Benchmark Electronics Inc (BHE) 2002 Q3 法說會逐字稿

Unknown Speaker*:

All participants please stand by. Your call will begin momentarily.

Good morning. Welcome to today's conference call. All participants will be able to listen only until the question-and-answer session of the call. At that time you will be instructed on how to ask a question. At the request of the company, this call is being recorded. If anyone has any objections, you may disconnect at any time. I would now like to introduce the moderator for today's call. Gayla Delly, you may begin when ready.

Good morning. Welcome to the Benchmark Electronics third quarter 2002 conference call. I would like to first introduce our team present with me today. I'm Gayla Delly, the CFO of Benchmark Electronics. With me is Cary Fu our President and Don Nigbor our CEO.

First, Don will provide an overview of the quarter. Then I will present the financial information and we will conclude with both Cary and I answering your questions in the Q-and-A session. We will hold this conference call to one hour. Before I begin, I will read the forward-looking statement. During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We would like to caution you that those statements reflect our current expectations and that actual events or results may differ materially. We refer you to the risk factors and cautionary language contained in the documents we file from time to time with the Securities and Exchange commission, specifically our recent filings on 10-K, 10Q, 8-K and S3 which identify important factors that could cause actual results did differ materially from our projections or forward-looking statements. We undertake no obligation to update our projections or forward-looking statements in the future. With that, I would like to turn it over to Don.

Good morning, everyone. During the third quarter of 2002, we stayed the course by maintaining our focus on improved financial performance overall. Our efforts have been rewarding. We are very glad that once again during the third quarter of 2002 we experience sequential revenue and earnings growth. The steps that we have taken toward our strategic goals of expansion into Asia have progresses well. Both our acquisition of our new Thailand facility and our (inaudible) operation in (inaudible) China are progressing to plan. Now I would like to turn it over to Gayla to go over the financial performance for the quarter.

Thank you, Don. We'll step through our press release and our overall financial performance. As we reported this morning in our press release, we completed the third quarter of 2002 with revenues of $428 million. This was at the higher end of our guidance, which was $420 to $430 million and our cash EPS was 38 cents per share which exceeds our guidance of .34 to .37 cents per share.

Our quarterly revenues represent sequential growth approximately 6% as compared to $404 million in the second quarter of this year. Once again our Q3 gap and cash EPS were the same. In other words, there are no reconciling items between the figures. There's no longer any good will amortization and we had no restructuring charges during the first three-quarters of 2002. This quarter was similar to last quarter in that we saw a more stabilized forecast from our customers, except the Telecom industry which is still experiencing difficult times in this downturn. The Benchmark team performed well in the third quarter, effectively managing working capital and focusing on cost improvements while maintaining great customer satisfaction. If I seem to be repeating myself in this area over the past few quarters, I am. I am extremely proud of our team for allowing me to do so by performing so well in operational and financial efforts. But I don't want to be overly pleased. There's still much to be done to achieve our internal goals.

For the third quarter, our cash flows from operations was $63 million. Our internal -- our inventory level was $209 million, comparable to last quarter's inventory level and our inventory turns were 7.6 for the quarter also comparable to the previous quarter. Growth margin was 7.6% of sales. This growth margin was flat and comparable to the previous quarter. The margin was favorably impacted by the volume increases, but this favorable impact is off set by engineering and start up costs incurred as we support new programs, introductions, and our expansion efforts into Asia. SG&A was approximately $17 million compared to $16 million last quarter, slightly higher than anticipated with the inclusion of the Thailand operation from the date of acquisition, transition costs associated with the acquisition activities and China's start up activity as well as other volume related start up SG&A expenses. As previously stated, good will amortization no longer exists under the new accounting pronouncements. Benchmark is currently evaluating our good will under these pronouncement and has not determined the impact of Faz 141 or 142 which will be adopted for fiscal year end December 31, 2002. We do not expect any impairment of good will upon the adoption of these new pronouncement. Our interest expense was $2.9 million for the quarter. Interest income was approximately $1 million. And other income was approximately $1.4 million, including foreign currency gains. Our tax rate for Q3 was reduced and was approximately 35%. Mainly benefiting from our newly acquired Thailand operations being included in our overall tax rate calculation. Our shares outstanding for the quarter were 24.924 million shares.

