Chart Industries Inc (GTLS) 2008 Q2 法說會逐字稿

Good morning and welcome to the Chart Industries, Inc., 2008 Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. As a reminder, today's call is being recorded.

You should have already received the Company's earnings release that was issued earlier this morning. If you have not received the release, you may retrieve it by visiting Chart's website at www.chart-ind.com.

A telephone replay of today's broadcast will be available following the conclusion of the call until August 14. The replay information is contained in the Company's earnings release.

Before we begin, the Company would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in the forward-looking statement.

For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the information regarding forward-looking statements and risk factors included in the Company's earnings release and latest filings with the SEC.

These filings are available through the investor relations section of the Company's website or through the SEC website, www.sec.gov. The Company undertakes no obligation to update publicly or revise any forward-looking statement.

I would now like to turn the conference call over to Mr. Michael Biehl, Chart Industries' Executive Vice President and Chief Financial Officer. You may begin your conference.

Thank you. Good morning, everyone. I'd like to thank all of you for joining us today. I'll begin by giving you a brief overview and highlights of our second quarter results, and Sam Thomas, our Chairman, President, and Chief Executive Officer will provide highlights of the operating results for each of our business segments. And then I'll finish it up by giving our revised outlook for 2008.

We're pleased with our second quarter results. Sales for the quarter $197.8 million representing an increase of 18% compared to net sales of $167.6 million a year ago. The sales growth of over $30 million was led by our energy and chemical segment, but we also had positive sales growth in both distribution and storage and our biomedical businesses.

Net income for the quarter rose to $22.2 million or $0.76 per diluted share, a significant increase over the $8.4 million in net income or $.32 per diluted share reported a year ago. We should note, however, that the second quarter of 2007 did include $7.1 million of one time, pre-tax, non-cash, stock based compensation expense from the vesting a performance based options in conjunction with our secondary stock offering completed in June 2007.

Our gross profit for the quarter was $64 million compared with $51 million a year ago. This increase was led by our energy and chemical segment due to improved project mix and execution, but also due to performance incentives and change orders earned during the quarter. In addition, our biomedical segment contributed to the margin expansion due to higher volume and improved pricing.

With the strengthening of foreign currencies against the US Dollar, we had favorable impact from currency changes when comparing to the quarter against the same quarter in 2007. This primarily impacted our distribution and storage segment with our operations in the Czech Republic and China, and our biomedical segment because biological storage system sales are largely transacted in Euros.

For the quarter, the benefit from these currency changes increased sales by approximately $9 million in gross profit by approximately $3 million if you apply the currency rates that were in effect in the 2007 quarter against the 2008 quarter results.

SG&A expenses for the quarter were $26.3 million or 13.3% of sales compared with $28.8 million, or 17.2% of sales for the same quarter a year ago. As I mentioned earlier, the 2007 quarter included $7.1 million in stock based compensation expense from the vesting of performance based options from the vesting of performance based options in conjunction with our secondary stock offering last year.

Excluding these charges, SG&A expense as a percentage of sales would have been 12.9% of sales for the prior year quarter. The growth of SG&A expenses in the current year was primarily the result of increased support costs related to our business growth. Amortization expense for the quarter was $2.8 million or 1.4% of sales compared to $2.6 million or 1.5% of sales for the prior year quarter, reflecting additional amortizable and tangible assets from our acquisition.

The quarter had a foreign currency gain of $1.5 million compared with foreign currency loss of $600,000 for the same quarter a year ago. The majority of this currency gain occurred in our Czech Republic subsidiary as the Czech Koruna strengthened significantly against all currencies, including the Euro. Since many customer contracts and supply purchases are in Euros at this subsidiary, they use forward and spot contracts to sell Euros and purchase Korunas at set rates, which are needed to pay employees and certain suppliers. These currency hedges have provided the majority of the majority of the currency during the quarter.

Income tax expense was $9.2 million for the quarter and represented an effective tax rate of 29.3% compared with $4.3 million for the quarter, representing an active tax rate of 34.1%. The decrease in the effective tax rate was primarily due to an increase in foreign investment tax credits and lower foreign tax and domestic state tax rates.

