Quaker Chemical Corp (KWR) 2003 Q3 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the Quaker Chemical Corporation's third-quarter earnings results conference call. At this time all participants have been placed on a listen-only mode, and the floor will be opened for questions following the presentation. It is now my pleasure to turn the floor over to your host, Mr. Ronald J. Naples, Chairman and Chief Executive Officer.

Thanks very much and welcome, everybody. Thank you for joining us on this Halloween morning. We decided to do this in on the morning on this such a day so that everybody could get home in time to deal with whatever ghosts and goblins come their way. I hope this earnings announcement is not one of those. Here with me today is Mike Barry, our CFO, Joe Bauer, our President, is also available. I will give some comments and Mike will give some comments and we will all be available to answer questions. What I plan to do is just cover a few financial highlights because details are usually forthcoming from Mike, as it will be today. More importantly I would like to briefly cover some of the strategic steps that we have been up to, because those are the things which really impact our long-term future. Of course we are all in this for the long-term.

But I do want to say a few words about the third quarter financials. On the sale side, our sales were up 22 percent. This is a mix of acquisitions, inflated topline from the CMS revenue recognition accounting. We talked about that in the past and will continue to keep you informed of that as it does change the shape of our financials a bit. Also contributing to the sales increase was the weaker dollar versus the euro, and part of it was very modest core business growth for the globe as a whole.

We did see a fair number of regional differences in the quarter and different regions did differ markedly. The U.S. and Europe, which are the most important to our financial results, have seen struggles by steelmakers in particular all through the year, as the steelmakers respond to reduced demand. Our share in these businesses in fact its expanding share in the U.S., but the market as a whole has not met our expectations and the demand for steel and the consumer durables that they supply has not seemed to move along in the near term as the kind of economic growth statistics we would see would suggest. That has been a continuing problem both in the U.S. and Europe.

Asia and South America, on the other hand, particularly in South America and Brazil, which is the bulk of our business, have seen good growth this year. They are growing markets and they have an excellent demand characteristics for us. So as the press release pointed out, double-digit growth in both of those in the third quarter helped offset some of the doldrums of the U.S. and Europe. That is some sense of the top line. Mike will cover that in a little more detail. On the earnings side, our net income was down about 3.5 percent in the quarter. Earnings-per-share were at 42 cents versus 45 cents last year. So that was disappointing to us, since one of the things we do try to shoot for is year-over-year growth every time. Sequentially, though, our earnings have grown from 33 cents in the first quarter with a 9 percent increase in the second quarter and now a 17 percent increase in the third quarter.

So our level of quarterly earnings through the year has been up, but the reality is that it has been tough finding the kind of growth we shoot for in the short term. I want to emphasize in the short term. Yes, we are subject to the industrially based slow growth businesses, which are driven by demand for consumer durables, and this demand is always tempered by the vulnerabilities of economic cyclicality. For the past seven or eight years, though, we have avoided the most dramatic effects of the negative cycles. Our earnings record has been much more consistent than the markets were subject to. Through last year, 2002, we had a compounded annual growth rate of 11 percent in operating earnings since 1995 with almost every one of those years an up year over the prior year. In fact, everyone was except for 2001. We have been able to achieve growth in low growth businesses through share of market extension, geographical penetration, increasingly acquisitions, and new business extensions such as CMS.

All that we have done over the past seven or eight years has in one way or another been preparing us for executing what we need to accomplish this. Strategies to set us apart, a global organization to deliver for our global customers, emphasis on the knowledge aspect of our business, which we think can set us apart, and managing our balance sheet for returns and to allow the funding of growth opportunities. And we will stay focused on our goals, which are good absolute performance in earnings and consistently good performance year-to-year, returns in capital and equity that are good on an absolute basis and well head of our industry peers, and the financial strength that we need and the strong balance sheet to fund what we would like to do going ahead.

We are going to do what we need to do to accomplish this, just as we have been doing for the past several years. The events of the last 18 months and this year in particular actually evidence this. Over the last 18 months we have made 5 acquisitions, 3 this year and 2 last year. Yes, they have been modest in size, even small, but they have all been type fit in some way, whether it be products or strategic customers or complimentary technology. All of this allows them to build on a market or financial leverage that we can take advantage of and all of them have been or we expect to be accretive in the first year. We recently announced the Balkan acquisition just a few days ago in fact. It is a very tight fit for us in the steel business. We get important customers in the U.S. and China in particular. We are buying a business, including the people that go along with it, that fits our strategy very well without the negative aspects, such as plants, which we don't really need. So we think this has the ingredients to be another good acquisition for us and is indicative of the way we try to approach these tight fits of businesses which will allow us to get financial leverage from them.

