Aerojet Rocketdyne Holdings Inc (AJRD) 2005 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the GenCorp third-quarter 2005 earnings call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions being given at that time. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded. I would now like to turn the conference over to Linda Cutler. Please go ahead.

Thank you, Leah and good morning, everyone. Before we start, I would like to remind you that during this conference call GenCorp's management team may make forward-looking statements as defined by the Private Litigation Reform Act of 1995. All statements in this conference call and in subsequent discussions, other than historical information, are forward-looking statements. These statements represent management's current judgment on expectations for future operations. We encourage you to review the cautionary language regarding forward-looking statements and the factors contained in our third-quarter 2005 earnings release released this morning as well as management's discussion and analysis and elsewhere in our most recent Form 10-K and other filings with the SEC.

These statements and factors could cause business conditions and actual results to differ materially from those expected by the Company or expressed in our forward-looking statements. With that, I would now like to turn the call over to Terry.

Thank you, Linda and welcome to our call. Today, we announced our third-quarter earnings. We are going to go through this call; I'm going to make some brief comments and then turn it over to Yasmin to go through the financial results and then come back and talk a little more about the operations of the Company and what we see as our opportunities going forward.

This quarter I think we demonstrated that we continue to make progress on our strategy, which is to develop a strong and growing Aerojet business and to proceed to develop and entitle and realize value on our real estate assets. With Aerojet, obviously a lot of what has happened this year revolves around the consolidation of the U.S. propulsion industry. That consolidation is complete and we are one of two players in both the liquid propulsion market and the solid propulsion market, which is exactly where we wanted to get to.

What you are seeing from Aerojet is sales growth. You saw double-digit growth this quarter. We are projecting something in the neighborhood of 20% growth for the year and that is coming in part because of our position in the marketplace and in part because we're seeing still extremely robust demand for our products. The backlog is up 57 million to 936 million and for contract backlog we are up that amount and for funded backlog, up to 562 million.

In terms of the real estate, things happen slowly in California. But we are on schedule for entitlement of 5800 acres. We believe that we will receive the first entitlement for the Rio Del Oro project in 2006, which is what we have previously told you.

We still have a ways to go in both of our businesses, but right now everything that we can see makes us extremely bullish on the prospects of those businesses going forward. Now I will come back and give you a little more color on what we see both for Aerojet and the real estate business a little later on. But right now I would like to turn it over to our CFO, Yasmin Seyal, to give you her views on the financial results for the third quarter.

Thank you, Terry and good morning to everybody. I am sure by now you have had a chance to read our third-quarter earnings release that we issued earlier this morning. Today, I would like to focus my comments on the results from our continuing operations. As all of you know, 2004 included the results of the GDX Automotive business, which we sold at the end of the third quarter last year and which we classified as a discontinued operation for reporting purposes along with our Fine Chemicals business. Fine Chemicals is in the process of being divested and the status of which I will comment on further on in the call.

Now since the 2004 losses associated with the GDX operation and its sale were substantial, period-over-period financial performance comparisons that include discontinued operation losses tend to lose their analytical value in assessing how we look at the ongoing business and the continuing operations. So I want to focus my comments really on continuing operations and how we see the business going forward.

Looking at continuing operations for the quarter, our net loss was 5 million or $0.08 per share in the third quarter compared to a net loss of 15 million or $0.33 per share for the same period last year. Now the 2004 third quarter’s numbers included a tax provision of 3 million related to the uncertainty of realizing tax benefits in the future. And both periods include a 12 million charge for retirement benefit plan expenses, which I would like to remind you is mostly non-cash.

So if you look at continuing operations, excluding income taxes and the retirement benefit plan expense, we actually show income of 7 million in 2005 compared to a breakeven position in 2004. So you see the trends of this improvement that we have been talking about. As I go through this call, I will address the factors that contribute to this in segment performance, interest expense and corporate and other expenses.

Let's look at sales briefly. Our continuing operations generated 134 million of sales in the quarter compared to 116 million in 2004, a 16% increase with Aerojet driving the increase. Aerojet sales were 132 million in this quarter compared to 116 million in 2004, a 14% increase. Looking at Aerojet's operational performance, excluding the retirement benefit plan expense, segment performance operationally was 16 million in this quarter compared to 18 million in 2004. This performance expressed as a percentage of sales is about 12% in 2004 compared to 15.5% in 2004.

