LSB Industries Inc (LXU) 2005 Q4 法說會逐字稿

Please be advised that this conference call is being recorded. Welcome to the LSB Industries fourth-quarter 2005 conference call for April 13, 2006. Your host for today will be Carol Oden. Ms. Oden, please go ahead.

Good morning, and welcome to the LSB Industries, Inc., conference call. Today, LSB's management participants are Jack Golsen, Chairman and Chief Executive Officer; Barry Golsen, President; and Tony Shelby, our Chief Financial Officer.

This conference call is being broadcast live over the Internet, and is also being recorded. An archive of the webcast will be available shortly after the call on our website at www.LSB-OKC.com and will be accessible for one month. An echo playback will be available at 888-509-0082 until May 13, 2006. International callers can dial into 416-695-5275.

After comments by management, the question-and-answer session will be held. Instructions for asking questions will be provided at that time. Information reported on this call speaks only as of today April 13, 2006. And therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay.

Safe Harbor -- we will not make any projections as to the first quarter of 2006 or of future results as to revenues, income or earnings per share of the Company during this conference call. However, comments today may contain certain forward-looking statements, including, but not limited to future results of our climate control and chemical businesses; demand for ammonium nitrate; sales by product lines within our chemical business; plans to produce agricultural-grade products during 2006, and that if present pricing holds up, we expect better results in 2006 than in 2005 within our chemical business's agricultural section; plans to turn around our Cherokee facility within our chemical business, and that if we are successful, our Cherokee operation will become profitable; the backlog of our climate control business, and that the increase in incoming order levels should help facilitate this operation's improvement during 2006; the long-term outlook for the climate control business is strong; cost of our materials for our climate control business; cost reductions with our climate control business; outlook for 2006 for our climate control business and various product lines within this business; positive effects of the recent enacted U.S. Energy Bill on our climate control business, and that we are optimistic about the future climate control business. The term EBITDA as used in this presentation is net income plus interest expense, depreciation, and amortization, income taxes, and certain non-cash charges unless otherwise described. EBITDA is not a measurement of financial performance under GAAP, and should not be considered as an alternative to GAAP measurement. When we discuss the climate control business, excluding MultiClima, please refer to our 2004 10-K for MultiClima results. All statements, as in the statements of historical fact, are forward-looking as more fully discussed in our 10-Q for the third quarter of 2005 under special notes regarding forward-looking statements. A more comprehensive listing of risk factors which could cause results to vary from any forward-looking statement made during this conference call is also included in the Company's 10-Q for the third quarter 2005 under Special Notes Regarding Forward-Looking Statements. We will post on our website a reconciliation to GAAP of any EBITDA numbers discussed during this conference call.

Now, I'll turn the conference call over to Mr. Jack Golsen, the Company's Board Chairman.

Good morning. This is Jack Golsen, CEO of LSB Industries. Thank you for joining our conference call this morning. After hearing all that Safe Harbor language, maybe we don't have to give this presentation at all. But anyway, I'm here today with Tony Shelby, our CFO; Barry Golsen, our President of LSB Industries; and Paul Rydlund, President of our Chemical Group, who are all here for this conference call.

This call is to review the fourth quarter and 12 months of 2005. After our review, we will also field questions that you may have about the business. My discussion today will be a general overview of the entire company. Tony and Barry will go into more specific details about our climate control and chemical businesses. And Tony will give you a financial review of the Company.

Our sales for the fourth quarter 2005 were 13.8% higher than 2004 for the same period. And our full sales year-to-date for 2005 were 9.1% higher than 2004. This was due to increase sales in both our climate control and chemical businesses in the fourth quarter and in the complete year.

For the fourth quarter of 2005, our operating income was up from a loss of $877,000 in 2004 to a 2.7 million gain in 2005, and up from a 3.2 million gain in 2004 to 14.96 million gain for the full year of 2005. For the fourth quarter 2005, our net loss was 45,000 compared to 3.4 million loss in 2004. For the year 2005, our net income was 5.1 million compared to 1.4 million in 2004.

Earnings per share after deducting dividend requirements for preferred stocks which were not declared or paid were $0.19 fully diluted in 2005. This compared to a loss of $0.07 in 2004. For the 12 months in 2005, our EBITDA was 28.5 million compared to 23.7 million in 2004.

During 2005, both our climate control business and our chemical business improved over the prior year. The climate control business operating income in 2005 was 2.4 million greater than the prior year, reflecting recovery from the round of copper, steel, and other cost increases that occurred in 2004.

At the last conference call, we told you that we expected the fourth quarter of 2005 in the climate control business to be improved over the prior year, and it did improve. Operating income in the fourth quarter of 2005 was 3.8 million compared to 1.1 million in 2004 for climate control.

The anticipated changes in our chemical business started to materialize in 2005. Operating income increased to 7.7 million in 2005 compared to a loss of 877,000 in 2004.

As we previously told you, there are only two remaining producers of agricultural-grade ammonium nitrate in the United States, our El Dorado chemical plant and Terra Nitrogen's plant. There are still importers of agricultural-grade ammonium nitrate, although imports were lower last year than in previous years.

Also, we previously predicted the closure of ammonium nitrate plants in the United States has led to a tighter and more balanced market condition, resulting in our plants becoming more freight logical to markets in the United States where we were previously not able to ship product. In addition, we have made substantial improvement in plant operations in El Dorado.

Our Baytown, Texas acid plant produces nitric acid, and is not dependent on the agricultural industry for its volume. It supplies acid for many industrial products such as polyurethane and it purchases (technical difficulty) ammonium, which is its feedstock.

About 33% of our El Dorado, Arkansas plant's production is agricultural-grade ammonium nitrate. This agricultural market is the least predictable part of our chemical business. Last year, we produced approximately 200,000 tons of agricultural-grade ammonium nitrate. During 2005, we completed certain modifications to this plant, and have received a permit to increase its production. This year, in 2006, we plan to produce 260,000 tons of ammonium nitrate for the agricultural market.

El Dorado also uses purchased anhydrous ammonia as its feedstock, which is delivered by a pipeline that runs through the El Dorado plant. With current freight costs increasing, this is an important advantage.

Although we plan to produce 260,000 tons of ag-grade ammonium nitrate this year, we do not know what the selling price will be. If present pricing holds up, we expect better results in 2006 in this segment of our business.

