B&G Foods Inc (BGS) 2006 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the B&G Foods Incorporated fourth-quarter 2005 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session; instructions will be provided at that time for you to queue up for questions.

And I'd now like to turn the conference over to Mr. David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.

Thank you, Vicki. Welcome everyone to B&G Foods’ first-quarter 2006 conference call. Everyone on the call today can access detailed financial information on the quarter in our earnings press release issued today and available on our website at www.bgfoods.com, and in our quarterly report on Form 10-Q that we filed with the SEC today.

Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. The statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

We will also be making reference on today's call to certain non-GAAP terms like EBITDA and adjusted EBITDA, and a reconciliation to GAAP terms is provided in today's press release and will be included in our quarterly report on Form 10-Q.

As usual, I'd like to start the call by asking our CFO, Bob Cantwell, to discuss financial results for the quarter. After Bob's remarks, I will discuss factors that influenced the past quarter, some of the business highlights, and our current thoughts concerning the business going forward into the second quarter. Bob?

Thank you, Dave. Net sales increased $2.9 million, or 3.2%, to $93 million for the quarter ended April 1, 2006, compared to $90.1 million for the quarter ended April 2, 2005. Net sales for the Ortega food service dispensing pouches and dipping cup acquisition accounted for $2.9 million, and the Grandma's Molasses acquisition accounted for $0.9 million of the sales increase.

Net sales of our Ortega, excluding the dispensing pouch and dipping cup business, B&G, Sa-Son and Regina products increased $3.2 million in total, offset by decreases in our Maple Grove, Las Palmas, Joan of Arc and B&M products of $4.2 million.

Gross profit increased $1.2 million for the first quarter of fiscal 2006, or 4.3%, to $27.9 million from $26.7 million for the first quarter of last year. Pro forma gross profit, which excludes our 2005 restructuring charge, increased $1.1 million, or 3.9%, to $27.9 million for the first quarter of fiscal 2006, compared to $26.8 million for the first quarter of last year.

Pro forma gross profit expressed as a percentage of net sales increased 0.2% to 30% for the first quarter from 29.8% for the first quarter of last year. The increase in pro forma gross profit was primarily due to price increases, which were partially offset by higher costs for packaging materials, transportation costs and maple syrup.

Sales, marketing and distribution expenses increased $0.4 million, or 4.2%, to $10.5 million for the first quarter, compared to $10.1 million for the first quarter of last year. These expenses expressed as a percentage of net sales increased to 11.3% in 2006 from 11.2% in 2005. This increase was primarily related to an increase in brokerage and salesmen commissions.

General and administrative expenses increased $0.3, or 23.3%, to $1.7 million for the first quarter of fiscal 2006 compared to $1.4 million for the first quarter of fiscal 2005. The increase was primarily due to an increase in employee compensation. Operating income increased 2.7% to $15.7 million for the first quarter from $15.3 million for the first quarter of last year.

Interest expense increased $0.4 million to $10.8 million for the first quarter from $10.4 million for the first quarter of last year. The average debt outstanding was $25 million higher in the first quarter of fiscal 2006 as compared to the first quarter of fiscal 2005.

I'd like to take a moment to discuss EBITDA and adjusted EBITDA non-GAAP financial measures that we have reconciled to net cash provided or used in operating activities in today's press release. Our EBITDA increased to $17.5 million for the first quarter compared to $17 million in the first quarter of last year. No adjustments to EBITDA were made for the first quarter of 2006. Adjusted EBITDA for the first quarter of 2005, which excludes fiscal 2005 restructuring costs, was $17.1 million. Capital expenditures for the first quarter of fiscal 2006 were $1.6 million. We continue to foresee modest capital expenditure requirements for the foreseeable future.

Moving on to our consolidated balance sheet, we finished the first quarter of fiscal 2006 with $22.7 million in cash compared to $25.4 million at the end of fiscal 2005. We used approximately $5.1 in cash for the Grandma's acquisition during the first quarter. We also finished the first quarter with $430.8 million in long-term debt and $81.9 million in shareholders' equity.

