ATI Inc (ATI) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Allegheny Technologies quarterly earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Tuesday, July 20, 2004.

I would now like to turn the conference over to Dan Greenfield, Director Investor Relations. Please go ahead, sir.

Thank you, Dominique. Good afternoon and welcome to Allegheny Technologies' earnings conference call for the second quarter of 2004. This conference call is being broadcast live on our Web site at AlleghenyTechnologies.com and on CCBN.com. Members of the media have been invited to listen to this call.

Participating in the conference call today are Pat Hassey, Chairman, President and Chief Executive Officer, and Rich Harshman, Executive Vice President of Finance and Chief Financial Officer. After some initial comments, we will ask for questions.

Please note that all forward-looking statements made this afternoon are subject to various assumptions and caveats as noted in the earnings release. Actual results may differ materially.

Here is Pat Hassey.

Thanks, Dan, and good afternoon. Thank you for joining us today. Our second-quarter results demonstrate that our strategies are working and our markets are beginning to recover.

Sales increased 32 percent, compared to the same period last year, and operating profit increased to $38 million. These results do not reflect the benefits of our J&L asset acquisition and our new labor contract, and they were achieved in spite of a LIFO inventory valuation reserve charge of $26 million in the second quarter.

Some highlights -- first, we accomplished the acquisition of the J&L assets on attractive pricing terms. We believe this acquisition strengthens our leadership position in the global stainless steel industry. It also served as the catalyst for a new progressive, cost-competitive labor agreement for our entire stainless steel business.

The performance of our Flat-Rolled Products segment during the second quarter was especially impressive. Sales increased by 47 percent, compared to the same period last year. Operating profit reached $20 million as a result of strong demand, price restoration and the impact of our cost-reduction efforts and did not yet reflect the benefit of our new labor agreement or the J&L acquisition.

In our High Performance Metals segment, shipments of our premium titanium alloys increased by 23 percent compared to last year. Demand for commercial Aerospace spare parts improved considerably, particularly for regional jets, as revenue passenger miles began to recover. Our exotic alloys business continued to perform well. Demand remained strong for the government, high-energy physics and medical markets and from the corrosion markets, particularly in Asia.

Sales of our Engineered Products segment increased as a result of strong demand from several key markets such as oil and gas, transportation, which is large truck and locomotives, and wind energy, as well as a pickup in overall manufacturing demand.

The effects of ATI business system (ph) and our ongoing cost reductions were apparent in the second quarter. Employees throughout ATI deserve a lot of credit for these accomplishments. First, operating profit as a percent of sales improved nearly -- to nearly 6 percent, which is the highest level since the third quarter of 2000. This was achieved with even the negative impact of a significant LIFO inventory valuation reserve charge.

Managed working capital, as a percent of annualized sales, improved to approximately 27 percent at the end of the quarter, compared to 31 percent at the end of 2003, excluding again the effect of the J&L asset acquisition.

We also achieved $63 million of cost reductions before the effects of inflation in the first half of 2004. Therefore, we are running well ahead of our initial 104 million cost-reduction goal for 2004. In addition, this does not again include the previously announced $200 million of cost structure improvements and synergies we expect to realize from the J&L asset acquisition and the new labor agreement.

Cash generation over the first six months has been strong. Cash on hand was $64 million, only 15 million less than a year ago at year-end 2003, even though managed working capital increased by $111 million in the first six months of 2004. In addition, cash outlays for net capital investments, acquisitions, debt repayments totaled over $40 million in the first half of 2004. We continue to have no cash borrowings under our secured credit facility.

In addition, we reduced our other post-retirement benefit liability by approximately $331 million, reflecting the actions taken in the second quarter to control our retiree medical costs. We previously announced a $285 million reduction in this liability. The favorable impact of the new federal Medicare Prescription Drug Program provided an additional $46 million reduction in OPEB liability.

So, we've accomplished a lot so far this year and we have much more to do. We are truly transforming ATI. The J&L asset acquisition and the new labor agreement are leading to significant revenue growth potential, up to $400 million or more, and an improved cost structure. We believe we now have one of the lowest-cost paths for commodity flat-rolled products in North America.

