AAR Corp (AIR) 2007 Q1 法說會逐字稿

Welcome to the AAR Corp. first quarter fiscal year 2007 earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. John Bowman, Director of Investor Relations. Mr. Bowman, you may begin.

Thank you. Good morning, ladies and gentlemen, and thank you for joining this morning’s conference call. Before we begin we would like to remind you that certain of the comments made today relate to future events which are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please refer to the forward-looking statement disclaimer contained in the press release issued this morning as well as those factors discussed under Item 7 entitled Factors Which May Affect Future Results included in the Company's May 31, 2006, Form 10-K. By providing forward-looking statements the Company assumes no obligation to update the forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. At this time I would like to turn the call over to our Chairman, President, and CEO, David Storch.

Thank you, John, and good morning everyone. I'm taking this call today from out of town and so bear with us and joining me of course in Chicago is our Chief Financial Officer, Tim Romenesko. Overall we are pleased with the results for the first quarter as the Company exceeded its sales and earnings growth targets and continued to significantly improve its financial performance on a year over year basis. Sales for the quarter increased 21% to $242 million, and income from continuing operations grew 127% to $11.9 million, or $0.29 per diluted share. Last year sales for the first quarter were $200 million, and income from continuing operations was $5.3 million, or $0.15 per share.

First quarter results included four special items which in aggregate resulted in a net $400,000, or $0.01 per share favorable impact on earnings. I will discuss each of these special items in greater detail in our review of each segment. All four of the Company's operating segments experienced meaningful sales increases compared to the previous year driven by strong demand for our products and services from both commercial and defense customers. Sales to commercial and defense customers increased 21 and 22% respectively as we benefited from our industry leading position in supply chain management, expanded MRO capabilities, aircraft sales and leasing activity, and the development of products for new applications.

In our aviation supply chain segment first quarter sales were $127.5 million or an increase of 19% over last year.We are pleased with the strong performance in the segment and we see many new opportunities in the marketplace as we look ahead. The Company recorded a $4.8 million non-cash pretax impairment charge to provide additional reserves for certain inventory acquired prior to September 11, 2001. You might recall that we set up a provision for this inventory in November of '01 and a minor provision following up in May, '03. The charge was triggered by our decision to aggressively pursue the liquidation of this inventory. We made this decision to recognize the impact of persistently high fuel costs and fewer operators on the demand for these parts as well as to better align resources to higher potential opportunities.

Sales in the maintenance repair and overhaul segment were $49.6 million in the first quarter, an increase of 31% compared to the same period last year. Sales were up at all of our MRO businesses and our landing gear operation in Miami had a particularly strong performance. AAR's airframe maintenance facilities in Oklahoma and Indianapolis continued to execute well and deliver solid results and we made progress on our goal to diversify our customer base at the Indianapolis facility. We expect to experience improved margins as new base load customers are added and as we gain further efficiencies at the Indianapolis facility. I might add also that Indianapolis maintained profitability throughout the period.

In the Structures & Systems segment, first quarter sales were $60.4 million, up 18% from the first quarter of last year. Demand for our mobility products remains very strong and as a matter of fact today the Company announced the receipt of a new $68 million order to supply mobility products to the U.S. Department of Defense. Deliveries for this new order will begin in the third quarter of this fiscal year. Going forward, margins in the segment are likely to remain under pressure due to the mix of products sold, but as time marches on we do expect to see operating efficiencies drive margins back to historical levels.

The Company will be expanding its cargo systems capability by opening a new facility in Goldsboro, North Carolina, in November of this year. We plan to produce cargo systems for the Airbus A400M military transport aircraft at this new location and this facility will eventually replace our cargo systems manufacturing plant located in Michigan. In addition, we sold a noncore product line from this business unit for $6.6 million in cash and recorded a $5.4 million pretax gain on the sale.

Our aircraft sales and leasing segment strategy is to build an aircraft portfolio through our participation in joint ventures and for our own account while opportunistically selling aircraft. We've discussed this over the last few years and we believe that this strategy is starting to pay dividends. The market remains very active in the market for trading of aircraft and leasing of aircraft. The Company had a net increase in its portfolio of two aircraft during the quarter and at the end of the first quarter a total of 17 aircraft were held in joint ventures and 8 were owned by the Company outside of joint ventures. The Company also restructured the lease of a 767 300 aircraft that we originally purchased before 9/11. Related to the lease restructuring, the lender of the non-recourse debt on the aircraft reduced the outstanding principal balance by $2.9 million which resulted in a $2.9 million pretax gain on the extinguishment of this debt. We also made a decision to offer the aircraft for sale and recorded a $2.9 million pretax impairment charge to reduce the carrying value of the aircraft to net realizable value. The Company reclassified both the asset and the related debt from long-term to current based on this decision.

