ATS Corp (ATS) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the ATS fourth quarter conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session. (OPERATOR INSTRUCTIONS).

I remind you that our presentation today may contain forward-looking statements reflecting the Company's expectations regarding its future growth, results, and performance. These forward-looking statements reflect the current use of the Company's management and are subject to various risks and uncertainties which could cause the Company's future growth, results, and performance to differ materially from those expressed in or implied by the statements. Certain of these risks are described in the ATS annual report. ATS disclaims any intention or obligation to update or revise these forward-looking statements. This call is being recorded for replay purposes on Thursday, May 20, 2004 at 10 AM Eastern time.

I would now like to turn the conference over to Klaus Woerner, President and Chief Executive Officer of ATS. Please go ahead, Mr. Woerner.

Thank you very much, operator and good morning, ladies and gentlemen. I'm joined today by Ron Jutras, Mike Cybulski, Carl Galloway and Bruce Seeley. If you have read our fourth-quarter report, you'll notice that we are considerably more optimistic and upbeat than we were back in the time of our Q3 call. In fact, we are more optimistic than we have been in quite some time.

Why? For a few reasons. Number one, our Automation Systems bookings and backlog climbed sharply in the fourth quarter, in fact, our Q4 bookings were at a record level. Higher demand for the last couple of quarters has enabled us to be more selective in bidding on new orders. That in turn has allowed us to be improving our quality of our backlog and should have positive impact on future earnings. As a result of substantially healthier volumes, it is a much better capacity utilization. In fact our Canadian automations systems division are already back to very good levels.

Number two, we're seeing far greater optimism among our customers as well. In fact, we've seen tremendous opportunity in health care. That is a key driver of our backlog right now in our bookings. But to be clear, we're getting a substantial number of requests from (indiscernible) in all of our markets, including computer electronics and automotive. That's a very good sign, because it signals a broad-base recovery.

Quotations are not firm orders, but we always apply caution, but combined with recent booking activities, the evidence suggests continuing growth, obtaining ability for us to be selective in the type of work we pursue. That should have simple and solid impact on Automation Systems figures in the future.

The third reason for optimism is we are anticipating an ongoing ramp up in volumes on previously announced automotive contracts, now on Precision Components Group.

And 4th, we like where we are in solar right now. Our Photowatt's division made a solid contribution to revenue and operating earnings growth fiscal 2004, and we're striving to make that continue. Marketing conditions for solar seem very supportive and of course, we are also getting very close to commercialization of Spheral Solar power, which we will talk about a bit later on.

What I would like to communicate today is that our outlook has improved, we're happy about that, but we're not, of course, never satisfied. Yes, revenues, backlog, bookings have shown a tremendous improvement both in the quarter and for the year, no doubt about that. Operating margins for Automation Systems and solar have also come along. In the case of PCG, ASG sorry, should be assisted by the quality of orders in backlog. But there is still room for improvement in both groups. Precision Components Group results are clearly not acceptable.

Our number one goal for fiscal 2005 is to restore profitability, growth over all. We will not be satisfied until we reach that goal. To do that we must sustain revenue growth and continue to selectively and be strategic in the customer assignments we seek out, enhance utilization and earnings for our non-Canadian operations, achieve better efficiencies in Precision Components Group, which combined with the continuing ramp of our custom volumes, should help to offset the foreign exchange challenge. Our goal is to get these operations back in the black as soon as possible in fiscal 2005, which includes of course, our target of breakeven or better profitability in the current quarter. And execute a strategy to improve thermal products, which acted as a significant drag on precision components operations last year. This is our roadmap for fiscal 2005. We have more on the goal on these items, because as always, we are committed to keeping ATS in a position for value creation beyond the near term. But they also are our primary focus because proper execution on these tasks will deliver profitable growth.

I'm now going to ask Ron to provide a brief financial overview, and when I return, I will talk to you about SSP and a couple of other developments that are pretty important to our future. Ron, please go ahead.

Thanks, Klaus. And good morning. Before we get started, I want to make sure you have had a chance to see our fourth quarter press release which was issued at 8 this morning. If not, it can be found at our website at atsautomation.com and at Canon newswire's website at newswire.PA.

Because the MDNA (ph) included with the press release and financial statements contains a detailed review of our performance and shows our substantial balance sheet strength, I'm going to limit myself today to some summary comments. The first and most important is that we believe fiscal 2005 holds considerable promise of stronger earnings and margins for ATS. Opportunities for growth have accelerated and we are much more optimistic. Our optimism is grounded in higher order backlog and bookings in automation systems group and our growing success in health care, strong order prospects, and indications of better market conditions over all.

I will talk about order backlog bookings in our future shortly, but first I want to review some important items from Q4, beginning with the bottom line, and more specifically, special charges. There were three in the quarter. The largest representing 2.8 million before tax and 1.8 million after-tax, is a provision for non-income related tax reassessments by the province of Ontario. These go back to the years 1998 through 2003 and concern two separate areas.

The first and largest arises from the workers safety and insurance board decision to reassess our labor classifications and do higher rate categories. Even though we received favorable experience ratings and in fact rebates in each of the years in question. The second reassessment also by the Ontario government is for capital taxes. Its based on the government using a different calculation of our taxable capital base upon which capital tax is determined. The reassessment is a change in the approach we have used for a number of years, one which was previously audited and accepted by the provincial auditors. We don't agree with either of these reassessments and we are preparing to appeal them. The outcome of the appeal is uncertain, however, and therefore we recorded the full amounts, including interest, as a special charge in the fourth quarter. These are tax deductible.

The second item was a 2.7 million write-down for impairment in the value of a portfolio investment. ATS has, from time to time, made strategic investments in companies that possess emerging technologies and we believe could have excellent future applications in our markets. In this case, the investment was made in a small semiconductor company which had promising technology and the financial backing by one of the largest semiconductor companies in the world.

The downturn in semiconductor over the past few years and the difficulty that that company is currently having in raising additional capital makes the current write-down appropriate under GAAP. The write-down is a non-cash charge, and because it's a capital loss, we have not recorded a tax deduction on the charge. By the way, the remaining total book value of our portfolio investments is roughly $2.6 million and we're satisfied with this value.

The last special item was a write-down of $2.7 million before tax, $1.4 million after-tax, on certain redundant fixed assets in PCG to their net realizable values. These assets were freed up during the past two quarters, and since we do not have any immediate use of the equipment, they have been written down to an estimated liquidation value. The tax benefit of the write-down has been recorded in the accounts.

