Methode Electronics Inc (MEI) 2009 Q1 法說會逐字稿

Greeting, ladies and gentlemen. Welcome to the Methode Electronics Incorporated first quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded.

This conference call contains certain forward-looking statements which reflect managements expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws.

Methode undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this press release involve a number of risks and uncertainties. The factors that could cause actual results to differ material from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly reports.

Such factors may include without limitation the following. One, dependence on a small number of large consumers within the automotive industry. Two, rising oil prices could affect our automotive consumers future results. Three, the seasonal and cyclical nature of some of our businesses. Four dependence on the automotive industry. Five, dependence on the appliance, computer and communications industry. Six, intense pricing pressures in the automotive industry. Seven, increase in raw material prices. And eight, customary risks related to conducting global operations.

It is now my pleasure to introduce your host, Mr. Don Duda, President and Chief Executive Officer of Methode Electronics, Inc.. Thank you Mr. Duda. You may begin.

Thank you, Doug. Good morning, everyone. Thank you for joining us today for our fiscal 2009 first quarter financial results conference call. I am joined today by Doug Koman, Chief Financial Officer, Ron Tsoumas Methode's Controller and Joey Iske, Director of Investor Relations. Both Doug and I have comments today and afterwards, we will be pleased to take your questions.

Methode completed the first quarter of our 2009 fiscal year with a $9.5 million increase in net sales to $134.5 million and net income of $6.8 million or $0.18 per share. These figures were impacted by various factors during the first quarter, North American automotive sales were positively impacted by $3.9 million in net year-over-year price increases, attributed to the legacy programs we are winding down. In addition, stronger sales came from Honda and the transmission lead frame program that is in the process of ramping up. However these sales increases were offset by lower production volume from Ford in North America and GM in Asia.

In addition, Methode recorded a $3.3 million after tax charge or $0.09 per share, for the previously announced restructuring of our US based automotive operations and interconnect legacy products. Excluding the restructuring, Methode achieved net income of $10.2 million or $0.27 per share, compared to $8.3 or $0.22 per share from last year's first quarter. To provide some perspective on the automotive volume decreases, Ford's North American sales volume to Methode decreased from approximately $15 million in the first quarter of fiscal year 2008, to $10 million in the quarter just completed; a 33% drop. We anticipate further reductions.

In Europe, however, Methode launched new automotive programs during the quarter, products included controls for the BMW Phantom and several products for the Ford Fiesta. It is important to note that this small vehicle will initially be sold in Europe, but is anticipated to expand into Asia, the US and South America in the next few years. New programs launched with Fiat Alpha in the first quarter warrant a bit of history.

Methode's Malta operation began its highly successful relationship with Fiat Alpha in 2001 with several products on the Alpha 159 program. The success of this program has made Methode a preferred supplier with Fiat. This has once again been proven with the most recent award from Fiat, the vehicle dynamic selector better known as VDS. This is an interface panel just below the center console and allows the driver to change the handling characteristics of the vehicle to adopt to the different road conditions, such as sport handling, daily driving and poor weather conditions. We believe Methode is well poised to expand its business with Fiat Alpha.

In addition to these program, new automotive programs were awarded during the first quarter spanning our three global markets. In North America, Methode has added a secondary version of the infotainment console featuring our touch sensor technology for Ford launching in 2011. This human machine interface or HMI is in addition to the initial HMI business awarded last year, bringing the combined annual sales volume for these products to just over $17 million beginning in 2011.

Our automotive operation in China has revamped the highly successful Mitsubishi paddle shifter and added business with Shanghai GM. While in Europe, in additional to the Fiat program awards, Europe has been awarded an array of products from several OEMs including GM Europe, Ford of Europe and VW. Many of this program begin launching in 2010, however the majority of the production will be in 2011. This combined business will add approximately $20 million annual sales again beginning in 2011.

Turning to Methode's interconnect segment, consolidated sales increased 13% in the first quarter of 2009 compared to fiscal 2008. Our touch sensor business has had a remarkable first year with Methode launching the entire suite of products for the new Electrolux product line. While we are pleased with their progress, we remain cautious as to their market growth as appliance sales tend to follow the housing market. Due to the slow economy and severely impacted housing markets this business felt the impact from reduced sales volumes in the first quarter. We monitor this closely and make operatable adjustments as needed.

However, on the new business front, touch sensor was awarded significant new business including new fluid level sensors for sump pump and marine applications and several new cooking, refrigeration and dish washing user interface panels. These programs will be launching later this year and will add approximately $6 million in annualized sales when fully launched.

Our power product segment increased during the quarter compared to last year's first quarter. The increase was primarily due to the addition of value engineer products that was not included in last year's results. Globally, bus bar margins were impacted by higher material costs and increased logistical costs. I want to note that we are concerned with the decreased profits from our power segments, particularly since the sales have increased. Management takes this very seriously and is implementing actions to improve the profitability level.

