Matthews International Corp (MATW) 2006 Q3 法說會逐字稿

Welcome to the Matthews International third quarter financial results conference call. [OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to our host, Mr. Steve Nicola, Chief Financial Officer of Matthews. You may begin.

Good morning, I'm Steve Nicola. On the call with me today is Dave Kelly, Chairman of the Board and CEO of Matthews, and Joe Bartolacci, President and Chief Operating Officer. Today's conference is set up for one hour and we are conducting the call to comply with the Securities and Exchange Commission Regulation FD. This call will be available for replay at approximately 1:30 p.m. today. To access the replay dial 1-320-365-3844 and enter the access code 834452. The replay will be available until 11:59 p.m. August 4, 2006. If you access our website at matw.com and click on the investor information icon, you will have access to the third quarter earnings release and financial information we will discuss this morning. This data is available now. For those of you who will be asking questions, we request that you limit them to one question and a follow-up question until all those who wish to participate in the Q&A session have had an opportunity to do so.

Before beginning the discussion, I have been advised by our legal council to read the following disclaimer as it pertains to forward-looking statements. Any forward-looking statements in connection with this discussion are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from management's expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the Company's results to differ from those discussed today are set forth in the Company's annual report on Form 10-K and other periodic filings with the SEC. In addition, the balance sheet and income statement data provided today should be considered preliminary data, since our quarterly report on Form 10-Q for the quarter ended June 30, 2006, will not be filed with the SEC until around August 9, 2006.

To begin the conference, I will review the financial results for the quarter. Dave Kelly will then provide general comments on our operations. Following that, we will open the discussion for questions. For the quarter ended June30, 2006, the Company reported earnings per share of $0.55, compared to $0.49 for the same quarter last year, representing an increase of 12.2%. For the nine month period ended June 30, 2006, earnings were $1.47 per share, compared to a $1.32 for the first nine months last year. Higher sales and operating improvements in several of our businesses, combined with the impact of the acquisition of Milso Industries in July 2005 were the principal factors in the earnings growth. I should also point out that other income for the first nine month last fiscal year was $1.5 million or about $0.03 per share higher than the current period, as a result of one-time currency exchange gains on innercompany advances on our oversea affiliates. Please note that prior period earnings per share amounts have been restated by $0.01 for the third quarter and $0.04 year to date to reflect the adoption of Statement of Financial Accounting Standards number 123(R), which is the accounting rule requiring expensing of stock options.

Consolidated sales for the third quarter of fiscal 2006 were $182 million, representing an increase of 14% or $23 million over the same quarter a year ago. On a year-to-date basis, consolidated sales were $533 million as of June 30, 2006, an increase of 15% or $69 million over the same period last year. The acquisition of Milso was the principal factor in the quarter and year-to-date increases. In addition, sales were higher in our Bronze, Marking Products and Cremation segments for these periods. In our memorialization businesses, sales for the Bronze segment were $57 million for the third quarter and $159 million year to date, representing increases of 3% and 6% respectively over the comparable period last year. These increases are primarily attributal to higher pricing and an increase in mausoleum sales from the prior year. Casket segment sales for the quarter and nine months ended June 30, 2006, were $50 million and $153 million respectively, compared to $30 million and $93 million respectively for the same period last year. These increases resulted from the acquisition of Milso. Excluding Milso, casket sales declined on lower unit volume, which is partially attributal to a lower death rate and partially related to the transition to Company-owned distribution in certain territories.

Sales for the Cremation segment for the quarter and nine months ended June 30, 2006, were $7 million and $19 million respectively, compared to $5 million and $16 million respectively in the same periods last year. Higher unit volumes and better pricing for both cremation caskets and cremation equipment continued to be the principle factors in the sales growth. In the brand solutions businesses, our Marking Product segment reported an increase of 11% in sales compared to the third quarter last year and a 17% increase on a year-to-date basis. Higher unit volume, which included the benefit of new product offerings, was a principal factor in the segment sales improvement. Graphics imaging sales for the third quarter were relatively consistent with the same quarter a year ago and down approximately 3% on a year-to-date basis. The year-to-date decline resulted primarily from a reduction in the value of the euro compared to the U.S. dollar. Excluding this effect, sales for the current nine month period were higher than the same period last year.

