Culp Inc (CULP) 2014 Q4 法說會逐字稿

Good day everyone and welcome to the Culp Incorporated fiscal 2014 fourth-quarter and year-end results conference call. Today's conference is being recorded. At this time I would like to open the conference -- turn the conference over to Drew Anderson. Please go ahead.

Thank you. Good morning and welcome to the Culp conference call to review the Company's results for the fourth quarter and year ended fiscal 2014. As we start, let me express that some statements made in this call will be forward-looking statements. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results, or otherwise are not statements of historical fact. Actual performance of the Company may differ from that projected in such statements. Investors should refer to statements filed by the Company with the Securities and Exchange Commission, including the Form 8-K filed yesterday, for a discussion of those factors that could affect Culp's operations and the forward-looking statements made in this call.

The information being provided today is of this date only and Culp expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations.

In addition, during this call the Company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included in the schedule to the Company's 8-K filed yesterday. This information is also available on the investor relations section of the Company's website at www.Culp.com.

A slide presentation with supporting financial information and additional quarterly and annual performance charts are also available on the Company's website as part of the webcast of today's call. I will now turn the call over to Frank Saxon, President and Chief Executive Officer. Please go ahead sir.

Good morning, everyone, and thanks for joining us today. I like to welcome you to the Culp quarterly conference call with analysts and investors. With me on the call today is Ken Bowling, our Chief Financial Officer.

I'll begin the call with some brief comments about Culp, and then Ken will review the financial results for the quarter and the year. I'll then update you on strategic actions in each of our businesses, and after that Ken will review our first-quarter business outlook. We will then be glad to take any of your questions.

Culp had another solid performance in fiscal 2014 with higher sales in both businesses and excellent returns on our capital. Notably, this is the fifth consecutive year of overall sales growth and a record year of annual sales for Mattress Fabrics. Further, while pretax income for the year was down slightly from the previous year, it is important to note that last year's level was the highest pretax income in 15 years.

Throughout the year we've continued to make excellent progress with our strategic focus on product, innovation and creativity. These efforts have been the key driver to our sales growth with an increasing percentage of our sales coming from our latest product introductions. Demand trends have been favorable and our ability to sustain excellence in creating innovative fabrics season after season is an important advantage for Culp in the product- and fashion-oriented business we are in.

Importantly, we achieved excellent free cash flow in fiscal 2014. As a result, we are pleased that our Board of Directors approved a special cash dividend of $0.40 per share, as well as approved our regular quarterly dividend of a nickel a share. This action reflects our commitment to delivering value to shareholders. At the same time, we have the financial strength to make the strategic investments necessary to enhance and expand our production capabilities and take advantage of additional growth opportunities in the coming year.

I'll now turn the call over to Ken, who will review the financial results for the quarter and the year.

Thanks Frank. As mentioned earlier on the call, we have posted slide presentations to our investor relations website to cover key quarterly and annual performance measures as well as our capital allocation strategy.

Total sales for this quarter were $74 million, up 5% from the fourth quarter of last year. For the year, sales were $287 million, up 7% over last year. On a pretax basis we reported $4.1 million compared with $5.9 million for the same period last year. For the year, pretax income was $19 million compared with $20.3 million last year.

Adjusted net income, a non-GAAP measure, was $3.4 million or $0.27 per share, compared with $5 million or $0.41 per share for the prior year period. Adjusted net income for fiscal 2014 was $15.7 million or $1.26 per share, compared with $17.4 million or $1.40 per share last fiscal year.

The Company's overall adjusted effective income tax rate through the fourth quarter was 17.6%, compared with 14.2% for the same period last year. This adjusted effective income tax rate, or ongoing estimated cash tax rate, represents income tax expense for Culp's non-US entities divided by consolidated income before taxes. This information is important because the Company currently does not pay cash taxes in the US, nor do we expect to for a number of years due to approximately $45.7 million in loss carryforwards as of the end of fiscal 2014.

Here are the results for our two businesses. For Mattress Fabrics, we reported $43.7 million of sales for the fourth quarter, up 7% as compared with the fourth quarter of last year. For the year, Mattress Fabrics sales were $160.7 million which represents a new sales record and a 4.3% increase over the prior year.

