Benchmark Electronics Inc (BHE) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Benchmark Electronics fourth-quarter 2010 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time. (Operator instructions). As reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Don Adam. Please go ahead.

Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the full year and fourth quarter of 2010. I'm Don Adam, CFO of Benchmark Electronics. Today, Cary Fu, our CEO, will begin our call, talking about the year 2010 for Benchmark. Gayla Delly, our President, will then discuss our activities and our performance for Q4 and outlook into 2011. I will then follow with a review of our financial metrics for the year 2010 and for Q4. After our prepared remarks, Gayla, Cary and I will take time for your questions in our Q&A session. 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 would 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-K and S-4 filings, quarterly filings on Form 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. Thank you for joining us on our call today. We are very pleased to share with you our results for the year 2010. Overall, 2010 was a very good year for Benchmark. We accomplished revenue growth about 15% when compared year 2010 to 2009. Along with the revenue growth came earnings per shares growth about 52% on a year-over-year basis.

We finished 2010 with a strong Q4. As you can recall through the last conference call we expect some weakness from our computing customers in fourth quarter. However, the sales to the computing sector pick up late in the quarters was stronger than was originally anticipated.

Along with these financial results for the year, Benchmark completed two of our strategical goals; number one, medical Class III device capability in Asia. In November, we announced that our Thailand facility had been approved by FDA to manufacture Class III finished device on behalf of our large tier one medical customers. This is a significant accomplishments that give us medical customers this capability everywhere around the globe.

Number two, expansion of our precision technology capability. During the fourth quarter, we signed an agreement to acquire increased precision technology capability in Asia. This acquisition of a local precision machining company had a book value in (inaudible) strengthening our offerings in the Asia region for our customers.

Looking forward, our Q4 guidance reflects both a traditional slower Q1 for Benchmark, specifically in the computing sectors, as well as the impact of the conclusion of our production for Sun Micro during 2010. We are slightly more positive in our outlook compared to Q4, but we believe there remains a healthy level of caution from our customer when providing a forecast. We expect a bounce back in our revenue in the second half of the year with our new (inaudible) [RAM].

For the year 2011, we anticipate a modest revenue growth, but also the continued diversification of our revenue base, providing a stronger margin opportunity to where our near-term operation margin goal of 4.5% and a solid EPS growth.

Related to supply chain, supply-chain environment continued to improve in Q4, and component constraint that impact through the first half of 2010 has been largely abated, although the long lead times still exist in some cases. Improvements are being seen due to the stabilization of demand at the OEM and the EMS level, according to our suppliers.

Now I will turn the call over to Gayla.

Thank you, Cary. As Cary noted, the fourth quarter was a strong finish to a good year for Benchmark. We delivered some key improvements in our operating metrics for the last quarter of the year with increased revenues, EPS at the high end of our guidance, reduced inventory levels and improved operating margins. For the fourth quarter, we had year-over-year as well as quarter-over-quarter revenue and EPS growth and improved operating margins.

We did have two items not forecasted that impacted us -- a lower tax rate due to a change in the mix between taxing jurisdictions as well as a negative impact from FX fluctuations. We continue to focus on and drive improvements in our use of working capital. With our focus on inventory management and a somewhat improved component market environment, we were able to reduce our inventory levels by $18 million during the quarter.

The strong demand increases we experienced later in the fourth quarter, however, did have the impact of increasing our accounts receivable balance at year end, a working capital investment we are pleased to make. But it had increased AR levels of $29 million as compared to that of the third quarter September 30 end.

This resulted in a decrease in cash flow as compared to our original forecast. Our operating cash flow was $10 million for the quarter. The impact of the back-end-loaded Q4 then translates into a projected higher level of cash flows for the first quarter of 2011, with those being in the range of $50 million to $75 million.

The overall market for our services continues to be strong. During the fourth quarter, we booked 22 new programs with a current estimated annual revenue range of $110 million to $121 million. You will notice that these bookings include a number of new engineering projects which are typically smaller in terms of the dollars per program and also indicates the level of activity and increase in focus we have seen on the engineering projects across Benchmark. We are very excited about these new engineering projects and the opportunities they bring to us to expand both the nature and the scope of services we provide our customers.