Now looking at the balance sheet, cash was approximately 238 million, an increase of $12 million for our June quarter. This amount is after expending 45 million cash for the acquisition of our Thailand and UK operations on July 29 during the quarter. Our receivables were $188 million, compared to $192 million for the second quarter of 2002. Day sales outstanding improved to 40 days as compared to 43 days for the second quarter of 2002. Inventory was $209 million, comparable to that of last quarter. Again this quarter, our team's performance was excellent in reducing inventory levels. Inventory turns remained at 7.6 tons (ph) turns this quarter comparable to last quarter. Current assets, approximately 666 million and current ratio was 2.4 to 1.

Capital expenditures for the third quarter were 1.6 million and depreciation was approximately 7.9 million. Total debt was $148 million comparable to the $136 million in the previous quarter and represents a net increase of approximately $12 million when including the debt from the Thailand (inaudible) indebtedness which at the date of acquisition was approximately $15 million. We have no amounts outstanding on our revolving credit facility which is approximately 175 million and we do remain in compliance with each of our debt covenants. Cash flows provided from operations, again with $63 million for the third quarter and $136 million for the nine months ended September 30. Expressly highlighting our effective work and capital management.

Now to look at our revenue break down by industry for this quarter, video audio represented 2%, medical 10%, Telecom 12%, high-end computers 63%, industrial controls 11%, and test and instrumentation with 2%. Our top three customers represented 66% of revenues, which is a decline from the previous quarter. We believe this trend of reducing the level of concentration amongst our top three customers will continue as we begin to ramp new programs and as new product introductions ramp to volume. Also we have seen the Telecom sector continue to demonstrate weakness, although it has not declined more significantly. Revenue from the industrial control segment, however, increased 135% over the previous quarter, while revenue from the remaining sectors remained flat. The medical sector has remained flat in dollars, as three of our new programs have not yet ramped to full volume, which is expected to occur in approximately Q1 of 2003.

During this quarter, we booked 11 new programs. Two are significant opportunities, working with new customers, bringing new products to market. One is in the high-end computer sector and one is in the medical sector. Of course, in these instances, we cannot speak currently as to the sizing or the timing of those new programs, except to say that we're very excited to once again be selected to work at the early ages of product development with these customers on important products for their future. We anticipate the production revenue from both projects will occur in 2004.

Of the remaining nine programs, one medium-sized project with potential revenues of over $15 million was booked. We also won 8 smaller programs with revenues ranging from 2- to $10 million each. The break down by industry of these new programs is two in Telecom, five in industrial controls, 1 in medical, two in computers, and two in test and instrumentation. We are now beginning to see what appears to be a new wave of out sourcing taking place. With the duration of this downturn far out lasting what many management teams had expected or planned for as it began almost two years ago. The levels of quotation (ph) and site visit activities are increasing. Component markets have not changed over the past couple of quarters as demand still lags capacity in most component markets.

Looking forward, we once again experience good revenue growth this quarter and we anticipate our fourth quarter will be flat to slightly -- capital spending programs, particularly I.T. spending is still in a holding or even a declining pattern for many corporations however and it is difficult to provide an outlook due to the uncertainties that still exist. Therefore, we have factored into our guidance for the fourth quarter the overall softness that is witnessed in I.T. spending and the markets in general.

Benchmark continues to believe it is prudent to provide guidance for only one quarter looking forward until better information is made available from our customers. Any guidance provided is based upon the information available at this time. Based on the customer information, adjusted for market conditions that we currently have provided to us, we expect the fourth quarter 2002 revenues to be in the range of $425 to $440 million, with corresponding gap earnings per share in the range of 37 to 40-cent.

We believe the next quarter will again be a challenging quarter as the economic uncertainties and the resultant decline in technology spending can further impact our marketplace. We remain optimistic given our continuing new program wins and support of new product introductions, yet we are cautious as we want to recognize that the softness in the overall technology market still exists and they could impact us.

I will turn it over to Cary for a few opening comments before our Q-and-A session.

Thank you, Gayla. The technology sector still, the problem difficulties still have not been subsided. The challenge is still surrounding us. All teams continue to perform very well. Sales, new product introduction, engineering introduction, finance and I.T. perspective. We are very proud of our teams and now are pushing them even harder to accomplish the excellent result in the future. You can see a result of our efforts over the last 18 months. Some of the most recent awards recognize us as being -- I want to once again personally recognize our team for their efforts. Another one of our major customers -- recognized us. I am proud to be part of this motivated and successful team. At this time I will take over the call to Gayla for the Q & A section .

During this segment we request that you limit yourself to one question and one follow-up question. Operator?

