Hexcel Corp (HXL) 2004 Q4 法說會逐字稿

Good day everyone, and welcome to the Hexcel Corporation Fourth Quarter 2004 Earnings Release Conference Call. This call is being recorded. With us today are Mr. Stephen Forsyth , the Executive Vice-President and CFO, and Mr. David Berges, Chairman, CEO and President. At this time, for opening remarks, I would like to turn the call over to Mr. Forsyth. Please go ahead sir.

Thank you, and good morning to everyone. Might I welcome you to Hexcel Corporation’s Fourth Quarter and Full Year 2004 Earnings Conference Call, today, Wednesday, January 26, 2005. With me today are Dave Berges, Hexcel’s Chairman, CEO and President, and Michael Bacal, our Communications and Investor Relations Manager.

The purpose of the call is to review our fourth quarter and 2004 full year earnings that we released last night. As always, we will be happy to take your questions at the end of our prepared remarks. Before beginning, let me cover the formalities. First, I would like to remind everyone about the Safe Harbor Provisions relating to any forward-looking statements we may make during the course of this call. Certain statements contained in this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

They involve estimates, assumptions, judgments and uncertainties, caused by a variety of factors that could cause future actual results or outcomes to differ materially from our forward-looking statements today. Such factors are detailed in the Company’s SEC filings, including our 2003 Form 10K and today’s earnings release.

Lastly, might I also remind you that this call is being recorded by Hexcel Corporation, and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes your consent to that request.

Well, having taken care of the formalities, let me first review the financials. And then I will turn over the call to Dave, to discuss our market trends and outlook. So for the fourth quarter, we continued to see dramatic year over year revenue growth, driven by the ongoing recovery in the commercial aircraft production rates, continuing strength in the sales of ballistic fabrics, and this was a good quarter for wind too.

Heavy spending on Sarbanes-Oxley related activities, the early retirement of debt, and the costs related to the recently completed secondary offering, made for some unusual pressures on the SG&A within our reported results. But yet again, we were able to have operating leverage on incremental sales.

Year over year, fourth quarter gross margin was up almost $17m. And we delivered all of that to the bottom line, as we had a $17.3m improvement to net income in the final quarter of this year. Sales of $276.4m for the quarter were 24.8% or $55m over last year. On a constant 2003 currency basis, that is with our revenues translated at the same rates as applied in the fourth quarter of 2003, sales would have been $48.3m higher, so that we’d have had about 22% real volume growth year on year.

For the year, sales were 19.8% up, to $1,074.5m. In constant currency, the increase was about 17%. While this appears to be the highest sales quarter of 2004, it’s actually a little stronger than the second quarter, solely due to foreign exchange rates. The average Euro rate has continued to strengthen throughout the year. And in the second quarter, we averaged around $120 to the Euro. This quarter we averaged $130 to the Euro.

If you computed this quarter at the same exchange rates that applied in the second quarter, our revenues would have been a little less, about $6m less than reported this quarter, about $2m less than the fourth quarter -- or the second quarter of 2004.

Gross margin for the quarter was up $16.8m, or 230 basis points over last year, thanks to good factory leverage and increased volume. For the full year, gross margin increased $54.6m, and as a percent of sales was over 180 basis points, to 21.3%, a rate comparable to the rate that we’ve achieved for the full year of 2004.

Operating income was $20.6m for the quarter, up 92%, compared to last year’s $10.7m, despite the costs incurred in respect to the secondary offering, as well as the final round of spending in terms of preparing for the Sarbanes-Oxley 404 procedures, and other miscellaneous impacts.

Depreciation was $13.1m, which was lower than the fourth quarter of 2003, when we had some accelerated depreciation we recognized. Lastly, business consolidation and restructuring expenses for the quarter were about $900,000, compared to $1.6m last year.

So, taking these components together, and looking at the year as a whole, operating income was $28.8m, despite these non-recurring impacts. And both in this quarter and in prior quarters, when we had the bad debt provision of $2.3m charges related to litigation settlement, offset in part by a gain on some sale of land.

The tax provision for this quarter was lower than it had been in recent quarters, due to the mix of earnings between our U.S. and European operations. We continued to adjust our tax provision rate, through the establishment or release of a non-cash valuation allowance attributable to currently generated U.S. and Belgium net operating income or losses. Now in this quarter, where U.S. income was higher, that valuation allowance reduced taxable income. And therefore, the tax provision was lower than it would have been, had that income been generated in Europe.