The weather will be one factor in determining our results. Also, there is a question as to whether the corn growers will plant their normal acreage, [or] higher fuel and fertilizer prices drive them to switch crops to soybeans, which require less fertilizer.

According to the USDA report, U.S. corn growers intend to plant 5% less acres this year. However, according to the latest issue of Green Markets Intelligence Weekly, published on April 10, some sources are saying that the demand for increased ethanol production, which uses corn, will keep corn production about the same or greater than it has been, and further, that corn seed sales, which usually precede production, are up in excess of 20% to support this position.

Our Cherokee, Alabama plant uses natural gas as its feedstock. It makes anhydrous ammonia from natural gas. We use approximately 6 million MMBTU of natural gas per year as a raw material.

After skyrocketing in 2005, natural gas prices started to come down in January 2006. Today, gas prices are one-half of what they were at their peak. By comparison with past years, this price is still high. In the long run, there is uncertainty about whether or not gas prices will stay down or come down further. The futures market for natural gas does not reflect a reduction at this time.

In 2005, Cherokee results actually detracted from the EBITDA of the chemical business by 2.3 million and continued to do so in the first quarter of 2006. Because of hurricane damage to the pipeline that supplies gas and the high gas prices which caused customers to curtail orders for agriculture products, we were compelled to shut down the Cherokee plant twice during 2005.

So what are we going to do to turn around the Cherokee operation? This year, we have refocused the Cherokee operation to emphasize industrial products sales. Cherokee is one of only three plants in the United States that produces R-grade anhydrous ammonia. It is used primarily for metallurgical purposes.

Our regular anhydrous ammonia is used by co-operated electric power plants to abate harmful omissions, and its use is mandated by law. Cherokee also produces ammonium nitrate solutions used in the mining industries.

We're emphasizing our sales efforts in these markets. Our projections indicate that if we are successful, Cherokee will become profitable.

In our climate control business, bookings of new orders are up substantially over last year. It has the largest backlog in history. We closed year end 2005 with approximately a 56.2 million backlog. This compares to a 28.4 million backlog at the end of 2004. In the first quarter of 2006, we continued to increase our backlog, and the incoming order level continues to be strong in the first quarter 2006.

In order to continue to the growth in our climate control business, we have added substantial new production equipment, and have stepped up production to meet demand. At this time, the long-term outlook for this business is strong.

This concludes my portion of this conference call. And I'm going to turn the call over to Tony Shelby. Thank you.

Thank you, Jack. During this conference call, we will assume that everyone has had access to the 2005 10-K and the press release that we made on April 3 of our results for the fourth quarter and calendar year of 2005, both of which are available on our website.

For the calendar year 2005, sales were $397 million, an increase over 2004 of $33 million, or approximately 9.1%. For the three months ended 12/31/05, sales were 95.4 million, an increase of 13.8%. Included therein were the climate control sales which were up 19.4% and the chemical sales which were up 10.7%, both compared to the same period last year. Net income for 2005 was 5.1 million compared to 1.4 million for 2004, both numbers before dividends. For the three months ended 12/31/05, LSB reported a net loss of $45,000 compared to a net loss of 3.4 million for the same period in 2004. Both amounts are before dividends.

LSB's fourth-quarter results were favorably affected by having the El Dorado, Arkansas facility back to full capacity after the casualty loss suffered in the fourth quarter of 2004 and from the related recovery of 1.9 million business interruption insurance proceeds recorded in the fourth quarter of 2005. The fourth quarter of 2005 -- on the other hand, the results were negatively affected by the unprecedented increase in natural gas costs at our Cherokee, Alabama facilities caused by the Gulf Coast hurricanes which Jack alluded to in his overview.

For the fourth quarter, chemicals operating income was $778,000 compared to a loss of $600,000 last year. Climate control's operating income for the fourth quarter was 3.8 million compared to 1.1 million last year. We will address results for climate control and chemical business in detail later in the conference call.

For the year of 2005, cash provided by continuing operation activities was approximately $11 million after providing for increased working capital requirements of approximately $6 million, which for the most part was increases in receivables inventory based upon higher sales levels.

There were -- investing activities were approximately $10.5 million, which include capital expenditures of 15.3 million. Offsetting those capital expenditures were proceeds from property insurance recoveries of 2.9 million and proceeds from sales of property and equipment of 2.4 million. The net financing activities were pretty much a push -- and they were approximately equal to the net increase in cash for the year.

Included in the capital expenditures of [15.3] which netted out to 10 and change, chemical's capital expenditures for '05 net of property insurance recoveries were 7.9 million and climate control's capital expenditures were 4.5 million, which Barry will discuss later as we talk about the changes that we're making in terms of capacity.

Currently, let's talk for a minute about the Company's liquidity. Currently, the amount available under the Company's working capital revolver for additional borrowings is approximately $18 million. The borrowing under the working capital revolver is approximately 32 million. Now, the 18 million of additional borrowing is capped a somewhat by the fact that we have a $50 million revolver, though we have excess capacity in excess of that which, if we were so inclined, we would raise that borrowing limit on our working capital revolver.

On March 16, 2006, we announced the completion [of the] $18 million, 7% convertible debenture offer. In that press release, we indicated that our intent was to use the net proceeds of the offering to repay or purchase LSB's debts, our debts from our subsidiaries, and the balance for general corporate purposes. The net proceeds of the $18 million offering were 16.9 million after all the costs. Through today, we've expanded 7.2 million of the proceeds for the repurchase of ThermaClime bonds -- ThermaClime is a subsidiary of LSB -- and 9.7 million is currently held as cash on hand for continuing to supply that to outstanding debt. The 9.7 cash on hand is in addition to the $18 million of borrowing availability that we have under our working capital revolver.

EBITDA for the 12 months ended December 31, 2005, as Jack indicated, was $28.5 million compared to 23.7 million for the 12 months ended 12/31/04. For the fourth quarter of '05, EBITDA was 5.8 million, and this was an increase of 3.4 million compared to 2004 fourth quarter.

At December 31, the Company -- and this is before the $18 million convertible debentures that I mentioned above -- at December 31, the Company's total interest-bearing debt was $112 million, including the $50 million senior secured note that is due in 2009, the 13.3 million senior unsecured notes -- ThermaClime notes due in 2007, the working capital borrowings of $32 million, and various mortgages and equipment loans were approximately 16.8 million.

The interest rate for borrowings under the Company's working capital revolver is 200 basis points over LIBOR. And we have in placed an interest rate cap on $30 million of estimated average borrowing that caps LIBOR at 4.59%.