These special charges were very disappointing for us and had a substantial negative impact on fourth-quarter results, pushing us into a loss for the quarter and for the year. These unusual charges were not reflective of our operating performance in the fourth quarter. To understand how the underlying business performed in the quarter and its progress, you must look at operating earnings. Here you can see that the fourth quarter showed strong improvements.

This is well covered in the MDNA, but just to highlight, Automation Systems Group's operating earnings increased 90 percent compared to last year's fourth quarter. And operating margin improved a 5.5 percent from 3.9 percent. This is a good start, but operating margins are still significantly below the double-digit margins produced in 2000 and 2001. And it is those high margins that we want and are striving to achieve.

Canadian Automation Systems operations were the primary contributors to the substantial improvement in operating earnings. In fact, operating margins here in our Canadian facilities are now into double digits. And based on higher utilization and the quality of our backlog, are progressing nicely towards the historical levels of 14 to 15 percent. This is in spite of the weaker U.S. dollar. Our goal is to bring the performance of our non-Canadian operations up to similar levels and we're working hard to achieve this objective, especially in the West Coast and in Europe. More robust market conditions should help improve utilization in earnings in the plants that act as a drag on our results in fiscal 2004. But as we noted at the time of our last earnings announcement, we also made management changes in our West Coast operations in the quarter to strengthen overall project execution, performance and margins. We have also seen improved order flow and quotation demand in Europe recently that should help generate improvements in Europe.

Total groups results also showed excellent improvement. In fact, Photowatt made a strong contribution to ATS in fiscal 2004 and capped that off with Q4 revenue growth of 170 percent. As a result, solar operating earnings reached $2.1 million, a $2 million increase over Q4 of last year, and it contributed 4.2 million to fiscal 2004 operating earnings. Our outlook for Photowatt and for solar overall is favorable. European demand, in particular, is strong and the future of (indiscernible) power is extremely promising.

Turning to Precision Components Group, although the Canadian dollar has stabilized over the past few weeks, the exchange rate did have a big impact on PCG year-over-year earnings. As you'll see from the table in the MDNA, this was an estimated $2.6 million negative impact in Q4 and $7 million for the full fiscal year. There were also other factors at play in Precision Components Group. We continue to experience high launch costs on a number of new customer programs, incurred a number of non-customer extra costs, which totaled $1.1 million in Q4. The largest of these expenses were to reduce the workforce as part of our cost reduction and efficiency improvements, which we talked about last quarter. The results of consulting expenses to enhance the groups' business system operations and implement TS16949. TS is an important quality in cost reduction initiatives that will improve our efficiency and save us money in the future.

As Klaus said, PCG's results are not satisfactory and we are committed to returning the operations to profitability in spite of the currency impacts. PCG's should benefit from five main factors in fiscal 2005.

First, we believe the costs associated with new customer programs will decline in the first quarter, along with an acceleration of volumes. Second, consulting expenses related to the TS initiative are now largely behind us. In fact, they are entirely behind us. Third, PCG's initiatives to secure lower-cost component supplies and tools from Asian sources should provide additional benefits in this new fiscal year. Fourth, we are aggressively making changes to reduce cost everywhere by reducing our workforce through each efficiency gains, U.S. sourcing, and continuous improvement. And lastly, we are negotiating price increases and rationalizing areas of our business that are not profitable.

My final summary comments concern Automation Systems Group's order booking backlog and our outlook. Bookings in the quarter were nothing short of superb. At $184 million, ASG order bookings were at their highest level ever. Not surprisingly, given the dollar value, there were a large number of orders booked. To give you some granularity in order booking, 28 orders were in the range of 1 to $4 million in value. Five orders were in the 4 to $10 million range. There was one order for between 10 and $15 million, and this was from a repeat computer electronics customer. And the largest order was the U.S. $34 million assignment for a repeat health care customer that was formally announced in April.

The systems under this large contract are scheduled to be installed in a phased approach at the customer's facilities during calendar 2005. In other words, the orders came from a wide variety of customers and they also came from all of our core market segments -- health care, automotive, computer electronics, and consumer products. The broad-based nature of our order booking is a positive indicator of our market positioning. And also that our markets are improving. This is another reason for optimism.

As a result of record high order bookings in Q4, period-end order backlog was pushed to $227 million. That is a very healthy level for the start of our new fiscal year. This is a level which we have not seen since fiscal 2001, a record year for earnings, I might add. Order backlog isn't only large, it's of high-quality. Meaning, we believe, contains a good mix of repeat and new systems work with good margins. And it is well diversified both by industry and by size of order. The industry makeup is disclosed on page 12 of the MDNA.

Clearly, as a result of our strategic initiatives, there was a big boost in Automation Systems backlog in health care during the fourth quarter. Although not quite as dramatic, we also saw a 41 percent increase in backlog in the segment we refer to as "other." Primarily these were orders from consumer products customers. Naturally, it's going to take time for the quality of the backlog to be revealed in earnings, but in our view, order backlog gives us a great platform to improve our performance in fiscal 2005.

Before I turn it back to Klaus, one final comment. I believe the results for Q4 and our expectations for earnings recovery in fiscal 2005 are a reflection not only of better market conditions, they had been made possible because we remain committed to a strategy we adopted three years ago. A strategy that saw ATS used the downturn to invest in developing our people and enhancing our technical skills, investing in our global market presence, and investing in strategic marketing to target health care and pharma sectors. In fact, in the past three years we have invested over $200 million in new technology, facilities, and production equipment, strategic acquisitions, and our Spheral Solar power initiative. These investments are only beginning to pay off and they will be key drivers of what we expect will be rapid growth and better profitability in the years to come.

I will conclude by saying that we have many reasons for optimism and we continue to have the balance sheet strength to employ all of our strategies for profitable growth and enhanced shareholder returns. Klaus?

Thank you, Ron. I will complete the call with a review of the three items that we believe are important to position ATS to drive future growth. First is the introduction of TS Compliant Solutions. We announced the launch of this service in the press release at the beginning of May, so I will confine myself to a very brief update only. Since we announced this creation of this unit, four clients have already signed up to use ATS Compliant Solutions services.

This does not surprise us for two reasons. First, the team we have assembled is headed by a very experienced and respected member of the health care community who has a lot of connections and a lot of substantial amount of direct health care process knowledge. Secondly, there's a tremendous need for this type of specialized consulting service. Because of the complexity in regulatory requirements involved in health care, pharma, manufacturing, (indiscernible) automation to purchase and satisfy the qualifications set up and validation requirements is a very difficult and time-consuming process for our customers. ATS Compliant Solutions makes this process easier and faster and that in turn should return the purchase cycle time for our customers and the sales cycles for us.

