International Flavors & Fragrances Inc (IFF) 2003 Q1 法說會逐字稿

Good day. Welcome to the International Flavor and Fragrances first quarter 2003 earning release conference call. Today's call is being recorded. The speaker for today's call will be Mr. Richard Goldstein, chairman and CEO, and Mr. Doug Wetmore, senior VP and CFO.

Gentlemen, please go ahead.

Thank you. Good morning. Before we begin, I need to read you some cautionary remarks.

This conference call may contain statements that are considered forward looking within the meaning of the private securities litigation reform act of 1995. The complete forward looking statement is in our press release and is updated from time to time in the company's SEC filings. Now to move forward with our first quarter review.

I'm pleased to report that our results for the first quarter are in line with expectations outlined to you in January of this year. Both from the sales and an earnings per share perspective. Sales for the quarter increased 5% in comparison to prior year in reported dollars.

The 2002 results included approximately $5 million of sales associated with non-core businesses we disposed of in June of last year. Excluding these sales from the prior year for comparative purposes sales increased 6% for the quarter.

On a local currency basis, again excluding those sales attributed to non-core businesses, the quarter sales were also in line with our guidance declining 1%. This performance must be framed in the same context as our guidance was in January.

We, along with everyone else, continue to confront a difficult global economic environment. Further aggravated by, first, the imminent threat and then the reality of major military conflict. In this context I am pleased with our sales performance for the quarter. And continue to believe that the full year will develop in a manner consistent with the guidance we previously provided.

Top line growth in local currency in the low single digits. Our earnings per share for the quarter were 34 cents. These per share results reflect the impact of nonrecurring charges equivalent to 14 cents per share.

We announced the elements of those charges in the release earlier this month. The nature and genesis of these charges are rooted in all that we have accomplished over the last 30 months. In this time, we under took a number of initiatives including the acquisition and integration of Bush Boake Allen and the reorganization of IFF.

In doing so, we have emphasized speed and decisiveness in our actions. The integration of IFF and BBA operations, research, selling and administrative functions, which we completed in 2002, was an enormous success. But these latest steps in our reorganization could only be taken after completing the integration and after having performed a thorough analysis and assessment of our company's personnel and process post integration.

Our first actions in the first quarter eliminated over 150 positions. I cannot emphasize enough that some of the decisions made and the actions taken were not easy. But they were necessary to enable us to take full advantage of our network of global creative facilities designed to supply our customers with high quality flavor and fragrance products and to then produce them in our efficient, state of the art plants, all the while enabling cost efficiencies and enhanced profitability. We will complete the balance of the contemplated reorganization this year and we will share details with you as and when appropriate.

Excluding these charges, our earnings per share would have been 48 cents per share in line with the range we previously provided. We achieved our expected earnings for the quarter and year while at the same time increasing our spending on research and development to the targeted levels. R&D is the cornerstone of our future profitable growth.

We also continue to take steps to better manage our balance sheet and our debt position. As you have also seen in this morning's release, we have repurchased $200 million of the five-year notes we have outstanding and funded the purchase with commercial paper.

We recognize the loss of $3 million in the first quarter and will have another $1 million or so loss in the second quarter in connection with these repurchase activities. But at current interest rates, we will save between $3 and $4 million annually on the shift to commercial paper. And we will be able to pay down the commercial paper easily as we generate cash flow.

Even in difficult economic times we continue to have very strong cash flow. Based on where we stand now, we expect that we will have approximately $900 million in outstanding debt at the end of this year. This is a reduction of approximately $370 million from the peek debt after the acquisition of BBA.

Looking ahead to the balance of the year, for the second quarter we expect local currency sales to be flat and up between 5% and 6% in dollars.

In earnings per share for the quarter, be in the range of 58 to 60 cents per share. For the full year we continue to hold to our earlier guidance. More specifically, we expect revenues to grow in low single digits and earnings per share to increase between 10% and 15%.

With all the progress we have made and the steps we are taking I firmly believe that IFF is well positioned to drive long-term growth and shareholder value.

Now I'll turn the call over to Doug to discuss our financial results in more detail. And we will then be pleased to take your questions. Doug.

Thanks, Dick.