At the same time, we have created significant new capacity for our high-value products and have the opportunity to greatly enrich our product mix. We are off-loading commodity products from our specialty melting and finishing facilities and transferring these products to our low-cost Midland, PA melt shop and our new continuous automated finishing line. With the transfer, we now have additional capacity for precision-rolled strip products (indiscernible) sheet and strip, nickel-based alloy and specialty steels and titanium products. This has been accomplished with no additional capital investment. We need this new capacity now, as demand for these high-value products is particularly strong. In the second quarter, 2004 shipments of our high-value flat-rolled products increased 23 percent compared to the same period last year.

We are a global leader in our high-value products and are growing international sales of flat-rolled products, up $100 million in the first -- up to $100 million in the first six months of 2004. That's already 70 (ph) percent of our total for last year.

As the third quarter of 2004 begins, we expect sales to grow -- to continue to grow. We also expect cost reductions and cost structure improvements to further improve our operating margins. Retirement benefit expense will be further reduced by $9 million in the third quarter of 2004.

We expect to see continued improvement in our operating results and are targeting to achieve positive earnings per share for the second quarter -- excuse me, positive earnings per share for the second half of 2004, and this is without the benefit of special items.

Summarizing, we're making substantial progress in transforming ATI to a profitable company. The J&L asset acquisition has the potential for being the best acquisition I've experienced in my career. We have a new progressive labor agreement in our stainless steel business. The transformation of our stainless steel business provides an improved cost structure and significant revenue growth potential. We see a cyclical recovery in many of our capital goods markets such as aerospace, power generation oil and gas, all driving growth, and we believe we now have the size and scale necessary to be competitive on a global basis.

On July 12, 2004, we announced a proposed public offering of shares for our common stock. Details of this proposed offering are described in the preliminary prospectus supplement filed with the SEC on July 12.

This concludes my opening remarks. Operator, would you please open the call for questions?

Thank you. (OPERATOR INSTRUCTIONS). Robert LaGaipa of CIBC World Markets.

Good afternoon. I just had a few quick questions for you. One, I was hoping you could outline the $200 million in cost savings, specifically if you could actually break that down into its components and over what time period?

I'm going to let Rich Harshman do this. We have been talking about this the last couple of weeks here and we have this broken down into the major components and also the percentages per year. Rich, go ahead.

Yes. First of all, we would expect to be realizing the $200 million fully by the second half of 2006 but the time frame -- we will certainly start to realize some of this in the second half of '04 but more fully in 2005. The major component of the 200 million is the new labor agreement, both a significant reduction in positions, hourly positions at Allegheny -- at the pre-acquisition Allegheny Ludlum, 650 hourly positions are being eliminated, as we've disclosed in prior news releases. That will be done on a time-phased basis over a period of 2.5 years at our choice. We can accelerate that if we think that that makes good business sense but at this point, we're planning on the 650 positions being eliminated and those individuals being transitioned through a TAPs payment. 40 percent of them will be eliminated by the end of 2004, 70 percent by the end of '05 and the remainder, or the full 100 percent by mid-year 2006.

In addition, the impact of the retiree medical cop that we had discussed in our June 28 release and further here today, between those two events, that's about $7 million a year of the 200 million. (multiple speakers) -- biggest piece is reduced salaried staff. You know, we substantially reduced the number of salaried employees. Prior to the acquisition, J&L had little over 300 salaried employees and we will end up with 85 of those individuals. In addition, there are other salaried reductions that we have and are implementing at Allegheny Ludlum operation -- (technical difficulty) -- salaried staff reduction is another $40 million a year of savings.

When you look at the pre-acquisition J&L cost structure, as you know, we did not take the legacy costs of J&L. We do on the hourly side. The 310 hourly employees that will become full-time employees in Allegheny Ludlum organization from J&L will become part of our defined benefit plan at a favorable benefit level, number one, lower than the benefit level of J&L -- than they had at J&L. Also, we're only responsible for future service costs, not past service costs. In total, the lower retirement benefits are another $20 million. We've identified $40 million in total synergies on the operating side as well as on the procurement side, which are detailed specifically, so we are comfortable with that $40 million level and quite frankly, as we integrate J&L into our operations, we find more opportunities there every day.

