Azenta Inc (AZTA) 2004 Q1 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by and welcome to the Helix Technology first quarter conference call. [OPERATOR INSTRUCTIONS]. I would now like to turn the conference over to our host Mr. Robert J. Lepofsky. Please go ahead.

Thank you, operator and good morning ladies and gentlemen. It's our pleasure to have you join our first quarter 2004 conference call. Joining me today are Jay Zager, our Chief Financial Officer; Jim Gentilcore, our Chief Operating Officer; and Bev Couturier, our Director of Investor Relations. Before we get underway, I would ask Bev to advise you of our Safe Harbor disclosure. Beverly.

Thank you, Bob and good morning everyone. We assume that each of you has received a copy of our earnings release that we issued this morning. If that is not the case, please call 508-337-5172 and we will fax one to you immediately. Now, I would like to take a moment to read our Safe Harbor statement. The following conference call contains forward-looking statements including statements regarding the future performance of the company's business and the semiconductor capital equipment industry, which are subject to a number of important factors that may cause actual results to differ materially from those indicated. These factors include, among others, market acceptance and demand for the company's products, the success of the company's strategic initiatives including its global support operations, the health of the global semiconductor capital equipment market and the timing and scope of any change in industry conditions, the company's success in sustaining order bookings and other risks contained in exhibit 99.1 to the company's annual report on Form 10-K and its other filings with the Securities and Exchange Commission. The company assumes no obligation to update the information in this call.

Thank you, Bev. As Bev said by now each of you has no doubt seen our press release. We also continue to set the standard for the timely disclosure of complete financial information, as this morning we filed our 10-Q essentially at the same time as our press release crossed the wire. By this time, you have probably listened to the conference calls of many of our customers and peers in the sub tier space. Both you and we have the benefit of having heard the views of these companies on the dynamics that drove the first quarter results, the tone of forward projections and the views about where we are at in the cycle. Our own views this morning are fairly consistent with what you have heard over the course of the past few weeks from others. Consequently, in our prepared remarks we will have less to say about the broad external environment and more to say about Helix's specific or Helix's unique issues.

Here at Helix we are pleased with our first quarter performance. Revenues were up 27% sequentially after a 22% sequential gain in the fourth quarter. Each of our business groups saw sales growth in the quarter. The sequential rate of growth of our CTI Cryogenics and global customer support groups, were generally in line with the range they achieved in the prior quarter. Our Granville-Phillips group significantly exceeded the rate of their growth compared to the rate of growth of the prior quarter.

Operating expenses and permanent head count across the company remained essentially flat. We achieved an operating profit margin of 12.1% despite some constraints at the gross margin level, which I will comment on in a moment. While everyone in the sub-tier space did very well this quarter this level of operating margin performance is the best we have seen reported by any of our peer subgroup, sub-tier component suppliers.

Our reported EPS of 18 cents was at the top of our guidance range and increased almost six-fold over the level reported in Q4. We had outstanding balance sheet metrics and continued to generate cash throughout the quarter. The one area of frustration for us was at the gross margin line. While gross margin in the quarter improved from 37.4% in the fourth quarter to 39.1 in the first quarter that result was actually below our expectation and our model performance at the $40 million sales level.

Importantly our business model is intact and the issues slightly depressing our gross margin performance in the first quarter have been addressed and will not repeat in the second quarter and beyond. Jay will speak to these issues in a bit more detail, but let me summarize. An aggressive sales effort aimed at reducing our inventory of refurbished products and the attempt by one of our suppliers to take advantage of our ramp requirements by imposing price premiums were principally responsible for our shortfall.

These issues combined to cost us about 1.5 points of margin at both the gross margin line and the operating margin line or just under two cents a share in the quarter. We have completed the housecleaning initiative with regard to inventory reduction and we have replaced the misguided supplier with a higher-performing lower-cost business partner.

Beyond the financials, the quarter was excellent across the board. Our CTI Cryogenics group continue to excel in meeting the ramp requirements of our customers. Our On-Board IS platform continued to own accolades and orders. The accolades validate this platform's ability not only to outperform every Cryopump on the market, but to meet the demanding performance requirements of new production processes and the new tools being brought to market by our major OEM customers. The orders are helping us to improve our margins while delivering more for less to our customers when compared to the Legacy products On-Board IS replaces.