With this overview of the consolidated results as background, Barry will review the climate control business.

Thanks, Tony. For the benefit of those of you who are new to LSB, here's some of the basic information about our climate control business. And for those of you that have been on the last few conference calls now, you can take a break while I'm going over the first part of my presentation.

These companies design, manufacture, and market a broad range of high-quality air-conditioning, heating and heat pump products that are used in commercial and industrial and residential climate control systems. During 2005, approximately 88% of the sales volume of the climate control business came from ClimateMaster and International Environmental Corporation. ClimateMaster manufactures and markets commercial water source heat pumps and geothermal heat pumps which are used in commercial, institutional, and residential applications. International Environmental manufacturers and markets hydronic fan coil units and small air handlers which are also used in commercial and institutional applications.

We also manufacture and market large custom air handling units used in commercial and industrial applications, modular water chillers which are used in central HVAC systems, and coaxial heat exchangers which are used as components in our water source heat pumps and various other products. We also complete large-scale geothermal installations throughout the United States.

We have five plants, which are all located in Oklahoma City, totaling over 500,000 square feet. Our products are used in many different types of buildings for new construction, renovation, and replacement. These include hotels, motels, resorts, apartments, condominiums, single-family residences, dorms, hospitals, extended-care facilities, retirement centers, schools, universities, office buildings, industrial and high-tech manufacturing facilities, pharmaceutical and food processing plants, and many others.

During 2005, approximately 90% of our sales were to the multifamily and single-family residential, office, lodging, assisted living, health care, and educational construction sectors. We have an installed base of millions of units in thousands of buildings throughout the U.S. and around the world.

We are considered to be the U.S. market leader for hydronic fan coils, water source heat pumps and geothermal heat pumps, with the leading marketshares in these segments. During 2005, our U.S. market share for hydronic fan coils was approximately 44%, up from 41% in 2004. And our market share for our heat pump products was approximately 34%, up from 32% in 2004. Market share percentages are based on numbers reported by the Air-Conditioning and Refrigeration Institute for shipments in the United States.

Fourth-quarter results -- during the fourth quarter, sales in the climate control business were $39.5 million versus 33 million in 2004, a 19% increase. Operating income was approximately 3.8 million in the fourth quarter as compared to 1.1 million in the fourth quarter of 2004, a 245% increase. EBITDA for the fourth quarter was 4.4 million as compared to 1.7 million in 2004. The bottom line is that for the fourth quarter, our sales were up approximately 19% over the same period last year, with EBITDA up by 2.7 million.

2005 year-end results -- during 2005, sales in the climate control business were 156.5 million versus 140.6 million in 2004. Operating income was approximately 14.1 million in 2005 as compared to 11.7 million in 2004. EBITDA 2005 was 16.6 million as compared to 14 million in 2004. In summary, during 2005, our sales in the climate control business were up approximately 15.9 million or 11% over the same period last year with EBITDA up by 2.6 million.

As I reported to you during the last conference call, operating income and EBITDA in the first half of 2005 were impacted by raw material and freight price increases we experienced during 2004. These increases were the largest we have seen in several years, and we were not fully able to pass them through our customers at the time we received them. Over time, we were able to pass many of the increased costs through to customers in the form of price increases; however, timing factors impacted our margins during the latter part of 2004, particularly during the fourth quarter, and continued for the first half of 2005.

In the aggregate, and for the full year 2005, the climate control businesses raised selling prices in order to cover higher raw material cost. In addition, certain of our sales policies regarding freight costs have been modified to pass more of these costs through to customers. As indicated by the third and fourth quarter results, we're gaining ground.

Updating the raw material cost situation, in the wake of last year's hurricanes, steel prices increased, and recent trends have indicated that prices may continued to creep up. In addition, copper continues to rise, with spot prices up 40% during 2005, and nearly 100% from the start of 2004. During the first three months of 2006, spot prices for copper have increased by another 20%. This may continue to have a significant impact on cost, especially in purchase and manufactured coils and motors.

We continue to closely monitor our cost structure and implement price increases as indicated and to the extent market conditions allow. Overall, cost reduction is a very important part of our culture of our Company, and it is something all of our companies work on continuously.

During the fourth quarter, bookings of new orders continue to strengthen in all areas of our climate control business. 2005 bookings were up 30% over 2004. At 12/31/05, our backlog reached a record 56.2 million, almost doubling the backlog as compared to 12/31/04. We consider this a leading indicator of future sales.

Of particular importance is the fact that the bookings and backlogs have substantially increased in our large custom air handler business. This is one of the newer businesses we have been focusing on to increase this level of sales above the breakeven point. The increase in the incoming order level should help facilitate this operation's improvement during 2006. I will discuss this in more detail later.

The level of incoming business in our climate control business experienced in 2005 exceeded the estimates of United States construction activity growth reported by McGraw-Hill's Construction Market Forecasting Service, which is a key indicator we use for monitoring the markets we serve. McGraw-Hill's estimate for nonresidential construction for 2005 was an increase of 7.4% over 2004 as compared to our climate control business's increased sales of 14% and increased bookings of 30%. McGraw-Hill is currently forecasting another increase of 8% for 2006. Whereas there are no guarantees that these forecasts will be realized, in the past, McGraw-Hill has been a reliable indicator, and we're optimistic about the outlook for the balance of 2006.

Now what I would like to do is review a few issues we discussed during previous conference calls and update you on some recent developments. As discussed in the earlier conference calls, we have a number of newer product lines and activities that have not yet achieved profitability, but which we believe are investments in the future growth of the business. Operating losses of these activities are contained within the overall reported numbers of the climate control business.

In the aggregate, the new product lines and businesses reduced the climate control business EBITDA by an estimated 2.6 million in 2004 and by 3.3 million in 2005. It is important to note that the 2005 results included a onetime nonrecurring charge of 1.1 million for legal expenses that we do not expect to repeat. And I will go into that in more detail later.

After eliminating these onetime charges, the newer businesses actually improved by about 400,000, from a negative EBITDA of 2.6 million in [2.4] to a negative EBITDA of 2.2 million in 2005.

Here is an update more specifically on these newer operations. As previously mentioned, ClimateCraft, our large custom air handler business, has seen a substantial increase in its order bookings. As of 12/31/05, ClimateCraft had a backlog of approximately 14.1 million as compared to 5.2 million a year ago, which should result in strong shipments growth during 2006. As a result of the improvement in order activity, ClimateCraft has doubled their manufacturing floor space, acquired new machinery, and increased their production capacity to meet the increased business activity.

