DMC Global Inc (BOOM) 2008 Q2 法說會逐字稿

Good afternoon.

My name is Tasha and I will be your conference operator today.

At this time, I would like to welcome everyone to the second quarter earnings conference call.

(OPERATOR INSTRUCTIONS) Thank you.

I would now like to turn the call over to Mr.

Geoff High of Pfeiffer High Investor Relations.

Please go ahead, sir.

Thank you, Tasha.

Good afternoon and welcome to Dynamic Materials' Second Quarter Conference Call.

Presenting on behalf of the Company will be President and CEO, Yvon Cariou, and Senior Vice President and Chief Financial Officer, Rick Santa.

We also are joined today by John Banker, Senior Vice President of Customers and Technology.

I'd like to remind everyone that the matters discussed during this call may include forward-looking statements that are based on management's estimates, projections, and assumptions as of today's date and are subject to risks and uncertainties that are disclosed in Dynamic Materials' filings with the Securities and Exchange Commission.

The Company's business is subject to certain risks that could actual results to differ materially from those anticipated in its forward-looking statements.

Dynamic Materials assumes no obligation to update forward-looking statements that become untrue because of subsequent events.

A webcast replay of today's call will be available at Dynamicmaterials.com after the call.

In addition, a telephone replay will be made available for 48 hours beginning approximately two hours after the conclusion of this call.

With that, I'll now turn the call over to Yvon Cariou.

Yvon, please go ahead.

Thanks, Geoff, and welcome to all of you joining us for today's call.

Our second quarter financial results came in above our forecast, which is indicative of the continued strength of our business and the end markets we serve.

Our results also reflect an exceptional effort by our Mt.

Braddock production teams, which worked around the clock at the end of the quarter to process some late-arriving material shipments.

The refining, chemical and petrochemical, aluminum smelting and alternative energy markets all have been especially active in recent months.

We also received a sizable hydromet order for plates that will be used in the processing of gold, as well as multiple orders from the solar sector for plates that will be used in the production of highly purified silicon.

In spite of the continued strong bookings and an increase in our order backlog to $105 million, it now appears that the second half of 2008 will be adversely affected by the longer lead times we are seeing for the delivery of carbon steel.

In some cases, it is taking longer than expected for anticipated orders to be executed.

We believe this latter issue is likely tied to the stretched resources of the engineering and construction companies that are charged with the design and construction of major infrastructure projects.

In addition, it appears that certain projects are going for (inaudible - heavily accented language) processes due to the sharp increases in the cost of certain imports.

However, we are not seeing project cancellations.

We believe these issues are simply impacting the timing of orders and do not reflect a downturn in demand.

To the contrary, our hot list of prospective orders remains very robust and span a broad array of industries.

In addition, the discussions we regularly have with major end market customers indicates there is a very full pipeline of planned infrastructure projects scheduled for construction during the coming year and beyond.

We therefore remain very optimistic about the long-term growth prospects for DMC.

I will now turn the call over to Rick Santa, who will discuss the highlights of our second quarter financial performance.

Rick?

Thank you, Yvon.

Good afternoon, everyone.

Sales in the second quarter came in at $63.2 million, an increase of 83% or $28.7 million versus last year's second quarter.

Approximately $16.5 million of the increase came from our acquisition of DYNAenergetics, while $12.2 million resulted from organic growth.

Q2 gross margin was 30% versus 35% in the year-ago quarter.

The decline was due to a larger proportion of sales coming from our European operations, which as we've discussed previously, traditionally deliver lower margins than our domestic business segments.

Second quarter amortization expense related to the acquired intangible assets was $2.5 million or 4.0% of revenues and net interest expense was $1.4 million, or 2.0% of revenue.

We did not report any amortization or interest expense in last year's second quarter.

Second quarter adjusted EBITDA increased by 54% to $14.7 million from $9.6 million in the second quarter last year.

Because adjusted EBITDA is a non-GAAP disclosure, we encourage you to read the section in our news release regarding our use of such measures.

We reported net income of $6.2 million, or $0.49 per diluted share, versus $5.7 million or $0.46 per diluted share in the second quarter of last year.

As Yvon mentioned, strong worldwide demand for basic materials is resulting in longer lead times on carbon steel deliveries.

These extended delivery windows have led us to revise our financial guidance for the second half of 2008.

We now expect sales during the second half of the year to be approximately 5.0% less than sales during the first half.

We expect Q3 sales to be up to 20% below second quarter sales, while fourth quarter sales are expected to be equal to or above those in Q2.

