Matthews International Corp (MATW) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Matthews International third-quarter financial results conference call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session. The instructions will be given at that time.

(Operator Instructions)

As a reminder this conference is being recorded. I would now like to turn the conference over to our host, Chief Financial Officer, Mr. Steve Nicola. Please go ahead, sir.

Thank you, Brett. Good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. Also on the call this morning is Joe Bartolacci, our Company's President and CEO. Today's conference call has been scheduled for one hour, and will be available for replay around 11 AM today. To access the replay, dial 1 (320) 365-3844 and enter the access code 297220. The replay will be available until 11.59 PM August 2, 2013.

We have posted on our website, which is www.MATW.com, the third-quarter earnings release and financial information we will discuss this morning. You can find the earnings release on the face of our home page. For the quarterly financial data, under the Investor tab at the top of the home page, click on Financial Reports to access the information under the section Matthews International Quarterly Reports. These documents are presented in a PDF file format. Before beginning the discussion, at the advice of legal counsel I have been advised 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 10K, and other periodic filings with the SEC.

In addition, please note that the balance sheet income statement and cash flow information provided today are preliminary data, since our quarterly report on Form 10-Q for the quarter ended June 30, 2013, will not be filed with the SEC until the week of August 5. To begin the conference, I will review the results for the quarter. Joe will then provide general comments on our operations. Following that, we will open the discussion for questions.

For the quarter ended June 30, 2013, the Company reported earnings of $0.65 per share, compared to $0.58 a year ago, representing an increase of 12%. On a non-GAAP basis, the Company's adjusted earnings per share were $0.72 for the current quarter, compared to $0.65 last year, representing an increase of almost 11%. The net amount of non-GAAP adjustments for the current quarter were $0.07 per share. In our earnings release yesterday we provided a reconciliation of these adjustments, which included a pension and post-retirement expense adjustment, costs related to strategic initiatives and other charges, and acquisition-related items. The pension and post-retirement expense adjustment, which is consistent with last year, was made for our non-GAAP disclosure to reflect only the service cost components of this expense.

As we have previously reported, we are implementing several strategic cost structure initiatives that will impact all of our businesses. The current projects principally include strategic sourcing and Lean initiatives. During the fiscal 2013 third quarter, the additional costs associated with these initiatives have been reflected as a non-GAAP adjustment. Acquisition-related items included a favorable adjustment recording during the fiscal 2013 third quarter on contingent consideration owed in connection with a previous acquisition in our Funeral Home Products segment. In addition, we incurred incremental costs in connection with recent acquisitions, and under current accounting rules, most of these costs are required to be expenses. The net of these items favorably impacted earnings per share for the current quarter.

Consolidated sales for the fiscal 2013 third quarter were $250.7 million, compared to $227.5 million for the same quarter a year ago, representing an increase of or $23.2 million, or 10.2%. Year-to-date consolidated sales for fiscal 2013 were $733 million, compared to $670 million a year ago, representing an increase of 9.3%. The increase in consolidated sales for the fiscal 2013 third quarter principally resulted from the benefit of recent acquisitions and higher sales in the Funeral Home Products segment.

Consolidated offering profit for the fiscal 2013 third quarter was $30.8 million, compared to $27.5 million a year ago. Year to date, consolidated operating profit for fiscal 2013 was $72.3 million, compared to $71.7 million a year ago. Excluding unusual charges from both years, third-quarter consolidated operating profit increased from a year ago, due primarily to higher sales in the Funeral Home Products segment, and the benefit of recent acquisitions.

Sales for the cemetery products segment were $61 million for the fiscal 2013 third quarter, compared to $58 million a year ago. The increase primarily reflected the impact of the acquisition of Everlasting Granite, and higher memorial revenues. Year-to-date sales for the cemetery products segment were $169 million, compared to $157 million last year.

Operating profit for the cemetery products segment was $11.7 million for the current quarter, compared to $12.6 million a year ago. The principal factor in the operating profit decline included the unfavorable impact of unusual charges. Year-to-date operating profits in the cemetery products segment was $23.9 million, compared to $27.3 million last year. In addition to the impact of unusual charges, the segment's operating profit for last year was favorably affected by a gain on an acquisition-related settlement.