The Merchandising Solution segment reported a decline in sales from last year of $1.5 million or 7% for the third quarter, and $6.3 million or 10% year to date. The reduction in sales was primarily due to lower volume of merchandising systems and displays. The decline reflected tighter market conditions in the current year and some distraction relative to the segment's facilities consolidation. Part of this reduction also reflected the inclusion of several large promotional programs in last year's first fiscal quarter, which did not repeat in this fiscal year. Consolidated operating profits for the quarter ended June 30, 2006, was $30.5 million compared to $26.6 million for the same quarter a year ago. For the first nine months of fiscal 2006, consolidated operating profit was $82 million compared to $71.6 million last year. Please note that prior period operating profit amounts have been restated to reflect the accounting change to expense stock options.

In our memorialization group, the Bronze segment reported operating profit of $17 million and $44 million respectively for the quarter and nine months ended June 30, 2006, representing increases of 3% and 6% respectively over the same period last year. For the quarter, operating profit as a percent of sales was slightly lower than the same quarter last year and relatively consistent on a year-to-date basis. Despite an increase in bronze metal cost, to date the division has been successful in maintaining its profitability through higher sales, cost reduction initiatives, and pricing changes. However, current metal pricing is well above our quarter and year-to-date unit cost averages, and if they remain at or above these levels, could be more of a challenge in future quarters. Management is continuing its efforts to look for ways to mitigate this impact.

Operating profit for the Casket segment for the three months ended June 30, 2006, was $5.1 million compared to $3.4 million last year. Year-to-date operating profit for the Casket segment was $15.6 million compared to $11.9 million a year ago. The improvement in operating profit reflects the acquisition of Milso. Excluding Milso, operating profit would have declined for the period as a result of lower sales and costs related to the new manufacturing plant in Mexico. In addition, the Casket segment incurred costs of approximately $700,000, mainly in the fiscal 2006 second quarter, in connection with shutdown of its manufacturing facility in Lynn, Indiana. Third quarter operating profit for the Cremation segment was $1 million compared to $98,000 for the same quarter a year ago. Year to date, the segment's operating profit was $2.7 million compared to $83,000 last year. Higher sales volume, improved pricing and cost reductions were the principle factors in the operating profit growth.

In our Brand Solutions business, the graphics imaging group reported operating profit of $3.9 million for the fiscal 2006 third quarter, compared to $3.7 million for the third quarter last year. For the nine months ended June30, 2006, the segment's operating profit was $11.6 million, representing an increase of 11% over the same period last year. Cost structure changes in the U.S. and UK operations, which were initiated in the fourth quarter of fiscal 2005, were the principal factors in this improvement. Marking Products operating profit for the fiscal 2006 third quarter was $2.2 million compared to $2.3 million a year ago. Year to date, the segment's operating profit was $6.6 million compared to $5.5 million a year ago. The increase in operating profit for the year is directly attributal to the segment's sales growth.

The Merchandising Solution segment reported operating profit of $1.2 million for the current quarter, compared to $491,000 for the third quarter last year. For the current nine month period, the segment's operating profit was $1.6 million, compared to $2.4 million last year. The reduction in operating income for the year is a result of the segment's lower sales. However, the third quarter improvement in operating profit reflects the results of the Company's recent cost structure initiatives, intended to address the low margin rate in this business. Its operating margin, as a percent of sales, is expected to continue to improve in the fourth quarter of this fiscal year, as a result of these actions.

Third quarter and year-to-date sales and operating profit by segment are posted on the website. Year-to-date operating margins by segment were as follows: Bronze 27.6% of sales; Casket 10.2%; Cremation 14%; Graphics Imaging, 11.2%; Marking Products 17.2%; and Merchandising Solutions 2.6% of sales. Our consolidated operating margin for the fiscal 2006 third quarter was 16.8% of sales, compared to 16.7% for the third quarter last year. Consolidated operating margin for the nine months ended June 30, 2006, was 15.4% of sales, which was consistent with the same period last year. Gross margin for the quarter ended June 30, 2006, was 38.7% of sales, versus 35.9% for the same period a year ago. Gross margin for the nine months ended June 30, 2006, was 37.2% of sales, versus 34.5% for the same period last year. The gross margin increase for both periods primarily reflected the Milso acquisition and improved margins in our Merchandising Solutions and Cremation businesses. These increases were partially offset by a decline in Bronze gross margin, with a significant rise in metal cost.

