Carlisle Companies Inc (CSL) 2009 Q4 法說會逐字稿

Good day, welcome to the Hawk conference call.

Today's conference call is being recorded.

At this time, I would like to turn the call over to your host, Mr.

Ronald Weinberg.

Please go ahead, sir.

All right, thank you and good morning, everyone.

The purpose of this call is to discuss our 2009 year and fourth quarter results.

Conducting the call today with me are Chris DiSantis, President and COO of Hawk.

Tom Gilbride, Vice President of Finance.

As you know, we released the earnings today for the fourth quarter and full-year ending December 31, '09.

During our call, we will review the financials and give you an operating report on the business and then as usual, open the call to questions.

I would like to remind you that statements made during this conference call, which are not historical facts, may be considered forward-looking statements.

Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied.

For further information concerning issues that could materially affect financial performance related to forward-looking statements, please refer to Hawk's quarterly earnings releases and periodic filings with the SEC.

As those of you who have seen the release and had a chance to review it, our revenues were $172 million.

They were down from $269 the year earlier.

I'm going to comment right now on the full-year.

Our operating income, which had been $39 million in 2008, was $16.7 million this year, leading to earnings per share of $0.73.

A couple of comments that I will make on the year as a whole and characterization, characterizing what we have been doing and then I will turn this over to Chris and Tom.

We continued to have a strong cash position at the end of the year, December 31 we had $83 million in cash.

That was derived from cash from operations of $19 million.

So, despite the fact that we have had a difficult year, probably and hopefully the most difficult any of us have seen in a long, long time, we continue to throw off cash from operation.

Some of that came from net income and depreciation and some of it came from what I think is effective management of our current assets.

We reduced inventory receivables.

Typically when this happens, of course, payables goes down because you pay some down but the net result of those two was a good match and so we actually pulled cash out of working capital, which is what you're supposed to be able to do and not be left with an overloaded of inventory at times like this.

We use the cash for some of the purposes that we talk about.

We had a stock repurchase during the year of approximately $12.6 million and retired a number of shares and then we retired some of the debt, approximately $10 million of bonds.

So we were effective users of the cash while at the same time we had the cushion that it gave us in a year like this.

I will take a minute and kind of characterize where I see the Company in terms of how we view our strategy and some very broad perspectives.

Hawk is a worldwide leader in the friction business.

We manufacture all over the world, we sell all over the world and as an independent we really operate in a predominant position with customers.

It is a very interesting experience in the fact that when we go to call on customers, we're recognized and very, very often we do get the business.

We are not steimied by no -- by a lack of opportunities.

We have an excellent deck of organic growth prospects.

When we look at them internally, something like 15 of them just all sort ranging from geography to new products, product opportunity, customer opportunities, after market, et cetera and I think it's fair to say that these have a very high probability of happening.

And we -- even during the past year, have continued to have new business awards.

All of these things going on somewhat subRosa are masked by the fact there's been a very.

very a slow economy.

And so I want to keep that in front of everybody's eyes as we go forward because it really does muffle very good things that are going within the Company.

A couple of the growth initiatives that we got, have what I would call breakout possibilities.

We have talked about those.

One is fuel cell, which we've begun to report and has a reporting line in our sales revenue and the other is our carbon initiative which we haven't tried to quantify but we think it's got very interesting long-term possibilities.

We've talked a lot in the past about acquisitions.

We did make and announced a very small one recurrently in China.

It essentially was the purchase of a supplier that we think this is very strategic for us to control it.

It makes steel, we call them cores they're an effect steel that is in back of a friction lining that's a support mechanism.

That's very -- that's a strategic -- competitive core process for us, and we want to make sure that we control it.

It's also part of a larger initiate in China where we're attempting to localize our presence there.

We transferred a senior member of the R&D staff who is heading up a new R&D initiative in China.

So that with an economy like that, that's one of the largest in the world and is going to continue to be one of the fastest growing in the world, we want to truly be an endemic presence in that country and not just a manufacturing shop to supply shipments back to here.

And we think it's going to pay big dividends in the time ahead.

As far as acquisitions go, we continue to search.

We're maintaining our discipline.

Because all It takes one correct appropriate acquisition and it will make this entire effort worth while.

We know what to do, we know how to buy them and we're not deterred in our search.

The guidance that Chris and Tom are going to cover in just a few minutes is based on a couple of assumptions.