ATS Compliant Solutions exists to help the client determine exactly what kind of automation that they need before they make their request for quotation. And it stays with the client all the way through to ensure that once installed, the system is fully qualified by the FDA and/or other regulatory bodies. In other words, it starts working with the client well before our Automation Systems group will be on the scene and well after. No other service like it exists in the market today. We believe it will make an excellent contribution to our prospects within pharma and health care because it will create our customers' knowledge of automation. It will enhance our understanding of what customers need, and we'll extend our interaction with customers beyond the capital equipment purchase cycle.

This service is part of ATS, but it is independent in that it is also free to recommend other solutions that ATS may not be providing, but it will provide the best solution for the customer. To reinforce its dependence, ATS Compliant Solutions will charge and hourly consulting fee which won't be material to our revenue stream, but orders that we believe will flow as a result of our service, will be.

The second items that is important for growth in technology development, again, we have an active agenda keeping with the health care theme for a moment. We recently showcased a prototype of our new ultra-clean aseptic robotic technology called VHP, or Vaporous Hydrogen Peroxide-compatible robotics. We believe VHP will be the first automated robotic solution capable to withstand the harsh sterilization retreatments required by aseptic process environments. We have been working on developing it for the past year and aim to commercialize it by the end of calendar 2004. Furthermore, we expect our first sales to be made very quickly thereafter to a global pharmaceutical company that will help us to test and qualify our new VHP technology.

VHP is one example of technology development that will add to our future value creation. An example of that has already been created -- has already created value is our high-speed, fully automated ATS machine vision systems for pharma. These systems were prototypes in fiscal 2004, we secured or first order for them, valued at almost $3 million, in the middle of Q4. Because virtually everything that's manufactured by pharma and/or health care companies is suspected -- this platform technology is a very important addition to our technology. ATS puts everything we know into our visions inspection and in these systems, and results -- we can see things competitive equipment cannot.

The first us of our technology will be inspection of prescription drugs. However, we have designed the platform to be capable of inspecting products over a common range, a wide range of formats, including vial, plastic (indiscernible) refill syringe packages.

The point of discussing this technology is simple -- our portfolio continues to expand, and with expansion comes more opportunities to secure the kind of strategic business that will drive profitability and revenue. The development of standard technology is vital to driving margins and manufacturing efficiency within ATS and manufacturing throughput that is critical, particularly in dealing with the surgical market.

Third item, which was announced today, is our Asian strategy. ATS has had facilities in Asian Pacific for the past -- better part of the past decade, because we follow our customer. But now, we have decided actually, based on customer demand and economics, to strengthen our presence there. Take the lead, somewhat. We have acquired land and we will build a 50,000 square foot facility in Malaysia, Penang, to be specific, over the course of next year. And this facility will replace a small leased factory we already have in Penang. By taking this step, we'll increase our ability to serve customers in that area. We are expanding our Asian manufacturing and we well capitalized on the availability of skilled and semi-skilled workers in the region. Using a local Malaysian workforce, this new facility will build (indiscernible) automation systems for consumption in the region. This will help our cost base and therefore margins.

Why have we chosen Malaysia? It's British roots means that the language used in English, they use English, and laws and legislation are based on the same system as ours in Canada, giving us and our customers IP protection. ATS has also been granted tax incentives as a technology-based company. And we estimate skilled labor costs at roughly 30 percent to 35 percent of what they are in North America. In other words, this move makes economic sense for our future.

I ended my prepared remarks last quarter by saying that every one of us here is committed to making -- to getting back on track on an earnings perspective. I conclude this time by saying that, from an operating earnings perspective, we've started to get back on track. Improvements are still necessary and we remain, therefore, committed to producing better bottom-line results all the time, especially in fiscal 2005.

Now Ron, Mike, Bruce, Carl, and I would like to be -- would be pleased to hear your questions. Operator, would you please turn the listening audience on with the questions please?

(OPERATOR INSTRUCTIONS). Cherilyn Radbourne of RBC Capital Markets.

Hi, guys. I wonder if we could dig into the impact of foreign exchange, both on the fourth quarter and for the year as a whole in a bit more detail. The press release does indicate that foreign currency reduced earnings by 8 cents per share in the fourth quarter. And I'm just wondering what exchange rate that reflects, including any forward contracts that you had in place? And how would that compare to the actual market exchange rate during the quarter?

Carl, maybe you will take that question?

You are looking for the effective rate?

Yes.

I will be back to you in a moment on that one. It was plunged among the hedges in the quarter, and I will let you know shortly.

Okay. My next question really relates to the mix between translation and transaction exposure. And the press release does indicate that translation exposure was not material in the fourth quarter. I'm just wondering whether translation exposure was material for the full year, or is the $0.19 currency impact for the year primarily transaction exposure?

It is mostly transaction-related, and would not have been material.

Okay. And so then, effectively, the transaction exposure you've basically increased to $12 million increase in your cost structure, mostly in PCG? And you talked to us about some of the initiatives that you are undertaking to offset that?

Yes, I think that the tables actually break out so you can see it by segment. So, yes, I agree with you. You can take a look at the granularity by segment by the tables. That is why we provided it.

Okay. And did I hear your right in your comments that you do anticipate being breakeven in PCG in Q1 of '05? Or for the year as a whole?

That is our goal, to move to that level in Q1.

Okay. The next question is related to the bookings -- I think if I heard you right, you said that the $34 million health care contract was for delivery on a staged basis in calendar 2005? So would that mean that part of it might hit your Q4 fiscal '05, but the bulk of that is probably in fiscal '06 for you?

As you know, we recognize our revenue on a percentage completion basis.

Okay.

Therefore, we'll recognize as we complete the work, as in accordance with GAAP, and we just gave you an indication of when delivery would take place. This will start to have an impact on revenue and earnings almost immediately. And it will be a progressive scale, as our projects typically unfold.

Okay. That's helpful. And just last question, quickly, could you give us the third-party revenue percentage in the quarter?

Sure. Just a second. May we can take another question, and I will get back to you with that number.

Okay. Thank you. I will get back in queue. Thank you.

David Tyerman, Scotia Capital.