SG&A expense for the fiscal 2006 quarter was 21.9% of sales compared to 19.2% of sales in the same quarter last year. SG&A expense for the first nine months of the current fiscal year was 21.8% compared to 19% of sales in the same period last year. The increase principally reflects the acquisition of Milso and the transition the Company-owned distribution in certain territories formally served through independent distribution. Sales through Company-owned distribution facilities generally result in higher gross margins and higher SG&A expenses as a percent of sales, compared to sales through independent distributors. Also, Bronze SG&A costs were lower for the quarter and year-to-date periods, due to actions intended to control cost in an effort to mitigate some of the increase in bronze metal costs. Graphics Imaging SG&A costs were also lower.

Investment income was $366,000 for the fiscal 2006 third quarter, which was relatively consistent with the fiscal 2005 third quarter. Year to date, investment income was $937,000, compared to $1 million last year. The reduction in investment income reflected lower levels of invested cash. Interest expense for the quarter was $1.9 million, compared to $519,000 for the same period a year ago. For the nine months ended June 30, 2006, interest expense was $4.9 million compared to $1.5 million last year. The rise in interest costs principally reflected an increase in the average level of debt and higher interest rates during the current periods. Minority interest deduction was $720,000 for the third quarter, compared to $1.2 million a year ago. For the nine months ended June 30, 2006, minority interest deduction was $2 million, compared to $3.8 million last year. The reduction principally reflected the Company's purchase in September, 2005, of additional ownership interest in one of its less than wholly owned German subsidiaries.

Our third quarter and year-to-date tax rate was 37.6% of pretax income, which is equivalent to the effective rate of fiscal year 2005. At June 30, 2006, the consolidated cash and investment balance was approximately $48 million, compared to $51 million at September 30, 2005. At June 30, 2006, our current ratio is 2.1 to one, compared to a ratio of 1.6 to one at September 30, 2005. Our outstanding accounts receivable balance at June 30, 2006, was approximately $117 million, which represented 58 day sales outstanding. Outstanding accounts receivable at September 30, 2005, approximated $115 million, which represent 58 day sales outstanding. At June 30, 2006, consolidated inventories totaled approximately $87 million, compared to $71 million at September 30, 2005. The increase in inventories relates mainly to the Company's expansion of its casket distribution capabilities.

The Company had 32,078,719 shares of its common stock outstanding at June 30, 2006. During the third quarter, the Company purchased 54,300 shares under its share repurchase program. At June 30, 2006, approximately 1,323,000 shares remain to be purchased under the current repurchase authorization. Our long-term debt balance at June 30, 2006, both current and long-term portions, approximated $162 million. $134 million of this balance represents borrowings under our domestic revolving credit facility. The remainder is primarily debt on the books of our German and Italian subsidiaries. The maturity of the domestic revolving credit facility is April, 2009. The increase in borrowings during the current year related to two acquisitions, one of which was our Southwest independent casket distributor and the other a small graphics operations in the U.S. Depreciation and amortization expense for the third quarter and nine months ended June 30, 2006, were $5.5 million and $16.2 million respectively. Capital expenditures for the quarter and nine months ended June 30, 2006, were $4.5 million and $12 million respectively.

In summarizing our results through this point in the year, the improvement in earnings can be attributed to the Milso acquisition, higher sales in our Bronze, Marking Products, and Cremation segments, and cost reduction initiatives. It is particularly noteworthy that we're beginning to see the benefits of some of the recent initiatives in our Casket and Merchandising Solutions businesses. The recent results from these initiatives are encouraging. However, since we're in the early stages of the improvements generated from these actions, we remain cautious about our earnings for the near term, as we still expect some challenges. In addition, as you are aware, copper prices, which are the principal component in bronze, continue to be volatile. Despite these items, we are still maintaining our projection that current year earnings growth over the prior year, which was $1.79 per share adjusted for stock option expense, will be in line with our 12% to 15% long-term growth objectives. In addition, we continue to have confidence that our actions and investments have enhanced our ability to achieve our growth objectives on a long-term basis.

