H.B. Fuller Company (FUL) 2004 Q1 法說會逐字稿

Good morning and welcome to the first quarter year 2004 earnings release. At the request of the company, this conference is being recorded for instant replay purposes. Following today's presentation, there will be a formal question and answer session. Instructions will be given at that time should you wish to ask a question.

Management in attendance on today's call include Mr. Al Stroucken, Chairman of the Board, President and CEO, Mr. John Feenan, CFO, and Mr. Scott Dvorak, Director of Investor Relations. At this time I'd like to turn the meeting over to Mr. Scott Dvorak. Sir, you may begin

Thank you Sarah, Good morning, everyone. This morning's conference call will be available for replay approximately one hour after we are finished with questions.

Before beginning I would like to inform everyone that the discussion today will cover certain financial information that has been adjusted to reflect our restructuring initiatives and is considered to be non-GAAP under applicable SEC regulations.

Our earnings press release issued yesterday provides a reconciliation of these non-GAAP items with our GAAP results. This press release is posted on our Web site at www.hbfuller.com under "Shareholder Relations" press releases.

In addition, certain matters discussed during this call will include forward-looking statements as that term is defined under the Private Securities Litigation Reform Act of 1995. Since such statements reflect our current expectations, actual results may differ. For more information, please refer to our press release, quarterly report on Form 10-Q, and annual report on Form 10-K filed with the SEC.

Now John Feenan.

Thank you, Scott and good morning to everyone.

Before I review the first quarter results, I want to remind everyone that prior year results discussed will be before any special charges incurred due to the restructuring initiative which has been reflected in the pro forma statements provided in the news release. In addition, per share amounts are reported on a diluted basis.

For the first quarter of 2004, net earnings decreased from $6.3 million in the prior year to $4.6 million. Earnings per share were 16 cents, compared to 22 cents for last year's first quarter.

The first quarter results for 2004 were marked with improved volumes in all regions, reversing the trends of the past several quarters. Net revenue for the quarter was $318.6 million, 8.1% higher than Q1 2003 revenue, of $294.6 million.

Looking at the components of sales increase for the quarter, we see the following: Pricing was down 1%, volume increased 3.9%, and currency effects primarily due to the euro and to a lesser degree the yen, Australian and Canadian dollars accounted for a 5.2% increase. The decline in pricing is mainly due to the competitive environment that we noted last year.

The delayed economic recovery caused many adhesive manufacturers, despite increasing raw material costs, to bid for volume at significantly lower prices. This has reduced the overall pricing in the market, creating situations in which business is generally secured at lower prices than historical levels.

Improved volumes were realized in all regions, with a year-over-year increase of 3.9%, nearly doubling the volume growth of the fourth quarter. Actual tonnage increased by 5.7%, up 200 basis points from the fourth quarter.

As you may recall, we saw our sales evolving from a slow start to a more robust finish in the fourth quarter of 2003, and that momentum has continued into the first quarter of this year.

Gross margin for the first quarter was 26.9%, the same percentage at the fourth quarter of 2003 which compares to last year's first quarter gross margin of 28.5%. The year-over-year percentage decline in gross margin was primarily due to lower pricing, higher delivery costs due to higher energy prices, and a plant closure and severance costs within our Full-Valu specialty segment mentioned in the previous quarter's conference call.

Operating expenses were $75.4 million, or $7.1 million higher than last year. As a percentage of sales, operating expenses were 23.7%, one half of a percentage point above last year's 23.2%.

Foreign currency translation increased the reported U.S. dollar amount of operating expenses by approximately $2.8 million. We also realized an increase year-over-year spend of approximately $1.7 million for company-specific growth initiatives also discussed in the previous quarter.

Operating income decreased $5.3 million to $10.4 million, which compared to $15.7 million for the first quarter of last year. Operating income in global adhesives in the first quarter was $7 million, a decrease of $3.9 million, from the first quarter of 2003.

Full-Valu specialties operating income of $3.4 million decreased $1.3 million from the previous year's quarter. Interest expense of $3.6 million was 5% lower than first quarter of 2003, driven by a lower average outstanding debt level.

Miscellaneous other expense of $900,000 in this year's first quarter compared to $2.7 million of expense for Q1 of 2003. Last year's first quarter expense included a significant foreign currency loss relating to the British pound, an issue that you will recall was corrected in the second quarter.