Production of our new line of modular water chillers used in central HVAC systems marketed as ClimaCool has been successfully transitioned from the outsource supplier in France to our plant in Oklahoma City. The move should result in lower costs and higher margins for this product line going forward after we have used inventory that was produced in France. In addition, demand improved during 2005, and appears strong for this product line moving into 2006.

Also within this group of newer operations is Trison Construction, our large scale geothermal contracting company. As disclosed in our most recent 10-K filings, during 2005 Trison incurred legal fees of approximately 1.1 million relating to an arbitration case it is involved in.

I'm pleased to say that last month, the arbitrator found in favor of Trison and awarded Trison legal costs. These costs have not yet been quantified by the arbitrator, and it is unclear at this time to what the exact amount Trison's [covery] will be. Also, the other party in the case might attempt to appeal the verdict. We will keep you posted as to the outcome of this case.

From an operating perspective, Trison was awarded a significant order related to privatized housing within the United States government for energy-efficient geothermal installations. This award is the first of its kind, and Trison and is working to obtain other similar orders.

Summing up, the results of these newer operations, despite only a modest improvement during 2005, after eliminating the legal expenses, we have made progress that should help improve these businesses going forward.

Departing now from the newer businesses, ClimateMaster's Tranquility heat pump product line, the most energy-efficient HVAC product on the market today, continues to gain market share and market acceptance with its EarthPure refrigerants for residential and commercial products. ClimateMaster has also expanded the production of EarthPure products to offer a complete line of environmentally friendly products that allow for cost-effective green building design. Earlier, we had introduced this on a limited basis for our residential products, and we have now expanded this to the full line of our commercial products as well.

We believe that as the U.S. Energy Bill, which provides over $11 billion for tax credits and other incentives for the installation of products that are highly energy-efficient or use renewable energy, takes effect, and as energy costs remain high, higher efficiency and environmentally friendly products such as ClimateMaster's Tranquility product line will gain favor. And this will continue to have a positive effect on the sales of our residential geothermal and high-efficiency commercial products.

International Environmental's fan coil business has rebounded from the post-9/11 slump that impacted the lodging business, an important part of International's market. During 2005, International's backlog increased considerably.

To accommodate the sales growth we have experienced, we have increased our production capacity at ClimateCraft, International Environmental and ClimateMaster. As discussed, ClimateCraft has doubled its production floor space and added more fabrication equipment. At International, we have added fabrication equipment. At ClimateMaster, we have added fabrication equipment and upgraded our assembly lines by increasing their capacity and adding automated quality control equipment.

Since our last conference call, we have shipped thousands of units to hundreds of projects. Here are a few projects of note. The World Market Center in Las Vegas, which is expected to be the world's largest furniture market when it's completed; the Ritz-Carlton Hotel and Condos in Dallas, Texas; Loyola University of Chicago; Memorial Sloan Cancer Center in New York City, and Memorial Hospital in Colorado Springs, Colorado.

To sum up, our climate control business's 2005 fourth quarter and full year sales were up over 2004. EBITDA was improved during the fourth quarter and for the full year, despite absorbing 1.1 million in legal expenses, which we do not expect to repeat. Results during the first half were impacted by the cost increases we incurred last year. But as sales price increases for products rolled through, this impact was reduced during the second half of 2005. Our incoming order level is up substantially, and the general construction level continues its upward trend. And our water source heat pump and fan coil businesses continue to be the market leaders in their respective product niches, increasing market share during 2005. We're optimistic about the future of this business.

Thanks for your attention during these comments. I hope they weren't too long. I will now turn the meeting back over to Tony, who will talk about our chemical business.

Thanks, Barry. To supplement the overview comments that Jack made regarding chemical in his opening comments, I will run through the 2005 results for chemical. And Paul Rydlund, president of chemical, is also available for Q&A at the end.

As we previously told you, I'll give a little bit of overview on what our chemical business consists of. Our three nitrogens production facilities in Cherokee, Alabama; Baytown, Texas; and El Dorado, Arkansas collectively comprise the chemical business.

On an annual basis and in a normal year, our chemical business consumes approximately 475,000 tons of ammonia. From this, we sell roughly 50,000 tons as ammonia, and we convert the remaining tons into 530,000 tons of ammonium nitrate both agricultural and industrial; 146,000 tons of UAN; and 420,000 tons of nitric acid for a total of 1.1 million tons of upgrade product, and the tonnages this year are increased over the prior year.

Approximately 65% of the chemical business sales are products sold pursuant to pricing arrangements that provide for the pass-through of the cost of natural gas and the ammonia feedstock costs. The remaining 35% is primarily nitrogen fertilizer which is seasonal and sold at the spot price in effect at the time of sale.

A brief thumbnail of each of the three operations -- the Baytown, Texas plant consumes approximately 120,000 tons of anhydrous ammonia per year. The majority of the Baytown production is sold pursuant to a long-term contract that provides for the pass-through costs, including the ammonia costs, plus a profit. This operation is consistently and predictably profitable on a quarterly and annual basis. The Baytown management has done a superb job at this location, and they have achieved numerous safety awards and certifications.

The El Dorado, Arkansas plant purchases approximately 200,000 tons of ammonia per year pursuant to contract, and produces and sells approximately 400 to 500,000 tons of nitrogen products per year. Approximately 51% of the sales in '05 were sold pursuant to pricing arrangements that transferred the ammonia costs to the customer.

The balance of the output in 2005 was primarily agricultural products sold at spot prices. Demand for ammonium nitrate remains strong, and supplies remain tighter than in previous years, due in part to fewer producers, lower imports, and more restrictive security regulations.

The third facility is the Cherokee, Alabama plant. And that is the only plant in our chemical business that consumes natural gas as raw material feedstock.

In the first quarter 2006, we're producing at a lower level than we did in '05, due to the high cost of gas and some of the problems we encountered as a result of hurricanes and the effect and gas prices. For the calendar year end 2005, sales for the chemical business were approximately $233 million which is a 7.8% increase. By location, the 233,000 sales volume for 2005 compared to 2004, El Dorado chemical was 129 million versus 114 million. Cherokee was 62 million versus 56 million. And the balance was El Dorado nitrogen at Baytown.

