CRA International Inc (CRAI) 2006 Q1 法說會逐字稿

Good day and welcome to CRA International's first-quarter 2006 conference call. Today's call is being recorded and webcast. You may listen to the webcast on CRA's website located at www.CRAI.com. In addition, today's news release is posted on the site for those of you that did not receive it by e-mail. With us today are CRA's President and Chief Executive Officer, Mr. James Burrows, and Vice President and Chief Financial Officer, Mr. Wayne Mackie. At this time for the opening remarks and introductions I would like to turn the call to Mr. Mackie. Please go ahead, sir.

Thank you, Lynn. These statements are based upon management's current expectations and are subject to a number of factors and uncertainties. Information contained in these forward-looking statements is inherently uncertain and actual performance and results may differ materially due to many important factors.

Such factors that could cause actual results to differ materially from any forward-looking statements made by the Company include, among others -- changes in the Company's effective tax rate; share dilution from the Company's convertible debt offering; the impact of the adoption of Financial Accounting Standards Board statement No. 123R; the total stock compensation -- interest (indiscernible) compensation; dependence on key personnel; attracting and retaining qualified consultants; dependence on outside experts; utilization rates; factors relating to the Company's recent acquisitions including integration of personnel, clients, offices and unanticipated expenses and liabilities; risks associated with acquisitions it may make; risks inherent in the international operations; the performance of its Neuco subsidiary; changes in accounting standards, rules and regulations; management of new offices; the potential loss of clients; dependence on growth of the Company's business consulting practice; the ability of the Company to integrate successfully new consultants into its practice; intense competition; risks inherent in litigation and professional liability.

Further information on these and other potential factors that could affect the Company's financial results is included in the Company's filings with the Securities and Exchange Commission. Jim?

Thanks, Wayne, and thanks to everyone joining us today. Overall I am very pleased with the first-quarter results we reported this morning. We extended the momentum we established in fiscal 2005 and got 2006 off to a great start. For the quarter revenue increased 17.5% to $72.5 million from $61.7 million in Q1 '05. This growth was primarily driven by large gains in several of our litigation practices and a moderate uptick in our business consulting practices.

For the quarter our utilization rate continued to grow, increasing to 78% from 76% in Q4. Q1 can be a difficult quarter in which to achieve utilization growth because of the impact of the Christmas and New Year's holiday weeks. The momentum we've had in the last two quarters gives us a good start on achieving our targeted utilization of 78 to 80% in FY '06.

Moving through the income statement, we achieved net income of $5.6 million, 22% higher than the year ago period. EPS increased to $0.47 from $0.43 per diluted share for Q1 of last year. Included in the net income and diluted EPS amounts are approximately $700,000 and $0.06 per share respectively of stock based compensation expense in accordance with the adoption of Financial Accounting Standard Board statement No. 123R.

We experienced robust demand for many of our practice areas this quarter. Overall our litigation revenues increased more than 20% over Q1 of last year. This improvement was led by our finance and intellectual property practices. In fact, our finance practice increased nearly 15% year-over-year while our IP practice is up more than 40% from Q1 of 2005.

Some examples of IP work in the quarter that we can discuss include work for Masimo in a patent infringement case against Nellcor that led to a successful outcome at trial and to the ultimate settlement of the case for $265 million and work for Sprint Nextel Corp. in connection with a patent infringement lawsuit involving global positioning system technology.

With respect to finance cases, CRA has an active pipeline of work relating to certain states' investigations of business practices within the insurance industry and SEC scrutiny of trading in the mutual fund industry. More specifically, we are working on several mutual fund cases in the United States and Canada, analyzing damages due to market timing, late trading, and broker execution of trades and developing distribution plans relating to the settlement of regulator actions. We are also working for the board of a mutual fund investigating an alleged fraudulent inflation of asset values by the manager of that fund.

Revenues in the competition practice, which includes antitrust litigation and M&A, increased slightly over Q1 of 2005. M&A work continued to represent approximately 12% of Company revenues as compared with 12% for the sequential fourth quarter and 11% for Q1 '05.

With respect to selective competition cases, in the United States CRA advised Singer Sewing Machines in connection with its acquisition of Viking Sewing Machines and we have also been working on behalf of Ortho in its antitrust litigation against Amgen. In Canada CRA is working on a dispute between the Canadian competition tribunal and Agricore United. In the United Kingdom CRA assisted Boots, the UK's largest drugstore chain, in gaining of its acquisition of Alliance Uni Chem, a European distributor of healthcare and pharmaceutical products.

