Bruker Corp (BRKR) 2003 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Bruker BioSciences Q2, 2003 earnings conference call. During this presentation, all participants will be in a listen-only mode and we will conduct a question and answer session at the end of the conference. (Caller Instructions). As a reminder, this call is being recorded today Thursday, August 7, 2003. I would now like to turn the call over to John Hulburt, Director of Audit and SEC compliance.

Thank you. Good morning, everyone. I'm John Hulburt, the Director of Audit and SEC compliance for Bruker BioSciences. I'm here with Frank Laukien, President and CEO, Martin Haase, Senior Vice President and Laura Francis, CFO and Treasurer of Bruker BioSciences. On behalf of our new management team, I would like to welcome you to our first combined conference call for Bruker BioSciences. As you know, the merger of Bruker Daltonics and Bruker AXS to from Bruker BioSciences (ph) occurred on July 1, 2003. As such, we will separately discuss the financial results of Bruker Daltonics and Bruker AXS for the periods ending June 30, 2003. For informational purposes, we will also discuss the combined historical pro forma restated income statements for Bruker BioSciences for the three and six months ended June 30, 2003.

This discussion will include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including, but not limited to, risks and uncertainties relating to technological approaches, product development, manufacturing, market acceptance, cost and pricing of our products, dependence on collaborative partners, suppliers, competition, intellectual property, litigation and other risk factors discussed from time to time in our filings with the Securities and Exchange Commission. We expressly disclaim any obligation to release publicly any revisions to any forward-looking statements. These statements may not be rebroadcast, recorded, transcribed or otherwise used without the written consent of Bruker BioSciences.

I will now give you some highlights and additional explanations on Bruker Daltonics from the combined earnings release issued yesterday afternoon. Bruker Daltonics' second-quarter 2003 product revenues were 34.4 million, compared to a 27.9 million for the comparable period in 2002. This translates to a product revenue growth of 23 percent for the quarter, or 5 percent for the quarter on a constant currency basis.

Gross margins for the second quarter 2003 were 47 percent, as compared to 50 percent for the comparable quarter in 2002. We incurred approximately 1 percent higher cost of goods sold as a result of foreign currency. While we have a reasonable bottom-line hedge between the euro and the U.S. dollar, it is not perfect and when both currencies undergo major relative changes, we can see this effect on our cost of goods. Therefore, with the 23 percent strengthening of the euro to the U.S. dollar in Q2 '03 as compared to Q2 '02, it had a gross margin impact of approximately 1 percent.

Also in Q2 '03, we began shipping product from our contract with the UK MOD. You may recall that in recent years, this has been a problematic contract for us in which we incurred frequent design changes to the instrument. We are happy to report that these systems are now finally accepted by the customer and are in-service with the British Army. Nevertheless, from the first shipment if this UK MOD contract, we incurred 1.3 million in revenue and 1.3 million in cost, which translates to an impact of almost 2 percent on our Q2 gross margins.

During the second quarter, we also had a significant amount of OEM sales via one of our strategic partners in which you all know we had lower margins than our normal third-party sales. We will continue to deliver product for this UK MOD contract for another 2-3 quarters and expect that after the contract is complete, our margins will return towards their historical levels. Included in Bruker Daltonics' second quarter 2003 operating expenses are approximately .9 million of costs related to the merger with Bruker AXS.

Excluding the second quarter 2003 merger costs, our EBITDA for Q2 2003 was 3.9 million, as compared to EBITDA for Q2 '02 of 3.8 million, an increase of 4 percent. The Bruker Daltonics GAAP net loss in the second quarter 2003 was .2 million, or 0 cents per diluted share. This was compared with a net loss of 4.2 million, or 8 cents per diluted share for the second quarter 2002. Net income, excluding merger-related costs for Q2 '03, was .3 million, or 1 cent per diluted share, as compared with the net income excluding restructuring charges and investment write-downs, was 1.1 million, or .2 cents per diluted share for the second quarter 2002.

Bruker Daltonics' breakout of revenue between life sciences systems, substance detection systems and aftermarket as a percentage of product revenue for the six months ended June 30 was 72 percent, 8 percent and 20 percent, respectively, as compared to 73 percent, 12 percent and 15 percent, respectively, for the comparable period in 2002.