Operating income for this segment was $4.5 million for the fourth quarter compared with $5.4 million last year. Operating income margin was 10.3% of sales compared with 13.2% a year ago. For the year, operating income was $17.5 million compared with $19.9 million last year.

Return on capital for Mattress Fabrics business was 29% for this year compared with 36% a year ago.

Now onto Upholstery Fabrics. Sales for the fourth quarter were $30.4 million compared with $29.5 million in the fourth quarter of last year, representing a 3% increase. For the year, sales were $126.5 million, up 10% from the previous year.

The Upholstery Fabrics business reported operating income of $1.2 million or 4% of sales, compared with operating income of $1.8 million or 6.2% of sales for the fourth quarter of last year. For the year, operating income was $8 million, up 16% over last fiscal year. Return on capital for Upholstery Fabrics segment was 41% compared with 40% for the same period a year ago.

Now I'll turn to the balance sheet. We are very pleased to end fiscal 2014 with a strong financial position. We generated $13.8 million of free cash flow for the year, after investing $7.2 million primarily in working capital and capital expenditures. During the fiscal year we used the free cash flow to build our net cash position by approximately $9 million, to pay dividends of $2.2 million, and to make a small acquisition that totaled $2.6 million. At the end of the fourth quarter we reported $35.6 million in cash and cash equivalents and short-term investments, up from $30.4 million in the third quarter.

Total debt at the end of the fourth quarter was $5 million, which includes long-term debt plus current maturities of long-term debt and our line of credit. Notably our cash position, or cash minus total debt, was $30.6 million at the end of the fiscal year, representing the highest net cash position in the Company's history. We have two remaining annual $2.2 million debt payments due this coming August and August of next year.

Looking ahead to fiscal 2015, we expect a meaningful year for free cash flow, with capital expenditures projected to be higher than normal and modest growth in working capital. Further, based on the current capital budget, we expect capital expenditure spend to be approximately $10 million. And depreciation and amortization is expected to be approximately $6 million.

As Frank noted earlier, the Board has approved the payment of the special cash dividend of $0.40 per share. In addition the Board approved the payment of the Company's quarterly cash dividend of $0.05 per share. Both of these payments will be made next month on July 15 to shareholders of record as of July 1. Future dividend payments are subject to Board approval and may be adjusted at the Board's discretion as the business needs or market conditions change.

Additionally, following the end of the fourth quarter, we purchased 22,000 shares of Culp common stock for approximately $380,000, pursuant to the $5 million share repurchases program authorized by the Board this past February. The Company did not repurchase any shares during the fourth quarter. Frank?

Thank you Ken. I will now provide you an update on both of our businesses. Let's start with Mattress Fabrics.

Our Mattress Fabrics business had another solid sales performance in the fourth quarter of fiscal 2014, capping off another year of growth and record sales. These results reflect a growing consumer demand for better designed bedding products. Culp is well-positioned to meet this demand with a complete array of innovative fabrics and mattress covers across all leading categories.

With our extensive design capabilities and technical expertise, supported by a scalable manufacturing platform and reactive capacity, we have continued to expand our business with all the major players in the bedding industry.

As previously announced, our operating profit and margins were affected by several factors during the fourth quarter of this year. The severe winter weather conditions experienced in many parts of the country affected our Mattress Fabrics locations with at least a week of lost production. The interruption placed additional pressure on our operations to meet the ongoing sales demand.

During the quarter we had higher-than-expected demand for premium decorative knitted fabrics, which stressed our production throughput and operating efficiencies. In order to meet this growing demand and to improve our efficiency, we are increasing knitted fabric production at all of our facilities.

In addition, we are expanding our Stokesdale, North Carolina plant in order to increase and enhance our internal knit finishing capabilities and improve our production flow. This first phase of the capacity expansion is anticipated to be completed by the end of December of this year. The second phase will involve purchasing additional knit machines, and they are expected to be completed during the second half of fiscal 2015. These additional machines will give a significantly greater flexibility and reactive capacity to better service our customers.

Our projected $9.5 million in CapEx for this business in fiscal 2015 as compared -- compares with an average of $5 million over the previous four years. And this demonstrates our continued commitment to the future growth of our Mattress Fabrics business.