We anticipate that gross margin in the third quarter will be between 28% and 29% as a result of lower sales spread over our fixed manufacturing and overhead expense base.

We anticipate fourth quarter gross margin will improve to a range comparable to that reported in the first and second quarters.

As we discussed in the last call, we expect that our full year operating income will be impacted by approximately $7.7 million of amortization expense associated with acquisition of DYNAenergetics.

We also expect pre-tax income will be impacted by approximately $5.0 million of interest expense.

Recent refinements to estimates of pre-tax earnings, as well as permanent differences between our book and taxable income for all of 2008, have reduced our expected '08 blended effective tax rate to a range of 32% to 33%.

We're now ready to take your questions.

Tasha?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Mark Parr with KeyBanc Capital.

Hey guys.

Hello, Mark.

Hi Mark.

Hey, Yvon, hey Rick, good afternoon.

Hey, I saw the second quarter.

It looks very good, second half looks a little weaker than what we had talked about last quarter and I understand the delay on availability or on receipt of carbon back plate.

But has there also been some -- because of projects having to go back for re-bid or reorientation, has there been some delays in releases of material associated with the projects that you're currently engaged in?

Delay in the re-bidding or re-budgeting of some of the projects, but associated delays for material because of that, I don't think so.

Right, so the delays on re-bidding are things that would impact the backlog or would they impact the current backlog or would they impact prospective backlog?

No.

The current backlog is not impacted.

We are talking about projects that we are quoting on that we have been quoting on for some time already.

Some of those have seen significant inflation and have to go back to their board for re-budgeting, which is not necessarily leading to cancellation or anything like that.

The input costs to those projects are higher, but also the output from those projects are positive and some of these ROI are not necessarily negatively impacted.

But there's a delay in the whole process.

Okay.

Okay.

Now, I think this is helping.

I just have one other question around this.

Could you talk about in terms of your hot list or in terms of the current opportunities, about what percentage of contracts are having to go back for re-bid?

It would be very hard for me.

We quote billions of dollars out of our sales offices.

It (inaudible - multiple speakers).

But does it feel like 10% or does it feel like 2.0% or --?

I would say it's a small share.

John Banker is with us here today.

Would you like to color that some, John?

No.

It's certainly a share of the offers that are near a level where projects would be released.

Certainly a share of them go back for recalculation and slow down the eventual placing those orders.

The impact of this is more readily described as a slowing in the rate of increase of future orders or delaying their income; not a reduction in any way, but sort of a stretching out and a moderating of the rate of increase of future activity.

Hopefully that helped some.

Well, it certainly does, because -- and then how that's -- how big of an impact is that on the second half '08 revenue outlook, as opposed to delays in carbon back plate availability?

I think most of the impact has to do with carbon steel for the second part of the year.

Most certainly.

By far.

Okay, all right.

Look, I'll pass it on to some other questions.

I'll get back into queue, but appreciate the color.

Thanks very much.

You're welcome.

James Bank, Sidoti & Company

Reviewing the metal issue with the steel carbon plates, could you give me an idea of -- relate that to, I guess, better or worse in 2006 and in 2007 with where we are right now?

It's worse in terms of difficulty to get the metal, longer-term.

I think maybe one concept here, James, we have seen an increase in delivery time.

It doesn't mean we're not getting the metal.

Once that transition mode is past, hopefully some time later this year, we might be again in a stabile regime.

You understand?

I do, I do and from what I understand is there new steel carbon capacity coming on line next year?

I would not --.

Certainly around the world, yes.

Okay.

But I think, dropping back, this -- at the present time we're seeing delivery times for carbon steel stretch out.

Two years ago it was delivery times for titanium.

A year ago it was delivery times for nickel.

Its sort of the carbon steel is the current issue.

But one of the interesting things, when those delivery times go out, the cost of carbon steel goes up.

We are covered on the cost and not only does our price go up, but our margins go up.

Right.

So the revision in guidance, is this more stemming from the supply issue or let's say the extended delivery times?

Are they steel carbon plates or is it more of the order timing, particularly with those two pivotal orders that you mentioned on the last quarter conference call that I want to circle back to?

I'm not sure what those are.

They have been shipped, I think a long time ago, James.

But the guidance has mainly to do with the fact that we don't get metal fast enough at this moment, right as we speak now, to have a stronger Q3 and Q4.

Okay, well, on the last press release, in fact, it even mentioned months May and June that were pivotal in terms of booking orders, due to the lead times of those projects and if they were not booked, then I think guidance was going to be reduced.