Sales for the Funeral Home Products segment were approximately $59 million for the quarter ended June 30, 2013, compared to $56 million last year. The increase reflected higher unit volume, and an improvement in sales mix during the current quarter. Year-to-date sales were $187 million for the current period, compared to $176 million last year.

Operating profits for the funeral home product segment for the fiscal 2013 third quarter was $12.1 million, compared to $6.9 million for the 2012 fiscal third quarter. The increase reflected higher sales and the benefit of improved production and distribution efficiencies. In addition, unusual items for the current quarter included a favorable adjustment on contingent consideration owed in connection with a previous acquisition. Year to date, the segment's operating profit was $29.5 million for the current period, compared to $20.8 million last year.

Fiscal 2013 third-quarter sales for the Cremation segment were $11.4 million, compared to $12.3 million for the same quarter last year. The segment's domestic sales increased during the current quarter on higher equipment sales. However, this increase was offset by lower sales in the segment's European and UK markets. Due to the decline in international sales, and the impact of unusual charges, the segment recorded a slight operating loss for the current quarter.

Year-to-date Cremation segment sales were $34.8 million for the current period, compared to $32.9 million last year, reflecting higher US sales and the benefit of a small UK acquisition completed last year. The segment's year-to-date operating profit was $1.4 million for the current period, compared to $3.3 million last year. Unusual charges and lower margins in the European and UK businesses were the primary factors in the segment's operating profit decline.

For the Brand Solutions group, the Graphics Imaging segment reported sales of approximately $79 million in fiscal 2013 third quarter, compared to $62 million last year. The acquisition of Wetzel Holding AG in November 2012 was the significant factor in the improvement. For the first nine months of the current fiscal year, the Graphics Imaging segment reported sales of $219 million, compared to $198 million last year. The benefit of the Wetzel acquisition was partially offset by lower sales in the segment's principal markets due primarily to soft economic conditions, particularly in Europe. In addition, changes in foreign currency values, principally the euro, had an unfavorable impact of approximately $1.4 million on the segment's year-to-date sales compared to a year ago.

Third quarter operating profit for the Graphics Imaging segment increased to $4.2 million for the current year, compared to $2.6 million a year ago, primarily reflecting the impact of the Wetzel acquisition. Year-to-date operating profit for the Graphics Imaging segment was $10 million, compared to $11.3 million last year. A significant portion of this decline was anticipated, as the early months of last fiscal year were particularly strong in this segment, as we had not yet experienced the impact of the European market issues.

Sales for the Marking and Fulfillment systems segment for the fiscal 2013 third quarter were $23.7 million, compared to $19.3 million for the same quarter last year. The increase in sales for the quarter was primarily attributable to the December 2012 acquisition of Pyramid. Year-to-date fiscal 2013 sales for this segment were $63.9 million, compared to $53.4 million last year, which reflected the benefit of the Pyramid acquisition, and an increase in sales volume, primarily in North America.

Operating profits for the Marking and Fulfillment systems segment was $2.5 million for the current quarter, compared to $2.9 million a year ago. The decrease primarily reflected the impact of higher research and development costs, and unusual charges related to the Company's strategic initiatives. Year-to-date operating profit for Marking and Fulfillment systems was $5.3 million, compared to $6.3 million last year. The decline mainly reflected an unfavorable change in product mix, higher R&D costs, and charges related to strategic cost structure initiatives.

Fiscal 2013 third-quarter sales for the Merchandising Solutions segment were $17.6 million, compared to $18.9 million a year ago. Sales declined on lower volume, as several projects anticipated for the current quarter were delayed by customers. Year-to-date sales for this segment for the current year were $57.7 million, compared to $52.6 million last year. The increase was primarily due to higher sales to several national accounts.

Fiscal 2013 third-quarter operating profit for the Merchandising Solutions segment was approximately $300,000, compared to $1.2 million a year ago, primarily reflecting the decline in sales, severance costs, and charges related to strategic cost structure initiatives. Year-to-date operating profit for this segment for the current year was $2.1 million, compared to $2.8 million last year. Sales in operating profit by segment, including the impact of unusual items for the quarter and year-to-date periods, are posted on our website for your reference.

