Fuel Tech Inc (FTEK) 2008 Q1 法說會逐字稿

Good day ladies and gentlemen. Welcome to the Fuel Tech first quarter earnings conference call. My name is [Ivona] and I'll be your coordinator today. At this time all participants are in a listen-only mode. We'll be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I'll now like turn the presentation over to your host for today's call, Ms.Tracy Krumme, Fuel Tech Vice President of Investor Relations and Corporate Communications. You may proceed, ma'am.

Thank you very much. Good morning everyone and welcome to Fuel Tech's first quarter conference call. By now all of you should have received a copy of today's release. If you have not, please call 203-425-9830 and we'll be happy to send you one. Joining me on the call this morning is John Norris, President and Chief Executive Officer, Vince Arnone, Senior Vice President, Chief Financial Officer, and Treasurer and John Graham, Senior Vice President and will assume the positions of Chief Financial Officer and Treasurer, effective June 1st.

As a reminder, the matters discussed in this conference call, except for historical information are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in our forward-looking statements. The factors that could cause results to differ materially are included in our filings with the SEC. The information contained in this call is accurate only as of the date discussed and investors should not assume that statements made in this call remain operative at a later date. Fuel Tech undertakes no obligation to update information discussed in this call.

And as a reminder, this conference call is being broadcast over the internet and can be accessed at our website www.ftek.com. With that said, I would now like to turn the call over to John Norris. John, please go ahead.

Thanks, Tracy and good morning everyone. We appreciate you joining us on this call. We're pleased to report a record breaking first quarter for Fuel Tech.

For the quarter revenues were $20.5 million, up 26% from the first quarter of '07 and making it the best first quarter in our history and the second highest quarter ever. Net income for the quarter was $1.6 million or $0.07 a share, double the $800,000 or $0.03 a share last year. Our CFO, Vince Arnone, will discuss our financial results in much greater detail in a few minutes, including the discussion on the impacts of various tax and other charges such as 123R stock compensation expense. Vince will also cover our balance sheet in detail, but it remains exceptionally strong with very little debt and with cash, cash equivalents, and short-term investments of $34.6 million.

Our business model continues to generate growth in revenue, profit and cash and we expect that to accelerate into the future. Now I'd like to tell you about the company business behind these financial numbers. As most of you know, Fuel Tech is a fully integrated company that uses a suite of technologies to provide water optimization and efficiency improvements and air pollution, reduction, and control solutions to utility and industrial customers worldwide. For reporting purposes, we broadly group those technologies into two product lines, a specialty chemical business we call FUEL CHEM and our air pollution controller APC capital projects product line.

For the first quarter of the year we have both product lines generating growth in revenue and profits. Our APC business sector saw revenues of $11.7 million for the quarter, up 36% from the $8.6 million in 2007. Gross margins for the quarter were 47%, up from 42% in 2007 and reflecting a bit less of the turn key work. This business sector started the year with a strong backlog of $28 million. During the quarter, we signed $6.7 million in new contracts including in ULTRA system in China and we ended the quarter with $25 million in backlog. Of note, this is the largest backlog at the end of a first quarter in our company's history.

Since the end of the quarter we've added $5 million more so far in signed contracts in this business sector. We do not see the delays in contract negotiations that we saw last year. And we expect this to be a strong year for sales in this business sector. For our APC technology, our NOxOUT-SNCR selective non-catalytic reduction and our NOxOUT ULTRA technologies, continue to enjoy market success, especially in the U.S and Canada. We expect that success to continue and accelerate in both markets. This is especially true for the NOxOUT ULTRA technology in the U.S. where the use of anhydrous ammonia is becoming problematic due to recent Homeland Security rules.

For our newest NOxOUT CASCADE technology, we are very happy to have had our recent commercial order in the Caribbean. While this was a small unit and system, it adds to our credibility for this exciting new option to achieve high reductions in NOx at very modest prices. Our FUEL CHEM product line, finished the quarter with revenues of $8.8 million, up 15% over the first quarter of 2007. Well that number alone certainly doesn't tell the full story here.

In the first quarter of 2007, our FUEL CHEM revenues were $7.7 million, of which, $5.1 million were from coal units and $2.6 million were from other fuels. In the first quarter of this year, 2008, our FUEL CHEM revenues were $8.8 million in total, of which $7.3 million were from coal units and that's up 45% from 2007. While revenues from non-coal units fell $1.1 million to $1.5 million in total. The large reduction in FUEL CHEM revenues from non-coal fired units this year-over-year, was due to the high price of oil, keeping the oil fire units in the U.S. from being dispatched at non-peek times.

The $2.2 million increase in FUEL CHEM revenues from coal units year-over-year, comes from the addition of units signed during 2007 that were started up on FUEL CHEM late in the year or midway through the first quarter of this year. This is exactly the market we're targeting and we're very encouraged by these results. Thus far this year, we've added eight new customer units, six of which are coal units, units, so we're off to a great start and we hope to continue that market momentum, domestically and in China, India, Mexico.

Our margin for this sector was 49% in the first quarter of 2008 and that's the same level from the prior year. Had it not been for the impact of risk share program in the first quarter of 2008, margins would have been greater than 50% where we expect this business sector to settle in the long-term. Looking at our international markets for this business sector, we are pleased to have announced during the first quarter our first new Fuel Chem demonstrations on large new coal units in India and China. These units are expected to start up in the second and third quarters, respectively, of this year.

We hope and expect to have new contracts in India and China, as well as Mexico this year, as the price of coal on the international markets have soared, due to the record setting cold temperatures in China especially. When coal prices are very high, utilities are very interested in technologies that can increase their unit efficiencies and thus reduce the amount of coal burned to produce a megawatt hour of power. This is one of the major benefits of our FUEL CHEM technology.

Our overall financial results are right in line with our business plan for 2008. And we are pleased to be off to a good start for the year. Now I'd like to turn the call over to our Chief Financial Officer, Vince Arnone to further discuss the details of our financial results.

Thank you, John and good morning everyone. As John mentioned, net sales for the first quarter were $20.5 million, up from $16.3 million in 2007.

Net income for the quarter totaled $1.6 million or $0.07 per diluted share compared with $.8 million or $0.03 per diluted share in 2007. The revenue and net income levels are records for our first quarter in Fuel Tech's history. The first quarter included $1.1 million in stock-based compensation expense, versus $.9 million in the first quarter of 2007. The first quarter included $1. million in income tax expense versus $.4 million in the first quarter 2007, representing the increase in taxable income.