Selling, general, and administrative expenses continued to decrease. In the prior year they were 12%. This year they were 10.7%. And this represents the lowest percentage that we've experienced since the third quarter of fiscal year 2000, and brings us closer to our goal of 10%.

Operating margin was 7.2% for the quarter and special items noted earlier reduced our operating margin by 100 basis points. Operating margin for the same quarter last year was 5.5% . So as you can see we are making great headway towards our goal here of getting operating margins up to 10%. The large improvement in operating margin is attributable to higher volumes, earnings from our aircraft joint ventures and, of course, leveraging our costs.

Net interest expense for the period was $3.3 million in the first quarter versus $3.6 a year ago or a decrease of $300,000. Our effective income tax rate increased year over year from 28 to 30%, primarily due to lower tax credits expected on export activities. The Company generated $1.2 million of operating cash flow for the quarter and capital expenditures were $6 million as we invested in the North Carolina facility. Depreciation and amortization was $8.3 million.

Overall first quarter results represent a great start to fiscal 2007 and provide a solid foundation from which to grow our business over the course of the year. The Company is in an excellent position to execute its growth strategy with improving financial results, a strong balance sheet, a new $140 million unsecured credit line and promising opportunities in the marketplace. We are executing on our commitments and we believe we are in a very unique position with a diverse portfolio of products and capabilities to serve both defense and commercial customers in a variety of new and innovative ways. So with that I would like to end my comments and open up the call for any questions that you may have out there. Thank you.

[OPERATOR INSTRUCTIONS] Our first question comes from Arnie Ursaner of CJS Securities.

Congratulations on the quarter. Can you give us the gross margin for the various segments, please?

Tim.

Sure. Arnie, the aviation supply chain segment had gross profit of $22.2 million. And that's after or including the $4.75 million impairment charge that we took. Maintenance repair and overall was $7.15 million. Structured and systems was $7.1 million. And aircraft was minus $1.3 million. But again that's reflecting the $2.9 million impairment charge.

It's been a pretty quiet quarter for you news wise and I think in the previous conference call you had talked about a very large number of opportunities out there. Is there anything you can identify that's holding back some progress on some of these additional awards or are they still in various stages of development?

Arnie, I think you've seen the growth in the quarter was 21%, so obviously we've connected on some of the things we were hoping for some of which we are either not allowed to announce or not appropriate to announce. So I think you are going to -- the momentum is very positive and I think you should consider this -- continue to expect very positive momentum.

Sounds great. Thank you.

Our next question comes from Tyler Hojo of Sidoti & Co.

Good morning, guys. I was wondering maybe you could talk a little bit more about the $68 million pallet contract with the Air Force. Specifically regarding the mix associated with that and your assumptions for the gross margin in structures and systems. And additionally, any further opportunities with additional branches of the government?

Okay. So first of all obviously we are very pleased with the order we've received from the government. The particular product that we received this order on is a product that we have a lot of experience on . It historically has lower margins than some of the other things that we do in that business unit, but we do based on the size of this contractor we do expect over the life of the contract to see the margins improve as we deliver more of these pallets. In terms of opportunities within the group, the business, the opportunities we are looking at on the cargo systems side continue to be strong. Obviously we are in a build up mode now for the A400M which we expect to begin deliveries I believe -- Tim, when do deliveries begin on that again? The end of this year, early next year?

Yes, early next year.

So again in this segment of our business there is a lot of good things going on and we expect as the Company continues to deliver against its commitments that we will see more opportunities present themselves here. We are very excited about the move into the new facility in North Carolina. It gives us a lot of operating flexibility. And it should contribute, as we get up and running, should contribute to increasing our operating margins for -- obviously for that business but also should have an impact on the overall margins as well.

When you were making your business plan within structures going into this year was this something that you were looking at when you originally made your plan?