We didn't pay any cash costs for the fixed assets at J&L. They had a net book value of about $240 million prior to it being written off by Arcelor in the fourth quarter of last year, so they were running about close to a $25 million a year depreciation expense through their cost structure. Under purchase accounting, we have a nominal amount identified to fixed assets, a little over $30 million a year, but we would expect depreciation expense in the cost structure to be about $22 million lower.

Finally, there is $10 million of fixed costs that had been eliminated because of really the different approach in terms of running J&L as a plant within the Allegheny Ludlum organization as opposed to a separate, stand-alone entity, which is how Arcelor was running it. So those are the components of the 200 million.

Sure. If I could, a couple of follow-ups? One, I wanted to find out the capacity utilization at J&L, what it's running now, and what kind of ramp-up?

Are you there? (multiple speakers).

The operator.

Is anybody there?

Can anybody hear me?

Mr. Greenfield, are you hearing us?

Yes, we are now.

Yes, we are now but we couldn't before.

Could you hear Mr. -- (multiple speakers).

We heard his first question; we answered the first question. We asked for another question and heard nothing.

Okay, one moment please.

Rob, did you hear my answer?

Yes, I did.

Okay, good, because we lost you and we asked if you had a follow-up question.

I do, thanks for asking. One, additionally, I wanted to find out the capacity utilization at J&L and what you envision the ramp up to be in terms of the transition from the high-value-added stuff, keeping that in-house and moving the more commodity oriented material over to the J&L facilities.

Where are right today, the first month we had the (indiscernible) -- now, if you go back and recall, we said in our due diligence that we would operate this line after we had a technical clearance using our hot mill coils onto their line and having those verified in the field. That's with the successful trial. So we have begun production on this line the first month we had it. We produced 19,500 tonnes the first month. We are on track for 20,000 tonnes the second month and we are quoted in our information here at least 200,000 tonnes out of these operations and I think that's a low number. We're doing very well with the line; it fits us well and we're very happy with it.

Terrific. One last question -- just from a demand perspective, what are you seeing in terms of price? Are you seeing the stainless steel price increases sticking on the base? Also, what are you seeing in the commercial Aerospace and power gen markets? In the commercial aerospace, I think you mentioned in the press release they're starting to stabilize. I was just curious as to where you are seeing an acceleration versus a deceleration in demand across your end markets.

First of all, it's an interesting phenomenon. All this information around a decline or a slight respite in our stainless steel orders -- we didn't see it. We've been booking solid straight through. We've had five increases on our base prices since January, and that was before the J&L asset acquisition. All of our prices are, in effect, in the market today; they are sticking. We've had a differential in base price from one competitor who is a discount provider on base stainless for about 60 days, and that price is his and this price is ours and basically the rest of the market.

We've also decoupled many of our extras from the base price of stainless. When we are talking about surface, width, quantity, edges, texture, color, different alloys and quantities to a much higher schedule than what was previously put into the industry as of 2003. So we are seeing some price-restoration that is needed in this industry, needed in our company, and all of those are sticking in the market.

In relation to the cyclical businesses, the aerospace business, the energy business and the capital high-corrosive market businesses, downhole drilling and so forth, our schedules are full. If you're looking for high nickel-based alloy production, we are well and almost completed through the fourth quarter of 2004 in terms of bookings. Our schedules for the titanium products are now beginning to book in the first schedule of 2005. Our schedules for precision strip products outside of contract business that has an allocation are well into the fourth quarter of 2004 and moving out. We have a pretty, pretty full load and just beginning to experience this restoration of the markets. The markets are up; we are projecting some 200,000 tonnes in the U.S. over last year.

If you look at the recovery cycle for stainless, I would say this -- I would say we bottomed out in the trough of this recession in December of 2003 and are accelerating forward in the recovery market. On our cyclical markets, especially aeroengine spare parts and OEM production for airframe and so on, we are stabilized in the first half and again, orders are increasing in the second half and moving into the 2005 timeframes. So, as our current contracts are expiring and new orders and new contracts are being made in the next period of time, we are optimistic about price restoration and our ability to fill our facilities.

Mark Parr from Key/McDonald.

My question has already been asked, but did I just wanted to get any color you could give on how -- the ups and downs of spot nickel prices could impact customers' perceived need to want to stockpile or add to inventory. You kind of had a blip in the market in the second quarter and I know that you said that on your order bookings you really haven't seen anything at all but does historically -- do historically things like this lead to fluctuations in order momentum?

