Benchmark Electronics Inc (BHE) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Benchmark Electronics third-quarter 2009 earnings conference call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session, and instructions will be given at that time. (Operator Instructions). As a reminder, today's call is being recorded.

At this time then, I would like to turn the conference over to Don Adam. Please go ahead.

Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the third quarter of 2009. I am Don Adam, CFO of Benchmark Electronics. Today we will begin our call with Cary Fu, our CEO, discussing the overall business environment for Benchmark. Gayla Delly, our President, will discuss our activities and performance in the third quarter, as well as our outlook for the next quarter. I will follow with a review of our financial metrics for the third quarter.

After our prepared remarks, Gayla, Cary and I will take time for your questions in our Q&A session, and we will hold this call to one hour.

During this 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 also like to refer you to Benchmark's periodic reports that are filed from time to time with the Securities and Exchange Commission, including the Company's 8-Ks and S4 filings, quarterly filings on Forms 10-Q and our annual report on Form 10-K. These documents contain cautionary language and identify important risk factors which could cause actual results to differ materially from our projections or forward-looking statements.

We undertake no obligation to update those projections or forward-looking statements in the future. Now I will turn the call over to Cary.

Thank you, Don. Good morning. We appreciate you joining us today. At Benchmark, we are pleased with how we are executing in this challenging but improving environment. We are encouraged to see that our focused efforts result in the revenue growth, earnings that exceeded our guidance and improved our (inaudible) metrics in the third quarter 2009.

We are starting to see the operations margin benefit of our hard work and as a result, leverage revenue are increasing. We expect this favorable trend to continue with our better product mix and as the demand levels stabilize.

While we haven't seen (inaudible) demanding level from our customers, we are also seeing some challenge from the supply chain. (Inaudible) leadtime has begun to stretch out, which is traditionally the first reaction at a time like this.

During the quarter, we saw strong shipments on all the other industry sectors we serve except the telecommunications sector, where we saw a slight decrease. Sequentially, comparing the revenue of Q3 to Q2, (inaudible) sectors were up 80%, and industrial control sector was up 16%. Medical sector was up 10%. Computer sector was up 1%. And telecommunication was down 4%, mainly due to the products (inaudible) in the segment.

In Q3 and into Q4, we see the customers are getting more comfortable with the economic environment was demonstrated by the spending and budget trends. During Q3, we continued to see increased levels of orders with (inaudible) leadtime. Looking to Q4, we continue to see positive signs that the economy is beginning to slowly recover, with increasing demand -- confidence from our customers.

As we continue, our focuses on growth, profitability and the investment in the futures will continue to provide excellent service for customers for some new business as well as [M&A] opportunity, major costs and maintain a strong balance sheet and cash position.

We are completing our global realignment -- footprint realignment and are taking action in two higher cost locations. During Q3, we incurred $3.8 million in restructuring charges, primarily related to a reduction of capacity at one of our European sites. We also have announced plans to close the one other US location, and expect to incur additional restructuring charges, about $3 million to $4 million, as part of our restructuring plan, which should result in annual savings of approximately $20 million once completed.

Our team's efforts continue to be strong and positive, and with our dedicated team, our strong balance sheet and flexibility, we are well positioned to continue our growth and to benefit as (inaudible) in time.

Now I'll turn the call over to Gayla Delly, President of Benchmark Electronics.

Thank you, Cary. Our third-quarter results evidence the continued execution of our plan, driving sales and bookings, while maintaining tight spending controls. We have a lot to be positive about. We are encouraged by the growth during Q3 and the operating margin leverage benefits to the bottom line.

This strength is seen even while we are supporting the steady flow of NPI activities resulting from our recent bookings, which we have discussed, and these do provide some downward pressure on our margins.

We believe that our profitability improvements will continue, provided a consistent product mix, due to our cost control measures and the strength of our financial model.

We continue to be focused on providing flexible support for our customers, including our recent extension of capabilities in precision machining, which has provided additional service scope for our customers.

We now have an expanded level of service offerings for our customers, specifically for the higher-end and systems integration products which customers are responding to quite favorably.

During Q3, our revenues were $510 million, which was at the higher end of our guidance and was up 6% from Q2. Our operating margin, excluding special items, was up from Q2, which demonstrates that our financial model is working, showing increased operating leverage.