We have also seen in the last year or so since May significant extension of our CMS business. This is an extension of a model we have been working on for the last number of years. It is built on knowledge and service to make our customers more productive. It gives us a window on the needs of our customers, which helps us in our product development and our product penetration, and we expect and hope and have found that it creates value based partnerships that it becomes hard for our competitors to fracture. And of course we have been working on our global organization, which we believe significantly sets us apart, from our competitors because it give us a way to deliver knowledge, and by that I mean not only what we know, but also in terms of technology, but also what we know our customer needs around the globe.

So we have able to deliver this consistently to our customers around the globe. The other part of our global organization is operating as integrated whole and we have been investing considerably in an enterprise resource planning system to allows us to be truly global. We have continued that this year, as we will over the next year or so. The point of this year is that we have now implemented in the U.S. Having done that, we have implemented both in Europe and the U.S., our two most important business regions. So this has put us in a position to have done a great deal to moving towards global integration.

So as we seek disciplined short-term performance, which is always in our sight we've got our eyes fixed also on long-term strength, which at the end of the day is the most important thing to us. For me this is one of the primary messages of the year so far and it is one I wanted to emphasize to you this morning. So with that I will turn it to Mike and allow him to cover some of the financial details before we get into whatever questions there may be.

Thank you, Ron. Good morning, everyone. As I usually do I will now discuss some of the components of the P&L for the quarter in more detail, and I'll start with sales. Revenues for the third quarter compared to the same period last year were up 22 percent to a record 89.7 million. There were some significant swings in some of the major revenue components and I would like to review these components now. First of all, the new CMS contract revenues represented approximately 12 percentage points of the growth. Currency translation, primarily due to the stronger euro, increased sales by 6 percent as the average euro rate was 1.13 this quarter and 0.98 turn the third quarter 2002. So you can see the new CMS contract and the change in currency accounted for 18 percentage points of the 22 percent growth.

Current year acquisitions of Eural and SGF Chimie accounted for 2 percent of the growth. Product volumes on our businesses without including the acquisitions and the new CMS contracts, were down 2 percent, primarily due to weaker demand in our scale business. And price and mix effects accounted for 4 percentage points of the revenue growth, although approximately half of this increase is due to higher prices in Brazil, which were necessary to recover some of the currency impact on raw materials. I would now like to give some revenue data on our segment basis.

As you may recall, we had segment of the business into three areas: metal working process chemicals, coatings and other chemical products. Metal working process chemicals are products used as lubricants for various heavy industrial and manufacturing applications and make up approximately 90 percent of our sales revenue. Reported revenues in the third quarter compared to 2002 were up 23 percent in the segment. I will now break down the major drivers for this 23 percent growth, again, the new CMS contract accounted for over half of the revenue growth or approximately 14 percentage points. Currency accounted for 6 percent of the growth, and our two acquisitions, increased growth by 2 percentage points. So these three items accounted for 22 percentage points of the 23 percent growth in the segment. The other one percent growth in the segment was made up of some large swings in our regional businesses.

For example, our U.S. business was down 8 percent without the new CMS contract. However, offsetting these declines, was a 16 percent increase in Asia-Pacific, a 2 percent increase in Europe, and a 38 percent increase in South America, with much of this increase due to higher prices needed to offset the currency impact of raw materials. So while the global based business was close to flat, you can get see there are some major regional growth differences as the US declined and Asia-Pacific and Brazil rose significantly.

Our second business segment is coatings, which makes up approximately 8 percent of our sales and contains products that provide temporary and permanent coatings for metal and concrete products. Revenues for this segment were essentially flat for the third quarter of 2003 compared with 2002. In our smallest business segment, representing approximately 2 percent sales, fall other chemical products, sales were up 11 percent, but this is off a small base.

Moving now to gross margin, gross margin as a percent of sales declined from 40.1 percent for the third quarter to 34.3 percent. As we mentioned previously, the company's new CMS contracts have caused different relationships between margins and revenue than in the past. As the majority of our current CMS sites, the Company effectively acts as an agent and records revenue and costs from these sales on a net sales or pass through basis. The new CMS contracts have a different structure which results in the company recognizing in reported revenue the gross revenue received from the CMS site customer and in cost of goods sold the third party product purchases. These additional revenues and costs will substantially offset each other in the short term, since the Company has very little of its own product converted as of yet at these sites. The negative impact to gross margin for the third quarter related to the new CMS contracts is approximately 4 percentage points.