Yes, but -- right, but even without them, for the existing backlog we have to struggle and be creative to optimize the delivery of metal, carbon steel in particular.

Okay.

So that is definitely affecting us for the second part of the year.

Okay.

So any discussion at all you can have with these -- this order flow that you had mentioned in May and June?

I think there's a lot interested parties who'd like to know what these two large orders were, maybe where they are in the order flow.

Is this on the hot list already?

Are they in backlog?

I'm not sure which order we are discussing, which two particular orders.

I think they are back to '07 and they have been shipped.

There was one hydromet order, I believe, that was discussed, but what's relevant today is that although we have not issued press releases for larger orders, because as we get bigger the threshold for a meaningful press release goes up as well.

We are booked, as we mentioned in my presentation today, significant orders, for hydrometallurgy for processing of gold, and a significant order for the alternative energy in the solar sector for the producing of purified silicon.

Those are multimillion-dollar orders.

Okay.

Well, I'll probably just circle back on that.

I'm just confused.

If I could just jump back with the guidance, Rick, that's sales dollars, right, absolute dollars not growth rates when you discussed the 20% and 5.0%?

Yes.

We talked about a decline of up to 20% in Q3.

Right, but not in rates, in dollars.

A decline of approximately 5.0% for the second half of the year, against third quarter -- second quarter sales in the first case and first half sales in the second case.

Okay.

Okay and you gave us gross margin.

Is there any help you could give us on the SG&A?

I guess if the sale's coming down or your sale assumption's coming down, could we assume that both selling expenses and G&A will come down as well in the back half?

The variable in the G&A tends to be incentive compensation, which is largely operating income-based, so that could come down, but there could be other factors, perhaps business development expenses that get added to G&A.

On the selling side, again it's incentive compensation, which is based on the profits that we earned and then it's also sales commissions, which depends on the blend of domestic versus export orders.

Yes, but for the most part I think, if you take a look at the first quarter and the second quarter and you model something that's based upon the first half activity, it would make sense.

Okay and then just two more questions.

I'll move quickly.

Some amortization is going away now, here in the back half?

If I remember correctly, some of the intangibles, so roughly maybe $1.5 million, or -- yes, $1.5 million third quarter/fourth quarter some amortization?

Yes.

It's in the range of $1.4 million to $1.5 million at current exchange rates.

Okay.

Yes, I think the current exchange rates still yield an annual of $7.7 million, so if you subtract the first half, which I think is roughly $4.9 million.

I think that gets you to that $1.4 million to $1.5 million a quarter run rate.

Okay, terrific.

So then I just wanted to kind of leave this open to see if you guys are able to discuss anything next year.

I guess with the order timing, some of the shift in what you won't be shipping this year, what can we possibly expect to happen next year with order timings and maybe some of the supplies you're alleviating a little bit?

Yes.

Usually we are not yet into a mode of giving guidance for '09.

No guidance.

No guidance, maybe just sort of a ballpark feel.

It's possible that, if metal delivery don't improve quickly, that we'll have a decent backlog to go into '09.

Some things will be postponed into '09.

I think all we can say today is that quality of the hot list of projects we have, they have the potential of a good outlook for the activities of DMC.

We can say that today.

Okay.

The quality of the hot list has not deteriorated at all over the past months or year.

Actually one of the sales guy says it's so hot I can't touch it.

So there you have it.

Okay.

Okay.

Great, thank you.

That's been very helpful.

That's all I have.

Yvonne Varano, Jefferies & Company

Hi.

Thanks.

I was wondering if you could talk a little bit about the Oilfield products segment.

It seems that they had a very strong Q2, just what's happening there and how should we look at the back half of the year for that business?

They started slower than we would have expected and so they're coming back to the levels that actually they were anticipating and it looks like that whole industry is pretty buoyant.

And we are looking [further], I believe, for the continuing of the activities in '08 and into '09.

Just to add to that briefly, Yvonne, at this point in time we expect second half sales to be stronger than the first half and probably in the range of 20% to 30% stronger in the second half than what we saw in the first half of the year.

Okay.

Anymore color in where that's coming from or why the increase?

Is it seasonality?

Is it just the business continues to get stronger or are there things that you've done to improve the business?

There is some seasonality.

You're getting out of the Spring period in places of the world like Canada, but also the overall industry is pretty strong and particularly in North America, but also worldwide.