Revenues for the NOx reduction technology segment were $11.7 million for the quarter, versus $8.6 million in the prior year, an increase of 36% due to the ongoing recognition of revenue on the $50 million in NOx reduction contracts that were awarded in the second half of 2007. This segment continues to be positioned well to capitalize on the next phase of increasingly stringent U.S. air quality standards. Utilities and industrial facilities across the country are planning for compliance with the Clean Air Intrastate Rule and Clean Air Visibility Rule, which take effect in 2009 and 2013, respectively.

Literally thousands of utility and industrial boilers will be impacted by these regulations and Fuel Tech's technologies will enable utility and industrial boiler owners to attain compliance. Our backlog is approximately $25 million at the end of the first quarter, which is the largest backlog at the end of a first quarter in Fuel Tech's history. Thus far, year-to-date, Fuel Tech has announced contracts with the value of $11.7 million. Revenues for the Fuel Treatment Chemical Technology segment were $8.8 million for the first quarter versus $7.7 million in 2007.

This segments growth is indicative of the continued market acceptance of Fuel Tech's patented TIFI, targeted in-furnace injection technology, particularly on coal fired units which represent the largest market opportunity for the technology, both domestically and abroad. As John noted, revenues from coal fired units were up 45% over the first quarter of 2007 and thus far in 2008, Fuel Tech has added eight new customer units to its installed base. Six coal fired and two fuel fired. The outlook for the FUEL CHEM product line continues to be favorable, both domestically and abroad. The addition of eight new units to the customer base, here in 2008, equalled or exceeded business activity with the exception of 2007 when 13 units were added.

Internationally, with the announcements of our demonstrations in India and China, which are schedule for start-up in the second and third quarters of 2008 respectively, we are pleased to be given the opportunity to showcase the benefits of our technology to these very large developing markets. On a global basis, the increased focus on the need to improve efficiency and reduce pollution, while meeting growing electrical demand, bodes well for incremental growth in the future. These factors, combined with the increased long-term utilization of coal as the world's primary fuel source for power generation, leads us to have high expectations for the FUEL CHEM program which offers numerous operational, financial and environmental benefits to owners of combustion units around the world.

The gross margin percentage for the first quarter of 2008 was 48%, an improvement over the 45% that was realized in 2007. The gross margin percentage for the NOx reduction business, increased to 47% from 42% in 2007, due to a mix of project business that had a lesser focus on turn key work. For the fuel treatment chemical business, the gross margin was stable at 49% in the first quarters of 2008 and 2007. The gross margin in the first quarter of 2008 would have exceeded 50%, had it not been for approximately $300,000 in revenues related to our risk share demonstration that will come to its completion in the second quarter of this year.

SG&A expenses for the first quarters of 2008 and 2007, were $7 million and $5.9 million, respectively. Of the $1.1 million increase, $200,000 is due to stock-based compensation expense, as discussed previously, and the remainder is due principally to employee-related costs resulting from the expansion of the business both domestically and internationally. R&D expenses were at the same level for the first quarters of 2008 and 2007. Fuel Tech continues in its pursuit of commercial applications, for its technologies outside of its traditional markets and in the development and acquisition of new technologies that could represent incremental market opportunities.

The first quarter announcements of our relationship with Chem-Mod and our agreement to licensed technology from FGC, Inc., are evidence of heightened activity in this area. The declining interest income in 2008 versus the prior year, is driven specifically by lower short-term interest rates at the end of prior year. As noted previously, net income for the first quarter reflected $1 million in income tax expense. As John noted, the balance sheet remains strong.

At March 31st, 2008, Fuel Tech had cash and cash equivalents and short-term investments of $34.6 million and working capital of $35.4 million versus $32.5 million and $45.1 million at the end of 2007. Operating activities provided $4.4 million of cash during the quarter, driven by the solid operating results.

Investing activities used cash of $.8 million during the quarter, as the decrease in short-term investments provided cash of $2 million, while offsetting this amount was $2.8 million in capital expenditures required to support and enhance the operations of the business. Of this amount, $1.9 million was spent for the developments of Fuel Tech's new development headquarters with the remainder principally related to the fuel treatment chemical technology segment. Fuel Tech provided $.4 million in cash from financing activities, principally due to stock option exercising activity.

Fuel Tech's market interest and sales activity continues at an unprecedented pace. As we look at 2008, it is too early to change the guidance we provided only two months ago. We expect revenues to range from $88 to $93 million. The NOx reduction technology segment is expected to generate $50 to $53 million, while the FUEL CHEM technology segment is expected to generate $38 to $40 million.

Our net income is expected to fall between $0.33 and $0.39 per diluted share. And the impact of stock compensation expense, under statement 123R, on Fuel Tech's earnings per share range is expected to be$0.16 per diluted share on a full year basis. With that I'd like to turn the call back to John.

Thanks, Vince. In summary, we're off to a good start in 2008 and look forward to a very strong year. With that said, operator can you please open the line up for questions.

(Operator Instructions). Our first question comes from John Quealy with Conaccord Adams. You may proceed.

Hi, good morning folks.

Good morning, John.

Couple questions, first on FUEL CHEM. Of all the units that were press released and announced in '07 on the coal side, are they all installed and producing in Q1? Can you give us an update there?

Yes, by the end of Q1. We had two large coal units that didn't come on until right at the first of February and the other one in middle February. So those two really only had about half a quarter of contribution so you really don't yet see, in this quarter, a full run rate from all of those coal units added, but they're all up and running.

And John, with the guidance, the 38 to 40,many of us are looking for this business line to get into that sort of $9.5 to $10 million revenue run rate per quarter. The guidance you gave sort of reaffirms that. Can you talk a little bit about the seasonality, are we going to see spikes in the summertime and maybe a gradual advance to that? Can you give us a little bit of thoughts on how the rest of that's going to work for FUEL CHEM?

Well there's always going to be a little bit of seasonality in these. The summer is always the strongest running season when utilities really want to have everything up and running and when they'll be pushing our FUEL CHEM a little harder during that time frame. The, the revenues from new clients that we're adding right now, probably won't affect us until third or fourth quarter coming on. So I think for like the second quarter you'll see the full extent of the contribution from the units we added last year and then probably in the third and fourth quarter, you're going to start seeing additions from this year.