Operating income for the calendar year -- chemical's operating income for the calendar year 2005 was $7.7 million versus a loss of 900,000 for 2004 for an increase of 8.6 million, a significant turnaround this year in terms of bottom-line results. EBITDA was $16 million this year compared to $9.7 million last year. For the quarter ended December 2005, sales were approximately $54 million, which was an increase of 11%. The volume breakdown for the fourth quarter showed El Dorado with 33 million versus 24 million the prior year. Cherokee's sales volume was down to 11 million from 13 the prior year, and El Dorado nitrogen in Baytown made up the difference.

Operating income for the fourth quarter of 2005 was 778,000 compared to a loss of 600,000 for the fourth quarter of '04. For the fourth quarter, EBITDA was 3 million versus [1.4] million from the prior year. The fourth quarter of '05 includes significant improvement at El Dorado chemical in terms of sales and margins over 2004, and including the insurance business interruption recovery. But these policies were offset by the negative results at Cherokee caused by the lacked of availability and the cost of their natural gas feedstock.

Stepping back and looking at the year as a whole, the year was a mixed bag in terms of improvements versus offsetting forces. The unit volumes and margins at El Dorado chemical were significantly improved, despite the fact that the DMW nitric acid plant that was damaged in '04 did not return to service until midyear.

The 2005 improvements at the El Dorado, Arkansas facility -- the improvement is primarily due to a more favorable balance between supply and demand in the markets for the nitrogen products, and significantly improved plant performance at the El Dorado, Arkansas plant.

On the other hand, the unit volumes and the margins at Cherokee nitrogen were significantly worse in '05 than in '04. As Jack indicated in his overview comments, there was a significant degrading of the overall results from the Cherokee operation.

Cherokee's natural gas cost averaged $9 and $13 in the third and fourth quarters of '05 compared to $6 and $7 in the third and fourth quarter of '04. That is a significant increase, and everybody is familiar with what happened as a result of the hurricanes. As a result of this sudden climb in the market price of natural gas during '05 and the interruptions resulting from the hurricanes, Cherokee encountered significant disruptions in its operations. The facility suspended production on September 23rd due to the inability to receive adequate and reliable supply of natural gas. And by October 21, they resumed production. But during November and December of '05, natural gas prices continue to climb to a high of $15, and management suspended production again in December. In mid-January, Cherokee resumed production at approximately two-thirds their normal production rates, although gas prices continued to be well above historical averages.

That is a recap of the results of operations for the year 2005 and the fourth quarter. To sum up, El Dorado nitrogen at the Baytown location and El Dorado chemical and El Dorado Arkansas showed significant improvement this year, both in terms of marketing -- their margins, and their volume levels were increased. Both plants ran extremely well during the year. We have shown substantial improvements in the plant production at El Dorado, Arkansas. And that was offset by the negative impact of the hurricanes and the effect on the results at Cherokee. I think that concludes the overview of chemical. Jack, do we want to begin Q&A?

Yes. We're ready. I know we've given you a lot to swallow in one setting. But we're willing to take questions. Paul Rydlund is here in chemical to answer any specific questions you have about our chemical operations. Barry will answer specific questions about the air-conditioning operations. And Tony and I will answer any questions about the general operations of the Company.

(OPERATOR INSTRUCTIONS) [Michael McNulty], Context Capital

Thanks very much for the conference call. I appreciate you doing this. Just one clarification before I ask some detailed questions. Jack, I think you mentioned something about the Cherokee plant in your introduction and you started talking about how you would use 6 million MBTUs of gas. And then you said something right after that about -- you were hurt in Q1, and I thought you said '06, but can you just clarify that? Was there anything that happened in Q1 '06 that would cause you to -- that would cause Q1 results there to be worse in '06 than it was in '05, or was it '05?

(multiple speakers) Jack mentioned '06. I think we've mentioned that before that when we took it down in December due to the unavailability of gas, we didn't bring it back up until mid-January. And I think that's what he's referring to.

Well, we didn't bring it back, and we only brought it back at two-thirds rate. And we were still laboring under unusually high gas prices at that time. So the effect affects the first quarter of 2006. Now, I'm not at liberty to discuss the first quarter under the SEC rules until we have released that 10-Q for the first quarter.

Okay, but this has already been announced, there is nothing else --

This is just consistent with what we talked about in the fourth quarter as far as the disruptions caused by the hurricanes and the gas.

It really extended into the first -- it was the end of the fourth quarter and into the first quarter.

Okay, now just moving forward on that particular point, with regards to your gas supply there now, would it be -- your gas costs going forward today are obviously a lot cheaper than they were this time last year, is that correct to say?

I don't think so -- not at this time last year. I think gas prices are more or less the same as they were this time last year. The gas prices are around 7 to 7.5 MMBTU --

I think the short answer there is our gas prices are consistent with what you see if you look at the general market. (multiple speakers) You can see --

Okay, so it's just the -- so you didn't have any -- you don't do, like, 30- or 90-day type lock-ins or something?

No, but we do have as we indicated, 60-some-odd present, or [60 to 70%] of our customers accept the cost of gas (multiple speakers) we have a natural hedge on part of it.

We have a natural hedge. And from time to time, we do hedge for short periods. We hedge when we have orders on hand that we know we're going to fill. And we want to lock in the price of gas, because the price we have given to the customer depends on what our cost of gas is. And so we try to do that, you're not always able to match, but we try to match when we can.

Okay, that's great. And then just a general financial question. When I went through the 10-K -- and near the end, there is your quarterly breakout where you broke out by -- I think it's F-64 or F-65, somewhere in there. And then there is about nine footnotes. And it was kind of hard to follow all of the nonrecurring charges quarter to quarter. And do you have some type of a pro forma thumbnail discussion or number that you could share with us, please?

I don't have it recapped that way. I can -- you just will have to go through these notes. But we had in the -- no, in answer to your question, I don't have a thumbnail of that in front of me.

And is that something that you would possibly prepare or do an 8-K on, or is that -- you don't usually do that?

(multiple speakers) well, the footnotes on pages F-66 and F-67 have a lot of disclosures, some of which are nonrecurring things such as impairments, insurance proceeds, losses due to the failure of DMW, gains on sales of properties. It's got some things going both ways and [off] -- for two years, for eight quarters.

Right, it was just kind of hard to --

Well, we're available to answer your question off-line about whether they were reoccurring, or whether they were one time.