Now as we've talked about before in the earlier calls this year, Aerojet's margins are lower this year compared to last year largely because of the contract mix, which is more heavily weighted to R&D works this year and increased Atlas sale for which we are not recording any profit. In this quarter compared to previous quarters, the margin is higher too. Earlier on in the first and second quarters we were looking at margins at about 9%. Now we're looking at a margin of about 12%. This margin is driven by contract performance in the fourth quarter, which was favorable, and also the fact that those relatively minor Atlas revenues in this quarter.

Let's focus on everybody's favorite topic here, the Atlas contract and I will give you a few comments on that. We delivered only one more Atlas motor in this contract. Through August, we have in fact delivered four motors with four more production deliveries anticipated in the fourth quarter of this year. We're also working on a couple of qualification motors for Atlas and design work on the contract, which we expect to be completed in the fourth quarter. So we do expect Atlas sales to spike in the fourth quarter to somewhere between 45 to 55 million. From a revenue perspective, obviously this is good. Unfortunately not favorable from a margin perspective because the Atlas revenues do depress the overall margins given the fact that we are not recognizing any profit on this contract.

Now as we have previously discussed, the Atlas contract is currently being renegotiated. Lockheed is in discussions with the Air Force and in fact had hoped to complete those renegotiations by October 1. Obviously that has not happened. We are behind schedule in that. We are currently negotiating with Lockheed and do hope still to complete this renegotiation by the end of this year.

Turning a little bit to real estate now, our other core operation, we have not had any real estate sales transactions during the first nine months of 2005. Segment performance represents is one million in both 2005 and 2004 just reflecting the ongoing leasing activity, which is really in a very steady state. As Terry commented earlier on in the call, we are continuing to make steady progress towards our entitlement goals and do expect to see entitlement in accordance with the schedule that we have talked about earlier.

Looking at corporate expenses and other expenses, we continue to experience a favorable trend compared to last year and consistent with what we have seen in the earlier quarters of this year. We reported 4 million in expense in the third quarter compared to 10 million in 2004. The 2004 expense included a 2 million provision for environmental remediation costs. The 2005 numbers clearly reflect corporate expense reduction that we initiated at the beginning of 2005 and the fact today that we are a simpler, more focused company.

Interest expense also declined to 16 million in the third quarter of 2005 from 9 million in 2004. This improvement is the consequence of using the sale proceeds from GDX to pay down debt and our recapitalization activities that we undertook late last year and completed earlier this year.

Now I would like to turn my comments to debt and cash flow. Our net debt position, our total debt less cash as of August 31, 2005, was 421 million compared to 408 million at May 31, 2005. This represents a cash usage of 13 million during the quarter. The good news on this is that continuing operations generated cash of 3 million this quarter with discontinued operations using 16 million and that use was primarily driven by investment in Fine Chemicals, which will obviously be a non-recurring event for us as we go forward.

Looking at cash flow for the full year, the Company's cash usage has been 113 million year-to-date with 76 million being used in the first quarter. As we have talked about in prior calls, the usage included a substantial amount, which was related to timing from 2004 to 2005, our recapitalization costs incurred earlier on in the year and also our continued investment in the Atlas program. We have talked about our cash flow guidance in the last few calls and indicated that absent the proceeds from the sale of Fine Chemicals business we expect cash usage for the Corporation for the full year to be somewhere between 95 million to 110 million. I think the variable around this expectation is really what happens with the Atlas renegotiation and the contract this quarter.

We do have an $80 million revolver with 10 million that was drawn as of August 31, 2005. This undrawn revolver together with the anticipated proceeds from the sale of the Fine Chemicals business, which we expect in October, is more than sufficient liquidity to support our operating plan as we continue to make progress toward becoming cash flow positive and achieving our strategic goals.

In closing, I would like to help you understand the Fine Chemicals transaction a little bit more. As we noted in the release, back in July we reached an agreement with American Pacific Corporation to sell the Fine Chemicals business for 119 million consisting of 100 million in cash at closing and the seller note of 19 million. Both parties have been working very diligently since that announcement towards closing the transaction, which includes obtaining numerous regulatory and government approvals here in California as well and also AMPAC getting their financing in place. That process has certainly progressed well but through that process and as a result of further negotiation the purchase price now consists of 89 million in cash at closing, a seller note of 25 million and a $5 million earn-out.