We also worked with Telefonica in obtaining Phase I EU clearance of its acquisition of [O2] and we worked for INEOS and BP to get EU clearance for the INEOS/Innovene merger. In Australia CRA worked for Qantas in connection with a dispute involving pricing negotiations with the Sydney Airport and we worked with a transport and logistics operator, Toll Holdings Ltd., with respect to its acquisition of Patrick Corporation. In New Zealand CRA worked with Fonterra, the main dairy company in New Zealand, in connection with its acquisition of Kapiti Fine Foods. And I'll all remind everyone that we're working on hundreds of litigation cases most of which we can't talk about.

Turning to our business consulting practices, overall revenue increased about 8% compared to Q1 of fiscal 2005. Our pharmaceuticals practice continued to experience healthy growth fueled by new projects related to recent Medicare changes for both existing and ongoing litigation projects related to pharmaceutical pricing.

Looking at energy and environment and chemicals and petroleum, the year-end effect of holiday and vacation time in both Asia-Pacific and throughout most of Europe negatively affected revenues particularly early in the quarter. Chemicals and petroleum practice revenues increased by 5% for Q1 from Q1 of fiscal 2005. The pipeline of work in the Middle East is active and we expect revenues of this practice to increase in the coming quarters.

Electric utility and environmental revenues declined by 5% for Q1 as compared to last year. As previously reported, the E&E practice designed the rules for a successfully implemented -- an Internet auction of a virtual 200 megawatt coal-fired power plant for IWE.

With respect to [CMP] assignments during the first quarter for one of the oil majors, we have an ongoing assignment helping the Company to optimize the production roadmap for one of its strategic regions. We are helping the client improve performance by optimizing the labor pool, shortening cycle times, and developing supporting material flow processes. For a leading specialty metal producer we helped its board and senior management evaluate the potential for a long-term earnings recovery through asset consolidation actions and changes in its business model.

Looking at our business from a geographical perspective, on a year-over-year basis international revenue was up nearly 80% as a result of accommodation of acquisitions and successful growth initiatives. International revenue in Q1 accounted for approximately 19% of total revenue which is equal to our full year fiscal 2005 percentage of revenue but down from 26% in Q4. The sequential decline was the result of the Q1 holiday season and some delays in the startup of some projects in our Europe and Middle East operations.

Revenues of our Neuco subsidiary continued to be volatile on a quarter-to-order basis. Q1 revenue was $1.5 million, up from $1.4 million in Q1 of 2005 but down from $2.9 million in Q4 2005. The business has a healthy pipeline of projects and potential projects and backlog remains strong. Based on the expected timing of current contracts we anticipate that the revenues for the full year will be in the same range as FY '05 or higher and that the revenues will be higher in the second half of the year than in the first half which is the same pattern we observed in FY '05.

We continue to anticipate sequential variability in Neuco's results but we remain optimistic about Neuco's long-term growth prospects. With that I will turn the call over to Wayne for his financial review.

Thanks, Jim. Q1 revenue increased 17.5% to $72.5 million. First-quarter gross margin was 38% compared to 40.2% in Q1 of fiscal 2005. Approximately half of the gross margin decline between the quarters was the result of the effect of FAS 123R. The other principal factor contributing to the gross margin decline was higher direct compensation costs resulting from a higher proportion of our revenue being sourced by internal staff rather than outside consultants whose performance payments are classified under SG&A rather than cost of services.

Total reimbursable expenses were $7.6 million as compared to $6.5 million in Q1 2005 and represented approximately 10.5% of revenue for both quarters. In comparison reimbursable expenses averaged 12% of revenue for fiscal 2005. Total consultant utilization in Q1 was 78%, up from 76% reported in Q4 and 74% in Q3 of 2005. As Jim mentioned earlier, improving utilization continues to be one of our top priorities in 2006 and we continue to be right on track of achieving our annual guidance of 78 to 80%.

SG&A expenses for the first quarter were $18.1 million or 24.9% of revenue compared to $15.8 million or 25.6% of revenue for the first quarter of 2005. Q1 SG&A expenses improved on a percentage basis principally as the result of lower performance payments to outside consultants.

