Quaker Chemical Corp (KWR) 2007 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Quaker Chemical Corporation first quarter 2007 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mr. Richard Naples, Chairman and CEO for Quaker Chemical Corporation. Thank you, Mr. Naples, you may begin.

Thank you very much. Welcome, everybody. Always glad to have you here. With immediate today is our new CFO Mark Featherstone, as you know. Neal Murphy left a month ago to join a much larger public company headquartered here Obviously we're sorry to see him leave, he was a fine fellow and a fine CFO, and we certainly wish him well. But I am equally glad to to Mark Featherstone to step into his place to his place because it makes for a great transition. Mark has been our Global Controller for six years. He know the company well, its finances and accounting matters and control processes and its operations, so he is uniquely qualified to step in, and we're glad to have him in the job. So welcome, Mark. I trust you all will get to know him as we go along. And obviously as we are out and about with investor presentations and that kind of thing. As we've done in the past, I am going to make intro comments, and I will keep mine mercifully short, and then Mark will provide some more detail, and we'll take questions at the end if there are any.

Well, you saw the press release, and you will know I think and hope you will agree with me the first quarter provides a fine start to the year, particularly when we compare results versus last year's first quarter. Sales were up almost 14%. Net income was up about 39%. Our earnings per share went from 26 to 35 -- $0.26 to $0.35, and that's even with about 200,000 more outstanding diluted shares. This was our fifth consecutive quarter of year-over-year earnings improvement in our core businesses. Now, it is true the net income increase I talked about was helped by our reduced tax rate, but of course a reduced tax rate doesn't happen on its own. It flows from initiatives we've been taking and work to do try to put ourselves in that position.

I should note that the reduced tax rate alone played only a supporting role in our earnings increase. If you look at our operating volume, or operating income which doesn't get any help from the tax rate, that was up about 30% in any case. We feel the first quarter was a very good start that represented a really good progress, and we think it will lead us to a year of solid progress this year. As I said, I would like the first quarter to stand on its own and speak for itself, but there are a few points that I would like to make of particular note about the quarter. Number one, it was achieved, the earnings increase was achieved in the face of continued raw material challenge. That issue is not finished. Versus last year's first quarter the price levels of raw materials in this year's first quarter added considerably to our costs in the quarter. It is true that oil prices were more stable, that volatility was much less, but they're still high, and at the same time we see shifts in other important raws that is we use, so we expect raw material costs in 2007 will be considerably ahead of 2006 for the year as a whole, ahead not just for volume but for the prices we'll be paying, but we're in a much better position with our customers than we have been to live with this changing world.

We continue to focus on the value delivered as we discuss our issues with the our customers and at the same time we work on recognizing the realities of our costs and we've really seen the benefits of that. We saw that last year and continues into the first quarter, and we continue to work on that. It is also good to see our strategic initiatives that we talked about consistently these meetings are contributing in a major way. One of those strategic priorities was that we improve our global presence and our global reach and that we continue to focus on operating at a globally integrated whole. We see that in a number of ways. One of the most obvious and apparent is China. China had a great first quarter, both in the Metal Working business and the steel business in terms of real growth, in terms of dollar growth we have a leading market share in that business, particularly in steel. We have a growing business in Metal Working showing great progress even though it is growing from a much more modest base.

We've been active in China now for a little over ten years I guess it has been, and you'll recall that last year and into this year we restructured our operations in China so that now we own the operation 100%, our partner is still available to us on a consulting basis but no longer has an interest in the operation. We built a new plant. We built new facilities. R&D facilities, I should say, and I think all of that is contributing to the continued progress we're making in the Chinese market. It has been a very successful for us, and first quarter was really another indication of the kind of success we've had in China. We have as I said earlier a leading position by considerable margin in the steel business and a growing business in the Metal Working business. China has been a real success story for us, and we believe we can continue to build our position in China as that economy continues to grow. Although we all recognize that is looking straight upward line because the Chinese folks, the Chinese government has already been expressing some concerns about the over-heatedness of their economy, and so we may see some effects of that later on in the year.