For the six months ended June 30, 2003, our average day sales outstanding was 73 days, as compared to 63 days in 2002. Due to the increases in older receivables, this was true for various types of customers, including industry, distributors and even government, who are paying more slowly. At this time, we are comfortable with our receivable reserves and will continue to monitor these outstanding receivables throughout the remainder of the year.

As we've previously mentioned, Bruker Daltonics in mid-2002 began to make efforts to improve its inventory management. Our net inventory days on hand has improved by greater than 10 percent. Our days on hand for the six months ended June 30, 2003 was 212 days, as compared to 242 days in 2002. I would like to now turn the discussion over to Laura Francis, CFO of Bruker BioSciences, who will discuss the financial results for Bruker AXS and Bruker BioSciences.

Bruker AXS second quarter 2003 revenues grew 10 percent to 26.5 million, compared to 24 million for the comparable quarter in 2002. Excluding favorable currency effects, second quarter 2003 net sales decreased 3 percent year-over-year. Sales in the single crystal defraction systems continue to be weak due to the unfavorable economic environment. In addition, we sold fewer (indiscernible) defractions systems to the normal fluctuations in the materials research business. These decreases were offset by increases in global sales of x-ray flourescent systems and thermal analyzer sales in Japan.

We also continued to experience increases in aftermarket sales. Those same aftermarket sales accounted for approximately 30 percent of sales in the second quarter of 2003. Bruker AXS gross margin increased to 40 percent for the quarter, compared to 39 percent in the second quarter of 2002. Bruker AXS drove improvements primarily in x-ray defraction systems and aftermarket sales. These gains were offset primarily by overcapacity in our single crystal diffraction lines due to soft sales. Bruker AXS will continue to drive gross margin improvements in the future through productivity improvements, redesign to cost initiatives and the introduction of higher margin products.

The Bruker AXS GAAP net loss in the second quarter of 2003 was a negative 2 million, or a negative 3 cents per diluted share, compared with net income of 600,000, or a penny per share for the second quarter of 2002. Included in the Bruker AXS second quarter 2003 operating expenses are approximately 2.1 million of costs related to our merger with Bruker Daltonics. The net loss, excluding merger-related costs for the second quarter 2003, was a negative 500,000, or a negative penny per share.

I will now discuss the year-to-date pro forma combined financial results for Bruker BioSciences. Bruker BioSciences' product revenues for the six months ended June 30, 2003 increased 22 percent to 123.9 million, compared to 101.4 million for the six months ended June 30, 2002. Excluding favorable currency effects, year-to-date product revenues increased 7 percent, compared to the prior year. Gross margins for Bruker BioSciences year-to-date remained relatively constant at approximately 45 percent for the first half of 2003, compared to the first half of 2002.

Bruker BioSciences incurred a total of 6.2 million of merger-related costs in the first half of 2003. Excluding these first-half 2003 merger-related costs, our EBITDA for the first half of 2003 was 9.8 million. This compares to EBITDA before restructuring costs for the first half of 2002 of 8.5 million, an increase of 15 percent. On a GAAP basis, the net loss for Bruker BioSciences was a negative 3.2 million, or a negative 4 cents per share in the first half of 2003. Net income excluding merger-related costs was 1.1 million, or a penny per share for the first half of 2003, compared to 2.7 million in net income before special charges in the first half of 2002. Combined cash for Bruker BioSciences totaled 94.9 million as of June 30, 2003. I should note here that the company paid 16.1 million of cash to Bruker AXS shareholders in exchange for 5.8 million Bruker AXS shares in July. As part of the merger, we've effectively transacted a very significant buyback program of 5.8 million Bruker AXS shares.

Based on the factors that affected our business in the second quarter, we remain cautious for the third quarter. These factors include the weakness in the Bruker AXS life sciences business, the mix of business at Bruker Daltonics and the impact of currency on the company. Bruker BioSciences currently estimates that third quarter 2003 net sales will be in the range of 60-63 million with EPS, excluding special charges of 0-2 cents per share. We will provide guidance for the fourth quarter in our third quarter earnings release. This ends our summary of the second quarter year-to-date financial summary results and the financial outlook. I would now like to the discussion over to Martin Haase, Senior Vice President of Bruker BioSciences, to talk about certain highlights and new developments during the quarter.