We're now ready for the question-and-answer session of the call. If you would like to ask a question or have a comment, please press star 1 at this time. You will be announced prior to asking your question. At any time you need to withdraw your question or comment, you would press star 2. Please press star 1 now and it will be one moment while we queue up for questions and answers.

The first question or comment will come from [[Brian White]] from Merrill Lynch.

Walk through the revenue contribution from the ACD transaction in the September quarter and the impact this had on earnings. Maybe also if you could break out the impact it had on your inventory accounts receivable and the good will contribution in the quarter.

As always, Brian, we do not comment to any specific location or division revenues. But I would like to say that the acquisition is tracking and is online with our expectations. I also wanted to point out for everyone that we recently filed an A.K. with respect to the ACT acquisition which, I believe, provides full compliment of information, answering most of the questions which arise. As to the specifics on inventory and receivables, once again, we haven't broken those out, but I think each of you can understand that we were pleasantly -- I guess surprised is the appropriate word to use to see that our turns including the acquisition for a portion of the quarter and, of course, the inventory and receivables for a full boat load still resulted in very favorable turns. We have gained a lot of traction there and have not broken out those inventory or receivable numbers that I believe our full results demonstrate that we have had effective management. Our revenue target again, for the ACT acquisition was at the run rate of 180 to $200 million annually.

OK. Maybe you could just discuss what the response has been for your Thailand facility from some of your customers and how many customers are currently at that operation. .

As to the response from customers, I believe the response has been excellent. As we do in each of our acquisitions, we look for opportunities to in essence cross pollinate and have opportunities to show customers any acquired facilities, capabilities and skill sets, the full Benchmark range of services, and, likewise, any of our customers who have products that may fit into that facility that we currently are not building that we look for opportunities to take them to visit that facility. We have had in excess of four customer visits already at that facility, and we already had one of the programs convert to a Voxville (ph) program and I think we're very pleased with the progress there. There was a follow on in part of that question. .

Just how many customers are currently at that facility?

I don't have the exact count but I would say an estimate of about 10 customers, 10 to 15.

Thank you very much.

Next question or comment comes from [Shawn Severson] from Raymond James and Associates.

Good morning, Shawn.

Could you add more detail to the idea that you're expecting a continued slide in I.T. in the fourth quarter? Could you quantify what you are expecting in terms of maybe the organic downturn and then we can separate out what is happening with Benchmark in terms of new programs and things like that?

I would say, Shawn, that would I expect that the -- we would see some other areas continue to grow and maybe a slight decline in the I.T. side. But, more importantly, it would be the growth in the other areas that I expect that I would not continue to see going forward into the next quarter.

OK. So if you look at, you know, the core organic business and you have areas like computing and things like that, would that be down 5%, 10% in the fourth quarter or is that too much?

I wouldn't expect it to be down a full five to 10% given the new programs that we're also adding in that area. I would say that potentially you could see it, you know, 2 to 5% maybe.

OK. And then just lastly, on Emerson, now that you've had a chance to sort of warm that relationship up again with the ACT assets, how does that turn in terms of the next three or six months in terms of some opportunity with them?

As you can probably appreciate, Shawn, I'm going to shy away from speaking about any specific customers on customers opportunities but we are progressing with each of the customers that we had expanded relationships with through the Thailand acquisition and are looking for incremental opportunities to service them and, of course, Emerson is one of them.

Thank you very much.

Next question or comment comes from [[Michael Morris]], Salomon, Smith, Barney.

Good morning, Mike.

Good morning, everyone. Could you give us an update on your China up plant? I think last quarter you said it should be up and running by the end of the Q4? Could you just let us know how that stands? Also talk about what you think your utilization rates will look like at the end of Q4 with the impact of the China assets and comment on the impact on margins from the startup in China. Thank you.

Good morning. This is Cary. The China Greenfield (ph) project is very much on time. We anticipate we will start the initial production toward the end of this quarter. The interesting thing about this project is the cost of the project is really significantly lower than we anticipated due to the cost of the equipment (ph) had come down so significantly due to this downturn. So we really don't see a whole lot of impact -- of impact from the P&L point of view. And of course each project or new customer going into that factory had to be certified and go through the initial startup learning process. So I don't project a significant impact even from the revenue point of view for the next six months. However, excluding the China facility, our utilization rate today is at a high 60% and we will anticipate it will continue going up slightly with other new projects.

