Hubbell Inc (HUBB) 2004 Q1 法說會逐字稿

Good afternoon. My name is Marcy, and I will be your conference facilitator you the today. At this time I would like to welcome everyone to the first quarter 2004 earnings release 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 period. If you would like to ask a question during this time simply press star 1 on your telephone keypad.

If you would like to withdraw your question press the pound key. Thank you. At this time I would like to turn the call over to Tom Conlin, Vice President of Public Affairs. Go ahead, sir.

Good afternoon, and thank you for joining us, everyone. Couple of preliminary comments, as is usual.

This earnings conference call is being simultaneously webcast on the Hubbell corporate website at Hubbell.com, and it will be archived on that website under the Investor Relations tab.

You may also replay the telephone -- by telephone, starting two hours following the conclusion of the call, by dialing the replay access number which is 706-645-9291, and entering the passcode for this call which is 6682330. Let me also refer everyone on the call to the paragraph in the press release about forward-looking statements.

I'd like to in corporate that paragraph by reference into today's conference call.

Though we're all familiar with it, the paragraph discusses the fact that forward-looking statements involve numerous assumptions, known and unknown risk and other factors that may cause our actual results to differ from any expectation we may discuss here today.

With me at Hubbell headquarters in Orange, Connecticut, is Tim Powers, Chief Executive Officer of Hubbell, and joining us from another location by telephone is Bill Tolley, who is the Chief Financial Officer. We'll start with Tim Powers with a brief discussion of our first quarter results.

Tim.

Thanks, Tom. Last call, after the fourth quarter, we said that we expected that the first half of 2004 would look much like the second half of 2003.

Slow but steady growth in our end-use markets with a 2 to 4% growth year-over-year in sales, and one full point of operating margin improvement. We were pleasantly surprised with the strength of our first quarter, particularly in March.

The 11% increase -- sales increase had a nice drop-through effect on earnings, but we think that a portion of the additional first quarter activity was driven by customers trying to beat the announced price increases across the industry. More on that in a minute. We also continued to be pleased with the increased productivity in our factories, warehouses, and offices.

This improvement, along with higher sales, helped push our first quarter operating margins up by over three points versus last year.

First quarter earnings per share were 56 cents versus 36 cents last year, an increase of over 50%. Which continues the upward trend over the last several quarters. Bill will have more details on the first quarter results in a few minutes.

Our biggest challenge in the first quarter was the impact that raw material cost increases had on our costs and pricing. As you know, over the last several months, most metal prices have risen.

Steel has risen by over 80%, copper by 70%, nickel and aluminum by 30%, diesel fuel is also up, which drives freight costs. These cost increases had only a modest effect on the profitability in the first quarter, but the effect grew in each successive month, and will be felt in full force in the second quarter and into the second half of the year.

In response to these cost increases, we announced price increases to our customers across all of our businesses as did our competitors. The size of these increases vary depending on the degree to which raw material increases affected the cost of the product.

Our Raco Metal Box, Wigman steel enclosure, and utility hardware businesses were most heavily affected since those products have the largest metals content, with some lighting businesses also affected but all of our businesses were affected.

The question as we head into the rest of 2004 is: will the raw material cost increases that we are seeing today continue upward, hold, or will they decline, and at what rate, and will the price increases recently put in place across the industry be realized or not.

I'll have a few more comments on this a little later. A few comments on the state of our end-use markets.

While the pace of our recovery in broad economic terms seems to be gathering momentum in our markets, that's Hubbell's market, we continue to see a very slow recovery. Commercial construction market continues to be burdened by the bubble of overbuilding created in the late 1990s.

Nonresidential construction activity is still contracting and was down in the first quarter by 3 to 4% year-over-year. And with the construction industry consuming over 40% of the steel produced in the U.S., the recent run-up in steel prices won't help the construction industry recover.

Nevertheless, we expect that the market will bottom sometime this year and start to head up in the second half, which bodes well for our more substantial market recovery in 2005. Residential housing markets, we believe, have peaked, but remain very healthy, driven by optimistic consumers and by low mortgage rates residential construction activity in the first quarter was up 13% year-over-year.

National home builders continue to support strong backlogs and home renovation and Diy activity continues at a high level. Although capital spending looked like it has turned the corner, industrial construction activity continues to decline. But the declines are now in the low single digits.