Pretax earnings of $5.9 million was 36% lower than the previous year's first quarter pretax earnings of $9.2 million. The effective tax rate for the quarter was 32%, which should be the effective rate for the full year.

As we turn to the balance sheet, I would like to remind everyone the following figures may be subject to minor changes, prior to filing the quarter's 10-Q.

Cash at the end of the quarter totaled $1 million. Networking capital amounted to $284 compared to $269 million in the previous quarter. As a percentage of sales networking capital is 22.3%, versus 22.1% at last year's first quarter end.

Capital spending for the quarter was $6 million, compared to last year's first quarter spend of $8 million. Depreciation, and amortization were $13.5 million for the quarter, and debt increased from the previous quarter by $11 million, to $184.8 million.

The company's capitalization ratio was 26.3% at the end of the quarter, compared to 31.2% at the end of the first quarter last year. Free cash flow for the quarter, approximated a negative $14 million, compared to a negative $28 million in first quarter of 2003.

Now, before turning it over to Al, I would like to take a moment to express two of my key priorities for 2004.

First, profitable top line growth and second, improving our networking capital position. We continue to improve our internal processes and procedures regarding both of these issues and expect to see continued improvement throughout the year.

Al will talk to the recent Probos acquisition that was announced earlier this month and with our current debt position and favorable interest rates we anticipate that this acquisition will provide momentum throughout the year on additional M&A activities.

With regards to our networking capital position, I'm very dissatisfied with our present performance. We are working on reducing our global networking capital and plan to show improvements in our cash generation throughout the year. I am encouraged by our current momentum, and I look forward to reporting on the progress of these two and other priorities throughout the year.

I would now like to turn the call over to Al.

Thank you, John and good morning.

You may recall that during the last conference call I was a bit more optimistic than I have been in a long time, because we had seen some sales pickup in the last two months of our fourth quarter. I also mentioned that we were going to change our focus somewhat to ensure that we could participate fully in the economic cycle, and finally start to benefit from the improvements that we had made in our company.

As you heard from John, our sales development in the first quarter of this year suggests that the economic upturn is gaining in strength, and allowed us to record sales levels that we have not had in quite a while. We are seeing positive year-over-year top line comparisons in virtually all businesses, while some regions and product lines are clearly leading the positive development.

In our adhesives business, Asia Pacific, one again, led the way for improved volumes, but Europe reflected the best percentage point improvement, reversing a year-over-year percentage decline of 6.5% in the previous quarter to a slightly positive number for the first quarter of 2004.

Latin America and North America also reflected improved year-over-year growth percentages compared to the trends that we were seeing most of last year.

In North America, our volume improved nearly 3%, and our adhesives business, while pounds shipped improved 7.4%, over the same quarter last year led by the significantly improved volumes, in our automotive division, as well as some regained market position in our assembly and converting end markets where we had lost share due to competitive activity in earlier quarters.

Our sales to the packaging industry were supported by the sustained growth in our solvent-free flexible packaging product lines and rates that we believe continue to exceed the industry's overall growth rate.

As I noted last quarter, despite the improvement realized in North America, I'm still not satisfied with the overall development in this region. We need to be able to demonstrate higher growth rates in our whole market, where our solid infrastructure provides us with the greatest opportunity to gain new customers, or additional share at existing customers. The leverage we can achieve with additional growth in this region also will help us to get closer to the financial performance levels that we strive for.

Our Full-Valu specialty business' top line improved as well aided by strong growth in our window business, as well as in our powder coatings unit. The latter development very well can change in the trends that we were seeing over the last couple of years. We expect this positive change to continue in the remainder of the year.

In Europe, our tonnage increased 1.1% but our performance is not yet consistent across all product lines and countries. We're getting some more traction through our sales force as of changes that we've made over the past two years are now leading to some increased momentum.

Despite our own slight improvement on a year-over-year basis, the euros' own growth forecast for 2004 remains subdued due to the low business sentiment and weak labor markets. And that is suppressing any hopes for a rapid recovery of domestic demand. Export orders for European manufacturers and thus for our existing customer base remains weak.

Latin America and Asia Pacific continue to demonstrate considerable volume growth and Latin America, the economic progress in the larger countries such as Brazil, Argentina and Chile provided an environment in which we achieved a near 9% volume improvement.

The increasing value of some of the currencies in that region are impacting our local cost structure, and we need to adjust our prices that are predominantly quoted in U.S. dollars accordingly. The instability surrounding the situation in Venezuela is likely to have more of an impact on crude oil prices than on our top line development for the overall region.