Good morning, everyone. As Dick mentioned. Local currency sales for the first quarter decreased about 1% from the prior year in line with our expectations resulting in a 6% increase in dollars. This performance excludes for comparison $5.1 million of sales in the first quarter of 2002 attributable to the non-core businesses we disposed of in June 2002. Essentially, all of those sales were in North America. Including the sales related to non-core businesses, sales for the current quarter declined about 2% versus the prior year and increased about 5% in reported dollars.

The favorable currency translation was principally attributable to the strengthening of the Euro versus the U.S. dollar and to a lesser extent the strengthening of the Japanese YEN and the Australian dollar versus the U.S. dollar. In comparison to the prior year, these currencies strengthened by about 21%, 10%, and 13% respectively versus the dollar.

As Dick mentioned, per share results excluding the effect of the nonrecurring charges were 48 cents per share in the middle of the range that had been forecast back in January. In looking at the regions, North America fragrance sales declined by 7% for the quarter representing a weaker performance than had been anticipated.

Functional fragrance declined by 10% in the quarter and this was in line with expectations. We had forecasted a decline in functional product sales mainly due to continued destocking in various distribution arms. The functional fragrance performance was aggravated by a very difficult comparison with the prior year.

Functional fragrance sales increased 20% of the first quarter 2002. Fine perfume increased by 1% in the first quarter continuing to benefit from new wins. However, the poor holiday season impacted first quarter restocking activity.

This factor, combined with the effect of ongoing economic weakness and the impact of declining travel had on duty free sales limited fine fragrance growth for the quarter.

ARoma chemical sales declined by 9% for the quarter, a somewhat larger decline than had been foreseen. North America flavor sales declined 3% for the quarter. This performance was somewhat below expectations and reflected a continuation of a slow down in customer order activity that we first saw in the fourth quarter of last year.

Nevertheless, we continue to see a high level of new brief activity in North America flavors and wins, as well, and expect the situation to improve somewhat as the year progresses.

Europe fragrances, local currency sales, decreased 2% for the quarter on translation. This resulted in a reported dollar increase of 17%. The performance was in line with expectations.

The performance was led by a very strong growth in fine fragrance sales, which increased 12% in local currency. Resulting in the 37% increase in reported dollar sales. This strong growth was defined by a number of new wins and is evidence of the continued improvement in our fine fragrance business.

Our performance was as expected in functional fragrance products where local currency sales decreased in the low single digits. On a reported dollar basis functional products increased 16%. ARoma chemical sales declined 11% in local currency resulting in an increase of about 5% in reported dollar sales. The aRoma chemical comparison with the prior year was extremely difficult in that 2002 aRoma chemical sales had a 26% local currency increase in the 2002 first quarter.

As we've noted in the past, for several quarters we have seen gyrating order patterns rather regarding chemicals in Europe and the first quarter of this year was no exception. Europe flavors increased 3% in local currency for the quarter resulting in a 21% increase in reported dollar sales. The local currency performance was somewhat better than had been expected and reflected the benefit of some good new wins.

Latin America fragrances reported a decrease of about 4% for the quarter. The performance was consistent with what had been expected. Argentina showed a modest degree of growth in the quarter although it had the benefit of a very easy comparative having declined nearly 50% in the first quarter last year.

Brazil decreased about 14% for the quarter. There has remained some skepticism regarding the economic policies of the new President in Brazil and that skepticism impacted our results in the quarter. However, we remain cautiously optimistic about Brazil's prospects and forsee an improvement in that market as the year progresses.

Mexico grew in the low single digits although this growth was nearly offset by continuing weakness in Venezuela due to the ongoing strike in that country.

Latin America flavor sales decreased about 9% in the quarter, in line with our expectations. Argentina flavor sales rebounded sharply increasing 86% over the prior year quarter.

The comparative was admittedly easy in that Argentina had declined 60% in last year's first quarter and Brazil flavor sales declined 6% in the quarter in line with our expectations . Mexico declined 30% with the performance aggravated by a very difficult comparative with Mexico having grown a greater than 30% in the first quarter of 2002. Venezuela flavors declined 45% in the quarter.

Asia Pacific fragrances increased 6% in the local currency resulting in an 11% increase in reported dollars. The performance was consistent with what had been expected and the strong growth reflected the benefit of several new wins. Growth was led by Indonesia, which increased 20%, China-Hong Kong which grew 11% and Thailand, which grew 39%. Vietnam, while still a small market, grew 44%. Japan declined 1% in local currency. And Australia and South Korea declined by 17% and 39% respectively.