With our improved profitability, and the potential continued revenue growth in 2005, as commercial aircraft build rates increase, our tax provision rates will now move towards more normalized levels, as our earnings continue to change. The provision rate for 2004 for the full year was 28.8%. And we’d anticipate moving back into a more normal 30-40% range, as profitability grows with revenues.

Equity and earnings this year improved. In the fourth quarter, we generated a $300,000 recognition, reflecting the profitability of our U.S. based (tech fab) (ph) joint venture, and the diminishing ramp up losses at our two Asian structures joint ventures. This was a $600,000 improvement over the fourth quarter of 2003. And, if you look at the year as a whole, with these improving trends, we had $1.1m of equity earnings in 2004, a $2.5m improvement over the prior year.

So you put these components together -- lower tax provision, continued improvements in interest expense, joint venture performance -- add that to the improvements made in operating performance, and we had net income for the year of $7.6m -- sorry, net income for the quarter of $7.6m, and being a $17.3m improvement over the fourth quarter of 2003, and for the year as a whole, generating net income of $28.8m, a nearly $40m improvement over the prior year.

To simplify things today, in our news release dated January 14, we explained all the accounting behind the conversion of our convertible preferred stock, which resulted in the one-time charge of $12.9m reported today. I don’t plan to discuss that further at this moment. But, to the extent any investors have questions, we’d be more than happy to respond to them in our q-and-a section.

In terms of EPS, with that charge though for the convertible preferred stock, our earnings for the quarter are anti-dilutive. However, for those of you who are interested in what would have been the diluted share count, we provided that in the bottom of the footnote table D&R release. There were 94 million shares on a diluted basis this quarter.

Now for those of you who want to try and compute what would EPS for the quarter have been, had it not been for these non-recurring items, let me describe the methodology. You would take the reported net income of $7.6m, and add back the costs for which you might wish to adjust, namely the secondary offering expenses and the bond repurchase costs of $1.1m and $1.6m, respectively. So you would have an adjusted figure of $10.3m. If you divide that by 94 million shares outstanding, I think you will find that equates at $0.11 per share.

Another highlight of the quarter was the decrease in total debt net of cash in the quarter. It decreased by $31.7m this quarter, and $67.5 for the year as a whole, leaving net debt at the end of the year at $374.2m. Now, interest expense, as that debt has declined, also continues to climb for the quarter. We were at $11.4m, compared to $12.5m fourth quarter of last year. And for the year as a whole, at $47.7m, versus $53.6m in the year of 2003.

Last year’s refinancing, our continued debt reductions, as well as our interest rate swaps, have helped generate these reductions in both book and cash interest expense. Table C, as usual, in the release, provides a breakdown of the components of cash and non-cash interest.

Lastly, I would mention that we did disclose in the release that we are exploring other refinancing options, to obtain further reductions in interest expense. We do not plan to discuss that on this call. But we will provide details at such time as we are in position to describe what we are doing.

Cash flow, to reduce the net debt, improved from operating profitability, reductions in working capital this quarter were significant. We reduced working capital by nearly $20m for the quarter, leaving it actually improved by $5.8m for the year. Now, as a whole, as your revenues grow, your working capital will grow. And so, while we have made this improvement in this period, we’d expect that we’re going to need to invest some working capital in 2005, as our revenues grow.

Consistent with past years, the first quarter of each year tends to be a cash usage quarter. And we don’t expect that 2005 will be any different. From a capital expenditure perspective, our capital expenditures were slightly higher than we’d indicated for the year, at $38.1m. We’d suggested around $36m. Most of this change came partly from the FX impacts of the strengthening Euro, and also from the timing of projects.

Compared to where we started 2004, we have spent more. And that really reflects the more rapid rates of growth and opportunities in our markets. And in terms of looking forward to 2005, we’d indicated in the release that our capital spending will now move nearer the depreciation rate expense. In other words, moving towards levels of about $50m a year.

Well, that’s probably enough of all of the financials for the moment. Might I turn the call over to Dave, for him to give you his perspective on the quarter and the year.

