ICU Medical Inc (ICUI) 2004 Q2 法說會逐字稿

Good morning and welcome to the ICU Medical Inc. earnings release conference call. At this time I would like to inform you that this conference is being recorded and all participants are in a listen-only mode. At the request of the Company, we will open the conference for questions and answers following the presentation. I will now turn the conference over to Dr. George Lopez.

Good morning. Thank you for joining us for our review of ICU Medical's results for the second quarter and six months ending June 30, 2004. I am Dr. Lopez, Chairman and President of ICU Medical and with me today is Frank O'Brien, our CFO. On today's call I will provide an overview of our operational results, and then Frank will provide detailed financial information for the second quarter and the six months ending June 30, 2004. I will wrap up with our prepared remarks with an update on targets for the remainder of the year and a discussion of current business trends before we go to the Q&A. As always we will limit the length of the call to about 45 minutes.

Before we begin, in the event that we touch on forward statements on this call, please be aware that they are based on the best information currently available to management and assumptions that management believes are reasonable. But such statements are not intended to be representation of future results and are subject to risks and uncertainties. Future results may differ materially from management's current expectations. We refer all of you to our filings with the SEC for more detailed information of the risks that have a direct bearing on our operating results, performance, and financial condition.

Overall I am pleased with our second quarter. Although we did experience some temporary disruptions that were out of our control and related to Abbott Labs spin-off of Hospira, its hospital products division, despite these disruptions we managed to achieve revenue of $21.7 million, in line with the expectations we set on the first quarter conference call. End-user demand through all our domestic and international sales channels continue to grow stronger. Of particular note was the solid growth in domestic specialty distributors and our international distributor, and our customize IV systems products are still growing rapidly in all channels.

As you know, during the second quarter Abbott successfully spun out Hospira as a separate operating company. We continue to be very excited about the long-term potential of this partnership, but several elements of this transition will temporarily affect our sales for 2004. First, Hospira has recently advised us they will carry less inventory in the future. This inventory decision will only have a temporary effect on our sales and will have no long-term effect. The temporary effect on ICU could potentially be equivalent to four months or more of sales to Hospira in the second half of 2004.

Well into the second quarter, Hospira told us of their desire to reduced inventory in the third and fourth quarters, and this was not expected. But we see this is a onetime adjustment in 2004. Second, during the first half of 2004, Hospira's sales force spent much time educating customers on the effect of the spin-off from Abbott. Along with transitioning various customer contracts from Abbott to Hospira, the time and effort during this process resulted in fewer conversions during the second quarter of 2004. Hospira's CLAVE business is strong. Hospira is actually experiencing stronger sell through of CLAVE products as compared to last year. I repeat, Hospira's sell through is strong.

I would like to take a moment and cover what transpired in the court yesterday concerning our patent suit against Alaris Medical System, now part of Cardinal. As you know we sued Alaris in mid-June because we believe the smart site and smart side plus IV connector infringe in one of our patents. Yesterday there was a hearing and Alaris was ordered to show cause why the court should not issue a preliminary injunction against Alaris. The court has taken the matter under consideration and requested additional information from both parties by July 26, so there is no outcome to report yet. This is all I have to say about our litigation against Alaris at this time. I will not answer any questions about Alaris in the Q&A section.

Before I get into greater detail about the current business trends and our outlook for the remainder of 2004, I would like to turn the call over to Frank to discuss our second-quarter and six months financial results.

Thank you, Doc. As Dr. Lopez mentioned, revenue for the second quarter was $21.7 million, which was in line with our target. We had targeted Q2 revenue for approximately 15 to 19 percent of projected annual sales, and we ended up at 17 percent so, what was in our targeted 2004 sales versus $21.3 million last year. Net income was $3.4 million versus $3.9 million in 2003, and EPS was 23 cents in 2004 versus 26 cents last year for the second quarter.

For the six months, revenue was $43.9 million versus $52.0 million last year. Net income was $7.6 million versus $10.9 million in '03 and EPS was 50 cents for the first half versus 72 cents for the first half of 2003.