Yes, I will put some more color on that. When the nickel prices started to decline for about that 30 to 40-day period, we actually saw the high-nickel alloys, the high strong nickel alloys bookings start to turn down a bit, which is not unexpected as the price of that product was coming down. I think buyers were waiting to see where it would bottom out and if they could buy at the lower end of the surcharge cycle. As that nickel price turned around and it came right back to the same levels that we experienced at the end of the first quarter, we just had a surge of nickel business coming in.

So I would say what we might see is some slight delays up and down, but if you average it out, the nickel order load is very strong.

Thank you very much.

Michael Gambardella from JP Morgan Chase.

Good afternoon. I've got two questions. One, could you give us some color on your contract business, the fixed-price business in the book in both flat-rolled and the high-performance metals and give us some flavor of -- when are these contracts coming due for renegotiation on price and when was the last time? I think, in precision strip, you probably have some decent upside on those contracts. Are there others out there as well? And the magnitude?

Thanks for the question. It's a very good question because, as we look at our company and look at our recovery in pricing, I'm going to say three things are happening. One, we have the J&L acquisition and we have a low-cost commodity path which opened up more capacity for our high-priced special commodity products in the stainless business without any new capital.

Secondly, the ability of us to take cost out of this business over the last three years during that time frame was either lost to the marketplace in volume or it was priced into the marketplace, so those are what we've been through the last three years.

Now, let's take precision strip as an example for the stainless business. Usually, those are annual contracts. A good percentage of our business is under contract. Those are normally annual contracts that are negotiated in the fourth quarter of each year and then our annual contracts for the next year. So, the last time we did our annual contracts for our precision strip customer load, it was in October of 2003 and it was a different market than it is today. So I think we're going to see some substantial changes in those contracts. If you recall many of those contracts, the customer would hedge the nickel portion of that or they would have to go with the surcharges we have today, so I think we're going to see some differences as the contracts are negotiated in the end of the third quarter/fourth quarter for 2005.

On our aerospace side of the business, aeroengine and airframe, many times those are three-year contracts with the large customers that are negotiated over that time frame. Most of those contracts that we have in place were negotiated in 2001, and so we have 2001, 2002, 2003 and are coming due at the end of 2004 as we come out of this cycle. So it's an interesting situation that we now have an opportunity moving into the 2005 say through 2008 time frame, and many of these large customer contracts are ready for negotiation.

An indication of the concern maybe by the customer base in getting a reservation for capacity and getting the order load that they need to have is that some customers are contacting us as early as this month, in July, to talk about 2005 through 2007, the end of 2007. Does that help?

Yes, so in terms of the precision strip and the aerospace contracts, you are covered in terms of escalating costs; either the customer hedges or they accept the surcharges. So what you missed in these contract periods are the base price increases, is that correct?

That's correct. Where we were on the aerospace side is, back in 2001, of course I wasn't a part of the Company at that time but I think it was a good decision made that we wanted to maintain share; we wanted to maintain our current position in the market. When you do that in recessionary period in a downcycle after the 9/11 incident and the first parts of the middle of 2001, you have some price concessions and you have some other issues to deal with. But those contracts are now coming to their end.

The other side of it is the annual contracts on precision strip, which were I think negotiated again for this year, 2004, at the bottom of the cycle.

If you look at your precision strip and your aerospace business that's under contract, just ballpark, what percentage of your total sales is that approximately?

What percent of total sales or segment sales?

Just of total sales for the Company. I'm just trying to get a sense for what percent of your total sales would be under contract that has not seen a price increase.

I would say about a third of total sales.

Of consolidated sales for the Company?

30 to 35 percent.

Okay, last question -- in the second quarter, when you were doing the J&L transaction, I would assume that you had some unusual expenses related to making that acquisition. Were they in SG&A? Because I noticed that your SG&A for the total Company was up in the second quarter by about $4 million. Did you have unusual expenses related to the J&L transaction -- anything else that won't be in the third or fourth quarter?

We've had some one-time expenses but I think rich can address those better than I can.

