Matthews International Corp (MATW) 2014 Q3 法說會逐字稿

Welcome to the Matthews International third quarter financial results conference call.

(Operator Instructions)

As a reminder, today's conference is being recorded and I would now like to turn the conference over to your host, Mr. Steve Nicola. Please go ahead.

Thank you, Brad. 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 later this morning. To access the replay, dial 1-320-365-3844 and enter the access code 331303. The replay will be available until 11:59 PM on August 1, 2014.

We have posted on our website, which is www.matw.com, the third-quarter earnings release and financial information we will discuss this morning. On the top of our homepage, under the investor tab, click on investor news to access the earnings release. For the quarterly financial data, click on financial reports to access the information under the section Matthews International quarterly reports. The 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 press release, annual report on Form 10-K, 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, 2014, will not be filed with the SEC until the first week of August.

To begin the conference, I'll review the financial results for the quarter, and Joe will then provide general comments on our operations. Following that, we will open the discussion for questions.

For the quarter ended June 30, 2014, the Company reported earnings of $0.70 per share compared to $0.65 per share a year ago. On a non-GAAP basis, the Company's adjusted earnings per share were $0.86 for the current quarter compared to $0.72 a year ago, representing an increase of 19.4%. The net amount of these non-GAAP adjustments was $0.16 per share for the FY14 third quarter and $0.07 for the same quarter a year ago.

In our earnings release, we provided a reconciliation of earnings per share on a GAAP and non-GAAP basis. The FY14 non-GAAP adjustments included the following. One, pension and post retirement expense. Consistent with last year for our non-GAAP disclosure, we have adjusted pension and post retirement expense to reflect only the service cost components of this expense.

Two, acquisition costs. In March 2014, we announced the signing of a definitive merger agreement for the acquisition of Schawk, Inc. Transaction and integration planning costs in connection with the pending acquisition totaled approximately $0.08 per share for the FY14 third quarter and $0.20 year to date. The year-to-date amount also included an unfavorable $0.02 per share income tax impact for the nondeductible portion of these costs. Acquisition related items last year primarily included net gains from settlements on previous acquisitions.

Three, cost reduction initiatives. As we have previously discussed, we have significant ongoing strategic cost reduction programs in our businesses. The additional costs associated with these initiatives unfavorably impacted earnings by approximately $0.04 per share during the current quarter compared to $0.10 per share on the year ago. For the nine-months ended June 30, these costs totaled $0.12 per share this year and $0.19 per share last year.

And four, litigation costs. As we've previously reported, our Funeral Home Products segment is currently in a legal dispute. Due to the extent of anticipated costs in connection with the litigation of this matter, we are including this expense as a non-GAAP adjustment in FY14. Non-GAAP adjustments for the prior year also included an intangible asset impairment charge and costs related to the ERP implementation for the Cemetery Products segment.

Consolidated sales for the FY14 third quarter were $280 million compared to $251 million for the third fiscal quarter a year ago. Consolidated sales for the nine-months ended June 30, 2014, were $757 million compared to $733 million for the same period a year ago. Significant projects in our Merchandising Solutions and Cremation segments were the principle factors in the sales increases for both the current quarter and year-to-date period. The current nine-month period also included incremental sales of $11 million related to acquisitions.

In addition, year-over-year changes in foreign currency exchange rates had a favorable impact of $7.6 million on year-to-date consolidated sales for the current year. Consolidated operating profit for the quarter ended June 30, 2014, was $32.2 million compared to $30.8 million a year ago, representing an increase of $1.4 million.

Non-GAAP adjustments, except for the pension related non-GAAP adjustment, for the current quarter were $5.5 million compared to $1.2 million a year ago. Excluding the impact of these adjustments, consolidated operating profit increased 18% from the FY13 third quarter. Higher operating profit for the Merchandising Solutions and Cremation segments was partially offset by a decline in our Cemetery Product segment.

Consolidated operating profit for the nine months ended June 30, 2014, was $68.1 million compared to $72.3 million a year ago. Non-GAAP adjustments for the current period were $14.1 million compared to $6.9 million a year ago. Excluding the impact of these adjustments, consolidated operating profit increased $2.9 million from last year. The current nine-month period also included incremental operating profit of approximately $900,000 related to acquisitions.