These bookings were across all industry sectors that we serve and represent both relationships, expansions of existing customers and new customers. These bookings, of course, are subject to the risks of timing and ultimate realization of estimated revenues.

Our teams continue to be diligently engaged in supporting the new programs we have booked in prior quarters, and specifically related to two of the larger programs we announced earlier this year the programs do continue to progress at a somewhat slower ramp rate than originally anticipated, which we noted last quarter. One of the programs has been slow to ramp due to overall market demand situation, and we expect this program to be in full production sometime during the first half of 2011.

The other has been slowed because of production introduction delays, and this program we expect to be delayed by about six months and expect it to ramp during the second half of 2011.

This is a good time to bring up an important point. Throughout 2010, even with the variations in both mix and revenue levels, we were able to sustain a 4% operating margin for the year, and in Q4 our operating margin was 4.1%.

We are not providing guidance for the full year 2011, but I do want to point out that, looking forward, with the base of customers and the new programs we have booked, we are on path for continued revenue growth and, importantly, continued operating margin expansion driving toward our near-term goal of 4.5%. As noted earlier, Q1 is traditionally a slower quarter for us. Based on this and the indications from our customers, we expect estimated revenues for the first quarter of 2011 to be in the range of $565 million to $605 million, the corresponding earnings per share for the first quarter in the range of $0.30 to $0.36.

At this time I will turn the call over to Don to discuss our financial metrics for Q4.

As Cary noted, we completed the fourth quarter of 2010 with revenues of $627 million, which was a 4% increase over the prior year and a 2% increase over the third quarter. These revenues were at the high end of our revenue guidance of $590 million to $630 million provided during our last conference call.

On a quarter-over-quarter basis we saw stronger shipments in three of the industry sectors we serve. Sequentially, comparing the most recent quarter to the third quarter, revenues from the computing sector were up 9%, revenues from the medical sector were up 8%, revenues from the Test and Instrumentation sector were up 1%. Revenues from Industrial Controls sector were down 4%, and revenues from the telecom sector were down 3%. Note that for Q4 the revenues from the medical sector were up as anticipated and noted during our last conference call. In addition, as noted by Cary, we did complete our production for some legacy programs during the quarter.

Our earnings per share for the quarter were $0.37 excluding special items, compared to $0.29 in 2009. GAAP diluted earnings per share were $0.31 in the fourth quarter compared to $0.26 in the fourth quarter of last year. During the fourth quarter of 2010 we completed or initiated several global realignment activities, and we continue to review our global footprint with customer demand in the overall marketplace.

During the quarter we incurred approximately $4.6 million in restructuring charges related to these activities.

To provide a more meaningful comparative analyst, we will present certain financial information excluding special items during this conference call. We will call your attention to the fact that these items are excluded when we do so.

In today's press release we have included a reconciliation of our GAAP results to our results excluding these items.

Our gross margin excluding these special items for the fourth quarter was 7.8%, which was consistent with the third quarter. Our operating margin for the fourth quarter was 4.1% excluding these special items, a slight improvement from the third quarter. Net income was $22 million for the fourth quarter of 2010 compared to $18.6 million for the fourth quarter of 2009, which is excluding special items. GAAP net income for the fourth quarter was $19 million versus $16.7 million in the fourth quarter of last year.

Interest income was approximately $413,000 for the quarter, interest expense was $340,000, and other expense was $1.9 million, which was primarily related to foreign currency losses. Our effective tax rate was approximately 4.5% for the fourth quarter, excluding special items, compared to 8.8% for the last year -- or for Q3.

Diluted weighted average shares outstanding for the quarter were 61.2 million. Our cash and long-term investments balance was $382 million at December 31, which includes $35 million of auction rate securities classified as long-term. The unrealized loss on our auction rate securities at December 31 was $3.9 million, due to changes in the market value of these securities. The unrealized loss is included -- is accumulated in other comprehensive loss as a component of our shareholders equity.

For the fourth quarter our cash flows were impacted by the strong demand push at the end of the year from the computing sector. During the quarter, we provided cash flows from operations of approximately $10 million. Again, we do expect cash flows from the first quarter of 2011 to rebound and should be in the $50 million to $75 million range.