Mike, I think that, as we outlined in our news release, one of the things that impacted the second quarter was there's some of the costs associated with the transaction and the new labor agreement, some of which would certainly go through on the traditional or the classic income statement, SG&A. The other thing we had was -- and we commented on this briefly in the news release -- we had a significant accrual for the equity-based incentive compensation program with the strong recovery in the stock of the price -- or the price of the stock. You know, that's, under accounting rules, is something that we have to mark-to-market that accrual every quarter. All of that would be running through SG&A. That's something that is a true-up at the end of the quarter. Given how those programs are put together and what the limitations of them are, we would not expect that kind of a run-rate going forward in the third and fourth quarters.

How much of a reduction would you see, then, in the run-rate of SG&A?

We included roughly $8 million in the second quarter for the equity-based compensation accrual. I would say that a more normalized accrual would be something in the 1 to $2 million range.

Thanks a lot, Rich.

Anything else?

No, I think that does it with the other questions that were asked before me.

(OPERATOR INSTRUCTIONS). Aldo Mazzaferro from Goldman Sachs & Co.

Good afternoon. I was wondering, on the labor agreement itself, could you discuss a little bit about the levels of profit-sharing or VEBA payments that might be included in that?

Well, there are certainly two different things. We do have the ability from the steelworker VEBA fund to pay medical costs for our steelworkers out of that particular fund, and I will let Rich talk about that more.

From the labor standpoint, which is a separate part of the question, we have an agreement with the steelworkers that we will work together at each of our individual plants to develop a profit-sharing plan that is appropriate for that facility, so it moves it off the guaranteed wage basis into a profit-sharing program that I think will see some benefits for the hourly employees as well as the gains for the gain-sharing it with the company. Those are yet to be done.

I see. The VEBA payment, is that something that is on -- in line right now? Is that ongoing at this point?

Yes, Aldo. The only contractual obligation we have under the collective bargaining agreement is to make, within the time frame of the contract, a 4 -- I believe it's a $4 million contribution into the VEBA trust. That's the only obligation that we have. Everything else -- we have in excess of $100 million in a VEBA trust that we've had for a number of years -- that we have the ability -- to the extent that those trust assets are more than $25 million, we use that VEBA trust to pay for and fund the retired medical obligations for the United Steelworkers at the Allegheny Ludlum operations. So, the only new -- the only funding requirement we have contractually is a $4 million funding here within the next couple of years.

Thanks very much, Rich.

(OPERATOR INSTRUCTIONS). Dan Roling from Merrill Lynch.

Going back to your comment about 30 to 35 percent of your sales, by volume, are under contract. The question I have is, does that all expire this year or is some of that multiple-year contracts?

For the most part, Dan, the position strip contracts are annual contracts, and I would say they all expire at the end of this year and will be negotiated for 2005. I would have to do more checking on the aerospace side, but my understanding -- my belief in this is that we did most of our major contracts in 2001, and those are all up for contract negotiation between now and the end of 2004.

Would it be reasonable to expect, going forward, that as aerospace recovers, that each year you would get like a three-year contract, so it would be a more normal third-third-third roll-off? But I do understand in the downturn no one was signing any new contracts.

Well, I think it's the other way around. I think we're going to be interested in a longer-range commitment for the contracts that we are offering in 2005.

You're looking to stretch these contracts out to five years-plus?

No, no, I'm not saying that. I'm saying that we have a three-year cycle and we will probably look for a three-year cycle, something like that. We will have to work with each individual account but in the end, we certainly wouldn't take anything less than a year and we would prefer multiple years, based on the shares that we have and based on the need of the customer as a percentage of our total capacity.

Last question -- are you having any problems or challenges getting any of the alloy materials that you need, or are they readily available but just at a price?

Well, we have long-term suppliers that we have locked up physical quantities with but not pricing, so although I do believe there is a physical supply constraint, I don't think it's on paper. The thing there is truly a physical constraint. We are being able to get the materials that we need.

I guess I have one more question. How is your plant in China doing? With all the concerns about China and the slowing down in China, is your facility over there experiencing any slowdown or is it continuing to show good strength?

Dan, this facility is up to its maximum capacity. The problem we have today is whether we can keep up with the orders. Now remember, as you've been there, our facilities are precision-strip. We are handling the high-end parts of the market, electronics business, computers, that type of thing. What the facilities we have there, they are basically sold out.