But in any case at this stage we had a very good quarter, and I should point out I think we're well positioned to continue to have our leading position in China. Beyond just China, we're building and maintaining leading share in our core business in industrializing countries, India and Brazil. India had a fine quarter also. We're building our steel business there in which we also have a leading share, and we're increasingly growing in the Metal Working in China. Brazil we have the leading position in Brazil in steel and Metal Working, and we continue both of those businesses continue to perform very well. It is not just the industrializing countries, it is also the highly developed markets, U.S. and Europe. U.S. has come a long way in improving its financial performance. We're doing better and better with the U.S. auto manufacturers. In Europe we're also improving our -- Europe had a fine quarter where it improved its earnings and its sales.

And we're building our position with the European steel makers as they consolidate, so all in all it is quite a good story across the board. As we think about our strategic initiative on our global reach. We're also seeing the strategic initiative that is we've initiated concerning value to customers, seeing them pay up. The most -- I guess the most prominent example of that is our CMS business. It is a channel of distribution that's been very important to us. It allows us to use our products to the best effect for our customers. It allows us to become a more important part of our customer's resource to improve their own performance. Those are two very important aspects of why CMS is an important strategy for us. The business itself is contributing very importantly in the U.S., both at an absolute level and an incremental level. In the last few quarters as well as this quarter. In the last six to eight months or so we've renewed about 31 CMS contracts. We've had zero losses of any contracts that have come up with renewal, but we're adding sites so that today we have over 50 sites in the U.S.

We are increasingly pursuing international opportunities for CMS, and we can take advantage of the learning curve we've had here in the U.S., so that business has been a very important contributor for us, and we think it is a great platform to continue to build because it allows to us demonstrate and to provide value to our customers. The third strategic initiative that has been important to us and will become increasingly so is our focus on growth areas. These are complimentary products and markets or product extensions. They're much more [Inaudible] and much smaller than our traditional Metal Working and steel effort, but they have a great deal of promise. I am talking about areas such as mining and coatings in a number of different applications. All of those have contributed increasingly, importantly, over the last few quarters and into the first quarter. So all in all we had a very good quarter. We feel good about the start it has given us to the year. I think one of the things it does beyond providing good financial start is it demonstrates the resilience and it demonstrates the continuing promise of our business, and we're determined to demonstrate that as we go through the year. With that, I will turn to Mark, and then as I said when Mark is finished we'll have time for questions if you all have any.

Thank you, Ron. Good afternoon, everyone. Yesterday we announced record first quarter 2007 sales of $124.9 million and diluted earnings per share of $0.35. This compares to sales of $109.8 million and earnings per share of $0.26 for the first quarter of 2006. Net income increased 39% to $3.5 million versus $2.5 million in the prior year quarter. I will now spend the next few minutes focusing on the first quarter P&L, and then we'll go onto questions. Now, as Ron mentioned, revenues for the first quarter comparative with the prior period were up 13.7% to $124.9 million. This growth was driven by pricing improvement, volume growth, as well as higher revenue related to the company's CMS channel.

Pricing improvement occurred broadly across all regions and market segments. Foreign exchange also increased revenues by approximately 4% on the strength of the Euro versus the first quarter of last year, up about 9%. The higher sales prices reflect our continuing efforts to work with our customers to deliver value while also recognizing the impact of higher raw material costs. Overall raw material costs continue to remain significantly higher than prior year levels. However, the overall picture for raw materials is somewhat more balanced than we have experienced in the recent past. Volume growth with double-digit increases in our volumes in China was somewhat offset by softness in other areas. The weaker demand we experienced in steel volumes in the fourth quarter, particularly in North America and Europe, continued into the first quarter. However, as the inventories throughout the steel supply chain became more balanced, our volumes improved somewhat as the quarter progressed. We also continue to see pockets of slowness in a few of our automotive customers. I would now like to give some revenue data on a segment basis. Now, as you recall, we segmented the business into three areas: Metal Working Process Chemical, Coatings and other Chemical Products.