Thanks Stephen. You know, since I joined Hexcel, 42 days before September 11 in 2001, cost and cash management were about the only tools we could use to really improve performance. This year, finally, we had the added benefit of solid growth in all of our market segments. And that growth accelerated in the second half, thanks to the recovery of commercial aerospace, our largest segment.

Our first half total revenue growth of 16% was easily topped by a 24% increase over 2003 for the second half of the year. Let me just run through the trends by market, using constant currencies to indicate the real volume growth. In the fourth quarter, constant currency commercial aerospace revenues were up about $28m, or 31% over last year, thanks to the shipments to support higher OEM build rates in 2005, and to growing shares, by growing sales to the new composite intensive A380 program.

This new Super Jumbo aircraft will carry 150 more passengers than the 747, and had its formal rollout ceremony last week in Toulouse, France. The invitation only audience included four heads of state and three very proud Hexcel employees. While a number of airlines struggle with costs, global passenger and freight traffic is clearly on the rise. And low cost carriers are emerging worldwide, to create a whole new level of demand.

Airbus and Boeing build rate projections are up. And the increasing penetration of composites lead us to expect a long run of double-digit growth in this segment. Industrial market revenues again showed strength in the quarter, up 21% over last year on a constant currency basis, driven by another strong quarter of ballistic reinforcement sales and materials for wind-powered generators. The demand for ballistic materials remains strong, with customer announced backlogs at an all time high.

Wind energy revenues were up dramatically, due to continued market growth and new product introductions. A 2004 lapse in the U.S. production tax credit for renewable energy muted the industry growth in the first three quarters. But the September reinstatement by Congress for 2005 will return this business to its historical growth levels.

This industrial segment, which is made up of hundreds of customers, and thousands of applications for our materials, has grown relentlessly over time, and is now 54% bigger than it was in 2000, for a kegger of almost 12% a year. We expect this steady expansion to continue.

Our currency adjusted sales for the space and defense applications were 9% higher than last year’s fourth quarter. This growth came despite the loss of revenues for the cancelled Comanche Helicopter Program, which contributed over $4m to the prior year’s same quarter. Our approvals cover a wide range of military programs.

And while delays or cancellations disappoint, our 2005 and 2006 outlook has no single program upon which we are heavily dependent. In some cases, diversion of funds for short-term needs is likely to help as much as it is to hurt, such as with increased helicopter blade replacements. In addition, our very strong position in Europe leads us to believe this segment also has the potential to grow at double-digit rates once we get past the year-over-year Comanche impact this first quarter.

Electronic revenues for the quarter in constant currency terms were up 10%. Year-end inventory corrections slowed the growth pace slightly. But, for the year, we’re up 14% in real terms. And we expect this recovery to continue. As we’ve said before, we’ve focused our downsized operations on the advanced technology materials and specialty applications. So we also expect good incremental margin leverage on this growth.

In summary, I think Hexcel had a great year. We delivered solid improvement in virtually every financial measurement, despite some significant non-recurring charges. We also cleared into profitability. We delivered net income in every quarter of the year for the first time in over five years. We had a very large and successful secondary offering, that expanded our float, our ownership profile, and our equity coverage. And we made great strides in reducing our net debt and resultant leverage ratios.

Here’s another way to look at it. This quarter marks the first time our LTM sales were higher than that peaceful summer of 2001. But we ran with almost 30% fewer employees, and 47% less net debt. But the top highlight, in my mind, had nothing to do with our financial performance. I believe 2004 will be seen as a watershed year for the advanced materials industry. The long-term dream of carbon fiber composite commercial airplanes is now becoming a reality.

I see 2004 as the beginning of a stiff change utilization of composites, in place of metals in commercial aircraft. It happened in the defense industry after the B2 bomber was developed with carbon wings. Almost every military aircraft to follow maximized the use of composites in place of metals.

In the 1980s, new commercial jet designs started to incorporate composites, displacing 4-6% of the metals by weight. Aircraft introduced in the 90s moved into the 10-13% range. And the A380 Super Jumbo, the first new design to roll out in this decade, has over 22% composite content. The next new Airbus aircraft announced will have carbon fiber based wings, and will move the composite content above 30%. And, of course, the biggest prize to date will be the Boeing 7E7 Dreamliner, announced as having composite wings and fuselage, with more than 50% composite content.