One is a modest recovery as opposed to a rapid recovery in the worldwide economies.

Other than maybe China and India, the rest of the world seems to be coming out of it very slowly.

Is coming out but slowly and we based our guidance on that.

We have also included the thought of summary -- some reinstatement of cost that we had that were kind of takeaways from employees and they'll be reinstated slowly during the year.

So those are the things on which our guidance is based.

We hope we're able to consider it modest but we consider it accurate at this point.

And we will be monitoring it carefully as we go through the year.

That concludes my opening remarks.

I'm going to turn this over to Chris DiSantis who will cover the next phase of our presentation.

Thanks, Ron.

I'm going to go through our sales numbers and then provide some commentary on the markets.

As Ron stated, net sales finished at $172.4 million for the full-year, which is down $97.2 million or 36.1% for 2008.

The way this broke down was 36.2% of it was volume, foreign exchange was minus 0.9% and we had a modest pricing benefit of 1%.

So as you can see from the data there, the reduction that we saw was the result of dramatic volume decreases across most of the end markets as a result of the downturn in the global economy.

And we also saw some substantial inventory reduction by our customers as they aggressively began to manage their working capital.

There was no significant loss of business or market share to speak of in 2009.

Looking at the year-over-year market comparatives, mining and construction, our largest segment was the hardest hit, down 50.6%, with the smaller equipment used in the lower end of the construction sector being what is most affected.

In 2008, the slice was 47.2% of the total sales of the Company in 2009 and it represented only 36 .5% of the total.

Aircraft and defense combined were down less so from 2008 to 2009, 13.5%.

And although aircraft was down, this was offset by a slight increase in the military business.

So this segment as a percentage of total sales actually increased from 20.3% to 27.5% in 2009.

Agriculture was down 39.4% with particularly heavy weakness in the European market and heavy truck was down 32.5% on weakness in both the OE truck builds and freight mileage overall in the economy being down, which hurts both the after market and the OE service challenge as well.

Our direct after market business, which is sold under the Velvet Touch and HAWK Performance brand names was down 15.2%.

It's important to note that all of this decline was on the Velvet Touch side which services the industrial aftermarket.

Our HAWK Performance brand, which is disc brake pads for the fleet street and racing markets, actually did very well, increasing by 13.8%, as a result of two things, new product introductions as well as being able to dramatically reduce the lead times the customers experience.

General market intelligence tells us that in that segment in particular, the performance market, that most of our competitors actually shrank 10% to 20% in 2009.

And finally, I'll touch on alternative energy, the fuel cell business.

Albeit a small slice of the pie, it was up 14.5% versus 2008, with both higher unit volume and the addition late in the year of more value-added operations to the products we sell.

So we positioned ourselves at a point later in the year so that going forward for every unit sold, we're going to be getting some substantially higher revenue.

And we expect larger growth in this area in the future.

The sales from our foreign facilities represented 27.2% of the total sales in 2009 and that is the large decline compared to 41.6% in 2008.

The difference between domestic and international is that our domestic operations have been holding up better because overall, they have a lot better end-market diversity and there's substantial sales concentration in the international operations in China and Italy and the OE construction mining and agricultural segments.

Specifically, sales in the Italian facility in Euros were down 57.2%.

That plant was hit the hardest versus any of our other facilities and sales in China and R&D were down 52.5%.

Now despite these declines overall, we are glad to see that there were no major loss of customers, no lost programs, no lost share in any of our businesses.

Quite the contrary.

In 2009, we were successful in landing new business and increasing the number of products that we offer to the marketplace.

We are also quite pleased to be able to generate nice cash flow and remain profitable in 2009.

I think that show the resilience of the business model that we have.

We've already begun to bring back a number of hourly employees to deal with the increase in demand that we're seeing.

We're also being selective about making additional salaried adds in the organization, particularly, in the areas of engineering and sales.

This is the resource alot of the growth initiatives that we have.

One of which is the start up in India.

Although we've been doing business in India, we have had customers there for many, many years, we just recently hired our first full-time sales person who will be in country there and we've also engaged a consulting firm to assist us in the construction of a facility in India, which we expect to complete in 2011.

Heading into 2010, all the signs point to at least a modest improvement in the market dynamics for our Company.

The order boards with our customers are increasing in almost all segments, less so in terms of what we're seeing in aircraft and military.

And higher commodity prices, which we're seeing right now, usually means good things for our end customers, particularly people like Caterpillar.