In our Metal Working and Process Chemical segment which makes up 93% of our sales, revenues in the first quarter compared with 2006 were up 14% to $116.3 million, and operating income improved 27% to $17.5 million. Sales in our Coatings segment which makes up about 7% of our sales increased [Inaudible] $.9 million or 12% due to higher temporary and permanent coating sales. Operating income was flat at $1.9 million. In our small business segment representing less than 1% of sales called Other Chemical Products, sales were down $200,000. Now turn to go gross margins, gross margin as a percent of sales up 30.9% this quarter represented a strong improvement over the 29.6% from the first quarter of 2006. Our persistence on the pricing front has enabled some margin restoration despite continued escalation and raw material costs over the prior year. Gross margin in dollar terms was up almost 19% or $6 million for the quarter primarily due to price recovery actions as well as volume growth and stronger performance from our CMS channel where we have continued to add sites. Compared to the fourth quarter of 2006, our gross margin percentage was approximately 1.4 percentage points lower.

The percentage decrease primarily relates to our CMS channel as higher CMS service revenues which includes revenues from third party product sales to CMS accounts have lower gross margin percentages than in traditional product sales. Significantly, we continue to gain product conversions at our CMS sites which contributes to overall profitability. While we expect production reductions and plant closures at some customer sites in North America, we expect that product sales and service opportunities at new CMS sites both in North America and other regions to help offset any profit loss from volume reductions at existing sites. Moving onto SG&A and other expenses, SG&A of $31.9 million this quarter is $4.6 million higher than the first quarter of 2006. As a percentage of sales, SG&A was 25.6% of sales this year versus 24.9% of sales last year. Now, the first quarter last year as you recall benefited from a $900,000 gain related to the curtailment of pension plan due to a legislative change. Adjusting for this gain in the prior year, SG&A as a percentage of sales in the prior year would have been 25.8%. Now, this compares to a 28% SG&A percentage of sales for the fourth quarter of 2006 and a full year 2006 percentage of sales of 26.2%.

For the full year we continue to expect our SG&A percentage of sales to be in the 27% range as we continue to fund a number of growth initiatives. Now, in addition to the pension gain in 2006, foreign exchange rates also accounted for approximately $1 million of the increase in SG&A compared to '06. Continued planned spending in higher growth areas such as China, higher commissions higher sales, and increased incentive compensation on higher earnings also contributed to the increase. Now, looking at interest expense, the interest -- the increase in net interest expense over the first quarter of 2006 is reflective of higher average debt balances outstanding in the first quarter of 2007 as well as higher interest rates. Turning to the tax rate, the effective tax rate for the first quarter is 32.9% versus 36.2% for the same quarter last year. The first quarter tax rate benefited from a shifting income toward lower tax jurisdictions including tax incentives related to our new facility in China. We also adopted FEN 48 accounting for uncertainty in income taxes during the quarter. Going forward, FEN 48 is likely to add some more volatility to our tax rate on a quarterly basis as reserves for various individual tax positions are provided for or are relieved.

We also recorded a $5.5 million non-cash charge to retain earnings related to the adoption of this new standard. Looking at the balance sheet, the company's net debt has increased from December 2006 primarily to fund working capital needs. The working capital increase in the first quarter was largely due to several timing items. Accounts receivable increased due to higher sales later in the quarter as well as the start-up of our new facility in China. Also impacting working capital was the payment of 2006 incentive compensation in the first quarter 2007. From a cash flow perspective, even with the timing items noted previously, first quarter 2007 operating cash flow was significantly better than the first quarter of 2006. Now, the first quarter has historically tended to be our weakest quarter in terms of cash flows, and we are continuing some initiatives to improve our operating cash flows as we move through the year. The Company's net debt to total capital ratio was 43% at March 31, 2007, compared with 40% at December 31, 2006. The FEN 48 charge to shareholders equity impacted the net debt to total capital ratio by approximately 1%. That concludes my prepared remarks.

Thanks, Mark. At this stage, we'll turn to any questions you all may have.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of Robert [Soeit] with Giabelli & Company Please proceed with your question.

Hi. Just a couple of quick questions. You had two interesting mix effects that is occurred during the quarter I want to get my hands around. I guess first on the tax side, I would imagine you're benefiting from your larger Asian exposure. If that's the case are we seeing a longer term structural shift in your tax rate and should we expect this to continue as higher growth emerging markets make up a larger portion of your overall earnings?

As part of our new facility in China, we will be paying a reduced tax rate for the next several years, so we should see some benefit from that, at least for the next several years.

In the same magnitude as we saw this quarter? I mean, overall I think a better tax rate for the year and I guess as a look out over the next couple years how much benefit do you receive from that?

