Mativ Holdings Inc (MATV) 2005 Q3 法說會逐字稿

Good morning.

My name is Deshanta (ph) and I will be your conference facilitator today.

At this time I would like to welcome everyone to the third quarter 2005 earnings conference call. (Operator Instructions).

Mr. Roberts, you may begin your conference.

Thank you, Deshanta.

Good morning.

I'm Paul Roberts, the chief financial officer of Schweitzer-Mauduit International.

With me is Wayne Grunewald, our corporate controller.

Thank you for joining us for a review of our third quarter 2005 financial results.

Various comments or remarks that we may make during today's conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor created by that act.

Actual results may differ materially from the results suggested by these statements for a number of reasons.

Such factors are discussed in more detail in Schweitzer-Mauduit's Securities and Exchange Commission reports, including our annual report on Form 10-K for the year ending December 31, 2004.

Prior to a detailed discussion of our financial results, I will review the highlights of the quarter.

Diluted earnings per share were $0.37 compared with diluted earnings per share of $0.67 in the third quarter of 2004, a decline of 45%.

Operating profit was $10.7 million, a decline of $6 million, or 36%, from the prior year quarter.

The company's gross profit margin was 14.7% compared with 19.3% in the prior year quarter.

The decline in profitability compared with the third quarter of 2004 was largely the result of the inability to fully offset inflationary cost increases to either improved mill operations or higher selling prices.

Inflationary cost increases unfavorably impacted operating results by $4 million in the quarter.

The financial results were also unfavorably impacted by lower paper production volumes, currency exchange rates and interest expense.

These unfavorable factors were partially offset by lower non-manufacturing expenses.

Total sales -- total net sales totaled $165.7 million, 1% above the prior year quarter, primarily due to changes in currency exchange rates.

Capital spending totaled $5.2 million compared with $10.8 million spent during the prior year quarter.

Spending for our major capital projects is now behind us.

I would now like to provide a more detailed discussion of our third quarter financial results and our outlook for the full year.

Net sales were $165.7 million, an increase of $1.6 million, or 1%, compared with the third quarter of 2004.

Changes in currency exchange rates increased net sales by $1.6 million, or 1%, compared with the prior year quarter.

The Brazilian real was approximately 27% stronger versus the dollar, while the euro was roughly 1% stronger versus the dollar.

Although changes in currency exchange rates had a positive impact on net sales, they had a $1 million unfavorable impact on the company's operating profit during the quarter.

Changes in average selling prices had a favorable $400,000 impact on the net sales comparison.

Higher average selling prices in the United States more than offset lower average selling prices in our French and Brazilian operations.

Unit sales volumes increased by 1% compared with last year, but had an unfavorable $400,000 impact on net sales due to changes in the mix of products sold.

Excluding sales volumes from our operation in the Philippines, which was acquired in June of this year, unit sales volumes would have declined by 2%.

Sales volumes in our Brazilian business improved by 6% compared with the third quarter of 2004.

This improvement was the result of increased sales of tobacco related papers that more than offset a decline in commercial and industrial papers.

The increased sales of tobacco related papers were primarily due to export shipments.

Sales volumes for the French segment were essentially unchanged from the prior year quarter.

Reconstituted tobacco leaf, or RTL sales volumes, were 5% above the prior year quarter.

The increased sales of RTL products offset lower sales volumes in the tobacco related papers business.

Sales volumes in the United States decreased by 1%.

Increased sales of commercial and industrial products were more than offset by lower sales of tobacco related papers.

Sales of cigarette paper for lower ignition propensity cigarettes were above the prior year quarter in support of the introduction of lower ignition propensity cigarettes in Canada in advance of the October 1, 2005 compliance date.

Gross profit was $24.4 million, a decrease of $7.2 million, or 23%, from the prior year quarter.

The gross profit margin was 14.7%, declining from 15.6% in the second quarter of this year and from 19.3% in the third quarter of 2004.

The decline in both gross profit and gross profit margin was largely attributable to significant inflationary cost increases.

Higher costs were incurred for purchased energy, purchased materials and employee labor rates.

The weaker dollar versus the Brazilian real also put pressure on the gross profit margin since costs in Brazil are primarily incurred in local currencies, while selling prices are often linked to the dollar.

Inflationary cost increases unfavorably impacted operating results by $4 million in the quarter.