Good morning. First question is on foreign exchange -- related to ASG. It seems that it still hitting the division fairly hard, which I guess, I'm not surprised, given that the dollar is probably -- the rising dollar is probably still in your backlog in the quarter. But I would guess that it is coming down over the next few quarters. Can you give us some sense of how that will play through?

Well, I think that what we're saying is, we're seeing the fact and the reality that exchange rates have changed 13 percent year-over-year.

Yes.

And so, obviously, there is an impact associated with that. I think the really important message, David, is the fact that our exposure to currency, the U.S. dollar is primarily in our Canadian operations. As I indicated in my comments, our margins there have moved into double digits. And we are looking for them to move higher because of the improved utilization of the factory and also the quality of the work and our pushing into these new market sectors where we see margins being more attractive. We are also seeing a much better mix of repeat systems business, in addition to new customers as well. But overall, we're comfortable with our ability to offset the exchange impact and grow our earnings because of these fundamentals which we believe are all falling into place quite nicely.

Right. I understand that. But I guess what I'm thinking here is, you had a 4.6 million hit in the quarter, I think. Given that the dollar seems to have stabilized, should we see that 4.6 to zero over one, two, three quarters? I don't know what number there --

Well, I think it will be a function of what happens in the exchange rates.

Sure. But assuming it stays somewhere where it is right now --

Well, obviously as the exchange rate changes, mitigate, then that difference will mitigate.

Can you give us some sense, like we have had stability now for I think the better part of a quarter now. If we continue on this track, would you expect the hit to come out over the next one quarter, too, three-quarters?

I think you are missing the point a little bit, David, in that they year-over-year comparison is basically saying, if we took our results for the current quarter and the exchange rates that were in effect last year were applied to the current quarter, what is the impact?

Okay.

So, therefore, if the exchange rate is different, changes from quarter-to-quarter, there's going to be an impact.

Right.

I think, from an operational standpoint, what you are asking me is have we reflected the changes in foreign currency within our backlog from a pricing standpoint? And I can tell you, yes we have.

Right.

Getting to the fundamental part of our business, I think that from a pricing standpoint, we have now reflected the foreign currency in our backlog because it's been in place for a while, as you point out, and that's one of the things that we are bringing into account when we say we're much more comfortable with the quality of our backlog and the margins there.

Sure enough. And then, just another thing on the margin side. You mentioned in your comments Europe and the U.S. West Coast, potential for improvement there, it sounds like from backlog and also from some management changes on the West Coast. Can you give us some sense of how you see those -- the margins unfolding in those businesses? Is this a quick thing, or is it going to take a while for them to really improve?

Well, I think we're expecting improvement in the first quarter of this year. But it's also going to be a gradual improvement over two, three quarters. But clearly, the big thing that is going to help us drive that -- and that's a function of how long it takes for work to go through. We have seen an improvement in the backlog in the fourth quarter, so our challenge now is to take that backlog and to run it through the business and generate earnings from it. And you know, clearly we're focused on that particular initiative. And secondly, we are also seeing good order prospects which allows the buildup momentum on a go-forward basis. So that is the promise for the future.

Right.

I think that is the situation. But I think we are expecting improvement as early as the first quarter from those operations.

Okay. But it sounds to me, from the message -- my interpretation of what you just said, Ron, is that don't expect to see the overall unit margins dramatically vault higher in like one or two quarters. It's going to be a gradual process from international and also it sounds like you've got more in Canada, too. That's the best way to think about this?

Well, I think we're expecting to see a step up in improvement in margins because of the comments we have made today. I think it's going to take a bit longer to get back to the historical target levels, which I mentioned in my comments.

Do you have any sense of timeframe for that?

No. I'm not putting that out there at this particular point in time. We're working as hard as we possibly can, and I think a lot of fixes are in place, but it is a matter of getting a good handle on how projects will actually ramp within the various facilities. You now, obviously, we are anxious, we are shareholders too. And we are obviously anxious to move those utilization rates up as quickly as we can. But there's a natural progression projects need to get through. They need to go through the concept and design phases, and then they need to get into production. Fortunately, it will assist us in the fact that we have more repeat systems business in our backlog, which will help us expedite that process. But like I say, I don't think we get the 13, 14, 15 percent operating margin in Q1. I don't think that is realistic expectations, certainly not mine.

I know. I understand. And I'll take your thoughts into account. I had one last questions -- I was sorry to see the press release about Klaus. I was wondering -- two things on that. One, from Klaus, perhaps, your anticipated continued level of involvement in the company. And then I was wondering if you could give some idea of the management depth. Obviously I know Ron and Carl, but I don't know a lot of the other people very well. I was wondering if you could give us some idea who is driving the company forward. What kind of experience they have with the company and so on.

Okay. Answer to your first question is definitely yes. I will definitely be around as long as my abilities let me do it, and right now, I don't feel any worse than I did two, three weeks ago, believe me. And I will do everything I can to fight this problem I have. But also I have an excellent, excellent team of (indiscernible) people around, the world over, to really provide backup wherever backup is needed. Because we all know, nobody lives forever, okay? We've worked on this succession planning for quite some time here at EPS, and Ron, for the time being anyway, will be the interim CEO --

COO I think is the --

COO. Okay. I'm sorry, COO, correct. But of course, Mike Cybulski will continue in his role as VP, ATS (indiscernible) operations. Jim Shelton (ph), a fellow gentleman, we just hired a little while ago, who's taking over the West Coast operation, has a long, long time of experience in this business. Came in just-in-time. We have good people in Europe and also our European GM, (indiscernible), already been spending an awful lot of time running back and forth, holding these two different divisions together, so he has helped me, got a lot of mileage off my schedule, okay? And helped me get to this source to work, the problem that much quicker. And having me to jump on a plane all the time. I think, from a management point of view, I'm quite satisfied that ATS is in good shape.

Okay. Great. I hope you have our -- . (multiple speakers)

I'm sorry, one more, sorry. Mr. Bruce Seeley of course, who's also run our components division, run the contract manufacturing division, has ten years and some, and certainly we'll probably double his efforts to help myself and also help the cause. That's all I can say really. Very, very experienced people, very committed people, and I really know we still have very much of a winning team.

Thank you. And Klaus, I wish you a complete and rapid recovery.

Thank you very much.

If I can just add to something Ron mentioned in your foreign exchange question -- you may have noticed our hedges are much higher at the end of this year than they were last year. That's the result of this year we have much more visibility and reflect the success we have in our backlog in are high probability list. If you take yourself back a year from now, we did not have that visibility going out, so we only hedge what we can identify going out. If you combine that with the fact that the rates came off very quickly at the end of last year and into April, by the time throughout this year that we were identifying the success that we had in building backlog in high problem, the rate had moved away from us, so our hedging program was not as effective as perhaps we would've liked.