As we -- with that I think the tax rates we're getting a break now, and then the break will diminish over the next several years so overall I expect the benefit this quarter will be similar for most of the rest of the year but as we move forward into future years those benefit is decrease somewhat.

The benefits specifically from China will decrease.

Yes.

But we'll have benefits coming from different directions, but I guess as my exposure to tax rates, this has been a very -- when we have a business as global as ours, it is really a complex issue that depends a lot on levels of profitability, the portfolio profitability around different parts of the world. We have several places like China where we already have a tax break built in, but others are going to be much more subject to our performance in certain areas of the world going forward.

I think also as I mentioned during my prepared remarks with the adoption of FEN 48 overall there will be more volatility with our tax rates than there may have been historically.

Quarter to quarter or on an annual basis?

Quarter to quarter.

Quarter to quarter. For the full year it is safe to assume an effective tax rate somewhere around this quarter's level of 33% ish?

If you exclude the FEN 48 impact which is usually in the short-term always non-cash impact. But we would expect a lower tax rate for 2007 than 2006.

Okay. Fair enough. And then the second thing, you had the negative mix effect from the CMS business, and I know we need to balance the short-term effect of third party product sales versus the time it takes to convert those accounts to Quaker product but longer term as you continue to grow the CMS business relative to conversion rates, are you expecting to go see overall margins decline? Perhaps you can help me with this a little bit?

I wouldn't expect our overall margin to decline. They will be sensitive to a shift in contractual relationship to whether we're accounting for it by gross -- by the gross method or the net method. That's part of what you saw in this shift in this quarter, but the gross margin of our products going into CMS if anything are improving, not declining. I don't know if that specifically addresses your question.

Well, could I infer from that that means your conversion rates from third party product to Quaker product are picking up?

I don't think it is necessarily a continuous thing that they're picking up because what you do when you get a new contract you will have a flurry of activity in the beginning to convert what you can convert while still of course serving the customer appropriately, but over time as the contract becomes more mature, the conversion rate tends to slow down and stabilize. But as new contracts come on, that rate will increase again.

Certainly our sales through our CMS channel were higher first quarter this year versus first quarter 2006.

Our sales through the automotive channel generally in the last three years I guess have been up in the neighborhood of 25% a year, 30% a year, and that's I think reflective in part of the CMS effort.

Okay. And then I guess of the 14% revenue increase during the quarter, can you break that down I guess price, volume, what portion of that was third party product sales? I know FX 4% you mentioned that, if you can just delve into the other factors?

Why don't you go ahead, Mark.

Thanks, Ron. Overall volume was up in the range of 4%, and a combination of price and mix, including the CMS effect we talked about, contributed about 6% to sales, and then you had FX rates being a little under 4.

Of that 6% price in mix, do you break out the CMS component?

Not publicly, no.

Okay. And then I guess lastly, I know that raw materials are always the unknown, but given the external environment as you see it today, do you see first quarter margins as representative for the full year? Is that fair to -- is it fair to assume that or do they compress a little bit with additional CMS business, just if you can delve into first quarter margins relative to the full year outlook?

Well, I don't expect the same -- I don't think we expect the CMS margin to change dramatically over the year because I think the mix of gross business and net business is pretty much as it will be for the rest of the year unless the contract that we don't expect gets renegotiated somewhere along the way. I also think that the effect that we had of raw materials in the first quarter in terms of its dollar impact on us will probably -- our expectation now is that it will over the course of the year will be lower proportionately -- what I mean by that is the effect in the first quarter is probably greater than we expect the quarterly effect to be going forward. But of course there is a heavy influence of mix in the business if the China portion slows down and the U.S. portion increases that has an impact on us. I think the balanced answer is we would expect our margins in this -- for the rest of the year to be roughly in the same range as our margins are right now. I don't think we can expect dramatic change one-way or another. Would you want to add to that, Mark?

No, not really. I think particularly on the CMS side the impact we saw this quarter on gross margin percent of sales should be roughly the same going forward as well.

Okay. Fair enough. That's helpful.

Thanks for your interest, Robert.

No problem.

Our next question is from the line of Daniel Rizzo with Sidoti and Company, please proceed with your question..

Good afternoon guys

Hi, Dan.