Thanks for that, Cary. Let me ask any second question. We know Benchmark works in some instances on a hub system. I wonder if you could give us your perception of customer inventories, whether inside or outside of the hub and is that having any depressing impact on your fourth quarter out look?

I really don't think so, Mike. As you know, this downturn OEM and customers are very focused on inventory management. And we have seen the inventory level continue coming down in our customer base. At this point in time, it's very clear, you can look at, excluding Telecom sites, most customers' inventory is coming down significantly. I don't believe the inventory level would impact our Q4 performance. Now, one point that I would like to point out at this point in time is, I think we will be ahead of OEM recovery maybe by a quarter, mainly due to the holding patterns. The customer walk down the inventory level, we would be -- I customer would have to owe us inventory before they able to ramp up their revenue. So from that point of view we seem to be slightly ahead recovery timing wise compared to our customer base.

Thanks very much.

Thanks.

The next question or comment comes from Steve Savas, Goldman Sachs and Company.

Thanks, good morning. Gayla, can you clarify, the other income that affects (ph) impact? Are those hedge programs that are in place that have expirations during the third quarter or is that ordinary course of business and nothing unusual?

No. We have ordinary business. Most of ours occurs in natural hedging form.

OK. So that's just straightforward hedging. What is your hedging program?

Most of our hedging is natural hedging. We do not have hedge arrangements out there to, you know, hedge in favor of one currency versus another.

So it's not derivatives. It's just FX forwards as you can anticipate it?

That's correct. .

The next question or comment comes from John McManus from Needham and Company.

Good Morning, John.

Could you give us some indications whether the first quarter revenue with the ramps of the medical customers could be close to your fourth quarter revenue?

John, as I have said, we don't have forecasts provided going out two quarters. Primarily because I don't believe they focus an attention that has been given enough detail scrubbed down by each of the customers to feel comfortable with that guidance. But I don't see any significant changes, you know, looking out one quarter beyond the fourth quarter. But again at this time we're not giving forecasts specifically because I don't believe that adequate attention has been given to that period of time yet.

Could you give us some idea of the revenue range? What is the biggest factor there which would swing the revenue either higher or lower?

I believe, John, it's primarily going to be the market place in general, seeing exactly how the fourth quarter shakes out with the softness of potential I.T. spending. We hear things in the marketplace that cause us to want to temper the information that we have, and we've done so in providing that guidance.

You have, in the past, broken out the top -- the percentage of the top three customers. Could you do that for us? .

As we have said last quarter, upon request of some of our top three customers, we have not done that. We did indicate that the top three customers in the aggregate represented 66% of revenues for the quarter.

Thank you.

The next question or comment comes from Scott Robertson from [Invest Tech].

Good morning, Scott.

Good morning, Gayla. I was wondering if you could quantify what you mean by significant on the other two programs. Are these 20-million plus, 30, 40, or do you have any guidelines on that?

I don't, Scott. The reason I hesitate to do that is, as you probably can appreciate, when you're introducing and supporting new customers with new product, the information that the customer gives you is a litmus test. It gives some identification as to how they expect the product to be received in the marketplace, which they are targeting. However, I don't think any of us can sit here today with full knowledge of how or what the market receptance will be at the time it hit the marketplace, but I would say that the target market and the expectations from the customers greatly exceed the numbers that you had presented there.

OK. Great. Thank you.

Next question or comment comes from [[Thomas Hopkins]] from Bear Stearns.

Good morning. Good quarter. Cary, it seems like two of your top customers are still shifting programs around, not quite set on the EMS companies, and I know you don't like to talk about specific customers, so you -- so you don't have to it. But we know Sun is giving stuff to Selectron (ph) and it made people nervous about Selestica (ph) we know that EMC is moving stuff around. What kind of protection or how do you view the relationships in terms of making sure that -- because there's a lot of price pressure going on, that Benchmark will be able to protect its position with its top two customers?

Tom, thank you. We have an excellent relationship -- as a matter of fact most of our customers, the top customers. From our top Sun relationships and, as I discussed earlier in my presentation, we wonder we have a very high honor, supplier of the year from Sun Microsystems, out of all the supply bases they have; we are recognized as number one for the year. Saying that, and our relationship with the account is doing very well, and this is the first time EMS recognized us as supplier for the years. Given that relationship, you can see our relationship is pretty solid with the customers. I'm not going into detail about any program involving so on and so forth. But I can tell you, with our top three customers we're involved in future products and from the engineering and all the way to production standpoint of view. So we are very comfortable with our relationships. As far as pricing pressures, you know there's always pricing pressures. And I think our team does very well not only looking for but providing our customers a different alternative, including moving the component of the system to the low cost area, so we're very focused on our supply chain development, as well as -- a source of the component. Plus we're constantly working on efficiency on our team. In that way our price and performance are as good as or maybe better than our competitors.