During the quarter, we made important progress in demonstrating the efficacy of our innovative solutions to emerging requirements in new-for-Helix segment of the semiconductor manufacturing process.

As noted earlier, our Granville-Phillips group had an excellent quarter. Beyond strong shipping levels and excellent asset management performance the group continued to focus on expanding its product lines. We are seeing the early returns of our focused product development efforts and have recorded several customer conquests with more expected throughout the balance of the year. Granville-Phillips non-semiconductor initiatives are also bearing fruit, as well.

We want to note that both of our product businesses are now achieving balance sheet metrics that exceed their prior peak of cycle performance. And we believe that we are still in the early stages of the recovery. With our planned improvements and the cost of our products and the expectation of continued revenue growth, things will only get better from here.

Our Customer Support business continues to report good progress in their strategically important initiatives and core operations. We continue to invest in building this business. In the short term, we actually have more capacity than we actually need today and an infrastructure capable of supporting a bigger business. That said we see the Global Support business as a major growth engine and their performance to date justifies our support.

We continue to sign new customers to our innovative TrueBlue support agreements. Revenues from these agreements now represent more than 10% of our Global Support revenues, a milestone that gives us confidence we are on the right track. At this time we think we'll be able to achieve our broader goal that TrueBlue can represent at least 10% of our total revenues and have an increasing impact on our business model throughout the cycle. These relatively large dollar, multi-year contracts spread out our revenue streams, therefore mitigating a portion of the cyclicality inherent in our principal served market.

All in all, an excellent quarter. Our people have risen to the challenges of steep ramp, dealt with a few hiccups along the way, remained focused on our longer term objectives and satisfied our customer's seemingly inSatyable appetite for new product developments, application support and solutions that improve tool availability and productivity. Against that backdrop, let me turn the call over to Jay, who will provide you even more details about our financial performance and give you our thoughts about second quarter expectations. Jay?

Thank you, Bob and good morning everyone. I'd like to provide some insight into the financial results that we just released. Sales for the first quarter were $40.4 million, an increase of about 27% from our fourth quarter results and 71% higher than a year ago. Our operating profit for the quarter was $4.9 million or 12.1% of revenue, compared with $1 million or 3.2% of revenue in Q4 and a $2.6 million operating loss a year ago.

Net income was $4.7 million or 18 cents per share, a significant improvement over the Q4 results, which was $800,000 of net income or three cents per share. Orders for the quarter were $41.1 million, up about 4% from Q4. Our book to bill ratio was about 1.02. Let's look behind these revenue levels.

Sales to semiconductor customers were about 70% of consolidated sales for the quarter compared with 66% in Q4. Sales attributable to our CTI Cryogenics vacuum pump products were about 82% of our total. With sales of our Granville-Phillips vacuum measurement and controls instrumentation products at about 18% of the totals. These percentages were essentially unchanged from the prior quarter.

Our global customer support business contributed about 30% of our total revenues in the quarter compared with 36% in the fourth quarter. This lower percentage is due entirely to the strength of our product sales in the quarter as we continue to be pleased with the progress we are making in our global support business. Customer acceptance of our TrueBlue service offerings continues to be strong and in the first quarter we completed several new service contracts.

OEM sales as a percent of revenue were about 55% of total sales while sales attributable to our largest customer including outsourcing partners were 34% of our business compared with 20% in Q4. We ended the quarter with backlog of $15.7 million, up from $15 million at the end of the year.

Head count at the end of the quarter was 593 people including temporaries, compared with 561 people at the end of the year. Virtually all of the increases in the quarter were related to temporary manufacturing personnel. Our permanent head count remains below 500 people.

Our gross margin in Q1 was $15.8 million or 39.1% of sales, an improvement of 170 basis points over Q4 levels. This improvement was due primarily to increased volumes as well as continued improvements on manufacturing operations. While we are pleased with the continuing trend of strengthening gross margins, our Q1 results were below our expectations.

The shortfall was due primarily to two factors, a decision in the quarter to focus on sales of our used equipment through our Value-Line program which is used to sell selectable used equipment from our inventory at lower prices and unexpected price increases from selected suppliers. We do not expect any of these issues to continue in the current quarter.

We are not planning to push Value-Line sales as we have achieved our inventory target for the product line and we have identified new lower cost vendors as part of our low cost global sourcing strategy and are beginning to see the benefit of procurement from these vendors this quarter. We therefore remain confident that gross margin will continue to improve and will exceed 40% in the current quarter.