Thank you, Laura. Good morning. I would like to discuss new opportunities we're pursuing at Bruker BioSciences. Overall, we continue to invest in R&D and strategic collaborations to expand our technology platform and product offerings. For example, during the second quarter, Bruker Daltonics announced a new (indiscernible) solution for clinical proteomics and biomarker discovery (indiscernible). The Bruker Daltonics Division improved sample capacity by (indiscernible) and flexibility for (indiscernible) proteomics while decreasing costs dramatically. We are excited to be entering this revenue growing segment of the overall proteomics market.

In addition, we announced a host of new life science mass spectrometry products at (indiscernible), including our Apex 2 to hybrid STMS (ph), our SS3 (ph) research grade electro (indiscernible), the esquire HCT high-capacity ion trap and microtop benchtop (ph ) high-performance electro (indiscernible). It is clear that our customer needed some time to evaluate our many new life sciences mass spectrometry products, as well as these products' introduction (indiscernible). However, our customer is expressing a high level of interest in our new products and we expect for a rapid (indiscernible) growth to continue.

Further, Bruker Daltonics announced the formation of the (indiscernible) and the Department of Energy (indiscernible ) Northwest National Laboratory for the further development of methods for (indiscernible) high throughput proteomics research. This is the latest endeavor on second creator (ph ) between Bruker Daltonics and (indiscernible) and the Department of Energy's Pacific Northwest National Laboratory. At Bruker AXS, we announced the strategic partnership with Discovery Partners International to provide seamless integration of systems for protein crystallization and x-ray crystallography for (indiscernible) proteomics application. Bruker AXS is now the worldwide distributor for Discovery Partner's crystal (indiscernible) line of protein crystallography products.

In addition, we expect a number of new product announcements in the third quarter which will again improve our competitive position as (inaudible). These and other measures we're taking to improve our global distribution and support capabilities will drive new growth of the topline and bottom line to our combined companies. Of course, the most significant reason development is the closing of our merger and (inaudible). I will now turn the discussion over to Frank to discuss our integration efforts and outlook for our company.

Thank you very much, Martin, and good morning ladies and gentlemen. It was a long process to conclude the merger, but we are now ready to move ahead at Bruker BioSciences. We have made substantial progress already on integration. A few examples as promised -- we have moved to eliminate redundant public company costs and we estimate cost savings of $1-$2 million per year here. We expect to see the impact of these savings immediately in the second half of this year.

In addition, we're beginning to streamline processes in accounting, human resources, particularly information technology, as well as other overhead functions. We estimate cost savings of 1-2 million per year from these efforts as well. We expect to see the impact of these cost savings in 2004. Further, we have begun to put in place processes and incentives for joint marketing and cross selling in major markets and for expanding distribution in international markets. We anticipate 5-10 million in incremental revenues and 2-4 million of incremental EBITDA by 2005. At this time, we are also evaluating additional opportunities to improve our bottom-line.

So despite the difficult economic environment, we believe we're taking the right steps to (technical difficulty). We believe that the merger will drive significant operational benefits for the company as discussed above. From a capital market perspective, we believe we will increase investor interest and liquidity. In addition, we believe our increased will increase visibility and exposure to Wall Street, allow us potential public market access in the future and create a stronger acquisition currency.

We also believe that the merger reduces risk through a more diversified product portfolio, a broader customer base and reduced dependence on a single technology platform. Finally, we believe that we will be able to quickly recognize the benefits of the merger because of our long-term working relationship, as well as our intention to retain the entrepreneurial drive and growth momentum of the two operating companies. So as President and CEO of Bruker BioSciences, I look forward to the new opportunities afforded to us. Our goal is to capitalize quickly on these opportunities. Ladies and gentlemen, we now invite your questions please.

(Caller Instructions). Larry Niebor, Robert W. Baird.

Good morning. It is Andrew Schram (ph) for Larry. I apologize. It looked like operating expenses for the combined company were a little higher than they had been trending for each company as a standalone entity in the past. And obviously, I understand that you're going to be realizing these cost savings going forward. Was there anything in the quarter particularly that drove the higher operating expenses in Q2?

First of all, you have to take the impact of currency into consideration costs and we will break it down at least a little bit by company. From the AXS perspective, R&D was actually flat if you take currency out. G&A was down. However, sales and marketing was up by -- excluding currency, a little less than $1 million. Most of that is due to the fact that a lot of our sales in this quarter were sales in countries where we don't have a sales subsidiary, so we had to pay additional costs to agents and distributors. In terms of the Daltonics side, I don't think there is anything in particular to point out, just typical fluctuations, and obviously, operating expenses is one of the areas that we will be focusing on very heavily going forward as a combined company to drive profitability to the bottom-line.