As you should recall, we had $6.7 million of non-recurring revenue items in the first half of 2003, so if you adjust for these, the revenue decrease would only be about $1.5 million. During the second quarter of 2004, our product line breakdown was as follows. CLAVE products excluding custom sets, 50 percent; custom sets, 32 percent -- and that is all types of custom sets -- Punctur-Guard 6 percent, CLC 4 percent and the other products 5 percent and nonproduct revenue, 3 percent. This compares to the same period last year when CLAVE products excluding custom sets was 54 percent, custom sets 22 percent, Punctur-Guard 8 percent, CLC 3 percent, other 6 percent, and nonproduct revenue 7 percent.

Sales were up in all channels and for all of our major product lines except for our Hospira CLAVE product sales and sales of our Punctur-Guard line. Of particular note in the second quarter, domestic specialty distributors were up 27 percent year-over-year to 6.4 million for the quarter. International distributors were up from the depressed levels of 2003 to $2.8 million for the quarter. For the same quarter in 2003, it was $0.6 million. Europe was particularly strong, reflecting the success of improved European production and distribution from the plant we bought last year in Italy.

Custom IV systems were up 52 percent, spread across all channels. The success of this program with Hospira was up 22 percent. Domestic distributors were up 43 percent and international was up almost fivefold. Sales of CLAVE and custom sets with CLAVE on them were $15.9 million in the quarter, versus $14.9 million in the quarter in 2003 as domestic and international distributors and the Hospira set source program more than offset the decrease in our CLAVE sales from Hospira.

Now, a word on the CLAVE sale to Hospira. As we got well into the second quarter, Hospira told us about their desire to decrease their inventory of CLAVE products through the balance of 2004. This is purely inventory management, the kind of things we do ourselves. Their sell through to customers is strong and growing. We will work with them to achieve their goal and it will temporarily impact our sales. It reduced our CLAVE sales to Hospira in the second quarter from $10.3 million last year to $7.4 this year, and we expect further reductions in the second half.

Punctur-Guard sales were lower than last year, but we have a lot of activity and a lot of interest in the products, and we expect to see some good market penetration in the second half of 2004. It is important to note that our pricing has remained steady with Hospira. In fact companywide the only significant pricing adjustments we have made is in the Punctur-Guard line, where we are making some pricing concessions to gain market share and wider distribution, which we believe will be beneficial to us in the long run.

Our gross margin based solely on product sales and excluding nonproduct revenue was 54 percent in the second quarter of both years and unchanged from the first quarter of 2004. Excluding our recent acquisitions, our gross margin for the six months was actually 59 percent, 200 basis points better than our 57 percent benchmark.

The Punctur-Guard production and our new Italy plant are both a drag on gross margin but we are working on specific steps to improve them. Operating expenses were up on increased administrative costs on things such as new personnel, IT costs, and Sarbanes-Oxley compliance costs, and the cost of the Italy operations, which we did not have last year, partially offset by the elimination of the Bio-Plexus administrative costs, and the respite albeit temporary on patent litigation costs.

With the relatively flat sales and higher operating costs our operating margin decreased from 28 percent to 23 percent for the quarter. We continue to generate strong cash flow. We finished the quarter with $91.9 million in cash and investments, an increase of $6.2 million for the quarter and an $18.8 million from December '03. For the quarter operating cash flow excluding tax benefits from the exercise of stock options was $1.6 million. For the six months, our operating cash flow again excluding tax benefits from option exercises was $14.3 million.

We expect our capital expenditures for the remainder of 2004 to be about $3.7 million, bringing our total for the year to about 6. (ph) million in total. Remember in 2002 and 2003 we upgraded all of our facilities to handle a the substantial increase in output and the way our business is positioned, most of our 2004 capital expenditures will be for maintenance.

Receivables at the end of the second quarter were $16.2 million, down from $17.8 million at March 31, 2004. DSOs were 70 for the second quarter of 2004, down 6 days compared with the 76 at March 31, 2004. Inventory at June 30, 2004 was $9.4 million compared to 5.9 million at March 30, 2004, and that is a record high level for us. Day sales and inventory at June, 2004 based on quarter end balances is 88 days compared to 58 at the end of March, 2004.

As we mentioned on our first quarter, we will continue to keep inventory levels higher than in the past to avoid the inefficient production spikes that we have had late in the year in the past several years. Now I'd like to turn the call back over to Doc to discuss the balance of 2004 and ongoing business trends.

