gig is still there. The switches can operate at 40 gig. So that's not an expansion, that's really more of an upgrade to existing data centers. So, I won't say that it is total or mutually exclusive, but it’s close. I’m not – we’re not particularly concerned about that. Past 10 gig, we're starting to see attraction there. Our major customer for one gig has tested the product and we're discussing commercial terms now, it's been through the labs. HP continues to buy product at an increasing rate. So – not completely different, but enough that we are optimistic about 10 gig.

Okay, I understand. Thank you much.

Thank you.

Our next questions come from the line of Steve Dyer with Craig Hallum. Please go ahead with your questions.

Thank you. Good morning.

Good morning.

Don you mentioned within auto a couple of awards that start in your fiscal 2020. Just curious there’s been sort of a large one that's been – it’s been lingering out there, I’m wondering what you can say about that, has that been resolved or awarded or is that still a potential for you guys here in the next couple of years?

That is – if you're talking about the opportunity with our other large customer, that is still pending and we would anticipate that they are going out for bid here sometime this year. I can't confirm from when, but that is still very much an opportunity for us.

So, we’re likely -- would you say at least a year off from an award there?

It's up to the customer. No I don’t – I think we'll see that in this calendar year.

Okay, got it. Any comment, I guess, around that as to how you feel your position presumably fairly well given some of your other successes in relationship?

It depended on the customer – decides to bid it. With GM, the screen is involved, with this customer it usually isn't. So it depends what the package will look like from the customer. I know they are still evaluating exactly what the configuration should be. Every time I get asked this question, I don't wanted say too much because it is a competitive situation. We have to be conscious of the customer’s wishes as well. So it's about all I can say.

Okay, got it. And then I guess just last question for me. A few years ago you laid out kind of a target and a composition package around 9% to 10% EBITDA CAGR through 2020, is that still a goal that you think is achievable or has anything kind of puts or takes moved around there since that was initially sort of laid out?

First of all, we very much believe it's achievable and certainly the awards we announced this morning certainly help that. I’d say in the past Dabir is a factor in that, not heroically, but it is a factor, so that’s something that has to happen. Now we never had connectivity or AES in for big numbers for 2020, but they were in there. But we had also at one point in fact in the original plan we had taken our appliance business to zero because of – Whirlpool has changed to more of a in-house design and then go out for built to print to contract manufacturers, which we generally don't participate in that. But what has changed since then and you saw the award, the award we announced this morning. We now feel that we will continue to have a good business with that customer. They've changed their approach. So, while some things gone out, that's actually a rather large one that has come back in plus in the interim while we were – maybe we get along with that customer, the group refocused on commercial cooking and also – and vending [indiscernible]. So we see that growing as well. So, a number of ins and outs, but we're still very enthusiastic about that. And I can't really talk – say anything more about the acquisition we didn't make. We weren't quite at the altar, but we were in the church. We have been through a good portion of due diligence that also would have contributed to 2020. So we are enthusiastic about it. We are planning on that. We are obviously incentivized to that.

That’s pretty helpful. Thanks, Don.

Thank you. [Operator Instructions] Our next questions come from the line of Jimmy Baker with B. Riley. Please go ahead with your questions.

Hi. Good morning, Don. Good morning, John.

Good morning.

Good morning.

So you're going through it seems about a $0.12 headwind to earnings from the litigation spend, I guess, it’s a little less than half the fiscal 2017 headwind, right? So, should we take that to imply you’re optimistic about a resolution midway through this year, but if it does go to the full year then that's when the language – you mentioned I think that it could approach fiscal 2017 levels, then that number about $11 million spend would come back into play?

Jimmy, I make the attorneys nervous whenever I comment on litigation. So if you don't mind, I think I'll just stick with my prepared remarks there.

Okay, fair enough. Just switching gears then over into interface. So I'm just hoping you could speak a little bit more about what could pressure the gross margin there into the high-teen that’s pretty low for that segment, which I guess is counterintuitive if you’ve exited the – a fairly unattractive business?

That’s a good question. We are taking a little bit of a wait and see approach. 10 gig is – well, it is gaining momentum, that's going to be latter half of the year that we are encouraged with what I talked about earlier with our prime time customer for 1 gig and then HP as well. So that's a factor there. It’s probably more of us just being cautious that let's see how 10 gig goes. Appliance is – lately has been up, not every month, but Whirlpool has had some good success. They had help from [indiscernible] competitors that has helped us. And then we really want to see where Hetronic goes in the first half of this year. I don’t want to say that there is conservatism in that, but there's probably some room.