And then I believe that we mentioned last quarter, Yvonne, that we've learned that their business is susceptible to the impact of larger orders that are booked periodically, maybe once, maybe twice, maybe three times a year from their larger customers.

And they had a very slow start to the year, slower than what they expected, picked up in the second quarter and now they're working on a couple of relatively significant orders that they expect to ship during the second half.

Okay, so you have the --?

So there's some seasonality, as Yvon mentioned and there's also the large order impact.

I guess I'm just trying to find out what your visibility is on that and the lead times for that business.

The lead times are very short, compared to our batting business.

They have most of the materials on hand to assemble what's needed for a given order.

But for the guns systems, an example, they don't want to build them out until they get the specifics from the customer so they know what might the cut -- the metal gun systems do.

And then there's a variety of different types of safe charges, so they can turn orders around within one to two months, typically.

The large orders might take a little bit longer than that.

Okay and how big would you classify a large order as being?

For that business, the large orders are 10% of the annual.

Yes, 1.0 to 2.0 million Euros.

Okay.

Are the largest orders that they tend to book.

Great.

Thanks very much.

You're welcome there, Yvonne.

Fritz von Carp, Sage Asset Management

Afternoon.

Are your competitors similarly constrained by the lack of raw material?

Are they seeing the same thing that you are, do you think?

Well, in explosion welding we don't really have much competitors.

I'm not sure how our Japanese friends fare, but I suspect they are in a very similar situation.

Are you raising-- and then -- okay.

So part B is are you raising prices?

I mean, in many businesses when supply becomes short there's a response in pricing and sometimes that even is a benefit for the industry and where are you on that score?

Two components.

First, we systematically pass down the metal cost, which are presented to us by the supplier.

That's part of our model.

And (inaudible - multiple speakers) --.

Right.

I'm talking about your profits, your margin.

Typically it seems to improve to better, our margins.

We will (inaudible - multiple speakers) --.

But it's not so much that you actually -- I mean, some industries make more money when things are tight, but I guess pricing isn't -- do you see pricing moving up more dramatically like in the future or is this just how it is?

We always see pricing moving up.

We have an internal culture who are very sensitive to pricing, at the best price.

But there's somewhat of a limit that some point you don't want your customer fabricator maybe to be presented with a situation where another solution would become more [faster] and more economical.

So you need to be a little careful.

I'm referring to explosion-clad versus solid, for example, maybe.

I see.

Okay.

Great, that's very helpful, thank you very much.

I was just going to say it's also important to note that even if the margin rate doesn't go up, but material price are rising, the pure gross profit dollars are going out for the same amount of work effort.

Okay, I see.

Thank you.

(Inaudible - multiple speakers).

So the focus can't be only on the margin rate.

I understand.

Okay.

That makes sense.

Thank you.

(OPERATOR INSTRUCTIONS) Mark Parr, KeyBanc Capital Markets

Hey, thanks very much.

Hey, I had a couple things, Yvon and Rick.

Could you give us some color on the sequential reduction in the second quarter from DYNAplat?

I think in any of our explosion-welding businesses you see quarter-to-quarter fluctuations and the quarter-to-quarter decline for DYNAplat is largely attributable to the realignment of some of the European sales regions.

We have three plants in Europe now.

Right.

So, what, you shifted some business into the U.S.

from Europe?

Nn, no.

We shifted some business from Germany into France.

Okay.

All right.

And then in part it's just the general flow of the business, even in years that we're growing we will see quarter-to-quarter fluctuations, up or down.

Yes.

We need to look at it from a European point of view now and that's what we do.

All right.

So, yes, so okay.

I'm neglecting that there's a significant part of the DMC reporting segment that is also European.

So, I guess, kind of where I was going with this, Rick, was that if DYNAplat has significantly lower margins than say your DMC explosive metalworking operations do and that business was down, say, whatever, 20% or something, sequentially, wouldn't that have a positive impact on margins, second quarter versus first quarter?

I was kind of where I going with that.

Okay, yes, and part of the -- the margins were fairly flat, quarter-to-quarter, even though sales were up.

Right.

And the biggest impact on the movement related to lower average margins in the U.S., the explosion-welding division, which again related to typical quarter-to-quarter changes in product mix.

Okay.

All right.

That helps explain that.

I have one other question.

Could you talk a little bit about the currency impact on the second quarter in terms of how that might have impacted bottom line performance?

There's virtually no impact to the bottom line.

It just ends up being a gross up of sales, cost of sales in the operating expenses.

Okay.

And what flows through the bottom line is very insignificant.