In addition, during May of 2008 the Internal Revenue Service completed an examination of the company's US Income Tax Returns for 2004 and 2005. As a result, the company's unrecognized tax benefits decreased, resulting in an income tax benefit of $230,000, which reduced the current year's tax expense. Therefore, the effective tax rate for the full year is now expected to approximately 30% versus our previous estimate of 31%.

From a cash flow standpoint, we continue to generate positive cash flow from operations with our cash billion at $101 million at June 30, 2008 and that's after paying almost $19 million for our acquisition which closed on April 1, 2008. Cash provided by operations for the quarter was $13.2 million compared with cash provided by operations of $7.3 million for the prior year quarter. The increase was primarily due to higher net income, partially offset by increased inventory in accounts receivable to support our business growth.

Cash used in investing activities for the quarter was $21.5 million compared with $5.6 million for the same quarter in 2007. Capital expenditures for the quarter were $2.7 million compared with $5.6 million a year ago. Capital expenditures in both periods were primarily used for facility expansions to support business growth. The 2008 period also included $18.8 million for the acquisition that we closed on at the beginning of the quarter.

For the quarter cash provided by finance activities was $800,000. The year ago quarter included $40 million of voluntary principal prepayments under the term loan portion of our senior credit facility and $38.1 million in net proceeds received from our secondary stock offering.

Now, I'll turn the call over to Sam Thomas, who will review our operating results of the segment highlights.

Thank you, Michael, and good morning, everyone. We were very pleased with our second quarter operating results, which again were led by our energy and chemical segment. At energy and chemicals, or E&C, sales grew by 35% to $78.2 million for the quarter compared to $58.1 million for the same quarter in the prior year.

E&C growth profit margin increased to 32.1% in the quarter compared to 27.2% for the same period in 2007. The improvement in project mix includes significant work on LNG liquefaction and petrochemical projects. In addition, performance incentives and change orders were earned on several projects, improving margins by about 1.5%. These performance incentives for early project completion are validation of the positive changes that E&C management has made relative to project execution.

We should note that the second quarter of 2007 included additional costs from complex one-time, long-term insulation projects that lowered results, as well as other fixed price contracts where we have incurred escalating raw material and labor costs.

At our distribution and storage segment, or D&S, sales increased by $6.6 million to $93.2 million compared to $86.6 million for the second quarter of 2007. The increase was primarily due to an acquisition and higher volume in packaged gas systems as a result of continued growth in the industrial gas market. D&S sales also benefited from the strengthening of foreign currencies against the US Dollar, as Michael previously mentioned.

Lower volume in US bulk storage tank shipments and the timing of price increases versus material cost increases were the primary reasons for the decline in gross profit margin to 30.8% in the quarter, compared to 31.8% a year ago. It should be noted, however, that the US bulk storage tank orders rebounded somewhat during the second quarter of 2008 and the trend we've seen over the last several quarters appears to be turning.

As you may recall, the Linde-BOC merger had resulted in lower US bulk storage tank shipment, as they integrate and work through existing inventory levels. While there was gross margin deterioration due to the rapid strengthening of the Czech Koruna versus the Euro, much of this was recovered in the currency hedges that Michael mentioned earlier.

Our biomedical segment sales for the quarter increased to $26.4 million from $22.9 million for the same quarter in the prior year. All product lines contributed to the sales increase. Both medical respiratory and biological storage system product sales increased due to higher volume, particularly in biological storage systems where we are seeing strong growth in both domestic and international markets.

Biological gross profit margin increased to 38.4% in the quarter compared to 34.5% a year ago. The improvement in margin was due to higher volume and continued shift to higher value added customer solutions for biological storage system sales, as well as favorable currency impact from Euro denominated sales.

Backlog at June 30 approached the $0.5 billion milestone at $498.1 million, 6% greater than the March 31, 2008 level of $468.9 million. Orders at E&C during the quarter were $85 million compared to $51.1 million in the first quarter of 2008. Orders during the second quarter of 2008 included a number of smaller orders totaling an excess of $30 million destined for the Asian market, which demonstrates how strong and important that market is to us.

Projects includes several ethylene plants in China and Singapore, natural gas processing plants for Korea and Thailand, and numerous air separation projects in China where our braised aluminum heat exchangers are used. Our bid and proposal activity has remained strong with multiple opportunities involving base-load LNG plants and other products related to propane dehydrogenation or PDH, nitrogen rejection, and clean coal technology applications for industrial gas companies.