Operating expenses including R&D, sales and marketing and general and administrative expenses were $10.9 million in the quarter, essentially unchanged from Q4. Within these levels, R&D expenses were $2.6 million compared with $2.5 million in Q4 and selling, general and administrative expenses were $8.3 million, unchanged from the prior quarter. As a result of these factors our operating profit was $4.9 million compared with $1.0 million in the prior quarter.

The contribution to our profits from our joint venture in Japan was $595,000 compared with $421,000 in Q4. We continue to be pleased by the performance of our Japanese subsidiary and net interest income for the quarter was $215,000, essentially unchanged from Q4.

Profit before taxes was $5.7 million, compare wide $1.6 million in Q4. So we earned $4.7 million or $0.18 per share reflecting an 18% tax rate, which is our projected full year tax rate, based upon current assumptions.

Let me now turn to our balance sheet. At the end of the quarter, our cash and investments were $70.1 million, an increase of $2.7 million from the year-end balance. This increase reflected significant strength in our operational performance and marked the fourth consecutive quarter of positive cash flow from operations.

Customer receivables were $24.1 million, an increase of about $3 million from Q4. This increase was due entirely to higher sales volumes. Our DSO declined from 60 days in Q4 to 54 days in Q1 and we do not have any significant collection issues. Inventory levels were $22.8 million, compared with $22 million in Q4, also due to higher sales volumes. Inventory turns improved from 3.6 turns in Q4 to 4.3 turns in Q1.

Capital expenditures were about $500,000 for the quarter. We anticipate full year capital spending in the $4 million to $5 million range. Depreciation was $1.4 million for the quarter. Subsequent quarters should be at about the same level. Yesterday our board approved a quarterly dividend of $0.04 per share, unchanged from the prior quarter.

Now I'd like to provide some insights on the current quarter. We continue to see strong demand for our products across all product lines and service offerings. Orders for the first three weeks of the quarter have also remained strong. Assuming these trends continue throughout the quarter we would anticipate Q2 revenues to be up to 10% higher than Q1. We also expect sequential improvement in our gross margins and anticipate that gross margins will be in the 40% to 42% range for the quarter.

We will continue to closely manage discretionary spending and expected operating expenses should be flat to up slightly from Q1 levels. As a result of these factors, we anticipate continued improvement in our operating profit margins with Q2 earnings of at least $0.20 per share. And we continue to remain encouraged by the overall health of the industry as well as by the signals we have received from both our OEM and end-user customers. Now I'd like to turn the meeting back to Bob.

Thank you, Jay. Before opening the call to questions, let me just say that while we'd like to give you more clarity into our near-term expectations all we can say at this time is, as Jay reiterated, our order book remains quite strong through the first three weeks of the quarter. We see no backing off of customer commitments. We know that fabs are running at high utilization rates and that our customers highly value system upgrades that improve tool availability and productivity.

Our short cycle manufacturing process will allow us to continue to rapidly turn orders into revenues and profits. And we believe the recovery is well underway and that it does still have a lot of life left. We are focused on the opportunities, realistic about the risks and maintaining the intimacy with our customers that will protect and enhance our position throughout the business cycle. With those thoughts, Jay, Jim and I will try to be responsive to all of your question this is morning.

Thank you sir. [OPERATOR INSTRUCTIONS]. Our first question comes from Robert Stern of Needham & Company. Sir, your question, please.

Good morning everybody. You talked about Granville-Phillips accelerating and, if I heard correctly, it grew faster than either it was before or the rest of the business. But yet the percentage mix between Granville-Phillips and CTI remains flat. So I guess I'd like you to be more specific about what's going on at Granville-Phillips and if you are gaining momentum there, if you could be specific about that, as well?

Hello Rob, it's Jay. Obviously, to be very specific our total sequential growth Q4 to Q1, as we reported, was about 20%. Granville-Phillips grew in excess of 35% from Q4 to Q1. Sometimes in the rounding it doesn't affect the overall percentage of the total business, but obviously we're very encouraged by the sequential performance that we saw in the Granville-Phillips.

So do you think you're gaining market share there and if you are in what specific areas?