We don't see the, the big delays in installations that we saw last year, outside of the, we had a month delay in India and a two-month delay in China. In China was government dictated by the very strong cold weather. We really don't have in our expectations, because there's going to be a demo period in both of those countries. Really don't have any significant contribution from our expectations for those who international ones, we just want them to get out and be a success and have others in demo at the same time in those two countries and I hope and expect we will have. But I think from the U.S. we can start seeing contributions and maybe also true from Mexico from additions.

And when you're looking at those additions, so six new coal units, two non-coal, last year was it 13 in total? You talked in previous calls, do you think you can match that number in total FUEL CHEM units? At least on the coal side? Can you match that number, John?

I would be sorely disappointed if we don't exceed that. If we are going to be a growth company, we really need to have a growth pattern. I'm really encouraged by the pace of wins so far this year and the visibility we have in contract negotiations, but you never know on this stuff, until it's a done-deal. It's not a done-deal, but yes, I would expect it to be that strong or stronger. I'd be disappointed if it's not.

And just a couple other questions, just one more on FUEL CHEM. When you talked about the installation delays and all the things that you had, I think you actually mentioned it in reference to APC as well as FUEL CHEM. Can you comment, you know, what has changed in your mind in terms of the timing expectations for these units to get up and running this year versus last? From an outsider view on the macro it seems similar, if not potentially more conservative given the election cycle and some environmental regulation pushout we're seeing on the [camer] side.

Yeah, and the Mercury ruled had some impact , but not as much for the ongoing units. [Camer] is probably going to cause more of an issue around new units that are trying to be built and what exactly they have to comply with. What we're seeing with our interaction in utilities and what we're seeing in the utility industry now, is the more normal utility kind of delays. Utilities are utility Bs. Last year they were spooked. This year I don't see the spooking at all in our discussions with utilities.

They're more into their own budget cycle and more normal kinds of stuff you have to put up with utilities. On the China front, that actually is, is actually a lot more encouraging. That's our success there, on the units with Huaneng, the largest power company in China. That was well-noted throughout that corporation and I'm, I'm real encouraged by what we see in China on the opportunities for 2008. The opportunities beyond that are just incredible, but this could be a really great year in China for us, on the APC side, and we hope to get the ball rolling on the FUEL CHEM side there

And then just a couple others. On the FGC relationship and Chem-Mod, what, how should we look at that? What one do you think is going to contribute more? What's the sort of revenue profile we should be looking at for the software business?

First I'll deal with the Fuel Gas Conditioning, that is, I think, FGC Inc. in my opinion has the best fuel gas conditioning technology especially for melting of the sulfur there, their patented approach in the industry. We liked it a lot. They're great guys to work with, those sales will look a lot like an SNCR sale, with revenue and profit margin and we're, we've had our, our, all of our sales staff in here for training. Last week, and, and they're really hitting the ground running, both in, both in Europe and we're looking at in Asia, there too.

On the Chem-Mod, that's a little bit longer shot. FGC is a proven technology, that's just us taking it to market. Chem-Mod is a true R&D. We have high hopes for that. We hope that we will be able to, to sign up a customer to do a demo, to see if our expectations are in-line with the reality. We'll see, but that is more of a we got to see. If it worked really well, that would be an incredible hole home run. If is doesn't work it is a swing and a miss, but you have to be at the plate.

And final two for Vince, you gave us the segment split on the revs, the margin profiles, can you comment on what sort of ballpark margins for both business lines you're looking at for this year?

Right, for APC as we've seen in Q1, we have an uptick in gross margin. That's specifically related to the mix of project profile that we're working through right now from a, a backlog perspective. So on a prospective business overall for APC, we're looking at lower to mid-40s as that overall target. As we work off the backlog we have out there today, it may be a little bit on the higher end because it's an overall mix of projects that's in favor of Fuel Tech only scope work, as opposed to the turn key scope of work, which has a tendency to go ahead and dilute margins. gain, longer-term basis, lower to mid-40s. Immediate quarter or so, perhaps the higher end of that on the APC side.

FUEL CHEM, you see we were at the 49% level here in Q1. Had it not been for the carryover of a riskier demonstration, we would have been at approximately that 51% level. Lower 50s is our target for FUEL CHEM. That's where we're looking to be and I'd expect to see that as we move forward in the future.

And my last one, the cash flow in the quarter was exceptionally high, 2.5 times net income. Are we still looking for roughly one to one this year, Vince, in terms of cash flow generation, terms of net income?

Actually, that's exactly on. I mean, the timing of cash flow obviously varies greatly with the change in working capital. We did have a substantial receivable collections here in Q1. So it gives us a little bit of a benefit there. But on an overall basis for the year, your point is dead on.

Great, and congrats, Vince, we'll miss you.

Thanks, John, I appreciate that.

Take care.

Thanks.

And the next question comes from the line of Rick Hoss with Roth Capital Partners. You may proceed.

Hey guys, good morning.

Good morning, Rick.

Good morning. Just on the APC side of things. You talk about domestically and Canadian utilities looking more at ULTRA's, you say that's more regulatory-driven as far as increasing caution about transporting ammonia?

Yes. The, the ULTRA's will go with SCRs, as you know, both installed SCRs and new ones. The, Homeland Security regs that just came out and the railroad's reaction to that has been, has been pretty pronounced. Those regs, which will soon go into place are going to pay, put a, an extreme burden on the rail shipment of, of anhydrous ammonia, which is the way most of it is moved around. I think one of the railroads told us recently that the hauling of anhydrous ammonia amounted to less than 1% of their revenue and 50% of their corporate risk. Those are pretty incredible numbers. The costs that they're going to start, if they will deliver the stuff, at all, the costs are going to go through the roof.

They'll have to reroute lines , not being able to pull into yards, that's pretty difficult to not have rail shipments being able to pull into a yard here in a place like here in Chicago where the big rail yards are. Those are real issues. Utilities are looking at switching from anhydrous ammonia to some sort of urea-based solution. We believe we have the best one of those on the market and new systems that are going in are most definitely going to be looking at some sort of urea-based approach. In China, they're, they've been a believer around all their big cities. So ULTRA is really a, it's really a hot item over there right

Okay, thanks. Do you have a timeframe for that domestically? When that's supposed to hit?

It'll, utilities, as, as, as any kind of thing like this hits, utilities will look at it, they'll put it in their capital budget, they'll then look at the technologies. So it'll be something that will start, but won't be like a meat cleaver coming down. It will be utilities will switch as the cost go through the roof.