These three aircraft, and those that follow, will dramatically change the nature of our largest market, and have the potential to magnify the impact of ongoing recovery commercial aerospace for those of us in this business. 4%, to 10% ,to 22%, to 30%, to 50%, all within a 25 year span -- that’s what we mean when we say growing share, growing markets.

After three tough years of doing what we had to do to survive, we’re in great shape organizationally, financially. And, by golly, we’re finally playing with the wind at our backs. Stephen and I would be delighted to take your questions.

Thank you. (OPERATOR INSTRUCTIONS). Steve Binder, of Bear Stearns.

Hi. This is [Lucy Guo] (ph) for Steve Binder. I have a question on incremental margins. Sequentially, 4Q revenue increased about $13.3m. But profits only increased a million before corporate and other. You’ve mentioned that Sarbanes-Oxley played into this. Maybe it’s also business in Europe, selling in dollars, but booking costs in loan currency. What do you see as some of the factors driving these three thoughts?

If you look sequentially, first of all, looking at it from the gross margin perspective, gross margins in the third quarter were 20.9%, and in the fourth quarter 21%. And yet your revenues were up by about $13m, a little less on constant currency.

You didn’t get any up-tick in gross margin in the quarter in terms of percentage rate, I think really probably from two considerations, the mix of what we sold this quarter, and the fact that, as you get towards the end of the year, with the December plant shut-downs and those sorts of things, it just doesn’t run as smoothly at the end of the year.

So I wouldn’t point to anything specifically going awry there, just that it is not a quarter when you’re going to see a significant pick-up. And in fact, if you look at the last few years, it tended to be a comparable sort of phenomenon.

If you look at the SG&A area, the SG&A area is up this quarter. We don’t view that increase as an embedded run rate. We had the peak of our professional costs associated with getting ready internally for 404, and the added audit costs that go with it embedded there, and a few other items that sort of pushed SG&A higher than it’s been at any quarter during the year.

We hope to make progress against that as we get further into 2005, and certainly not to have it continue to grow like this as revenues grow, and maybe in some of the quarters coming over lower than this. So those are the factors that, in terms of operating leverage, while we’ve got some reasonable leverage here, we didn’t get it as strong as we’ve done in other quarters. Those are the sort of factors that drove it from our perspective.

Thanks very much. That’s all for me.

(OPERATOR INSTRUCTIONS). Howard Rubel of Jeffries & Company.

Good morning gentlemen. A couple things. First, could you talk a little bit about where you spent capital? It was up significantly. And what you are thinking about for the year?

Well, first I’d say Howard, I’ve been in manufacturing most of my career. And no matter what we do, we seem to always have our biggest capital quarters in the fourth quarter. Something to do with the way we approve and authorize and calendarize the year. So it is very typical. In fact, I think you will find that for every fourth quarter of many companies, but certainly this company.

So part of it is timing, as we launch the new year, and get approvals on projects, and they come in as the end of the year comes. But it’s basically supporting either cost reduction initiatives that have good pay backs, or growth projects. I mean our growth of composites, particularly in Europe, is significant.

We had a number of expansion plans. I don’t mean factory expansions, but new prepreg lines, that were scheduled to come in, or scheduled to be ordered in 2001, that we stopped after September 11. And now we’re turning them in, to support the A380 and other new programs.

So what we’ll see going forward here is some of these new lines will make a contribution to results in early ‘05? Should I be concerned a little bit about start-up costs, Dave, in the process?

Mostly what we’re talking about here Howard are just new lines of the same thing that we do. And certainly there is some inefficiency of starting up and getting qualified. But we have those kinds of things going on all the time. I don’t think you’ll be hearing that as an excuse from us.

So, if anything then, we should see some improvement? I mean you’re sort of leading us towards, or my interpretation is that we should see some reasonable operating leverage, a) as these lines come on, and b) because they’re similar to what you’re doing, as opposed to substantially new processes.

Generally speaking, yes. As you see, as capacity is expanded and we get top line growth, of course we’ll get operating leverage. Now is the first time we’ve started to need capital to be able to support it. The last two or three years, what little growth we’ve had, we’ve been able to suck up easily.

And we would still think capital spending should be in the $45m range or so? Maybe $50m for the upcoming year?

I think so. You know, our depreciation rate is in the 52 range. And if you sort of think of that as a proxy of what the steady state support of the business has been historically, that’s sort of a good indicator of where we belong.