Sales for the Cemetery Products segment were approximately $59 million for the FY14 third quarter compared to $61 million a year ago. Year to date, the Cemetery Products segment reported sales of $161 million for the current period compared to $169 million last year. Lower unit volume of memorial products was the main factor in the sales decline. Based on published CDC data, we estimate that the number of casketed, in-ground burial deaths in the United States declined this fiscal year.

Operating profit for the Cemetery Products segment was $10 million for the FY14 third quarter compared to $11.7 million a year ago. Lower sales and losses on several mausoleum projects were the principle factors in the operating profit decline. However, the segment continues to realize benefits from the Company's recent cost structure initiatives such as lean and strategic sourcing. As a result of these initiatives, the segment's year-to-date operating profit was $24.2 million for the current period compared to $23.9 million last year, despite the decline in sales.

Sales for the Funeral Home Products segment were $58 million for the FY14 third quarter compared to $59 million a year ago, reflecting a decline in casket unit volume. Year to date, the Funeral Home Products segment reported sales of $180 million for the current period compared to $187 million last year. Operating profit for the Funeral Home Products segment was $8 million for the FY14 third quarter compared to $12.1 million a year ago.

On a non-GAAP adjusted basis, operating profit for the Funeral Home Products segment was $9.3 million for the FY14 third quarter compared to $9.6 million a year ago. On a year-to-date basis, operating profit for the Funeral Home Products segment was $23.9 million for the current fiscal year compared to $29.5 million a year ago. On a non-GAAP adjusted basis, operating profit for the Funeral Home Products segment was $28.1 million for the current fiscal year compared to $28 million a year ago.

Similar to Cemetery Products, on an adjusted basis, the Funeral Home Products segment's year-to-date operating profit and related operating margin increased from a year ago despite the decline in sales, reflecting the benefit of the Company's recent cost structure initiatives.

Non-GAAP adjustments for the Funeral Home Products segment for the current fiscal year primarily included costs related to lean initiatives and the litigation related costs mentioned earlier. The prior year included costs associated with the Company's cost structure initiatives and a gain related to the settlement of a previous acquisition.

FY14 third-quarter sales for the Cremation segment were $21 million compared to $11 million for the same quarter last year. The increase related to a significant waste incineration equipment project in Saudi Arabia during the current quarter. Year-to-date sales for the Cremation segment were $40 million as of June 30, 2014, compared to $35 million for the same period last year. As a result of the sales increase, the Cremation segment reported operating profit of $4.8 million for the current quarter compared to an operating loss of $67,000 a year ago.

Year to date, the segment's FY14 operating profit was approximately $5 million compared to $1.4 million last year. In our Brand Solutions group, Graphics Imaging sales were $81 million in the FY14 third quarter compared to $79 million last year. The increase primarily reflected higher North American sales and the benefit of favorable currency exchange rate changes.

For the first nine months this year, Graphics Imaging sales were $234 million compared to $219 million last year. The acquisition of Wetzel in the first fiscal quarter last year and favorable currency rate changes were the primary contributors to the year-to-date sales improvement. Third quarter operating profit for the Graphics Imaging segment was $983,000 for the current year compared to $4.2 million a year ago.

Non-GAAP adjustments for this segment, which primarily included costs in connection with the pending acquisition of Schawk, totaled $3.9 million for the current quarter. Non-GAAP adjustments totaled $1.2 million for the same quarter last year. Year to date, the Graphics Imaging segment reported operating profit of $3.3 million compared to $10 million a year ago. Non-GAAP adjustments were $8 million for the first nine months of this fiscal year compared to $2.4 million a year ago.

Sales for the Marking and Fulfillment System segment for the FY14 third quarter were $26 million compared to $24 million for the same quarter last year. The increase reflected higher volume in North America and Europe. Year-to-date sales for this segment were $70 million this year compared to $64 million for the same period last year. This increase resulted from a combination of higher sales volume and the benefit of the December 2012 acquisition of Pyramid Controls.

Operating profit for the Marking and Fulfillment Systems segment was $2.8 million for the current quarter compared to $2.5 million for the FY13 third quarter, reflecting the increase in sales. On a year-to-date basis, the segment's operating profit was $5.8 million compared to $5.3 million last year.