Capital expenditures for the fourth quarter were approximately $7 million. We anticipate capital expenditures for -- CapEx expenditures for Q1, including the expenses related to the expansion of our precision technology capabilities in Asia, to be in the range of $25 million to $30 million.

Depreciation and amortization expense was approximately $9.6 million. During the quarter, we repurchased common shares of approximately $5 million, or 300,000 shares. Shares repurchased totaled 59 million, or 3.3 million during 2010. Since the inception of our share repurchase program in July of 2007, we have repurchased approximately $234 million, or 13.4 million shares. We have $91 million remaining under the approved share repurchase program. We will continue to evaluate any future repurchases under this program.

Receivables were $456 million at December 31, an increase of $29 million from the last quarter due to the increase in timing of sales. Inventory was $362 million at December 31, a decrease of $18 million. Our inventories improved to 6.4 times for the quarter compared to 5.9 times in the third quarter. We expect inventory levels to continue to decrease when compared to this quarter.

Current assets were approximately $1.2 billion, and the current ratio was 3.8 to 1 in Q4 compared to 3.7 to 1 in Q3. As of December 31 we have $11.4 million in debt outstanding. The debt outstanding is primarily in a long-term capital lease on one of our facilities.

Comparing the fourth quarter of 2010 to the same period last year, the revenue breakdown by industry is as follows. Computing was 33% in 2010 versus 39% last year. Industrial Controls was 24% for the recent quarter versus 21% last year. Telecom was 22% this year versus 21% last year. Test and Instrumentation was 11% this year versus 7% last year. And Medical was 10% this year versus 12% last year.

At this time I would like to open it up for the Q&A session. During the session, we request that you limit yourself to one question and one follow-up question. Thank you.

(Operator instructions) Sherri Scribner, Deutsche Bank.

Cary, I was just curious about your comment that you expect to see a strong second half. I guess the implication there is that you expect the first half to be somewhat weaker. I'm trying to understand -- it sounded like you had a strong close to the quarter. Did you see workers weaken into the first quarter, or have you seen that this quarter? Or is that generally based on forecast changes that you've seen?

Well, as we mentioned in the discussion, the Q1 traditionally has been a slow quarter for us, particularly for the computing sectors. On the top of that we talk about in last conference call we had concluded all the Sun production in Q4 2010. At this point in time we see -- for Q1, it's pretty slow quarter, as traditionally, and particularly in the computing sectors.

Other sectors, seems like we're doing okay. And there is a slightly minor adjustment and we still see a cautious -- a caution from our customers in providing the guidance. And I guess and the comment we are making about second-half bounce back is, we do see a large program kicking in the second half, to give you a strong lift on the revenue side. And as you say, we are probably a little bit conservative in Q1 at this point in time.

Okay, and then I guess just trying to get a little more detail on your comment for fiscal 2011 that you expect modest revenue growth, is that -- does modest mean single-digit? Does that mean low double-digit? Just trying to flesh that out.

Of course, we have not given guidance for the year. And I think that modest will be in the -- I guess we did not provide guidance. We will probably see a double-digit growth in the second half and not the first half.

Okay, with the Sun business going away, would you expect the strength in June that you typically see to be less than usual?

Well, probably not, because we do have some new project running and with (inaudible) we have not having all the data yet in the second half. The indication was -- it's actually direction is going correctly, and we had to see all the number come through.

Sherri, one thing to point out for clarity on that is the level of business over the past year, in 2010, was not even close to double-digit for Sun in 2010. So it wasn't -- it wouldn't have as significant of an impact, based on that.

Okay, great, thank you.

Brian White, Ticonderoga.

Just on margins, you did a decent job on the operating margin this quarter. Are we still thinking a 6.5% operating margin is attainable? And do you think you can do it next year or this year?

Well, I hope it's 6.5%.

No, 4.5%, Brian, not 6.5%.

Excuse me, 4.5%.

I guess we're not changing our projection in the past. We believe we can reach the 4.5% operation in the margin at the $675 million revenues range, although we have not given the guidance for the years. I believe, personally, we will probably get a shot toward the end of the years for the range.