As you may have read, Energy World Corporation has publicized its plans to move forward with construction of additional LNG projects in Indonesia and Queensland, Australia. We're optimistic that the successful relationship between Energy World and Chart E&C will continue for these projects.

Orders to distribution and storage in the quarter were very strong at $115.4 million compared to $91.1 million for the first quarter of 2008. This represents one of the strongest quarters for order intake in recent history for D&S. Orders include several large engineered tank orders as a result of what appears to be stronger demand in the global industrial gas market.

In addition, as I previously mentioned we also noted a small improvement in US bulk storage tank orders during the second quarter of 2008 relative to the last several quarters. Distribution and storage backlog has grown to $146.5 million at the end of June, an increase of $22.3 million over the backlog at March 31, 2008.

Biomedical orders in the quarter were $26.7 million which increased $4 million over the $22.7 million of orders during the first quarter of 2008. Medical respiratory orders rebounded from the first quarter, which was negatively impacted by elections in Italy, one of our largest markets, as healthcare providers were concerned about potential impact on the regulatory environment with respect to medical respiratory. Those issues did not materialize and our orders improved during the second quarter.

Michael will now provide you with our updated outlook for 2008.

Thanks, Sam. Based on year to date results, current order backlog, and second half expectations, the company is raising previously announced sales and earnings guidance as follows. Our net sales for 2008 are now expected to be in the range of $770 million to $800 million compared with the previous guidance of $745 million to $780 million.

Our diluted earnings per share are now expected to be in the range of 255 to 265 per diluted share compared with prior guidance of 233 to 245 per diluted shared, which is based on an effective tax rate of 30% and approximately $29.1 million weighted average shares outstanding.

Thank you for participating in our conference call. This concludes our prepared remarks and I'll turn it over to the operator, open up the lines for questions and provide the participants with instructions for doing so.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. And your first question is from James West from Lehman Brothers.

Good morning, guys. Sam, we've obviously been tracking the Energy World news that's been coming out as well, plus I've seen at least one award recently from Bechtel in Australia and it looks to me like, I guess first off your LNG orders could start to accelerate here in the next, call it, six months. I guess, first, is that an accurate statement and then secondarily, do you need to, or are you planning to add additional capacity in anticipation of this?

There has certainly been an increase in LNG bidding activity and working through the details of bringing these projects to fruition, getting full funding for them, which is exciting for us. But we try not to get too excited before we actually close the deal.

And in response to your question about capacity, we have added capacity in many areas and we're well set up for braised aluminum heat exchangers, in particular, a key component. In terms of our fabrication areas, we have capacity. We also have plans ready to go forward for increasing our capacity both here in the US and in China to meet anticipated orders.

And Sam, where would you say your utilization is currently?

It varies by site, but I would say in general we're in the 75% to 80% of installed capacity.

Okay, and then Michael, I had a question on the E&C business. Obviously, very impressive margins for the second quarter. I think Sam mentioned a 1.5% was from -- instead of awards ran into some contracts, but going forward do you think that margins could be maintained at probably a 30% or higher level?

Yes, we think for the year, the average probably in the 30% range, but there's potential that it could go higher because there's potential for more change orders and more incentives out there.

Okay, great. That's all I had. Thanks, guys.

Your next question is from Ole Slorer from Morgan Stanley.

Congratulations with a very solid set of numbers there. Well, Sam, half a year ago you warned a little bit of a slow down in the US domestic market, industrial market. Since then, sort of economies and everything have turned maybe to progress a little bit worse than we thought, rather than better.

So what is it that turned out so much better than what you thought back then?

Well, there are times when I like being wrong, but the US has been a very interesting environment, because while we're certainly seeing lots of struggles in the economy, significant parts of the US manufacturing base are still very strong, whether it's because we have high exposure to energy related manufacturers, or the weak dollar encouraging exports of US manufactured products from heavy manufacturing.

Our customers, and hence we, have enjoyed continued demand. In addition to that, we worked pretty hard in all of our businesses at identifying opportunities where the markets were growing when some of our traditional markets were softening, so that we've opened up new applications. And our success in doing that has really been gratifying.