And Cherilyn, you had asked for an effective rate. As Ron mentioned, the exposure largely is on the transaction exports from our Canadian operations. And I have an average number between the two systems here, of somewhere between 134 and 135.

Maybe just before we wrap up, I could come back to your other question, Cherilyn, about third-party content.

Third-party content in the fourth quarter. (multiple speakers)

I thought I had it, sorry, just bear with me. It was 48 percent, and that's higher than we would say is customary. And that's also reflective of the gearing up of the factory. So we have a lot of material flow that's coming through right now that's driving that percentage up. Which is a natural part of the flow, which we have talked about in last times, where we were heavily backlogged in the design with that stuff, and had flowed into the floor in the fourth quarter, as we anticipated. And so we are at that point in the cycle. Other questions?

Peter Sklar of BMO Nesbitt Burns.

Good morning. Really three areas I wanted to address. First, on your more optimistic outlook in the precision components group. Ron, you listed a number of reasons. I think the first reason, as I recall, was that a number of the startups in that group have ramped, and you expect less associated costs and higher capacity utilization. Specifically, is that the thermal products you're referring to?

Bruce, maybe you want to add some color to that?

It really is a wide range of really automotive-based products that have ramped over the past few quarters. And they are continuing to ramp, but clearly, the bugs out of the initial ramp phases are disappearing. We are on track in the efficiency improvements, getting back to the levels of the standard that we set. And we should see an improvement quarter-over-quarter going forward.

And is this the seat adjustor?

It is a variety of -- that would be one of the programs, but it is variety of automotive programs. Last year we announced the seat adjustor as well as $20 million in additional programs. And its really that total spectrum of products.

Okay. And can you give us an update on the levels you're operating at with respect to the thermal products?

On the thermal side, we actually saw a contraction in our coming through. Seasonal factors, obviously, you know the fourth quarter, which follows the Christmas period, is a different period than the period through the Christmas timeframe. As we noted in the press release, we continue to win additional businesses, and volumes for additional programs which we'll scale up as we move forward. But the volumes actually in thermals were not a major factor on the year-over-year change in revenue in the PCG group.

Okay. Ron, the next issue I wanted to address is the order intake. Based on the company's comments this morning, the indication is that the order intake is strong and broad-based. And I'm wondering if you can reconcile it with this -- if I can just challenge you a little bit on this and maybe you can reconcile this.

Feel free to do so.

Okay. I'm looking at the backlog, the segmented backlog that you disclosed. I understand that backlog may not necessarily be directly related to order intake. And I'm looking quarter-over-quarter rather than year-over-year. So when I'm looking, computer electronics backlog is down a little over 10 percent; automotive looks like it's up 15 percent; there's a huge leap in health care. And then in the other area, which is an area that you specifically identified on the call as an area of strength, is down. So when you look at it from this perspective, it looks like the order intake is not broad-based, rather it is concentrated all in health care. And on the other areas, you have some pluses and some minuses.

I think you're right. You're looking at cumulative factor when you're looking at the backlog, and the booking activity we're talking about is what actually transacting during the period. If we take a look at what transpired -- maybe I can give -- just give you a better understanding of the broad-based nature of the looking activity, what we do is we do an analysis during the quarter of our larger order bookings, meaning basically, bookings that are in excess of $1 million. If you look at that, it shows that total orders that were over $1 million represented about 78 percent of the total bookings in the quarter. Of those large order bookings -- you're right, health care was the largest amount, it was 44 percent. We had automotive in at 25 percent; we had the electronics sector in at about 24 percent; and the other sector in at about 7 percent. So, I think that that's the issue that we are seeing -- broad-based activity, clearly are push into health care is very much an important strategic element of our push. And I think it's allowing us to participate more fully than many of other people in the industry, because we are unique in our push into that industry. We identified that early on as part of our strategic marketing initiative, and we're starting to realize the benefits of that. But overall, I think we're seeing good opportunities, both in what happened from a booking standpoint, we are also seeing them in what's in the prospect list as well. And maybe, Mike, you have a few comments in that regard as well?

The initiatives that Klaus had described would be the high-speed vision inspection and the pharma industry and the VHP aseptic cell. Development environment is extremely important, and we have only scratched the surface with regards --

World's first --

Exactly. We are just beginning to understand the impact of those new automation tools on that industry. And it's going to be quite exciting and we see a large opportunity for us there moving forward.

Okay. Ron, the last area I wanted to address is the Spheral Solar initiative. You have internal budgets and forecasts on this business, and I'm just wondering how it's going to shape up in terms of impacting the bottom line of ATS as an overall. It sounds like you are going to be ready for commercial production this summer. And I guess my first question is, do you have any commercial orders at this time? What level of commercial orders you anticipate? And I would presume that there is going to be, just by your comments in the press release, that there's going to be some protracted period of ramp of this business, which suggests to me there is going to be a period of initial losses. I'm just wondering if you can outline to us, to the extent you are prepared to do so, how this is going to unfold? And specifically, in the context of the impact on ATS's overall earnings.

Okay, I will do my best. Just to give you a quick idea of where we are at, our project is progressing nicely. The equipment for the first 20 megawatts is largely in place. It is now installed or being installed, and it is being powered up. And the commissioning process has certainly begun and is underway.

With respect to market -- market reaction to the products that we have taken out has been excellent. This is clearly a market, a product that is right for the time. The flexible integrated nature of the product is meeting with a very positive reaction from people, both people who are interested in the off-grade Flex module, which is our first product, but also looking at opportunities to use the flexible product in other applications, such as dust shelters, those types of things. We are also seeing good activity levels in our relationship with Elk, which we now some time ago, by developing integrated product for the residential market. And we're also working and continuing to work with people on the commercial building side of things and the membrane, the roofing membrane market.

We are very, very pleased with the reaction we have gotten from the marketplace. We are in this kind of catch-22 situation where we are basically getting ready to produce full-blown production sells, and it is difficult for us to take orders until the time that we're able to provide the full-blown production product. So we're in that -- but we are very, very comfortable that the groundwork has been laid from the standpoint of the product and that there is a great market opportunity for us as soon as we are ready to start our production and begin shipments.