Purchased energy costs increased by $2 million compared with the third quarter of 2004.

Higher energy costs were experienced in each of our business units related to higher electricity, fuel oil and natural gas costs.

Inflationary increases for purchased materials other than wood pulp had an unfavorable impact on the operating results of $2.1 million, largely due to increased chemical costs.

Changes in labor rates increased manufacturing expenses by $800,000 during the quarter.

Changes in the per ton cost of wood pulp lowered our operating expenses by $900,000 compared with the prior year quarter.

The list price of Northern bleached softwood kraft pulp, or NBSK, a bellwether pulp grade, averaged $625 per metric ton in the United States during the quarter compared with $670 per metric ton in the third quarter of 2004.

The world pulp market was relatively stable during the seasonally weak summer period with a list price of NBSK finishing the quarter at $620 per metric ton.

This list price increased to $640 per metric ton in October.

The list price of NBSK in the fourth quarter is expected to be above the average of $630 per metric ton in the fourth quarter of last year.

Non-manufacturing costs were $1.2 million less than the prior year quarter, a decline of 8%.

Lower selling, general and research expenses were incurred with a decline in compensation and sales commission expenses.

Non-manufacturing expenses declined from 9.1% of net sales in the third quarter of 2004 to 8.3% in the current year quarter.

Operating profit was $10.7 million, a decline of $6 million, or 36%, compared with the third quarter of 2004.

Operating profit return on sales was 6.5% compared with 6.4% in the second quarter of this year and 10.2% in the third quarter of last year.

Operating profit was lower in our French and Brazilian operations and was unchanged in the United States.

Operating profit in the French segment was $11.7 million, a decline of $4.7 million from the prior year quarter.

The decrease in profitability was the result of lower product selling prices, a less favorable sales mix, increased purchased energy, purchased materials and labor expenses, and unfavorable impacts of volume changes.

These unfavorable factors were partially offset by lower non-manufacturing costs.

The French segment results include the impact of our recently acquired tobacco related papers manufacturing facility in the Philippines.

Our Philippines operation had a $400,000 operating loss during the quarter, primarily as a result of purchase accounting requirements which dictate value in inventories on hand as of the acquisition date at anticipated sales value less incremental selling expenses.

As a result, no profit contribution was generated from the sale of these products during the third quarter.

Our operation in the Philippines is expected to be a positive earnings contributor in future quarters.

Operating profit in Brazil declined by $1.6 million from the third quarter of 2004 to a loss of $200,000.

The strengthening of the Brazilian real versus the dollar during the quarter had an unfavorable impact on operating profit of $1.1 million.

The decrease in profitability also reflected lower average selling prices, primarily for commercial and industrial papers and increased wood pulp and purchased energy expenses.

These unfavorable factors were partially offset by increased sales volumes and improved mill operations.

The U.S. business unit had $800,000 in operating profit during the quarter, unchanged from the prior year quarter.

Operating profit benefited from improved mill operations, somewhat higher average selling prices, a favorable pension expense adjustment due to the freezing of all salaried employee pension benefits as of the end of this year, and lower non-manufacturing expenses.

Unfavorable factors included higher purchased energy, purchased materials and labor expenses, and unfavorable fixed cost absorption due to lower paper production.

In addition, during the quarter the decision was made to exit the unprofitable cigarette paper booklets business in the United States.

The booklets operation had an unfavorable impact of $1.1 million during the quarter, which included accelerated depreciation for the booklets production equipment.

The phase-out of the booklets operation is expected to be completed during the fourth quarter, having a small unfavorable impact on that quarter.

Interest expense totaled $1.7 million during the third quarter, an increase of $600,000 compared with the third quarter of 2004.

The increase in interest expense was the result of increased debt levels and higher interest rates during 2005.

Schweitzer-Mauduit's effective income tax rate was 24% for the quarter compared with an effective income tax rate of 26% in the third quarter of 2004.

Net income totaled $5.8 million, unchanged from the second quarter of 2005, but a decline of $4.5 million, or 44%, from net income of $10.3 million in the third quarter of 2004.

Diluted earnings per share were $0.37 compared with diluted earnings per share of $0.67 during the third quarter of last year, a 45% decline.

The decline in both net income and diluted earnings per share compared with the prior year quarter was caused by the lower operating profit and higher interest expense.