FY14 third-quarter sales for the Merchandising Solutions segment were $35 million compared to $18 million a year ago. Year-to-date Merchandising Solutions sales were $72 million this year compared to $58 million a year ago. A major portion of these increases were due to a significant merchandising display project during the current quarter.

As a result of the sales increase, the Merchandising Solutions segment reported operating profit of $5.6 million for the current quarter compared to $298,000 a year ago. Year to date, the segment's operating profit was $5.9 million compared to $2.1 million last year.

Sales and operating profit by segment, including non-GAAP adjustments for the quarter and fiscal year-to-date periods, are posted on our website for your reference. Our FY13 third-quarter consolidated operating margin was 11.5% of sales compared to 12.3% a year ago. On a non-GAAP adjusted basis, our operating margin was 13.5% for the current quarter compared to 12.7% last year.

Year to date, our consolidated operating margin on a non-GAAP adjusted basis was 10.9% for the current year compared to 10.8% last year. Gross margin for the quarter ended June 30, 2014, was 37.2% of sales compared to 36.5% a year ago, primarily reflecting higher sales for Merchandising Solutions and Cremation. Year-to-date gross margin was 36.4% this year compared to 36.3% last year.

Selling and administrative expense for the current quarter was 25.7% of sales compared to 24.2% for the same quarter last year. Year-to-date selling and administrative expense for the current year was 27.4% of sales compared to 26.5% for the same quarter last year. The increased percentages mainly reflected the impact of acquisition expenses and costs related to the Company's strategic initiatives. In addition, SG&A cost in the prior year included the benefit of favorable adjustments related to the settlement of previous acquisitions.

Investment income for the FY14 third quarter was $456,000 compared to $634,000 a year ago. Year-to-date investment income was $1.7 million for the current year compared to $1.5 million a year ago. Year-over-year changes reflected investment performance on assets held in trust for certain of the Company's benefit plans.

Interest expense for the current quarter was $2.8 million compared to $3.5 million for the same period last year. Interest expense for the first nine months this fiscal year was $8.2 million compared to $9.8 million for the same period last year. The lower interest cost for the current period resulted primarily from lower interest rates.

Other income deductions net for the FY14 third quarter represented a deduction of approximately $1 million which was relatively consistent with a year ago. Year-to-date other income deductions for FY14 represented a deduction of $2.7 million compared to $3.2 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 intercompany debt.

Net income from non-controlling interest for the current quarter resulted in a deduction of $376,000 compared to additional income of $93,000 a year ago. Year-to-date net income from non-controlling interest for the current year resulted in a deduction of $286,000 compared to additional income of $482,000 last year. The deduction in the current year reflected the minority interest portion of income generated by our UK cremation segment operation.

The Company's effective income tax rate for the nine months ended June 30, 2014, was 34.1% of pretax income. The effective tax rate was 32.7% for the fiscal year ended September 30, 2013. The effective rate for FY13 included the benefit of European tax loss carry back.

At June 30, 2014, the Company's consolidated cash was $81 million compared to $59 million at September 30, 2013. Our current ratio is 2.4 at the end of the current quarter compared to 2.2 at September 30, 2013. Accounts receivable at the end of the current quarter totaled $199 million compared to $188 million at the end of FY13. Consolidated inventories at June 30, 2014, were $142 million compared to $131 million at September 30, 2013.

Long-term debt at the end of the current quarter, including both current and long-term portions, approximated $368 million compared to $375 million at September 30, 2013. At June 30, 2014, $305 million of the outstanding debt balance represented borrowings under our domestic revolving credit facility at an average interest rate of around 2.6%. The borrowing capacity of this facility is $500 million with a maturity date of July 2018. In connection with the pending acquisition of Schawk, the Company intends to increase this facility to $900 million.

The Company had approximately 27.3 million shares outstanding at June 30, 2014. Since September 2013, the Company has only purchased approximately 130,000 shares under its share repurchase program at a cost of approximately $4.6 million. As you would expect, our repurchase program was curtailed as a result of the pending acquisition. At the end of the current quarter, approximately 1.1 million shares remain under the current repurchase authorization.