The other thing that we are experiencing in our international sales office out of Tokyo is that our sales will have a record year in Asia, absolutely record year.

Does that mean we should look for capital expenditure to expand that plant?

We mentioned that we are here looking for an offering, but part of what we need to do is make a decision as to what we're going to do in China. We either have to put some capacity in there, ship to China from the U.S. to support those markets, or expand the capacity at the plant.

(OPERATOR INSTRUCTIONS). John Tumazos from Prudential.

I admire very much the diversity and richness of your product mix. What do you, from your vantage point, see as the two or three strongest sectors of the U.S. economy? Are there any segments that are particularly stagnant or still declining?

John, you always ask some interesting questions!

I just respect your wisdom! (LAUGHTER).

The thing I think that is really helping us a lot is the recovery of the capital markets. We are seeing a lot of sustaining work coming our way in the stainless business for the chemical processing, chemical petro business. We are seeing a lot of U.S. makers getting foreign capital projects that we haven't seen in a long time. Maybe it's based on the weakening dollar, whatever it is in the Asian markets, so construction and mining, petrochemicals has been very good for us.

Transportation, when we look at the truck/trailer business, is about as busy as I've ever seen it in my time with Alcoa or this year. We have also the oil and gas downhole drilling for our tungsten tool business, so we have a construction business that seems to be running. I haven't seen any new numbers yet on the residential side, but when we look at our appliance business in residential construction, whether we are redoing kitchens or building new kitchens, but the appliance business is strong.

So, we are seeing strength in many different segments of the market. Automotive -- I know there are some issues there but when we look at 16.5, 17.5 million cars coming out of the U.S., that's pretty good business. For the percent that we want of the market, we are not having any problems filling up our particular share of that.

Medical continues to grow in exotic alloys.

Then I think the flattest one is probably the land-based turbine and electrical energy business, but I would have to say that there are signs of life coming there, where we have some new orders coming in, but my personal believe is that, at the end of 2005 into 2006, we are going to see a fairly strong spare parts market that took us a long time to get to in the aerospace engine business. That is a five or six-year market maturity in the land-based turbine business. Is that enough?

Let me ask a second question. You are probably aware there has been some unusual volatility in some metals prices. Given that you traditionally sell about half of your stainless business to distributors and carbon sheet hot-rolled sheets tripled -- I mean, the strikes that are happening, it maybe goes up a tad more before it ends? It would seem like a reasonable population of distributors might be bankrupt in two years. Talk about your credit controls and how you are going to keep from having an Accounts Receivable reserve that is 5 or 10 percent of sales two years down the road.

One of the things -- we like to concentrate on some pretty well respected, well-financed distributors. We do have, of course, the full variety of the marketplace. I think it's a question that we watch on a continuing basis. But we are not -- as that industry consolidates, of course then we look more carefully at the credit limits of each of our particular customers. I'm not aware that we are having any major difficulties today in collecting or any -- (Multiple Speakers). Rich, do you have any thoughts on that?

No, John, I think your question is a good question; it's something that we focus a lot on from a financial management standpoint and in coordination with the commercial organizations. We try to be proactive in working with the operating company presidents and making sure we have good risk-management controls in that area. We will continue to do that.

How much of the stainless division sales are the five or six biggest distributors?

It's probably 80 percent of our distributor sales.

Maybe 80 percent of 50 percent? 80 percent of 50 percent?

Yes, yes.

John, just one follow-up. When you look at the Flat-Rolled Products segment, the top 10 customers represent about 40 percent of our total sales. Of that, maybe 30 percent or more in the distributor/ distribution arena as opposed to OEMs. So we've got a reasonable level of diversification across our sales base, not only at the individual company level but then obviously when you bring it up to the ATI total level, it's even more diverse.

Thank you. Mr. Greenfield, there are no other questions at this time. I will turn the call back to you.

Well, thank you very much. To all of you on the phone, thank you for joining us today and thank you for your continuing interest in ATI. We think we have an exciting company, an exciting future, and we are delighted with the progress that we are making in a very short period of time.

Thanks to all of our listeners for joining us today. As always, news releases may be obtained by e-mail and are available on our Web site at www.Alleghenytechnologies.com. Also, a rebroadcast of this conference call is available on our Web site. That includes our conference call.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.