I think it's pretty clear whether they are or not. I think what he's asking is will you have a recap kind of showing what the effect is on both years? And the answer is no, we don't.

Okay, that's fine. And I guess the last question is, can you just drill down a little bit further, please, on your construction unit and what that did last year in terms of profitability versus -- I know you can't talk pro forma or prospectively, but maybe you could just give us a little more sense of just from a business perspective --

Are you talking about our Trison Construction company?

Yes, please.

Okay, it's a very small part of our business. Its sales are very small. We classify it as newer business. And most of it -- and it really didn't have very many active projects last year. What it was basically doing last year was sales and marketing to line up projects for the future. And so it's really not a significant part of the overall picture in last year's numbers.

Okay, so last year was -- startup expenses and the million and change arbitration of legal cost?

Well, I wouldn't say startup expenses. I would say marketing expenses for the most part. (multiple speakers) It generated some revenues and income last year, gross profit. But I don't remember what it is sitting here at the table. I would have to --

But it was small and -- okay. Just based on what you're saying, you are now starting to get big orders, and it sounds like that should change positively. All right, that's fine.

Adam Ritzer, CRT Capital.

A couple of things. First of all, on the climate control side, Barry, can you comment on the backlog at the end of Q1 and how much it was up from year end?

I know it was up somewhat --

Q1 this year?

Yes.

I know it was up somewhat, and I just don't have that number in front of me right now.

Okay, but it's still moving up?

From 12/31 --

Yes, (multiple speakers) it is still moving --

It's moved up, yes.

Okay. And if you were to look out at a point in time when the new product lines become profitable, what do you think the operating margins would be at that time? You ended -- Q4 operating margins were about 10%. I'm just trying to get an idea of how profitable it could be when all cylinders are running?

Well, I really -- Adam, with all due respect, I would really rather not answer that question, because that falls in the area of pretty much giving guidance on how we're going to do in the future. And it's against our policy to do that.

But what I will say is that what we're shooting for in those businesses is to try to have margins that are comparable to the margins in our other business. You know, at some point when we get them matured or (multiple speakers)

Well, I think we can tell you this -- that our two core climate control businesses, which would be heat pumps and fan coils -- our gross margins are 30% or better. And in our other businesses, we have not yet achieved those margins and those are our targets.

Okay, could you -- for the heat pumps and fan coils, could you tell me what the operating margins are for those two businesses?

We don't have them pulled out separately right now in front of us. It's all combined into total climate control that we're looking at.

What do you think the current gross margins are for -- call it the new business lines?

To gross margins?

Roughly.

Which ones; the current ones?

No, no -- I guess, the new businesses -- you know, the geothermal, the Trison, the large custom air handler -- those are the new businesses I guess.

The geothermal is not -- we don't consider that part of our -- these newer product lines. The geothermal is part of ClimateMaster. So that's in one of our established core businesses, just like our fan coil business.

What was the question again; I'm sorry?

I guess Jack mentioned that on the -- let's say the existing businesses, the heat pumps and fan coils, you have gross margins of 30% plus. I'm just wondering on a custom air handler business for example is something you're trying to ramp. What do you think the gross margins are there, currently?

Well, let me answer the question this way. It is hard to calculate your gross margins because we haven't reached the breakeven in '05. Once you come through the breakeven, then you start to realize those margins.

Okay, I will move on. What do you think -- what are your CapEx requirements for the climate business in '06?

I believe our CapEx are going to be in the range of about -- total of about $4 million.

4 million -- got you. And then I guess the other question --

Adam, let me add to what Barry said. That is because as we experience this increase in volume, and our penetration into the market, it's going to be necessary for us to continue to expand our facility. And if we were going to be stagnant, we wouldn't have to spend much money. But because we are projecting ourselves -- the growth that we are projecting, we believe that that is going to be necessary to spend that.

I think it's great. If you could increase revenues in excess of what --

Also, there are some things that we're going to do, like bring in house manufacture of some products, some items that we buy out. And there is savings in those, and they will add to our profits if we bring them in and produce them ourselves. I'm thinking specifically of heat transfer coils. And that will require some investment to do that. But there's a good payback on them. And we won't do it unless there's a good payback.

Well, for the EBITDA and operating incoming and cash flow that business generates, the spend -- $4 million seems pretty minimal for the growth this business has.

I guess that leads me into the next question that, unfortunately, I usually ask every quarter, but I will ask it again just to be consistent.

I just left the room, Adam.

(laughter) I mean, every quarter, every year, we have the same issue with the chemical business. It's always something -- it's the weather, it's competition, it's the hurricane. What I still can't understand is why we don't have a much greater effort to separate these businesses, monetize them somehow, be part of a bigger entity and get back equity and just focus on a business that's going to keep growing and generating significant amounts of free cash. And I guess I'm going to ask it again, and maybe you give me the same answer but I have to ask.

Well, we're working on what the options are and how we can do that. But nothing has occurred yet. And we're not going to give away that business.

Well, you say you're not going to give it away, but don't you think that even if you -- and I'm sure with a couple of phone calls, you could get this thing sold. You probably know who the natural buyers are, etc., etc. You have been doing this for -- I don't know how many years, Jack -- 40 or 50 years.

But don't you think even if you sold it for a little bit less than the real price you think it's worth, it would increase shareholder value significantly more by focusing on a business that can grow and generate a lot of excess free cash? That is the real question.

Well, there are a lot of pros and cons to that. And too many to discuss on this (multiple speakers) call.

[Paul Dendi], Private Investor.

Barry, the good news to me is the backlog that you have increased, where you doubled your backlog from '04 to '05. At what rate can you start to hire -- I guess, in other words, to increase that production to start in -- I mean, obviously by whittling down that backlog, it increases your profit, increases sales, and so on. I mean, it's good to have a backlog, and you said you've expanded the plants and so on. But at what rate -- is the backlog growing at a faster rate than you can build the product, I guess is --

Well, it was initially. However, we've taken several steps to pull that backlog down. So it's nice to have a big backlog, but then your leadtime push out. So what we have done is -- there was a detailed discussion about what we have done to the physical plants for capacity. And in addition to that, along with that, we have ramped up the hiring of additional employees to increase production. In the ClientMaster, facility, which is where probably we've seen the biggest backlog increase, in that operation -- we have gone from four -- we were working -- we had that plant working on four 10-hour days as opposed to five 8-hour days. And we had set it up initially that way so that if we had a bulge in production, we could work overtime on the 5th day of the week.