This, along with a steady increase in factory maintenance and repair activity, generated a modest increase in our overall industrial sales in the first quarter.

With factory utilization rates still low, we don't expect that the industrial construction market will grow at all this year and perhaps not even next year. But with MRO spending increasing in the mid single-digit range and capital spending trending up, our industrial sales may be up this year after several years of substantial decline.

Finally, the utility markets are flat. The industry continues to be plagued by uncertainty about energy policy and a lack of rules for rates of return on transmission and distribution investments.

As a result, we are seeing a lot of T & D projects and investments on hold, and that said, we continue to be pleased with our ability to grow our sales in a soft market. The need for substantial investment remains.

We are hopeful that legislation will eventually be passed that will clear the regulatory fog that is slowing the investment in our utility infrastructure. In summary, our markets are starting to turn, and we are more optimistic about our markets and the state of our recovery now than we were in December. And as we have said before, 70% of our business are in markets that are bottoming and are starting to turn up.

That bodes well for a substantial market growth, particularly in 2005. But there is considerable concern about the stability of the recovery and the effect that raw material costs will have on our industry in the near term. At this point, I would like to pass the discussion to Bill Tolley for more details on the first quarter.

Bill.

Thanks, Tim. And hello everyone. As Tim said, we were very pleased with our progress in the first quarter, but as Tim will discuss when I pass it back to him for comments on the future, we're very cautious at this point about extending the first quarter's results to the full year.

Our end-use markets are continuing to recover but they're far from buoyant, and a portion, as Tim said, of the first quarter sales increase we think was customer prebuying in front of the price increases we announced in February and March.

The 11% year-over-year sales growth was driven by a slow but continuing recovery in our core end-use markets and we believe share gains in some markets.

The year-over-year comparison was also made more favorable due to foreign exchange rates, about a point benefit year-over-year, the fact that activity in February and March of last year slowed measurably, leading up to the Iraq war, and an increase in shipping days in the first quarter of this year.

First quarter sales were up 5% sequentially from the fourth quarter, and all segments were up both year-over-year and sequentially. As you saw in the press release, first quarter earnings per share 56 cents this year, 36 cents last year, both periods included about a penny of restructuring expense.

From our perspective the highlight of the quarter was the three-point year-over-year improvement in operating margins, and that was after an incremental 2.5 million of pretax expense associated with the Hubbell 2006 business system initiative.

As was the case in the last half of last year, almost all of the operating margin improvement came on the gross margin line, more evidence to us that productivity gains across the corporation are translating into improved profitability.

We continue to be net debt free after very strong cash flow in the fourth quarter of last year, our first quarter cash flow reflected a build in working capital to support the sales growth and a typical increase in accounts receivable and inventory in March as we head into the seasonally stronger second and third quarters. For the quarter we generated $25 million of free cash flow from operations.

After using 7 million of cash for capital spending, we used the remaining cash to pay our quarterly dividend of $20 million and to purchase $2 million of Hubbell stock which was offset by $4 million of option exercise proceeds.

Net debt at the end of the first quarter was a negative 3 million, up 1 million from year-end 2003.

Net inventories increased by $7 million in the quarter while days supply of inventory remained flat at 59 days. Days sales outstanding in accounts receivable rose by 1 day to 51 due to strong sales in March, but we improved our days payable during the quarter to offset that impact.

For the quarter, our operating working capital--that is, inventory plus receivables less payables, was about the same as the level in the fourth quarter of last year.

We continue to believe that there is substantial opportunity remaining to improve our working capital efficiency especially inventories, and expect to report improvement in the ratio over the next several quarters.

On to the segment results. The electrical segment's first quarter sales were up 11% year-over-year and up 4% sequentially. As was the case in the fourth quarter all four of the businesses that make up this segment reported up quarters year-over-year with the increases ranging from a low of 9% to a high of 19%.

Excluding restructuring, operating margin for the quarter of 11.2% was 2.6 points better than last year. Wiring Systems margins were much stronger year-over-year as industrial and MRO demand continues to recover.

Rough-in electrical product margins were also higher despite higher steel costs and competitive pricing, due to higher sales and higher factory productivity. Harsh and hazardous margins were also up, but modestly due to slowly improving sales and favorable project margins.