First-quarter operating income was $9.5 million versus $9 million for Q1 of fiscal 2005. Operating margin was 13% compared to 14.6% in the first quarter of 2005. Excluding approximately $900,000 of pretax effect of FAS 123R, operating margin in the quarter would have been 14.2%.

Our results for the first quarter included a minimal foreign exchange loss of approximately $20,000 versus a loss of about $55,000 in Q1 of 2005. We continue to manage our foreign exchange exposure carefully by hedging our foreign dollar position and through frequent settling of intercompany account balances.

Interest income was $1.1 million for Q1 2006 compared to $278,000 for Q1 2005 and $877,000 for Q4 of fiscal 2005. The rise in interest income is the direct result of higher interest rates combined with higher cash balances from our mid 2005 stock offering and cash generated from operations. The higher interest income contributed approximately $0.04 incrementally to per-share earnings in Q1 compared to Q1 2005.

Our effective tax rate in the first quarter was 42.3%, directly in line with our fiscal 2006 guidance of 42 to 43%. First quarter fiscal 2006 net income was $5.6 million or $0.47 per diluted share compared to $4.6 million or $0.43 per diluted share in Q1 of 2005. Net income and EPS include the effects of FAS 123R which were approximately $700,000 and $0.06 per share respectively in the quarter.

In terms of share count, we calculated Q1 earnings per share using 12.1 million weighted average diluted shares outstanding utilizing an average share price for the quarter of $46.79 compared to 10.8 million shares outstanding in Q1 of fiscal 2005. Professional headcount stood at 667 at the end of Q1 compared to 663 consultants at the end of Q4. Our current staff breakdown is 205 junior consultants and 462 senior consultants.

Looking at the balance sheet, cash and equivalents stood at $124.8 million at the end of Q1 compared to 115.2 million at the end of Q4. We generated cash from operations in Q1 of $9.6 million compared to $6.6 million for Q1 a year ago. We anticipate a reduction in our cash balances during Q2 from the expected payout of fiscal 2005 bonuses.

Billed and unbilled receivables in Q1 increased to $96.1 million compared with $92.8 million at the end of Q4. Total DSO, Days outstanding, were 109 days versus 105 days for Q4 fiscal 2005. This consists of 38 days of unbilled and 71 days of billed versus 33 days of unbilled and 72 days of billed in the fourth quarter of 2005. The increase in DSO occurred principally in our international operations. For example, one large receivable in Australia, most of which was collected subsequent to year-end, and some billing delays in our UK operations account for the increase.

We are actively pursuing collection efforts in all our operations. In addition, our bad debt and write-off rates in Q1 2006 remain below our recent historical average. Current liabilities were $84.6 million at the end of Q1 compared to $78.6 million at the end of Q4. Our capital expenditures totaled approximately $1.6 million for the quarter, about the same as Q1 a year ago. Depreciation and amortization expense was approximately $2.2 million for Q1 compared with approximately $2.3 million in the sequential fourth quarter.

During the first quarter our closing stock price did not exceed $50 for at least 20 of the last 30 consecutive trading days. Pursuant to the terms of the indenture governing our convertibles debentures, the coco trigger was not satisfied and these debentures cannot be converted during the second quarter of fiscal 2006. The test will be repeated each quarter. To date no bonds have been converted. Now back to Jim.

Thanks, Wayne. Our first-quarter results have set the foundation for a successful fiscal 2006. We continue to experience positive market conditions and we are growing our pipeline of business across many of our litigation and business consulting practices. As we announced in today's press release, we are reaffirming our previously provided fiscal 2006 outlook and financial guidance.

We anticipate that revenue growth for the full year 2006 will be in the range of 18 to 20%. We continue to anticipate that we can achieve a full year utilization rate of 78 to 80% in fiscal 2006. CRA anticipates net income for fiscal 2006 of $26.5 to $27.5 million or $2.18 to $2.27 per diluted share which includes a $0.29 to $0.30 per share impact from stock based compensation.

Our 2006 EPS guidance is based on approximately 12.2 million average diluted shares and assumes a stock price of $47.44 which is the average closing price for the past ten trading days. Deviations from this stock price will cause our earnings per share to vary based on share dilution from our stock options and convertible bonds. These estimates are based on an effective tax rate for the year of approximately 42 to 43%. With that I'll ask the operator to open the call for questions.

(OPERATOR INSTRUCTIONS). Matt Litfin, William Blair.