Earlier today, Schweitzer-Mauduit announced a quarterly common stock dividend of $0.15 per share.

This dividend will be payable on December 12th, 2005 to stockholders of record on November 14, 2005.

The company has paid quarterly dividends of $0.15 per share since 1996.

Capital spending totaled $5.2 million compared with $10.8 million in the third quarter of 2004.

Capital spending for our major strategic projects has now been completed.

Spending for the company's new cigarette paper manufacturing strategy, which included rebuilt or new cigarette paper manufacturing equipment in both the United States and Brazil has been accomplished.

Schweitzer-Mauduit is expecting capital spending for 2005 to total approximately $20 million, with capital spending in 2006 also expected to be approximately 20 million.

In July, Schweitzer-Mauduit announced execution of an agreement to form a joint venture to produce tobacco related papers in China.

The joint venture will build a new state-of-the-art paper mill producing both cigarette paper and porous plug wrap.

The joint venture is in partnership with the China National Tobacco Corporation, which is the principle operating company under China's State Tobacco Monopoly Administration.

The joint venture is subject to obtaining project financing and various governmental approvals.

Governmental approval is expected in late 2005 or early 2006.

Construction is expected to take approximately two years following receipt of governmental approvals.

Momentum continues to build for lower ignition propensity cigarettes in North America.

As of October 1 of this year, all cigarettes manufactured or imported into Canada must meet lower cigarette ignition propensity requirements.

Earlier this month, the state of California passed legislation that requires all cigarettes sold in California as of January 2007 to have lower ignition propensity properties.

California joins the state of New York, which already requires lower ignition propensity properties and the state of Vermont, which requires cigarettes to have these properties as of May 2006.

In addition to Vermont and California, 13 other states introduced bills in 2005 that provided for lower ignition propensity properties for cigarettes.

It is likely that other states may take action on cigarette ignition propensity legislation in 2006.

Schweitzer-Mauduit had increased production and sales of cigarette paper for lower ignition propensity properties during the third quarter in support of the new regulations in Canada.

Sales of cigarette papers for lower ignition propensity cigarettes are expected to contribute positively to operating results in future quarters.

These papers sell for a higher price and a better margin than the conventional cigarette papers they replace.

Although Schweitzer-Mauduit's financial results for the third quarter of 2005 were well below the prior year quarter, the earnings were consistent with the second quarter of 2005 and with our recent expectations and most recent earnings guidance.

The fourth quarter of the year, however, is not expected to be as strong as previously anticipated.

Accordingly, earlier today we announced that we are lowering our earnings guidance for 2005.

We are now expecting diluted earnings per share for the year to be in the range of $1.25 to $1.30.

The change in earnings guidance reflects more challenging market conditions that are expected to result in lower than previously anticipated sales of both tobacco related papers and reconstituted tobacco leaf products in the fourth quarter.

The lower sales expectations reflect a number of factors, including the slowdown of business experienced by several of our customers, year end inventory adjustments being taken by some customers, and slower than expected results from new reconstituted tobacco leaf business development activities.

We are also expecting a less profitable mix of products sold.

With the lower sales volumes we are expecting that increased paper machine downtime will be taken during the fourth quarter in France, the United States, and Brazil in part to reduce inventory levels.

The weakened dollar versus the Brazilian Real is also expected to continue putting pressure on our financial results.

The Brazilian Real has continued to strengthen versus the dollar to levels we were not anticipating.

The unfavorable currency impact on operating profit in Brazil is expected to be approximately $4 million or $0.17 per share for the full year.

In Brazil costs are primarily based on local currencies while selling prices are often linked to the dollar.

In addition Schweitzer-Mauduit will continue to face significant inflationary cost pressures.

Higher purchased energy costs are expected to have an unfavorable impact on the full year of approximately $10 million or $0.42 per share.

The cost of chemicals and other purchased materials has increased more than previously expected.

Higher labor rates and employees benefits are also expected to continue.

In total, inflationary cost increases are expected to have unfavorable impact on full-year 2005 operating costs of approximately $20 million or $0.84 per share.

The company's effective income tax rate is expected to be approximately 5 to 6 percentage points higher than the effective income tax rate in 2004 in the range of 27 to 28%.

The prior year effective income tax rated benefited from the utilization of foreign tax credits and other non-recurring tax items.