Consolidated operating margin for the fiscal 2013 third quarter was 12.3% of sales compared to 12.1% a year ago. Year to date, the consolidated operating margin for fiscal 2013 was 9.9% of sales, compared to 10.7% for the same period last year. The decrease in year-to-date operating margin primarily resulted from declines in the Company's European operating margins.

Gross margin for the quarter ended June 30, 2013, was 36.5% of sales, compared to 38.6% for the same period a year ago. Gross margin for the nine months ended June 30, 2013, was 36.3% of sales, compared to 37.4% for the same period last year. The lower quarter and year-to-date gross margin percentages were primarily attributable to declines in the Company's European operating margins.

Selling and administrative expense for the current quarter was 24.2% of sales, compared to 26.5% for the same quarter last year. Selling and administrative expense year to date was 26.5%, compared to 26.7% for the same period last year. The lower percentages for the quarter and year-to-date period mainly reflected the benefit of the contingent consideration adjustment in the most recent quarter.

Investment income for fiscal 2013 third quarter was $634,000, compared to $176,000 a year ago. For the nine months ended June 30, 2013, investment income was $1.5 million, compared to $3 million a year ago. The variances in the quarter and year-to-date periods resulted from changes in the investment performance on assets held in trust for certain of the Company's benefit plans.

Interest expense for the fiscal 2013 third quarter was $3.5 million, compared to $2.9 million a year ago. For the nine months ended June 30, 2013, interest expense was $9.8 million, compared to $8.2 million a year ago. The increased interest cost resulted primarily from a higher average level of outstanding debt, which was due primarily to borrowings for acquisitions during the past year.

Other income deductions net for the fiscal 2013 third quarter represented a deduction of $1 million, compared to $602,000 a year ago. Year to date, other income deductions net for fiscal 2013 represented a deduction of $3.2 million, compared to $1.8 million a year ago. Other income and deductions generally include, among other items, banking-related fees and the impact of currency gains or losses on certain inter-company debt. The Company's year-to-date effective income tax rate through June 30, 2013, was 34.3% of pre-tax income. Excluding the favorable impact of a second-quarter adjustment, the effective tax rate was 34.8% for the fiscal year 2012.

At June 30, 2013, the Company's consolidated cash was $55 million, compared to $58 million at September 30, 2012. Our current ratio is 2.2 at June 30, 2013, compared to 2.1 at September 30, 2012. Accounts receivable at the end of the current quarter totaled $183 million, compared to $175 million at September 30, 2012. Consolidated inventories at June 30, 2013, were $132 million, compared to $131 million at the end of fiscal 2012.

Long-term debt at the end of the current quarter, including both current and long-term portions, was $377 million, compared to $320 million at September 30, 2012. The increase during the current fiscal year resulted from borrowings in connection with acquisitions. At June 30, 2013, $307.5 million of the outstanding debt balance represented borrowings under our domestic revolving credit facility, at an average interest rate of 3.1%. The borrowing capacity of this facility was recently increased to $500 million, with a maturity of July 2018.

The Company had approximately $27.5 million shares outstanding at June 30, 2013, and purchased approximately 405,000 shares under its share repurchase program through the first nine months of this fiscal year, at a cost of $13.5 million. At June 30, 2013, approximately 1.4 million shares remained under the current share repurchase authorization. Depreciation and amortization expense for the quarter and nine months ended June 30, 2013, was $9.2 million and $26.5 million, respectively. Capital expenditures for the quarter and nine months ended June 30, 2013, was $6.3 million and $17.3 million, respectively.

In summarizing our results, our adjusted earnings for the current quarter and year-to-date periods were in line with our internal expectations. The performance of our Funeral Home Products business, combined with the contributions of our recent acquisitions, resulted in year-over-year earnings growth on a consolidated level, despite continued challenges in several European markets, and some recent softness in the US and Chinese Brand Solutions markets.

Last November we provided guidance that the adjusted non-GAAP earnings per share were projected to be in the range of $2.45 to $2.55 for fiscal 2013. Based on our year-to-date fiscal 2013 operating results and our current forecast, we are still projecting our adjusted results to be in this range. Please note that we are cautious with this projection based on the recent economic softness in our US Brand Solutions markets, and a slowing in the year-over-year increase in US deaths over the last several weeks of the quarter.