And I'll now turn it over to our VP of Finance, Tom Gilbride whose going to talk more about the financial results.

Thanks, Chris.

As Chris indicated, 2009 was really a story of volume and in our case, it was significantly reduced volumes to most of our major markets.

As Chris indicated, sales we down 36% to $172.4 million and he gave you the indication of what was going on in each of the markets and the components of that reduction.

Looking at, going down the income statement at cost of sales, cost of sales were $124.9 million for the year ended December 31, 2009 compared to $192.6 million in 2008.

Looking at as a percent of sales, our cost-of-sales was $72.4 million and in '09, compared to $71.4 million in '08.

This increase was really, again, driven by the lower production volumes in our facilities.

There were some partial offsets by the labor and benefits reduction programs that we undertook in 2009.

We also had a slight benefit from our product mix in '09 and we'll talk a little bit more about product mix as we look at 2010.

As a result, in spite of the 36% decrease in sales, our gross profit margin only declined slightly in 2009 to 27.6% of sales from 28.6% in 2008.

Looking at selling tactical administrative expenses, those decreased 19% in 2009 to $7.1 million.

-- I'm sorry, to $30.2 million from $37.3 million in 2008.

As we reacted to the downturn, we decreased the amount that we were going to pay under our incentive compensation plans.

And for those who have been on the calls before, you know that the incentive comp plans within the organization are very far-reaching, include all employees and so as results were impacted by the volume declines, that program was also impacted.

The decrease in incentive compensation represented approximately 54% of our total reduction in SG&A.

We also initiated a head count reduction program in the first quarter of 2009 with regard to salaried employees.

This program represented approximately 38% of the total reduction in SG&A expenses during the period.

Looking at interest expense, interest expense decreased slightly as a result of our purchase, our repurchase of $10 million of our senior notes, which Ron mentioned, and that took place in 2009.

Looking on a forward-basis, interest expense on these notes will drop to $6.7 million or expected to drop $6.7 million in 2010 as a result of the purchase and the fact that the notes are fixed rate at 8.75%.

Our effective tax rate in 2009 was 40.9% compared to 35% in 2008.

This increase was driven primarily by effective rate issues at our Italian facility.

And again, as we look at their tax issues, it's primarily driven by non-deductability of certain items with regard to what we would call local and state tax returns.

So even though their national rate is lower than the US effective tax rate, when you look at what makes up their effective tax rate, there's a number of non-deductible items included in that.

Additionally, we did provide about $500,000 million in our provision to deal with expected tax audit issues matters in our Italian operation.

Flipping over to the balance sheet, total assets declined by $35.5 million in 2009 compared to 2008.

A number of items that drove this were mentioned by Ron.

Clearly, there was an impact on the working capital assets.

We reported an $11 million decrease in accounts receivable.

The decline was primarily the result of lower sales volumes in 2009.

Our day sales in accounts receivables increased slightly to 58 days compared to 52 days in 2008.

However, we want to emphasize the quality of our receivables does remains strong.

We did have a $13.9 million decrease in inventory.

As Chris indicated, this decrease was again in response to the reduced sales volumes of our customers.

It's also a reaction on our part to make sure that our inventory levels were not -- we weren't including inventory that wasn't going to be needed for current production.

So those two items saw approximately a $25 million decrease.

Our cash in investments went down by $10.2 million in 2009 and during 2009, we used our cash to repurchase 12.6 million of our common stock.

We also used it for the $10 million repurchase of the senior note.

And earlier in the year, we made a $3.9 million contribution into our pension plans to bring those plans up to what we consider satisfactory funding levels.

Even with this decline in the current assets, our current ratio increased to 4.6 to 1 from 3.4 to 1 in 2008.

As we also adjusted our liabilities to reflect the lower demands on the business as well as the reduced incentive program that was effective for 2009.

Other liabilities on the balance sheet decreased by $6.8 million.

The biggest change in that decline is related to the funded status of our pension plans.

As a result of the contribution that we made in early 2009 and investment earnings within the plans and we saw a significant decline in the liability related to the pension plans.

Flipping over to guidance, we're expecting 2010 to bring a general recovery to most of our markets.

As both Chris and Ron indicated, that recovery will be relatively modest and not very quick.

So as a result, we expect our revenues to come in at between $190 million to $200 million or an increase of 10% to 16% compared to 2009 levels.