We've also made continued progress in fiscal 2014 with respect to the development of Culp-Lava, our mattress cover operation. The demand for new mattress covers has been better than expected and we are pleased by the market response for this category. While our margins in this business showed significant improvement compared with the fiscal third-quarter, we did experience some short-term production challenges due to the efficiencies caused by absorbing new product placements.

Overall, the fundamentals of our Mattress Fabrics business are strong, and Culp has a solid competitive position as we continue to outpace the overall industry growth. We are especially pleased with the favorable customer response to our exciting designs and new product introductions that meet today's style trends. We are excited about the opportunities ahead in the new year to grow our business and to enhance Culp's leadership position in the bedding industry.

Now I'll turn to Upholstery Fabrics. Overall we are very pleased with the improved sales and profitability for Upholstery Fabrics in the fiscal 2014. These results are product-driven with favorable customer response to outstanding designs and innovative fabrics. Our 100% owned China platform provides significant manufacturing flexibility to produce a wide variety of product categories, and we have continued to leverage this capability to meet changing customer demand in line with the latest furniture style trends.

Sales of China-produced fabrics accounted for 92% of our Upholstery Fabrics sales in fiscal 2014. This platform has also supported our ability to expand our global market presence and reach new customers.

We had a great showing at the recent April furniture market with very positive feedback from customers and strong placements. Our Upholstery Fabrics business has experienced continued growth throughout the previous year. However, as announced earlier, our operating results for the fourth quarter were affected by a couple of factors. We experienced very strong shipments in the third quarter with a 20% year-over-year sales increase, as customers anticipated the Chinese new year holiday shutdown. As a result we had a much lower than expected start to the fourth quarter.

Adverse winter weather conditions in the US also affected our operating results early in the quarter because of weaker customer demand.

With respect to Culp Europe, we did not achieve the level of sales we had expected for the fourth quarter of fiscal 2014. However, our sales trends and operating margins returned to normal levels, except for Culp Europe, later in the fourth quarter and have continued to show improvement. We believe Culp is well-positioned for continued growth in Upholstery Fabrics, especially as business conditions improve with a more stable housing market and higher consumer spending for home furnishings.

I would now like to review again with you our capital allocation strategy. We have been and continue to be in the very fortunate position of generating significant free cash flow above the requirements to grow our business organically and maintain a strong net cash position. We expect this positive free cash flow trend to continue for the foreseeable future. Therefore, let me again review with you how we prioritize our use of capital and what you can expect from us.

The first priority for us has always been investing in our existing businesses with working capital and CapEx to grow organically. It is important to note that we have minimal requirements for CapEx in the Upholstery Fabrics business because it is not fixed asset intensive. Therefore, the majority of our CapEx requirements are in our Mattress Fabrics business. We believe building our business internally with existing and new customers and new customer segments offers the highest return with the least risk.

Secondly, we initiated a regular quarterly dividend two years ago at an annualized rate of $0.12 per share. And we increased it in June of 2013 and increased it again in November 2013 to the current level of $0.20 per share annualized. With the free cash flow we are currently realizing and expect to continue generating, we have ample runway to increase the regular dividend in the future. Our goal is to grow the regular dividend annually on a moderate basis over the years ahead, based on our performance.

Third, we are open to strategic acquisitions in our Mattress Fabrics business. As you may remember, we have invested $20 million in two great acquisitions in this segment in 2007 and 2009, both of which added significant value to the business.

In addition, during this fiscal year we entered into a small $2.6 million asset purchase agreement. We will continue to be disciplined and patient with any acquisition that we consider. We remain open and we have the capital necessary if an acquisition did fit strategically and financially.

With regard to our Upholstery Fabrics business, we do not have any expectation of an acquisition at this time, given the potential for continued organic growth. We experienced a 10% year-over-year sales growth in this business in fiscal 2014 which followed a 5% growth the year before.

Fourth, we wanted to build our net cash position this year to $25 million, which we accomplished in the third quarter. This level represents just under 10% of annual sales. This seems to us as a prudent level to maintain at this time.

Importantly, this cash level helps Rob and I sleep very well at night, and always have the dry powder to be opportunistic. It also gives our customers confidence that Culp will be around for many years, and can and will invest as necessary to provide more value to our customers and support their growth.

Also, having a strong financial position contributes significantly to our thinking about and running our businesses for the long term.