Our inventory at the end of the first quarter was $92.4 million, up from $85.5 million at the end of fiscal 2005. This increase is due to a series of reasons, including recent acquisitions, higher maple syrup purchases, and higher case production. Taken separately, we do not believe these factors are reason for concern and do not expect them to have a negative affect on our gross margins or otherwise impact our P&L. That said, we would like to reduce our inventory slightly and our proactively taking steps to bring our inventories down to be more in line with historical levels.

The business remains healthy from a cash point of view. Planned capital spending is expected to remain consistent with fiscal 2005. Annual cash interest expense for fiscal 2006 is approximately $41 million.

As previously announced, we will make a cash payment on May 1 of $0.4265 per EIS to holders of record as of March 31st, 2006. This reflects a cash dividend of $0.212 per share of Class A common stock and an interest payment of $0.2145 for a $7.15 principal amount of our senior subordinated notes.

I also think it's worth highlighting that since our IPO in October of 2004 through the May 1st dividend payment, we will have paid cash dividends of $24.9 million to EIS holders. I will now turn the call back over to Dave for his remarks.

Thanks, Bob. We're very pleased with our first quarter fiscal 2006 performance and the improvement therein as we continue to navigate a very challenging cost environment. Net sales and EBITDA both increased approximately 3% in the quarter, and we're especially pleased that we were able to maintain a very solid gross margin in Q1. The cost environment remains difficult, but we're continuing to meet these challenges and we believe that our first-quarter performance testifies to the fact that our strategies are working.

Since I'm sure it's at the top of everyone's mind, I will address cost first in my remarks and then recaps sales performance. Going through our P&L, the first cost component of substance is trade spending. As many of you recall, we've discussed our pay-for-performance initiative in previous conference calls as one of our major efforts to control costs.

We've seen earlier progress, but we really saw this initiative gain traction in a substantive way in the first quarter, with a reduction in trade spending of 1% of our gross sales. That was very gratifying because we had paid a volume price on sales to our grocery customers for implementing pay-for-performance in past quarters, and in the first quarter as we've pulled back on trade spending. That said, we think consumer volume is holding up nicely and we believe that pay-for-performance initiative will enable us to improve our efforts to communicate with consumers in the long-term.

Perhaps most importantly, we remain confident that it's the best way to combat the trend in the industry toward ever-increasing trade spending and we expect to see further trade spending reductions in Q2.

Gross profit improved by $1.2 million in the quarter, and as a percent of sales, from 29.8% in the first quarter of fiscal 2005 to 30% in Q1 2006. Price increases, lower trade spending and, to some extent, sales mix were all factors in the improved gross profit. Cost of goods sold was slightly lower as a percent of sales, mostly due to pricing and product mix and in spite of increased year-to-year costs.

We continued to see cost increases in the first quarter, particularly in glass and other packaging components. And as long as oil remains high or continues to increase in price, there is no reason to think we will see meaningful relief on cost of goods. Instead, we expect more events such as the linerboard price increase announced last week, which will ripple through our corrugated packaging costs shortly.

The price of oil is underlying many of the cost increases we're seeing and of course most directly affects our distribution costs. Shipping costs for the first quarter of fiscal 2006 were up significantly. Almost half of the increase was due to fuel surcharges, which continued to increase throughout the quarter.

Our hope that these surcharges would begin to approach Q1 2005 levels did not come to be. In fact, surcharges today are nearing the Katrina peak last fall and are higher than most of the fourth quarter 2005 by about 20%. This means that we will continue see cost increases in distribution similar to those we've seen for the last 12 months, unless oil moves downward.

The remainder of the increased shipping cost was inventory-related, including moving inventories associated with our two acquisitions. This inventory-related shipping cost should not be a continuing cost in the business going forward.

Commodities were fairly neutral in the first quarter. Bean costs are trending downward in some varieties and meat costs are improved from last year. On the other hand, sweetener costs, sugar and corn syrup in particular, were up over 20% compared to 2005 costs. The maple syrup crop is just finishing up and appears to be large in Quebec. Since Canadian maple syrup prices are regulated, we do not expect to see relief in price, but there should be little if any pressure for higher prices. But we know we will experience an effective price increase for Canadian maple syrup because of currency, which we estimate at about 5%, or roughly $600,000 annualized.

All things being equal, we would have expected commodity impact in costs to be steady by now and distribution costs to be catching up with prior-year costs. Given the recent dramatic swings in the price of oil, that probably will not be the case.