In essence, if you look at the transaction, we are getting $11 million less in closing with an increase in the seller note of 6 million and an earn-out provision of 5 million. As a result of these negotiations and finalization of the agreement, we did recognize a $28 million loss in the third quarter of this year and that is essentially because we are recording the cash proceeds in income and we are recognizing the benefit of the sales off the seller note and the earn-out as they are realized.

As most of you know, we embarked on this process of the Fine Chemicals disposition last year when we decided strategically to divest the business and concentrate on our core businesses. The process has taken longer than we would like but we believe we have received a fair value for this business and do anticipate closing this business -- this transaction in the next few weeks.

In closing, I would like to say we are a company today focused on our core businesses, Aerojet and real estate. And with that, Terry will comment more on the outlook for the businesses and where we are with the different businesses.

Thank you, Yasmin. Let me talk about Aerojet first. Obviously Aerojet's performing well and we expect that trend to continue. But let's talk about risks and opportunities going forward. Obviously one of the risks that we have in our business is the congressional budget cycle, really defense spending. Today, the Senate approved a $440 billion defense budget for 2006. Our programs did quite well as far as anything that we have seen. There will be a reduction in missile defense KEI program. We had already put that into our forecast and so we weren't surprised and we're doing, as I said, quite well on everything else. The Senate did cut some major satellite programs, which don't affect us. They cut the laser-based transformation satellite program and the space-based radar program and an early warning satellite constellation program. None of those really impact us. So we are looking good in terms of defense spending on our products in 2006.

Second risk obviously is Atlas V. Atlas V has been a sizable cash investment for the Company. In fact, it's been the single largest cash outflow of any item for the year. We had hoped to finish by now a renegotiation of the contract with the Air Force and with Lockheed Martin. Again, that is taking longer than we anticipated but the one thing is certain that we will not continue to spend the kind of cash on this program and ultimately when we negotiate it we expect to see an increase in the price for our solid rocket boosters that we do on Atlas V. As Yasmin said, the effect of Atlas V is still unknown. And it could negatively impact the fourth-quarter cash flow depending on when an agreement is reached. Right now, we'd expect this program to be restructured in a way that is favorable to the Company going forward.

In terms of opportunities, one of the opportunities that we have talked about in our past calls is the NASA space initiative and opportunities to us to get a larger piece of particularly the manned space program going forward. Where we are on that is NASA has made a decision on the launch vehicle to use existing shuttle components, the solid rocket booster from AllianTech and the liquid main engine as a second stage engine that was produced by Boeing Rocketdyne, which is now Pratt & Whitney propulsion. We really -- we're not counting on having a big role in any launch vehicle. Our focus was more on the payload, which is called the CEV, the crew exploration vehicle. That is still our focus and so the decision to go with shuttle components has really had no impact on our optimistic view of our future with the CEV.

What has happened is there has been a delay in the schedule due to NASA's new approach. Their new approach is basically they want to have a larger role in the design work of the new manned system, which may negatively impact our primes. We don't see it affecting us in terms of content. Currently, the primes are expecting draft requests for proposals this month. There will be a response and we are expecting, mid next year, probably an award -- perhaps somewhere in the summer to the primes. At the same time, we have got proposals in to both of the teams that are bidding, the Northrop team and the Lockheed team, and we remain focused and optimistic that we will get a sizable piece of the CEV contract.

Aerojet also is obviously very involved in the robotic space exploration part of the new NASA space initiative and there we are still viewing that as a great opportunity for us simply because we believe we are the only ones who have most of the hardware that is needed for that program. We think that it will be late 2006 before we see any real revenues on the NASA manned space program and so until the prime contract is awarded, we expect to see very little impact on the first half of fiscal 2006.

In terms of another opportunity which we really haven't talked much about, but looks like there is potential, is our fire suppression systems. As most of you know, we have a contract to do a fire suppression system based on propulsion technology with Ford Motor Company on their Crown Vic police car. The Crown Vic has had an issue with collisions causing fuel tank explosions and we developed a technology which suppresses the fire which seems to be the only one that works with any great success. We have started now producing that product in Socorro, New Mexico and delivering that product to Ford.