As was the case in the last two quarters, lighting margins improved nicely. Residential margins were up modestly, but combined with higher sales margin dollars grew by well over 10%.

The commercial and industrial lighting businesses also grew their sales by mid single digits year-over-year with operating margins growing by over two points. As we've been saying for the last couple of quarters, there is increasing evidence to us that the lighting restructuring actions are translating into improved profitability in this business.

Despite the fact that you utility markets in general continue to be sluggish, our power systems segment reported strong year-over-year sales growth of 11%, which is up sequentially 6% from the fourth quarter. Continuing the trend of what we think is a slow but steady increase in market share, and some utility prebuying in advance of price increases.

Operating margin of 12% grew by almost four points year-over-year and over a point sequentially driven by the higher sales and better factory performance. And finally, the industrial technology segments first quarter sales increased by 13% year-over-year driven by improvement in heavy industrial activity, which was in part due to increased steel mill activity.

Growth in our GAI-Tronics specialty communications business also continued. Operating margin of 10.6% rose by over four points year-over-year due to margin improvement in every business in this segment.

Some due to sales growth but a lot due to productivity gains. A nice job by all of these businesses. First quarter capital spend as I said of $7 million compared to 12 million of depreciation expense.

We still expect our full-year '04 capital spending will be about $10 to $15 million higher than last year's 28 million with most of that increase driven by an increase in our investment in the Hubbell 2006 information system initiative. We remain very much on track with the Hubbell 2006 program, both in terms of spending and schedule.

As we said during our last update, we expect to complete the first of several staged implementation starting in the fall of this year. A total cost for the program still expected to be in a range of $40 to $60 million spread over 30 months with the cost about evenly split between capital and expense.

During 2003, last year, we expensed about $4 million and capitalized 3 million. With the first quarter program expensed this year of $2.9 million on the books we are very much on track towards our plan to expense $8 to $12 million pretax in 2004. We will be in an investment mode for the next several quarters in this program.

Net savings from the program are expected to start in 2006 with full-year annualized savings of $10 to $15 million in 2007. Our effective tax rate for the first quarter was 28% consistent with the guidance we gave you during our last call and about two points higher than last year, due to a higher mix of U.S. taxable income.

With that, I'll turn the agenda back to Tim for some comments on the rest of this year.

Thanks, Bill. Talking about now the outlook for the balance of 2004. Referring to our markets, improving slowly but patience is required since the recovery in this construction market will be slower than the general economy, but a recovery is coming. Sales are now expected to be up between 4 and 8% year-over-year.

We expect one full point of operating margin improvement, potentially more if sales grow faster than expected and if the commodity cost and selling price relationship doesn't deteriorate. We are increasing our full-year 2004 expected earnings per share to a range of from $2.15 to 2.40, up from the old range of $2.05 to $2.25.

We still expect 15 to $25 million of restructuring expense as a result of the ongoing productivity gains and the lost-cost country sourcing not included in the earnings per share range just given. And with more progress on working capital efficiency, we expect cash flow to exceed net income despite the sales growth.

Moving to our full-year guidance for sales and earnings per share up modestly may be viewed as conservative given the strength of our first quarter results, but there are several reasons why we consider -- why we continue to be cautious.

First, we don't know how much first quarter sales strength was the result of customer prebuys in anticipation of price increase.

Second, we don't know how much of the announced price increases will stick in the marketplace.

Last, we think the overall economic recovery is fragile and the lagging recovery in our markets is also fragile. In short, it's too early, in our view, to be substantially increasing our full-year expectations on the basis of one strong quarter.

But we acknowledge the likelihood that earnings may be at the upper end of the revised range if the first quarter trend holds for the first year -- for the full year.

Just a few words on our focused initiatives. We continue to make progress on six key initiatives. Transformation of our business processes into a lean culture were becoming more lean each quarter, each year, but we still have a long way to go.

Improving our working capital efficiency, particularly inventory, despite our progress in inventory reduction over the last few years there's more to be done. Executing our lighting restructuring and cost reduction plans, are mostly factory and overhead reductions and we expect that to continue through this year and next. Global sourcing.

We continue to increase the sourcing of products and components to low-cost countries. About 15% of our cost of goods sold now are from low-cost sources, and we would expect that to rise to about 30% over the next several years. And as Bill commented, implementing an enterprise-wide information system.