Okay. On the electromechanical facility in Malaysia, that ramped in the fourth quarter -- is that correct?

We signed the agreement in the fourth quarter, and it will begin in the first quarter.

So what's the margin impact? Obviously, a higher gross margin type business, but as you ramp it, is it dilutive to the first half and accretive to the second half? How does that impact your margin profile as we go through the year?

Again, this particular facility we acquired -- again, I'm saying is acquired at a book value. And the -- is -- really have no impact from the earning contributions standpoint of view, at even the first quarter. And so we anticipate it will start some, make some significant contributions second half of the year.

So, Brian, for clarity, it's more of an operating platform with capabilities and facilities than it is -- we did not buy a revenue stream or business there.

And you had previously mentioned this business could contribute 10% of revenue in 2011. Do we still stand behind that?

Yes.

Okay, thank you.

Jim Suva, Citigroup.

Hi, thank you for taking my question. This is actually (inaudible) on behalf of Jim Suva. So, this is [associated] with last quarter, that Benchmark would take restructuring charges. I was one training if we have completed shifts or adjustments in Benchmark's global footprint, and should investors expect additional charges going forward?

I would respond to that, yes, based on what we see currently. But as you know, our business being a global business and as demand continues to increase in some geographies and moderate in others, I believe it's an ongoing process to make sure that we have the aligned footprint.

Are there significant adjustments I see coming down the pike? No. Are there potential restructurings that will be needed at some point in the future? Yes. So I think that we have what I would consider maybe the heavy lifting done in the current environment, yes.

Great, and then just a quick follow-up -- I know the industrial segment was guided to be strong going into the end of the year on the last earnings call, and it actually declined mid-single digits sequentially. I was wondering if you could just provide any details around that adjustment.

I see that more as a timing event. Specifically, no dynamics that are underpinnings to that, that give rise to any concern.

That timing, I would assume, just pulls forward into this quarter?

Right, so I do expect that Q1 would be a stronger quarter in Industrial.

Very helpful, thank you.

Alex Blanton, Clear Harbor Asset Management.

Looking forward the next year or two, what sectors of the five sectors would you expect to be your strongest? And are you emphasizing marketing programs in any one of these sectors, believing that the opportunity might be greater there? Could you discuss that whole issue?

Yes; to the best of our ability, we will give you how we are approaching the market. We see strong opportunities in what may be sometimes referred to as the nontraditional EMS. That's not to downplay the traditional ones. And for level setting, I think those are often referred to, the traditional ones, being computing and telecom. Those are just clearly the more mature industries that have outsourced for the longest period of time.

So the opportunity that isn't just share shift amongst and between players is typically seen as not being as significant for taking share. Saying that, I don't expect that to be a major falloff. We are still seeing opportunities there but don't see the dynamics such that the overall market is continuing to expand through new outsourcing. It's mostly really based on their marketplace and what kind of underlying growth they have as customers.

In other sectors where we see the strong opportunities for growth in Industrial Controls, in Medical, in Test and Instrumentation and Defense and Aerospace -- the opportunities there are much more significant because of the non-mature or the growing nature of outsourcing opportunities and the level of outsourcing that are available to us.

So hopefully, that frames for you kind of the why and where. And as always, we are either beneficiaries, or -- I hate to use the word victims -- but we are always impacted by the underlying markets of each of the industries we participate in. And so we will not buck the tide of whatever the underlying markets have.

Well, I know the nontraditional industries are the ones that everybody is emphasizing. But you've got three here -- Medical, Test and Instrumentation, Industrial Controls. Now, of those three, where do you think the best growth is going to be?

I would say we see some real strength in Industrial Controls and Medical, and I would probably be hard-pressed at this junction to say I see Medical twice as strong as Industrial Controls. We see very good opportunities in both of those.

Okay, thank you.

(Operator instructions) William Stein, Credit Suisse.

Really just a housekeeping question -- is Sun completely done yet? And if so, can you help us understand the weakness in computing in March?