Asia Pacific flavors local currency sales decreased 6% resulting in a flat performance in reported dollars. The local currency performance was somewhat less than had been expected. Japan, the Philippines and Thailand all contributed to the performance with decline in double digits in local currency. Indonesia declined 9%. China-Hong Kong sales were flat for the quarter. South Korea increased 11% while Vietnam and Australia increased 6% and 2% respectively. India fragrances reported a 20% local currency increase in sales resulting in a reported dollar increase of 27%. This performance exceeded previous expectations. And reflected the benefits of several new wins in the market place.

India flavors reported a local currency increase of 16% resulting in a reported dollar sales growth of 17%. Performance in flavors in the region was also better than as expected and as with fragrances reflected the benefit of new wins in the market place.

Looking at operating results, our gross margin came in at 42% of sales, slightly better than the prior year quarter as reported and in line with what had been expected. Our operating costs were in line with expectations. Such costs included expenses of approximately $1 million in the quarter incurred in connection with the implementation of SAP.

During the quarter, we had two very successful implementation of SAP and our fragrance plants in Ireland and our flavor and fragrance compounding plant in China. Customer service continued at very high level at these plants during the implementation period and there after. Our operating margin improved to 16.6% of sales from 16.2% in the prior year comparable period.

Interest expense continued to decline -- decreasing by 22% in comparison to the prior year quarter and our average interest rate this quarter was 3.4% versus 3.7% last year. Interest also declined due to lore debt levels -- debt outstanding tend of this quarter is about $77 million less than at March 31, 2002. And we will continue to reduce debt as the year progresses.

Other income and expense decline in comparison to the prior year for two principle reasons. First, 2002 results included about $3 million of favorable exchange gains, most notably in Argentina and there are no exchange gains of this order of magnitude in the current quarter. Secondly, other income and expense reflects approximately $2.7 million of loss on the repurchase of debt that Dick mentioned in his opening remarks.

During the quarter, we repurchased approximately 570,000 treasury shares under our buy back program. On March 31 we had a remaining authorization of $78 million. We remain committed to properly balancing the repurchase of shares with reduction in our overall debt levels.

The effective tax rate for the quarter was 32% before giving consideration to the effect of the nonrecurring charges. After giving effect to these charges the effective rate was 31.2%, the reason for the difference is that a substantial portion of the nonrecurring charges, were in higher taxing jurisdiction including the United States so that the tax benefit of the charges drove down the overall effective rate. Excluding the impact of nonrecurring charges during the course of 2003, I expect the full year rate will be 32%.

Other item of note, cash and [inaudible] at March 31, 2003, totaled about $16 million. Our day's sales and inventory declined from 154 days at December 31, 2002, to about 148 days at the current quarter end. Our receivable days declined from 70 days at December 31, 2002, to 68 days at March 31. Our capital investments for the quarter totaled about $11 million.

And depreciation for the quarter totaled $18 million. At this time, we continue to expect capital spending for the full year 2003 to approximate the $80 to $85 million that we outlined in January.

On April 3rd we announced the latest steps in our reorganization plan announcing the elimination of more than 150 positions.

Essentially all charges taken in the quarter represent costs incurred in connection with the elimination of these positions and essentially all of those people have left the employ of the company at March 31. As we also noted in the April 3rd release we now expect the final costs of the reorganization to approximate $110 million increasing from the original range of $90 to $100 million that we put together about two and a half years ago.

The reason for the increase from the original cost is a combination of some additional actions now contemplated by the plan and currency has also impacted overall cost to the extent that the reorganization efforts take place outside the United States.

Looking briefly at the second quarter '03 expectations, for the quarter as Dick said, we expect local currency sales to be flat in local currency. For purposes of comparison, we exclude 2002 comparable figures of $4.3 million attributable to the non-core businesses disposed of during June, 2002.

Exchange is expected to continue to be favorable in the quarter resulting in a reported dollar sales increase of between 5% and 6%.

And looking at the regions, some preliminary guidance is as follows. North America fragrances is expected to increase in the low single digits.

Aroma chemical sales are expected to increase somewhat but fine and functional fragrances are expected to be flattish. North America flavor sales will be flattish compared to the 2002 second quarter. Europe fragrances will decrease in the low single signatures in local currency terms resulting in a low double digit increase in dollar terms.