This kind of misconception where it's a bigger the better thing. I don't agree with that. We are very focused. We're one of the few EMS first where we can have a good database from our component pricing standpoint of view and we constantly value our pricing performance from a component standpoint of view with our competitors.

So we have not lost any project to our competitors from a pricing standpoint of view. In this business, service, flexibility, pricing all had to be together. Our customers are looking for performance and they continue awarding us with the project. And the -- we're gaining market shares. Now we're not losing anything.

Great. A follow up is on margins. I understand from a startup cost margins basically slipped a little bit. But if you look at the operating margin, it's basically flat. But longer term, you want to increase the margins from here but at the same time you're currently growing, so it's hard for you to take out costs. What are you going to do in the near term to get the operating margin higher?

Well, the margin is a factor -- I would say three things. The loading factor, the efficiency, and the material pricing. And, you know, (inaudible)-- we're looking in all areas very closely, get on top early, as Benchmark has not taken any restructuring charges for these years. Indeed that is true. But that is not stopping us from continually looking at all areas together. Again, we still believe at this time, once the Thailand acquisition is fully integrated, and the (inaudible) is through ramping up, we should have a market opportunity. I am very happy with the numbers. You look at the total performance and we are very happy with what we have done in this very difficult time. And we will continue to work very hard to improve the results.

Thanks.

Operator*: The next question or comment comes from [[Michael Walker]], Credit Suisse First Boston.

Hi, how is it going. Just a question on the A.T.T. integration. By on track, I want to confirm what you mean by that, about what we said last quarter, that it should be fully ramped to the 200 million annualized level by December and we're about a third of the way there into September? . .

Yes.

OK. And the other question I had was, could you give us the number of 10% customers? Was it two or three? . .

I think it's two. .

Mike, we will have to specifically look at that. There's one that probably, in rounding will go one way or the other but it's either two or three.

Thank you. .

Unknown Speaker*: One being on the cusp. .

O.K. thanks.

The next question or comment compress [Roger Norberg] from JP Morgan.

Hi, good morning. Just one question on your fourth quarter plan as far as revenue, just very roughly speaking, where do you think that will take your concentration as far as your top three customers in a percentage of sales versus the 66% in Q3? .

I think based on what I'm seeing today, we're probably going to be continuing to operate at a 2 to 4% range. .

Plus or minus two to four points off the 66?

Yeah.

And just to readdress the gross margin problem again, your sales on a year over year basis are 65% higher gross margins are 30 basis points higher so if you calculate it out, the incremental is about 8%. Is that something I should expect in the future to potentially be higher on incremental growth, or is there -- you know; there a continual other offset in your mix? I know you mentioned you had a lot of incremental startup costs, maybe the ACT acquisition, but that seems like relatively skinny incremental on that big a revenue jump. Can you talk a little bit about your gross margin potential on a longer term basis?

I guess -- you are right, the impact on the gross margin did include the acquisition and also the costs of us starting the China project. Plus the M.P.I. activity. And at this point in time, I still anticipate that our near-term gross margin profit is 8%. We will work very hard to try to get there. You know, earlier, we were asked a question about pricing, and pricing has an impact on the (inaudible) sector too. We have to remain competitive in this industry. Definitely there's an opportunity for that. Particularly when we start to be able to further move our low cost components into low cost sectors, we should see some more opportunities for the margin to improve.

And just one more question, talking about the program wins, just two questions along that line. Is the high-end computing program you're talking about a large existing customer or a new customer? And then, as far as color around a lot of your other program wind activity it looks like there's a lot of non-computer non-Telecom activity and program sizing is relatively smaller. Is that a complexion of what the market is showing you right now or is this some sort of short-term phenomena? .

It's kind of short-term, Roger. Today you get a project for the customers and they can give you a range so big. We're constantly adjusting it downwards. We're not taking on the customer unless they have good futures. And some of the customers we took on today may about major customer down the road but they tend to have a very small revenue base at this point in time, either based on market condition or based on the inventory level they had so -- the high end computer is a significant opportunity down to 2004 with our existing customers. The second opportunity is the brand new customers.