Depreciation and amortization expense for the quarter and nine months ended June 30, 2014, approximated $9 million and $28 million respectively. Capital expenditures for the current quarter and year-to-date periods approximated $9 million and $19 million respectively.

In concluding my financial remarks this morning, as Joe stated in our earnings release yesterday, our existing businesses are currently projecting to be within our initial full-year FY14 guidance range at a consolidated level on a non-GAAP adjusted basis. The pending acquisition of Schawk is now targeted to close before the end of this month. Costs associated with this acquisition, including transaction and integration costs, and the impact resulting from acquisition valuation and related step up expense, will affect our fourth-quarter results.

Lastly, the Board yesterday declared a dividend of $0.11 per share on the Company's common stock. The dividend is payable August 12, 2014, to stockholders of record at July 28, 2014. This concludes the financial review, and Joe will now comment on our operations.

Thank you, Steve. Good morning. During the quarter, we had very good performance from two very large projects delivered out of our Merchandising Solutions division and our Cremation division. In both divisions, successful project and production planning allow us to deliver solid results from these projects while continuing to deliver on normal business. These divisions are to be commended for a job well done and reflect our ability to ramp up production when necessary.

Our Marking and Fulfillment business continued to improve versus prior years and is seeing traction with its new and innovative products. We have seen good backlog growth in our fulfillment businesses and strong shipment of traditional products in the United States and Europe. Generally, these markets have been precursors for overall economic growth or decline. So the increased activity is a good sign for all of our businesses. We continue to expect improving performance from these divisions -- from this division into FY15 and beyond.

In the Memorialization business, our volumes were generally in line with the casketed death rates. But challenges in a couple of mausoleum projects negatively impacted the quarter in Cemetery Products. It is also important to note that many of you who have been shareholders for a very long period of time have heard us reference operating profit targets of mid to high teens for our Funeral Home Products division. We have finally attained those goals and we expect to continue improve from here. Looking forward, as Steve indicated, we expect to close on our Schawk acquisition of SGK sometime later this month.

We have been involved in an in-depth planning and I am pleased to confirm that we continue to expect $95 million to $100 million of incremental EBITDA over the next 24 to 36 months. We have many challenges ahead and the visibility on a quarterly basis remains cloudy at this time, but directionally we believe that we are on the right path. As I just stated, our quarterly visibility is cloudy, particularly in the near term.

Purchase accounting, integration cost, increase interest cost, and increased share count all combined to make the balance of 2014 difficult to foresee. I am pleased, however, to confirm our original guidance of $2.62 to $2.70 on our traditional core businesses despite the SGK transaction. With that, I'd like to open it up for questions.

(Operator Instructions)

Brad?

(Operator Instructions)

Daniel Moore.

Good morning. Thanks for taking the questions.

Good morning, Dan.

Can you give a sense of the size of the two big shipments in the quarter by both the cremation sale as well as the merchandising display project?

Yes, the merchandising project was in the neighborhood of $12 million, $13 million, and the cremation, the incineration project was about $10 million.

Great. Then just to clarify guidance, obviously it's adjusted so excluding non-recurring items, does the $2.62 to $2.70 adjusted include any potential initial dilution from Schawk or is that excluding Schawk?

That is looking at our Matthews businesses pre-SGK.

Perfect. Okay.

Liam Burke, Janney Capital Markets.

Thank you. Good morning Joe, good morning Steve. Joe, if we adjust for the mausoleum sales in Cemetery Products, how have lean initiatives contributed to the improving operating margins? And then how much progress has been made on the electronic ordering side?

We are at the initial stages of our electronic ordering side. We have about a little over 80 customers are online. Some of our larger customers are anxious to get on and between their challenges of integration and our availability frankly of capacity, we think that is yet to come.

But with regard to lean initiatives, I think the best way to phrase it, Liam, is that we are approving our margins every day. If we exclude -- there wasn't a sales impact from the mausoleum, it was purely operating profit. So if we exclude the impact of the mausoleums, you are seeing the return to decent operating margin percentages in our Cemetery Products business.

Great. On Marking and Fulfillment, how many customers have you added on the fulfillment side of the business now?

I can't give you an exact number on the number of customers, but I can tell you that we continue to expand new customers and expanding within existing customers. Our backlog is pretty strong in that business, so we are expecting fourth quarter but more importantly, we are only into 2015 to be a pretty good year for those folks.