The higher effective income tax rate is expected to have a negative impact of approximately $0.15 per share for the full year compared with 2004.

That concludes our planned comments.

Deshanta, could you please open the phone lines for questions?

(Operator Instructions).

Your first question comes from Ann Gurkin of Davenport.

Paul.

Hello, Ann.

I wanted to start with earnings reduction first.

It seems like -- I thought we had taken numbers down as much as we thought we should last time.

Now we're revising down another $0.20.

So can we get any more detail on it?

I know there's cost pressures, inflationary pressures, shifting of RTL business that kind of stuff, but what else went wrong?

Well again the third quarter came in about where we expected it.

As I mentioned decline in earnings projections are really in the fourth quarter.

And I think if I were to summarize really in the order of what has -- having the most significant impact and then down as far as the factors impacting the change in earnings guidance, I'd say the largest single factor is the reconstituted tobacco business not being as strong as we previously expected.

The fourth quarter should still be a good quarter for RTL but below what our expectations were going to be.

Fairly recently, actually in October, we did get a request for a delay in requested shipment dates from 2005 to 2006 for a very large order that we were counting on.

A couple of our customers for reconstituted tobacco have recently told us that their inventories were higher than they expected them to be at this point in the year, and they were reducing their orders, their shipments for the fourth quarter.

There was also some new business that we were expecting that we had worked through and developed with some customers that now looks like it will not materialize this year, not as quickly as we were expecting.

So the reconstituted tobacco business will be good in the fourth quarter but again not as strong as we were expecting.

We did expect our Paper business to be weaker in the fourth quarter.

We expected our paper business to have -- be the weakest quarter of the year but we expected the improvement in recon to offset some of that.

Now as we're looking forward, the sales of our tobacco-related business mainly in France and Brazil will not be as strong, again, more challenging market conditions.

Again, there too we've been notified of some inventory adjustments by some customers.

Given what's going on with our sales situation we now expect to take more paper machine downtime in the fourth quarter than we were previously expecting in response to the lower volumes, but also to bring our inventory levels more in line so that going into 2006 we'll have those where we were expecting them to be.

We would expect more paper machine downtime in France, U.S. and in Brazil, really all three of our major units.

The fourth item that has also contributed to the change is the Brazilian currency that continues to grow and be stronger than we were expecting.

When we gave earlier guidance in July the Brazilian currency was at about $0.45 or excuse me, $0.41 to the dollar.

And actually at that time based upon projections of economists in Brazil, slight weakening of the Brazilian real was expected the balance of the year.

The Brazilian currency has now strengthened to about $0.44 to $0.45 to the dollar.

It's about 7 to 10% higher than what it was back in July -- actually a little bit higher than that -- than our expectations.

Since most of our costs in Brazil are in local currency those costs will be proportionally higher and our profitability in Brazil will be lower than what we were expecting.

We have seen inflationary cost pressures be a little bit higher than expected, but again those are not near as significant as the other items that I mentioned -- the weakness in RTL, the lower-than-expected sales of tobacco papers, the paper machine downtime and the Brazilian currency.

Okay.

When you talk about the reduced mix of products is it primarily because of the RTL and the mix of business in Europe?

Or is there something else?

No, it is primarily that, Ann.

Again, as our volume has been a little bit weaker we have looked at getting some other volume in some non-tobacco grades which have a lower margin so it was really a combination of both of those.

Okay.

In terms of plant downtime, I think three of your six lines in France are down right now?

What are we going to?

Well, we have eight cigarette paper machines at our mill in Quimperle.

And we have three cigarette paper machines at our mill in Saint-Girons.

So we've got 11 cigarette paper machines in total in France.

Those 11 paper machines, and then the eight in Quimperle, six of those eight in Quimperle are fairly small cigarette paper machines.

We currently have three of those machines down, and they have been down really since the first quarter, and we will probably be taking an additional machine down in the fourth quarter, an additional small machine.

Okay.

All right.

Are you going to make any changes in terms of hedging your costs as we go forward?

Again, in terms of energy we are looking at our energy procurement strategy.

Again, if we were to lock in right now we'd be locking in largely at the rates that they are.

I would expect that we will be doing something differently in 2006, but probably after energy rates drop down a little bit.

Okay.

And in terms of pricing can you talk about what level of pricing you've gotten in the U.S.?