I think that there are a couple of things happening, Rob. First of all, the core business expanded nicely in the quarter as did our CTI business. The second piece is yes, we are gaining market share and penetrating new areas and new applications both within semiconductor and outside of semiconductor. We're, for competitive, given the competitive situation where we are battling out, I use the word conquests in our prepared remarks. We would prefer not to get into the specifics of customer by customer and tool by tool. But we are in fact seeing customers embrace the newer product offerings coming out of Granville and that means they're embracing those at the expense of competitive offerings.

Anything about combo gauges in there?

Certainly combo gauges are central to that new product portfolio and maybe Jim wants to comment because it's our view that that is a trend relative to what customers buy. Jim?

I would just add that, Rob. We, in the combination gauge area, there is still a lot of requirement clarification going on the tools that are just starting to come into volume. So it will be a while before it's very clear, but we are confident in the places we're being evaluated, where our customers are sharing information about the evaluation process that we are in very good shape there.

And as you know, Rob, and others on the call, in the combination gauge business Granville-Phillips actually did not lead the entry into market, others did. That gave us the ability to focus on product shortfalls, deficiencies of the current products in the market and also be very specific in our targets relative to customers where we want to displace the competitor.

OK. Thanks a lot.

Thank you. Our next question comes from Bill Lou of Morgan Stanley. Your question please.

This is Gary Hsueh, Morgan Stanley. Good morning, solid quarter, Bob and Jay. Got a few questions here. The first question is about, a lot of the OEM customers talking about a, makeshift from 300 mm back to 200 mm. I was wondering about the impact to growth margin in first quarter and going to second quarter based on that.

Yes, for us that's never an easy question to answer, so I'll try to give it to you at a broad level. Whichever way that pendulum swings, it's positive for us in our continuing quest to expand margins. Our 200 mm products obviously are reasonably mature. However, we're not standing still there and we continue to have cost improvements driving those products. Our 300 mm solutions again are favorable and almost a double whammy favorable there because the 300 mm solutions are typically the On-board IS solution and as we've said a number of times that has a much more favorable cost price relationship than the legacy product specifically replacing. So that was a 300 mm legacy product replaced by On-board IS at 300. So we're in kind of a nice position that regardless of which way the customer requirements go we remain on the expanding margin track.

OK great, understood. My second question is just about manufacturing efficiency. Looks like (inaudible) here and you are getting close to a turns ratio on inventory of about 5.0 and that enables you to drive down to a book to bill ratio of 1. Can we expect you to maintain a book to bill ratio of about 1 going forward? How much better can inventory turns get at yields?

Uh, if we had all of our operating people from the product business on the phone today they would give you a resounding much better. They are continuing to make excellent quarter-by-quarter improvements particularly in the inventory management and the turns area. Our aggregate performance of course includes the broader inventories that are required to support our global support business and that holds down our reported numbers a little bit. So if you like the aggregate number you can imagine why our people are pretty excited about their individual numbers in the product side of the business.

OK. And last question for Jay. Jay, where can I find or what is the unearned service revenue on TrueBlue contracts in the balance sheet?

Well, it doesn't go on the balance sheet. But, essentially to-date a good way to look at this is we have booked in excess now of about $13 million of contracts. And you know these contracts tend to range anywhere from one year to three years and obviously the nice thing about the model is that each quarter we're building a bigger base of installed revenue from these that will help us in the future.

OK. What was that number at the end of the fourth quarter?

Which number?

The total value of the contracts -

Rough basis, I would say we added somewhere between 2 and 3 million of contracts in the quarter. So it's growing nicely. Again when I say 2 to 3 million, I'm talking about the total length of the contract, not what gets booked in the current quarter.

Right. Sounds great. Thank you.

Thank you. Our next question comes from Stuart Muter of RBC Capital Markets. Your question, please.

Thank you. Question for Bob or Jay. Jay, I think you said in terms of guidance up to 10%. Could you guys bound it, is it possible revenues are flat? What are you hearing from your OEM customers in terms of their rolling forecast?

Stuart, let me take a crack at that. As I'm almost apologetic for our lack of specificity in guidance. As I said in my prepared remarks we've listened to the same comments that you've heard from other sub-tier suppliers and some of the OEMs. It's not clear what the revenue line is going to look like in the second quarter to anyone. What we can ensure you is that we are turning the orders into revenues and profits without problem.