Okay. And I just wanted to go back to the 2020 plan, if we could. So you talked about your conviction and that target still – can you – and I understand that there are many puts and takes and there are various scenarios that can get you to that level. Help us understand in terms of just the automotive backdrop. Is there a SAR level where if we're below, is it $16 million, is it $14 million, where you feel like at that point or below it's really compromised your ability even if some other things go very well for you?

I don't know that we’ve related to a SAR level, but obviously in 2020 if there's a downturn in automotive that affects our key platforms, which would be pickup trucks and SUVs, we are going to be affected by it. And that's a risk that we knew when we initiated the plan. We could also be in a full blown economic recession at that time, which could – which is going to affect everybody. Both of those events would affect certainly anybody that's in the automotive segment. So when we look at that plan, we – that don’t look – SAR is so much as we look at what is LMC showing through the platforms that were on. Given those projections, an LMC doesn't take into account any type of a downturn. Given those projections, we feel comfortable in our automotive – the contribution that our automotive group will give to the plan. Now, if there is a downturn in auto and Dabir is where we expect it to be, that could be offsetting. If we do an acquisition, that could be a non-automotive acquisition, that could be a offsetting. So, we run those scenarios, but that's still several years out and that is definitely out of our control. Other than – you know, what can we do in our other businesses are still potentially off something – offset something like that.

Okay, got it. Just lastly more of a housekeeping item. What's assumed in the guidance in terms of the average full year share count and any discussion with the board in terms of increasing that share repurchase plan?

Yeah. Jimmy, share count is 37.5 million. And I apologize, what was the other part of your question?

Just if you’ve had any conversations with the board about adding and expanding to that share repurchase program, I think, about three quarters the way through it at this point?

Well, we have discussions every quarter on that. And at this juncture, we didn't do any – last quarter we were looking at a larger exposition, so from that standpoint, we didn't go any further. We still have little ways to go on that. And then – so if we're – if we continue to look at acquisitions, it really depends. We make an acquisition, a larger one then maybe we won’t expand it, if we don’t then I think we will ask the board to continue it. We are sitting in a very good cash position and it makes sense if you're not going to use it for an acquisition or expansion within the company that we do something like or with the dividend.

Okay, understood. Thanks very much.

And then I just want to clarify what I was reach for before is commercial foodservice, not commercial cooking and vending where our touch sensitive group is pursuing and they also are pursuing on controls for gas pumps putting our touch sensor technology there, so that’s another area that we are working on. And so we do also came from Whirlpool, so we are feeling very good about touch sensors as we go into our 2020.

Thank you. Our next questions come from the line of David Leiker with Robert W. Baird. Please go ahead with your questions.

You just created a follow-up question for me. You said commercial foodservice and what’s the other one?

Vending.

Bending?

Vending.

Vending, got it.

So putting touch sensor on…

My ears figured it out. Yeah, because you’ve talked for a long time about a soda machine product right or…?

We are on a small program that Coca-Cola is coming out with. So the team has made some progress. I just want to clarify to commercial cooking in that I was…

Yeah, yeah. And vending, is this in restaurant or like a dispensing machine?

Right now, it’s in restaurant, but it could also be on Coke or Pepsi machines. Our hyper-touch technology allows us to work with vending and that it doesn't require any – or allows for space in between. The typical touch cell has to be in contact to the surface of [indiscernible].

Right.

That doesn’t require that. So that’s why we’ve gone back to the Coca-Colas and the Pepsis on that.

Yeah.

And then the gas pump application, the three select buttons are a large warranty issue for the pumps and then again the gas stations and we have demonstrated our ability to make them very robust using our touch technology. So that – in the lull while we are trying to figure out where Whirlpool – where they were headed and their vendor base team was redirected, so what we think now is that you’ve got Whirlpool back in the fold if you will and plus these other applications.

Okay. My real follow-up question was General Motors’ full size pickups. There is a lot of discussion about the model changeover there, they are closing down the plant to retool and then the switch over. What are your thoughts in terms of what you can share on the timing of that and the impact of that for you over the course of the next year?

David, I have to be very, very careful on what we say there and it’s up to the automaker to announce when they are going to launch the product.

Yeah.

But probably more of a fiscal 2019 effect then it is here in 2018, but again I really can’t say too much about that because I have to respect the customer’s wishes.

Do you – let me ask it this way. What kind of a revenue impact do you have – it doesn’t sound like there’s much of an impact in 2018 for you – revenue impact?

That’s correct. Yeah, yeah, exactly.

Okay. All right. That’s all. Thanks.

All right. Thank you.

Thank you. This concludes our question-and-answer session. I’d like to turn the floor back over to management for closing comments.

Thank you, Brenda, and we will wish everyone a pleasant summer and we will talk to you in the fall. Thank you so much.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.