In Asia Pacific, pounds shipped were up specifically by more than 20%. We believe our position in China, Australia and Japan gives us ample opportunity to expand our business in the region, and we're proceeding with our steps to ensure that China, in particular, will be the driver for organic growth.

The consumer business in Asia Pacific has realized strong growth rates in each of the last two years after we made some changes in strategic direction and by adding new expertise to our marketing team. The success of our team there is based on their ability to listen and act according to the voice of the customer.

Having been given the Australian 2002 Hardware Supplier of the Year award and by the National Builders Supply group, they took it as a challenge to move on and beyond. And this is only one example of the culture change that is being effective throughout the organization.

To support growth in a more overall positive economic environment, we need to drive the introduction of new and profitable products into our markets. The sales of our new products continue to achieve 30% year-over-year growth this quarter, and accounted for 16% of our total company sales.

In our window business the ratio of new product sales is now at 42%. Several new product introductions in this unit over the last couple of years like our Insul-Cure line are finding a very a good reception in the market.

In October of 2003, the H.B. Fuller window group along with SashLite LLC introduced its first total solution offering. H.B. Fuller and SashLite became development partners in the commercialization of a revolutionary new technology for the production of high performance windows.

SashLite technology is based on bonding glass directly to a vinyl sash. The solution being offered by H.B. Fuller includes both new patent-pending sealants and [DESICANT] or barrier materials. It is offered as a package with machinery, engineering support, vendor managed inventory and training included.

Five window manufacturers have signed contracts at this time and machinery is being installed. Momentum gained after the Glass Build America Exposition in San Diego earlier this month, where new higher speed equipment was introduced.

In addition, a major vinyl producer became a partner in the process by agreeing to invest in [D-ICE] for complete new window systems utilizing SashLite technology:

Among the new products in the adhesive business, the automotive divisions direct glazing has received industry-wide qualification and acceptance and is now realizing rapid market penetration.

Our packaging customers are benefiting from the Latham product line, a low application temperature hot melt, that has low volatile organic contents, reduced odor and non-charring and non-gelling characteristics. With similar physical properties as our Advantra product line, Latham serves as a lower application temperature alternative. Latham and Advantra's combined sales increased for the quarter nearly 35%.

In the wood working industry of our assembly market, our one component wood glue, GXL 4 achieves the highest European performance classification, historically reached by only two component types of adhesives. The advantages of the one component glue for our customers include ease of application, less waste, and the avoidance of potential mixing errors. This quarter alone, sales increased 45%.

Now, let me move away from the top line perspective and turn to some of our cost factors.

I believe that raw materials for our business generally peaked in the first quarter. Our strategic sourcing teams have done an excellent job in mitigating as much of the raw material impact as possible considering the market environment and generally high energy costs.

As the overall climate of political and economic uncertainty prevails, events like we just witnessed in Madrid have of course, the potential to impact the current raw material costs development. Aside from the influence oil prices have on our raw material base, they are also affecting another segment of our cost of goods.

Delivery expenses have increased by 16%, and we are falling behind passing these fuel increases or fuel surcharges on to the market. We are presently working on some mechanisms that will hopefully allow us to largely neutralize the effect this has on our cost structure.

Because of the closure of Saint-Andre-Est facility in Canada and some census reductions in the first quarter, our conversion costs this quarter have taken a hit. But as I have already said in our last conference call, we expect the effect of these steps to turn slightly accretive for the year.

The training and rollout of our Lean Six Sigma deployment is progressing on schedule. We have conducted our first round of black, green and yellow belt training and in addition, we continue to run [inaudible] and events within our manufacturing facilities and other functions of our company.

The feedback I receive and the energy I observe in these training sessions is contagious as employees begin to realize the potential benefit of the common language, tool set and problem-solving capability in arriving at disciplined, data-based decisions. In combination with the progress that we have made in our information technology capabilities, the effect-free processes as arrived at by applying Lean Six Sigma can be replicated and are scalable with maximum impact for our customers and our company.

Incorporating electronic technology and further digitizing our business likewise is a priority for us. During the past several years we have converted 58% of all transactional value on the buy and the sell sides to e-business.

To help us take this technology beyond the transactional level, we recently hosted an e-based event featuring guest speakers and participants from several well-known global companies. We will use the collective wisdom and experience as we fine tune our e-business strategies.