Good morning. Congratulations on the solid quarter. A few questions. First one regards the flattish consultant headcount versus the November fiscal year end. Did you see any higher turnover in the quarter or was that more a function of fewer hires seasonally?

Let me address that, Matt. We're focusing on getting utilization up which I think we're achieving successfully. This is not a big hiring season. For example, all of our entry-level hiring, whether from college, undergrad or graduate school, would come almost entirely in the third and fourth quarters. We do have actually an extremely active pipeline of recruits at more senior levels, but we were not driving headcount growth in Q1 because the strategy right now is to get utilization up for this quarter and the next quarter or two. But we still have the same target for headcount growth for the year.

Okay. As a follow-up to that, I know that normally second quarter is stronger in utilization than Q1 seasonally, are you seeing that playing out here in the early three or four weeks of the second quarter?

Well, I guess what I could say is that we would not be surprised if Q2 had higher utilization because that is sort of a seasonal pattern.

Okay. Last question, assuming that you don't want to pay down the convertible debt because of the attractive terms there, your cash balance is building and I wondered what are your plans with that and what's the priority in terms of uses of cash over the near-term?

We are looking at potential acquisitions, that's no secret. But we're not acting under pressure to make acquisitions. If it turns out that we have more cash than we think we need for our business we will probably at some point consider stock buybacks or something like that, but there's nothing in the plans right now.

The other thing I would add, Matt, is that our bonuses, which we'll be paying out here in the next month or so, we'll use up somewhere in the low to mid $30 million of cash, so that represents a pretty sizable disbursement.

Thank you.

Michael Fox, JPMorgan.

Good morning. Can you talk about the hiring environment and whether you're seeing any pressure there? And then the current M&A environment?

First, on the hiring environment, we're not experiencing any difficulties in hiring the people we need really at all levels. Obviously the big scarcity is people with experience who can bring in business, that's always true. But just at all levels of staff we've been able to hire and get a high acceptance rate on offers. We have not experienced significant cost pressures other than in the [Ph.D. Pinus] market where the alternative employment is either business school teaching jobs or investment banks that are driving up pay scales in that areas. But we're matching those and it's not affecting our ability to hire.

Okay. And then what about the -- has there been any change in the M&A environment with (multiple speakers)?

No, that continues to be quite strong. And as you probably know, it's quite strong in Europe. So there continues to be significant activity there.

Okay, great. Thanks a lot.

Brett Manderfeld, Piper Jaffray.

Good morning, guys. Nice quarter as well. Two questions. First, internationally, I think if I heard you correctly it sounds like that business was down if I'm looking at the math correctly sequentially maybe 25% overall. I just wanted to touch base on that. I think you mentioned holidays, but was there considerable headcount turnover there or anything else going on? And related to that, do you think the mix will snap back to the 25% range looking out to the second quarter?

I think there were several things going on. One is that now that we have a higher percentage of the Company abroad we're more impacted by the seasonal swing of holidays which tends to be a little larger in the foreign operations than here. Secondly, we had just some timing issues in our business consulting practices that occurred really in the earlier part of the quarter with projects ending and new projects that were in the pipeline not quite starting up yet.

It's very hard to get -- particularly from the Middle East -- authorizations for new starts particularly during holiday periods. That was already turning around halfway through the quarter. And third, there were some significant litigation involvements that peaked in Q4, but again that's turning around. So this is something that we think will come back.

So no real change in headcount from the turnover, Jim?

No, I don't have the data in from of me, but I'm not aware of anything.

Okay, very good. And then I think I heard you correctly; you said that the antitrust business was pretty flattish versus last year. It seems a little surprising given the strong and active M&A environment and your strength in that business traditionally. Is there anything happening in that area of the competition practice?

No, I think that was just the rhythm of projects. A year ago there was somewhat of a -- what actually was quite strong, unusually strong for us at that time of year. You work with (indiscernible) people are quite busy in that practice, they're looking to hire, so there's nothing fundamental going on.

Okay, very good. And final question, Wayne, I think you mentioned reimbursables were around 10% in the quarter. Is that a number we should be looking to for the rest of the year? Thanks.

Actually, Brett, historically for the full year of 2005 it will be there about 12%. They came in at 10.5% for Q4 which is roughly what they were as a percentage for Q1 of '05. Normally we expect them more in the 12% range. So it clearly has an impact on revenue when percentage is lower as it was this quarter. So we would look for them to typically to be more in the 12% range.