We are projecting our 2010 operating income to come in at between $18 million and $19 million, an increase of 8% to 14% over 2009 income from operations of $16.7 million.

As a percent of sales, our 2010 income from operations should come in between 9% and 10% and of projected sales, compared to an actual 9.7% of sales in 2009.

The -- this is a result of our expectation of reinstituting wage and benefit programs that were reduced or frozen in 2009, selective hiring in 2009 as production volumes come back online.

We also expect to experience products mix changes specifically in our aircraft and military markets in 2010 that will impact our income from operations.

Depreciation expense, we reported $7.5 million in 2009.

We expect depreciation expense to increase to approximately $8 million in 2010.

Our capital expenditure program will come in between $8 million and $10 million in 2010 and that compares to $7.5 million which was actually spent in 2009.

As you will recall our original expectation for 2009 was also between $8 million and $10 million; however, that was reduced as we reacted to the downturn in the economy during the year.

We expect our worldwide effective tax rate will remain at approximately 40% in 2010.

And again, as a result of our expected mix of earnings throughout the operations.

As you are aware, we had a $15 million stock repurchase plan.

Under that plan, we repurchased $1.1 million worth of shares of our common stock during that program and that began in late 2008 and ended in early January 2010.

If you look at our balance sheet, our actual shares outstanding declined by 857,000 shares as of December 31, 2009 compared to December 31, 2008 as a result of that program.

The Board of Directors also approved a new $25 million stock buyback program.

These programs are subject to covenants within our various debt instruments.

Under the indenture, we can currently purchase a little over $20 million of shares and under the bank facility, we can purchase the full $25 million.

The indenture covenant changes as we report current income.

So we do expect under that $25 million program that the indenture will eventually allow for the full purchase of $25 million of shares.

To-date, no shares have been purchased under that program.

And with that, I'm going to turn it back over to Ron.

Okay.

Thanks, Tom.

And at this point, we're glad to take questions from any of you.

Thank you.

(Operator Instructions) And we will take our first question from Ivan Marcus with Keybanc Capital Markets.

Hey, guys, how are you doing?

Good, how are you in.

Good morning.

Ron, for the expenses you said they're coming back in 2010.

Can you quantify how much that is or would you expect like the comp expense, you said, 54% of the savings from SG&A in 2009.

So would yo expect that 54% to come back, you know, and how should I think about it or is it going to flow through?

Is it flowing through cogs or is it flowing through more through SG&A?

Most of it is costs-of-goods sold.

Because where we have done -- where we have made additions is where we've needed to reinstate, you know, shop floor operators, we have done that and some of the cuts and things like 401k's and that sort of thing, we made some partial restorations of.

Don't know that we have an exact quantification of it, but, you know, there's some modest reinstatements there as we come back.

Like everybody else, we're trying to be very stringent and keep as much of a lower level of operating costs as we can just to sort of take advantage of a rebound as it occurs.

And the variable portion of the, I see for salaried people will be going through SG&A and there would be an increase from 2009, you know, assuming we achieved the guidance or above but it would not be at the level of 2008.

So.

So half of that 50% coming back?

I don't want to say specifically what it would be.

Because there's a lot of variables and objectives going into achieving that that aren't just financial.

Okay.

And you described in your -- well, obviously, sequential bump up from third quarter to fourth quarter so are you continuing to see that from fourth quarter to first quarter?

Under revenues is business improving on a month-over-month basis or is it pretty much leveled out?

I can't say what happened on a quarter-to-quarter.

We're not guide on a quarter-to-quarter basis.

But I can tell you that overall we are seeing some modest, sequential improvement and we expect that to continue.

Okay.

And through your guidance, you said you were looking for a modest recovery in 2010.

So that modesty, are you looking for, you know, throughout the year, small improvements or is that, you know, you're at the level you're at in the first quarter and then maybe flattened out.

Like, how are you seeing demand in your customers' orders come through?

I think the comment I made was more global rather than try to disaggregate quarters and the reason I said it that way, we think our guidance is modest.

Not in the sense that we consider it, you know, a sandbag but so many people right now are looking at 2010 as, you know, just as you're trying to correctly analyze.

Costs are down and revenues are going increasing, you know, there's no question about that.

So should it be pulled through profits?

So, we're trying to be cautious in the sense that there will be some cost restoration and the sense of if revenues went down 30%, 40% in many cases, why aren't they bouncing back 30% or 40% or 50%, you know, and so we're just trying to temper this because we believe that the recovery's going happen.