Lastly, the Board yesterday declared dividend of $0.10 per share on the Company's common stock. The dividend is payable August 12, 2013, to stockholders of record at July 29, 2013. This concludes the financial review, and Joe will now comment on our operations.

Thank you, Steve. Good morning. Our third-quarter results were in line with our expectations. Continued strong performance from our Funeral Home Products division was buttressed by good performance from our recent acquisitions; and our European [gravure] businesses to help us achieve our results. As we stated last quarter, our cemetery products division has returned to normalcy, as evidenced by its performance net of unusual items during the quarter, and has begun the process of improving its results. We still have a lot do to improve performance in this division and in others, but we are past the challenges imposed by ERP.

As we have communicated during our quarters -- during prior quarters -- we continue to have higher-than-normal labor costs and other inefficiencies in the cemetery products division, largely due to the continuation of our Lean transformation for this segment of our business. Our Lean transformation is expected to bring operating costs in this segment in line over the next 12 to 18 months, allowing us to work toward our long-term margin goals for this division.

Furthermore, as we have committed, our Evantage web-based ordering solution will begin beta tests this quarter, and should be available for the market by the end of the year. We continue to believe that Evantage will drive value and margin improvements for both us and our customers in the Bronze portion of our business, solidifying our leading position in this industry.

In the Funeral Home Products division, we continue to see an increase in the de-casketed death rates, which coupled with good price management and mix delivered another strong quarter for this division. This division deserves great credit for its results, as we continue to see good asset control, as well as strong financial performance. Our Cremation division had strong domestic performance, but challenges in our European businesses, including disputed claims which negatively impacted our third-quarter results.

On the Brand Solutions side of our business, we continue on see a difficult environment throughout the world in our flexographic packaging businesses, but continue to have good performance from our gravure businesses, largely due to good tobacco volume. We have begun the process of integrating our gravure businesses more closely with the two recent acquisitions in Germany and Turkey. Moreover, we have a strong team in these businesses, and have begun to see the fruit of our recent R&D investments into various alternative uses for our cylinder technology. We hope to expand these opportunities beyond our European borders in the years to come.

Our Marking and Fulfillment division had challenges in its powered rollers business, specifically with delays by a large consumer of embedded controls for the oil drilling industry. This portion of the business, which has been strong over the past few years, is subject to more episodic fails, but is well-positioned for continued strong performance, given the growing domestic oil exploration industry. The performance of our recent Pyramid Controls acquisition, our warehouse control systems provider, continued to be strong; while several of our other fulfillment businesses continued moving down the path of an integrated solution for order fulfillment.

From a negative standpoint, an economic slowing in China has impacted our year-over-year results, and has been a drag in our quarter relative to our expectations. Our Merchandising Solutions division had several large anticipated projects pushed to the fourth quarter, thus impacting results for this division. Since the projects are only deferred to the fourth quarter, we are expecting a very strong operating performance for this division next quarter.

Also, as many of you may recall, we are expecting to continue our cost-reduction initiatives in many of our businesses. As such, we have had good initial success with our strategic sourcing initiative, from which we expect to begin to see the benefits during the fourth quarter and throughout fiscal 2014. We still have numerous strategic initiatives under way, and more to come as we transform our business to a more integrated operation. Much of these efforts are facilitated by European investment, which should give us a road map for continued improvement for several quarters to come.

In the short term, we expect to achieve our goals for 2013 that we communicated at the beginning of the year. To do so, we will have to continue many of the improvements we have begun to see. As usual, we are optimistic of achieving our goals, but prudent with our guidance. Economic conditions in several of our served markets remain challenged, and casketed death rates are subject to volatility. Therefore, we are cautiously maintaining our non-GAAP EPS guidance of between $2.45 and $2.55 per share for fiscal 2013. With that, we'll open it up for questions.

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 have had an opportunity to do so. Brett?

Thank you.

(Operator Instructions)

Our first question is from Daniel Moore with CJS Securities. Please go ahead.

Steve you mentioned toward the end of the quarter the last two weeks you saw a slowing in the year over year increase in death rates. Can you talk about the trends there and what you are seeing thus far into fiscal Q4?