At the time of our last conference call, we noted that the pipeline of opportunities was strong and that we were working on several substantial new program opportunities. Our actual bookings for Q3 include one of those opportunities, and yet another has been booked in Q4. During Q3, we booked nine new programs with an estimated current annual revenue rate of $120 million to $166 million. And as I noted, this does include one of the significant programs which we had mentioned last quarter.

Our new program opportunities are with both new and existing customers, and they are in the industrial controls, test and instrumentation, medical and telecommunication industry sectors. Due to the current market conditions, the timing and actual future revenues from these bookings are uncertain at this time.

Our Q4 is shaping up to be strong for bookings also, with the strong pipeline continuing, and it will include another substantial opportunity, which we mentioned. Our team is working to ensure that we continue to differentiate ourselves with our execution and our service model. Given our solid operational and financial metrics, we are confident in our ability to support our customers, both current and future, in this dynamic environment.

Based on our current outlook, we expect another quarter of sequential growth, with fourth-quarter revenues estimated to be in the range of $520 million to $560 million, and a corresponding earnings per share for the fourth quarter in the range of $0.22 to $0.26, excluding restructuring charges.

At this time, I will turn the call over to Don to discuss our financial metrics for Q3.

Thank you, Gayla. We completed the third quarter of 2009 with revenues of $510 million. These revenues were at the higher end of our revenue guidance of $470 million to $520 million provided during our last conference call, and were up 6% over the second quarter.

As Cary noted, we saw stronger shipments for all the industry sectors we serve except for telecommunications.

Our diversification efforts have been successful, diversification among the industries that we serve and also diversifications within those industries, that as computing sector has grown to include a number of customers.

Our earnings per share for the quarter were $0.27, excluding restructuring charges and a discrete tax benefit related to a previously closed facility. Note that this -- again, this tax benefit has been excluded from the non-GAAP -- for non-GAAP purposes.

Our non-GAAP earnings per share also include several discrete tax benefits, the largest of which was due to a tax benefit recorded related to a revaluation loss in Mexico.

For the fourth quarter, we anticipate that our effective tax rate will range between 9% and 10%.

Our results for the third quarter of 2009 include two special items, restructuring charges of $3.8 million and, again, a discrete tax benefit related to a previously closed facility. The restructuring charges incurred during the quarter were primarily related to the reduction of capacity in Europe, and was both facility and severance related.

To provide a more meaningful comparative analysis, we will present certain financial information, excluding these special items, during this conference call. We will call your attention to the fact that this item is excluded when we do so. In today's press release, we have included a reconciliation of our GAAP results to the results excluding these special items.

Our gross margin for the third quarter was 7.2%, again excluding special items, which is consistent with the second quarter. We believe that this gross margin level will be sustainable at current revenue levels.

Our operating margin for the third quarter was 3% as compared to 2.8% for the second quarter. Excluding the special items, net income was $17.4 million compared to $20.4 million in the third quarter of last year. GAAP net income for Q3 this year was $6.4 million(Sic-see press release) compared to GAAP net income of $23.6 million for the third quarter last year.

Q3 diluted earnings per share, excluding special items, were $0.27 this quarter compared to $0.31 last year. GAAP diluted earnings per share were $0.25 in the third quarter.

Interest income was approximately $382,000 for the quarter, interest expense was $350,000, and our foreign currency loss was $609,000 due to the weakening US dollar. Interest income continues to decrease due to the continuing low interest rate environment.

Weighted average shares outstanding for the quarter were 65.2 million on a GAAP basis.

Our cash and long-term investments balance was $484 million at September 30, which includes $46 million of auction rate securities classified as long-term. The unrealized loss on our auction rate securities at September 30 was $4.3 million due to changes in the market value for these securities.

The unrealized loss is reflected in accumulated other comprehensive income as a component of shareholders' equity. Note that we did receive principal repayments at par of $2.6 million of these auction rate securities during the quarter.

We continue to monitor the financial institutions and cash management vehicles that we are using to invest our excess cash balances. We continuously monitor the overall creditworthiness of the financial institutions that we use, in addition to investing our excess cash balances in vehicles where preservation of principle is the priority.

Note that our interest income has been significantly impacted by the over-decline in the market rates of interest.

For the third quarter, our cash flows from operations were approximately $41 million and $117 million for the first nine months of the year. Capital expenditures for the third quarter were approximately $4.7 million. Depreciation and amortization expense were approximately $10.2 million.