We are encouraged by the long-term growth opportunities at ICU. We have a leading diversified product line and proprietary manufacturing processes that will enable us to deliver shareholder value for many years to come. Let me highlight a few numbers, as I usually do. Second quarter. Operating cash flow, 3.4 million. Free cash flow, 2.5 million; cash, 91.9 million; stock buyback for the quarter is zero. Accounts Receivable, 16.2 million; DSOs, as Frank said, 70; inventory, 9.4; CSI's 97, CAPEX total for the quarter, 800,000; CAPEX for 2004, 6 million expected; CAPEX maintenance 0.9 for the quarter.

Sales by product group. Custom set source, 2.9 million, up from second quarter of '03 from 2.3 million. Custom totals, 7 million, up from same quarter last year 4.6 million. Custom with CLAVE, 15.9 million, up from 14.9 million. CLAVE, 10.8 million, down from 11.5 million. Punctur-Guard 1.2 million, down from 1.7 million.

Sales by channel. Hospira, 8.2 million, as compared to 11.6 million same quarter last year. Domestic distribution, 6.4 million, up from 5 million. International, 2.7 million up from 600,000. First six months of 2004, 4.8 million on international and same period, up from 1.8 million.

Now to ensure ICU's continued growth we're focused on increasing the market penetration of our products and have identified several attractive ways to accomplish this. One, expand sales and distribution. This means expanding the ICU distributor relationships and increasing our sales force. We have had a great relationship with Hospira based on a long-standing partnership with Abbott Lab. When Abbott announced it would be spinning off its hospital parts division, Hospira, we saw an opportunity to work even more closely together and to create new opportunities such as selling Abbott pump with ICU's CLAVE or custom set. Last quarter we signed three contracts bringing Hospira worldwide distribution of all ICU products through 2014.

While Hospira remains our largest distributor, we continue to work with and add other distributors, particularly in the international arena. In addition, ICU continues to ramp up our sales force in order to generate incremental sales from our new domestic and international opportunities in advance of actually having the sales. We have a highly skilled and trained sales force.

Number two, capture and convert hospitals to ICU products. We see significant opportunity to convert hospitals using needleless products to our CLAVE and to our custom IV sets and have determined the most effective way to achieve this is with Hospira. By combining their Hospira pump with our systems, we can help lower medication error and help hospitals continually enhance the quality of care they provide to their patients.

Not only does a better quality product improve insurance costs and reduce other costs associated with hospital error, the Hospira pump combined with our systems also supports higher margins for both us and Hospira. Furthermore we are targeting two large groups for this effort, the existing customers of Hospira pump and potential new customers for the combined pump and ICU products.

Number three, international growth. Our international sales have jumped several fold compared to the same period last year, and we believe this growth is just the beginning. A lot of opportunity for market expansion is international. We estimate the international market for needleless IV product is more than five times the size of the North American market. Currently international is only a very small part of our revenue, but we expect to see it grow in 2005 and beyond.

As I mentioned on previous calls, we will not count revenue in our target for 2004 for our new international contracts until we begin to actually receive it, but we are including expenses associated with the anticipated ramp up in sales in our budget for 2004.

Number four, continued product development. We introduced our patented custom IV system five years ago and have since seen compounded growth of 48 percent. This is a very young and fragmented industry and we continue to maintain the leading market position because we are able to make IV sets that are specific to the customer but faster and less expensively than our competitors. We place a strong emphasis on innovative new product development and we continue to look actively for companies or product lines to acquire.

Talk about targets. So what are we targeting for the rest of 2004? Just about everything is at or close to our earlier targets except for one thing that is really out of our control, and that is Hospira's reduction of its inventory of CLAVE products. As a result of Hospira's inventory reduction in the second half of 2004, we now anticipate that our sales to Hospira for the third and fourth quarters will be approximately $22 million less than we previously expected. It is too early to tell whether we will be able to make up any or all of that shortfall from other sources such as possible acquisitions, new products, or expanded sales of existing channels. We are working on all of this.

We do not anticipate, however, that revenue from other sources will have any appreciable impact on the results for the third quarter. Based on these facts and our results for the first six months, our revenue for this year could be 100 million or slightly higher, down from the 123 million that we previously targeted. Because Hospira's sell through is going well, we see this as a temporary effect, so we will continue to invest in growing the business and continue to ramp up our sales force internationally and make additional investments domestically as well.