Fifth, after the above-mentioned priorities and assuming an acquisition does not materialize, we expect to continue generating free cash flow that exceeds our net cash target level. Therefore our Board will consider returning funds above $25 million in net cash, as measured at our fiscal year-end, by way of a special dividend. Obviously considerations for such distribution would include the economic and business outlook as well as the possibility of funds being required for an acquisition. With respect to share repurchases, because we do not want to decrease our available float, we are only interested if the market is valuing Culp at what we would consider an opportunistic price.

Now let me link our capital allocation strategy to what we accomplished in fiscal 2014 and how we see fiscal 2015 at this point. First, with respect to working capital, we had modest growth of about $2 million for the year, which supported the growth of both businesses. Additionally we spent $5.3 million in CapEx, most of which related to Mattress Fabrics.

Second, as implemented this past November, we increased our regular dividend by 25% to its current level of $0.20 per share. Third, in early 2014 we entered into an asset purchase agreement related to Mattress Fabrics totaling $2.6 million, which gave us the ability to sell our fabrics to a leading bedding manufacturer. Fourth, we built our net cash position to $30.6 million at year-end, well above our $25 million target level. Fifth, as announced yesterday the board approved a $0.40 per share special dividend to be paid next month.

Finally, during May we repurchased 22,000 shares of Culp stock at an average price of $17.23, totaling $380,000. Now as we look ahead to the new year, let me give you our thoughts as to how we see things.

We expect another year of strong gross cash flow, which we define as net income plus depreciation and amortization and other non-cash items. However, with respect to free cash flow, which does include changes in working capital and CapEx, we expect the amount generated to be lower as compared to the previous two fiscal years, due to the significantly higher level of CapEx we have mentioned related our expansion initiatives in the Mattress Fabrics business.

Still, despite the higher than normal level of CapEx, which we expect to be approximately $10 million based on our current budget. Along with modest working capital growth, we expect fiscal 2015 to be another year of meaningful free cash flow generation. Therefore, as outlined in our capital allocation strategy, we are optimistic that the Company will again be in a position to return funds to shareholders via share repurchases and/or a special dividend.

Ken will now review the outlook for the first quarter and I'll have a few concluding remarks.

At this time we expect overall sales to be up 4% to 9% as compared with the first quarter of fiscal 2014, which was a very strong first quarter of sales for both divisions. The first quarter fiscal 2015 will have one more week than the first quarter of the prior year, or 14 weeks compared with 13 weeks.

We expect first-quarter sales in our Mattress Fabrics business to be up 8% to 13% as compared with the same period a year ago. Operating income in this segment is expected to approximate last year's level, while margins are expected to be slightly lower as compared with the same period a year ago.

In our Upholstery Fabrics business we expect first-quarter sales to be flat to slightly higher compared with the previous year's first-quarter results, which had exceptionally high sales. We believe the Upholstery Fabrics segment operating income and margins will be slightly down when compared with the same quarter of last year.

Considering these factors, we expect to report pretax income for the first quarter of fiscal 2015 in the range of $4.8 million to $5.7 million. Pretax income for last year's first quarter was $5.5 million.

I'll now turn back to Frank for some closing comments.

We are pleased with Culp's performance in fiscal 2014, and our ability to drive sales and enhance our leadership position in the marketplace. Our consistent growth reflects our ability to meet changing customer demands and style trends with our creative designs and innovative fabrics. We are building a strong economic moat in both businesses with our flexible and scalable global manufacturing platform, supported by design expertise, product innovation and outstanding customer service.

At the same time, we've maintained a solid financial position and generated strong free cash flow, allowing us to reward our shareholders with significant dividend payments and share repurchases. Above all, we are committed to outstanding performance for our customers as a financially stable and trusted source for innovative fabrics. We are excited about the opportunities before us as we look ahead to fiscal 2015 and beyond.

With that, we will now take your questions.

(Operator Instructions). Budd Bugatch, Raymond James.

Good morning. Good morning Frank, good morning Ken, thank you for taking my questions. Congratulations on the year. You used the phrase several times meaningful free cash flow or meaningful cash from operations. Care to hazard a number on that and put that for fiscal 2015?

No, I think we won't put a number on it, but I think we have given you all the elements of that, to where it's not too difficult to come up with. And so we have -- we start with growth cash flow, net income plus D&A was other non-cash, and then subtract from that working capital and CapEx.