We knew the possibility was out there. We were not certain as to whether the funding would be there or not so we put a -- a factor when we're in these situations where it's either all or nothing, what we do is we put a kind of a percentage factor as we go into the plan. So we factored this in. We probably didn't factor in the full 100%, but we did factor in some piece of this contract, yes.

Great. So bottom line is the visibility has improved here?

Yes.

Okay. Great. And just one more for you regarding Indianapolis, how many bays are you operating currently?

Six.

It's six bays, okay. And what -- I know we've talked about this on a couple of past conference calls but what's it going to take to utilize the other bays? Is it possible that United has some additional work for you or how are you feeling there?

Yes. The key here is that we continue to improve on our performance. So if the customer’s experience with AAR continues to improve I still think it's very remarkable when you take a look at the landscape that this business unit has been profitable pretty much since its inception and I believe that we are starting to build up steam. We have secured business from other customers and I would anticipate, there's always a little bit of a teaching experience as a new aircraft and a new customer comes into your facility and we are going through that to some extent with one of our new customers and I would think that as we gain that experience that, A., we will have a happy customer, B., we will make improvements to our earnings and, C., we will continue to attract new people for the balance of the facility.

So, yes, we remain -- we feel pretty good about that business. There is some seasonality to that business and -- there is a little bit of lumpiness at this stage as we are in still kind of the formative stages of the business, but I think we have a fair degree of confidence that as time marches on and as we earn our stripes, which I think we are doing, that we will continue to attract business.

The backlog of opportunities continues to be strong and positive for that business. So we are trying to -- and we are in the process of attracting some real high quality names to the facility. As opposed to, let's call it, second tier financially positioned companies to -- let's call it, the cream of the crop as it relates to this industry. So, yes, we feel we are making progress there.

Great. Thanks for that color. Just actually one more. I heard you mention your operating margin goal of 10%. Is there any reason to think that that's not attainable this year?

I would be disappointed if we didn't achieve that or come very close to it by the fourth quarter of this year which I think is what I signaled last year. So I think if you take all the special items under consideration or eliminate, if the special items hadn't occurred in this quarter obviously we would be a lot closer. And we just continue to make progress in that regard. So, yes, I'm relatively optimistic. Some stuff has to happen and we have to continue to improve our performance, but I think we are clearly heading in that direction.

Thanks a lot, guys.

Thank you. Our next question comes from Peter Arment of JSA Research.

Good morning, guys. David, just to push you a little further on the MRO, is that -- the customers you're attracting are you more in the freight category versus passenger?

We've had some freight success and we also are expecting some passenger success, yes.

Okay. And--?

But we have had -- we have already signed -- we already are performing work for a well regarded freight carrier whose name we are not supposed to discuss.

Okay. And that's -- and you think that's a business that you can continue to expand with them.

Yes, what it comes down to, Peter, is performance and we've had one if not two of their aircraft in our facility and so far at least through the first aircraft at least we expect that they were pleased with our performance results. So we have got to get a few more aircraft in and get the efficiencies right and at that point we should have a happy customer and we should have happy shareholders.

And this particular segment was about 15% higher than our estimate. Was landing gear exceptionally strong this quarter?

Landing gear had an exceptionally strong period. Oklahoma is also very strong -- and Indy is -- they are all strong but Oklahoma was -- landing gear was particularly strong.

Is landing gear, is it something that you think that momentum could continue at landing gear or was it just a seasonality aspect?

Well, it should -- we are expecting it to continue. We should the balance of the fiscal year based on recent dialogue I've had with the business unit, but based on their assessment, based on backlog and their assessment of the market it should be -- continue to be a strong year and stronger than originally forecasted.

And then just a quick question on aviation supply. That also was a little stronger than we were anticipating. Do you view that all as organic or was there some benefit from previous deals that might not have been up and running a year ago?

There are some on a comparative basis, there is some of that -- a mix of programs kicked in last August so you would have maybe one-third of a -- two-thirds would not be comparative and one-third would be. And then the second Mesa program didn't kick in until November so you should have another quarter at least of year over year improvement because of that. But in general the business itself, the business -- the business has strength across multiple product lines and it's just in a really good position.

Okay. So looking at what you did this quarter, 19%, I mean a little bit higher than organically and what you are seeing but you would expect that business still to be able to grow.