We think that given the impact of our largest single customer that he certainly will have an impact on second quarter revenues and he's yet to report publicly on his view of the near term. Some of our other OEM customers, you've heard, I would consider generally bullish and upbeat views of second quarter.

OK, Bob, I appreciate the comment. In terms of the 200, 300 mix following up on Gary's question, was 200 particularly strong in Q1 and do you think that strength will stay in Q2?

Just give us a second, here -- uh, we actually just give us one more second. We're going through our notes. 200, 300 mm was essentially unchanged from Q4 to Q1 in terms of the mix of our business. And it's running right around 50-50, based upon specific customer requirements not anything we're doing.

Understood. Do you think that mix will change in Q2?

Again, it's based upon customer preference. The early indications we have indicate that Q2 may be little bit stronger in 200 mm. Again that could change as the forecast plays out.

OK. Thanks very much.

Thank you. Our next question comes from Theodore O'Neill of AG Edwards. Your question, please.

Thanks very much. The question about the Value Line program, not sure I fully understood it, but can you tell us about some of the mechanics of that? As you are trying to get rid of old inventory do you target customers you know would be interested or was there sort of a mass media campaign to let the world know you had product out there for sale at discount?

Good morning, Theodore, let me take a crack. First of all, Value Line has been a product within our CTI Cryogenics group for sometime. Value Line is probably a 7 or 8-year-old product line. It basically represents refurbished equipment. The source of that refurbished equipment comes out of our worldwide global support inventory. We normally use those sales to, again, manage inventory, support non-semiconductor customers. One of the dynamics I think you are well aware of is that in the last year or two there has actually been an increased amount of activity in refurbished tools for the semiconductor space.

Right.

And so that actually has broadened our market, if you will, for some of our Value Line products. The dynamic in the quarter, however, was less related to our ongoing support of the market opportunity but an internally generated objective to actually be a little more aggressive in reducing the inventory level within that refurbished equipment area. I would say that Jim, Jay and I by the end of the quarter realized that our guys had done an extremely good job in the quarter. That was the good news.

The margins on that refurbished equipment were less than our norms so it had the negative effect. One of our guys says why is it bad to do good things? Well, this time it was bad to do good things to the tune of about 300.000 or 400,000 of lost margin against expectations. I think that is the key. We continue to be focused on our rate of drop-down and our aggregate performance. So again not bad in the absolute, but certainly was an element of our sub-par performance against expectation.

Can I assume that the positive aspect of this, in terms of the volume of business flowing out in refurbedequipment, was due to either one or two fabs or particularly PVD tools?

I wouldn't read too much into it. I think it was actually probably fairly broad based. There may have been one or two situations late in the quarter that helped a bit. But I wouldn't read too much into the dynamics or try to take it beyond as any kind of an indicator of trend outside of Helix. I think it was a very Helix-specific set of circumstances.

Thanks, Bob.

Thank you.

Thank you. Our next question comes from Tim Summers of Stanford Financial, Your question please.

Thank you. I wanted to touch on the gross margin issue a bit. When in the quarter did you make the decision to focus on the Value Line products and what was the specific catalyst that made you do that because you didn't talk about that on the fourth quarter conference call? Secondly, can you give us more granularity on this issue with the price increase from these suppliers? Thanks.

Yeah, I'll follow-up on my prepared remarks. Again, the Value Line issue is fairly small and I would say, as I just said in answer to Theodore, how successful our guys were in pushing Value Line was actually apparent to us fairly late in the quarter, number one. Again we wouldn't make a lot out of it. It is merely having people understand why our margins were lower than our models suggests and again I quantify that for you only to the tune of couple of $300,000 to $400,000, a fairly small amount in the aggregate business. So it is an event and we acknowledge it as an event.

Ongoing there will continue to be Value Line sales, just as there have been Value Line sales as I said earlier for the past 8 years quarter by quarter. In the first quarter, our guys did a great job in taking the inventory down an extra chunk, but it had a negative impact.

With regard to our vendors, no, I don't want to be specific, but one egregious vendor knows who he is because he is no longer a supplier to Helix. I think across the industry people have talked about the ramp, the support that suppliers give to customers, demands from customers on suppliers throughout the food chain. We share the good times and the bad times together.