How are you doing? A question on the CMS contract, you said you renewed a bunch over the past couple months. Does that include the GM contract? What's the status with that? Can you provide color on that?

Yes. We renewed -- I think the number I threw out was 31 contracts towards the end of '06 and '05 and GM was among those of course. We have more than one contract a GM. We have a number of contracts there.

You said '06 and '05.

Sorry. '06 and '07. The end of last year and the beginning of this year.

OK, and those contracts were like annually, they're year long?

Usually three years.

Three years. And same basic parameters as in terms of revenue and stuff like that?

Well, we renegotiate some of the contract so that the -- we can find a better way to work with our customer to provide nor certainty for both of us, there is a shift between gross and net as we talked about. Some contracts went from fixed cost to pass through, so you had that kind of shift in there, but the contracts we have today we expect the renewed contracts we have today we expect to continue forward the way they are today.

Okay. That's all I had, guys. Thank you.

Great. Thank you.

Our next question is from the line of Patrick Flavin with Flavin, Blake and Company. Please proceed with your question

Congratulations, Ron on, a nice quarter.

Thank you, Patrick.

It is nice to see that growth, but I'm mindful of the impair imperatives of growth and the negative cash flow that is developing both on the working capital front and in general, and therefore I would love for you to just spend a little time philosophizing with us on your capital structure and your balance sheet and where you want to see parameters set and the extent to which you want the debt component to rise, et cetera?

Well, I guess the first matter is that we certainly don't want debt to rise unreasonably, and we try to keep a pretty sharp eye on that. One of the concerns we had this quarter which we mentioned already was the operating cash flow which was negative this quarter, but as Mark said it was a big, big improvement over last year's cash flow in the first quarter. A large part of that was due to I will say the bull that swallows the cow. It is a big bolt that's passing through the system related to China, related to the sales being much more heavily loaded towards the end of the quarter related to some -- a couple of CMS issues we have that we're getting resolved. So there was a chunk in the first quarter that really relates to timing which we expect to get resolved. Going forward, the rest of the year has typically been much stronger for us in cash flow than the first quarter, Mark also noted earlier that the last year's cash flow was negative in the first quarter, but we ended up with a fairly good positive operating cash flow for the year as a whole, and we're counting on that this year as well. We don't -- we think our debt level is about as high as it ought to go. Obviously we'll need to do what we need to do to continue to finance the growth of our business but all things equal that is not something we want to continue to see grow and obviously as we-- as operating working capital improves, we're going to devote some of that to reducing debt.

We do want to continue to invest in our businesses, however. That's an important part of getting the growth we're able to achieve. That goes to places like China, as well as to investing in some of our businesses where we think like, for instance, CMS which does require working capital investment where we think there is real opportunity to build our relationship going into the future, and prove our value to customers. I do think that depending on how the year goes and what happens on our stock price, we will think about whether it makes sense for us to think about an equity offering along the way, but that's very speculative, but that would be something that would help improve our balance sheet although I have to say our balance sheet even though we've been in a negative situation in the first quarter our balance sheet is overall still in a pretty strong position even with the negative to net worth that the FEN 48 charge causes, so it is a matter of tremendous attention for us, operating cash flow, we have objectives set around working capital. We look at working capital in every business review, but we've made tremendous progress since last year's first quarter and even actually since the end of last year we made tremendous progress in several of our businesses in terms of the percent of sales represented in working capital.

We've seen that in Europe. We saw it in the United States. It stayed pretty flat in the South America which is our lowest working capital area anyway, and Asia and China specifically has been our biggest problem in working capital because of the long receivables that are outstanding there and because of the timing problems we had with the start of the new planted going into the first quarter. So we--that's a focus that we have that's very direct and very high visibility for us where debt is operating cash flow, and we expect for the other quarters of the year to be stronger than this quarter was to be sure, so on the whole we expect to continue to make the kind of progress we made there last year in this regard.

Okay. So you are mindful of the balance sheet, you are focused on cash flow generation. I gather you do not find the capital structure to be a constraint to your growth, and is -- would all of that be fair, Ron?