That said, new business awards created an opportunity to enter new markets. We received an order from a large military supplier for the new Navy DDX program, which is a significant award because one of our competitors has been very dominant at this customer for several years. We congratulate our power segment on this win. The new Navy DDX program when placed in service will replace the Perry class frigates and and Spruance class destroyers. Interestingly these ships will be all electric drive, eliminating drive shift reduction gears thus reducing the acoustic signature by which other ships can identify a vessel.

There will be ten times more power available for all of the ship systems compared to conventional ships. This additional power will be necessary for future electronic-based weapons. We look forward to being included in the power needs for what the Navy is calling the Navy of the future.

One area of power products has been focused on is wind power. We have engaged several key OEMs in this market. The main application in this arena for power products is the inverter control system. One order recently received is for custom power rail and bus bar design that has the potential of creating solid annual sale if the OEMs product line is well received in the marketplace. In addition to wind power we were awarded a production order from a large elevator manufacturer. This is our first entry with this multi-national OEM and we will seek to gain additional power business from their transportation and automotive businesses going forward.

Before I turn the call over to Doug, I would like to take a moment to mention our new strategic relationship with Lumedyne announced in early August. One of Methode's key strategies has been to develop new technologies for applications in the market Methode serves. Lumedyne's bio metric sensors can reliably capture accurate and high quality data for use in systems requiring secure spoof proof automated identification.

Already used in worldwide applications for identification and security, Methode tends to extend Lumedyne's bio metrics to automotive applications such as convenience and security in the vehicle. We believe Lumedyne's bio metric sensors can be used to support potential vehicle features such as keyless entry, ignition authorization and authentication of in vehicle transactions via telemetrics, telematics, rather.

As we continue to expand our human machine interface or again HMI applications, the ability to move this multi-spectral imagining technology into applications from their current markets such as transportation will be key in supporting our future growth. I am personally excited about this technology and our relationship with Lumedyne. They're a strong company and well funded and supported by strong technologists.

At this point I will turn the call over to Doug for his financial review.

Thanks, Don. Good morning everyone. Let me start by reviewing the sales and margin activity for our reporting segments.

The automotive segment had first quarter net sales of $84.7 million compared to $82.9 million last year. In the quarter, North American sales were positively impacted by year-over-year net price increases of $3.9 million on the Chrysler business that we had decided to exit. We expect that the benefit of these price increases will decrease significantly during the remainder of fiscal 2009 as Chrysler continues to transfer their business to other suppliers. Also we had increased sales from automotive operations in Europe, but these were offset by lower sales from both China and North America.

The decline in Asia and North America is primarily due to lower demand for parts and components that are included in less fuel efficient trucks and SUVs. In the quarter, the weaker US dollar actually contributed about $3.5 million to the sales improvement year-over-year. Gross margins for the automotive segment were $17.1 million, compared to $16.4 million last year. This is primarily the result of the Chrysler price increases and higher sales in Europe.

Restructuring charges in the first quarter for the automotive segment totaled $3.2 million and drove income before income taxes down to $10.5 million, compared to $11.7 million last year. The interconnect segment had net sales of $35.6 million in the first quarter, which is up from $31.4 million last year. This increase is primarily attributable to interconnect sales in Asia and from our touch sensor business. Currency translation increased net sales by about $0.5 million in the quarter.

Gross margins for the interconnect segment were $9 million, compared to $7.6 million last year. This is primarily the result of the higher sales. As a percentage of sales, gross margins increased to 25.3% compared to 24.2% last year. This is because products manufactured in Asia have lower percentage cost of products sold compared to similar product at our North American operations.

Restructuring charges in the first quarter for the interconnect segment totaled $1.7 million and is the primary reason for income before income taxes dropping to about $0.5 million from $2.4 million last year. The power segment sales increased in the quarter with $12 million this year, compared to $9.1 million last year. As Don mentioned the increase is due to the VEP acquisition and strong sales from our Asian operation.

Gross margins, however, decreased to $2.3 million in the quarter from $2.6 million, primarily due to a product that went end of life at the end of fiscal 2008, which had higher gross margins than the business that remained during the first quarter of fiscal 2009. The decrease in income before income taxes to $800,000, compared to $1.8 million last year was impacted by higher shipping costs and higher commissions and also expenses related to Tribotek which was acquired on March 30 of 2008.

The other segment had first quarter sales of $2.2 million, which is up from $1.7 million last year. This was primarily driven by sales from our torque sensing business. Gross margins, however were flat year-over-year at $200,000 and the loss before income taxes was about $600,000, compared to a loss of $300,000 last year. This primarily due to additional support staff being added at our testing facilities.