Very good, thank you.

Sure.

Colin Gillis, Canaccord Adams.

Could you talk a little bit about on the utilization side what the impact of vacation time was in the quarter and just give us a sense as to how that compares to the prior year quarter, some of the denominators and the available hours?

I don't have that data in front of me. If we can get it out before the call runs out I'll give you an answer. But clearly the quarter is a high holiday vacation time for us.

Was there more vacation time do you think in this quarter than in the prior year?

As I said, somebody is trying to get that data for you right now but I don't have an answer.

Could you talk a little bit about marketing efforts and reaching out to law firms and expanding awareness of the various practices and any success stories you have from those efforts?

I'm not aware of anything that was different from what we've been doing in the past. We have an extremely active program of presentations, papers, talks, brown bag lunches, seminars. We have a -- there's a marketing report that comes out monthly internally and there's some event happening almost every day somewhere in the country. So the pace of that's been increasing over time change but there's been no step change.

Okay, great. And then just, Wayne, do you have bill rates for the quarter? And could you also break out stock option expense on a pretax basis where it falls in the various line items?

Yes, good question, Colin. As I think you know, the tax rate that is associated with 123R and stock-based compensation in general is not necessarily the effective tax rate of the overall effective rate for the Company. And in fact, when I tell you this number you'll see that it's considerably different here in Q1. The pretax 123R number is about $900,000; the after-tax, as you may recall from a couple of minutes ago, is $700,000. That represents an effective tax rate of about 22% versus our overall effective rate in the 42 to 43% range.

The reason for that is that the accounting rules do not allow you to tax benefit options that are ISOs versus options that are nonqualified. The nonqualified you can, so it bears on the mix of the options that have been issued in the past that are nonquals versus ISOs that now under 123 are spilling into 2006.

Just a couple of other points on this 123R and moreover the whole stock-based compensation point. When we put together our estimates of what we thought stock-based compensation was going to be for 2006, the $0.29 to $0.30 that's been previously mentioned, we had to make some estimates of what the mix of various stock-based compensation that we would grant to employees as well as that which we already had outstanding from prior years that would then be amortized over its vesting period in 2006 and beyond.

And so, just to be clear, the $0.29 to $0.30 represents the after-tax estimate of all stock-based compensation. And we as with I think all companies would be looking at various forms of stock-based compensation -- ISOs as well as nonquals and perhaps some other forms -- as we roll along. So just want to be clear that the $0.29 to $0.30 represents all stock-based compensation on an after-tax basis.

Excellent. And of that $900,000 could you just give us a breakdown as to what lands in COGS and what lands in SG&A?

Roughly it's a 90/10 split. That is cost of sales 90 and the SG&A 10%.

An I guess bill rates and an organic growth number in the quarter?

I don't have that right here with me, Colin.

I'll circle back for that.

Colin, let me just give you a couple of follow-ups. On the fringe time, that increased for the Company as a whole from 13.2% to 13.7% and that was driven essentially by international, the higher rate of international is what caused that result. So what that means is there was a half a percent and fewer hours available for work than would have been the case a year ago. And that number of course is higher than some other quarters because of the seasonal affect.

On the rate increase, I'm not sure we'll be able to get the data before the call ends, but we did implement a rate increase that was in excess of 5% at the beginning of the quarter. The way it works is we increased rates for most of our clients effective the first day of the quarter, but not for all the clients because we [tend] to grandfather clients who acquired us in recent months. The full effect of the rate increase doesn't generally show up until perhaps some time in the second quarter, but the first quarter would have seen a lot of that.

Okay. Excellent, thank you very much.

Theresa Churchwell, Ryan Beck.

I had a quick question regarding the sequential improvement on the utilization rate. Normally that implies an improvement with revenue when in actuality we had a somewhat flat sequential revenue growth. Could you give us a little bit more color on that?

In terms of utilization because it has -- two sides of the equation, the denominator and the numerator, we take out of the -- both sides of the equation nonbillable time. And so although there clearly should be a correlation with utilization, it will, one, increase revenue, but it would also potentially increase a cost as we accrue additional bonuses and that sort of thing. The utilization rate certainly was up from Q4. It was actually slightly down from Q1 of a year ago. So it's a multi-headed analysis in terms of the affect of utilization on what revenue is.