We've won orders for, as an example, within our distribution and storage business for CO2 carbon capture applications in combined heat and power, power plants. We've been a beneficiary of the Port of Los Angeles converting all of their trucks over to LNG vehicles, winning both LNG refueling stations and LNG vehicle tank contracts. And we've won some large storage tank business, or in our D&S business, or effectively new applications, things like nitrogen injection to stabilize the heat content of LNG in peaking stations.

So we've been very successful in prospecting for and winning new applications for our products, and tailoring our products accordingly, and winning as a result of that. So it's very encouraging.

It looks as if the domestic natural gas prices might trend well below world prices for the next 10, or 12 to 18 months. If domestic natural gas prices stay relatively soft, how will that affect your business? A lot of your customers will be very competitive, but have you thought about that?

We spend a lot of time trying to understand that and our business is sufficiently diversified that if one segment goes down, we're oftentimes picking up elsewhere. A period of relatively soft US natural gas prices doesn't concern me overly. We've seen lots of drilling activity in the US, which has helped our E&C air cool heat exchangers. It's pumped up natural gas processing projects and I guess what we've seen is that if you US natural gas prices trend down, there's a fairly effective floor that comes up pretty quickly from increased use of natural gas for Power-Gen.

So I'm not overly concerned. I guess a feature is that the projects that are hottest in terms of looking like they're going to move forward for LNG are in Asia where spot market and contract prices are in contrast to the US, amongst the highest in the world.

Absolutely. I was thinking more in terms of US chemical or other industries becoming more competitive, and therefore somehow require more clean oxygen or oxygen compression, or anything along those lines.

Well, that's a good point, Ole. The products that we supply that are used in efficiency improvement projects will be positively benefited. I think that when you look at the US chemical industry, what we're seeing is marginal plants being out of production and the most productive plants getting significant capital expenditure improvements, which we've tended to benefit from.

So we seem to be very well exposed to people adjusting to higher energy prices worldwide and the drive for higher efficiency. And I think that the key feature is that a big part of all of these things, whether regardless of where spot prices are, I believe we're going to see a fairly long-term trend towards investment in energy conservation, which again we tend to benefit from.

So based on your capacity and how you see the industry, do you think it's fair to assume that you can manage, say, a multiyear, high teens, top line performance, sales growth?

Yes, I would be happy to confront that problem and I think we're well positioned to do it. We've got capacity available and within the time frame where we run out of capacity, we've got the capability and the cash flow to put in additional capacity. So I feel very good about that.

Finally, we're hearing some rumblings that various players are considering US LNG export facilities. Are you seeing enquiries of any of your products that might support that?

I have not seen those go to a proposal level. I think they're at -- my view is that they're at the level of rhetoric and raising the view that there is more US natural gas available. I guess I personally would be surprised to find that outside of Alaska, that the US would build an LNG export terminal. I think we've got plenty of good uses for natural gas in the US, whether it's for Power-Gen, or as Boone Pickens has suggested, as a vehicle fuel.

Thank you, Sam.

Your next question is from Michael Weisberg from ING.

Hi, everyone. Great job as usual. Sam, one would have expected maybe the check subsidiary in D&S to see some softening in Europe. It doesn't sound as if that's happened. Or has it happened a bit? Because it sounds, just from your talk, that the Asian end market is really the strong ones. Or was that evidenced in the China subsidiary growth?

It is. Our China facility has seen lots of demand growth and our biggest constraint in China is adding qualified people to ramp up capacity. The underlying demand is very robust. In the Czech Republic, we did see some softening of demand for standard bulk tanks for Western Europe, as there's been some consolidation amongst the industrial gas players within their country organizations to a more Pan-European approach.

But we've successfully maintained very strong order intake with some of these diversified applications that we've chased. So that in fact their demand has been robust. In fact, their backlog is at an all time record level.

That's great. Great job, guys.

Your next question is from Pete Wahlstrom from Goldman Sachs.

Staying on the E&C margins just for a minute, do the majority of your contracts have performance incentives and are they solely related to the delivery schedule? Or is there something -- some other aspect that we should be considering?