There is no question it's going to happen but we think that it will be called slow and steady.

Right, and looking back at more of the historicals, the company, specifically the friction productions since that's what you're in right now, coming out of recession and I understand you're being, the reasons to be conservative in 2010 but in the past recessions, how have order patterns or how have revenues reacted with in friction product industry or Hawk specific?

Well, I mean I think what has happened is it has been steady, you know, in other words I don't have the numbers in front of me.

But when you look back after the '01 period, it was like a two or three year nice run.

It was not suddenly the earnings doubled in a given year.

And then, ad so what you're asking is maybe prompting us to be somewhat cautious with it here.

The other thing we have that tempers it, the good news is that we're in a lot of markets and we will enjoy the good ones.

And if there's one that lags a little bit it will slow us down and so, you know, we see that.

So we cover the world's geography.

Asia is going ramp up faster than Europe.

They stimulated very hard.

There economies were in motion so we'll probably see more over there than we might in Europe.

It's lagging a little bit behind the United States in terms of what we think we're seeing.

So, it's a mixed bag of course and, you know, you all have done a lot of work, you know, forward indicators for various sectors and I'm sure you see different paces and those kind of things right now.

Last question, Tom.

You mentioned the product mix was changing in 2009 or 2007 versus 2009 and the aerospace specifically so that is that a negative impact or more of a positive impact and how should I look at that?

The areas that Tom cited, the point he was making was that some of the areas that are very attractive for us are not bouncing as hard or fast as we might wish.

One is military and you can kind of intuitively understand that and aerospace hasn't bounced or rebounded as hard and fast.

So those will be margin One is military and you can kind of intuitively understand that and aerospace hasn't bounced or rebounded as hard and fast.

So those will be margin One is military and you can kind of intuitively understand that and aerospace hasn't bounced or rebounded as hard and fast.

So those will be margin One is military and you can kind of intuitively understand that and aerospace hasn't bounced or rebounded as hard and fast.

So those will be margin impactors for us.

for us.

for us.

for us.

Okay.

Thanks for taking my questions.

Uh-huh.

Thanks.

We will go next to Zahid Saddique with Gabelli and Company

Good morning.

Good morning,Zahid, how are you?

Good, how are you?

A couple of questions.

The first one is on your numbers, the Q4 results compared to the third quarter results of '09.

So on a sequential basis, it appears that your revenue was up roughly 5%.

My question is why did the cost of goods sold in that period sequential on a sequential basis and why did SG&A vent up as well and although you have higher revenues, your EPS number is lower, right, compared to Q3.

What is behind the scenes for cogs and SG&A?

I believe that there was an adjustment or true-up in the incentive compensation for the organization in the fourth quarter that would have driven the SG&A up relative to quarter .

And what about costs of goods sold?

A mixed issue with respect to what was happening in the fourth quarter versus the third.

And anything specific?

When you said the mixed issue.

I think as we're looking at 2010 mix issues, we started to see some of that in '09 and the other thing, there were some legal expenses that would be in SG&A that we incurred in the fourth quarter of 2009 that we didn't see in the third quarter.

So sequentially, you know, there were a couple of rounds of expenses in there.

Another big factor is significant corporate development expenses that happened in the fourth quarter.

Yeah.

And should we expect most of these not to occur in Q1?

Well, let's take that back.

A corporate development, we never know that happens when we work on good things and we don't have a way to forecast that.

Yeah.

Hopefully to the extent we make big investments in the future.

We have a deal to show for it and that is the objective, of course.

You may be aware that if there was a time when expenses of corporate development could be capitalized with the deal, you can't do that anymore.

Okay and should we expect the mixed issues to continue in 2010?

Well as we commented, it will be -- it will tend to keep gross margins where might have been if these profitable sectors were stronger.

Okay.

And my next question is with regards to the end-markets.

You commented -- for the full-year basis.

What other trends were -- what were the trends for the quarter or last year's quarter.

You were asking what were the trends for quarter?

The last quarter over the third quarter?

No, Q4 '09 over Q4 '08.

Various end-markets.

We saw declines in areao space and defense and -- arrow space and -- aerospace and defense and we saw the most substantial decline in the mining and construction business.

Do you have the numbers?

The actual number, the percentage decline?

We don't break that out in the case.

So we really can't go into percentages.