Well, what we have done with that operation is we've gone to some partial second shifts, and we've also gone to -- in addition to four 10s to three 12s in certain areas. So in some areas of the plant, we're actually running around the clock.

Okay, so the Oklahoma City has the workforce to continue to expand that production facility. And obviously, you are buying the plant.

We're are [hiring in] and we're gearing up in all of these places.

So even if you continue to grow at a rate of -- well, obviously, I don't think you'll grow at -- I'd like to see you double your backlog every year. But you should see dramatically higher production because of this, is what you are saying?

Well, I would say we're going to see higher production -- dramatically is subjective.

Okay. Anyway, it looks good. It's terrific.

[Jenny Graber], student.

Who?

Jenny Graber; I'm sorry.

Jenny Graber -- who is she with?

It states here that she is a student, sir.

A student -- okay.

Ms. Graber, if you could please pick up your handset?

Where is she a student?

I'm not sure, sir.

She will answer that.

Okay.

Ms. Graber, your line is open. (OPERATOR INSTRUCTIONS). There is no answer, sir. [Clifford Orban], CIBC.

A couple of questions. At what level does the Cherokee plant, which seems to me to be the problem plant in the chemical business -- at what level of natural gas price does this business go from a loss to a profit?

Well, go ahead, Paul; you can answer that.

Well, there's probably not a direct number that can be used because it depends upon the market prices of the products that we sell. And again, the connection between the cost of natural gas and the market prices of the products that we produce at Cherokee is not always the same number all the time.

If we had to pick a number and say, where is a number that puts a pretty big strain on Cherokee, we're probably talking $9 and greater.

Okay, at $6 -- with existing conditions right now -- I mean gas is just under $7. But let's say it's $6.50. Does this plant make money with existing selling prices or not?

The answer to that is yes.

The answer is it makes money at $6.50.

Well, to give you a little more insight, last year, the first half of the year, we made a profit in that plant. Second half of the year, we lost the profit we made plus.

Well, yes -- last year on gas prices? Yes, I can see that.

So we did make money at the gas price in the first half of last year.

Okay, which was kind of just below -- well, probably averaged around $7 or less. Okay, second question on that plant. The supply of the natural gas -- is that coming from the Gulf area, I suppose?

Yes, it is.

Via pipeline?

Yes, it is.

Is there any other pipeline that you can access if the Gulf has problems again?

No, there is not.

So you get gas solely from that area?

That is correct.

Okay, third question. There's something call the Pryor plant, which I believe is in mothballs. Is that correct?

That is correct.

Okay. What is that plant, and is there a selling price? Have you tried to sell it? Can you just flesh that out for me?

There are intensive efforts to sell that plant going on. We have been trying to sell it. We have many people interested. We have had many people come in and do an analysis and said they were wanting to buy it, but no one could put the money together to buy the plant and move it, because one of the requirements is the plant has to be moved. We do not want it to operate in our backyard, because historically, when we did not own them, they were big price cutters (multiple speakers) continuously disrupting the market. So we don't want that to reoccur.

So we keep that plant out of production for that reason. And the cost to move it -- take it apart, move it, and re-set it up -- hopefully out of the country, that's what we're talking about -- people who -- when they went to do it couldn't raise the money. So we have -- at all times, we have had three or four active prospects. And we have several active prospects right now who may be able to do a deal.

I don't know if you know the history of that. We have never operated that plant. We bought it in a shut down condition, and continued to try to move it offshore.

What plant does that compete against?

El Dorado.

El Dorado, okay -- how much is the prior plant -- what is the replacement cost of that kind of equipment?

The replacement cost on that plant based on appraisals that we have had is $400 million. The asking price for that plant and the price that we have had on it -- it's well known around the country -- is 25 million. Whether or not we will get that or nothing for it is still to be determined.

Is it in good shape? Is it rusting? I don't know --

No, it in good shape. We've kept it current -- it's in good shape.

Okay, in the HVAC business or climate business, what is the fastest-growing part of that business? Would that be the geothermal area?

I would say the heat pump -- well, the fastest-growing as a percentage of sales, or in terms of absolute sales dollars?

Percentage of sales.

Well, I would say in terms of percentage of sales, it would have to be the large custom air handler business -- do you mean growing for us or in the industry in general?

For you.

Okay. It would be our large custom air handler business, because based on the shipments last year and the current backlog, we expect to see a very substantial increase in its sales this year -- much bigger as a percentage of sales than any of the other segments.

Okay, so it can be profitable maybe -- okay -- we hope.

And I will add that next to that would be our water source heat pump business.

Right, now, the water source heat pump business -- (multiple speakers)

(multiple speakers) dollars, we'll probably match or even -- perhaps match or beat the sales dollar increase of that business. But it's less of a percentage of its total business because it's a bigger business to start with.

Sure, sure. In that business, actually -- in the geothermal side, which I guess is mostly ClimateMaster, correct?

It's all ClimateMaster.

It's all ClimateMaster. So how many employees did you have a year ago in that business?

(multiple speakers) I don't really have those numbers right in front of me, and I would hate to just throw out a number --

395.

A year ago?

Yes.

And today?

Well, we have got --

About 50 more.

Yes, we're up about 50, maybe -- and we're in the hiring in mode right now. We'll probably add another 50 within the next few months.

Okay, so I would assume that business is growing quite nicely based on that. The plant -- the actual infrastructure you're using in that business, which seems to growing rather quickly in the geothermal side -- do you have sufficient room within that plant to manufacture the projected orders over the next year -- just by adding shifts, basically, more or less (multiple speakers) [some] equipment?

We have debottlenecked the fabrication area by the fab equipment additions that I mentioned. We increased the [paint line] -- I didn't mention this, but we increased the paint line capacity. And in addition to that, we increased the length of our assembly lines and the capacity of the assembly lines by adding automated quality control equipment which basically speeds up the cycle time on the line.

Okay, but you're not going to have to go buy a new plant for this business any time soon right?

No.

What else did I want to ask you guys? The debt level of the business -- sorry, I know you mentioned it -- was it 112 million at December 31, '05?

Are you asking about the debt?

Yes.

112, yes.

Right, now you got the convertible debt, so you are paying down some of the debt, I assume?

That 18 million will eventually -- the net proceeds will eventually just offset some other debt.

Some of this 112 million?