We're making good progress over the first of several sequential implementations of SAP across the company, which will give us standardized processes and a common way to connect us with our customers and suppliers and increase our ability to reduce costs.

And finally, pursuing growth in our core markets, internally and through acquisitions, we continue to believe there are a lot of opportunities for to us grow Hubbell. We've demonstrated the ability to buy smart and then successfully integrate companies that are acquired.

And with an A credit rating and no net debt we have the financial capability to grow. We're looking for strategic fits in four core markets that are priced right and we will still continue to be disciplined buyers. And that, Tom, summarizes our comments for the first quarter. And I think we're ready to take some questions.

Thank you, Tim. Marcy, if you would be so kind as to open up the lines for questions.

Thank you. At this time I would like to remind everyone in order to ask a question please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q and A roster. Your first question comes from the line of [Tony Bose] with A.G. Edwards.

Thank you. Great quarter. I guess if could I get a little bit more color on your sales growth and, you know, maybe a little bit of a breakdown, and I know you said you didn't really know how much of the increase was due to a prebuy, but, you know, if you could just take a bit of a swag on, you know, prebuy versus market share gain, and end market performance.

I can tell you this much that we saw, you know, where steel was a large component of the product, you did see the most rise in business in the quarter, and that would be with our Raco product and with our utility products that are metal-based, and we believe that that was, you know, in advance of metal price increases, or product price increases north of 10%.

So that's where we had the largest surge, even though we tried to do the best we could in holding our distributors to about the same amount of material they bought last year at this time.

But I would say that we were very encouraged that there was a broad increase in business across every element that Bill alluded to, and that we are definitely more optimistic than we were even in December.

Just on the commodity increase and the impact, you mentioned that you felt that the first quarter there wasn't -- it seemed to be manageable or at least mitigated, but you'd see a full impact in the second quarter and through the rest of the year, and, one, I guess, can you quantify what you think that impact is going to be, and also why somehow in the first quarter it was, you know, you didn't feel the effect that you think you're going to see in the second quarter and for the rest of the year?

Because we had purchased as you can see our inventory rose, we were able to buy some materials at the old cost, and those were the ones that we bought in January, and then as February rolled out we saw further price increases, and by March you could see that virtually everything we were buying was at a higher price.

Also the surcharges that the steel companies put in place had two steps to them, so they're becoming magnified as time goes by, but the run rate of cost increases for us at the present time is somewhere in the 15 million as of the end of March, and we would expect that to rise to 20 to 25 million for what we can see right now.

And we think that the price increases we have put in place are more or less trying to offset that.

The question is, you know, at what rate you can battle the price, the cost increases and whether or not the industry will be able to successfully push these material cost increases through in terms of a successful price push.

Okay. So just to clarify, the 20 to 25 million, that's on a quarterly basis?

Annual right now.

Annual. So you take, you know, 25% of that, or 4 to 5 million of that would be a, you know, your quarterly impact?

But it's rising, so I would say that those are very rough numbers, and you should ask us again at the end of next quarter, because we will have, you know, a better ability to predict that, but right now I would say the cost increases are in the 20 to 25 million range and they're rising.

And also, for the power business, it sounds like that one might be the most affected on a go-forward basis with regards to margin pressure.

Can be. Can be.

We've done it -- we've tried to do the best job we can with communicating with our utility customers on this side, and making the case that, you know, the -- these product are largely steel-based, and we have had some good success in getting modest price increases through, so we're hopeful there, but there's always a lag between, you know, first you get hit with cost increases, then you're able to get the price increases later, so that, you know, our challenge is to try to determine what that lag time is between prices going up -- or costs going up first, and prices coming behind it.

Great. Thanks very much.

Sure.

Your next question comes from Robert Cornell of Lehman Brothers.

Yeah, hi everybody. Yeah, I guess just following on, on the price-cost question, I mean, when will your prices increase and when was the price increase effective, you know, if you can summarize maybe?

Virtually hardly any price increase was effective during the first quarter.

I think the first product line may have been March 15th but you still had to ship, you know, the backlog, so the effect of price in the first quarter was negligible but the range of dates that price increases are effective are scattered out into the next quarter, some starting as early as March - April 1st and going out into May.