We can just give you a qualitative effect of where we see strength and weakness.

Okay.

I can tell you they're relatively similar to the decline we saw from '09, the full year to '08.

Okay and if I understood you correctly in the first few months, seems most end-markets are improving somewhat with the exception of aerospace and defense.

Is that a fair assessment?

Yes.

Okay, the last question what, is the incremental EBITDA for you in Hawk?

What is the what?

The incremental EBITDA.

If revenue comes back up, what kind of incremental margins should we expect?

You're asking what is the full proof?

Right.

And let me answer it this way.

I will give you a theoretical member and you can modify it as you wish.

In good quarters, the sort of the base case that we analyze ourselves, from ourselves is 30%.

Now, you will ask well why aren't we showing that in our guidance and so forth and that is some of the reasons for some the mitigating factors we talked about.

Okay.

Thank you so much.

I want to make one thing clear with regard to the product mix and talked about the markets.

I wanted to make it clear that we have not lost any customers within either of those markets and in aerospace or defense.

It's a demand oh their end and to make yet clear, we're not talking about product mix because of anything other than just customer demand issues.

Quantities.

Yeah.

Okay, thank you.

(Operator Instructions) and we will go next to Eli Lustgarten with Longbow Securities.

Hi, there this is Derek standing in for Eli.

Can I just get a little clarification on the tax rate for the fourth quarter.

Was that where the Italian non-deductibility charge was completely taken?

The tax audit, the Italian tax audit charge of a half million dollars which we referenced in the K, that was taken in the fourth quarter.

But with regard to the non-deductibility, that is something we know about and that is tax law, similar to schedule M items in the US.

So as we're developing the effective tax rate during the year, those items that are non-deductible for tax purposes on the state local level in Italy, those are already built-in throughout the year.

There was an item that was taken specifically in the fourth quarter.

I want -- have you not seen enough pickup in mining at all, you know, you have a conservative outlook for 2010 and operating income.

The mining markets have actually turned quite a bit.

Have you not seen anything pull through yet on mining?

We're seeing strength there and you're correct.

You're correct on both counts.

We do think that 2010 will be conservative and mining is showing, is a bright spot.

There was upside, the lack of visibility everyone has today, turned into -- for the year, opposed to where we are today.

So, I mean, there is upside, the lack of visibility everyone has today, turned into -- for the year, opposed to where we are today.

Say that again.

There is some upside to your guidance at this point.

Because I know you had an adverse mix and there is no military defense.

There is an upside if things can be balanced.

We looked at Avatar talking about a little bit better defense business the second half of the year than probably we expected.

We can't guide to it because we frankly don't know.

But the Defense Department does have a way of surprising you alot.

of times.

We would hope it turns out.

And you know what is going inventorywise, across the channels for you guys, particularly OEM's.

Are they pretty well stocked at this point that we're looking at, you know, a pull-through and if day business moves up and they have to buy some more stuff from you.

I don't expect in one segment, perhaps on the military side of business.

I don't expect anymore inventory reduction on behalf of the customers.

I think they have taken it down as far as they can and they being very cautious with respect to restocking the inventories but we don't expect any major one-time hits going forward just because of the difficulty in predicting how the government's going to order parts it's very tricky.

One piece of information we can share with you, it comes from some of our customers which, is they are making their suppliers very well-aware of the multiplier effect even if the business goes up by x, by the time they restock inventory levels to match x, it will be x plus something for suppliers and they encouraging suppliers to be ready and I would consider that a bullish sign and we, of course, look forward to seeing that.

Are you guys seeing anything I know Caterpillar is basically is kind of, you know, guaranteed purchases for 90 days.

Are you seeing that from other customers where, you know, even if say demand moderates more than expected you kind of have a steady stream of purchases coming in?

I could say this, I mean the order board sequentially and on a comparable basis, if you look at the prior first quarter of 2009, to sort of what we expect in 2010.

All the indicators are going in the right direction But in terms of offering, you know, kind of more solid guarantee on what your demands will be over a period of time.

I would say CAAD would be unusual in that respect.

Most customers like to pass their variation down through the supply chain.

Thank you guys.

Thank you.

(Operator Instructions) And we have no further questions at this time.

Okay, well, thank you, everyone.

As you know, we always welcome questions and participation and we look forward to talking to you in the future.

Thank you.

Thanks.

That concludes today's conference.

Thank you for your participation.