Just to be clear, what we said is that we are expecting to commence our initial production and shipments during the summer period. I think that we expect -- you are right, we are expecting that there will be a ramp phase, because there is a fair amount of process technology in the production that needs to be refined. And as we refine those processes, it will allow us to both scale our production, get our costs down, and basically drive the business up to it's nameplate capacity. I think that from our perspective, we're actual working through. From an accounting perspective, what criteria we will use in order to determine when we complete the pre-production period and the development period, as opposed to getting into commercial production. I can tell you from an internal planning -- and that's a difficult thing for me to put a pin in the wall. I can tell you that, from an internal planning perspective, we are expecting that -- we put in provisions that we'll probably jump those hurdles late in calendar -- the current year 2004, and that we probably will record some operating losses during that final quarter of the year. Now, that's still very fluid. But that's what our internal planning scenario has incorporated.

As for magnitude, I don't think we are prepared to put that down. But again, I think it's a cost that is associated with the launch of this factory. It's more of a natural cost of the program as opposed to being indicative of our operating performance.

Could you go through the timing again? When do you think you will jump those accounting hurdles?

Well, again, I'm not prepared to put a firm date on it. I'm telling you for internal planning purposes, we are kind of anticipating that as we come through the end of this current calendar year.

So does that mean that everything --

The plan is for the fourth quarter. We would then be starting to see the impact.

So does that mean that there would be no financial impact up until then? Whether it's positive or negative, because you're just not into commercial production from a GAAP perspective?

Based on that assumption, that's correct.

Okay. And do you have any flavor for what the magnitude of the losses could be? Can we stray into that area?

I think it is quite manageable, but I'm not prepared to put a number on it.

Right.

Very fluid, so. As you can imagine, right now we are in a development phase, so it is fluid.

Right. Okay. That's all I have. Thank you.

Jay McKinnell, Raymond James.

Yes, actually, I had one or two, just probe a little further on the SSP issue, in line with -- following up on Peter's question. Can you give us an idea, or in your internal planning exercises, have you identified a breakeven level in terms of revenues? An either breakeven in terms of net earnings, or say, on an EBITDA basis?

We have, but we have not disclosed that, because obviously that's very sensitive. You're going to the heart of the issue of pricing in margins.

Okay. Well, let me pursue it if I could. With what you see happening in the market out there, are current market prices for flexible solar products -- and I guess there are a couple of other technologies out there. Are current prices in line with your planning exercises and in line with your expected costs, so that the -- I mean, the economics of the venture as you see it, do they remain on track?

Yes, I can say that the economics that we originally had in place when we launched the initiative are very much on track. I think we made that comment last quarter. Actually, from a pricing standpoint, we are actually seeing prices rising. But our actual model is based on prices which are lower than today's prices. We are anticipating, conservatively, that prices are going to decline, and that's based upon rigid sales. So it's not pricing from potential margin (indiscernible) from the standpoint of the flexible nature of the product. And all of that is based on a cost per watt type of scenario. A price per watt.

Right. Are you planning to try to sell the product at a premium because of some of its other attributes, flexibility and so on?

Absolutely. I think there are certain markets where we will command different pricing for the product. I think, as we have indicated before, the Flex module is clearly a premium-priced market. It's also off-grade connected, which means that the certification issues required to launch the product are much quicker, and that's one of the reasons why we're going after that market early on.

The second product, which is the large power module, which is going into more conventional marketplace, we're taking advantage of the lightweight characteristics of the product in order to provide very large solar panels, which of course, reduces the overall installation cost and the cost of the system as well. So, we are really looking to tap into the enhancements of the product in order to command premium pricing. But our financial modeling is based upon the market prices we're seeing, for example, in Photowatt. And an extrapolation of that for further reductions in the future.

Okay. And I just wanted to try to confirm, reconcile a couple of the guidelines and benchmarks you have given over the course of the last year and a half or so. I guess almost two years that you have been talking about this. As I recall initially, your general objective was to have most of the potential production, the output for the plant spoken for by the time you launched. Is that recollection accurate? And have you sort of moved away from that objective at this point?

We're talking about a fairly finite difference. I think that having product available, we'll quickly sell our availability to produce it. That's a bold statement for me to make, but that's certainly the feedback we are getting from our marketing people with respect to the product. Is that, we have customers that are ready to place orders when we are ready to deliver it.

Okay. And I think originally, you were anticipating a ramp-up period, but I think the general posture was that you expected that the plant would reach full capacity, full utilization by the end of the first year of production. Today you're talking about a gradual ramp, I guess throughout '05 and '06, maybe straddling a slightly longer period of time -- is there a change there in your outlook?

Actually, not. As you know, we slipped from the standpoint of the launch date. So it is naturally going to spill into our 2006 fiscal year. And so, that's just a natural consequence of it. And we've always talked about a gradual ramp. That's not a change.

Okay, so it's just to shift relative to the calendar as opposed to a change in the duration of the ramp?

That is right.

Right. Okay, one last question, actually, on the thermal product -- you indicated that in the first quarter you were going to try to decide what to do with the business. Can you give us a little bit more color on that?

I think it would be inappropriate right now.

Okay. Thanks very much.

Jennifer Pun (ph), GMP Securities.

Hi, I just had a couple of questions here. The first one is basically on your ASG division. Are you guys close to capacity right now? Can you provide some insight on that?

This is a difficult thing for us to do in a custom design and build business. But you know, we did some initial benchmarking in this area. And I think we did it relatively conservative, because on the basis which we did it, which is driven off of people, we actually, in some locations, actually went through the initial numbers, and we know we're note at full capacity. But I would think we probably have, on a global basis on full loading, we probably have a good 20 percent upside to our people capacity. And, obviously, the ability to expand our workforce means that capacity can leap up a bit further as well. So that's kind of a ballpark type of estimate.

Okay. Great. And then also in your ASG, you mentioned some of the downsides with the West Coast and Europe. Were there any pricing pressures as well do you find on your projects?

Maybe I ought to comment, then I will let Mike jump into it about what he is currently seeing in the market. I think we have seen pricing pressure, as we indicated in the past, primarily in Europe. Because a lot of our business in Europe is automotive-based, and that is where the pricing pressure has been the greatest. And also Europe has been the weakest economy, so that naturally has created more pricing sensitivity, I would say, and it's obviously been a factor. But as we indicated on the call, we are seeing those market conditions improving. Our backlogs have improved, and also the quality of the backlog, as we indicated, is also improving.

Great. And also, just in regards to the situation with costs again, is Ron going to continue on as CFO or do you also see a transition there as well?