Depending on, you know, degree to which these product are made out of, metal and also what some of our other competitors who may be leading in those market segments are doing. Sometimes we're a leader, sometimes we're a follower, and we just go with what our market position is, but most of the price increases are effective during second quarter of this year.

Just, you know, bear with me on this. So, what was sort of the price increase effort and why? Take me through wiring device, you know, rough-in, lighting, I mean, and wiring system, I mean, what --

To give you an idea, wiring devices would be modest because here you have a mix of small amounts of metal and more plastic, nylon, and so on.

You said Raco was one of the bigger ones.

Bigger ones would be Raco, for instance, is 15%.

And lighting, did you get anything --.

Yeah, lighting is fairly modest except for poles, which are made out of either steel or aluminum, and those we're trying to get up, steel poles about 15, and aluminum 10. The rest of it would be in the mid-single digits.

In the utility business what were you trying to do there, you said--

Once again, we're trying to get the products up between 5 and 10%. A little harder on that side. But pole line hardware would be closer to 10%, those kinds of things. So, depending on the content of material, we were trying to recover these cost increases.

How about just -- keep going here. The industrial tech, broadly speaking I know you have a lot of businesses in there, I mean. Can you generalize though for pricing in industrial?

Typical mid-single digits, 4 to 6, I would say, in that range.

Right.

The question is, you know, will commodity prices stop here, will they go down, will they go up, you know, so it's kind of going to be bumpy ride for the next couple of quarters. That's what I can tell you. And the reason we're being cautious is we, you know, we don't see this whole situation clearly yet.

Well, you know, one of your touchier product areas is, you know, Raco and Steel City what has been the response to the Raco price increase at this point?

I would say that our competitors are following but some distance behind us. Time wise.

So we were out front on this on the Raco side, others have been in other -- other competitors have been out you know front on other product lines, but generally I would say the industry keenly recognizes the magnitude of the materials going up here, so I would expect and I'm hopeful that in an effort to protect all of the profitability of our business that we could be able to successfully get these price increases through.

So, in this quarter you said the realized price increase was very little, if anything, right?

Right. And we had -- we had about $2 million worth of material price variation.

Okay. So that was my next question.

So you realized, you know, you had $2 million of cost increases effectively talking, you said January you had, you know, basically prebought that yourself, and February and March you started to experience adverse variance, right, and that turned into this $2 million?

Right.

And that 2 million you're saying is up to like a $4 to $5 million quarterly run rate -- is that what you're saying?

Yeah, the material variance, if you annualized March, would be in the 12 to 15 million range.

I'm sorry, I lost you. Previously, you said that -

If you just take March and you annualize it it's in the 12 to 15 million run rate of variance. So it went from like positive variance from cost savings to negative variances of run rate of 12 to 15 million.

I'm sorry, you know, you previously said that the cost hit was like 20 to 25, and in the previous question, four to five million a quarter.

I said this is how much we've seen so far. It's still continued to rise.

So the price increases you've announced will effectively deal with the 12 to 15? Or, you said I think you previously anticipated, you know, a cost increase run rate of, you know, 20 to 25, I think you said on an annualized basis. So the price increases are scheduled to recapture the 20 to 25 or the experienced 12 to 15?

Well, if you do an exact calculation we're a little bit short of recovering all of our anticipated costs but there's too many variables to predict one way or the other, how the market will allow us to recover and whether or not we have to pay all the calculated costs that we see.

You know, all I can tell you is there's too many moving parts but we think we have it covered as well as we can at this time.

Okay. I think I got it. Thanks very much.

Sure.

Your next question comes from Jeff Sprague of Smith Barney.

Hi, thanks, good afternoon everybody. Just a little more on this same road we're going down here.

I'm actually just to pick up right where you left off about, you know, whether it's covered or not. You know, you rattled off kind of a long list of price increases, obviously you don't know what sticks, but, you know, 20 to $25 million escalation over the year is something like 1.3% of sales, and you're raising selling prices 4, 6, 10, 15%.

It actually sounds like, you know, you could be way ahead of the curve, you know, if, you know, a decent chunk of this pricing sticks. What am I missing there?

You're missing the time effectiveness of the price increase on the lighting business, you've got jobs that you've accepted at old prices, and some of those have to be protected up to a certain point in time, so that's what you're missing right now, is the effectivity of price increases in different areas of your business.