Okay, and then as far as the APC proposal activity. I think a variety of discussions we had in 2007, it seems like the proposal activity is always robust. Just want to get a comparison to, I guess compared to 2007 levels what we're looking at.

Well, this year everything is more or less on schedule. What we saw about this time last year were utilities starting to, to put off meetings, starting to delay when they wanted bids and turning around and stuff. We didn't really see the pronounced impact of that until about the end of the second quarter when the, when stuff just wasn't getting done. This year, things are proceeding on a pace.

Utilities are keeping with their, their schedules for meetings, when they want to have kick-offs, when they want to go into negotiations. The quote activity is very high, the teams work in, working very hard. Again, the China situation there is quite remarkable. And, and we just got to bring those home, but with that, that could be quite, quite beyond our expectation this year if we're right.

Okay, and then, is there an increased sense of urgency among the utilities with care starting?

Yes, but it's more normal increased urgency, the fact that the, the annual price for NOx credits is setting at $4,000 some a ton is really big the market saying they believe that utilities are under complying at first. And if they do that, they'll just have to buy the credit. As you look at the more long-dated sales for NOx credits, you see it tapering down, which is the market saying "we think we'll start building this out." I think the, the expectation we have is that we'll see that start picking up more and more, utilities don't like to spend capital in the face of uncertainty if they don't have to.

The good part about our technologies is they're relatively low capital. So we actually see an up turn in interest on things like SNCRs, more than we thought. And a lot of interest in SCRs as the cost for construction of, a lot of interest in CASCADE's, as the cost of constructions for SCRs continues to really escalate.

Okay, perfect, thanks a lot.

Okay

Your next question comes from the line of Sanjay Shresthar with Lazard Capital Markets. You may proceed.

Hi good morning, guys, it's Graham Mattison.

Hi, Graham how are you?

Good thanks. Thanks for the details on the FUEL CHEM margins, just a quick clarification on that front. The margins were sort of low 50s, will these be helped at all as more FUEL CHEM customers move off demo contracts to paying contracts?

Absolutely. You not only have the risk share, in cases, sometimes we'll give a certain period of time, a couple weeks or a month, even free right up front in a 60 or 90 day demo and then they risk share for the next 30 days or 60 days where we split the cost. And, we're, we're trying to be competitive in our offerings there which means, at the front of any, deployment, you might depress, margins down to where they are now. But longer term, that's where Vince was talking about, longer term, we expect to see this segment be in the low 50s.

Gotcha, so there's potential as more of these roll over, you could see a little bit of margin growth here?

I think you could see that absolutely and you'll see these things more level out on the revenues and become more predictable as coal units are so deeply in the money. They're just running all the time, any time they can these days and from an analyst and investor point of view, you should see the noise get down to where it's a few hundred thousand up or down according to units shutting down, but nothing big as we get a much larger customer and revenue base.

Okay, great thanks. And also looking at, the rising raw material costs across the industry. Are you being impacted by that at all in either of your business lines or is there potential to pass some of those higher costs onto customers?

Well the steel cost, since we're a relatively low, cost solution, our steel costs are not, there's increases, but they're not material. And even for CASCADE, there's a little bit of creep-up, but it's not that much, mostly in the steel working around getting the one layer of catalyst in there. It's not outrageous, but you have a little bit of an impact. It's not going to hurt us commercially. What you're really seeing though is a lot of utilities choking on the cost of SCRs. They're going through the roof.

Steel workers are in short demand. A quick anecdotal note, our new office building, we have a central staircase that's steel. We're delayed by a bit over a month moving in because we couldn't get steel workers to come to build our staircase because they're working on utilities right now. There's a pretty big demand in this market. I found that quite incredible actually when I heard that excuse from our contractor, but I don't see that, I don't see that sort of stuff for low capital.

The only other thing that would be out there is some of the transportation costs. We do pass that through to customers, rail costs on magnesium hydroxide and the mag market is going up some, but right now we're under a, a fixed price contract with our supplier, so we're shielded from that right now.

Okay, great and then just looking, one final question. Just looking at the strong cash flow and growing cash balance. Do you guys have a target level for the amount of cash you want to keep on your balance sheet or are you looking at any options in terms of, do you want to keep it there for potential share buy backs? Is there any sort of corporate policy on that?

Well the board looks at that literally every board meeting. What is in the best interest of the shareholders. Right now we believe that we are going to find ways to use that capital to grow this business via acquisition of new technologies or M&A or whatever we're going to do with that. If that path proves not to use much of it, you can always look at special dividends. There are all kinds of ways, stock buy backs and the board actually looks at that darn near every meeting. They're a pretty astute group on our board and literally the answer comes down to what's in the best interest of the shareholders.

Exactly, right Sanjay to John's point. We don't have a specific target cash number in terms of what we want to keep on hand. We have, right now at the opportunity, on a global basis to truly grow this company and we need to use that cash in the optimal way to get into these marketplaces, because the time is now for us to do that. And to John's point, we're looking at all the possibilities you mentioned and looking at acquisition-type opportunities all of the time. So that's on our plate on a recurring basis.

All right, great, I'll jump back in queue. Thank you very much.

Thanks, Graham.

And the next question comes from the line of Martin Allen of Morgan Stanley. You may proceed.

Good morning.

Good morning.

Quick question on the Fuel Chem side, you talked about the high costs of oil reducing your revenues from that segment.

Uh-huh.

Is that going to be a continued trend? Do you see the revenues from oil, I know it's a smaller part, but do you see that continue to head down or level off?

I think it'll do both a little bit. It's going to be down year-over-year. That's a, at $120 a barrel, oil, break even, is, is for most of the oil fired units is about $120 a megawatt hour.

Hmm.

Gas has gone up what, $11 to $12 a million BTU and their break even is, right now, for combined cycle is about $90 to $100 and for simple cycle is like $110 to $120. So what you're likely to see is, in the shoulder seasons, spring and fall, you'll see prices hover probably at the, at the break even for combined cycle like they are around $80 a megawatt hour.

You'll see summer peaks start going up into the mid hundreds, because you're going to have to operate some of these units because they're must-run units, some of them. Where their near big cities, they'll be running at least part of the time for voltage support and then they'll be running during peek periods. The consumer's going to see ultimately higher electric prices as all those fuel costs passers. But where you lose is a lot of the oil units are just not going to be able to run at all in the shoulder months. And, our oil fired revenues aren't huge, but they're, they're not nothing either.