COO.

CFO. Sorry, CFO.

I think that the issue right now is that I will continue to wear both titles, although I obviously -- this news is rather sudden. So we are currently looking back to see how we fill in some of the title. We have a great team throughout ATS and I have a great team as well. So I'm sure we will be able to cover all of these areas. But we need a little bit more time in order to work our way through that.

Okay. Great. And no timing in terms of how long you will be in the COO position?

Well, until Klaus is back full time.

Okay. Great. So you're not sure how long that's going to be?

One day.

Well, I hope soon.

My Board of Directors had to put this in place. I feel as well as anybody ever felt on any particular morning. But it is prudent for the Board to put a successor in place, just in case something happened to me -- bang, overnight like this again. None of this know this, but until there's absolute reason for me to step aside as CEO -- meaning I cannot do my eight or ten hours a day anymore, then we will definitely need to bring Ron on.

That's great.

And I want him to be taking on more and more of my obligations (indiscernible). So as far as the day-to-day operations go and so on, because first of all, it's very good experience for him, no matter what. If I come back healthy as can be -- you know, sooner or later I will not be here for the next 55 years, you know that. But we have it covered if you need it.

I'm very fortunate. I have been an apprentice of Klaus's for 19 years. And kind of grown up with the business, so I'm very comfortable with the role he is asking me to assume. We have a great team, and you'll find that most of people on the executive committee have similar experience. It is a good team.

Great. And I guess, as my final question -- I think you've already discussed in terms of the thermal business. Any thoughts on -- I know you guys have mentioned in the past, possibly exiting this segment? Is there any color that you can provide to that?

I think that we commented in the press release, and I think we'll just leave it at that. I think we're right now looking at it, and we expect that we will have evaluated and made a decision in the current quarter.

Okay. Thank you very much.

Benoit Portier (ph) Desjardins Securities.

Yes, good morning gentlemen, I have two questions. The first one, I was wondering if you can disclose the booking in the first six weeks of the first quarter? I know that you provided that information in the last quarter.

I think it was actually in the press release.

Sorry. I did not see that. And my second question is related to the solar revenue -- I was wondering if it reflected a large onetime order from one customer? And just wondering the sustainability of those revenues in the next quarters? Thanks.

The actual revenue in Photowatt, which is what is driving the solar revenue, is fairly broad-based. Obviously, we announced a while back a large contract with one particular customer, which is continuing to be a factor, but certainly not the overall driving force in our solar revenues. And we expect continued market strength, as I said in my comments. Right now, the fact is that German subsidy programs have created a very, very high demand cycle. There's also discussions about other jurisdictions, Spain in particular is one that's looking at implementing equivalent programs, which is going to -- all these types of things are going to continue to fuel demand.

Just to give you an idea, the German subsidies for smaller installations basically give you a dollar a watt. They pay you for power you put on the grid. Put that in the context of what we're paying for power in this country, and you can see it makes it very lucrative. In fact, that type of scenario -- and this is depending on size, but the subsidy also extended into commercial applications, so we are now seeing larger power field projects, which are also fueling demand. It is a great scenario from the standpoint of driving demand, and our current expectations of what we're seeing is that it's likely to continue, at least for 2005. And depending on what happens from a subsidy standpoint within the U.S. market context and other jurisdictions, it could proceed well beyond that.

Okay. Thanks.

We have a follow-up question from David Tyerman from Scotia Capital.

Hi, a couple of quick questions. Ron, when you said fourth quarter for the period when you would begin to recognize it sounds like initially losses on SBP, are you talking calendar or fiscal?

What I said was that for internal planning purposes, when we're doing our modeling, we're forecasting that we would turn into a situation where we would record an operating loss in our fourth fiscal quarter. So that would be in what is the period that runs from January 1st of next year, 2005, through to March 31st, 2005.

Right. Just following up on the solar discussions you just mentioned, obviously, it sounds like demand is very good. And I am presuming that is part of the reason why margins are so high in that unit. Is that you? And then, I'm just wondering, how sustainable, given your previous comments, it sounds like a (indiscernible) that these kind of 7, 8 percent EBITDA margins are sustainable for some time to come.

Right now -- first of all, I think there is room for margins to actually improve. Because part of the reasons that our margins have improved has not been just because the demand is strong. Obviously, it is a very important factor, but we have also done a lot of things to get our costs and our efficiencies up there. We put automation in place, we have improved our production processes, we have increased sale sizes, done all these things --

Plus, the megawatt --

We are basically increasing the output of the factory overall without increasing its footprint. So all of these things are contributory to the margin line. And right now, with demand, it's got us running as hard as we can run. And so, other than the fact that August is not a good month in France, anywhere, the fact is that, you now, the demand cycle is very strong.

I think it is a good time to be by the sea -- I hear on the business side. Question for you on the systems side orders. Just kind of following along Peter's idea -- it looks to me like the orders, particularly in the computer electronics area, as I go back over quite a few quarters, I've kind of been in the 40 to 50 million range, and you were in that range in Q4. Do you see anything there, like are you seeing that demand really is getting better? I got the impression that you were, but that it hasn't shown in the numbers so far?

There is -- (technical difficulty) a trip to the West Coast and there's definitely a growing need and requirement, again, in the computer electronics semiconductor areas. And while that has been quiet for us, particular (multiple speakers) last couple of years, it is coming back again, as we knew it would. So we are prepared to take advantage of that requirement again.

Okay. This is just a situation where it hasn't -- you think it hasn't hit yet, but certainly all the signs are looking good?

Absolutely. Absolutely.

Okay. Fair enough. A question on the ability to produce -- I seem to recall a number of years ago you had a huge surge in backlog, and it actually caused a margin issue because you had to outsource a lot and so on. Is this a potential issue with the backlog beginning to ratchet up again?

I think that the resource loading is always an issue for a company like ours. And, you know, it's never perfect. I think right now there is some selective hiring that is going on. Overall, we're pretty well-positioned, but currently the prospect list means that that could change. So we're just going to have to manage our way through that.

We have to attack the backlog earlier, much earlier than we did last time around, that was our problem. We waited too long to react. This time around, hard lessons learned, it's not going to happen again.

And when you say you waited too long, Klaus --

I say too long, meaning we didn't really go into high gear, start the over time early, started subcontracting early. It may cost you a couple of points on your margins, but you know, then you won't get in trouble with your customers by being late on projects, by them being extremely angry at you for being late on a project and so on. These are things we have to totally, totally avoid at all cost.