So our operating expenses will stay about the same as originally targeted due to our expected ramp up in sales both domestically and internationally at the end of this year and beginning of 2005. The only exception is the patent litigation costs may be somewhat higher than originally estimated but this would depend on how rapidly the litigation with Alaris moves. All in all we expect earnings to be in a range of $1 dollar to $1.10. We believe the third quarter will be approximately $19 million to $21 million of revenue with earnings lower than we had in the second quarter.

Our gross margins for the later half of 2004 will be a little lower than the first half because of reduced production. It is a bit early to talk about 2005, but one thing is quite clear. The reduced revenues and earning levels in 2004 are temporary factors which we cannot control. Hospira's spin off and inventory reduction. That will all be behind us very soon. The year 2005 should be a boomer. Now I would like to turn it open to questions at this time.

Thank you, sir. (OPERATOR INSTRUCTIONS) Bruce Cranna of Leerink Swann.

I would like to start off if I could just a little more Hospira color. You mentioned obviously they are rationalizing inventory. How many days do you think they are carrying and I know you said that you are assuming or hoping that I think your comment was, four months of supply there, but where do you think they are in terms of days now? Many days are they carrying?

Bruce, two observation on the days. We got a fair bit of information from Hospira which they have asked us not share. Second is the days of inventory we know are coming down, but it's difficult to get much more specific than that. I will expand on that a little bit. They have got a very long distribution channel from the time it leaves our factory to the time it leaves their warehouse to go to a hospital. They still obviously carry a lot of inventory to support that. It's different amounts of days in different parts of the channel, we know that, but in terms of the total, that's something that they've asked us not to share.

Bruce, if I could add some texture to that, we have a long, long history of an ordering pattern with Abbott, and pretty routine. This was an abrupt change and they are doing exactly as Frank said what we would want to do. We would want to reduce inventory. This is an abrupt change for them and you can understand why with the $1 billion that they have in debt, it makes all the sense in the world. But I think the answer to the question is that we have done our calculations and are working closely with them. We think this is going to be a very, very lean inventory level for them. This would be the leanest they have ever, in our history that they have ever been at so (multiple speakers) its going to be very, very tight and one of the reasons they don't want to just abruptly lower their inventory levels is because they could overshoot and have customer complaints.

So they have shared with you what level they are at now and the fact they want to draw it down four months, and so you can then figure out where they will be, but you can't pass that along to us?

Not their inventory levels, no.

They have given it to us in confidence. We can't even give you the sell through numbers, although we have the sell through numbers but we can only tell you that they are strong. Sell through is strong. There is no issue with sell through, it is only trying to reduce inventory. Reduce inventory to free up cash, which is exactly what you would do.

Yes, that's for sure. And just as a segue, I know you don't want to talk about (inaudible) sell through, but your commentary on Hospira is strong sales and growing or something to that effect. Can you put some sort of brackets around that for us as to.

We knew you would ask and we tried, we actually talked to the -- but the problem is we can't. I would almost like to be able to give you some brackets in terms of digits, but we can't. All we can tell you is sell through is strong. It is strong and this is a change and a new Hospira. I understand that Chris Begley is running Hospira, strong, strong management team and expect other changes too with Hospira. They are very, very -- now that they have been sort of set free, they can run the Company the way the Company should be run. And we actually had conversations about reducing inventory years ago with Abbott, but it was a different focus at that time. So expect more changes out of Hospira, but none of those should affect us. They may speed up the receivables and slow down payables or do things like that, but none of those will have any impact on us.

I'm not sure I agree with that.

How so?

Clearly what they do does have an impact on you, but --

Only reducing inventory. What else is there?

Let me just expand a little bit. I think a lot of the things we're talking about with Hospira that we would not have talked about with Abbott is going to have a positive impact on us. Just for instance the international expansion, which is something that would not have happened under Abbott, we see as a strong positive and a positive in '05.

Look at the international numbers. Look at what is happening in Spain. We're having great success in Spain with Abbott/Hospira. We did not have that success before with independent distributors, so there is some great strong positive with Hospira. As I say, strong management team. They're going to do some good things with that company and I think they will make a lot of money.

Of that OUS (ph) number now that you are there, the 2.8 million in the quarter, how much of that was Hospira?

I don't know the number offhand.

Remember we bought the plant in Italy. It's not everything but it's a lot of it's for Abbott/Spain.

Bruce, I don't have the number. Order of magnitude, 5, 6, 700. In that range.

5, 6, 700 K?

Actually maybe a little more than that.