Europe flavors are expected to increase in the low single digits in local currency with a double digit growth in dollars. Latin America fragrances will increase in the high single digits. Brazil and Mexico will remain weak -- will decrease, Latin America fragrances will decrease in the high single digits. Brazil and Mexico will remain weak as will the -- most notably Venezuela.

Latin America flavors are expected to increase in the low single digits. Asia Pacific fragrances are expected to increase in the low single digits in local currency and in mid single digits in reported dollars. Asia Pacific flavors are expected to increase in the low single digits and local currency as well resulting in mid single digit growth and reported dollars. In the Indian region, fragrances are expected to decline in the low single digit in local currency and high single digits in dollars while flavors are expected to increase in both local currency and dollars in the high single digits.

We expect earnings per share for the second quarter 2003 excluding any nonrecurring charges to be in the range of 58 to 60 cents per share and for comparative purposes 2002 second quarter earnings would have approximated 54 cents per share and 54 cents excludes nonrecurring charges that were taken in the second quarter of 2002.

Just to repeat, the full year expectations we continue to expect 2003 revenues to grow in the low single digits in local currency excluding for comparative purposes the sales attributable to the non-core businesses disposed of during 2002. Similarly we continue to expect earnings per share for '03 excluding nonrecurring charges, to be in the range of $2.12 to $2.20 representing an increase of between 10 and 15% in comparison to the 2002 per share results also excluding nonrecurring charges in 2002.

With that, we'll now open the conference call to questions.

Thank you, sir. If you would like to ask a question on today's call, may do so by pressing star one on your touch-tone telephone. Again, that is star one if you would like to ask a question.

If you're on a speakerphone, please make sure your mute function is turned off. Once again that is star one if you would like to ask a question. We'll pause a moment to assemble our roster. We'll take our first question from Jeff Zekauskas from J.P. Morgan.

Hi, good morning.

Good morning, Jeff.

Could you provide a number for local currency -- for sales volumes and local currency for the year in 2003?

Jeff, that's where we expect -- local currency sales we expect to be up in the low single digits for the full year '03.

So that represents growth over the first half?

Yes.

Yes.

Okay. And just secondly, can you just give a little bit more detail about what exactly happened in North American food flavor and that is, you know, can you give some information, say, by industry sector or demand sector? Likewise, for fragrances in North America?

Well, I think that -- as far as the flavor business is concerned, we just saw the order patterns activity was not as strong and as vibrant as we had anticipated that it would be. Based upon the wins that we had at the end of last year. And I really don't have a strong explanation for what the reason for that was other than some speculation with respect to the fact that it was across the board and it may very well have been -- had to do with inventory levels within the stores on the basis of sell through tend of last year on our customer's parts and offtake at the beginning of the year resulting in lower reorders, Jeff.

On the fragrance side we definitely know that was the case and that the, you know, the holiday season not being a great holiday season, did result in lower reorder patterns coupled with the concern about the impending war in the Gulf, there was a withdrawal and a pull back on orders because nobody wanted inventory sitting in duty free shops when there was the likelihood of them not being traveled.

Okay. Thank you very much.

Just, Jeff, we also saw, I think, in many of the CPG companies and the food companies there was probably some decline in marketing spending particularly directed toward new products because it was a period of time, I think, when many of our customers were not inclined to launch new products.

On that point, Jeff, historically whenever there is a major, you know, disruption or a war, consumer products companies pull their advertising immediately and in anticipation of that, again, there was a slowdown or a delay in launch activity.

Thank you.

Once again, that is star one if you would like to ask a question. We'll take our next question from Alice Longley with Credit Suisse First Boston.

Hi. My first question is sort of to expand on what you were just discussing. Your functional fragrances were down 10% and that can't be explained with the duty free shop issue? I think you cited destocking there. How do you know that's from destocking? What's the -- that's a big drop, 10%.

There were first elements. First of all it was destocking and we did talk about that in January. I think the second thing, particularly North America, it was aggravated by a very difficult comparison because we had a 20% increase in the first quarter of 2002 and we had a 10% increase in the first quarter of 2001. So at some point in time, you know, we have talked about the destocking effect. We don't to believe it's going to take several quarters but -- it's the best information we have from our customers and our own sales force.

How do you -- how do you determine that the reason is destocking as opposed to share loss or anything else? Or a decline in demand or whatever? How do you know it's destocking?