Earlier this month we announced the acquisition of certain businesses of Probos, a company located in Oporto, Portugal. Probos had been a licensee of the H.B. Fuller Rakoll brands in Portugal since 1984. In 2003, revenues for the purchased businesses were 25 million euros. Probos served the Portuguese and Spanish markets as well as markets in the Middle East, and eastern Europe.

The acquisition strengthens our Rakoll brand, solidifies our presence on the Iberian peninsula and provides us with additional channels into the Middle East and eastern European countries. The acquisition includes a modern hot melt and resin facility and employs 130 people.

We expect the acquisition net of finance costs to be slightly accretive for 2004, prior to any realization of synergies. We hope this transaction will be followed by others from the several opportunities that we are pursuing.

Overall, we believe that the economy will continue to improve, but we may see some sudden deviations from the longer-term trend line because of the heightened sense of insecurity in the world that I mentioned before.

Within the controllable environment here at H.B. Fuller we remain focused on the future with new ideas, new products and associates who grasp the growth challenges and opportunities our customers and we face. I'm encouraged by the energy and the dedication of our employees who are focusing on the future growth and producing excitement within the organization.

Thank you and I will now open it up for your questions.

At this time, if you would like to ask a question, please press star one on your touch-tone phone. Once again, to ask a question, please press star one on your touch-tone phone. Your first question comes from Jeffrey Zekauskas. Please state your company name.

Hi, good morning. J.P. Morgan. The first question is for John Feenan. What are the working capital targets that you are attempting to achieve? And how do you plan to achieve them? And, I guess the second question is, can you talk about the appreciation in your raw material costs this quarter and whether you expect pricing to improve in the near future and by what magnitude?

Jeff, concerning the working capital, as I stated we're not happy with our current scenario. And we have a very strict target globally that we're shooting for and that's in the 14 to 15% as a percentage of sales.

One of the things that we've done internally is heightened the visibility of these metrics so that Al and I and the senior management team are focusing on these in our monthly detailed reviews but we're looking at it on a global basis. Also in order to keep it relatively consistent and simple, we're focusing on the three key elements of networking capital as opposed to operating working capital. So our main focus is on inventory, receivables and payables.

With regard to the raw material cost development, we have seen a slight uptick from what we have in the first quarter of last year but that includes also container costs and I think we've seen more impact in containers than we've seen in raw materials because of some of the containers, of course are dependent on raw materials coming from an oil-based derivative. But overall, we have been very effective in our procurement teams and minimizing that impact and we feel that we saw the peak in the first quarter.

We continue, of course, given the overall improvement and general economic activity to get accounts by raw material suppliers to raise prices but so far we have been very effective at mitigating those effects.

I guess just as one follow-up, you've got to get your gross, your incremental gross margins above your average gross margins. Do you think that will take a lot of time? Or do you think that that's something that you can, you know, effect as your volume ramps up relatively quickly?

No, I believe that we will see clear advantage of the cost steps that we've taken over the past couple of years and the leverage will become evident as we move forward, especially if the underlying growth rates that we've seen in our business continue.

Okay. Thank you.

Your next question comes from Ray Kramer. Please state your company name.

First Analysis. First, could you, do you have a specific dollar impact from raw material, the Six Sigma, and then the plant closing and the census reduction?

Yeah, Ray, this is John. For the quarter, the dollar amount around the plant closure was right around $1.8 million. I'm sorry what were the other two parts?

Okay. The Six Sigma and then the raw material costs.

The Six Sigma was right around 800 to $900,000 for the quarter.

And raw materials were basically flat.

Okay. So most of the increase in raw materials is in the container costs then?

That's correct.

What was the increase in those?

As I have mentioned, the cost of goods have gone up 16% over last year, so that has had an impact as well. Right.

Okay. And then looking at price sequentially, you had commented last quarter that it looks like it was stabilizing, at least through December. What happened for the full quarter? Is that, did it remain stable or have they started to creep down a little?

Well, I only have specific information on a quarter-over-quarter basis for North America at this point in time and the price level here has been stable compared with the previous quarter. We still have to realize that we had last year in the third quarter still in North America, an environment where prices were going down further and that really of course then only becomes evident in the retroactive perspective, and that is what you still are seeing at this point in time in the 1% decline.

Okay. But sequentially going forward, you would expect it to be flat to down at this point, at least in North America?

Well, of course pricing is never something that we all determine by ourselves. It's always an interaction between what's happening in the market place and what competitors are doing but I would certainly hope that given the overall strengthening economic activity as well as the runups that we saw last year in raw material prices that we will see some stability, at least some stability in the price area.