Our sales, marketing and distribution costs -- and here distribution is primarily warehousing -- increased approximately $400,000 in the quarter, or 1/10 of 1% of sales compared to first quarter 2005. This increase was primarily due to an increase in brokerage and salesman commissions. Also included in those numbers was nearly $200,000 of severance expenses related to the transfer of our direct store sales force to our New York broker effective April 1. This transfer should yield cost savings for the remainder of the year. We will continue to deliver directly to stores in the New York area as we traditionally have, and only the sales function has changed.

G&A expenses increased approximately $300,000 in the quarter as a result of higher compensation costs and an overrun of year-end audit expenses. We do expect compensation costs to be higher this year. You'll note in our recently filed proxy statement for the 2006 annual meeting that management bonuses were not paid in fiscal 2005. If we meet our goals for fiscal 2006, there will be bonuses paid to management.

Moving to the sales line, our net sales for the first quarter increased 3.2% to $93 million, and there's a lot of pluses and minuses in that number. On the plus side, price increases added roughly $2 million in revenue, which was somewhat lower than we expected. We are beginning to lap prior-year pricing gains, but that should not have reduced that increase quite that much.

Our two acquisitions in December and January added $3.8 million in net sales, about what we estimated. I would remind everyone that molasses sales tend to occur in the fourth quarter and in fact our Brer Rabbit Brand does nearly half of its sales in that quarter.

Ortega continued to grow nicely for us. New products such as our Grande Dinner Kit are doing very well in the marketplace. Other growth brands in the first quarter included B&G and Sa-Son, and both of those are very gratifying to see because they struggled in 2005. Our B&G brand appears to be working through the very competitive retail environment in its New York market, and in fact we've seen competition pull back a bit lately, and the brand is gaining share in both pickles and peppers. We've launched new formulations in the Sa-Son line, and that seems to have revitalized the line in its key Puerto Rico market.

Finally, I know some people out there are interested in the Emeril brand, and I'm happy to report that the Brand grew 2% in net sales in the quarter, led by the new line of cooking stocks, increased sales of pasta sauces and the repackaged line of salad dressings.

There were over $2 million in net sales declines in Maple Grove syrup business and B&M baked beans in the first quarter. Both of these brands were key pieces of the pay-for-performance effort, since they are high trade spend brands. The decline with retail customers in both brands is absolutely traceable to pay-for-performance, and our airport factory sales are verifying that the volume is still there at the consumer level.

Maple Grove also had a volume decline in food service; a key customer did not repeat a major promotion around maple syrup that took place last spring. The very good need news on the maple syrup front is that our largest competitor has increased price at a number of significant customers. We intend to follow with our own price increases very quickly.

Las Palmas was another brand that declined in the first quarter, approximately $1.2 million, or 19%. Delayed Easter holiday is the primary reason here. Promotions on the Brand are timed to that holiday and shifted from the first to the second quarter in 2006.

The only other brand with significant decline in net sales was Joan of Arc, which saw a $700,000 decline. That category has been hit as hard as any with cost increases and there have been several rounds of price increases within the category as a result. The dust is still settling on the best way to compete given the new pricing. And we think what we're seeing is a combination of consumer sticker shock and a disruption of key promotional prices. We're going to have to feel our way through all this with this brand. But the good news is that the Joan of Arc Brand is one small part of our diverse portfolio, and we are confident we can remedy this situation.

We continue to look for pricing opportunities, especially in light of ever-increasing oil prices and decreasing hopes for cost relief. As I said earlier, we are planning further increases on maple syrup in response to competitive movement in pricing and on several other brands as well. We believe that we're ahead of the cost increases we're now seeing instead of behind as we were in the first half of fiscal 2005, and we intend to stay ahead by being aggressive on the pricing front.

My final financial comment is on the consolidated balance sheet and our increased inventory level, which Bob mentioned earlier. Inventories increased almost $7 million in the first quarter from year-end 2005, an unusually large increase for our Company. There are a variety of reasons for this, each reasonable on its own, but the sum adds up to an inventory level that we find unacceptable in a business where cash management is very important. We've redoubled our efforts on reducing inventory and expect that the second-quarter number will be much more consistent with our historical levels.