And this is a U.S. event. For places like Mexico, where they're burning this sludge that is not marketable, that's not an issue. It's really the for places, and for some of the Caribbean islands and such, like that. That's the only source they have so they'll just pay it. So you're going to see those continue to run, but along the eastern U.S. seaboard is where most of the oil units in the U.S. are these days and some along The Gulf. You're going to see a lot of those be challenged by the market to operate very much.

Okay.

And we'll see that go down. You just saw a pretty pronounced version of that, but that probably, that kind of trend will probably continue, I would suspect for most of the year.

So what was the customer unit break down between the coal and the non-coal for the quarter?

The number of units?

Yeah, I mean, a couple quarters ago you put out a sheet that listed the number that you had for the quarter.

We've got it, and it's on our website too .

Okay.

In the U.S., our coal units now number 37 six of those, four of those are U.S. coal units that haven't started up as you know . On the non-coal units, we have 23 in the

Okay.

We update that chart every time we actually add a new FUEL CHEM customer unit. So whenever you see us put a press release out, we will actually update this chart on the website so you can track our progress as we do.

Great and one final question. On the APC side, were revenues for the quarter, were any of the revenues coming from China this quarter and what's the estimate percentage-wise for '08?

Just a very small piece of revenue that fell into Q1 here, related to China projects. It was really just what I would call some start-up related revenues from projects that we have signed up in 2007. So just a very small piece. As John noted, we do have high hopes for China here in 2008.

In fact we're expecting to see some order flow there, perhaps a little bit earlier than we would have expected last year at this point in time. So we think China looks promising and, we're looking forward to getting some announcements from China here in the near term.

But we didn't, we signed that $6.7 million in the first quarter, most of which were for ULTRA's in China. That just hasn't started generating revenues yet for us in the first quarter.

Right, correct.

Great, thank you so much.

And the next question comes from the line of Jeff Osborne from Thomas Weisel Partners. You may proceed.

Hey good morning, guys. I just had a couple questions on China. Can you talk about when the Huaneng trials wrap-up. You've been alluding to a couple orders in the future here. Would those be before the trial's completed or potentially after?

The orders for that particular utility were for once we signed it the first of last year, Jeff, and they are already in operation. Those were the ones that, they were designed, those were ULTRA's that were designed to give you better than 90% NOx reduction in conjunction with SCR at full power. They tested it at 50% power, and we got greater than 90% reduction at a data point it wasn't even designed for. The rest of the start-up have gone great and I think their internal comment was that not only that it far exceeded their expectation, but that we were the best foreign company they ever worked with.

They're the largest power company in China. That bodes real well, I think we are on their approved supplier list, now. So we're pleased about how that has gone. I expect to see that turn into more business for us and other Chinese utilities we're watching that.

So our NCRs, we're not with them, but they started up also late last year and exceeded our guarantees by a pretty wide margin. So everything we have started up over there has, has bettered our guaranteed results and that's well pleased our Chinese customers.

Excellent, I was thinking there was a third party validation test that needed to be performed.

That, yeah, you're thinking of the FUEL CHEM, with ITOCHU, the one we signed in the first quarter. That'll really start up here, the outage got moved by the government until June, so it'll start up in July, so it'll be during this trial period, really throughout the third quarter. The documented results from that will be verified by a third party from that one, that's from the FUEL CHEM.

That's more an '09 impact assuming the third party tests go well then? From revenue?

Yes, we didn't really in our business plan, we didn't have, since there being a trial period there, we actually just did not put in any revenue contribution from either of those as a conservative basis. I hope we do get some. In our business plan, we didn't put any in their for '08.

And two other quick ones. I believe your joint venture with ITOCHU comes to a close next month. Can you just talk about what your plans are afterwards an if there's any type of disruption in the near term that you might experience 2Q or 3Q?

I don't expect any disruption and I like our relationship with ITOCHU. I think the feeling's mutual.

Excellent, and then just the last question on the Chem Mod side. Should we expect R&D to be running at this rate, Vince, or would you expect another step up in 2Q and 3Q as you push forward some projects there?

I'd think we'd be at a similar level. If something happens where we need to come up with special funding for a certain arrangement with Chem-Mod, that's something we'll take a decision to do that if we think it's worthwhile to spend the money and obviously we'll discuss that with you when the numbers roll through on a queue.

At this point in time, I would not expect anything exceptional.

We have a lot more work than is known publicly going on in our R&D shop. We just don't publicize that. We're working on a number of different solutions and, and we're not going to let advancement of our technologies be limited by an arbitrary R&D budget.

Very good, thanks a lot.

Thanks, Jeff.

Our next comes from the line of Rich Wesoslowski with Sidoti & Company. You may proceed, sir .

Thanks, good morning.

Good morning, Rich.

Quickly I'm just assuming all the APC backlog is schedule to run off in 2008?

Oh no, not all of it.

Not all of it, but the great majority of it yes.

Okay, and the only other question I have is if you look at the overhead, SG&A expenses, ex any changes in FAS 123. You were negative for every quarter in '07, you were flat in December and up about $1.8 million in March here. Can you discuss how much additional spending you need on that front as you continue to grow, if any?

Yeah, just, the pace of growth that we have here is going to necessitate that we beef up some of the admin staff, that's expected. However the great majority of our employee base is engineering oriented. Those folks, when they're deployed turn into cost of sales for us. So with that factor in mind, we're not expecting a sizeable dollar or percentage increase in SG&A, as we move forth into the future.

Excluding your 123R impact. We have, as we always said, the ability to leverage our SG&A balance greatly and we anticipate that's still going to be the fact as we go forward here in the future. So again, are we going to have to add some SG&A dollars just to support and maintain the business? Absolutely, so, but it's not going to be a material level.

So I mean, we can back in a number easy enough for 2008, but looking at 2009, 2010, do you guys have a dollar internal plan? Do you look at it as percentage of sales? Is there some kind of bogie?

We don't have a specific target to be honest. We're going to do what we need to, to maintain the business and our focus has always been on improving our operating margin percentage. Our internal goal has been looking to notch that up over 20% on an annualized basis. So that's our internal goal.