Great. Thanks, Joe.

Jamie Clement, Sidoti.

Hello, Steve. Good morning.

Hello, Jamie.

Steve, thanks for the approximate revenue contributions from incineration and from merchandising. It sounds from your commentary and in looking at the press release that maybe some of this work came a little bit sooner than what you all were expecting. So are we -- it sounds like some of this work continues here into the September quarter, about how much?

You know, it's difficult to tell, Jamie. In both of these businesses, we think there's probably 20% yet to come or so. The challenge really is, is that in both these cases, we are not complete.

And when we look at the incineration product, we are out on a percentage of completion basis and we will recognize full revenue and operating profit when we turn it on before the end of the quarter. At this point in time, we think there's more out there, but we are being cautious with our guidance on that.

Okay. Joe, it sounds like I know in recent years having to do with cost savings and that kind of thing, the seasonality of the business maybe has been a little bit distorted. But over time it seems like there's a natural slight seasonal drop off between the June quarter and the September quarter, and based on your guidance it sounds like you're expecting that this year too, right?

Exactly right.

Okay. Great. Thanks very much.

(Operator Instructions)

Jason Rodgers, Great Lakes Review.

-- an update of the tobacco related orders and Graphics Imaging, how those are progressing?

Jason, we didn't hear the beginning part of that question.

The tobacco related orders and Graphics Imaging, the labeling requirements, just wanted to get an update on how that's going.

It's interesting. I just got some information from one of our largest customers just recently where they have been holding back frankly on their order rates. We are expecting pretty good orders throughout 2015 and 2016, and since we have not received everything that we had expected, and they confirmed that to me in an email. We think more is coming.

Okay. Then you'd mentioned in the Cremation segment about a possible opportunity in China last quarter. I wanted to see if you an update on that.

Yes, unfortunately we did not win that one but we have landed on about another three or four large potential projects similar to the one we did in Saudi Arabia that we are bidding on at this time. So we think incineration becomes a -- is becoming a more important part of the business, albeit lumpy. But on our core Cremation business, a pretty nice little addition.

We've been invited to bid on those projects.

Assuming you win one of those, three or four, could we see potential revenue this fiscal year from those?

No. These generally are fairly large engineering projects that will be seen in next year.

Thank you.

Daniel Moore, CJS Securities.

Thank you, again. Realizing obviously that the deal hasn't closed, anything incremental at all you can share about Schawk's business, the challenges and/or opportunities? Obviously, you've reiterated the incremental EBITDA expectation but what incremental are you seeing, Joe, as you look at the opportunity in front of you there?

When we look at this here, a lot of what we, as you know, when you go through an acquisition, you start the process due diligence without being able to expose yourself on the transaction. And I'm pleased to tell you that we pretty much confirmed a lot of what we thought was out there. The opportunities exist from a customer standpoint without significant, I would say, overlapping risks from customers.

We think that our product mixes, the addition for example of Merchandising Solutions to the offering that SGK has whereas adding some design capabilities in the European markets where we don't have anything today, but we think those remain positive. We have been very, very, very pleased with the quality of the team that has been added to the group. We culturally seem to fit pretty well and they're good guys to have on the team. So we are pleased at this point in time.

What really it is, Dan, we are left with execution. Execution will be the next 24 months to 36 months and that's on us. Right now, no negatives coming out of it. All the positive we expect to be confirmed, and we are bringing on a good team to be part of our organization.

And their US business was relatively soft in Q1. Any sense of the tone of the kind of Graphics Imaging type businesses at least in the climate in the US as we move into the middle of year?

Yes, their business remains soft. What we're going to start to talk a little bit more about as we go forward is our positions with some of the largest CPGs. They have wonderful market positions within a lot of CPGs.

That does not change abruptly, and it's just a question of the marketing spend of those organizations. We are expecting that to pick up a little bit more in a second half although it is not necessarily in our control to drive those sales. Having said that, we see some cross-border opportunities that we think we might pick up a few opportunities from a customer standpoint and/or project standpoint globally.

Got it, and lastly you touched on tobacco. Anything in the proposed combination of Reynolds American and Lorillard that, good, bad, or presents an opportunity? Anything you might comment on there?