And, two, could you talk a little bit more about the trends? If we sort of look at the numbers, we should be able to look for revenues on a constant currency basis, being up maybe low teens, maybe low double-digits, somewhere in that range?

Definition of teens, we had this debate, is it 13 or is it 12. But low double digits, if double digits goes from 10-99. I think, depending on the market, I mean I would suspect that the unknowns around space, in a sense, would make it the one that’s closest to the brink. And then commercial aerospace and industrial should be the strongest I would think. No, actually, electronics is such a small base, that could be a big number. But I think double digits in each of them is a very reasonable expectation.

Two last questions. One to go to wind for a moment. Have there been some new customers? I saw also, is it Gamesa is opening a plant in the U.S. Are there some other things that you might be able to address?

The wind energy has been pretty volatile, because it started out, I think three years ago there were probably 15 players, that had at least three or four points of share of the global wind turbine generator market. Many of them didn’t exist 15-20 years ago. A lot of them came from the sailboat industry. As this industry has grown in such dramatic fashion, as you might expect, there’s been some pretty serious consolidation going on, and big league players coming in.

So Vestas acquired NEG Micron last summer. Vestas was number one. NEG was three or four or five. G.E., of course, bought the Enron assets, and has been winning share pretty dramatically. Siemens even bought a small one in the last few months. Gamesa, which was a joint venture of Vestas, is doing very well. Right now it looks like 2004 results will look like Vestas, G.E., Gamesa are the big winners. And the all others are starting to fade. So it’s a pretty dynamic industry. We focus pretty seriously on the big ones that are growing strong.

And then, finally, on there is a lot of UAVs that continue to sort of show up in the market on the military side. And that’s sort of an area that actually, as you look at the size of these aircraft, that they are fairly large and fairly composite intensive. Have you been able to get your fair share? And can you address that?

Yes, Howard, to the extent we’re aware of where our materials are going, an awful lot of programs go on behind closed door. The material goes in, and we don’t know what comes out. UAVs range from very, very, very small to very large. Many of them are glass prepregs, because they haven’t got the performance requirements of fighter aircraft. Some very long ones though, very long wing ones, and some of the UCAV type equipment, has carbon. But yes, you could assume anything that’s military that’s got composite textile has got a significant roll out.

Thank you Dave.

[Lionel Jolivat] of Goldman Sachs.

Good morning. A couple of quick questions. First of all, you talked a little bit about the outlook for the commercial segment and the electronic segment. I was just wondering if you could give us a quick outlook for the space and the segment, and what kind of growth you are looking at in ‘05. If you consider that the Comanche program will not penalize your (indiscernible) this year.

Yeah, well the Comanche will still penalize in the first quarter. I think we had 4 million last year. Once we pass that, I think we’ll be okay. We find, I mean we have some swings quarter to quarter, just because deliveries aren’t quite as steady and consistent on a program as commercial aerospace.

The Euro Fighter, the Typhoon, for instance, is built in traunches, and in different countries. So we have some lumpiness to the sales. But generally speaking, this whole segment has had sort of a steady 8-12% growth rate. We had some much stronger periods I think last year, year over year comparisons.

And we don’t see wide swings in this, other than quarterly timing, because we’re so widely represented. We have, I think, 80 or more active programs that we participate in now. So as some things slow down and some things ramp up, we tend to have a fairly stable looking outlook in this business.

There are a lot of newer aircraft coming into production that are helping us foundationally. And to the extent there are delays in JSF or F22 or V22, it seems to be being made up by burn rate kinds of issues from aircraft in Iraq that are needing replacement parts, and helicopter blades, which are being worn pretty dramatically in the desert.

So I think, as I mentioned earlier, I think outside of the Comanche, I mean once you clear the first quarter, I think double digits are possible. But what’s going on in Congress, and war costs, make it a little less certain.

Okay. And in terms of margins in this business, do you think it will be relatively comparable to what you did in ‘04, or slightly improving, given the growth in the business? And do you see an impact of mix in a major impact on margins in this segment?

No. I don’t know anything that would cause any significant shift in margins in that segment.

Okay. And then shifting gears to the cash flow statement, you mentioned that working capital was roughly a $20m source of cash in the fourth quarter. And it seems to me that it comes primarily from the payables, which went up significantly. Why was working capital such a relatively large source of cash? And why the payables increased so much? And the second thing, is it just a timing issue? And what will be the impact on the first quarter results, knowing that, anyway, the first quarter is typically a use of cash from working capital?