Repurchases of common shares for the third quarter totaled $6 million. Also during the fourth quarter, to date, we have repurchased an additional $5.7 million of stock.

Receivables were $378 million at September 30, an increase of $28 million from last quarter due to increase in sales during the quarter. The inventory was at $294 million at September 30. Our turns were 6.5 times for the quarter compared to 5.6 times last quarter.

Current assets were approximately $1.2 billion, and the current ratio was 3.9-to-1 in Q3 versus 4.1-to-1 in Q2. As of September 30. We have $11.7 million of debt outstanding, which is primarily a long-term capital lease on one of our facilities.

Comparing the third quarter of 2009 to the same period last year, the revenue breakdown by industry is as follows. Medical was 15% in 2009 and 15% in 2008. Telecom was 23% in 2009 and 20% in 2008. Computing, 36% in 2009, 45% in 2008. Industrial controls, 21% in 2009, 17% in 2008. Finally, test and instrumentation, 5% in 2009 and 3% in 2008.

At this time, I would like to open for the Q&A session. During this session, we'll request that you limit yourself to one question and one follow-up question in order to allow enough time for everyone's questions. Thank you.

(Operator Instructions) Alex Blanton, Ingalls & Snyder.

Good morning. I wanted to ask you about the component shortages. You're not the only one that is seeing them. And given the sales decline there has been in this industry, what is the real reason for this? I mean, you would think there would be a lot of spare component capacity at this point. So why are the leadtimes now stretching out?

Alex, a very good question. I believe that the answer is truly that during the downturn, the economic environment was such that capacity was reevaluated throughout the extended supply chain. And as that was done, whether it was people or people and facilities, people, facilities and equipment, throughout the extended supply chain, you saw that actions were required to align capacity to demand and try to best align with forward-looking quarters with demand levels that were visible.

The strength in demand that we've seen return, first of all, has come back within leadtime, which we've mentioned both last quarter and this quarter, that we've seen probably not as much visibility as far out as we may see in a more normalized period. So the reaction time has had to be very quick to respond to the increased demand.

With that, not all of the capacity has been able to come up to speed as rapidly as is needed to respond to end customer demand.

So I think that we will see things align. Again, to the extent that it was people-related, people will be brought back in. To the extent that it was facility-related, that may take a little bit more time to restart some equipment, etc. But I believe that a part of it will reconcile itself as headcount is brought back in or second, third shift, whatever the case may be, are addressed.

What kind of components are in the greatest short supply? Are we talking chips? Are we talking other kinds of components or just what?

Well, I believe it is somewhat across the board. That is not to say everything is, but you are not seeing it solely in one commodity. You are seeing the made-to-order items with extended leadtimes. Of course, that is normal because of the complexity involved with made-to-order, and maybe potentially some of the training that is required for bringing back in some of the employees to support those type of items.

On the active component side, since a lot of that is probably driven by consumer demand, that is partially seasonal, aligned with demand that is probably driven by China and some of their stimulus package. So to the extent that any of -- in our world, any of the components that we utilize to support our customers are common with those used in consumer products, there is demand challenges there in the supply chain.

Well, let me just -- I don't want to take up too much time. But I don't see that the floor space was reduced in component companies, and I can't imagine that they scrapped a lot of equipment. So is it mainly people-related, and how long does it take to bring back people to meet an increase in demand? It is really kind of -- I haven't seen this happen in other industries to this extent.

I think it is primarily people that we are seeing brought back in. Again, this is through the extended supply chain, so there is many touch points that we are reaching out and identifying. But to a great extent, it is people. And it is training of people and getting people in the right geographies to support the increased demand.

The second thing is I think there was capacity, primarily equipment, taken off-line or shut down. And so some of the production lines may have been off -- for instance, in test and instrumentation, they may have been off-line for quite near a year.

So it is just kind of repriming the engine, if you will. And I would expect to see that the reaction is pretty quick. And yet people are going to be cautious in this economic environment to not overhire and try to respond to potentially a bottoming and an increase, and treat it as if it was a complete de-ramp.

So I think caution is the other aspect we are seeing here, is trying to calibrate what the environment and the appropriate response is.

Thank you.

Brian White, Ticonderoga.

Could we talk a little bit about the trends you expect in the December quarter by end market? Looks like test and instrumentation had a big uptick in the September quarter. Can this continue, and what do we expect from telecom and computing?