In our particular case we had a supplier who reached just a little bit too far, pushed a little too far, took advantage of the situation. We gulped and quickly reacted to that. That supplier is no longer a supplier to Helix and again has been replaced by a what we think will be a long-term partnership with an even lower cost producer. More broadly the issue of suppliers to us and us to our customers, we are all working hard at the ramp. I think that on any given day you might have some additional cost related to a very steep ramp. But again, not important in our cost structure continues to go down and our margins continue to expand.

Bob, just sort of a lead in question here. Is there any relationship between changing suppliers during a ramp and your decision to focus on selling used equipment in the quarter or am I reading too much into this?

Totally unrelated events. We have a commitment to our shareholders and we will live to our commitment to shareholders that any time we do not operate to our model or the expectations we have set, we'll fully disclose the reasons that our model was not performing in the quarter and these are two specific events that represent some minor shortfall from model performance. Again, I do not in any way, shape or form, want to suggest to you that either of the events were particularly problematic, but they were off of our model and our shareholders expectations.

Yes, OK. Thanks, Bob.

Thank you. Our next question comes from cumulative Satya Kumar of CSFB. Your question please.

Yes thank you. Can you comment a little bit on what's your lead times are for your Cryopumps and also if you can talk a little bit about your ability to see better pricing with your OEM customers? And when you talk about lead times if you could add more color to if, given the supplier issues, you were able to sort of meet all the commitments for the OEM in the quarter or was there some variability among the different OEMs? Thanks.

OK. Let me take the last piece first, the supplier issue and how that affects us. Again our ability to quickly respond and react to a situation with a particular supplier was because of the excellent job our supply chain management people have been doing in continuously seeking and qualifying alternative suppliers. That's part of a back-up plan in case we have any of a range of problems with a given supplier if a given supplier who might have production hiccups whatever within his plan.

So this particular supplier situation for us was an irritant for us. Unfortunately for the incumbent and good news for one of our stand-by suppliers. So that transition was not particularly impacting us going forward fairly quick turn around.

With regard to lead times, we have very, very short cycle time in our product areas and in our major product areas from receipt of release from our customers to shipment is measured in days to a week, week and-a-half on our most prevalent products. Again that's all part of our fast-cycle time response activity.

In pricing, I will broadly say we don't have any pricing flexibility with customers. But where we are gaining the pricing flexibility is with high performance, high performance products. In terms of the product that you were selling yesterday, being higher priced today, is just not going to happen. Our customers have no appetite for price increase for the same product.

Where they are willing to give us price improvement is with product changes where we can actually deliver more value for them at less than their previous total cost. And in other areas we're seeing that with products, that have gradations in performance, we can sell lower performance for lower prices, higher performance for higher prices. But in terms of just straight, things are good and therefore we're entitled to higher prices that are just not the operative mode within the food chain.

OK thanks. And a just little quick follow-up. If you can also add any color on the different end market segments PVD implant and also flat panel? Thanks.

Jim, do you want to give some sense of the broad trends that we are seeing PVD and implant and also comment on flat panel which we haven't commented on today?

Yes, we are still seeing the same kind of strength in PVD and implant that we've seen in early part of this recovery. Both of those segments are doing well. And back to the question you just asked Bob about lead times. With our top five customers in both of those markets, our top five customers primarily. We understand that lead time, cycle time is an advantage that they're using right now to make sure that they get every order that's out there to be gotten and we are not on the radar screen of any of our large customers because of the short cycle time. In fact, with many of our largest customers we are on a replenishment program, where they pull from combine (ph) and we replenish instantly.

So both of those markets are doing strong. Both of our customer sets in those markets are telling us that lead time is important to them and they thank us for the fact that we are not one of their problems to be dealt with as they deal with those two markets. On the flat panel side, there, of course, we participate through our joint venture, as well. UCI and then there are a few other players that are trying to work their way into the PVD side of the flat panel market and we are engaged with everyone.

We see that market, especially as the generation 7 factories start to, they decide to facilitize the generation 7 factories. We see that as a big opportunity for us going forward. As Bob mentioned, that's where performance the performance of the Cryopumps, in particular, is very critical. These are big machines, high volume machines that have to be running 24/7 and we have some exciting design work going on with key OEMs in that area.

Thank you. That is all the time we have for questions. I would like to turn the conference back to Mr. Robert Lepofsky. Sir, please.

Thank you, operator. We appreciate your participation in our call this morning and each of us look forward to reporting to you on our continued progress over the quarters ahead. Thank you, operator that concludes our call for today.