Our two new businesses, the Ortega cheese sauce business and the Grandma's Molasses business, are both performing at least as well as we expected. We see potential opportunities in both that are beyond our expectations when we acquired them and will attempt to realize those opportunities this year. Consistent with our stated acquisition strategy, we continue to review acquisition opportunities as they present themselves to us.

Looking forward, our priorities are to stay ahead of cost increases and the dynamics of oil pricing, keeping our base business producing steady, reliable financial results. As we've said in the past, our minimum expectation, subject to the uncertainties of cost of course, is that our recent acquisitions would add to our fiscal 2005 results. That remains our goal for the remainder of 2006.

With that, I'd like to open the call up to questions. Operator?

(OPERATOR INSTRUCTIONS) Robert Moskow with Credit Suisse.

Good afternoon. Quick question here on the cash flow, you mentioned that you have some inventory scaling up. But in your adjustments to net cash flow from operations, it looks like you had a nice gain there to cash flow from changes in assets and liabilities compared to a big use of cash the prior quarter. So how did you generate that gain?

I mean, the biggest piece of that is a $9.6 million interest payment on our bonds that last year we -- timing -- it's due April 1st. April 1st ended last year within the period; we paid it the end of the first quarter last year, but we paid in the second quarter of this year.

I see. So this quarter typically is a source of cash from a --

Yes, very small. I mean, it should be very flat -- not much -- plus not much [money] is on cash.

Okay. Also, as I was going through your 10-K, I was trying to make sure I understand the terms of your credit facility. As I looked at those ratios, it seemed to indicate that you are a little bit beyond those ratios as to what you are allowed to do, debt-to-interest expense and so one. Did I read that correctly or where are you in terms of those?

We are well within our covenants. Acquisitions and the debt incurred in acquisitions, we would add our pro forma EBITDA for those acquisitions for the full year. So we are well in line with our interest coverage ratios and our leverage coverage, and have plenty of room in those covenants.

If you wouldn't mind walking me through just one of them related to debt. You have consolidated debt at this time of close to $430 million -- is that correct?

That is correct.

And EBITDA is beyond $65 million -- that is what had I had you at. Are you saying it's probably going to be a lot more than that because you're looking at it on a forward basis?

That is correct. That is how you would look at those covenants. You would take into the account the multiple and the businesses we bought.

Okay. So it is a forward-looking --

Correct.

-- number. Okay, thank you very much.

Eric Larson with Piper Jaffray.

Good afternoon, everyone. One, can you give us -- we hear about a lot of the large vendors on Wal-Mart with all this inventory reduction, etc. Can you give us an update what that might be for you -- impact on you?

Sure. Our people actually a month or two ago forecast that the switch to total remix warehouses for Wal-Mart would probably be somewhere between $500,000 and $1 million in sales, most of that in the fourth quarter. We are growing so quickly with Wal-Mart, well above their average, that we really don't think it's going to be a major factor in our results this year.

Okay, good. And then the second question, David or Robert, whoever wants to answer it, I think Dave in your prepared remarks you talked about how you're getting close to anniversarying the implementation of your price increases last year. And with oil at 70, 72 -- I know you addressed a little bit of that -- do you anticipate you may have to push on that price band again at some point here or how will you look at the rest of the year from a cost basis on pricing?

Well, we are and have been increasing prices where the opportunities availed themselves even before oil started clicking up. We actually lapped prior year in a significant way in the second half; that's where we saw most of our pricing benefit last year. About $6 million of the $8 million total that we estimate last year came in the second half. So the second quarter, we are still pulling against some lower pricing benefits, if you will, and should see still some price advantage off the in quarter.

Having said that, we do have other price increases that we implemented in January, implemented on April 1st, and we have another brand increasing price on May 1st. And then as I said, in maple syrup, our key competitor in maple syrup just recently increased price at some major accounts, where we had both been kind of in a staring match. So we are going to follow very quickly there. So every chance we get, we are working to push through price increases to make sure we are ahead of that curve on cost.

Okay, that makes sense. And you said that there is -- maybe it's a question for Bob -- but you said that just the impact of currency is going to have a negative -- I believe it was $5 million, if it's not the correct number for the full year.

I said about $600,000, or 5%.