We're going to manage our SG&A costs as we have done historically and again, we're not exactly a frivolous spending group here by any means. But that being said, we will do what is necessary on that SG&A line to ensure that we can support the growth that we, we see as coming here in the future. So, and again, no specific dollar level or percentage, in mind at this point in time.

Great, thanks for everything, Vince, good luck.

Thanks, Rich appreciate it.

(Operator Instructions). The next question is from the line of Dan Mannes with Avondale Partners. You may proceed.

Good morning.

Good morning. Pretty much three questions. Two on FUEL CHEM, one on APC. First on FUEL CHEM. Can you talk a little about maybe the second, third and fourth quarters of last year and what the split was between oil fired and coal-fired units? Meaning is this a trend you've already been seeing for the quarters and this is the first time you've sort of --? We've known oil units have been running less, but I am wondering if it has been this dramatic in your financials.

Well, the price of oil wasn't that high at the first of quarter of last year. And we, we, we have our own business plan that we're looking at the price of oil and how hard we expect it to run. Who would have expected a year-ago that we'd be at $120 oil? So we didn't have that in our business plan, the reason we raised it now, since we're breaking out units at coal and non-coal. Vince and I talked about this, and we'll, we'll be break out coal and non-coal revenues going forward, just to be of extra help for y'all, but just, there was always a question about where are all these new units you've been signing and they're there, just masked in this particular quarter by that down tick in oil.

Okay, so I guess, the question I was trying to get at was, there wasn't a similar impact in the second, third and fourth quarters of last year? Meaning there was a dramatic tick down in oil, oil plan output this quarter versus say the prior three? I mean we know what happened year-over-year.

Dan, to be honest, we don't have that level of detail here in front of us. Generally speaking, the coal fired business over this past couple of years has ranged anywhere between 70 to 80% of the, of the total FUEL CHEM revenue, just as rule of thumb. That percentage, we see as increasing obviously, because the coal fired marketplace is our largest market opportunity. I'll give you a fuel year 2007 net data, I have available.

As John noted on a prospective basis, we'll be giving you the break down between coal and non-coal, just to be consistent with how we're tracking number of units October a . On a full year business for 2007, of the $32 million and some change in revenues, $25 million was coal, $7 was non-coal, okay? Just to give you the magnitude of what we're talking about, relative to the revenue break down between those two industrial

That helps a lot and one other question on FUEL CHEM. You mentioned usually when you sign up a new customer during a demo period, you're discounting the price or revenue share obviously, you noted one of the reasons you were doing that was to be competitive. You discussed you haven't viewed a lot of competitors in the space. Is that new or is that just something -- ?

No, and don't, I didn't mean that in an, we're facing competition kind of statement, I meant, we're trying to be out there and give utilities the best detail they can get to go ahead and try us. To make it as low a threshold for giving us a try as we can make it. And to show them really what we got.

We're not being, we wouldn't be doing this because, and we're not doing this because some competition is offering them a better deal, but rather we're just trying to, to accelerate market acceptance. We think if they try it, they're going to like it. So the trick is, to get them to try it.

Understood and last question on APC, this is maybe more of a housekeeping issue. When I look at the backlog number, I mean I always assumed if you take prior period back logs, subtract out revenue and then add in new orders that you should come to current period backlog, but there's a bit of a delta there. Is there something I'm missing?

In APC business, we also have, in addition to project revenues, we have ancillary spare parts and some reagent chemical royalty revenues that factor into the total APC revenue line. There should always be a little bit of a variance there.

It's a variance that says there's more revenues than you're seeing in just the signed contract. It's not a variance in the other direction. So you always get at least the same contracts, the reality is, you're going to get more on an annual basis, a few million more than the signed contracts.

So this quarter you picked up somewhere between a million and two million of other stuff.

That's exactly right.

Thank you.

And the next question comes from the line of Peter Peng from ThinkPanmure. You may proceed, sir

Thank you for taking my call.

Hi Peter, how are you?

Very good thank you. My question is really basically on the APC side, again. You signed over $24 million of contracts, third and fourth quarters, we're wondering what's happening in first and second quarters, where you signed under ten or other $10 million in contracts.

Peter--

We should see more in third and fourth quarter again?

Got it Peter, utilities typically sign APC contracts in the U.S. to be in sync with their outage plans. Utilities will have most of, for our kinds of technology, for the low capital costs, but there's some capital costs, just not huge. They're going to sign more of those starting like mid-summer and through the end of the year, than they're going to sign at the first of any year going into the NOx season. In the, because, until 2009 the NOx season was May 1st through end of September. So, they would sign them in the fall to get the stuff installed in the spring, so they'd be ready to get NOx reduction during the NOx period.

I think one of the changes you're going to see next year, I believe, is that you will see utilities go to a more balanced ordering in the spring and in the fall because it'll be a NOx control will be on an annual business. But at least for the year 2008, which you were looking at were a number of utilities that delayed their contracting until really late in the second quarter, but all of that, a whole bunch of that stuff is being installed as we speak in outages across the nation. They install less in the fall, but again with care coming in, care pushes those NOx controls from being just seasonal to being annual. I think you will see the capital pattern of utilities change to reflect that . I would expect to see more balance.

There'll always be a bit more signing in the fall than in the spring just because there are more outages for utilities in the spring than there are in the fall. That's because the utilities like to get those plants in as good as shape as they can, for the higher prices and higher demand that occurs in the United States in the summer, than it does in the winter peak. That's a long answer, but I hope it

Yeah, that's real great. But on the other hand, there was concern if all of the utilities have already signed one type or another sort of NOx reduction devices for the market, is limited from this point on, can you comment on that?

Peter, it is just beginning. Utilities don't comply all at the first of a regulatory period in the, where you have a cap and tray type of situation. We are still responding to bids in the Midwest, to Sitcal requirements. Sitcal requirements went into place in 2004, as those units are being driven harder, they are actually still deploying in that region. Care, they'll be deploying against Care for a decade. This is just starts in a budget cycle. Utilities will be spreading out, they'll order a few SCR's, they SNCR's in, they'll look at their mix.

They were not ready for gas prices to be as high. So I am sure they had anticipated in some of their pro mod runs, and that's, production model run that all utilities, all regulated utilities will use that to predict which units they're going to be dispatched in a year and how they are going to budget for them.