As you know, we don't provide guidance on an industry and a forecast basis. But generally, we will give you some color on what we are seeing overall in the marketplace.

As you probably recall, in more traditional times, computing sees strength in Q2 and 4, as opposed to Q1 and 3, so we would expect a slight improvement in Q4, all things being equal in computing.

Test and instrumentation sees a significant uptick from a very, very low point. And I think we will expect to see some continued -- probably not at the same rate -- but some continued opportunities for growth in test and instrumentation.

Medical's probably flattish. And I say that as we continue to get reads from our customers, because there is a mixed bag of reaction to all of the talk and the buzz surrounding the medical world today, with healthcare in the forefront and a lot of budget and R&D and investment decisions being made. And so that is probably one of the unknown outcomes that we would look for in Q4, as to really how strong that pulls through.

In telecom, we would expect to see a bit of a bounceback, as Cary indicated. A good bit of the dynamics we saw in Q3 were related to crossover and lifecycles of products and new product introductions. So I think that telecom, we will see some potential growth there.

Industrial controls are starting to see some signs of increases. If you look at the complete industry that we have in industrial controls, some of the industries that are served, such as oil and gas, ultimately are late cycle, and they are actually seeing some softness. So overall, I think industrial control will see a modest improvement, but not as strong as some of the other industries.

So that is just generically, without specific math, what we see in the marketplace.

Okay. And what -- did you have any customers over 10% in the quarter?

Brian, we did have one customer that was in the computing sector and IBM-related product.

Okay, so IBM was a 10% customer for the first time, it sounds like.

No other 10% customer, correct.

No other 10% customer, correct.

And just on -- one of your customers is going through an acquisition. I know you can't comment on the acquisition. But did that have any impact on your computing sales in the quarter or in the outlook?

I've got a puzzled look on my face there, Brian, because there is more than one that are on acquisitions; it's a matter of which side of the acquisition they are on.

But specifically, on our significant customer, historically, we don't have any comment, and are reading, as I'm sure you are, on the day-by-day updates that are available in the marketplace to understand how that unfolds.

Okay. Thank you.

William Stein, Credit Suisse.

Thanks. First I'd like to just follow up on the shortages. Did that meaningfully hurt the revenue opportunity in the September quarter, and do you anticipate that to continue in December or alleviate?

I think it probably throttled back what we otherwise would have been able to ship for Q3. I do see that we did have some shortages that prevented us from achieving probably the max-out revenue.

We are still seeing that into Q4. I think there are a lot of actions in place by suppliers to try to remedy that. Of course, they would like to execute for in good shape. So it is really going to be determined over the next few weeks as to how quickly they can respond to the upside in demand, not just from us, but from others that you are seeing in our industry.

Was this a cross-end markets or in a particular end market that you have this issue?

I think it pretty much touched all markets. I didn't see anyone left out of that.

And any chance you are willing to quantify approximately how much the revenue could have been if you didn't have this problem? Are we talking 1% difference or is it more meaningful?

No, I don't have a factual number, so I wouldn't want to shoot from the hip on that.

Okay. How about pricing related to that? What I have heard speculated is that suppliers are reluctant to add back the capacity and are using it to try to get price. Are you seeing that request by suppliers?

No, I think traditionally what we see is exactly what we are seeing again. The first step is always leadtimes pushout. So extended lead times, and then as OEMs and EMS players are challenged to meet demands, then the next thing is they feel stronger about pricing power. I don't think you'd see that level of strength currently; it is primarily around trying to cinch down leadtimes first.

Thanks. And one other, Gayla, if I can. I think you mentioned something about precision machining as a new service. Is that -- are you guys getting into the components business or the, let's say, enclosures, metal or plastic? Did I hear that right?

We are probably at the upper end, on the high-end side of it. I don't see us going into the lower end of componentry and the plastics at this time. But it's on the higher-end precision machining capabilities that we've added.

Is that part of a broader new strategy or just a small, incremental offering? Any characterization of that would be helpful.

I think we see opportunities again on the higher end to support customers. So much as we talk about systems integration for computing and telco, where some of the complexities are around the file systems and software and whatnot, in the other industries outside of telcom and computing, we find that the precision machining and getting to a higher level assembly, that that is the type of service.

So I still focus our efforts -- or see our focus primarily on the service side, not on commoditized components. So more on the complex side.