We have completed production on our maturing products there, and the computing sector is traditionally weak in the first quarter of the calendar year, probably somewhat impacted, in my belief, by some sort of budget flush or year-end activities that seem to take place every calendar year-end. I don't really have any greater insight as to why the demands slow, but it does appear that every calendar year end is stronger than the first quarter.

Understood, but just maybe my view of what normal seasonality in the other segments -- maybe I'm just wrong in those. But it seems that you're guiding to below-normal seasonality overall, even contemplating the fact that high-end computing is typically down in the quarter. Do you think I'm just wrong, and the other -- in other words, is computing -- is this normal? Is the sequential revenue growth that you're guiding for, is that what you think is going to be typical, going forward, for the business?

I wouldn't be able to say I have a crystal ball saying what is typical going forward. If you compare to maybe prior years, clearly we did have Sun as a customer in prior years and do not have then going forward. There would be a nominal impact to that. But the overall demand in the markets, as we indicated in the prepared statement, we do see a bit of caution in the customer base. I think there's a number of key indicators out there that seem to be -- show some level of strength, but some of the customers have a bit of a cautious standpoint. And it's also supported by the fact that material availability has a bit improved. And so the requirement for them to be as kind of pre-positioned with their demand is not as strong.

And is that caution in the computing end market, or is it across your end markets?

It's probably a cross end markets. Computing probably has a greater availability to swing because of the type of products and components that they have. The availability is much more easily managed.

Okay, and then when we talk -- you mentioned expecting stronger growth in the second half. And I think you're highlighting one program, in particular. Is that right? Did I get that right, that it's essentially one program that's driving the outsize strength in the back half? And which end market is it in?

Well, I would not say that I attribute the second half to one program. I do think there is one large program that is growing in computing in the second half, but I do not believe that that is the single force that we have behind us to drive growth.

So it's more across end markets, then?

Correct.

Okay, thank you very much.

Brian Alexander, Raymond James.

Hi, this is Brian Peterson stepping in for Brian Alexander. I just wanted to get back to Brian's question on operating margins. If I'm looking at consensus for 2011, it assumes that revenue is up about 6%, but the implied operating margin is actually down about 10 to 20 basis points.

So as you look out, are there operating leverage benefits from these new computing wins that should drive margins up versus 2010? Or, should we see mix-related pressure keep them maybe flat to down? Just some perspective there.

I'm not sure I comprehended all of the comments there, but let me recast what we said in our prepared comments -- that even with the mix changes and some strength in computing and a number of dynamics ongoing during 2010, we have a model in place and cost control and behaviors in the business that allowed us to achieve a 4% operating margin and continue to drive for that model as well as additional operating efficiencies to move towards our goal of 4.5%, even with new program ramps, even with the different diversification in our revenues that we have.

Obviously, I think the key point there is each step forward as we go forward towards 4.5% becomes even that much harder to achieve. But we believe we've got a strong business model supporting the 4% margin and to continue forward from there.

And on the two big computing wins, one you said should ramp in the first half, the other in the second, I believe those, in aggregate, are worth about $250 million when fully ramped. Could you confirm that, and maybe bifurcate that between the first half and the second half?

I can confirm that, but I can't bifurcate it.

Okay, thank you.

David Fondrie, Heartland Funds.

Could you provide just a little more color on the design wins? It seems unusual to have 22 design wins with a range of 110 to 121. And you said some of that was, I guess, a different nature and more engineering wins? But a little -- because it's out of character with, at least, the past eight quarters, somewhat.

Absolutely, thank you for, I think, allowing us to expand on that. We have expanded as well as rededicated focus on our engineering efforts. We've seen a lot of opportunities with customers and prospective customers to support them. We've seen a good level of R&D investment being made and the needs of our customers to focus on design.

As such, as you know, we've got a strong design engineering team and are continuing to see opportunities and have had a strong quarter of bookings in Q1. In fact, I would probably go out not as a forecast but as a commitment that we're making to see that number continue to not only exist as a key portion of our bookings, but also to grow both in the number of bookings and as to the size of the bookings as we continue to expand both our engineering team and the focus on the revenue.

So -- and one way, I guess, to look at this is, it's a door-opener in new opportunities and new customers, in some cases that then is an on-ramp to expanded relationships that we expect to benefit us, both in engineering and production.