Dan, I didn't catch the end of that question but I got the first part. We did. In the brand solutions side of our business, both in the US market and in the Chinese market, we saw some slowing, particularly toward the end of the quarter and in the month of June. We do, when we talk about the fourth quarter, it just gives us some caution. Dan, did you ask about death rates?

Death rates as well, what the trends there are as we look into the first part of Q4?

With respect to death rates, in the last couple of weeks of the quarter, we still see data that shows year over year death rates higher than a year ago, but the level of increase is not the same that it was in the first couple of quarters of the fiscal year.

Got it. Lastly, can you give us a sense of the organic growth in the quarter in both graphics imaging and marking fulfillment? If you are willing, to sort of look out maybe over the next couple quarters what your expectations would be?

I can give you a little bit of a feel for that. We are looking at a relatively flat organic growth for the next 12 months, I would suspect, out of some of those businesses. We have some good things going in our marking and fulfillment business, but they're going to be a little bit more episodic. The biggest challenge we are seeing in the marking fulfillment right now is with our Chinese operations. On the aggregate, we are seeing a little better volume in the United States; relatively flat in Europe; and a decline in our Chinese operations, giving us a relatively flat organic growth year over year, we expect, in that portion of the business.

On the graphics side of the business, what we are seeing is continuing to see strong growth and strong volumes out of our grovura businesses, particularly as we integrate our businesses over in Turkey and the other acquisition in Germany. It is somewhat dependent on the tobacco industry. That has been stronger for us than the packaging side of the business. But our packaging businesses in Europe are somewhat subject to the economy over there. We have seen a decline throughout the served markets in the world of flexographic packaging volumes, as some of our brand owners kind of tightened their belt on the marketing expense, still.

Thank you. I'll jump back in queue.

Our next question is going to come from Liam Burke with Janney Capital Markets. Please go ahead.

Joe, could you give us a sense how the memorialization piece of the cremation business did vis-a-vis the systems sales for the quarter?

Are you saying -- are you specifically with respect to equipment?

Yes. I mean --

Okay. Cremation equipment sales were up in the United States. We've had pretty good -- we have some great initiatives going on in that part of the business, and our guys down there in Florida have done a wonderful job. Frankly, we're having some challenges with our European businesses. Part of the results you are seeing is the result of a very large project that we had in Stockholm, Sweden, where we had some challenges with our customer, were forced to take a charge for some amounts we thought were due us. We are still struggling a little bit with volumes in Europe, as several of our competitors have. As we have said before, these are municipalities that buy our equipment over in Europe, and there is not a lot of free cash flow over there to be able to be letting contracts. We have a lot of projects bid, and very few are being let these days.

Okay. Just as the rest of the cremation business involves memorializations and work with cemeteries, how is that part of the cremation business? How does that look?

We are -- we're growing little by little, but it's just a smaller business right now from a dollar standpoint. We see the industry as a whole becoming more attuned to memorializing and the revenue opportunities through cremation. I don't think this is an overnight switch, but I do find many of our customers starting to focus on ways to generate revenue from that. It is a welcome change. If you listen to some of our customers finally starting to talk about cremation niche gardens, and how to memorialize the individuals once they're passed; but today's it's growing, but on a small base.

Thank you. Thanks, Joe.

(Operator Instructions)

Next question will come from Jason Rodgers at Great Lakes Review. Please go ahead.

Hello, it's Greg Halter on for Jason.

Good morning Greg.

Good morning. Relative to the ERP implementation, have you been able to do away with -- if that's the right way to phrase it -- the outside help that you were using?

Yes. We are -- where we stand with ERP implementation, it is operating. We have no external consultants, per se, helping us with the integration at this point in time. However, as part of our initiatives that we have under way, we have engaged IBM do some IT outsourcing, and we are about halfway down that path of outsourcing our information technology to IBM. There are still more costs to come out. We think that over time that significantly reduces our operating costs as it relates to maintaining and running SAP.

Did you bring any of those people on that would have been consultants as employees of Matthews by chance?

No.

Okay. You made some mention about the tobacco packaging business. Are you doing that in Australia, and what's the status there in the US?