The big item for next year, of course for us is CapEx. And the $10 million budget is -- compares with an average of $5 million the previous four years. So that will impact free cash flow.

But the good news is, even with that, we are still going to have some -- although lower than last year's almost $14 million, still a meaningful level of free cash flow.

The other thing to point out is we are now above our $25 million threshold. This past year we had to build and use some of our free cash flow to build that up to that comfortable level which we decided we want to have. So, no free cash flow has to go to building up that.

The question, I mean really was is trying to get -- to see whether you thought you were going to have an increase in free cash flow this year. I think that would be very challenging with a $5 million delta of CapEx.

Correct. And we've said as much in our comments. With the $10 million we're not going to have as good last year -- the last two years. We had $13.8 million the year just ended, $13.1 million in the year before that. That's -- and we're going to be a little below that with the heavy CapEx here.

And the US -- the domestic tax loss carryforward came down about $5 million, I think, this year from the end of last year and I suspect that was impacted by what happened in the fourth quarter as well. And that came out about $9 million the year before. So taxes are still an issue, a challenging issue to project, I'm sure.

So, any other thoughts on that and how long that NOL lasts? Is it really on the equivalent of 5 to 10 years?

That would be maybe 6 to 9. I think we would suggest investors to look at it as we look at it. And we look at it with that adjusted tax rate.

Which we update each quarter.

And right now it was 17.5% (multiple speakers) that is up from the 15.5% in the third quarter, or 15.6%. And Budd pointed out that was near the fourth quarter, so it does vary. Within the past year it's been 14% to 17%. It's been pretty tight.

And what is your plan (multiple speakers)

That's how we look at it internally.

Understood. And what's your plan for this year and what is the plan for the first quarter? Did you mention that?

As far as the adjusted tax rate?

Yes sir.

I would use the same. We would just use the same one because that's the best information we have at this point. So yes. I think if we were to give any color to that, I would probably say looking at the new year at that rate is -- it's going to be that or less; 17.5% or less for the new year.

Okay. And finally from me, you I think said that upholstery except Europe had started to turn around. Can you give us some color on both, or maybe upholstery the upholstery by geography, the US plant and your European initiative and how is China doing?

I think the highlight of the upholstery fabric business, to give a little background, back in 2008 when we went through the crisis, we had just finished a lot of the restructuring in that business. And our product, we had focused on the motion business primarily because we were trimming the SG&A, trimming plants etc., but what has happened since then, we've been very good in the motion area.

But over the last really last year we have started to focus on the better stationary category, in the US primarily; Pottery Barn for example. And we have made some very good progress, and are most excited about the gains in that -- when I talk about new customers or new customer segment, that is certainly what we are referring to. In Upholstery Fabrics we will continue growing in the motion furniture area because we are fairly dominant in that category, and I've always done a good job.

But the new area that's really helping our growth in the US is the better stationary area. Hickory -- selling customers in Hickory, North Carolina, which has not really been a strength of Culp over the last years as, Budd, you know for following us for so many years.

When I look at in most of those fabrics, not all, but most of them are coming from our China operation. And as we look at it now, we have passed our 10-year anniversary of being in China. It really amazes us really every quarter, we are stronger there. And the benefit us competitively to having that long-term stable operation in China, in the business model we've got, is going to carry us for a lot of years.

We -- at the same time, you ask about domestic. We do have one plant in Anderson, South Carolina, as you know, and we are trying our best to come up with some kind of creative products there. That plant has principally been motion for motion furniture.

And we have one this past season at April market that is really our first into that better stationary area. And we are excited about that, and I think if we can keep that going, which we are trying to do, that could be a game changer for that operation. But you have to keep in mind, it's only 8% of the total sales. It's not a lot of capacity. But we think it's important still to have it, to have a domestic presence.

Lastly on Europe, we have struggled. We have made no beans about that. Everybody knows we have struggled with Europe of late. And we -- I think I would say we are committed to long-term to Europe. We don't have a lot of capital there, we don't have -- $2 million to $3 million in sales, but we haven't made the progress with -- we wanted to make. So we continue to look at different ways to accomplish some growth in Europe that we can be happy with.