Now, if I could just follow up on one of the previous questions regarding Sun -- I think you said it was below double digits. Now, is that below double digits of annual sales?

Below double digits every quarter, below double digits for the year; it continued to decline to negligible.

Correct.

In the fourth quarter, would you characterize it as de minimis? Less than, let's say -- let's throw a number out there -- 10% would be $62 million, 5% would be $30 million; below $30 million?

Yes, and -- yes, it was very insignificant.

Great, thank you very much, appreciate it. Congratulations, nice quarter.

Ryan Jones, RBC Capital Markets.

Some of your competitors, and one very noticeably this past quarter, has noted their intention to move more aggressively into lower-volume, more complex, less commoditized projects, which are really where Benchmark has carved out its expertise. How do you see the competitive landscape changing or not changing in 2011 and long-term as additional companies try and come into the nontraditional markets?

It's clearly a cycle. We have friends join us in a variety of business cycles, and I would say there's probably not any of the larger friends that haven't come out to play with us before. And we'll go through the cycle again. I think it's important to note that our customers recognize that and recognize that we have an existing long-term commitment to these industries and we don't come and go based on what's going on in the consumer markets.

So it's one more player in the field. And our teams will have to work ever the harder and be that much better to support the needs of customers.

Okay, that's helpful. And then, any update on cash priorities going into calendar year 2011? It seems like the Company is more open to acquisitions at this point, having done two in the last one or two years. Does that mean, when the buyback eventually is totally consumed, that the Company will focus more aggressive -- retain cash more for the use of acquisitions versus returning cash to shareholders?

Well, we will continue to look at the use of the cash. As we've discussed in the previous call, two priority is the acquisition front as well as the buyback program. We will continue to do both. You are right; it's a significant effort looking at acquisition front. We have been very active this in that particular area. We have nothing to announce at this point in time, but for 2010 and we will continue in 2011, we will have a very focused effort looking at acquisition. We are expecting our skill capabilities as well as the penetration into new industries.

And then just one housekeeping question -- were there any 10% customers during in the quarter? Sorry if I missed that.

Yes. Where we -- continue to be only one over 10% customers, so IBM overall is over 10% for the year, slightly over 10% a year.

Brian White, Ticonderoga.

On the Sun business, obviously they were acquired by Oracle. But Benchmark has a history with them, did a great job with them. Just big picture, why is Oracle moving in that business outside of Benchmark?

Well, we can't -- I think we had a long relation, did a good job with them. And I guess every company goes through the acquisition, makes their own decision. And I can't really comment why. And we appreciate the opportunity they gave us in the past tense years, and we move on from there.

Okay. And just on the -- I'm curious on the telecom market. How do you think of the telecom market in the March quarter? Is it going to see the seasonality like the computing market, less so?

No. We see some pressures on that particular market in the first quarter, have not really found a rationale behind it yet. And maybe an installation of a particular network slows as and so on. We try to get more information on that.

Okay, Is that in the US or outside the US?

Both.

Wamsi Mohan, Banc of America/Merrill Lynch.

Can you talk a little bit about where you see, potentially, the most improvement from your cash conversion cycle in 2011?

I think, for the upcoming quarter, Wamsi, I think certainly the receivables will probably have the biggest impact. You saw the receivables go up $30 million last quarter. As Gayla noted, we should see some -- I think you will see some improvement in the inventory. But the turns for the quarter were 6.4, which is a pretty good turn rate for us. But as I look forward, the receivables are going to generate the most improvement this quarter.

Okay, thanks Don. And the FX impact on the quarter that you said was unexpected was larger than previous quarters. Can you address why that was the case? Is this some incremental cost to hedge differently? Or any color you can share on there?

Really, multiple locations, foreign locations, and not necessarily isolated to one country. And in terms of the dollars, I think the overall loss, again, not attributable to one country. And we will continue to evaluate that and move forward, but not -- in terms of the cost, no hedging activity is there.

Okay, thank you.

There are no more questions in queue. Please continue.

Thank you all for joining us today, and we'll look forward to speaking to you and any follow-up calls you might have.

We are in our office.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.