As previously discussed in the third and fourth quarters of 2003, we will see the full impact of the new CMS contracts and we expect the negative impact on our gross margin to be approximately 4 to 5 percentage points. The remaining decline in the second quarter of gross margin or the third quarter gross margin were approximately 2 percentage points due to increased raw material costs as well as product and regional sales mix. We had expected our raw material costs to decline in the second half of 2003 due to the projected decline of crude oil prices, however, we now expect raw material prices to remain around current levels in the near-term.

Moving down the P&L, I will now discuss our SG&A and other expenses. Reported SG&A of 24.5 million is up $1.8 million or 8 percent from the 22.7 million reported in the third quarter of 2002. The bulk of this increase, the 1.4 million, is due to the 2003 acquisitions and foreign exchange rates, primarily from the stronger euro. The remaining part of the increase is primarily due to higher pension costs and other inflationary increases. As well as the continued rollout of our global ERP system. However these higher expenses were largely offset by lower incentive compensation expense.

The other income category declined by approximately 650,000 quarter-over-quarter. In mid 2002, the company decided to convert excess cash held in its Brazilian subsidiary to US dollars. As the Brazilian Real continued to decline, significant foreign exchange gains were realized in the other income category during the third quarter of 2002. Net interest expense is lower than in the prior year for the third quarter, primarily due to higher interest income from the Company's international affiliates such as Brazil. In addition, the rates on our short-term debt are somewhat lower in 2003 than in 2002.

The year-to-date effective tax rate was reduced to 30 percent during the quarter, and this reflects the Company's favorable settlement of several outstanding tax audits and appeal issues. We currently anticipate our effective tax rate will remain at 30 percent for the full year and it is likely that effective tax rate will return to more historical levels in future years.

Continuing down the P&L, minority interest was essentially flat for the third quarter of 2003, compared with the same period last year. Equity income is higher for the second quarter of 2003 compared to the third quarter last year primarily due to improved results in our real estate joint venture. I would also like to make a couple of comments concerning our balance sheet.

Many of the line items on the balance sheet have been impacted by the stronger euro. This would be a (indiscernible) go up and down the balance sheet and explain each account. Turning our leverage, our debt to total capital ratio remains strong at 31 percent at the end of September, 2003, compared to 25 percent at the end of 2002 and 35 percent at the end of September, 2002. As separately announced on Monday of this week, the Company completed its acquisition of the steel business from Cincinnati-Vulcan Company. This acquisition increased our debt-to-total capital ratio to approximately 35 percent or approximately where we were a year ago. As previously disclosed, we increased our available credit lines during the second quarter from 25 million to 50 million. The $50 million is made up of $30 million committed and $20 million uncommitted. At the end of September we had approximately 26 million outstanding under the credit line. We had increased our credit availability by bringing in additional banks in order to increase the number of bank relationships, which we felt would be valuable long-term to the Company. In addition, the additional liquidity will be ready as we continue to look for more tight fit acquisitions, as we have done five times over the past nineteen months.

On our cash flow statement, I wanted to point out that we received 4.2 million in a priority distribution for our real estate joint venture in the first half of 2003. In the fourth quarter, we also expect to see an additional distribution estimated to be 250,000. Also there is a significant decrease in cash related to the increase in accounts receivable. This increase is primarily due to the start up of the company's new CMS contracts, as well as increased sales volume quarter-over-quarter.

In summary, we made 42 cents per diluted share for the quarter and $1.11 per diluted share year-to-date. Looking ahead, we continue to estimate that the fourth quarter results will be similar to the third quarter. That concludes my prepared remarks.

Thanks, Mike. At this stage, we will be happy to respond to any questions you may have.

Thank you. (CALLER INSTRUCTIONS) Robert Kosowsky of Sidoti and Company.

I was just curious if you could give us more detail on where your marketshare stands right now in the different regions. Has it gone up in the past downturn? Are you getting any marketshare in U.S. during the downturn ends? And also in South America, is it all just pricing or did you pick up some share there?