Well, we haven't launched anything. It would have to be a share loss of our customers product and we haven't seen that if you follow me.

All right. So how are you determining that your sales are going to be improved in flavors and fragrances in the second quarter in North America?

Well, that's built-up in talking with our customers in terms of their order patterns and plans, because you know where we are in the supply chain we need to have a view as to their activity for the next two to three months so that we can plan our production to get it to their plants.

So that's, you know, we always look forward one month, and while you may have -- excuse me, one quarter, and while you may have some ups and downs, as we always do, that's the best information we have at any given point in time.

It's a combination of looking at the order book and on the feed that -- the feedback that we're getting from the sales force in talking with customers, Alice.

Do you sense that there's any sort of rebound in the second quarter from the first quarter that was maybe suppressed by the pull in advertising?

I anticipate that from -- that in our comparative that we're looking for a flat second quarter, flat as numbers, but it's very difficult -- I mean with the war now over, if history is a barometer, yes, advertising should begin, you know, to return to historic levels. On the other hand, you've got all sorts of other factors that are going to certainly impact with respect to fine fragrance and that's SARS, the duty free shops in Asia are certainly being hurt. And indeed travel in general is down, as you know. And that will have a negative impact on fine fragrance for the foreseeable future.

I guess my last question would be. On that topic, I'm a little surprised your forecast for Asia-Pacific for the second quarter is as good as it is. You factored in the SARS effect to those numbers?

Yeah, we did. And I mean those forecast numbers are really on the strength of the really the bulk -- the balance of the business, functional fragrance and flavors.

It's the best information we have at this point in time, Alice.

Okay. Good. Thank you.

Once again, if you would like to ask a question, you may do so by pressing star one on your touch-tone telephone. Again, that is star one if you would like to ask a question.

We'll take our next question from Amy Chasen with Goldman Sachs.

Hi.

Good morning, Amy.

How are you?

Good, thank you.

I don't mean to harp on this issue, but I guess I'm a little bit -- having a hard time making this all kind of add up. I mean the -- at least in the helpful products, personal care fragrance we've actually seen some really good first quarter sales numbers from these companies and you guys talked a while back about the fact that you started to see some momentum you were gaining some market share, and so again, I don't want to harp on the issue. I'm really having a hard time understanding the disconnect between you know, what you guys are reporting and what some of your customers are reporting.

Well, you know, Amy, I think what you can see is still -- some of our customers reducing their level of the inventory of fragrances that are included in their products.

You know, and I -- I benefit from repeating the fact we had a 20% increase last year and a 10% increase the year before. But all I can tell is you we haven't lost any significant business and we're filling the orders as they come in.

And we understand that -- you see it from some of the other companies that you follow, that they are making great efforts to reduce their investment in working capital and you know, our inventory is one of their elements of working capital.

So maybe -- maybe that's an actually interesting point to explore is maybe this is sort of a secular phenomenon that's going to continue to temper your results, you know, for the foreseeable future, if, indeed, what you're seeing is they are pushing the inventory back to you guys.

Well, I don't think it's something that's a brand new phenomenon. I think it's been ongoing and I think that it will -- it will level out but the point is that within the supply chain nobody is anxious to hold the inventory. And we've known this for a long time. And that the imperative on our part is to keep our inventory levels as low as possible as well.

But your point is one that has existed for a considerable period of time within the consumer products company and that is they don't want to hold inventory.

I think the other thing, it's not growth -- we've gone in the functional fragrance, we expect those sales to be flat in the second quarter, which arguably is an improvement over a roughly 10% decline in the first quarter. And I do think you see a gyrating order pattern there, as well.

But -- to touch on your point, Amy, it's not just them shifting the ownership of inventory back to us. It's really a question of them reducing their overall inventory levels of fragrances amongst everything else and elements of that mean they want us to hold it longer. But, also, they are trying to reduce the overall level of inventory in the complete supply chain.

Okay. Thank you.

Once again, that is star one if you would like to ask a question. We'll take a follow up from Alice Longley.

Alice Longley Hi. Could you give us a little update on what we might factor in for interest expense for the year? Also, gross margins?

Well, to answer the interest expense, I think right now based on the best information we have available, Alice, it's probably somewhere in the range of $31 to $32 million and obviously that is based on current approximate interest rates.

But I don't think interest rates are going to be moving up sharply in the second half of the year. I think you'll see gross margin move more favorably as the year progresses.