Could you also perhaps give us some idea of the trends you saw in the quarter by geography?

From the AXS perspective, we did not have any significant fluctuations compared to prior periods. Approximately 50 percent of our sales were in Europe, 30 percent the U.S., 10-15 percent in Japan and then the remainder the rest of the world. So we did not see any significant fluctuations on that side.

On the Bruker Daltonics side, just the trends were the -- actually a pickup in the United States. I don't know about those general market trends, but we just did better in terms of new order bookings and so on in the first half here in the United States. Japan, a little bit weaker and delayed compared to last year. Unfortunately, China, Hong Kong, Taiwan, Singapore was almost nonexistent in terms of revenue in the second quarter. That has a lot to do with SARS initially. And Europe was on the weaker side for us as well in the second quarter, or on the flat side. So Europe, flat, Japan, Asia down a little bit and the U.S. up in terms of trends. I don't know whether those are quarterly fluctuations or real trends, but that is what we have.

One follow-up to that, Frank. A number of other instrument suppliers are seeing a pickup as you are in the backlog and order volume and I guess the overall tone from pharmaceutical and the biotech companies has improved for the outlook for the rest of the year. Have you seen similar improvement amongst your salespeople in discussions with these customers?

Yes, I would second that. Not really -- during the war in Iraq, it was somewhat quiet, but then I think it got much busier in the second half of the second quarter, simply in terms of customer activity, how many demos we did in the U.S. and Europe and Asia. So it does seem like things are picking up, particularly in the pharmaceutical and even among the larger biotech companies. And in fact of you look at -- this is a Bruker Daltonicss-specific comment -- if you look at our -- our growth rate has been pretty high, but then you do the currency adjustment, it is on the lower side, but that is really not so much on the life science.

If I look at the life science and aftermarket, which is most of our almost 90 percent of our business, 85-95 percent of our business, that actually grew over 30 percent for currency adjusted. As you know, this had a big effect on us in Q2. Currency adjusted, it still grew in the low teens, around 13-14 percent currency adjusted gross. So that is really pretty healthy and I think we are continuing to gain market share there.

As we had predicted and as we knew from last year, our NBC revenue was down 23 percent in the second quarter, compared to the second quarter of last year, and NBC we know will be weaker this year than it was -- relatively weak this year, whereas our life science business at Bruker Daltonics continues to go at a slower growth rate than one or two years ago. But relatively speaking, we think we're still probably the fastest-growing mass spec company and continuing to gain market share.

Thank you.

Let me add something -- we're also seeing some positive signs, specifically in Europe, which was relatively weak, across all industries, including academic business. Asia as well, so a slight optimism.

Great, thanks.

Paul Knight, Thomas Weisel Partners.

This is Tim (indiscernible) for Paul. I have a question for Martin. So the x-ray crystallography market continues to be difficult, it looks like. Could you comment on the single crystal diffraction and diffraction product -- where is it being sold, into which country? And is it all through channels and (indiscernible) with some of your direct sales force?

Most of the life science products we are selling are going to our own distribution channels, normally with a split 80 percent plus on distribution channels and 20 percent by distributors and other third parties. We have three different areas. One is the academic world, the other is biotech and the third area is pharma. The academic world (ph) is really dependant on (indiscernible) in different areas. North America, funding is somewhat difficult right now, especially at state (ph) funding. If you go up north to Canada. it is just great. Europe is picking up. So the academic (indiscernible) I would say is relatively flat right now. Biotech is still very difficult because of restricted cash on hand at the biotech startup companies. Pharmaceutical industries are slightly picking up. But the overall picture is slightly positive. But since we are very much depending on public funding, the release of money in the public area, the economic world is (indiscernible).

I have a second question for Frank. In this quarter, we saw a couple of your competitors announce the various slow mass spec sales. And normally (indiscernible) maybe their customers need the time to evaluate their new products after the conference in (indiscernible). According to your experience, how long do your customers normally take to evaluate your new products and (indiscernible) interest translate into order book in your revenues?

I would -- good question. I think there is a little bit just before ASMS. There's usually -- people don't like to place a purchase order just before ASMS, because perhaps some new products will come out. So maybe before ASMS, I would think things are always a little bit slowing down. How long does it then take for customers to make their decisions after they may become aware of a new product? Maybe it will add one or two months to their decision is they think they have to evaluate something else that they had not previously taken into consideration. This is not hard data; this is my gut feeling.