Let me have a go at that one [Lionel]. I think the phenomena that you observed this quarter is a phenomena you see most fourth quarters, that because December really slows down in terms of shipments, you tend to collect receivables in December, and not invoicing anything like what you collect, you tend to get your inventories aligned. And you can, depending on the timing of those events to when you actually have to pay for the materials you’ve consumed, you can get a positive impact to payables.

It was a little more pronounced this year than usual. But you see that phenomena every year, just as in the same manner every year in the first quarter you tend to see a phenomena of, as the revenues start to ramp to the sort of higher level that you see, sort of as the first quarter gets underway, and then in the second quarter we tend to be use of working capital. And so I think what you are observing is a trend that seems to follow the seasonality of our business, and are not something that causes me any particular concerns here.

Okay. Thank you very much.

(OPERATOR INSTRUCTIONS). [Edmund Griffin] of Black Rock.

Good morning. A quick question. In commercial aerospace, if you were to assume a flat production environment, what, looking at the penetration rate, what would that increase your content for I guess plane per year? What sort of growth would you be looking at?

I don’t have a model that predicts that. I mean our model has airplane by airplane, because there is some shift in mix. It’s also significant as to the Airbus share of that build rate, because Airbus aircraft have generally been developed more recently than most of the Boeing fleet. We have a higher content per plane on average with Airbus. I think just suffice it to say there is growth without build rate growth on average, has been for some time, and will be more dramatically in the future because of this penetration story.

Okay. And then what about any platforms that are coming up, that you can possibly be awarded business on?

In commercial aerospace?

Yes. Yeah, any programs.

Well, the A380 is pretty much settled now. The next, from Airbus, is the A400M. It’s not commercial, but I think of it as commercial, because it’s a big transport, designed by generally the same engineers from the Airbus operations. And it’s got a carbon fiber composite wing, as well as carbon composite propellers on the engines. We have a very strong position, and a very good relationship with Airbus. And you could expect that would be a very good airplane for us.

Next, it’s sort of a race to the finish. But Boeing’s 7E7. All the work is going on, in trying to determine what parts to make with what materials.

What is left on that platform?

Lots and lots and lots. It’s -- these things constantly evolve, through a three or four year period that they go from ideas to launch. And we have, we’re talking about materials for floor panels, for secondary structures, for core, for lightening strike protection, for infusion framework. It’s many, many, many things. And once a new airplane is defined and launched, it becomes a massive effort by both sides in engineering -- their engineers and our developers, to optimize systems and materials.

So this will be a continuous process. And I would predict that every one of us who is in the composite business will declare victory at the end, because this aircraft will have so much more content for the whole industry, compared to the 757 that it replaces. We’ll be thrilled with it.

And then of course, Airbus announced last month that they’re going to try to compete with the 7E7, by converting an A330 design and updating it for efficiency, all the things they’ve done to reduce weight. So new engines, and a carbon fiber composite wing, and retrofitting the whole frame to modern materials. So that will be a huge prize. And they’re trying to accelerate that to a pace where it will be introduced in the range of the time that the 7E7 will, that it competes with.

And then just one follow up on the cash flow. You expect -- you’ve given any free cash flow ranges for the year? I know you said D&A was about 52. I want to say CapEx was 50. So I guess it’s -- you expect working capital to be a source, I mean a use, just through increase in sales. So –

Yeah. We haven’t provided any guidance on that basis. You’ve seen us reduce our total indebtedness year by year, over the last three years, from operations, by deploying those funds. If we’re blessed, as one would expect, with higher revenues, with higher profitability, that should improve our ability to contribute to de-leverage. And so that’s where we’d lead people to look in terms of building their models. But we don’t give you specifics.

If you look at the components, interest expense is shrinking. In the release we mentioned that we are exploring refinancing opportunities in terms of some or all of our debt. And that could give us further opportunities for improving cash flow.

Okay, great. Thank you.

And gentlemen, we have no further questions at this time. I’d like to turn the call back over to Mr. Berges for any additional or closing remarks.

I think we’ve taken enough of your time. We appreciate your patience. We feel real good about the year, real good about our prospects, and hope to talk to you again with some great numbers next quarter. Thank you.