Some of the highlights on the consolidated income statement, selling and administrative expense in the quarter was $16.5 million, up from $16 million last year. This is primarily due to higher stock award amortization and higher in tangible asset amortization. As a percentage of net sales, however, selling and administrative expense was down to 12.3%, compared to 12.8% last year. Interest income net was $0.5 million for the quarter, compared to $400,000 in last year's quarter.

The average cash balance, cash balance this quarter was about $116 million, compared to $68 million during last year's quarter. And also, the average interest rate earned in the current quarter was just about 2%, compared to 3% last year. This is because the investments that we are currently invested in are weighted more heavily to tax exempt. The effective tax rate in the quarter was 21.8%, compared to 25.3% last year. Both years reflect utilization of investment tax credits. The effect of lower tax rates at the company's foreign operations and a higher percentage of earns in at those operations.

Moving to the balance sheet, cash is up to $111.5 million, compared to $104.7 million at the end of fiscal 2008. The accounts receivable balance is $74.2 million, which is down from $85.8 million at the end of last year. This is primarily the result of the payment on a large tooling project, and tightened payment terms on certain US customers. The inventory balance is $55.4 million, down from $55.9 million at the end of last year. The activity across segments and the business units was fairly dynamics but netted only a small reduction of $0.5 million.

Other current assets were $16.4 million, up from $14.8 million last year. This is primarily due to prepaid insurance and advanced payments made to suppliers for capital expenditures at Malta. Property, plant and equipment is $88.5 million, this is down from $90.3 million last year. The increase in PP&E for capital expenditures in the quarter was offset by increased accelerated depreciation due to restructuring charges. Goodwill is unchanged at $54.5 million. Intangible assets are at $40 million down from $41.3 million at the end of last year. This is due to normal amortization.

Other assets at $27.3 million are up from $23.4 million, primarily due to our investment in Lumedyne and the increases in the cash surrender value of company-owned life insurance policies. Accounts payable are down at $33.8 million versus $42.8 million at the end of last year. This is due to ending the quarter on a large cash dispersement cycle in both the US and Malta. Other current liabilities at $33.6 million are down from $34.3 at the end of last year, primarily due to payment of estimated income taxes. And other noncurrent liabilities are at $20.1 million down slightly from $20.7 million at the end of last year primarily due to deferred compensation payments related to the touch sensor acquisition.

On the cash flow statement, year-over-year cash provided by operating activities decreased $11.3 million. This is primarily due to the decrease in net income and that last year's first quarter had a large prepayment from a customer.

The decrease in cash used in investing activities is primarily due to lower capital spending this year's quarter versus last year's and also in last year's first quarter there was a dividend payment on our joint venture and that we also had made a contingent payment related to the acquisition of Cableco. The decrease in cash used in financing activities is primarily due to fewer stock options being exercised.

Don, that concludes my remarks.

Thank you, Doug. Doug, I think we are ready to take questions.

Thank you. (OPERATOR INSTRUCTIONS). One moment please while we poll for questions. Our first question comes from the line of David Leiker with Robert W. Baird. Please proceed with your question.

Thank you. This is Keith calling in for David. Just a couple of questions, Don and Doug. With the power distribution segment , we have a couple of moving parts, a couple of moving parts for why margin is down there. You mentioned that the business that ended and some of these higher costs. A is this business that ended that's not coming back and what pressure does that put on margins and what should we expect going forward and what was the impact of these higher costs on margins in that business?

Okay. The business you are referring to that went end of life, was the IBM business we have talked about.

Yes.

Okay. That was higher margin business, but it was, it will be offset moving forward by larger business gains that offset it. I don't know that we will replace the margin one for one but we are certainly going to replace it with an array of different customers so we have less dependence upon one. Material impact?

I don't know if we were able to quantify the material impact, but material is a significant reason for the, the gross.

Put in perspective, Keith. I am not as concerned about the IBM end of life,. That is something we have taken into account. I am more concerned about material costs went up and plus some logistical costs. On the other hand, the business has grown, we are pretty good at taking costs out. We will address those, those issues. So it is something that we can have an effect on and control.

Okay. That's great.

So I am so positive about the business. If you think about it we have took a business that was located in rolling meadows and now have expanded business in two other continents. There's going to be some issues in increased material costs, I would prefer it didn't happen but again it is something we can control.

I guess two more follow ups to that, do you have any success passing those material costs on to your customers or is this a negotiated contract in advance?

A little bit of a mixed bag but in contrast automotive where it is very difficult. We are probably going to be able to do some of that. We have done it with some customers and it is a viable option in this case where it wouldn't have been or very difficult in auto.

Okay. And then, I mean if we look at the impact that this IBM business had on the power distribution business would you say that pushed the margin in that business above what you guys would kind of expect going forward?