At the same time, we used the same system basically on the V-22 Osprey aircraft, which was just approved for high rate production and we expect to see that program increase in volume going forward. At the same time, we recently received or told that we will receive a request for proposal for approximately 8000 units for Humvees in Iraq where they are currently field testing about 100 of our units and will, if they meet their time schedule, award that contract sometime mid 2006. That is a contract where we are competing with three other providers. And so while there is no certainty that we will win that contract, we are fairly bullish on the fact that our particular suppression system seems to be the only one that meets the specs of the Army going forward.

Both of those I think are great opportunities for us and as I said we don't seem to have much risk on the defense side and so we are still looking at performance from Aerojet that will meet or exceed this year's performance (indiscernible).

In terms of real estate, we don't have a lot of things that we can say have occurred. We continue to move forward on our application for entitlement on our three projects. Rio Del Oro is the first project; we expect to get entitlement in 2006. We are waiting on the city of Rancho Cordova to release the environmental impact review statement and they tell us that it will be out shortly. In terms of our other two projects, Glenborough is a 1400 acre project. There, the entitlement or zoning authority is the county of Sacramento. Their consultant has started the EIR and we expect again 2007 final approval on that zoning. And finally Westborough, which is 1700 acres, where the city of Rancho Cordova again is the zoning authority, we have filed an application and we are still expecting 2008 final approval.

Where we are is we are getting closer and closer to entitlement. The market and Sacramento continues to be fairly strong. We are not seeing the type of pricing increase that we saw earlier in the year but we're also not seeing a reduction in the pricing of properties here in Sacramento at the moment.

Our next strategic issue, which we have talked about in the past, is simply once we get entitlement, what are we going to do? We are currently looking at whether we sell some property once entitled, whether we increase our internal capacities and proceed to try to do the infrastructure development ourselves or whether we JV or partner with an experienced builder/developer in order to put in infrastructure to get the full value out of our property. That is a decision that fortunately we don't have to make at the moment but it is one that we expect to make in the next several quarters and so that is something that I wanted to make sure that you knew that we were thinking about.

Going forward, before I open it up for questions, I would say we remain extremely bullish on both our businesses right now given everything that we can see and we expect to see further progress towards meeting the goals of our strategy in the next quarter and in the next year. So with that, I would open it up for questions.

(OPERATOR INSTRUCTIONS). Joe Nadol, JP Morgan.

My first couple of questions are on the Fine Chemicals transaction. A, I am just wondering how much cash has been put into that business now over the last 12 months? And how is that being treated in the sales agreement in terms of recovery?

Joe, we in all honestly, probably put a fairly substantial amount of capital into the business and this capital was really needed for the ongoing growth of the business. And in the purchase agreement, we have an agreement whereby capital really essentially invested through the date of the agreement is ours and capital being invested after the day we sign the agreement is theirs.

In a situation where the business wasn't invested enough in in prior years, and this will be sort of catch-up or -- I'm just trying to understand it better.

This is really a question more of you have to invest capital in business and looking at the future of this business this capital investment is needed.

I think, Joe, a lot of the capital was invested because we had a particular customer who was asking us to increase the volumes. We did not want to lose the customer so our choice was either we invest the capital or we lose the customer. So it was really a question of sustaining the business plus right now the business has a pretty good growth curve going forward.

Okay. The second one on that deal is just why is the seller financing piece being written off for the time being? And I understand that you will book -- as the cash comes in, you will book that as profit. But is it being treated as unrecoverable right now and if so why?

Basically we had a decision to make. We consistently have been conservative in our accounting stance. But the question was we would rather not have to mark to market kind of this note going forward in our accounting viewpoint and say okay it looks good this quarter, it looks bad this quarter, it looks good this quarter and try to make decisions based upon how the business is doing in a particular quarter. We all believe and are certain that there will be a recovery of this note. However the accounting basically says that there is some judgment involved and we would rather not screw around with this and have to say okay this quarter it looks less doubtful so we are going to reduce it. And just take it all now and anything that we tell you in the future is all going to be good news.

Right. Okay. I guess secondly on the Rio Del Oro draft EIR, I know you already mentioned it briefly in your comments, Terry, but just -- have been delayed obviously a little bit here. Do you have any sense as to A, what the hold up is and B, when, more specifically, when we might see it?