Okay, thank you.

You're welcome.

David Cohen.

I had a few questions. In the future, what are you going to disclose? Are you going to disclose both product lines separately or are we going to get breakdown by A, B, C, D, E, and mass spec? Could you just tell us what your plans are on disclosure?

Our intention is to provide segment information for the two separate businesses, so the mass spec business or the Bruker Daltonics business, and then the Bruker AXS business as well as the overall bioscience business. It is primarily on the P&L of course, but that is our intention.

How many shares are actually outstanding after the merger? Is it 82.3 million after the buyback?

It is about 86 million, and that does not include the stock options.

I thought it was 86 million before the quarter end, and then you bought back the 5.8 of the AXS shares?

No. As part of the merger, because part of the AXS shareholders could elect either 100 percent --

I understand that, but what is number after the merger?

It is 86 million. The number that you see in the press release is an as adjusted number, David. So the number is correct.

Thank you. Can you give us any pro forma balance sheet data, especially working capital and some guidance on what you think pro forma CapX is going to be?

We can talk about the cash flow situation through this quarter, if that is helpful to you, and then we can also talk a little bit about the balance sheet as of 6/30. From a cash-flow perspective for the second quarter, if you look at the businesses separately, we generated approximately $100,000 of operating cash flow at AXS. We used approximately 1.4 million of cash flow at B Dal for biosciences operating cash flow of 1.3 million. In terms of CapX, we used approximately 1.4 million at AXS, 600,000 at B Dal and 2 million at Bruker BioSciences. If you take out the impact of the merger-related cost, we actually generated cash flow at AXS, because we paid around $1 million of cash out. And then for Bruker Daltonics, we used around 500,000, if you back out merger-related costs.

Working capital pro forma at 6/30 is about 160 million. I would just caution, David -- generally, the 6/30 balance sheet and the July 1st balance sheet will look dramatically different and we're working with E&Y (ph) on the opening balance sheet for July 1st. So with that word of caution, obviously, the cash position changes significantly before and right after the merger. So your second -- I think there was one part of the question regarding CapX in Q3 and Q4.

The intention of both of the companies was to be at less than 5 million apiece. And right now, we have had CapX expenditures year-to-date of 3.6 million.

We don't expect that to pick up significantly and we expect to be below the 10 million for both companies combined for the year.

Thank you very much.

Andrew Warren, Lehman Brothers.

Good morning. This is Andrew for Ken Goldman. Quick question. Is there any adjustment to the combined fiscal year '03 revenue? I guess your guidance, which was previously 250-260 million?

In terms of for the year?

Yes.

What we are providing right now is, you obviously have the historical information and you should bear in mind that that historical information is a consolidation of all of the revenues of both AXS and Daltonics, and then we provided our range or Q3 of 60-63 million and our intention is to provide guidance for the fourth quarter in our third quarter earnings call.

Okay. Thank you.

Thank you.

Sarah Michelmore, Strength Cowen.

Good morning. Just two quick questions. One, on the Q3 guidance for the combined companies, Laura, it doesn't imply a significant amount of organic growth if you adjust for foreign exchange, so I am just wondering what you are assuming there as far as the impact of foreign exchange on that (indiscernible) and then if you could just talk about the organic revenue growth assumptions for AXS and Bruker Daltonics that are a part of that forecast?

That is the difficult question. Foreign currency is having a major impact on our numbers in the first quarter and the second quarter. In the first quarter I believe that the euro between 12/31 and 3/31 fluctuated by 3-5 percent. And then in the second quarter, it was another 6 percent. And we are making our best estimates for the third quarter, but we actually felt that it was appropriate to provide an absolute number of the 60-63 million. It does imply some growth on the revenue side, but single-digit growth. is to the make.

So it is implying single-digit growth. I would guess, then, that you don't have a lot of foreign exchange built into that target then.

We have some foreign exchange built into the target, but that's our best estimate at this point in time, the 60-63 million on an absolute basis.

So topline single-digit organic revenue growth, what is the expectation for AXS and Daltonics?

If you break out the two different companies for Daltonics, we're looking at revenue of 34-36 million with EPS in the 0-2 cent range. And then on the BAXS (ph) side, 26-27 million in revenues with a negative penny to a penny per share on the bottom line.