Again, I would be disappointed if the growth rate didn't continue in this range. I am not going to say 19% but I think safely in the mid-teens on a growth rate I think should be attainable and then with some additional wins I think that 20% is clearly on our radar screen.

Just to ask you on that, the wins aspect, just the opportunities you mentioned that there are in the marketplace, and there are a lot of opportunities?

There are more opportunities today, Peter, than I've seen in quite some time and I think part of that is the kind of momentum we are experiencing. Part of it's what's going on inside the industry and part of it is I think people are seeing that the services that we are offering here are effective. So we've had a few testimonials in this regard from customers and we are catching the attention of some interesting players at this point.

Right. And just, Tim, one quick housekeeping, just the CapEx for '07 where do you expect that to come out?

In the 24 million range, Peter.

How much of that is for the 400--?

Actually, David,.

That's outside the 400.

Right, right. The increase in CapEx is due primarily to the building down in North Carolina.

Which is 400 related.

Right.

Okay. Great. Thank you very much.

Thank you. Our next question comes from John Rolfe of Argand.

Hi, guys, a couple of questions. One, on the new contract that was announced, the $68 million contract, what is your expectation in terms of the term of that contract?

We should start deliveries in say the latter part of our third quarter. So in the, let's call it, the February time period. And we expect deliveries to go at least a year. They may go a little longer.

Secondly, I was pleasantly surprised at the strength in the income from JV operations line item. Can you sort of help me understand I guess a little better what to expect there going forward and how to model that?

Let me try to provide if I may, John, just a little color. If you look at our -- we've been in the aircraft business since the mid '80s. But we approach that business up through 9/11 of '01 as a kind of on our own if you will without partners. Post 9/11 when we saw opportunities we thought that -- we would be better served -- shareholders would be better served if we could find financial partners that could kind of share some of the investment with us and, of course, at that point in time the profile may have been a little bit riskier and we were looking to obviously tap into people who had deeper pockets than we did.

So the Company has since -- since we started down that path we've made numerous investments in aircraft through the joint venture vehicles primarily and we -- our business model in this respect is one that's somewhat opportunistic. Opportunistic on the buy and opportunistic on the sale. So during the period we have an opportunity, A., to expand our fleet and, B., to sell off the assets that we thought the timing was right and we could get a very healthy return. We are very return driven in this business. Our goal is to have better than 20% return on our equity. So during the lease-hold period you might be a little short of that but when you take into consideration the sale of the asset as well, hopefully that gets you over the 20%. So based on the, where we are in the cycle on that particular aircraft will determine when we will go ahead and make the sale.

Now, right now we are still building the pipeline so we expect to acquire some additional aircraft this quarter and we do have letters of intent to acquire two aircraft and today we are in the process of maybe even acquiring some more and then our, at the same time there are some assets in the portfolio that we would consider selling. And so it's a fluid market and it's -- it is a little hard to model, but I would expect that the business would continue to perform well. It will continue to meet our return hurdles and we will continue to make what we consider to be attractive investments. As we get more size it will become a little bit more predictable because we will be able to function more on a regular basis in terms of determining at the outset of the -- our plan would be to determine at the outset of the year which assets we would like to sell that particular year. We are not quite at that point but we are close to that.

If I look at in the quarter the 3, what was it 3 million that you booked there, how much of that would have been related to sales of aircraft versus sort of I guess just operations?

Tim, do you have a sense of that? Maybe half and half or maybe a little bit more towards the sale side?

Yes. Slightly more than half would be related to the sales versus the leasing.

Would it be fair on just sort of a very rough cut if you guys are targeting a 20% return to look at the balance sheet, look at the investment that you have in there in terms of the investment in JV line item and sort of apply a 20% annual return number to that to try to--?

Well, the problem is I think from, what I'm referring to really is the 20% return on each individual investment. And at any point in time in the -- you might be -- when the asset is on lease, the return may be less than that 20% and when we really achieve the 20% is upon the sale. So at some point in time when we get the portfolio at the right level then I think the assessment you're making is correct. I don't think we're there yet and we still are dealing with some pre-9/11 legacy assets if you will; one of which is the one that we were able to get a reduction in the non-recourse debt and we restructured the lease with the lessee and it's nice that now we will be putting up for sale. But we will not make a 20% return on equity on that aircraft.

Understood. How much would you expect this year to invest in JVs? From a cash flow standpoint.