This concludes the financial review, and Dave Kelly will now comment on our operations.

Thank you, Steve. Let me make a few comments before we open the call up to questions. I'd like to talk about some of the successes of the quarter, as well as some of the challenges. To start off with, our Bronze division has really done a remarkable job, in spite of the commodity challenges that Steve mentioned. I attribute that to a couple of factors. One thing that's very exciting to me is a new product introduction. Some of you may be aware that we've introduced a new product called [Imagecast]; we have a patent pending on that. It enables us to cast photographic images on bronze with absolutely magnificent results. That product is being extremely well-received in the market and we have great expectations for it, going forward. The Bronze division is also been very active in cost improvements during the course of this year, including plant closings. And they have been instrumental in maintaining our profitability during this difficult time. So the entire Bronze team is to be congratulated.

The Cremation division has had a wonderful year. Last year they made a major effort to implement lean manufacturing in their facilities and really changed them from top to bottom, and we're now benefiting from that. The operating profit has jumped very substantially, up to 13.7% year to date. They've also been helped by some new products. Some of their new cremation caskets are being well-received, and sales in that area are picking up. As Steve mentioned, Marking Products has done very well this year. They've been helped by their acquisition and strong demand for their base products. Both revenue and operating profit are up 20%, and I think the management team there is to be complimented to have a strong backlog in the outlook, so I think 2007 is good at this point. North American Graphics are above budget in both sales and in operating profit. They have a very active list of leads for new business, and they're aggressively pursuing increase in sales.

Where our challenges are the same as we've reported in prior calls. One is the Casket business. Now the Casket business volume is up 65% this year, as a result of the acquisition and operating profit is up 26%, but that is far below where we would have liked to have been. And the factors are pretty much what we've discussed in previous discussions. Our volume is down because of the transition from independent distribution to direct distribution. Earlier in the year we had some plant start-up expenses related to Mexico. They're largely behind us now. And we had -- some of those expenses associated with some distribution centers that we established. We're now operating 42 distribution centers, and it did require some expenditures on our part to get those up and running.

On the Merchandising Solutions area, during our consolidation, we got hit with a dip in our volume. That dramatically impacted our profitability. But the management team there has taken very aggressive actions to adjust their expense level to our new volume. We did see -- as Steve indicated, we did see improvement in the last month of the quarter and our forecast for the fourth quarter is significantly higher. So we're cautiously optimistic there that the actions being taken are the right ones and that we should go into 2007 in a stronger position.

As Steve indicated, our forecast for this year is in line with the 12% to 15% earnings per share growth rate. We are just beginning our budget process for 2007. It'll take about two months to get that completed. But viewing our challenges as being opportunities, I'll be disappointed if we don't come up with another 12% to 15% improvement in our earnings per share next year. I think the things that are being done now are the right things, and they're going to help us moving into 2007.

With those comments, I'd like to open the meeting up to questions.

[OPERATOR INSTRUCTIONS] We have a question from Bill [inaudible] from [inaudible] Capital.

Yes, hi guys. I just had some questions on the Casket side of the business. On an organic basis, how much would you say that your volumes were down? And how could you split that up between sort of a lower death rate and transitioning from independent to direct in some of your territories?

Steve, do you want me to handle that?

Yes, go ahead.

I would say that most of the volume decline is due to the transition from independent to direct, although I think it is true that the death rate is down. Keep in mind that average life expectancy is about 75, so if you go back 75 years, you're in the middle of the depression and birthrates were low then. So I think we are going through a little bit of a dip in the death rate and that is a factor. You know, eventually that's going to help the industry as we, you know, get into the baby boomers.

What, in like a couple of years?

No, I'd say that it's more like ten or 15 years.

Oh, I got you. And do you think that, in this interim period while you transition your distribution, that there may have been some market share loss that, at some point you're going to be able to get back?

Oh, yes. I do think we -- as we lost volume in the transition, we have had market share loss. And you know, this industry doesn't change overnight. So, you know, I think we'll get it back, but it's going to take us some time. So, I think we have to build our business plans, you know, around, you know, the current volume level and then work hard at trying to improve it over time.

And when do you think that this transition will sort of be complete and you'll be able to begin regain in that -- some of that lost market share?