Great. Thank you very much.

Sherri Scribner, Deutsche Bank.

Thank you. I was hoping to get a little detail on your outlook for longer-term operating margins. You've made some good improvements. You've taken a lot of restructuring actions.

In the past, I think we've seen operating margins in the 4.5% to 5% range. And I'm just curious, do you feel comfortable with those operating margins? They seem reasonable, considering all the changes that you made. And when do we start -- what sort of revenue run rates do we need to get back to those numbers?

I think longer-term, we are still -- our long-term goal is still 4.5% to 5%. I think over the nearer term, a more realistic operating margin is around 4%.

In terms of where we hit that, again, I think we saw some pretty good improvement again this quarter. In terms of the 4%, I think if we are in the $600 million range, we should start to see 4% operating margins or thereabouts.

Okay. That's helpful. Thank you.

[Evan Fox, CLFA.]

Hi, it's Steve Fox at CLSA. Good morning. Gayla, just another question on the component shortages. Is this a situation where you guys wind up paying a penalty back to the OEM? Is the OEM coming in just late with their own end product orders, and that is creating the problem, and so they are the ones that have to pay up for the components? I mean, obviously, there is some extra manpower that goes into tracking this stuff down. But what is the financial implications, I guess is my question.

So, the financial implications as you know, our margins are not strong enough to be taking financial risk on modeling out the supply chain. So we actually act in concert with our customers and do the scenario planning, the what-iffing, with them.

But in this environment, what you are seeing is this is what we would typically refer to as load-and-chase, where the demand is coming in within a stated and known leadtime, and yet it's an opportunity where our customers seek to meet the needs of the end customer and respond within leadtime. So we do see it as working in concert with our customers and not us taking a penalty on that.

It does have an impact on just efficiencies for you tracking down those components, but it's not (multiple speakers).

Oh, absolutely. That is always the case. But, believe me, I think everyone in our industry would agree that it is an environment we do not mind surviving through.

Right. And then just secondly on -- just getting back to the computing seasonality, you said up, but maybe up slightly, if I heard you right. So is that more of a function of the customer base or are your customers not expecting a normal seasonal uptick in the December quarter?

I think what we are seeing as we look out overall is that there is a greater strength in computing on the PC side, and some strength in servers and high-end, but potentially not as much as we see on the PC side. So it's really going to be a function of how strong the demand comes through on the high end, as opposed to just the PC side.

Sean Hannan, Needham & Company.

Yes, thank you. Is it possible if you folks can talk a little bit around -- obviously, a couple years ago, you did a Pemstar deal and you brought along a lot of engineering capabilities with that. Embedded, I think, within some of the wins that you will discuss are engineering programs. And just want to see if we can get some color around what it is that you are seeing in terms of engineering activity, and the focus of some of those programs, etc.

I think that is a very good point. We may not have highlighted enough for you. In this environment, you've seen a lot of opportunities to expand a relationship with customers in the design and engineering focused area. We are seeing good opportunities there. In the scope of our revenue, we don't see it as a specific significant percentage of our revenue. But clearly as an onboarding of new opportunities which lead to strong revenue inflows, we do see an increased focus on engineering impact globally.

Are there specific segments where you're gaining a little bit more momentum or where that focus has perhaps changed for you over the course of the last couple of years or as we look at the current environment today?

I don't think we've seen specifically a change, as much as we've seen an intensified focus by OEMs to identify engineering potentially as another point of leverage and cost savings that they can have as they partner with us for engineering solutions.

Brian Alexander, Raymond James.

Good morning. Just as the component environment loosens over the next couple quarters, and given the changing end market mix that you guys are seeing in your own business, where you have different inventory turns in various end markets, how should we think about overall inventory turns going forward? Obviously, your inventories were very low this quarter, and I assume some of that is the tight component environment. So I'm just trying to get a sense for how to think about that once things normalize.

Well, we would love to see the inventory turns retain, as we always said, at 6.5 to 7, but it has as much to do with the supply chain, as you indicated. Clearly, with the upside in revenues that we see for 4Q, all things normalized, we probably would not have had the inventories quite as tight as they are.

Having said that, we're continuing to drive efficiencies in our supply chain management so that we can achieve the 6.5 turns. So it is a balancing act. I think our teams are well engaged on trying to manage the upside for customers and keep our inventory turns up.