The majority of our contracts do not necessarily have performance incentives, and typically those that do have performance incentives are related to schedule. There are some opportunities occasionally for exceeding cost targets or performance targets, but those are the exception. The benefit that we refer to here were primarily associated with change order -- with getting agreements on change orders for changes of scope in projects, or for meeting accelerated delivery schedules.

And from a change order perspective, is that also a majority of projects? Or do you tend to see those, maybe, one in three, one in four times when a contract comes up?

When you're dealing with EPC contracts, referring to better project execution oftentimes means being better at going after and getting change orders. So where in the past change orders as a significant portion of the final revenue on a job may have been the exception, in the current world it's becoming more of the rule.

So at the current time I would say that perhaps 30% to 40% of our contracts involved change orders where the revenue may grow more than 10% as a result. And that number, over the next couple of years, may grow slightly.

Thanks. That's helpful. And saying on E&C for a minute and just thinking about the scale of a couple of your projects, is there really a healthy mix between small, medium, and large projects? Or have you seen a recent trend toward one particular size?

I think if you look in the context of our project pipeline, it probably hasn't changed significantly. We're certainly seeing more interest in small and medium scale LNG projects and there is more of them in our bid pipeline. But at the same time, the past six months of very high Asian spot market prices for LNG has meant that quite a few of the Asian, or Austral-Asian potential projects have had increased activity on them. So the balance remains.

Okay, shifting to the D&S segment, you mentioned that some of the bulk tank orders were a little bit light in terms of volume, but bulk tank orders suggest an uptick in 3Q margins. Would that be a fair assumption?

Difficult to call. I think one thing that's worth pointing out, we're more or less forecasting fairly flat margins in D&S going forward for the rest of the year. But there is some upside potential from mix with large engineered tanks, and a part of the margin decrease compared to last year in D&S, or a significant part of it was related to the rapid appreciation of the Czech Koruna versus the Euro.

Our hedging worked effectively because a good part of that currency gain we reported was the offset for the loss in gross margin there. Because when we get rapid changes over a period of one or two months, it's difficult to get that reflected in pricing to customers immediately. There's a lag and, again, hopefully as it did in the past quarter, the hedging activity blocked that.

Okay, and lastly, could you just quickly walk through the prioritization of cash? And as you screen potential acquisition candidates, are you still targeting tuck-ins, or could there be something a little bit larger? And has valuation been a sticking point? Or have these remained relatively reasonable?

We've got a good portfolio of acquisition targets that we're working on, both tuck-ins and potentially some larger acquisitions. I am concerned by pricing expectations because the market in the areas that we're most interested in is fairly buoyant right now. We'll continue to be patient and not overpay.

It has led me to push all of our management teams to be more aggressive and do more work on capital expenditure for organic acquisitions. I think there's more potential there. Failing that, we'll consider other uses that would provide the greatest shareholder value. But I remain optimistic that we'll be able to make acquisitions, but we're not -- don't feel pushed to make them at very high prices at the moment.

Thank you.

(OPERATOR INSTRUCTIONS) And your next question is from Greg McKinley from Dougherty.

Good morning. Wanted to ask you a little further detail about the Energy World relationship. Can you remind us at this stage how much backlog remains on the initial order that you received last July?

Yes, there is right now at the end of the second quarter there's about $66 million sitting in backlog, still, related to Energy World, which is about 19% of E&C's backlog and about 13% of the company's total backlog.

And so as you mentioned at the beginning of the call, we've seen the company talk about some Australian opportunities as well as what they've called a Phase II potential to the Indonesian Project. What should we expect in terms of an order in advance of actual work commencing? What type of timing lead would there typically be when they award you an order before the project commences?

Following receipt of order, there would be two to three month delay before we had significant work on going forward, or significant revenue generation under percent of completion. Is that what you meant?

Yes, okay, and from a -- when you're looking at your current backlog, are you seeing much of a shift in the mix between LNG, natural gas processing, ethylene, et cetera? And are any clean coal or oil sands projects beginning to play a bigger role in the backlog?

They are. First, in our backlog LNG is still the largest of the roughly five segments we divided into. But in terms of order intake over the past six months, air separation, a large part of which is perhaps as much as 40% of the total air separation we're doing now is for clean coal or oxy-fuel combustion applications.