Well, I think that's a function, I mean, a net investment because I think we have to look at it from a net investment because we probably will be selling some assets out of JVs. So I think what you're probably -- I think in the $25 million range would be my guess, but net additional investment. But that's subject to change based on opportunities either to sell or opportunities to buy. But we have a very -- we are very focused on this business. The business has other benefits to AAR aside from just the lease revenue and the sale income from the assets.

We also have two aircraft, for instance, today that we own that are in our Indianapolis facility undergoing maintenance and the first two aircraft that went through the Indianapolis facility came out of one of our joint venture investments. So having the aircraft activity, A., obviously needs to support its own, generate its own results but, B., it does because of the nature of our business it does have ancillary benefits to other aspects of AAR. So it's an important business, but at the same time it's a little bit hard to forecast, we have a plan in terms of what have we would like to achieve but that can be changed based on opportunities either as I indicated to buy or to sell.

Thanks very much.

Our next question comes from James Altschul of Aviation Advisory Service.

Altschul, Aviation Advisory Service. Good morning and congratulations on an excellent quarter. A couple of questions, please. First of all, looking for -- I'm sorry, I didn't participate in the year end conference call, but anyway you would have had all those cash flow numbers reported. In year ended May 31, cash flow from operations was quite negative largely because had you a big build up in inventories. Why was that and do you have any forecasts or thoughts as to what cash flow from -- whether you will be able to achieve positive cash flow from operations this year?

In fiscal year '06 we made two very large investments, in inventory to support ten-year supply chain contracts and the investments were what really drove the negative cash flow from operations, the investments in these large inventory management programs. But we also made investments, advantageous investments in inventory to support our arbitrage business and I think some of that you are starting to see flow through in this years first quarter and hopefully as this year unfolds you will see more of that kind of flow through and we are getting very good returns on assets that we've bought actually since 9/11 actually, and so we continue I think to make really good investments.

This year it's hard to predict based on program activity that we might encounter. We have one particular program for instance that we know will require a significant investment in inventory. But I might add that the inventories that we bought last year support the program. I recognize these programs are only a year in duration so far. But we are achieving our targets and hurdles that we established at the time of the inventory purchases.

Great. And I have something else. And this is -- relates back to your 2005 annual report because there was a specific reference to it in the 2006, but reference was made in the 2005 to the contract that you won in fiscal 2005 for an estimated 10,000 new 463L pallet, standard pallet employed on, you mentioned three different leading military cargo aircraft. Over what period do you anticipate that those orders will be filled?

You are talking about from the '05? The orders from '05 have been filled.

All of those approximately 10,000 pallets.

Right. Now, if you noticed today we announced an order of mobility products, largely, I mean basically that was a pallet contract so that's a replenishment to that contract.

I see. You said in response to somebody else's question that you had shipment deliveries of 40, I guess you're talking about the Airbus 400M going to start later this fiscal year--.

Actually early next fiscal year.

Are these shipments of the products you were going to make of the actual airplane itself?

No, no, no, the airplane is manufactured by Airbus.

I mean obviously there's a lead time that they usually start accepting deliveries of components before they start building airplanes but you're talking about your shipments or theirs?

Yes. Our shipments will be the -- beginning the first quarter of, hopefully the first quarter of next year. Next year for us, we are on as you know May 31, fiscal year, so by summer next year we should start deliveries. That could get pushed back by Airbus but at this point in time that's what we are expecting.

In the next fiscal year do you think there will be a meaningful number of shipments or do you think it will take awhile to ramp up.

No, I think it will take awhile to build up. So far I believe Airbus has 200 aircraft sold, give or take a few. We believe based on our assessment of that aircraft that the aircraft will be a very successful aircraft. It has characteristics I think that make it a strong competitor to the U.S. C130 and it's new technology, obviously, new engines and our cargo system we think is a very robust system and so we think that they have a chance to significantly exceed that 200, and obviously the more systems they put out the better it is for us.

Okay. Thank you very much. Really appreciate your detailed answers to my questions.

Sure.

[OPERATOR INSTRUCTIONS] Our next question comes from Scott Blumenthal of Emerald Advisors.

Good afternoon, gentlemen, nice quarter.

Thank you.

Can you talk a little bit about the economics of the new Goldsboro, North Carolina facility as opposed to what you're going to be closing in Michigan and what type of charges and the time frame?