When you guys had first announced the merger, you were talking about free cash flow for the year -- actually, operating cash flow minus CapX I think was how you had described it of about $15 (ph) million. It sounds like you're tracking somewhat below that. Could you talk about what you think the free cash flow target could be for this year, and if the current business environment, if you changed any targets, as far as cash flow or (indiscernible)?

We are struggling on the cash flow side. And a couple of the factors that obviously are impacting us are the merger-related costs. But in addition, one of the key levers that we're really focusing on is management of our balance sheet, and that is inventories and accounts receivable. And those are the areas that we're really focusing on in order to generate cash flows, and those are the areas that we will focus on in the next few quarters and beyond.

Great, thank you.

David Cohen.

A follow-up on the working capital. You said 160 million at the end of the quarter. That includes your cash. What is the cash number that is included in that?

The cash number was the 94 million. But then again on July 1st, that cash number went down -- decreased by 16.

So your working capital, excluding cash at the end of the quarter, was something like 66 million -- is that what you are saying?

At the end or at the beginning -- at the end of the second quarter, or after the merger took place on July 1st?

Either or both, but just clear so I know which one.

About 63 million.

And which does that apply to?

That includes the cash as of June 30th and then (MULTIPLE SPEAKERS).

You are confusing me now. You're talking (indiscernible) working capital excluding cash now?

Excluding cash is 63 million.

To what date?

Excluding the cash (MULTIPLE SPEAKERS)

Excluding cash, it doesn't matter. You should just be using the 63 million.

Thank you.

(technical difficulty)

Two more quick follow-up questions. Could you give us an idea or maybe a little bit more color on the x-ray business, single crystallography business. For the life sciences, it has been struggling for several quarters. Could you perhaps discuss what you are seeing in that end market, what prospects you're seeing in that end market. Are we experiencing a secular change, so to speak, or is it just a continuation of the bottom of the cycle? And then second question -- you mentioned several new products coming in Q3. Could you perhaps give us some color on where those may be, what technology areas those could be? Thank you.

Let me answer the question on the life science side first. As I mentioned earlier, the funding climate is still difficult on the academic side. There is competitive pressure on the life science side, which we have covered with actually two recent product introductions. One is the Micro Style (ph), which is a high brilliancy x-ray generator.

And in addition to that, the expansion of our product line in the x-ray life science crystallography business by entering the strategic alliance with Discovery Partners. We believe that is something that (indiscernible) that we have reached the bottom and that the market will start to recover in that area. Talk about product introductions. One I mentioned already is the new x-ray generator for proteomics applications. (indiscernible) in the next two months, three major new product launches on the materials research business, some of them in conjunction with the acquisition of (indiscernible) Science in 2002 and other in nanotechnology and in entering the lower end of the diffraction market.

Thank you.

Andrew Wong (ph).

One other question. Laura, regarding the reversal of previously accrued liquidated damages associated with the UK MOD, that has now been resolved. So is it safe to assume this is just a onetime reversal, or can we expect anything else associated with the UK MOD?

Yes, Andrew. I'm more familiar with that, obviously, over many years of living with his contract on the Bruker Daltonics side. And indeed, we have gone through many ups and downs in this contract. We have never really separated them out in as unusual items or anything like that. Basically for us, it has always gone through operating income. And it is a difficult contract, or has been a difficult contract that now has been mostly resolved.

But what has happened is that we had a dispute with the customer, in addition to the technical rework. He had claimed an additional more than $2 million in R&D, additional R&D claims, which of course was not on our balance sheet because we would not be able to capitalize that, but we have made that demand. And basically, we've come to a settlement where they are not pursuing any further liquidated damage claim and we're not pursuing our additional R&D money claims. And we're in very good standing and have a very amicable relationship with the customer and an ongoing relationship. That is important to us. Yes, but I think the big uncertainties over that contract that have gone up and down, and it has basically been resolved at this point to the satisfaction of the customer, and also to our satisfaction, at least with a reasonable settlement.

Great, thank you very much.

(Caller Instructions). We have no questions in the queue.

I would like to thank you all very much and we will look forward to seeing you at carious health-care conferences or on our third quarter conference call.

Ladies and gentlemen, that does conclude the conference call for today. We do thank you for your participation and ask that you please disconnect your line at this time.

(CONFERENCE CALL CONCLUDED)