OK. Thanks, very much.

The next question or comment comes from Chris Lippincott from McDonald Investments.

Good morning. I was just wondering if you could discuss a little bit your outlook for the fourth quarter, working capita goals specifically inventory and A.R. turns.

We have to laugh, Chris, to the extent that, you know, if my team does this well and I don't set very good standards, I think I'm going to set some really good goals and see what we can do. Once again I think we will hit the point of diminishing returns on how good we can really do but would I expect to have 20 to $25 million in cash from operations provided.

OK. Just given the fact that, you know, some of this already included the ATT integration, I was wondering if there was anymore incremental change we could find for capital on the --

Again, I would like to put forth a really strong challenge to our team to do so and I think we can have incremental improvement but I would not expect it at the level we had this quarter once again.

You said you once were seeing the ATT and the China facility ramped up the bond. What would you expect, given where the geographic mix is now, A, where do we see geographic mix in this quarter and where are we seeing the geographic mix and the low cost production mix going?

I would say you're going to continue to see the revenues in Asia increase, not an anomaly in today's marketplace. You will continue to see that. Europe is continuing to show weakness in general and seems to trail the U.S. either when they had a decline in revenues or in an increase in revenues. I would expect it to be about 10% maybe today looking forward for the quarter of revenues in Asia and then growing over time to, I guess the real answer is who knows what it is, as much as the market can bear probably. .

OK. Asia, you're saying Asia 10%? .

I would say approximately 10% for the fourth quarter. .

OK. Thank you. .

The next question or comment comes from [Derek Wagner] from [Jeffreys and Company].

Thank you. I don't believe I heard the capital expenditure level correctly and if you can give guidance for capital expenditures going forward. .

Our CapX for the quarter was $1.6 million. And I would say for the fourth quarter, we would see it at 2 to 5 million.

And next year?

Next year, I don't have guidance out there, but again would I say probably on the range of approximately $5 million a quarter. .

OK. Thank you.

The next question or comment comes from Michael Gresons from Roberts & Beards.

Good morning. I was wondering if you could bring us into the 10-Q for the coming first quarter and reveal how large the biggest customer was?

I believe the largest customer will be just under 50%.

And that was -- when you said 66% for the top three customers, was that for the quarter or year to date?

For the quarter.

OK. And then you had three top 10 -- three 10% customers roughly?

Right.

And then the transition plus that were inccluded in the quarter for the ACT acquisition? .

I'm sorry. If you could repeat that. I'm sorry. I coughed.

The transition costs related to ACT acquisition during the quarter, do you have that number? .

I would expect that the transition cost as well as the startup cost in China would be approximately a million dollars.

OK. And looking beyond China, do you see -- or what do you expect your future expansion opportunities to be? What geographies are they going to be concentrated in?

We continue to work with customers and identify the opportunities and what they see as their desire for expansion, one that seems to kind of come and go would be the need for an Eastern Europe presence. It depends on kind of the timing and right now the European markets do not seem to be clambering for a significant presence over there, but we continue to monitor that.

Probably to address the China situation a little bit, the China market is targeted for Benchmark today to bring in another low-cost solution to our customer base. And we don't believe we will ship with all of the low costs in one area or one country. I don't think that's a very good risk-management standpoint of view. So we believe with the facility in Thailand plus China, that's a good safety net as well as a cost solution for our customers. Now, we have a very good reception by our customer base to work our China expansion project. And several customers expressed interest to go there fairly quick. And we also have more customers express interest in moving the low end product, a very labor intensive product, to both Thailand and China. So you can just look in China as the only expansion project we're looking on but we're very focused on Thailand and China, we can provide our customers a very stable solution. As well as provide a cost benefit for the economy in the future. The China project is very, very critical for us. But nevertheless, we already have a THAI facility, being in Thailand for 18 years. It's well run and they have a very high customer appreciation for the assets. So we are very comfortable with the path that path we're going down from a far-east expansion point of view. And China is critical but we also have a -- we already have a base to work from and our customers are very much appreciative that the pattern and end trend will go into the far east.

Once again, if you have final comments or questions, please press star one at this time. I'm not showing any more responses at this time, ma'am. .

Thank you very much. Thank you to each of you for joining us today. We will be available in our office if there's any follow-up question. Appreciate your support.

You may disconnect at this time much this concludes today's conference call.

[conference over at 11:50:00 a.m.]