And do you think, given the lag, I mean, do you think there will be a clamoring in the marketplace to roll these prices back if raw materials for some reason reverse here in the intermediate future, China melts down or something?

Yeah, certainly there will be pressure on manufacturers to do so, but I can tell you I don't have any believe that steel is going to knew down any time soon, in any big enough way to affect us.

Now, we are expecting most of the other materials to moderate as the year goes on, but that doesn't mean that at the end of the day they won't end up at the end of the year even double digits above where they began the year. So this is part of all the variables that we're talking about right now and why it's hard for to us predict.

We've done the best job we can following this on a weekly and even a daily basis, and getting as many forecasts as possible, but I can tell you it's just a moving target that we have to live with.

It's kind of, you know, a bumpy start-up to an economic recovery caused a little bit by, obviously, China factor in here, but there's way too many unknowns for us to be precise at this time, but we believe that raw material costs in general will end the year above where they began the year.

And this issue of just the price increases staging in, how long do you think it takes everything to work through the backlog? Are we talking kind of fourth quarter before everything's seeded in the marketplace, assuming it sticks?

I would say, you know, the -- it will work its way probably earlier than that, probably by the end of the third quarter we would know what's going to stick and what isn't and all of that. I would say it would be sorted out pretty quickly here.

And also just trying to get a handle on this issue of whether or not there was, you know, a prebuy, I mean, can you give us a sense of, you know, kind of, you know, the rate of sales growth January, February, and March and also, I think you said there was an extra shipping day or days in there.

On average, one extra shipping day for the quarter, and certainly January and February were a little bit better, but March was a whole lot better and I think that's what indicates to us that part of it is, you know, distributors trying to get themselves in a good stocking position, and customers, and I think it's also an awareness on customers' part of the severity of the situation and even electrical contractors trying to get their hands on conduit and wire, anything they could get their hands on that was made out of metal because many of them have fixed price contracts that they're battling with right now, and the apparent inability to pass these cost increases on to the general contractor. So it's going to be a lot of working through at every level in the industry here.

And just trying to think of the impact of the extra day, I don't -- we think --.

two to two and a half points.

So kind of a five-day week?

I would say 2% of sales or something like that.

And just looking at the four piece of electrical, you said the weakest was up 9, the strongest was up 19. Can you name those mystery business?

No.

No?

No.

And I guess, finally, do you -- I mean, do you have a sense of where, you know, distributor inventories are, you know?

Distributor inventories have not built substantially.

There are a few distributors. Those who have a higher appetite for risk that are, you know, speculating that they can figure this out and are trying to, you know, build inventory of wire and pipe and so on, but most of what I would consider the larger players in the industry are going along at their regular pace.

Obviously, you know, if they can throw an extra week or something on the shelf of rough-in electrical or boxes or conduit they might do that but I don't see any substantial move on the part of the national chains or the big regional players in any concerted way at this point, and I don't believe they're sitting on piles of inventory. I would say it's more the exception than the rule so far.

So if there was a prebuy they were going from being underinventoried, to kind of truing up?

Or they had a fixed commitment that they needed to make and they were scrambling to cover it, you know, some big job, and they knew they couldn't move the price on it so they had to cover themselves.

Okay. Thanks a lot.

Sure.

Again, I would like to remind everyone in order to ask a question, please press star, then the number 1 on your telephone keypad. You have a follow-up question from Jeff Sprague.

Just one quick number. Bill, you had said free -- I think you said operating free cash flow was 25 million. That's operating cash flow as we would find it in the cash flow statement was 25 million?

Yeah, operating cash flows before capital spending. So that would be cash flow from operations on the statement.

Right. Thanks a lot.

Your next question comes from [Roman Jenocov] from Mass Financial Services.

Hi.

Hello.

I have a quick question. Give us an update on the acquisition front. What are we seeing in the pipeline, you know, what are the expectations for the 2004?

There are -- we think there are opportunities in 2004.

Right now there are no major, you know, companies changing opportunities at this point but there are a number of mid-size and small-size deals that could happen, and the deal -- or the opportunity flow is reasonably good, and we are out doing the best we can.

Thank you.

Sure.

There are no further questions at this time.

All right, Marcy. Thank you for hosting the conference call, and I want to thank each of you for tuning in. We'll talk to you next quarter.

Thank you. That concludes today's conference. You may now disconnect.