I can tell you what the city of Rancho Cordova has told us. They have told us that we should see it in November. Whether they will meet that date or not obviously we have no control. I think the holdup has been a couple of things. One, there is a requirement in California that they have a general plan and they asked for a delay in providing the general plan. There is no approval for the general plan other than the city council of Rancho Cordova saying this is our plan. We don't know whether that is delaying it because they want the plan to go out first or not but there is some talk that that is part of it.

At the same time, they have still got to deal with any kind of comments that they get from U.S. agencies, primarily the Department of the Interior on endangered species and the Corps of Engineers on waterways and on vernal pools and the Corps of Engineers seems to be a little preoccupied with Louisiana right now. So I don't know whether they will meet their timetable or not. All I can tell you is they are telling us that they will.

And then finally just on the Sacramento market more broadly, I heard your comments, your brief comments, about it. But what are you seeing, not only on pricing, but also on houses, time on the market, inventory for builders, that sort of thing? Any changes?

I think what we're seeing right now from what I read is kind of a bifurcated market and what I mean by that is there seems to be a large demand for zero lot line units and condo units. There is a slowing down of demand and there has not been any price increase in terms of what you would consider traditional residential units. There hasn't been a price decline. The average price or mean price has stayed the same quarter-over-quarter. It is clear that the market is slowing down. It is not clear that there is a bubble that has burst. In fact, if everything we are reading -- and there was an article today in the local paper suggests that what you're going to see is 2 to 5% kind of growth in pricing over the next couple of years and they are still very bullish on this marketplace over the next 5 to 10 years.

Garrett Stephens (ph), Giovine Capital.

Not to beat a dead horse but on a year-over-year basis, can you talk about what you're seeing with regard to real estate pricing in your market?

Year-over-year, real estate pricing here was up approximately 23%. Now it hasn't -- from last quarter to this quarter, what they are saying is it is flat.

Okay. And in terms of your decision-making process, subsequent to entitlement, are you currently in discussions with strategic partners or are you kind of just deciding to sort of table that for the time being and pursue it once you get closer to the actual date?

Well the answer is yes and no. And what I mean by that is we talked to everybody who wants to talk to us about this. Are we so far along with anybody that we can say we are in discussions in terms of will we have a definitive agreement next week? No. Are there people interested? Yes. Our kind of requirements are we will not give up the entitled value since we're doing all the work in getting entitled to any partner but if somebody can come and show us they can add value and not require us to give up that entitled value that we will get when we get the zoning approved then certainly we would look at a deal.

And what happened with the Elliott Homes project? Have they faired any better in terms of getting their land entitled?

No, we have got a joint application with them on Rio Del Oro and their piece of the property and they have 1100 acres next to Rio Del Oro. We will both get approved at the same time.

And on the Light Rail, has that started construction?

Light Rail, I think they are going to start running it. It has not only started construction, they are going to start running it next week or the 15th of October. I think I am scheduled maybe to get one of the first rides. So that is going right ahead. They have got most of the work in and I think they are just doing the finishing touches now and so that is going to occur this month.

Eric Stevenson (ph), Hunter.

Can you review for me the rocket deliveries for the Atlas V for the quarter?

In this quarter, we delivered one motor, Eric, and in the fourth quarter, we're looking at delivering four motors. And we're also looking at two recall motors that we are currently working on. And then we're looking at substantial design work that we're going to complete in the fourth quarter.

We call all of those black bee (ph). They are more robust designs that are really going to be used going forward.

Right. I recall during the last conference call you were anticipating delivering three motors during the third quarter.

In the third quarter, yes.

What happened?

Two have slipped into the fourth quarter because of schedule and timing and then you are seeing two slipping actually into the beginning of 2006. And actually the next big Atlas launch is scheduled for January where they are going to put five of these on and launch a mission to Pluto.

At what point once you have reached agreement with Lockheed on the renegotiation would you actually start recording profits on Atlas V?

Depends on what the agreement is. We don't know enough to be able to answer that question.

Going back to the EIR process, you indicated that you expect something from Rancho Cordova in November.

That's what they are telling us, Eric. Are they telling you anything different?

They haven't yet. But perhaps you could just review once the EIR is approved, what is the process from there?