They're probably a little bit caught aback now with the high gas prices, the coal units are being driven harder, so their solution in the near term will be to buy credits on the market, which is what the market is seeing out there, when you see $4000 a ton for NOx. And you hear comments from people, I was reading Argus the other day where a guy was saying, that seems to be higher than we expected. Well it's higher because the market is looking and saying, hey utilities you are behind on your deployment of NOx stuff, you are going to have to buy more credit.

Okay. Then, final question. Of the $50 to $53 million that you expect out of the APC business. How much of that will come out of the backlog, the $25 million backlog, from the beginning of the year and how much comes from new contracts? And how many million dollars of new contracts would you ultimately expect to sign up?

Peter, the, we are building this business not only for 2008, but for the future. I was to see a higher backlog at the end of 2008, than we saw at the end of 2007. So we need to win enough new work. So you start with $28 million, that is more or less going to be all worked off over this year. We need to win enough work to get over that. We have one $11.7, so that brings to, whatever that is, $30 -- about $40 million.

So we need to win enough new work to now only meet and hopefully, well exceed our business plan expectations, but also have a strong basis going into 2009.

Okay, thank you.

(OPERATOR INSTRUCTIONS) The next question comes from the line Scott (inaudible). You may proceed.

Hi good morning, guys.

Hey Scott.

Hey John, how are you. Hey Vince. I just have a couple of quick questions. The backlog question was kind of answered, but at the end of the year, you guys had a $50 million backlog coming into this year, with the expection of new orders would be half the balance of the guidance?

Nope, we had $28 million coming into this year, right?

Leaving the fourth quarter?

Yeah, correct.

And now that backlog is up to $50?

Well the backlog at the end of the first quarter was $25. And we generate $11.7 million in revenue, so we worked off some of that, but we also signed some contracts. So we actually are just down slightly. And we've signed some more since then, $5 million more since then, so we don't do it on a monthly basis, but I would suggest we are probably up right now.

Okay. In respect to China and the global opportunity, can you quantify how you feel about the China opportunity in terms of dollars and a little bit of timing. And can you talk about the competitive situation in China now, with Nalco Chemical?

I'll talk about the latter. We really don't see them as a significant event in China. I think we've got our sales established as a pretty firm supplier there. I really don't see them over there and don't spend any time thinking about them in that market. The amount of dollars in China -- It doesn't have to be near term, if you look our three to five years. In the near term, one to two years, is pretty awesome. Far beyond what we have in our business plan and our expectations even as much as a year ago, but I am not going to count those chickens until they hatch and we probably are not going to give out those numbers on our expectations. I will tell you that we have said before, the number of leads we are chasing in China is into triple digits on the APC side. And those leads are turning into real prospects a lot faster than we had anticipated.

Okay. On the, can you look out and tell me about what your plans are for a new product, new product portfolio, refreshing either the APC line or maybe something into Mercury.

Well the Chem-Mod is one initiative at Mercury. If it works, there, some of the results they've got were too high to be commercially viable when they got it, but they're results in a non-targeted mode were pretty outstanding on Mercury. And some really pretty awesome results on SO2.

We are looking at -- we want to be across the board in air pollution. And that would mean SOX, which Chem-Mod might be able to do pretty well. And we have high expectations if it's not them, we're going to get somewhere else. NOx we are already pretty good at that. Mercury, again Chem-Mod, but we have some other initiatives on there too. Particulate, that is where fuel gas conditioning really help, dramatically improve the performance of electro-static precipitators in taking our particulates. And CO2 and we are looking at, I don't think, my own personal opinion that Carbon sequestration is going to fly.

I don't think the U.S. will ever get over the liability issues around pumping vast quantities of CO2 underground. I'm speaking as a person who probably launched the first of those kinds of initiatives, back when I was with AEP. But I just think that, that is going to be a huge stumbling block, but there are other ways. And we are working on other ways. It would be really neat if we could come up with a way that would capture some substantial portion of Carbon and bond it in a way that could be landfilled or used in building materials, without being deep underground sequestered.

Again, our FUEL CHEM programs. The Santee Cooper, they got 1.5% efficiency improvement with our chemicals and our consulting, we were able to help them achieve another 1.5% efficiency. Overall about 3% efficiency.

The CO2 reduction is double the efficiency gain, as a rule of thumb. They're going to drop their CO2 production rate by 6%, and they're saving an incredible amount of money doing it. We think that is a pretty strong case and most of the studies that are being talked about in Congress right now, are now recognizing that generation efficiency is the first and best step that can be done in this nation to reduce CO2 intensity if that is what we want to do.

So, in terms of the Chem-Mod product, you really see this rounding out the portfolio in more ways that just Mercury?

Yes. And if again, that doesn't work, that's not our, that's not our only fish on the line. But that is the only one we've announced.

You've also made reference to it not being commercially viable yet. Is that from the cost side?

It was just too high a volume on the injection. On the tests that they achieved, it would have overpowered the precipitator. You really can't do that. You can't afford a major precipitator upgrade. And that is the hope that our targeting, as it does with mag hydroxide, will allow, much, much less stuff to be used and achieve much higher level of performance.

Due to time limitation, this will be your last question. (Operator Instructions) The following question comes from the line of Michael Carboy from Signal Hill. You may proceed.

Good morning ladies and gentleman. Can you hear me?

Good morning Michael.

Hi Michael.

A couple of questions for you. First let me just come back to this non-coal burning unit issue. Out of the 23 non-coal burning units, how many of them are oil burners that are used in peak or upper shoulder power generation rather than industrial waste processing, or black liquor or biomass, or whatever?

Michael, I don't have those numbers in front of me, but the majority of those in the U.S. We have, in the U.S., one waste-to-energy plant that is using our targeted corrosion inhibition technology and there are a few other non-coal units in that 23. But the majority of those non -- yeah, that are not oil, that are non-coal, but the majority in the U.S. are oil burners. I can't give you a specific number, but it is going to be in high teens to 20 kind of number. There are three to five that aren't oil.

Okay, well that is helpful. Let's string back to fuel gas conditioning. In sort of looking at the technology, what portion of the installed base that is already using wet scrubbers, could still use the fuel gas conditioning technology, or does the fact that a wet scrubber is in the process, sort of box those operators out of sort of using FGC?

Oh, no, they don't. In the U.S., FGC has a great business going. A lot of folks upgrade particulate rich scrubbers. You would think that they would take out more of the particulates, that if you had a wet scrubber on, that they would get all of that. It actually doesn't do that. Just like, I use to think that when I first running AEP's fleet before the Gavin event, that wet scrubbers would take out SO3 too, which looks like a fine particulate going through that.