Tim, you want to take a shot at that? I think you have Mark on your side, maybe he can help you on that.

Sure. I will go to the last part of the question first. In terms of charges we will be having some costs associated with the relocation and severance. We will be expensing those as we incur them. We also though have offsetting those costs some grants and offsetting benefits from the state, county, and municipality. So at this point at least we are not expecting a significant impact to the P&L related to the costs associated with the relocation.

In terms of the opportunity going forward, we think it's a place where we can attract high quality labor at attractive prices. We think that we need additional space and manufacturing capacity. And this particular location seems to fit the bill. So we think that not only on the A400M but for all of our cargo systems production that this new facility will provide some significant efficiencies for us going forward.

Is that going to be a larger facility than you have in Michigan?

Yes, it will.

Okay. And the number of employees there, do you expect to grow that?

Yes, we will have more employees there. The A400M contract is a significant production for us and we will require additional workforce.

Very good. And my last question is, do you have -- can you give us any clarity, any color, or a little bit of insight about what's going on at the office in China and the opportunities there and what we can expect coming out of there?

Well, in China the -- we have a sales office in Shanghai and we have a operation in Zhuhai where we support a specific customer. The general tone is very positive. And actually throughout that region the tone is very positive. So I think we should expect to see the Company continue to perform well in that region.

Okay. Thank you.

Thank you. Our next question comes from Chris McDonald of Kennedy Capital.

Good morning. To what degree was the strength in landing gear driven by the growth in the Malaysia operation?

Not really. I mean most of it -- keep in mind right now Malaysia is still more of a front if you will for our Miami operation. When I say that is that, they bring the area and they do some light -- they do some disassembly but then they send most of the major components to Miami for repair and then they come back and reassemble in Malaysia. So the -- having a presence there I think has been a positive. We hope over the next year or so we will continue to develop capability there so that we will be doing more things in country. But most of the -- most of the -- the growth is basically coming out of the core operation of Miami.

And then in regard to the margins and the Structures & Systems segment if I were to generalize would I say mix toward more pallet work generally depresses margins versus the larger cargo system?

Not versus cargo systems, but versus some other products that we have in that sector.

Okay. And then lastly on -- just on the new business opportunity front, with what you are seeing going forward are there other large opportunities like the UK AWACS or the Mesa Air deals or are you looking at larger amounts of maybe smaller opportunities?

What we are experiencing now is we're experiencing a lot of the smaller opportunities I think to your point. There are some interesting larger situations where we are in discussions. So, yes, I mean it's kind of a blend of both, but I wouldn't be surprised if there were some large situations that happened as well.

Thank you very much.

Thank you. Our final question comes from Stan Manne of Manne Family.

Good job, gentlemen. Two questions. One, do you expect to pay down any debt in this year, in this fiscal?

Well, we really have no debt due this fiscal year other than maybe some minor IRB debt but we have -- we obviously are in the market trying to buy our debt when we can on advantageous terms. As you can see we have a fair amount of cash. Cash that's invested is, it's invested more than we -- at a higher rate than we anticipated when we first started investing, but nevertheless, obviously that's not why we have the money and one use of funds is to pay down debt. So as opportunities present themselves to buy our debt we will. We do not have, Stan, any significant debt due until December of '07, and that's a public piece. So from time to time we are in the market buying that debt.

Last year, Tim, what, we bought $7 million of that debt? Right?$7.2 million or something. And this year to date I think you bought in $3 million or so.

Right. That's correct.

So from time to time we will pay down debt.

What about the EBITDA in the quarter, EBIT to DA.

Tim?

EBIT, Stan, was $20.437 million and depreciation & amortization was $8.3 million.

Last question, do you have any plans at all of buying stock at these levels or do you consider?

Well, as you might recall you we did receive approval from the Board to buy shares. We have not actually acquired any shares since then. But obviously we may. Keeping our options open in that regard at this point.

The approval was for how much.

Tim, do you have that in front of you.

One second, David. It was 1.5 million shares.

And you bought none. Any reason why not?

Quite frankly we just haven't really -- maybe we should have, but we just didn't, there's no real specific reason though. Can't answer that.

Good job, thank you.

Okay. Thank you.

That concludes our question and answer for today.

Okay. Well, thank you very much for your participation and I hope you folks are as pleased with the results as we are. Good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Thank you and have a nice day.