Once they approve the draft, which basically means they put it out for public comment, the minimum time I am told in which to do public comment, public hearings, is about six months. In our schedule we have put in a year for public comments and we will just see how it goes. What I am told by our veteran real estate experts is that the period is shortened or lengthened by how loud the public hearings are. So if there is a lot of controversy, you tend to have more public hearings than if there is not a lot of controversy, you tend to have shorter public hearings. Or shorter time period, fewer public hearings. Right now, we just haven't seen a lot of controversy being generated by our project.

Going to the retirement plan expense, 12 million for this quarter, do you expect that to remain relatively flat for out quarters?

Yes.

And what percentage of the contract backlog is development versus production currently?

It's probably somewhere about 20 to 30 on a rough magnitude.

We're doing about 140 million this year in R&D -- customer sponsored R&D and we expect that number to stay relatively constant.

Garrett Stephens.

Could you please talk about the potential for the fire suppression projects either in total or perhaps some of the unit economics?

You know, we can give you some rough numbers. I think what we don't know -- obviously on the Ford product we are subject to standard kind of release terms on a purchase order, a PO, and there it's a question of volumes. But the initial contract is for volumes up to 9000 units.

The Humvee proposal or request for proposal from the Army is a request for what we're told is around 8000 units. It's not clear whether they will be in such a hurry that they will split the contract or whether they will give the contract to one supplier. We are bullish on the fact that we think we will get something simply because on the spec requirements that were done here and in the testing that's so far been done in the U.S., we were the only guy who qualified.

On the Osprey, V-22 it's basically 100,000 or so per ship set and I think they're talking about producing 22 or 25 units next year as they go into full grade production. So all in all, it depends on volumes but to give you an example, the Ford contract is somewhere in the neighborhood if you delivered all of the volumes, 70 million.

Paul Ross, ING.

Yasmin, you commented earlier that the retirement plan accruals would be flat versus the 12 million in the third quarter of 2005. But as you look to the fourth quarter of 2005 and into the four quarters of 2006, what portion of these accruals do you expect to require actual cash payments?

At this point, we are looking at very, very small cash payments and any of the cash payments that we do in fact make are recoverable under our Aerospace and Defense business.

When you say very small, do you mean less than 10%?

Yes.

And how are they recoverable under your Aerospace contracts?

To the extent you make pension cash contribution in a pension plan, the government through their contract base pays you for those cash contributions. And actually, the cash contributions that we are making are mostly related to the Sequa plan when we acquired the Atlantic Research ARC business from Sequa. But if you look at Aerojet on a historic basis, Aerojet is really still together with GenCorp in an overfunded position. So it's a very small amount. But it is subject to cash contributions.

Thank you for that clarification.

(OPERATOR INSTRUCTIONS). Hillel Olshin, Deutsche Bank.

I had to jump off for a second so I apologize if this has been asked but can you give us the terms of the $25 million seller note, what the maturity is, if there is a debt amortization schedule attached to that?

Hillel, we haven't disclosed that yet and won't be disclosing the terms of the note until we close the transaction here. But it is a term that we will hopefully be collecting sooner rather than later.

Great. And also Yasmin, in your comments about free cash flow used for the year of 95 to 110 and obviously the Delta is predicated on what happens with Atlas V, are your comments that that range still is appropriate or now that there is some delay in the Atlas V renegotiation that we are probably through that number?

I think it really, really depends on exactly when the renegotiations are finalized and what the terms of this renegotiation are.

And also this 89 million of cash that you are expecting at closing in October, you will use that for what?

We are required to pay down a term loan of about $25 million so we will pay the term loan down and then we will keep the cash on our balance sheet for the time being.

You plan on keeping the 10 million revolver outstanding?

I hope not.

So you will look to pay down that term loan, which you are required to do, and the revolver?

Exactly.

Eric Stevenson.

Just a follow-up on the cash flow. What is the maintenance CapEx level now?

Aerospace and Defense typically spends less CapEx than their DA (ph). We've probably been running somewhere about 3 to $4 million a quarter on Aerojet CapEx, which includes their maintenance CapEx and their program CapEx.

Including the Atlas V?

No. There really isn't anymore capital being invested in Atlas V, Eric.

Good. That's what I wanted to hear.

We have no further questions. You may continue.

All right. Well thank you, everybody for joining us. We will look forward to talking to you when we finish the year in a few months. And as I said, we continue to remain bullish on the business. So thank you and good day.

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