Yes. In other words, the 112 goes up and down with the revolver, and we've got a little bit of seasonality in the business. But using that as a -- if we had 18 million in debt, on the subordinated subsequent to that, and we'll get 16.9 in net proceeds, then other debts will eventually go down to 16.9. Right now, we're still getting a little bit of the cash trying to get some of the higher-yield notes back in.

Now that's that 13 million note?

That's correct -- we have bought back seven; there's still six out there.

Right, so just trying to buy this one out, okay.

In terms of the business, the Cherokee plant, which seems to be the problem plant -- I guess another guy alluded to this before me. Obviously, this is the most volatile business you have got going. You know, the El Dorado business seems to be a little more stable. I think the corn outlook with ethanol overall longer-term doesn't look terrible.

And the El Dorado plant sits on a pipeline; they can get their ammonia off the pipeline as opposed to having to buy natural gas. That gives them access to foreign-produced ammonia. So that's right, you're pretty much on point.

Right, so the Cherokee plant seems to be the big problem here. And then it's also, I know, the smallest plant. And I do know that much. What would be the effect of just shutting that plant down?

Well, we think it has a certain intrinsic value. And obviously, we have considered that. But we think it would affect the value quite a bit at this point. And I'll let Paul address what he thinks about getting it turned around. But if we get it turned around, obviously, we wouldn't want to destroy the value.

I think as Jack had mentioned earlier, we have taken our marketing focus on the products from the Cherokee plant and have focused more on the industrial end, where the results are more predictable. And we believe this is achievable. And we believe the Cherokee plant will be profitable.

Right, the problem is it's really not in your control to a large degree. You have got natural gas prices, the main feedstock product, which on balance is in an up trend. It doesn't look like it's going back to $4 Mcf anytime soon.

I think what has to occur long-term is the market has to recognize that they can't buy products that we make at the old prices. They have to adjust to the higher price for what they purchase, and they'll have to pass it through to their customers. And it takes a while before that sets in.

But is it not like offshore products that are coming, competing with the Cherokee plant?

There are plants coming in from offshore that, to a point, compete with Cherokee. But Cherokee has certain logistic advantages to certain markets. We are looking to develop and bring in proprietary products that possess -- of course, would be proprietary as opposed to products coming in from offshore.

So I think that the focus on Cherokee is that not a serving all markets, trying to produce something for everybody, but picking our niches, finding where it works for Cherokee. As we mentioned before, it is not a tremendously large plant. That may be an advantage, given the situation.

And I will just come back to the same thing -- increasing shareholder value -- do we play the risky game of Mcf prices going up; the longer-term process of developing new markets, the ever-present risk of foreign competition when they have a natural cost advantage, at least in their natural gas prices, I guess, from some of these places and it being the smallest sort of piece of the puzzle, and Cherokee being a smaller plant -- when you sit from where I'm looking, let's say you close it down, you reduced your losses in that business -- I'm not sure how much capital is employed there. How much capital is employed there? I mean, you have -- the plant is already -- you own the plant. To shut that plant down, what would it cost?

Well, we've got all kinds of calculations. There's all kinds of ways of shutting down a plant

We have some capital employed there. We've got it on the books for a few million dollars. And then we've got some working capital. But that's basically it.

So it's not on the books for that much at this point.

No. (multiple speakers) the books for enough that we don't want to write it off.

But that's really not the issue here. The issue is we're going to -- as Paul indicated, we see some long-term advantages here. And obviously, as management, we've got to continually evaluate all of the operations on the positive cash flow (multiple speakers)

I would say all of the questions that you raised and all the points that you threw out are good points that are right on point, and they're things that we have looked at and we continually look at over and over again. And we have run numerous scenarios based on all the things that could happen and might happen.

And we have come to the conclusion that right now, with gas prices where they are and with the plans that are in place, that we think we can turn this plant around without losing the value of it. If the situation changes in the future, we're going to have to reevaluate. That goes with any operation that you have, and that's where we are right now

Yes, thinking about that -- just one last question comment on that. Basically, from what I understood, it hurt your EBITDA last year by at least $2.3 million.

Right.

And that was last year. And half the year was good, and half the year was bad. And unfortunately, a lot of this stuff is not up to us. We have one bad hurricane, gas prices could be $12 again. I don't know. But that could happen. And on $2.3 million loss on EBITDA, you know, if you didn't have this problem in your business, you're talking about an increase in value in the business of certainly more than $10 million to the market cap. So you have got to balance off getting rid of that loss on the EBITDA versus your increased EBITDA, etc., etc.

Those are all good points.

Those are good points, and we discuss them all the time. And you're right on point.

Unfortunately, it's not under your control. And that is the biggest fearful part of it from an investor standpoint -- a lot of it because your costs are not in your control.

Everybody in this business has the same problem. A lot of things are off of management's control.

No, I understand that. It is your smallest part of the business when you have a lot of other good businesses going on. I mean, even the ag business in El Dorado, however you pronounce it -- I call it El Dorado. Even that business, you can make good cases for an increasing -- better business profile -- you know, given what's going on in the states -- ethanol, higher energy prices, etc., etc. And they're going to have to plant the corn if they want to replace MTBE instead of importing it, etc. Anyways, thanks for your time. I appreciate it.

Jenny Graber, University of Kansas.

I just have one question for you. [Due to] the chemical business -- obviously, we know it's volatile; people have kind of talked about how it's not your favorite. But I'm wondering if -- we're coming up on the planter season for farming, and I'm sure the farmers are preordering their fertilizer. And I'm wondering if you have seen what these volumes are in orders, and if so, are they ahead of maybe what they were last year; have you seen them growing, declining? Because you had mentioned the planting of the corn this year would be 5% less.

I said that that's what the USDA said -- the Department of Agriculture. But the industry publications are not agreeing with that. So it's anybody's guess who is correct. But go ahead, Paul; you answer that.

Well, I will speak particularly to El Dorado. Our shipments this year have been strong from El Dorado. This is in spite of near-drought conditions in a couple of our markets, where we haven't had the rainfall, which I'm sure everyone is aware of. Nevertheless, our shipments out of El Dorado have been strong. And so we believe our projections this year are right on target.

Okay. So as far as being ahead of last year, there's really no way to tell, but they've been good?

We can't make any forward forecasts.

We're not [allowed to] forecast.

Thank you, sir. There are no further questions.

Thank you.

Thanks for tuning in, everyone.

This concludes our conference call.