Great. And then just along the lines of how your end market mix is changing, with computing continuing to come down, how should we think about normal seasonality for revenue as we move throughout 2010? Thanks.

In terms of normal seasonality, I think still a little bit difficult to grasp. But I think if I looked at 2010, maybe leaning more toward the traditional model, where Q4 is the strongest. You know, Q1 is typically a little wider, and then Q2, Q3 would probably be sort of in between. But again, that's just sort of my sense. But I think in terms of where it ultimately ends up is a little bit difficult to discern at this point in time.

Jim Suva, Citi.

Thank you and congratulations, everyone. A quick question on, Don, I think you made a comment of operating margins of 4% in the $600 million revenue area. Did you mean $600 million flat or like the range between $600 million and $700 million?

Because if I look at your guidance, you are within close distance there. But if you back into margins, it is actually quite monumental far away from 4% margins. So can you just maybe clarify or reconfirm if I heard that right?

The way we think our model is working right now is, again, if you get to around $600 million in revenue, we would anticipate an operating margin of approximately 4%.

Okay. No, that's very impressive. And then Gayla, you were talking a little bit about the precision machining business. Can you talk a little bit about right now, is that like 10% of your business, 5% of your business, 1% of your business, and what type of profitability does that have?

It is clearly not a significant reportable portion of our business at this point in time, but it is an entree point. It is an opportunity to expand, and -- both in the level of revenue and the profitability. So it is an opportunity that we are seizing and not one that we have kind of a reporting sector or nature of the business. So much like engineering, it is a great solution to be providing to our customer, and a focus for us. But it's not as significant.

Sean Hannan, Needham & Company.

Yes. I just wanted to see if I could follow up. There were -- of the wins that you had discussed, you, I think, had specified that there is a win that was not included in the nine, which were $120 million to $166 million, a large notable win for Q4. Is that correct?

Correct. It did not meet the cut-off date. So much likely we treat accounting, we have our bookings cut-off and it didn't meet the cut-off date.

Okay, thanks very much.

Jim Suva, Citi.

Great, quick follow-up, Gayla. Traditionally, your Company has not been vertical, and now it appears at least you are starting to step into that a little bit. Why the change? A customer ask you to do that? You see an opportunity? And should we expect more select vertical areas to continue?

Yes, we see it as an opportunity. We see it as a marketplace that are in concert with our customers. We have determined it is not well served, and provides us opportunities. And again, we call it vertical, but maybe that is not in alignment with the definition of vertical that is traditionally used in the industry, because vertical typically would mean owning points in the supply chain that infeed into the electronic manufacturing.

So this is really kind of going vertical on the upper end, not on the lower end. So -- but to alleviate confusion, maybe we should've used another terminology. But I do expect us to continue to seek out and take advantage of opportunities to meet the needs of our customers, which are somewhat differentiated from that lower-end vertical play.

Thank you very much for clarifying.

[Ryan Jones], RBC Capital Markets.

If I'm correct, there's a little less than $65 million still outstanding on your buyback program. But with only about $4 million of purchases last quarter, $6 million this quarter. And I know you said you had spent about $5 million this quarter. Can you offer us any guidance on how you might approach the buyback in the December quarter and using that through 2010?

Well, again, as -- we look at this on an ongoing basis and consider that with potential other opportunities. Again, our expectation is to -- again, as you pointed out, we have purchased about $5.7 million, almost $6 million since the end of the quarter. In terms of the purchases, we will continue to evaluate those and balance it with the other requirements in terms of -- with our other cash requirements.

All right. And then just one follow-up question. Don, you noted that the tax provision, excluding the revaluation related to the closed facility, includes several additional tax discrete items, if I'm correct. I was wondering what the total value of those benefits were. And I know the Mexico benefit was about $2.4 million, but what I'm trying to get is non-GAAP tax rate excluding all the discrete benefits.

As we said, for Q4, we said our tax rate going forward is about 8% to 10% -- 9% to 10%.

Great. Thank you.

Does that help? Okay.

One moment, please. I'll open that line back up. All right. And sir, your line is open again.

Yes, that was fine.

At this time then, we are showing no further questions in queue.

I want to thank everyone for joining us today. We will be in our office if there is additional follow-ups. Thank you very much.

Great. Thank you. And ladies and gentlemen, that does conclude our conference for today. Thanks for your participation and for using AT&T's Executive Teleconference. You may now disconnect.