I think the -- that the last -- I shouldn't say last, but the major issue in front of us is our relationship with our Yorktown distributor. Their agreement expires in April of 2007. I think once that is behind us, and then going beyond that, you know, we'll be what we are and that's the period in which we start to rebuild.

I see. And any change in cremation rates recently or is that sort of trending, as it has always trended?

the cremation rates are continuing to trend up as they have been. There are no big surprises there. It's pretty much what the industry has expected. And, you know, I just might comment that year to date our cremation volume is up 23% and that's all organic growth.

Excellent. Okay. Great. Thank you.

You're welcome.

We have a question from Greg Halter from Great Lakes Review.

Hi, guys.

Morning, Greg.

Congratulations on the very good results, despite the high bronzing and cost. Steve, I don't know if you provided your cash flow from operations for either the quarter or the year to date?

We have not provided that on the website, but it's going to be -- the cash flow from operations year to date is going to be about -- oh, wait, I'm sorry, it is on the website. It's going to be about $34 million for year to date, which is between $11 and 12 million for the quarter.

Okay. Yes, you were at about $23 million through the first two quarters. Oh, yes, never mind I see it there.

Okay.

You snuck it in there. I missed what you had said on your capital spending year to date?

Yes, it's about $12 million.

And your expectations for the full year?

I'd say the expectations for the full year are probably in the -- it probably won't get the $20 million.

Okay.

So I'd say somewhere -- you know, $16, $17 million, somewhere in that range.

And any early thoughts on '07?

What I've said bef -- you know, what I've said in the past I still think is the case. You know, we've develop capital budgets that end up being higher than our average spend, but, you know, generally we end up with a capital spend in a normal year that's a couple of million dollars or so less than our depreciation and amortization, and that's running about $22 million on an annual basis this year.

Okay. Okay. You commented about the inventories being up, and I think on a year-over-year basis they're up around 74%. Is that solely due to Milso and your move to direct?

Say that again, Greg.

Your inventory levels are up about 74% on a year-over-year basis, and I'm wondering for the root cause for that? If it's Milso and the move to direct?

Yes, that is principally the reason because what we acquired a year ago. So if you're comparing to June of last year, we acquired Milso in July and then that build since then.

Okay. And is it your expectation that the -- once the Yorktown agreement ends that they will go with, I guess, it is Batesville Casket?

The answer to that is yes. They're currently under a distribution agreement with Batesville beginning in April of '07.

Okay. Okay. And are there any large contracts out there like an SGI or Alderwoods or Carriage or whoever that have not yet been awarded that you're currently still seeking business with?

We are currently negotiating and responding to RFPs for SGI. They are unable to include Alderwoods. As you know, Alderwoods was recently entered into an agreement to be purchased by SGI and they're waiting for [FGC] approval, amongst other things. So, yes, we are responding to RFPs. We don't know when and if we will receive any of that business.

Okay. And Steve, if you had to provide a figure on that 14.3% top line sales growth, if you had to just break that down into internally-generated sales growth, what would you come up to there? And I know you made the comments about Milso so far, but --

You mean other than Milso?

Right.

Yes, Greg, I really don't have that number at my fingertips.

Okay. All right. And did foreign exchange have much of an impact, either on the top line and/or operating profits?

It had some impact. Actually year to date it had a slight decline, but really not worth mentioning.

Okay. And obviously you've been working on the Mexican plant, and I believe it's up and running now, but can you add more color on what you're seeing there, if you've reached break-even, and what kind of volumes are coming out of that plant now?

We have reached break-even at the manufacturing profit level and the volumes are still at about 50% of a full shift. At this point we expect to continue to ramp up to full shift within the next six to 12 months.

Okay. and anything new on the [suit] by the -- I guess it's the industry relative to York and Batesville and the others in the group, I guess?

Not from our perspective, no.

Okay. Steve, similar question on accounts receivable. They're up 32% on a year-over-year basis, and I presume some of that is Milso, but if you could elaborate a little, I would appreciate it?

I would say a lot of that is Milso.

Okay.

Well, and direct distribution, yes.

Okay. Okay. And you mentioned the acquisitions in the quarter. The small graphics imaging company and a -- one of your distributors in the Southwest, I think it was?

Yes.