Our share is actually in very good shape around the world. I would say in the United States we definitely picked up share, because the bulk of the effect of our acquisitions has been in the steel business in the United States. We do not typically discuss share by regions, so I do not want to go into that detail, but we have definitely increased our share in the U.S. considerably over the last year with United and now with Vulcan. In Europe, our share has always been very high, and I think to be frank there probably our share slipped a little bit. There is always a give and take of customers. We probably lost a customer in Russia that hasn't been totally offset by gains on the continent. Our share there is still very, very strong, way ahead of number two. In Asia, we have always had the bulk of the share in China. We still do. That is becoming a much more competitive market as more and more suppliers like us decide that it’s a place where they can look for growth. But we have been there through our joint venture for seven or eight years now, six or seven years I guess, which has done very well and we expect to grow our share there from what is now, as I said, very large, to even larger. In South America, Brazil in particular, we are by far the leading player down there. And our share is I guess the best way to characterize it has been remained pretty stable down there although at a very high level. -- takes us around the world. Mike or Joe, do you want to add anything to that?

No, I think you covered it Ron.

The metalworking growth in Asia, was a lot of that volume based?

Metalworking in Asia is still not a really big number for us, so it is really -- that is one of our priorities going forward is to build that business, so it is really not a very meaningful thing for us to think about metalworking in Asia in terms of share at this stage.

Okay, and do you have an idea of what your CAPEX is going to be next year? And I also want to get an idea of what we can look for cash flow for next year, too, because I know you have a lot of investment in the CMS stuff this year.

We are in the process right now, Bob, of putting together our budgets for next year, so we have not finalized anything. We would not want to give you any guidance right now in that regard. The only thing I would say about CAPEX is that over the past couple years with our global ERP system as well as this year and last year for renovation and the joint venture initiatives in the real estate area, we have had abnormally high CAPEX. And we would expect to be somewhat lower next year, but we do not have the exact number yet.

Okay, thanks.

(CALLER INSTRUCTIONS) Sir, we do have a question coming from Greg Macosko of Lord Abbott.

You mentioned earlier that you wanted to improve metalworking in South America or in Asia, excuse me. How would you expect to do that? Any particular strategy? I know that you are using the CMS strategy here in the U.S. just generally speaking. A similar strategy in South America?

It may come to -- Asia we're talking about right?

Asia.

It may come to that kind of effort ultimately, but I think in the near term it is more a matter of building our presence in manufacturers in Asia, particularly in Korea, where there's a lot of manufacturing going on, and particularly in Japan. China of course, is another place were we would like to build metalworking share, but that is a bit different because you have so many small local suppliers there that are providing low-tech products. India is also a place were we believe there is a potential for growth in metalworking. I think the key factor for us is to put more resources on the ground there and the key factor is to more tightly -- another key factor is to more tightly integrate the efforts of our joint ventures in our global strategy. Japan and India are served by joint ventures. Korea is served at this stage by a licensee, so we are a bit removed from the direct action on those markets, more removed than we would like to be, so our strategies are really going to be built around how do we get more direct access to those markets? Or how do we find a way to work more directly with our joint ventures to put an emphasis on metalworking. I think it is fair to say that over the past our emphasis in these markets has been more on steel than metalworking, and so part of our shift will be to put more resources into the area in metalworking and also to work harder at integrating the efforts of our joint ventures into our global strategies.

How do you work with those joint venture partners? Is there a separate management team there and you basically ask questions, inquire? How do you work with your partner there?

Each joint venture has its own management. We serve on the boards of those straight ventures, we, being Quaker serve on the boards of those joint ventures and each of those joint ventures -- we have been working -- since we put our global organization in place in 1989 we have been working on the issue of how do we integrate the interest and activities of the joint ventures, which are course, locally based and have a local market perspective into our efforts globally. Because we do believe each of them plays a role in our global strategy. So it is kind of a matrix. You have a joint venture management, which is exclusive to that joint venture, and this management focuses on market development in its own local market such as India or Japan, and we have our global industry management overlay the activities of these joint ventures so that we -- they are included in our product development. They are included in our key account management, and increasingly are included in our technology development so they become a part of our global strategic effort in metalworking or steel business, while at the same time their execution responsibility is the local business. So it is a matrix organization. It functions as a matrix. Our global industry management overlaying the local interest of the joint venture management. Does that help you in anyway?

Yes, thank you. If I heard you right, if I looked across everything, the weakest part of the overall operations was the existing U.S. operations without CMS. Is that correct? You said that was down 8 percent.

That number is right, that's correct.