I would use that as a rough idea, and then just a quick little point of clarity. Back on the quarter I think you said 6.4 domestic, 2.8 OUS and did you say Hospira was 8.2?

By channel I said Hospira was 8.2. Domestic was 6 4. International was 2.7, 2.8 rounded up.

The Hospira number includes set source stuff. Let me go back on that, Bruce. The Spain number was closer to 400. (multiple speakers) It's all new and expect big things out of there.

Trying to fill in the rest -- are you still calling Bio-Plexus separately or other --?

The Bio-Plexus number is in the domestic distributor number to the extent it is going through that channel, which most of it is.

Okay, so the remaining pieces of the 21.7 in the quarter aside what we just talked about? Is that all just other OEM?

I think you got them. The other OEM is in there. That is $200,000, it's small, Bruce.

At 8.2, and 2.8, and 6.4, so that is 11, 17.4 on 21.7, so. What is the piece I am missing?

Let me give you the break out by channel, Bruce. For the second quarter of '04 OEM would be 56 percent. That includes set source. Domestic distributor is 31 percent and international 13 percent.

Okay, that helps.

I don't have the dollars but I got the percentages.

Last question and then I will get off. Let me ask you this question. Do you think I know you said you didn't do any buyback of the stock in the quarter. Do you think that your perspective might change there and?

Absolutely it would change depending on price.

And is there an authorization doc? I do not remember.

Absolutely.

How big is it?

There will be a high probability we will be buying stock back.

And what is the authorization.

It's open, Bruce, wide open.

Mitra Ramgopal of Sidoti.

I was wondering if you could give us -- in terms of the SG&A line you mentioned you're obviously ramping up expenses because of Hospira. If you could give us a sense of how much you expect SG&A dollar terms to be for '04 and the kind of ramp up you're looking for for '05?

I can talk for '04, it's basically the absolute dollar amount is going to be about the same as we had talked about earlier in the year, so we're not going to cut back on our expenses just because of a short term sales issue -- inventory issue. The calculation you've done in the first quarter is still pretty good.

And about 2005.

2005, we haven't really looked at that in a lot of detail. It's probably going to continue to grow but maybe not quite as much.

Mostly growth in international sales force, product specialists for each country.

Okay and without getting into too much detail regarding the contract with Hospira, I was under the impression that each year they have a certain obligation to make certain purchases. Clearly that is not happening this year.

No, we have a long-term relationship with them and we wouldn't (ph) enforce that, when they came to us with the inventory concern, we just said fine, we will work with you on it. We're not going to worry about minimums.

Our philosophy on that is put the contract in the drawer and never looked at it again. These are partners of ours.

Okay. In terms of looking longer-term out, the story used to be 20 percent growth. Now it is (inaudible) 16 percent and clearly this year is going to be somewhat disappointing. If you had to look out, you're obviously excited (inaudible) about '05. What is your sense in terms of what we should be looking for for a rebound?

I think, Mitra, if you take a look (indiscernible) 30,000 feet our growth rate and just take the growth rate we've had through '01, '02, '03, '04, projected through '05 and you go the different '04 that will give you some idea -- take a look at '05, it's going to be a big year, particularly in relation to '04.

Well, plus a lot of things should be happening in 2005.

The international stuff will start kicking in, we got a (indiscernible) of domestic initiatives we are working on with them.

Keep in mind this is a temporary issue. This is just -- this is not a change in the growth cycle of the business. This is a temporary issue with the reduction of their inventory. It is not -- it has nothing to do with the lifecycle of the company. It is all sell through. It's sold to the customer, so it is just an issue of the spin-off and focusing more on cash flow. Which they never had to focus on before that I know of.

Okay, thanks.

2005, we are honestly -- all of us think it's going to be a boomer. We just think it is going to be a good year. Everything should hit as you see it, custom sets are growing as we said they would. Twenty-two percent last year to 32 percent this year of our sales, compounded growth rates of 48 percent. Keep your eye on that ball. It is still going to be a great product line for us to.

I guess it is a little too early for you to be putting out some numbers in terms of where you expect the top line to be.

For 2005?

Yes.

We will have pretty good targets set by the fourth quarter, maybe as early as -- we will have some visibility in the third quarter. Our third quarter conference call, but by the fourth quarter we should have great visibility. About as good as we can get, and we can give you some pretty good targets at that time.

Okay, thanks.

Daniel Owczarski of Belmont Harbor Capital.