I think you'll see year over year improvement for the full year. We probably should be above 43% but so much of it is dependent upon product mix that -- I wouldn't want to be tied down any further than that right now.

Okay. What are you comfortable with for the R&D ratio?

It will be 8% for the full year. Remember the spending in R&D is pretty much linear throughout the year and the first quarter is smaller than the second and third. So you'll see the, I think we were 8.3% during the first quarter but for the full year 2003 I would expect R&D to be 8% of sales.

Okay. Thank you.

Once again that is star one to ask a question. We'll take a follow-up from Jeff Zekauskas.

Couple of things. What was the earnings per share impact of the currency benefit in the quarter?

You know, Jeff, it's always hard to say because some of our costs, Europe purchases some materials in dollars and the U.S. purchases some in Euros but I think it's general in line in the exchange effect on the top line, perhaps slight diminished only because we have some European debt where the interest rate or the interest expense obviously moves up with the strengthening of the Euro versus the dollar.

5 cents, 6 cents?

No, I don't think it would be that much.

All right. Secondly, when you look at the results of some of your publicly traded competitors and you sort of compare them to your own volume results, what do you make of the similarities and differences?

I think it's difficult for us to sometimes understand the release numbers of some of our publicly traded competitors. Given the currencies in which they are reporting and I only know that to the extent that what we see in terms of the context of the competition within the market place we're holding our own.

You know, I think to amplify that, we've talked in the past, in places like Latin-American and most of the countries in southeast Asia, we deal only in dollars. We don't talk about local currency growth because, if a currency devalues 40%, in a year or 60% as Brazil did in 1999, to talk in terms of local currency growth is not particularly meaningful. I think we're doing okay. In terms of the volume growth and share growth.

We're certainly holding our own and we're certainly gaining share in fine fragrance and I think we did pretty well in flavors in Europe during the quarter. And I think the other thing, you know, one of our competitors has suffered a bit because of disruption associated with SAP and that's regrettable for them.

On the other hand looking at the bright spot, as I mentioned, we had two very successful implementations of SAP in the quarter and that's following up a couple more that we had in the fourth quarter of 2002. And we're on track with our plan to get IFF globally on SAP by the end of '04 or the early stages of 2005.

I guess sort of one other matter is, given that your currency growth in rough terms will sort of help you by 4 or 5%, all things being equal this year, why isn't your sales forecast for the year sort of up mid single digits given you expect volume growth?

I think there's a great deal of uncertainty still in the balance of the year, Jeff. And you know in terms of -- in terms of reported dollars, we are expecting an increase in 7 to 8%.

That's in the press release.

And to be more bullish than that at this point, I think, would be a bit imprudent.

Okay. Thank you very much.

Once again, that is star one if you would like to ask a question. We'll take our next question from Vincent Leeburg(ph) with Protect(ph).

In relation to your previous point on the ACP [inaudible] of one of your competitors, I was just wondering if you could comment on what you've noticed in your own business following the announcement that they made a few months ago, I guess it's a few months ago, probably six weeks ago, about a 20% drop in their volumes and flavors. I was wondering if you picked up some business there. Also if you could comment on the overall behavior in your industry.

Do people try to compete really hard to get the business on pricing? On new -- I'm trying to understand a bit better how this works?

Any time there's disruption in the market place there are opportunities that are presented and it would -- we certainly -- you know, do respond to those market opportunities. And we will continue to do so to the extent that there is market disruption.

But you have noticed the pick-up in your business following the problems there?

I didn't say that.

I was trying to --

We know what you were trying to do --

I didn't say that.

When there is disruption there are opportunities and we have certainly presented ourselves to the customers when the opportunities have occurred. And we are -- we continue to do well within those circumstances.

You know, we reported a local currency increase in flavors in Europe.

Right.

About 3% in the first quarter. And we're looking at a low single digit increase in local currency in flavors in the second quarter. And I think that's indicative of doing pretty good in a difficult economic environment because there's really not a whole lot of strong spots in the European economies. That's about as close of an answer as I can give you to the question you're trying to ask.

Thank you, thank you. You answered it very well. Thank you.

Once again that is star one if you would like to ask a question.

Okay. If that -- is that the last question, thank you very much and we'll talk to you at the end of the second quarter.

This does conclude today's conference call. At this time you may disconnect.