What you're negotiating for next year?

How are contract negotiations going?

Can you talk about that a little bit?

Okay sure.

I did mention that our pricing was a little bit higher in the third quarter in the U.S., but was lower in France and Brazil.

The U.S. is the only market where we do have the ability for some of our volume to have an adjuster in pricing with changes in pulp prices so some of that has rippled through a little bit.

We have seen a little bit of some other pricing but not significant.

Most of our contracts with our major customers, the pricing is set in the fourth quarter and that pricing pretty will hold true for the following year.

When the pricing was set 2005 we certainly didn't expect the $20 million of inflationary pressures that we're experiencing.

We are in the process in the fourth quarter of negotiating higher pricing with our customers.

We would expect to be able to offset to some degree some of the inflationary increases we've seen but those negotiations are in process and will not really be completed until later in the quarter.

Okay, in terms of I think you talked about in the release offsetting some of the cost pressures through further operating efficiencies.

Yes.

Can you talk about what percentage of projected cost pressures you think you can offset with operating efficiencies?

I really couldn't give you an estimate on that, Ann.

We have been able this year to increase or offset some of it with higher efficiencies.

We would expect to see better mill operations going forward in a couple of areas that will provide us some benefits.

But I couldn't quantify it at this point.

Okay.

And then one more question, I'm sorry.

RTL outlook, how much of the volume can you make up next year from the lost volume this year, and will it be made up in the first half next year?

And then what's the overlook for the overall growth for RTL business next year?

The delay in shipments from '05 to '06 is reflecting weakness in a couple different customers for reconstituted tobacco leaf.

And I would expect that shifting of that volume probably will not be incremental to 2006 because it will simply delay requirements of those customers in the year.

We would still expect to see volumes up year-over-year for reconstituted tobacco next year versus this year in the low to mid single-digit range.

Okay thank you.

Thank you, Ann.

Your next question comes from Dennis Scannel of Rutabaga Capital.

Yes, hi Paul.

Hello, Dennis.

Just to follow up on the RTL question, I think you and Wayne had said earlier in the year that you thought that even after such a weak first quarter 2005 where RTL volume was off very significantly, that for all of '05 you'd see kind of flat to maybe even modestly up for RTL volume.

So with the weaker-than-expected fourth quarter is total volume down then, expected to be down for 2005?

Well our RTL volume was lower than last year in the first quarter of this year.

It was higher than last year in both the second and the third quarters, and we do expect that it will be higher than last year in the fourth quarter as well.

But the fourth quarter will not be as strong as we were expecting but we will still see stronger volumes in the fourth quarter compared to last year.

Because of some recent changes in the shipment dates our volume for RTL is going to be either fairly close to what we shipped last year or a little bit under.

Okay.

And is there anything else going on in that market in terms of -- I mean is this just a reflection of let's say end market demand, the actual cigarette demand.

Or are -- do you find your customers are using less RTL?

No, I think where we are finding the weakness in RTL compared to our expectations, I'd say our -- the market that we ship the most into is in Western Europe, and we have seen customers that their demands have dropped, but again they have not changed their blends.

They have not moved away from RTL but it has really reflected weakness in their volume.

Yes, okay.

And on the pricing negotiations, when will that -- when will those discussions be completed?

And is there -- is there any way for one -- I'm just trying to get a sense of how much of the inflationary costs that you and, frankly, shareholders have been eating for 2005 you'll be able to offset on the pricing side?

Well we'll be completing those negotiations in the fourth quarter and I would expect that we would comment on our pricing for '06 when we release earnings in January.

Okay.

And then one last thing, I think you mentioned this but I missed it when somebody stepped into my office, when do you expect to be making the actual capital investments for the Chinese venture?

We will -- we're anticipating to get approval for the Chinese joint venture either late this year or early next year.

And then the capital spending will be spent over the following two years.

So it's going to be spread pretty evenly between '06 and '07, probably a little bit into '08.

Of the $100 million that we mentioned for the total cost maybe 20% of that roughly is working capital build up and most of that won't occur probably until very late '07 or early '08.

So it will be a little bit back ended in terms of the total investment.

Okay terrific.

That's it for me, thanks.

Thank you, Dennis.

Your next question comes from Kevin Silverman with Hureras Capital (ph).

Thank you.

I just have two questions.