Thanks and good morning. To follow up on the Hospira, the inventory levels, you had mentioned that you would probably be $22 million less in the second half, but it sounded like they were already winding down inventories before the spin-off. Do you have a comparable number for the first half; how much inventory would have impacted? How Hospira inventory would have impacted the first six months of operations?

Not exclusively. You can see the Hospira numbers are down for the first quarter and first-half and that's reflected in what we saw in some short term reduction at the time in your product acquisition. At the time it just looked like timing, but it turned out that (indiscernible) reductions. I don't have an explicit number on hand.

So could we look at first-half Hospira sales for '04 versus '03 and then its going to be at least that difference? Like you said 8.2 versus 11.6 for this quarter? Could we go back to the first quarter and assume the same thing?

The comparisons get a little distorted there because I think as you will recall in the first quarter of '03 we had about $4 million of stuff that was carried over from '02, which tends to accentuate the decrease by comparison. I guess I wouldn't quite do it that way.

All right, turning to the SG&A, I know that you had talked about the second half really focusing on sales and marketing, and it looked like the second quarter there was almost a $1 million bump up over the first quarter, but it sounded like IT and Sarbanes-Oxley and litigation. So for the second quarter, did you do any of that selling and marketing expenses, or is that still to come in the second half?

What happened on the sales and marketing is it trended down in the second half of last year and its coming off on a sequential basis, but on (indiscernible) comps, it's not up that much. It was up a bit in the quarter. But we see that picking up more later in the year.

So really that investment hasn’t started yet?

No, it has started. We are spending more than we did in the second half of last year.

It's going to accelerate second half of the year?

The admin stuff may slow down a bit.

Just a quick question on gross margin. It sounded like what I was thinking was could we assume with your custom sets becoming growing and becoming bigger part of the mix would that gross margin go up, but it sounds like it's being offset and we should shouldn't really expect too much of a pickup in gross margins second half of the year.

Certainly not in the third quarter. Maybe a little bit in the fourth quarter. It's really going to depend on our production volumes then. Once we get the volumes up we make a very nice margin but we have a lot of fixed costs to cover.

Okay, great. Thank you.

Ladies and gentlemen, due to time constraints our last question comes from Greg Macosko of Lord Abbett.

I just wondered with regard to options and awards, where there any this year and are you expecting any?

We have had some this year, but we do not expect anything of any significance in the second half of the year and probably very little beyond that.

We have run away from options, Greg.

Okay and do you expect to expense those at this point?

Not until we have to.

But in terms of the options, how many were awarded?

You are taxing my memory.

Will that be in the Q then?

Yes. We can put it in there. The number about 200,000 comes to mind, and it's in that range.

Okay, good. And then with regard to Punctur-Guard, I was a little disappointed to hear that it was down. Where the units up and what was the reasoning?

The answer is yes. Units are up. We have lowered the price to clear it through different distribution channels to WES Laboratories and through Fisher, lowered the price to grow some more market share. Units are up, especially on the line that we want to focus on, which is the Winged Sets because that is why we acquired the company. Units (indiscernible) I think doubled per month or there abouts.

So units are up 100 percent year-over-year?

(multiple speakers) No. They are up, it is month-to-month, it changes. The last month I looked at, it was up double, but that was down the month before. We haven't really seen the success yet with that line. We're still optimistic. We still think that's a great product line and as you are, we are a little disappointed with the results also. Keep in mind something, we got to be fair here.

We pulled the sales force off that when we put it onto the other distribution, the broader distribution channels, because a salesman can sell custom sets and make a $30,000 sale or he can sell needles and such or Punctur-Guard line and make $2000, so the salesman tends to be following -- were following the commissions anyway and following the dollars, so that's why you saw the bump up in our -- one-third of our sales now are custom sets. So we are using other distribution channels, but it's still early in this product line and we fixed all the problems with the product. It's just a matter of better distribution, better sales now.

Okay and then just generally with regard to '05, would you expect to have a record earnings year in '05?

The answer is yes, we expect it. We expect to have a record year.

It looks like it's going to be a boomer.

It's nice to have you so active on the call, Doc.

Let me just back up on the option question. The number was about 286,000.

Thank you.

I will now turn the conference back to Dr. Lopez.

Thank you very much for joining us and we will see you at the next earnings conference call in October.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 using the ID number of 363719. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.