And did the movement to CMS impact that negative 8 percent, or is that basically a stand-alone sort of separate operation that is not impacted by your growth in CMS?

That number is largely driven by the steel business, not by the metalworking business, of which CMS is a part. In fact our metalworking business in the United States is doing fine, not getting all the growth we would like to get, but it is doing well. And of course CMS is adding to that by getting us customer penetration in places where we did not have it before. But the U.S. result that we have talked about is driven largely by decreased steel demand in the U.S., and I put it that way because I want to distinguish that from our share in the U.S. As I said earlier, our share in the steel business has gone up considerably here, but the volume of business that we're serving has slipped, and that is what has really caused the shortfall here in the U.S.

Am I wrong, but isn't the steel business doing reasonably well in the U.S.?

No, cold drilled steel demand is down considerably in the U.S.

Okay, and that is the basic driver?

Yes, it is.

Okay, and the coatings for metal and concrete, I know that is a small piece of total business, but that is flat on a year-over-year basis. Is that just basically industrial demand? That sounds maybe reasonably good, given the marketplace.

I would say fundamentally that we really in our businesses, particularly in the U.S., have not seen the industrial demand respond to the kind of economic growth figures that we have been seeing, and I think perhaps part of that growth is being driven by imports, which means the industrial base here does not get to play as big a role in that, as has happened in the past. So I don't think there is anything dramatic there. In fact we're looking for the coatings business to be a source of growth for us going into the future and we have programs in the Company under way to make that happen because we do believe there is opportunity for us there.

But if we look at just generally speaking the U.S., what would be, with regard to the steel business, I realize CMS is growing because it is a the new approach and the customers are, I think, interested in it, so it has a driver of its own because of your business approach there. But if I look at that cold rolled, what should I look for to see that grow in the future or see it turn around?

Well in our cold rolled sales are concerned, cold drilled rolling oil sales are concerned, and actually all the other chemicals we sell, process chemicals we sell at the steel mills, that is going to be driven by two things. One is inherent market growth, which is going to be relatively cyclical as the steel mills respond to the demand for cold drilled steel, which is largely driven by -- which is derived from the demand for consumer durables largely. So if that moves around, the demand in the markets are going to move around. It’s also going to be driven by changes in exchange rates because these are markets that are served by other countries that export to the United States. And of course there is a pricing dimension to that, depending on how prices move. The other thing that is going to drive it is our share, and one of the focuses we have had in the United States is trying to increase that share both through our own customer development efforts and through acquisition. If you look around the world, our share in the U.S., while it is a big business for us, our share in the U.S. is smaller than our share in other regions of the world, and we wanted to try to get that up. Because we want to become a key player to all the major steel companies who are increasingly having looking to a global view of the world, whereas before they had looked to a more local view of their interests. So it is important that we have strong positions with the strategic steel companies who are adopting this global view of the world, because we want to be able to serve them and their interests worldwide. That is one of the reasons we wanted to build our share in the United States. And we are doing that. The size of that business, though, is going to be driven by the demand on the steel companies for steel and we derive our demand for our lubricants based on what their demands are for production.

Have you seen penetration of any new customers in that cold rolled area in the last six months or so?

Absolutely. But I would think it is fair to say that that has been largely driven by acquisition. But that is a key factor in our acquisitions, is not simply to acquire steel volume, but to acquire volume that is connected to strategically customers we believe are long-term strategic players. Steel is one of those businesses where it is important to have the right customers, not just a lot of customers.

Who did you get with Vulcan, could I ask?

One of the key players there is U.S. Steel where we had business with U.S. Steel but we didn't have the rolling oil business which is important to us. ISG is another player that came along with Vulcan. We had business but we want to build the strength of that business.

Are there acquisitions such as what you got from Vulcan, which is a part of another kind of chemicals organization? I assume that was sort of an asset or a subsidiary spin-out of Cincinnati, right?

Yes, it was a piece of business they had that fit better for us than them. I wouldn't go so far as to say it was a sub or anything because they were not organized that way. We just bought a piece of business out of their Company.

Are their lots of acquisitions of that nature still existed in the United States?

No, they are not. We believe at this stage that we have pretty solid position among the key players and now we are in the business of solidifying those positions and trying to get more customer penetration through other products into those customers. We do not expect the U.S. business to be dramatically going ahead by acquisitions. There may be little things, there are a few very large players, of which we are one and the smaller ones who might be reasonable acquisition targets are really not that important any longer.