Okay. And then finally with volume, given your very strong results in the first quarter, have you seen that continue at least through March, that momentum you're building up there?

The numbers that I saw for the first couple of weeks March indicate that we were proceeding at about the same rate.

All right. Excellent. That's all my questions for now. Thanks, guys.

Your next question comes from Frank Dunow. Please state your company name.

Edge Capital. I've got a question. Just to follow up on that, the plant closure, the 1.8 and the Six Sigma, of 8 to .9 million. Can you break down how much was flowing through the SG&A line and how much is flowing through the gross margin line?

Yes on the plant closure $1.5 million of the $1.8 was in cost of goods, the balance in SG&A.

Okay.

And the entire portion of the Lean Six Sigma initiative is in SG&A.

Great. That's the only question I've got. Thanks.

Your next question comes from Dimitri Silverstein. Please state your company.

Longbow Research. I have a couple of questions. One, to follow up on the Six Sigma initiative. Where are you in terms of rolling it out on the timeframe that you established internally and do you have any targets as far as either increasing the growth rate of top line or margin improvement for this program once it's fully implemented?

Well, we are presently on target with what we had set as the schedule for the rollout. We believe that this year the benefits that we will generate will allow us to make this project self-funding.

I believe I mentioned at the last meeting that we are targeting 50% of the initiatives as growth initiatives. That means activities or projects that are related to customers, customer satisfaction, customer service, as well as cooperation with customers and I would expect that the benefits that we will generate this year will, of course, continue to be present in the income statement in the coming years as well and so it will have a strongly accumulative effect.

I would say this time, may be perhaps a bit too early for me to exactly state what we expect in numbers going forward, because the projects are still being forming at this point in time. And we will have a better handle on that by the end of next quarter.

Thank you very much. And the second question concerning raw materials, you've stated a couple of times that you think the first quarter was a peak in terms of prices. I'm just wondering, you know, why you think that, given the high utilization rates of many of the commodity, chemical makers and recent price increases that have been announced for March and, you know, probably for April as well. Conversely, if it is the peak, would you expect that your raw material year-over-year comparisons to actually get positive for the remainder of 2004?

We expect that we will continue to see attempts at raising prices, as we have seen all along. However, in the analysis that we have made of underlying capacity utilization and so on, we think that the negotiation position that we'll have will strengthen from now on, and what you are reading mostly, as far as increases are concerned, are related to the propylene area rather than the ethylene area and I think that will come off of its high that we see at this point in time and we also believe that in ethylene we'll see it coming off of its high which it traditionally does during the summer.

Okay. Thank you very much.

As a reminder to ask a question, please press star one on your touch-tone phone. Once again to ask a question, please press star one. We do have a question from Ray Kramer. Please state your company name.

Still First Analysis. Just a quick follow-up, looking through my notes, I had written down that you had expected the Six Sigma rollout to cost 4 to $5 million. Do I have the number wrong or are most of those costs going to end up being in the second quarter?

Yeah, Ray, no, you have your numbers spot on. It's in the range of 3.5 to $4 million. There was some timing issues as far as our quarter close, as far as when the exact expenses hit. We would expect whatever was a slight shortfall in Q1 to be picked up in Q2, but we still are quite confident that our results will be cost neutral on a full-year basis.

Okay, but expect, you're still expecting all the costs to be realized by the second quarter?

There could be a little bit of trailing into the third quarter.

Okay. Thanks.

You're welcome.

Your next question comes from Godfrey Birkhead. Please state your company name.

SBK Brooks. Good morning. I had a couple of bookkeeping items. Can you give me the net worth as of the end of February, please?

$517 million, Godfrey.

Okay. And the long-term debt?

161.

Okay. Cap Ex this year?

I'm sorry?

Capital expenditures?

We expect to be somewhere in the range of 35 to $40 million.

Okay. And depreciation and amortization?

It will be flat with last year, right around 55 range.

Okay.

52, 55, right in that range.

Okay. Thank you very much. Al, I think I expected the, like most of us for the first quarter be down, because of these unusual costs and so forth, and then I think I was looking, anyway, it seems to me that the second quarter last year was about 43 cents, if memory serves me correctly, and I was thinking that we might do a tad better in the second quarter and then I was looking for a $1.65 for year. Can you make a comment as to whether that's doable at this point in time?