Okay, terrific.

Thanks.

Thanks again for that additional color.

You're welcome, Mark.

[Bob Tuffy], private investor

Hi guys.

Hello.

How are you?

Thanks for taking my call.

A quick question in regards to the project you mentioned in your presentation, the hydromet gold project.

In the past we've seen the nickel projects.

Is this something new or have you been shipping on hydromet gold projects before?

Yes, that's an interesting one.

John Banker being with us, I will let him respond, Bob.

Certainly the projects that we're speaking of here we're prohibited from discussing them in any detail, but a big fraction of this is a new application for clad in gold hydrometallurgy that has not previously existed.

Okay.

Now is this, out of curiosity, is this like, say, like in a highly oxidized environment like a POX autoclave?

Actually, it's not POX autoclaves.

Okay.

Let me take that back.

The larger order of new application that I spoke of is not POX autoclaves.

The balance, which is an extremely nice chunk of business, is all POX autoclaves.

Okay.

Now, on the other projects that you mentioned in your presentation, can you give any color on the size of those projects' contracts?

The sum of that is around $8.0 million.

The sum of the gold projects is roughly $8.0 million.

Okay.

(Inaudible - multiple speakers)

And then sum of the alternative energy stuff is around $8.0 million.

Okay, great.

Thank you.

(Inaudible - multiple speakers) number of orders.

Now, out of curiosity, the other day Tessoro announced that it was cutting back on its maintenance work in the second half of 2008 and there was a similar announcement from Bolero.

Does that type of announcement or cutback impact you guys at all?

Or is that just smaller stuff that doesn't really affect you guys?

It's not uncommon for one company to announce cutbacks from one reason and another, to increase similar activity for some absolute opposite reason.

If you integrate all of those things, we certainly don't see any reduction in the rate of increase of activity because of those sort of announcements.

Okay and then one last question.

I noticed on the contact page of your website that it looked like NobleClad India and NobleClad Italy was added to that.

Is that correct?

Yes that is correct.

We have two sales offices in those two countries.

We've also opened a sales office in Dubai.

Okay.

Barry Gladstein, Delaware Investments

How are you doing?

Hello, Barry, how are you?

Hi Barry.

I just want to take up, I guess sort of what James was alluding to before, as far as the availability of the carbo clad steel.

It seems like we've been here with you guys before, as far as availability in material.

Unfortunately it seemed to come through at through at the last minute and get your hands on it, this quarter being your latest example of that.

So can you kind of frame, as far as your assumptions for the second half of the year, how dire your assumptions are as far as how it compares to the availability of the material in the first half of the year?

And also kind of what you're seeing so far in July as far as the availability of materials?

Well, John can jump in here.

My sentiment is that we are going to be relatively stabile in the second part of the year, as compared to the first part of the year.

I don't think it will degrade much more.

John?

We're certainly not expecting it to degrade much more.

In many ways it is probably past the peak and improving.

Okay, so your assumptions are that basically current conditions will continue for the rest of the year?

Yes.

Maybe another way of looking at it, too, is even despite the effort of the Mt.

Braddock plants toward the end of the quarter, we still had a few million dollars of shipments that were late because of late metal deliveries from our suppliers and that relates principally to carbon steel.

We expect -- we don't expect a real positive change by the end of the third quarter, but then as this one-time affect of longer lead times washes out, we should be in a better situation towards the end of the year, but it's an unknown.

It's based on our suppliers' performing up to expectations and commitments that they're making.

It should be stabile again, though.

It should not degrade further or not drastically so, anyway.

It should not improve drastically so either.

Okay.

Got you and then just a couple other questions.

I guess you just alluded during this call that you've kind of raised your threshold as far as when you're going to announce big project wins.

We never had a clear rule (inaudible - multiple speakers).

Right.

I guess what is the threshold now, as far as when we should see an announcement above what sort of level?

I like to think it should be close to around $10 million.

Okay.

But its depending on the type of order we'll see.

It's not a hard rule.

It's about how relevant and meaningful it is.

We could have maybe talked about those alternative energy orders and the gold processing order, but maybe it would have raised your expectations beyond what it was.

Again, the sum of those orders in each category was about $8.0 million, meaning each of them was around $4.0 million or $2.0 million to $4.0 million.

We said with sales that was too small to really make press releases.

Well, if I can throw in my two cents, more news flow is never a bad thing, so.

And then, I guess one final question.

I think you talked on the last call about gradually raising the margins from our acquisition.