Oh, 5% -- got you. Good. So it really doesn't make much sense to really hedge that. It tends to be probably more sensitive to hedges than to just absorb it. Would that be a fair comment?

This question has been asked on every conference call for the last year. And for a long time, we said we don't know enough to hedge, frankly. And I will continue to say for the benefit of my banker friends out there that all the forecasts say the Canadian dollar is going to weaken and it just doesn't. So I can't rely on them either.

And the other thing is, say, in the last three to four months, the Canadian dollar has not increased significantly to where hedging would have done us any good. We could not have hedged at a level below where it is now.

Got you. Well, you might want to try some new bankers, Dave.

I'm reading every bit of advice there is (multiple speakers).

Anyway, thank you, guys.

Reza Vahabzadeh with Lehman Brothers.

Good afternoon. As far as pricing is concerned, you said the first quarter was a tad below your expectations. Do you anticipate just the prior price increases to ramp up a bit in the second quarter and then get some more benefit from new price increases?

I think we will see more benefit in the second quarter. I think some of it is around a phenomenon of this pay-for-performance. Because customer deductions figure into your net pricing and timing of those customer deductions and all of that. And I think there is a bit of a phenomenon there that we saw in the first quarter. So I am hopeful we will see more benefit in the second quarter than we saw in the first.

Good. And pricing gave you almost 220 basis points, I guess, in the first quarter. I'm assuming the offset to that was largely the cost side equation, packaging and freight, this quarter.

I'd say to a large extent distribution cost. So the rest of it would be -- packaging, commodities tended to be fairly level.

Okay. Do you recall offhand, Bob, how much was distribution or freight cost?

Distribution was almost half of the offset.

Okay.

A very large shipping cost month, as I said, about half of which was fuel surcharge and the other half was moving inventory around for the acquisitions we did and some other inventory movement that we don't think we're going to have to repeat.

Okay. And on packaging, do you think that in total it's getting worse or is it pretty much the same kind of headwinds you've seen for a while.

It's getting worse. The glass suppliers announced a price increase effective January 1 that we've experienced. This linerboard increase last week -- and I'm assuming it's going to stick -- and those familiar with the paper industry know they don't sometimes. But I'm assuming it's going to. And we have like a one-month lag in our contracts where they can start charging us for those kinds of increases a month after they occur and are effective. So we're going to start seeing that.

If oil -- a lot of these packaging people, be it corrugated or cans or glass or whatever, are fairly energy-intensive. And the price of oil going up is going to drive up their costs and logic says we will see some of that.

I see. And how big is sugar and corn syrup for you?

It's not huge. In fact, it's getting less and less because our preserve business actually is more oriented towards all fruit, which doesn't use corn syrup, and sugar-free, which doesn't use corn syrup. But it's a couple hundred thousand dollar impact on the increases we've seen this year.

Okay. And as far as new product launches, anything you can share with us? I know Ortega did okay last year?

Ortega continues to launch some new products. We're very excited about the snacking occasion types of products. We haven't put them out yet, so I'm loathe to talk about them. But we're continuing down that snacking road. We're also continuing down the meal occasion road with Ortega. The Grande Kit has done very well, and we think there's other meal occasion types of things where you're selling essentially a whole meal, and not just in the taco area, where Ortega as typically been, but in other areas. And we're going to pursue those.

Okay, thank you much.

[Pearl Chang] with Seneca Capital.

Hi, good afternoon. First question, just with respect to the inventory increase, you did explain a number of factors -- the acquisition, the higher maple syrup cost. But I was wondering how much do you think you will be able to bring it down over the next couple of quarters? What are you targeting? Do you think you could get it to, say, low 80s or so?

I'm very hopeful it will be little if, any increase, over what we were at prior-year at the end of the second quarter. And I frankly don't remember what that number is offhand, but that will be a substantial decrease in inventory.

About half of the increase was a purchase of maple syrup we made here in the first quarter that we did not make last year. So that was sitting in our inventory and it was an opportunistic purchase of prior-year crop with the right blend and all that kind of stuff. And that obviously will liquidate itself as we use it in production.

Okay, great. And just a question on the acquisition environment. I think you've talked about it just not really any opportunities out there because multiples have been so high. Does that continue to be the case?