Not significantly for us. The Reynolds folks do more of their work in the United States than they do over there. We don't have a large percentage.

Having said that, we expect consolidation in the overall tobacco business, particularly outside of the United States since there still more businesses over in Europe yet to be consolidated. But we do business with just about every single one of them as the largest provider.

Very good. Appreciate it.

Scott Blumenthal, Emerald Advisers.

Good morning, Joe. Good morning, Steve.

Good morning, Scott.

Gentlemen, I'm sorry I got dropped in the middle of the call and I got on a little late for Q&A. If I ask a question that's already been answered, I apologize.

Can you talk about maybe the margin profile of the incineration project? Is it similar to the existing segment margins that you would get for a crematory?

Yes, Scott, it's a little different than a regular crematory, but I would tell you in total that it would be in line in general with what our total Cremation segment obviously because it was significantly incremental. You saw a nice bump in our margins for the year -- I'm sorry, for the quarter, and actually it bumped our margins -- our year-to-date margins as well. But I just think in general, I think those projects are the same whether it's cremation equipment or waste incineration.

The only thing I would add to that Scott is unlike our cremator businesses where we know that when we deliver, it's going to start up. We have some startup risk in our project of this scale that we think we've adequately prepared for.

Okay and since it is a little riskier Joe, you priced that in, I guess?

Yes.

We need to fall within those pricing parameters.

Okay. Are there ongoing engineering support costs or kind of a maintenance tail that would go along with this?

There's always going to be parts and some maintenance but probably not as significant as you might think on a scale this size. Because this is done in Saudi Arabia, we work through partners in that area and I think we're still working those arrangements out.

Okay. And I guess my follow-up would be that this is very meaningful during the quarter, more than 5% of the quarterly sales. Do you think at some point you may have to break this out as a different segment?

You know, we having some internal discussions as this becomes more prominent part of our cremation business. About whether we need to look at this differently. We will probably have more indication of that as we go into next fiscal year.

Okay, great. Thank you.

Jamie Clement, Sidoti.

Joe, if I could ask a follow-up just on the comments about some of the CPG graphics business at Schawk. Is this just more of the same SKU rationalization and just sort of temporary slowdown in terms of, for example, cereal box changes, and do cereal box launches and that kind of thing that we are hearing about from some of those customers?

Exactly right. We are looking at SKU rationalization, a little bit of what I would consider lack of innovation in the product development and/or packaging but at the end of the day, that's their bread-and-butter. We expect that to return. I wouldn't call it seasonality as much as economic situation.

Absolutely. I think that's been pretty well discussed by some of those customers in recent weeks. Thanks very much.

(Operator Instructions)

Scott Blumenthal, Emerald Advisers.

Gentlemen, can you give us an update on some of your web-based ordering initiatives that you've been working on over the past few months or so?

We've started the rollout on our cemetery product side. We've had very, very favorable reviews on the project, as you might expect.

There's still more development that will go on. I think this will be an ongoing process for us. But we are still early.

We have about 80 customers on it at this point in time. Some of the larger customers are still anxiously awaiting. They have their own integration issues to deal with, but we will see that change, we believe, a material change and our order rate as well as some of the anticipated benefits whenever some of the bigger guys come on.

Do you have any idea, Joe, as to how long do you think that will take? Have they given you any indication?

I wouldn't say they've given us any indication. Our team is spread a little that at this point in time also working on SGK transaction, but I expect that over the next 12 months, 24 months we will be up and running.

Terrific, thank you.

(Operator Instructions)

At this time, there are no further questions from the phone lines. Please continue.

Thank you, Brad. We would like to thank everyone for participating in the call this morning. We look forward to our conference call and our fourth quarter earnings release in November. Thank you, and have a good day.

Ladies and gentlemen, this conference will be available for replay after 11:00 AM Eastern today through midnight on August 1. You may access the AT&T teleconference replay system at any time by dialing 800-475-6701, entering the access code 331303. And international participants may dial 320-365-3844, and those numbers again are one 1-800-475-6701 and 320-365-3844, again entering the access code 331303.

That does conclude your conference for today. Thank you for your participation and for using the AT&T executive teleconference service. You may now disconnect.