Well, I mean, to work backwards, the capital structure could become a constraint to our growth if we continue to ladle on the kind of debt that has arisen in the last couple years, and I think we've slowed that down dramatically. I think we got our operating cash flow -- on that and our arms around it in a way that we'll be able to optimize that better than we've had in the last few years. I guess even though our capital structure is relatively conservative, I guess it depends what one means by conservative and how you measure it, but it is still relatively conservative capital structure but we want to be in a position where we have plenty of flexibility in our capital structure to do acquisitions when the time comes, when the opportunity is there or to invest where we think we need to invest to help grow the business. So we are mindful of that, and that's the reason why the whole notion of an offering down the road if the stock price looks positive is something that we would be willing to think about, but I can assure you this: that the focus on operating cash flow is a very direct and very high visibility focus for us, and we measure as I said before already, we measure it at every meeting we have and everybody has goals around it, targets for the year. We've met those targets last year, and I have every reason to believe we'll meet those targets this year.

Okay. As you have begun to find out the benefits of higher margins is very therapeutic with respect to cash flows.

There is nothing you can do better for cash flows than improve your margins. I am with you on that, man.

You got it. Thank you, Ron.

That hasn't escaped our attention I should also add.

Our next question is from the line of Jerry [Hefferman] with Lord Abbott. Please proceed with your question. Please proceed with your question.

Thank you, guys.

Hi, Jerry, how are you doing?

Fine, thanks. I apologize for being a little dense here. Real quick on this CMS business in the commentary towards the depressing the gross margin a little bit, is that because newer business is coming in with a pass through type or a gross charge of third party products as opposed to a fee system?

Some of it is related to the renegotiation of renewal of existing contracts, and there also is in new business in there as well.

Okay. In the renegotiation which direction are the contracts going?

Really over the last year we've had contracts go from gross to net and net to gross, so it is really case of balancing our needs and our customers needs in the best way, so both types of contracts can work out pretty well for us.

So this was --

Jerry, in terms of the reduction in margin that we saw in the first quarter, it was the shift.

From gross revenue from CMS are up this quarter.

Okay. But there is no general direction of the business, that's just the way it happened this quarter and next quarter or a year from now will you be talking about a shift the other way?

No. Typically only happens when you renegotiate the contract which is intended to be an every three-year exercise.

Understood, but you have a whole book of business

Right, it does turn over -- and it has happened to us that we've restructured a contract mid-stream, so that's not an unheard of event.

Okay.

If it is not working well for either one of us.

Let me ask you this. Certainly being very much in agreement with the comment of the last caller about higher margining being they therapeutic to cash flow, the quarterly operating income margin of 5.3 per the information I have is only the second time in the last 11 quarters that you've been above the five market there, and taking that fact and putting alongside the statement that you made about raw material prices, that they're going to continue to move but you're in a much better position with your customers today to handle this going forward, can we see a full year above this 5? Can we start moving this up on a consistent basis as opposed to the last two to three years where we've really been bouncing between this four and 4.7 level?

Well, we don't -- you caught me between a rock and hard place here, Jerry. We don't wish to be in a position of forecasting our earnings for the year, but let me say on margins I will reiterate what you observed that had we think we're in a better position with our customers today, and that we think we're much more current with the impact of raw materials on our costs, and that was really we saw that in the first quarter in terms of our pricing and our average net sales per kilogram so I would expect the kind of operating profit levels we have in the first quarter we should be able to see for the rest of the year, but I don't want to really get into the game of trying to forecast the specific figure.

Okay. I am not in the habit of stumping when I am on these calls, but I would like to say given the growth in your business it seems it is at a nice comfortable rate, your ability to start expanding the margins again at least what you've demonstrated over the last two years and seems to be getting into a more firmer footing today. It seems like an equity offering would be -- I would not be in favor of.

I don't want to get too far ahead of the game on that. It is not something we have in our plans. It is not something we thought through entirely, but we want to keep our eye on the -- it is a very preliminary thought, but we want to keep -- I raised it only in the context because we do want to keep an eye on our balance sheet structure and make sure we're doing the right thing in that regard. I don't want to over state that as an active plan, Jerry.

Very good. Thank you.

You're welcome.

(OPERATOR INSTRUCTIONS) One moment please while we poll for questions. Gentlemen, there are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Okay. Thanks very much, everybody. I appreciated your interest, and we appreciate your participation, and I will look forward to talking with you again in a few months.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.