We are doing -- a lot of our work, most of our work -- is done throughout the European union and into the Middle East. That was the reason for the acquisition in Turkey, as our tobacco companies moved their efforts more and more towards the Middle East, where smoking is growing and continues to grow. Our facility in Turkey is well-positioned to support that. We've had some pretty good success solidifying our positions with some of the key tobacco companies like Phillip Morris and others over there as a result of our recent acquisitions. We think longer-term they will take us elsewhere in the world to support them.

Thank you.

(Operator Instructions)

We have a follow up from Jason Rodgers from Great Lakes Review.

Hello, I should have just kept going. Can you give your thoughts on what you see happening in the merger acquisition area for Matthews?

Jason, as we have been for the last 20 years we will continue to be active. There is always something in the pipeline. Timing of those acquisitions is not always in our control. Frankly, we have said this before, one of the reasons for implementing our SAP ERP system is to make us a better operator to be able to integrate in to. We are pretty well locked down in trying to integrate those businesses that we have into our existing backbone right now. We will position ourselves for something maybe a little larger as we move forward, but timing is not always in our control, as I said earlier.

Right. Any thoughts on any potential divestitures of units that aren't performing up to par?

There is always consideration. Today we don't have anything that we have on the plate that we're willing to do. We continue to work to improve all of our businesses, and we see opportunities to do that. Until we figure out where these businesses can be, I don't think we have great consideration in doing that.

All right. How is Pyramid Controls doing so far?

Very well. The team, it seems to be integrating very well. That whole portion of our business, which is the fulfillment side, recognize that what we have done is cobble together some very good players in the industry. Aggregating them into a single solution for the market place is what our objective is. That will take a little bit of time.

On your raw materials side, specifically on copper, what kind of coverage do you have there? It looks like the costs, at least for the copper futures, have come down. Just wondering what it is for your bronze business?

Greg, obviously that continues to be an important input for our cemetery products for our bronze production. To date, those costs I would tell you have been -- in terms of what we are paying -- have been slightly below where we were last year. We were fortunate last year, even though it was somewhat of a high-water mark for us in our bronze costs. We weren't paying the real high costs, so this year as it's come down it's benefited us, but not to the degree that you see in the COMEX pricing. Hopefully it continues to stay at this point.

We see the same forecast or predictions that you do, where you see some services out there that are calling for lower copper prices longer term. We will try to be opportunistic in buying out bronze where we can for a few months where we have opportunities do it. As we have explained before, unfortunately there is not a sufficient degree of correlation between bronze and the price of copper for us to try to engage in hedging copper. But we'll continue to be opportunistic with our buys as we see good price points.

So you're bought out for a few months going forward here currently?

Yes, we're covered for the balance of this year, at least.

Okay. I think last time we talked you were looking at capital spending to be about $30 million for the year. Based on where you are now, it doesn't look like you will be that high. Is that the correct assumption?

I would say that's right. I would put that in a range of $25 million to $30 million.

Any thoughts on whether that figure for fiscal '14 will be higher or lower than that $25 million to $30 million?

I don't have a read on that yet, Greg. Our maintenance capital expenditure rate, particularly with some of the recent acquisitions -- just the fact that we are a larger business -- I would still put that probably at the higher end of that $25 million to $30 million range on a go-forward basis. But we'll have a better assessment for that in a couple of months.

One last one given the stock price over $40 here. What are your thoughts on the share repurchase? Is that something you will continue do, or is there a point where you become price conscious and you don't buy back?

I would tell you that we're always price conscious. Internally, we do try to be opportunistic, also, with our share repurchase program. We look for good price points. We certainly try not to chase the price when it's moving higher. But I would still tell you that we're in the market at these levels. During the last quarter, we were buying back stock I think on average somewhere in the $37 to $38 a share range.

Okay. Thanks a lot.

You're welcome.

(Operator Instructions)

No further questions.

Okay, Brad. Thank you. Well, we'd like to thank everyone for participating in the call this morning. We certainly look forward to our fourth quarter earnings release and conference call in November. Have a good day and a good weekend.

Ladies and gentlemen, this conference will be made available for replay after 11.00 today, and running through Friday, August 2, at midnight. You can access the ATT Executive Playback Service at any time by dialing 1 (320) 365-3844 with the access code 297220. That number again, 1 (320) 365-3844 with the access code 297220. That does conclude our conference for today. Thanks for your participation, and for using ATT Executive Teleconference Service. You may now disconnect.