Well, I think we gave some guidance at the last conference call, and the expectations that we, at this point in time see are basically in line with that guidance that I gave and I think that still is correct.

Okay. Okay. Thank you very much.

Your next question comes from Jeffrey Zekauskas. Please state your company name.

J.P. Morgan. Two questions. You spoke of the acquisition environment as being more interesting. Can you just give some very, very rough quantification on what you expect to achieve this year, or what would be sort of a very successful and good acquisition world for you? In terms of, you know, how Fuller may increase in size, if you got what you wanted.

And secondly, can you talk about your long-term goal as of SG&A as a percentage of sales? In that over time you talked about the commoditization of your business but your SG&A expenses are still more than 20% of sales. Should it be sizably lower over time? Or, you know, are we more or less where you can get it to?

Well, let me start out with the SG&A question. I believe that for our business we should be able to bring our SG&A down into the range of about 18%, and I've stated that before and I think that still is a target that we can achieve.

Mm-hmm.

We will, and that depends, of course, a little bit on, and that ties into your first question, how we're going to do in the area of acquisitions, because if our acquisitions are going to be more focused on the area of Full-Valu specialty of branded products, products that are closer to the consumer, we may, of course, see businesses that have a higher gross margin, but also carry with it generally, a higher degree of marketing expenses and marketing costs. And that may possibly impact a little bit the target that I had mentioned earlier.

In the area of M&A, I believe what we're seeing at this point in time, and that's really leading to the increased activity, I think people are coming out of a period of disappointing results, some companies are losing patience with underperforming products, or product lines or departments or units and are making those available for acquisition rather than trying to hold on to them. And I think also on the part of the acquirers, the outlook is a little bit more positive, which generally affords more interest and we see that clearly. The deal flow is increasing significantly.

I would prefer a stronger emphasis and that's why we're focusing in this area, on the acquisition area and our Full-Valu specialty area because I believe that will give us a growth platform that will give us greater growth rates and it will also give us higher margins for our business.

And, again, if you were relatively successful, you know, does this mean that maybe you would add $100 million in sales to Fuller this year?

Well of course that depends a little bit on the individual deals and transactions and when they will come to fruition but I would certainly expect and drive for at least $100 million over the next 12 months in addition and if it's going to be $300 million, I'm not going to be disappointed.

Okay. Thank you.

Your next question comes from Frank Dunow. Please state your company name.

Edge Capital. When you reduce the working capital which you're disappointed in the levels, is there going to be a negative impact to earnings as you try to right-size the business or maybe ramp back production for a little bit to try to get things in line?

No, we don't think that will impact our manufacturing side or our production side at all. It's strictly more of a disciplined focus on managing both the P&L and the balance sheet. We tend to think that it's a tremendous opportunity for some cash generation, and quite frankly, it will just strengthen our balance sheet further and as Al alluded to in our M&A strategy, it will really tie up into the freeing net cash to have some of these acquisitions funded internally.

Okay. Thanks.

You're welcome.

Your next question comes from Richard O'Reilly. Please state your company name.

Standard & Poor's. Good morning, gentlemen. I'm really impressed with the volume growth. I think that's the best in at least two years and maybe Scott can go back further. But I was interested in, John, I think your opening comments you use a tonnage figure of 5%, or 5.2%. I'm just wondering if that number was right? What's the difference between tonnage and volume?

The difference, when I explained just tonnage, and then when we break it out into volume, the volume includes the mix and the delivery as well.

The volume, basically ties to a dollar amount.

Okay.

Thereby we have to include the mix.

Okay.

Whereas the tonnage is purely related to the actual volume ships.

Okay.

We also define that in our Q and our K.

Okay, fine I will look that up. And I think you said in North America the volumes were up 3% and the tonnage was 7%.

That's correct.

Yes.

Right. Okay. I mean, that's --

What you see there reflected is of course that automotive did very well in the first quarter and automotive generally tends to have a lower price level.

Yeah, let me just clarify one thing you said. I said on a consolidated basis that our tonnage was 5.7%.

Oh, 5.7%. Thank you. Okay. Good. That's it. Thank you, John.

And once again, to ask a question, you can press star one on your touch-tone phone. And I'm showing no further questions at this time.

All right, thank you, Sarah. We'd like to thank all those that took the time to listen and participate in today's conference call and since there are no more questions we'll conclude this conference call. Thank you.

This concludes today's conference. You can disconnect at this time.