But I think I would leave you with we are committed to Europe. We just need to continue to find a way to have the right products, the right distribution methods to make some meaningful progress there.

Okay, thank you very much. Understood.

(Operator Instructions). James Fronda, Sidoti & Company.

Good morning. Most of my questions were answered. I was just curious on the demand and the revenue that you're seeing. Was a lot of it unit growth or is price helping you as well?

I would say probably when you look at the overall -- if you look at the Mattress Fabrics business, I mean we are, as we said, we're shifting toward the higher grade fabric, which it does increase the ASP. So you've got that, plus you do have some unit growth. So I think a little bit of both.

On the upholstery side, it's probably -- it's there. I think it's safe to say we are picking up market share with our fabrics, and so it's probably unit growth more than price. But again, we have got some very exciting fabrics that we are getting some higher prices on. So it's probably a mixed bag on both.

All right, thanks guys.

(Operator Instructions). Kevin Tracey, Oppenheimer Asset Management.

Thank you for taking my questions. Good morning. Your guidance for the first quarter suggests that your operating margins will be down a little bit in your mattress segment. Now, I understand the first quarter of 2014 was a strong quarter, but I'm just wondering if there's anything else there affecting margins.

I think as we've talked before, we are -- in the fourth quarter we had some production issues, some throughput issues that, as we address this demand, increasing the demand for knits and also on the class business, what we're doing in the first quarter is looking at that same type of reorganization. As we said in the release, we've got a lot of things planned for the next six months.

That's going to take some time to get under control and get in place. So we are looking at some continued pressure there for the first six months. And then once we get that in place in the second part of the year, we are looking for some improvement.

Okay.

Also, I would add to that is with the last couple of quarters we've had some -- a couple of issues there, so we would like to be on the conservative end of guidance here.

Okay, fair enough. And is it reasonable to expect, I guess after these improvements have been made, if you think we can see -- in the past we've seen 13% margins in your mattress business. Is that something that you think is achievable as long as raw material prices remain stable?

I think if you look at the long-term view, we would be happy -- given the concentration levels of the industry, what's going on as the bigger people are getting bigger as well, that 12% to 13% would be the range. And when we look at it, Kevin, it's a great question, too. When we look at the returns on capital we are getting in that business, and -- so 12% yields almost 30%; 12% OI margin yields almost 30% return on capital. So that's pretty darn good.

So, as we look at it, we want to drive more growth as long as we can have that level of margin. I'm not sure we -- we are always trying to push that margin from 12% to 13% or 13.5%, which you correctly point out we had in the past. We would not be unhappy with, on an annual basis, 12%-plus given a 30% ROC.

Okay. And just lastly I wanted to ask about your Culp-Lava business. It seems to be doing quite well. And I was wondering if you all would be willing to give us a sense on how big that business is today, and perhaps what your expectations for the growth there over, say, three years' time.

That's -- I think that business -- I think we said in as many words, while we are excited about it, it is a work in process. That business originates from the specialty mattress business, which has slowed some from the 20% to 30% growth rates it had for a number of years.

We've had some learning curves there, as we've also mentioned over the last couple of quarters. So I think our growth there is going to be a result of how specialty grows in the industry, and how successful we are in getting placements with most of the major bedding people.

And the business is from the major people. I mean that's where that business comes from. I think it's an important part of our business model because we start -- what's changed is when you sell a cover, we are actually designing covers now, not just fabric. We are designing the cover and presenting those type of looks to customers to choose from.

When we started, when the specialty started in the beginning, the customers did all their own design. But now we have various combinations of different Mattress Fabrics, Upholstery Fabrics, different styles, so we could give them different looks and we can -- in that business.

But as far as -- we haven't given -- you correctly pointed out we have not given any size of that business yet. But it still -- I think I would tell you now, it's still well under 10% of the Mattress Fabrics business. It's still relatively small, and we'll just see. We are doing all the things we think we need to be doing to compete for the placements that are out there, again with the major people.

Okay.

I hope that answers clearly what you're looking for.

No, it does. Thank you very much.

(Operator Instructions). It appears there are no further questions at this time.

Thank you operator, and again thank all of you for your participation and your interest in Culp. We look forward to update you on our progress next quarter. And have a great day.

That does conclude today's conference, thank you all for your participation.