Right.

And you make it back on the volume.

Yes, you make it back on the volume.

Fair enough. And then, on the backlog delivery time, it is very big. Is this like a couple of quarters where you are doing this typically with 6, 9-month leads? Or is there a longer than normal backlog here?

I think that we indicated some of the -- (multiple speakers) Because the rest of it is fairly compressed, so --

Okay. Other than that 34 million U.S. program, it is the normal stuff?

Yes. Our factories are either geared up or gearing up because of the increase in the backlog.

And then, CapEx and tax rate -- any thoughts for fiscal '05 on those?

I think from a capital expenditure standpoint -- (indiscernible) our internal budget is based on the plan we put together back in January had a CapEx budget that was in the neighborhood of roughly $35 million, for the Corporation overall.

Okay. You got a sort of normal, obviously if you've got, if your backlog starts to grow you're going to have to build more -- would you view that as sort of a normal at this point?

Don't forget that includes still some of the work on SSP.

That's obviously down dramatically from where it was the current year, but --

I think that is a reasonable number of that I would expect on the current size of the company. So, if you're talking about a sustainable level or maintainable levels, I think that's not a bad number.

Tax rate, I think that, (indiscernible) what the Ontario government is going to do to grab more money, and I guess I can answer the question. But the fact is that I think we're kind of expecting that tax rates will be relative consistent with our normal rates of around 34 percent, 33, 34 percent.

Great. And one last question -- the U.S. has an accelerated depreciation set of rules in place right now, but I gather that, at least based on what's going on right now, they could end on January 1st, '05. Do you have any sense from your talking to clients that they are pushing a lot of stuff ahead right now to get it up and running ahead of that date? And that we could have a potential issue later this year and into the first part of next year where we fall into a bit of a pothole order wise?

That is not what we are seeing out there.

(multiple speakers) I think he's talking about the (indiscernible) It is difficult to know whether that is --

I can tell you, when you look at the interest rates, there's still a tremendous amount of stimulus in the economy.

Right. But again, that could pull, could also go way. I'm just wondering, are we getting a great bang right now? You had a tremendous number in the quarter, obviously, on the orders. But there is a potential here for it to slow down --

Not at all.

No.

We have a huge (indiscernible) that's been behind what we would rate as high probability work. It is still very positive.

Okay. Super. Thank you very much.

Cherilyn Radbourne, RBC Capital Markets.

I just wanted some help on the Photowatt side for modeling purposes. And I guess I just wondered, you make a comment that the erosion of solar pricing appears to have slowed, and I'm wondering if we could just have an update on solar pricing year-over-year?

I don't have the exact numbers in front of me, but I think over the past few years, we have seen prices come down, and I'm going to guess -- (multiple speakers) 50 percent. But I will get back to you with some better numbers on it.

Okay.

It in that neighborhood, where we have seen it come down over the last few years. It's really -- we only saw this thing kind of back off during what I would say was our fourth quarter. Up to that time, we were continuing to see prices come down. But the demand just went up dramatically in the fourth quarter, as a result of the subsidy programs.

Okay. And now, over the last couple of quarters, it's been much stronger, you have been in sort of the 26, $27 million range from a revenue point of view. You have commented that there is a bit of seasonality in that summer quarter, just given that you are in Europe. Is that a stable rate that we should use for modeling purposes going forward in '04? Or is it kind of weaker in the first half of the year and stronger in the second half?

The other seasonal factor you should be aware of other than the August period is that -- and quite frankly, Q4 was a bit of an exception. We thought that our revenues would probably be a little bit less than they actually came in, because it's the winter months and people usually don't like to get on roofs and install solar panels in the winter months. But the demand cycle offset that. But typically you would see some seasonality in what would be our fourth quarter, which didn't materialize this quarter.

Okay. You indicate in the press release that your outlook for that business is favorable. Would that imply single digit revenue growth, double digit revenue growth? Can you give us some guidance there?

We have not provided guidance, and I think we're at that point right now we're going to do it. I think -- we're looking at the business, and quite frankly, our challenge is to be, is to produce as much as we possibly can within the existing confines of our business.

Okay. I thought there was some indication at one point that the revenue capacity at that facility was somewhere on the order of 80, or $90 million a year. Is that still correct?

We never gave that number.

Okay. Thanks. That is it for me.

Glenn Jamieson, Farlan Gordon (ph).

Ron, you suggested that your CapEx this year might normalize in the $35 million range. If I look at your cash balance over the last several quarters, it has been steadily declining, in large part I think, due to the increased CapEx on the new solar facility. Is it consistent with your internal projections that your cash balance would probably start to flatten out here in the next quarter or two? And as you start to generate more normal levels of cash, it will start to tick up?

This is something that we have been talking about internally -- maybe I will let Carl get into that a little bit with you.

Sorry, Glenn, I didn't quite understand your question. Can you try it again, please?

Just following up on a CapEx-related question. You went through a heavy investment period. It sounds like things are going to normalize here. I've been watching your cash balance decline fairly steadily over the last several quarters. My modeling would suggest that with more normal CapEx levels, your cash balance would probably flatten out here in the next quarter or two. And as your business gets stronger, cash flow generation picks up, starts to increase. Just wondering if that is consistent with what you guys are projecting for this year?

Relatively consistent. Obviously, as our business picks up, we will be investing in working capital, but we've also done an excellent job the last couple of years on our working capital efficiency. And at the same time, the last couple years we have been investing heavily in things like SSP, but I think your assumption is correct about the back half of the year.

And one last quick question -- are there any charges other than a potential charge, I guess, that could come out of whatever decisions you make on the thermal business? Are there any other charges -- one time items -- that we should maybe be aware of that you could see in the next quarter or two?

If I was aware of them, I would have booked them. I think that is basically my philosophy. You now, I'm not happy about taking special charges, because they overshadow the business, quite frankly. But from our standpoint, we never anticipate special charges. So I'm not aware of anything.

Have you done any -- have you taken any provisions relating to possible decisions on the thermal business?

We have evaluated the value of our thermals business, and today remain satisfied with those values.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). Gentlemen, there are no further questions at this time. Please continue.

I want to thank you very much for joining us today. And we will look forward to follow-up discussions with you. We are contemplating the holding of an investor relations day, and we will be making you aware of the details of that shortly. Right now we're looking at doing something within the month of June. Again, thank you for your time today and we'll look forward to speaking with you.

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating. And please disconnect your lines.