Just hoping you can update as far as the progress there.

Are you getting a lot of push back from their customers or is it still progressing the way you thought it would?

It's -- we are moving it on.

The bookings certain categories are clearly improving from that point of view, from the margin point of view.

We still need to proceed carefully.

Some customer or other recurring business that can compare where they were before, but always we pass down the metal inflation.

That's a credo that we have and we don't deviate from.

Right.

Okay.

Great, thanks a lot.

Debra Fiakas; Crystal Equity Research

Your last acquisition has proven to be a good contributor.

Are you amenable to doing additional transactions?

Are you looking at this time?

We have, I think, indicated in the past that we will be continuing to consolidate our global position in our core business of explosion-welding and we know the field pretty well around the world.

We keep in touch and if there are opportunities we'll certainly consider them.

As far as the non-core business, we are still somewhat learning the ropes and [just waiting] and we'll see what opportunities arise and as you have seen and maybe our little AMK division has been progressing well and should there be opportunity there we won't be adverse as will.

So, overall, we certainly are open minded to that kind of approach.

Thank you and current conditions with stresses and being able to source raw materials, pricing increases and so forth, is this the kind of environment where you might expect some of the smaller players to run into a little bit of trouble and be interested in making a combination?

Well, again, in explosion-welding there's not a big crowd playing in our sandbox.

So it's not like there's a bunch of little guys to go on and talk with.

So there may be, again, everywhere there will be opportunities in the world we are there and we know what's going on and we'll make appropriate moves.

All right.

Thank you.

James Bank, Sidoti & Company

Just a quick follow-up on the balance sheet.

It looks like you guys posted some nice cash, certainly have a good track record of generating cash.

Just wanted to have an idea of what your plans are with the debt that you have on the balance sheet.

Yes.

We have annual principle payments under the new credit facility that are due in November, mid-November timeframe.

And then there's also additional payments that will be due after the end of the year, based on excess cash flow that we generated, defined in the financing agreements.

So, certainly some of the cash will be used to finance those annual repayments under the existing debt.

Okay and could you give me the dollar amount for the first step to that?

The first step to that, the minimum scheduled payment is 10% of the outstanding principle, which is $45 million in the U.S.

and about the equivalent of $20 million in Europe, so $6.5 million plus whatever the excess cash flow amount proves out to be.

Okay.

So it's $4.5 million-plus we'll say should be off.

Okay.

That's it.

That's all I have.

Thank you.

Mark Parr, KeyBanc Capital Markets

Say, can you hear me okay?

Yes.

Okay, terrific.

I wanted to get some more color on the -- again, getting back to the carbon plate situation.

On the supply side, we had gotten the impression that you were using an expanded supplier base and I was wondering if you could talk a little bit about some of the changes that you've made as far as your acquisition of carbon backing plate is concerned.

And if some of these changes are still kind of in a place where you actually really could see some improvements in the fourth quarter or the first part of next year, assuming no change from middle.

Right.

That's a good question, Mark.

We have been, for a couple of years or more, trying to diversify the source of metals and carbon steel.

We all have to realize that outside of the name that you just mentioned, the other guys are pretty small for the kind of plates that we need.

But we're still pushing around on every opportunity to improve.

That's one thing.

We're working harder with service centers, particularly in the U.S.

It's a sourced not to be neglected and they bring shop delivery with higher prices, but we can manage that.

And I think we have made some progress in Europe, securing allotment from our supplier over there.

So it's on our mind every morning and obviously we try to improve where we are, but it's true that the bigger we are, that's still a lot of impact on our performance.

Yes.

If I've got some ideas on the supplier side from a service center perspective, who should I have them get in contact with?

If you some ideas to help us with the service side?

Yes.

Oh.

You should talk to John Banker here.

Okay.

All right.

John, I may have some thoughts, so I'll call.

I'll talk to your later.

I look forward to hearing from you.

Thank you very much, Mark.

Yes, sure.

Thank you.

There are no audio questions at this time.

You may continue with your presentation.

Thank you, Tasha.

Before we go, I want to mention that we've been invited by NASDAQ to open trading on first day September 9th, New York City.

We also will be hosting a reception at the NASDAQ MarketSite in Times Square after the close of the market.

Those of you who work or live in the New York areas who would like to attend are welcome to contact Geoff High for details.

His information is available on our website and in today's news release.

Thank you for joining us for today's call.

We look forward to speaking with you again very soon and take care.

Bye-bye.

This concludes today's conference call.

You may now disconnect.