Another very strong feature of the past six months' orders has been in natural gas processing, where early stage as more natural gas is being produced is the equipment to clean it up for pipeline use, to take out the natural gas liquids particularly. And that has been a particularly robust part of our first six months order intake.

And then my last question related to gross margin. When you look at margin going forward, how much of the opportunity that's still out there for you would you say really relates to product mix versus, I think you opened the call saying utilization is maybe at about 75% with some of the capacity expansion you did last year.

Can you give us a sense for how mix versus utilization sort of play out in your margin outlook, which plays a larger role?

That may be beyond my capabilities.

Well, I guess I'm just wondering how much opportunity lies out in front of you as you move toward fuller utilization at your expanded facilities?

I think that there's lots of opportunity and we certainly have upside. It's difficult to assess the pricing and the capacity utilization of our competitors, which makes a significant difference. We have opportunities out there. We work very hard to take such good care of our customers that they don't consider using anyone else, but we're not 100% successful.

Thank you.

(OPERATOR INSTRUCTIONS) And your next question is from David Anderson from UBS.

Hey, Sam, if we're looking at your distribution storage inbound orders, they've moved up pretty substantially the last four quarters. They were kind of at a run rate of about $70 million, $75 million. Now we're over $100 million now. Can you talk a little bit about what's happened over the last four quarters to change that?

I know you've talked about foreign currency has helped a little bit, but that's a pretty big jump. Can you just kind of walk us through a little bit how we've gone from there to here now.

Yes, if you'll remember that we have been growing capacity in all three of our locations and sales have been growing, some that you mentioned has been related to currency. But we've taken on a higher percentage of orders that are either for larger engineered tanks that have longer lead times because of material availability, or our space capability.

But there's also an element of selling to larger projects which, although the order is placed, they may not need the tank for 12 months, or 14 months. In other words, they're releasing orders based on a whole package of products that the tanks aren't on the critical path. So that some of them are for deliveries stretching out a little bit longer than we've historically seen.

And then there are others where there are orders for multiple tanks that may have a spread of 4 to 6 months before they are all utilized, because the case of ramping up on a site. But it's really a reflection of the fact that as some of the smaller tank business has declined slightly because of reduced industrial activity either in the US or Western Europe, we've supplanted that with larger project work which has longer lead times.

So I feel pretty confident that over the second half of this year and going into 2009, we'll start to see higher levels of shipments and a flattening of that backlog.

So it's sort of a catch up, because I guess if your revenue has been kind of growing at a slower pace on a sequential basis than your inbound, than what you're suggesting is more of a timing thing that should work out into next year.

Correct.

Now, how confident do you feel in terms of the projecting out those inbound orders from here on out? It's moved up pretty strongly the last four quarters. Where do you think it goes from here? Do you think it kind of continues to move up from here, or does it flatten out? What's your best guess right now?

I think the best I can do is just refer to our project activity, which is strong, and to our major industrial gas customers who are all fairly bullish. You probably noted that virtually everyone in the industrial gas world reporting has been raising their guidance and talking about strong project backlogs on their own.

So I feel pretty good that in the current framework, our customers are saying to us that they're seeing increasing activity levels going forward.

And looking over at the energy and chemicals division, on your backlog, $342 million or so. How much of that is in '09 and how much in the remainder, '09, roughly?

Bear with me just a minute. I just need to back into that. Roughly 50% will ship in '08. The balance, '09, I would say that if you go out 12 months from June 30 that we're probably still going to ship on the order of 85% of that backlog within 12 months.

Okay, that's the number you've quoted in the past, right?

Yes.

And with D&S, is that more like 60% or so, like 60% and 40%, 60% '08 and 40% '09, something like that?

I don't have those numbers close to hand, but that would seem very reasonable.

Kind of in the ballpark, right?

It would be in the 60% to 70% range.

Great. That's all I have. Thanks.

(OPERATOR INSTRUCTIONS) And there are no further questions at this time. Do you have any closing remarks?

I'd just like to thank everyone for participating today and to stress that as I've said previously, we're really excited about the prospects for Chart. I'm particularly gratified with the performance of our entire management team and all of our employees over the past quarter. And it really makes me very confident looking toward the future of our potential to continue growing. Thank you.

This concludes today's conference call. You may now disconnect.