We're seeing a little bit of a pickup. Actually, there wasn't much activity at all for a few months, multiples or no multiples. And now we're seeing a little bit of a pickup.

But, yes, the financial guys tend to pay higher multiples than we like to pay. And we were very glad to be able to do the two we did at reasonable multiples. It remains to be seen on the kind of things that are out there now what the multiples will be. If they are not what we want, then we just won't participate.

Okay, great. Thank you very much.

(OPERATOR INSTRUCTIONS) [Gary Lenhoff] with Ironworks Capital.

Thank you. Dave, if you adjust the revenue line for the acquisitions and the pricing that you said you got, it looks like units year-over-year -- or volumes may have been down 3% or so. If I'm looking at that right, do you feel like you've lost share in any of the brands because of pricing or can you help me understand what is going on there?

Yes, sure. No, it's not a share issue. It is all-around pay-for-performance with a couple of the brands. As I said Maple Grove and B&M were $2 million of that drop in and of themselves. And those were absolutely pullbacks on trade promotion activity that we thought was meaningless in terms of consumer movement last year. It did generate factory sales, and we lost those factory sales to the retailers because we pulled back that promotional money. And I'm confident in saying that because I can see it in my April factory sales. I can see those volumes back. They were just not bought at that lower promotional pricing in the first quarter.

Las Palmas is another $1 million plus of that decrease year-to-year. And a very large part of that is around that Easter holiday promotion that shifted from first quarter to second quarter.

When we look at our retail movement and then factor in the gains we're making with Wal-Mart, because if you look strictly at our Nielsen, you'll see some of our brands losing a couple of a percent of sales. We're very happy with where our retail movement is to consumers.

Okay, that is helpful. Bob, you mentioned before -- I'm not sure if this is the reason -- accrued expenses were a source of about $5.5 million in cash in the quarter. Is that the interest expense you were referring to earlier?

It's really just timing of when that was paid year-over-year.

Got it. Okay. And similarly, the question earlier about the debt-to-EBITDA covenant, is that covenant calculated looking back four quarters or forward four quarters?

It's a trailing 12-month covenant, so (multiple speakers).

But you adjust it for --

For acquisitions.

Okay. And you said that adjusted for the acquisitions you made, you were within the 6.5 times?

Absolutely. Very comfortable on the covenants.

Can you tell us where that number was at the end of the quarter?

Prefer not to because that is really projecting what we're going to do on the rest of the businesses. But we are very comfortable that we have plenty of room in those covenants.

Okay. Thanks very much guys.

(indiscernible)

Hi, guys. Congratulations for a good quarter. I just wanted to ask -- I'm not sure -- maybe I missed it -- just a breakdown in millions of dollars over the growth. I think you had almost like $2.9 million growth in revenue. So the breakdown between volume and price?

Well, as we said, about $2 million of the increase was pricing. And then another $3.8 million was actually the acquisitions we did. So we had some volume losses in some of the other brands that were accounted for by that Easter holiday movement and the losses in volume on pay-for-performance. So if we had not done pay-for-performance, you could argue that our sales would be several million dollars higher at least. But we wouldn't have seen what we have seen, which is a 1% of growth sales improvement in trade spending. And that is a very good trade-off; I will take that trade-off any day.

Okay, thank you very much.

Robert Moskow with Credit Suisse.

Hi. I think you answered it, but I wanted to know of the price increase, is it possible to break out your pricing in the quarter based on list pricing versus lower trade spending?

That is very difficult to do. That is very difficult to do because it's all about -- the trade spending number and everything is all about accruals, anticipated future trade on sales we did, and it gets very tough. I mean, we tend to look at pricing -- it is a net pricing effect that we're looking at, so trade is in there somewhat. But I think there's not a lot of overlap in them.

So the pricing number that you are giving us is a net number then?

That's correct.

Yes.

Okay. Thank you.

There are no further questions. Mr. Wenner, I will turn the conference back over to you.

Okay, thank you very much. Again, we're very happy with the quarter. We think it shows that for the third quarter in a row we have brought this business to at least a steady state and actually made some nice improvements this quarter. And we're looking forward to continuing the same in the second quarter. Thank you all for joining us.

Thank you very much. And that does conclude our conference for today.