What was spent on those in the quarter?

This past -- no we didn't spend any. Those acquisitions weren't this quarter. They were the second quarter.

Okay, okay. So there were none in Q3?

Correct.

And besides the clover leaf, or let's call it Merchandising Solutions, are there any other earn outs with any of your other acquisitions?

Well, with respect to some of our minority-owned companies, they -- you know, there are formulas that determine if we decide to buy those out what those purchase prices would be, but that's not really your question. You're talking about earnout, but we have the Milso earnout.

Okay.

Greg, would it be okay if we move on to some additional questions and then we can kind of do double back again?

Sure. Thank you very much.

Okay.

We have a question from Bill Burns from Johnson Rice.

Good morning, everyone.

Good morning, Bill. How are you?

Pretty good. You all looked good on television yesterday morning. [LAUGHTER]

Thank you.

Most of my questions have been asked. Let me follow-up on the distribution centers. If I heard you right, you have 42 distribution centers?

Yes.

Is that all you need or are we looking to do more?

Joe, do you want to --

It is substantially -- Bill, it's substantially all the distribution centers we need to confront the territory where we are direct at this point.

Okay. And how about equipment, like trucks? Are you all leasing or purchasing?

Well, we are currently looking at various options. We are right now leasing them right now.

Okay. Well, that's all I have. Thanks, Joe.

[OPERATOR INSTRUCTIONS] We have a question from James Clement. with Sidoti.

Good morning, gentlemen.

Good morning, Jamie.

Of the 42 distribution centers that you guys are now operating, how many, you know, in aggregate came from Milso and the Southwest business that you bought? And how many were actually developed by the Company itself? Approximately?

They're about half and half, Jamie.

Okay. Okay. And just switching gears a little bit to the merchandising segment, where are we in the facilities consolidation? Has the equipment that needs to be delivered been delivered? How far along are we now?

Jamie, the last piece of equipment we needed was a five-station team of press coming from Germany. It has arrived. It's now up in Butler, and we are now installing it. We were delayed slightly by getting necessary environmental permitting. It took a little bit longer than we expected. But it should be up and running, hopefully, shortly in the next couple of weeks or so. And we're planning to immediately press it into action, as we have a high volume month for August. So it should get a pretty good workout in the month of August. And once that is in, we will then tear down the team of press that we have in our [Plum] facility and move that up also to our new plant, and that should complete the consolidation. That probably will take place in August/September time frame.

Okay. In the June quarter, do you feel -- were there still hard costs that the Company was absorbing, you know, that may have hit the P&L in this segment or is that pretty much out of the system? Is it just a question more of soft cost inefficiencies and that kind of thing at this point?

No, since we had not been able to consolidate that last facility, our printing facility, we had some significant expenses in terms of transportation, moving things back and forth between the two buildings, additional management costs, et cetera. And all those should be additional savings once the consolidation is completed.

Okay. You know, and last, last question and I'll just -- I'll move on. You guys, you know, are obviously focused on, you know, return on assets, and obviously, it's not just the numerator that's involved in that calculation, but the denominator. As you look out 12-24 months, are you -- are you happy with the asset base overall in general terms? I mean do you think that there are areas of your business that, you know, you could further make more efficient via facility consolidations or cuts or what have you?

I think that, you know, we have a wonderful opportunity with our asset base. As we established direct distribution, our first concern was the customer, and so we have put in more inventories than we've needed. We've invested in more distribution centers than we most likely need at this point in time. And we are beginning a process now of putting all of the building blocks necessary to improve that efficiency. Things like forecasting systems, inventory control systems, ordering systems, et cetera. These things will take time. You know, I would say we could be talking about, you know, one to two years. And as we do those things, we will see significant improvements in our assets from where we are today.

Okay. Great, thank you very much.

[OPERATOR INSTRUCTIONS] I show no further questions.

Okay. Well, I'd like to thank everyone for attending this morning, and we look forward to our fourth quarter, our earnings release and conference call, which should be mid November. Thanks again.

Ladies and gentlemen, once again, this conference will be available for replay after 1:30 p.m. today through August 4, 2006 until 11:59 p.m. To access the AT&T teleconference replay system, please dial 320-365-3844, using access code 834452. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect and have a wonderful day.