One, would you be able to talk about the -- just to put some more color on this, what the capacity changes have been in Europe in the industry, and how that compares to the demand changes in Europe with the idea of trying to come to some guess as to when that new capacity will be absorbed?

And secondly just to follow up on a couple of other questions from some other listeners, in terms of recovering inflationary cost increases, there's some history of inflationary cost increases, and I'm wondering if you could talk about the outcomes in those cases in the past and whether you feel that would be predictive in this case?

Thank you.

Okay, sure.

Kevin, in terms of the European capacity two of our competitors added capacity in 2000 -- one in 2003 and one in 2004.

Each of them added one new machine for cigarette paper.

Each of those machines was probably in the range of 8,000 to 10,000 metric tons of capacity.

It represented probably a total increase of capacity worldwide for cigarette paper probably in the high single-digits range in terms of increase.

We were relatively close in terms of capacity at that point in time prior to the capacity being added.

It's unlikely since worldwide demand for cigarettes is growing maybe about 0.5% right now, the growth in demand isn't going to absorb the extra capacity.

It's going to really require some less efficient capacity coming out of the marketplace and some shifting around of volumes.

And we've done some of that ourself with some new equipment, some older less efficient equipment coming out of the market.

Did that create some permanent cost increase per unit that you could talk about?

Well in our particular situation when I mentioned, to give you an idea, the eight cigarette paper machines that we have at our mill in Quimperle, the six small ones each have annual production of about 2,500 metric tons each where the two larger ones have annual production more in the range of about 10,000 metric tons each.

So shutting down the smaller machines will mean that we'll have more of our production on the larger machines that have a better cost per unit than the smaller machines that are going down.

But we probably will not be able to offset or get rid of the unabsorbed fixed costs exactly with the smaller machines.

So on balance there will be some increase in costs but again the improved productivity off of the bigger machines will offset that to some degree.

What order of magnitude is that?

Can you talk about that?

I wouldn't be able to quantify it right now for you.

Okay well thank you.

How about in terms of history of recovering inflationary cost increases?

I would say over the last several years -- I would say historically --

Well some of the big inflation times in the past -- you know, the late '70s, what happened in those periods?

Well the dynamics was quite a bit different.

In the '70s, '80s, I'd say even into the mid-'90s it was fairly routine being able to pass price increases through to our customers and have almost full recovery.

That was probably the case into the mid to late 1990s.

About '97, '98 the multinationals pretty much went to global purchasing, consolidated their purchasing requirements, put a lot more pressure in pricing to the market dynamics since about 1997, '98 have been much different than what we had prior to that.

In the period of time from '97, '98 through, let's say, the last year or so, I would say typically the industry was able to pass through a portion of their cost increases but not all of them but we're in a position where we were able through efficiency gains and improvements to make up the difference.

So I'd say the last several years it was really a combination of us being able to maintain margins from both improved efficiencies and some offsetting of the inflationary cost increases.

But I'd say since global negotiations of the late 1990's it's been hard to get full recovery of cost increases.

Thank you very much.

Okay, thank you Kevin.

(Operator Instructions).

Your next question comes from Jonathan Lichter with Sidoti and Company.

Hi Paul, how are you?

Good Jonathan.

Just had a question about the cigarette paper booklet business.

Yes.

How big is that and what kind revenues and losses was it generating prior?

The cigarette paper booklet business is a relatively small part of our U.S. operation.

I don't have an exact number in mind in terms of the sales value, but relatively small.

I'd say typically it has been a positive profit contributor, but not significant to our business.

There have been some changes in the industry where the type of product that people are looking for has changed and the customers had a requirement for papers that were interleafed where as you pulled one out the next one would immediately pop out.

And that was something that we didn't have the capability of.

Again, some customers have taken some of their business internally in terms of the converting of this paper.

So we reached a point where because we didn't have the ability to make the different type of booklet paper and based on where we were on a volume standpoint that it made sense to exit this business.

Okay, thanks.

All the other questions were asked.

Okay, thank you Jonathan.

Thank you.

At this time there are no further questions.

Mr. Roberts, are there any closing remarks?

No.

I thank you, Deshanta and I'd just like to thank everyone for taking the time to join us today.

Good bye.

Thank you.

This concludes today's third quarter 2005 earnings conference call.

You may now disconnect.