Utilities have a choice when trying to control fine particulates and that really is -- well you can use a baghouse and use a bigger baghouse, but that is incredibly expensive and a giant pain in the rump for operators. The electro-static precipitators are the preferred methods. You could build and use a lot more fields to capture it. Far and away the first this you do is to try to condition the fuel gas so your existing facilities are much more efficient.

In the U.S. a number of people have already done that and that's being rapidly being deployed. It is places like China, where almost nobody has done it, and the few that have done it, tried to use a single fuel gas conditioning stream to do it, and they got relatively poor results. Dual fuel gas condition, where you actually inject, belive it or not, SO3 and ammonia in small quantities, together achieves pretty dramatic results and that is really what FGC offers, a patented approach to the way you package those two chemical drivers.

Okay, as I look at the data that is in the BIRT and EPA databases, I found about 880 units, representing about 160 gigawatts of the U.S.'s 495 gigawatt capacity of coal units that are untreated on this sulfur front. What proportion of those are available as options for you to bring FUEL CHEM as a means of sulfur mitigations?

Well the vast majority of those are, and even some of the ones that have wet scrubbers. I know we have more than one customer that has a scrubber. And scrubbers are designed around the fuel, just like the boilers are designed around the fuel. And in many cases, the scrubbers were not ever designed to burn the much higher sulfur coals that you find in the Illinois basin areas. I mean they'll take out a lot, but the amount of sulfur was just more than they were designed for.

In such cases, if you could offer them say a 20% to 30% trim, on that SO2, they would be all over that in a heartbeat, because that would allow them to burn much cheaper fuels. And the fuel costs far weighs the cost of the additive. So it is not only the ones that don't have a scrubber, but it's trim for many of those who do. And that is a pretty viable business in the U.S. Now you go overseas where people don't want to have all of that capital cost in units, that becomes really viable. And in the U.S. where a lot of the small and mid-size power plants, utilities just don't want to pay $200, $250 million for a scrubber, for a unit that didn't cost that much to originally be built in total. A low capital cost option, that might be higher variable cost, but low capital cost, is really preferred.

Okay, looking at coal prices, we have seen a huge escalation in low sulfur coal prices. Starting to see higher sulfur coal tick up. Can you talk a little bit about the economic balancing act and maybe quantify for us the break points, where we would expect to see the utilities finding FUEL CHEM, just enormously powerful for sulfur management.

Well, it is Michael and you are raising some great points there. The export market for coal is up in the triple digits now. And, over a $100 a ton and almost double that for Med-Co. At the same time, you have rail transportation costs, with the high cost of oil, low transportation costs of the fuel cost adders are increasing the cost of bringing Powder RIver Basin coal, into the East. And there is still a lot of that coming, but that is becoming more and more of a factor. Illinois basin coals and those coals that are in that region are much cheaper from transportation point of view, and they are cheaper in cost. And utilities are really looking at ways to dramatically reduce their fuel cost, because in coal, not only just esoterically, because they want to do that, but their alternative energy sources in gas and oil are going through the rough.

Outside of nuclear, they don't want to get hit with trying to go through a public utilities commission with a fuel cost adder that is outrageous. So they are doing everything they can, across the board, to lower their fuel cost. I think you will see Illinois Basin coal become much more popular. For us, it is a double win, because they are a pretty high slaggy coal and they are high sulfur. So for SO3 mitigation and for slag, that is kind of a double win for our FUEL CHEM program.

So you can't give us any idea of the -- for the -- given all of the advantages of FUEL CHEM. There is an incremental cost associated with the feed of the mag ox. What incremental cost do we need to see, in coal prices, for the operators to see an offset.

I think you are more than seeing that, see the operators are never going to see all of the benefits that the coal buyers and the trading and marketing will see from the extra power to sell, and from the lower fuel costs. What you are now finding though, and the Sandee Cooper paper has helped immensely. Is that people are going wow, I can lower fuel costs and save money and it means an increase in the O & M budget, some of which will be offset by the reduction in labor for clinker-grinder maintenance and for outage labor. But the majority of the benefits are going to flow to the corporation.

That message is really starting to be heard and the more senior levels of utilities, at least in my meetings with them and with our market response. Now, having said that, you still fight in the short term, as utilities don't have it in their O & M and they are very reticent to add anything to O & M within a year. They really want to get it into the budget planning and reduce elsewhere, because that really comes out of the shareholders hide.

Okay, and just two more questions if I may. With regard to the NOx credit issue, John, you pointed out that they are starting to run wild at $4000 a ton. It is my understand the the PUC begin to penalize the utilities for repeated use and start devaluing the use of any surplus credits they may be generating at other plants. Can you elaborate on the trend a little bit.

It really does Michael, it's not only because the cost is out there and when you are a PUC, public utilities commission, you are looking at that and saying okay well how long is that going to continue. Are you going to keep buying credits. And they are political based. To buy other pollution credits so you don't have to deploy the technology, is not a long-term viable public relations stance, by any utility. So they will put up with it, but only if you have a plan on how the heck you are going to get back under and start selling those credits and offset that. They'll, they usually, utilities like, to be honest with you, they like capital additions, because they can earn a return on that. When the capital additions go through the roof, though, those same public utilities commissions are not going to want to see base rates go up. So utilities are really choking on the capital cost of SCR's right now and relooking at other options and there is a lot of careful consideration being given to CASCADE, by folks who we were talking about for an ULTRA.

Okay and then last question. Vince, more on the housekeeping front here. I think last quarter you suggested that we might get to the, what I'll call the price break point for the mag ox purchases in Q3. Are you still on track for that?

That actually happened earlier this year. Probably happened sometime in Q2 based upon the increased revenue based increase, customer base that we have on FUEL CHEM. We expect that to happen, probably late in Q2.

That's great. It would happen in beginning of Q4 last year, right?

Actually I think maybe in late Q3.

Late Q3, okay. Well thank you very much.

Thanks, Michael.

And now I will pass the call over to Mr. John Norris for closing remarks. You may proceed.

Well thank you very much and thank you all for listening in on the call and for your questions and your interest in our company. Again, I think we are off to a good start. Our goal is to have increasing results throughout the year and we are looking forward to trying to achieve that. Have a great day.

Thank you ladies and gentleman. This concludes the presentation for today. You may now disconnect.