I see, so the acquisition side, at least in the steel business, is done.

In the U.S.

But you are saying overseas there are still opportunities?

There may be prospects. I do not want to over play that but there are may be prospects. Certainly acquisitions are going to continue to be an important focus for us because in businesses that are driven just by industrial demand, particularly businesses like ours which are in turn driven by the derived demand from consumer durables, we would continue to develop -- we do not want to rely just on the growth of those markets and we do not want to be pilloried by the cyclicality of those markets. So we are trying to find ways to make sure we get equal penetration in different parts of the world to give us a bit of a portfolios effect.

How much cross-sell do you expect from your products sold into the Vulcan customers? Is there much there?

We think there is opportunity there, but don't forget some of these customers we have already been serving some of their needs, so it is not like introducing us to an entirely new customer.

I see, sure.

When we think of the steel business, most people tend to think of the rolling oil for the cold rolled steel and that is certainly the most important of the chemicals, of the processed chemicals and it is indeed the one that one that adds the greatest value, but there are a whole number of other kinds of products that go into a steel mill for rolling. And even if we do not have the rolling oil in a particular mill we may have the corrosion preventive for instance. In some cases we have the rolling oil and not the corrosion preventative. So it rare that you are not in a customer to all, but the question of acquisitions is to get the right chunk of business with the right strategic customer.

Is it a facility based situation?

I do not understand what you mean.

One steel mill versus another, you have this one but not that one within U.S. Steel or within ISG?

Yes, a mill by mill game absolutely.

So in some mills you might not be penetrated, others you're very penetrated?

That is true.

I see, and so your competitors have a piece of U.S. Steel and you share the same customers with your competitor?

That is largely correct. Our goal is to get all of those darn guys out of there, but the reality is at this stage that I do not think there's probably an account in the country where somebody has all of everything.

And what would you say your share in the steel business is overall in the U.S.? Versus Europe?

Let's say that our share in the U.S. is probably somewhere just south of -- in the 40 percent range. If you add everything. That is not just rolling oils. And I would say, I would say probably that is a pretty decent number, around 40 percent of U.S. If you look worldwide, our share in rolling oils is in excess of 50 percent.

And that is a good reason why you need to maybe look more into the metalworking business, because your share is pretty high and to get more there. If I was a steel customer I would not want you to be much more than 40 or 50 percent of my total need.

Bite your tongue, Greg.

I don't know if there's any more questions out there, but thank you very much.

Robert Kosowsky.

I was just hoping you could give us an outlook over the next quarter for steel and industrial production for U.S. and Europe. I know you mentioned in the press release some of your customers were looking for some downtime in December, little longer than usual. Where are those located. Is that U.S. or Europe?

I will give some thoughts. Joe or Mike might want to add something here. The vibes we're getting from the European steel business, and those vibes we get by public announcements by big makers like Arselor, so it is not like we have some secret channel for knowledge is that they expect demand to be very tough as the year winds down. The U.S. steel companies have been less vocal about it, but everything we see in the marketplace suggests the same thing, that demand continues to be tough. Now you hear statistics like we heard yesterday about growth for the quarter being 7 percent. That is pretty dramatic stuff. How that is going to wind through, if that plays its way through consumer spending and plays its way into consumer durables, there is going to be a demand there that maybe wasn't expected. But that is -- there's no clear indication of that at this stage. Plant shutdowns affect not just the mills, steel mills probably less so the steel mills and more so the metalworking customers who are looking at there flow of the demand for their products and their inventory status at this time. So, I think it is fair to say the shutdowns are probably more an issue for us in the metalworking side than they are on the steel side. Anything you want to add to that Joe or Mike?

No, the U.S. in the last week or so, we have seen a slight uptick, so it is hard to read that. But no question what we're hearing out of Europe is that they are going to make the most of the Christmas holiday season and shut down.

And how is the quarter just sequentially as you look to July, August, September, and now through October?

How is the quarter sequentially, Bob?

Yes, in those regions, sales volumes and whatnot.

We don't have any of that data in front of us.

Okay, thank you.

(CALLER INSTRUCTIONS)

Thanks for joining us, everybody. I do not want to keep you here unnecessarily but on the same I do not want to cut it off, so if there is another question or two we will be glad to take them.

No, there is no further question.

Okay. I just want to thank everybody for their interest and for joining us. I wish you a safe and happy Halloween for you and your kids and we look forward to seeing you, talking to you again in a few months.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.