If I could just elaborate. Utilization increased from Q4 to Q1 from 76 to 78%, but the increase in holiday time is higher than that. So that factor alone would have resulted in lower revenue because you have offsetting affects. Now other things going on were that we had rate increases and some headcount growth, but in addition reimbursables were down and, bear in mind, reimbursables are essentially (indiscernible) and there were a few that would have some profit on them but it's almost entirely 100% pass-through. And reimbursables were down as a percent of revenue in Q1 from Q4. And secondly, Neuco revenues were down very substantially from Q4 to Q1. So it's really a mix of a lot of different things.

Okay. One other question regarding the higher interest income amount, should we be expecting the same range going forward? This is higher than we had expected.

Obviously it's a function of what the average balances are as well as the rates. The rates, we can all guess at what they may do here, the short-term rates. As far as the balances, I think I mentioned that we'll be paying out here shortly the fiscal 2005 bonuses. That will be something in the low to mid $30 million range so that will certainly reduce our balance. So the interest income in Q2 will reflect that. Don't expect a dramatic drop, but again, it's subject to other uses of cash that we may have.

Okay, that's all. Thank you very much.

(OPERATOR INSTRUCTIONS). Matt Litfin, William Blair.

I had a question about the mix of international revenue in the quarter. It was a little below what it's been the last couple of quarters since you made the London acquisition, etc. So I wondered, is that purely a function of the greater seasonality that you get around the holidays with your international segments or are there particular countries that either came in above or below your expectation that were of note?

Well, I think, as I said, it's a combination of things. One is seasonal, but that's not the whole story. The other factor was that the first half of the quarter was down a bit particularly in the chemicals and petroleum area. We had some significant projects that were mostly Middle East that ended and new projects that didn't start up until after the holidays. So during the quarter we actually saw a pretty steady increase from the London operations largely stemming from that. So there was a combination of some -- basically project timing issues plus the seasonal factor. But it was something that happened early and then got -- basically improved as the quarter went on.

That explains it. Thank you.

Jim [Wilson], JMP Securities.

I was just wondering -- not sure it sounded like you had or had available now, but I was looking at your comment along bill rate trends. I know you gave the total bill rate increase, the bill rate trends by business practice? Maybe it's just very similar to the total average.

We have had similar billing rates across all of our businesses and the trends I think have -- the 5% plus increase was pretty much across the board. Although it's done on an individual basis, but it was pretty similar across the board. And the underlying trend in billing rates has been 5% or better virtually every year now. There's some mix effects because when we've done acquisition some of them come in at lower billing rates, and so you might see the corporate average not quite at 5%, but that's because you have our legacy deal going out at 5% or more and then you're going against some more rate people for whom we then start increasing rates.

We generally do not have a bill rate by practice. But as you may recall, the overall bill rate for '04 was 310 an hour, in '05 315 an hour.

And I'd actually add that that was essentially entirely caused by the effects of acquisitions. Our underlying rates were going up more than 5%, but we made a significant acquisition in '04 (indiscernible) whose rates were lower than ours. And there were other smaller acquisitions. So this is all a weighted average effect.

That makes sense. And then either through the hiring process or through acquisitions, are there business practices or target segments that you either have already existing or would be looking to add that are sort of at the top of your expansion list?

I think our business plans for the coming year don't contemplate adding significant lines of business or geographies. We do plan to grow significantly in certain areas, for example finance and particularly in the forensic accounting and litigation area we're anticipating -- or we're at least planning significant growth. We don't have in our plan for '05 any new practices or new geographies.

Okay, great. All right, thanks a lot.

Colin Gillis, Canaccord Adams.

I just wanted to follow up on any update you can give us in terms of London offices and consolidation of efforts along those lines?

That's an active area, Colin. The person who has principal responsibilities under me for facilities is in London this week, has been looking at some facilities, so that's an active item that we expect to move forward on in the near-term.

When do the current leases expire?

Well, the current leases don't expire for a while that we have, so we have a fair amount of room in that sense of the word.

Okay. Thank you.

At this time we have reached the end of the Q&A session. I will now turn the conference back over to Mr. Burrows for any closing or additional remarks.

Thank you, everyone. We look forward to speaking with you on our second-quarter conference call. This concludes today's call.

That concludes today's conference call. Thank you. You may now disconnect.