No, no not at all. I'm -- that segment is a, a good margin segment to be in. I -- no, we would, I guess the best answer is no, absolutely not. That margin should be going up.

Okay. Up from the fiscal '08 figure?

Yes. I'm -- it is we are not satisfied. We weren't satisfied last year where the margins were and you can imagine with it dropping that causes us some more issues. But, that should be a higher margin business than Methode generally operates at.

Okay.

We certainly intend to get it there.

Sure. That's perfect. And then, can we quantify the acquisition revenue that was in the, that was in the power distribution segment?

From the VEP?

From VEP.

Yes. There was about two million of revenue in the quarter.

Okay. That's perfect. Then just lastly here, I wanted to kind of dive into the automotive segment because I'm I think you guys did a pretty good job managing to increase revenue even if you exclude the price it was only down slightly in a very difficult environment. And I know you mentioned some of the, some of the new business in Europe but can you kind of help me quantify some of the moving parts here so I can get my arms around the success?

I am trying to think how to answer that.

We have quantified the European wins.

Ford was down about five million, Chrysler was, how was Chrysler in North America?

Well I mean we're just about out of Chrysler.

Okay. So that's a anyone diminimus amount or shrinking amount?

I think as Doug mentioned or I mentioned, we certainly had an increase or an impact on income because of the increases to the product.

Okay.

Probably another factor we should issue or discuss is the automotive lead frame transmission that is launching. That has had a positive impact. Also, if you look at Malta, it is up year-over-year, it is about 20 -- I take that back it is about 7%. Year-over-year.

So just look at Europe.

Yes.

Okay. And that's primarily new business wins as opposed to volume?

That's new business wins. That's a strategy we implemented, talked about Fiat. Fiat was really the first major win we had in Europe, when we essentially instructed Malta, quit focusing on the US and start focusing on Europe. That's why you were acquired. And Fiat was the first win and has continued to pay off and plus VW.

Their Ford volume for hidden switches shipped to the US was down just in, they have the same issues that automotive in the US had with Ford volume reduced. What I am pleased about is even with $5 million down from your, what is our major customer, Methode still had I won't say great quarter, but had a good quarter. And when you think about oh four or five years ago Chrysler represented $120 million of business. Had we stuck with Chrysler we would have had a very serious issue.

So, I don't know if I can put anymore parameters on it. The lead frame transmission program we are very pleased about that is launching in the US and then will be transferred on to Shanghai. That's had a good impact. That's the T76 GM transmission. I, I don't know how much more I can give you unless you guys have other comments.

I think that's good. Thank you very much.

Our next question comes from the line of Jeremy Hellman with Singular Research. Please go ahead with your question.

Hi, good morning everybody.

Good morning.

Just want to make sure that I was following things correctly, some of the prior discussions surrounding Chrysler. Ex the 3.9 million price increase in the quarter, did you state how much business you had kind of on a normal quote unquote basis with Chrysler in the quarter?

No. We, we don't break down the business by OEM on a quarterly level. We will do that at year end, when we identify materially customers, but not in the quarter.

Right. So that's just that Doug, your qualitative commentary, that the dominant portion obviously the Chrysler business is already gone and there's not much left to run off then. Am I right about that?

It will phase out completely by we keep saying year's end here, but Chrysler has had trouble transferring product. They have got their own issues. So it should wind down here by the end of the year.

Okay. Kind of switching over to the appliance market, particularly in terms of, of your new customer there, without naming names I guess. Have you got any feedback on where their inventory is versus expectations, particularly with sales being affected by what's going on in the housing markets? Are they sitting, are they running a lean inventory program there, or are they getting backed up at all?

Are you talking about our customers?

Yes.

The one customer that I mentioned we do know that they have inventory that they're, I won't call it backed up, but they're going to wind or work off here really this past quarter. I want to wait and see what happens next quarter. We are tracking the housing market now and that does impact it. So it affected that launch. The other major customer from what I have read although I have not spoken to them. What I have read is doing a better job of managing at least that is what some of the analysts feel about that, that is a major appliance manufacturer.

So --

It, I mean what's the root of your question is it are we going to see more, more reductions in orders?

Yes, that's what I am getting at. Here we are mid Q2 essentially and wanted to get a handle on where their order activity with you guys is. And is basis being if they over ordered from the get go and are sitting on inventory, then they would be taking orders down or if they adequately foresaw what was going on in their end markets if they were running things lean and therefore still kind of on pace with you.

Yes, that's a very good question. I think we have been cautious as to our view of that as we move forward. I think either Doug or I mentioned that we have taken that into account, and how we look at touch sensor. I would anticipate another quarter of call it slight reductions. I don't, it is so doggone tight that housing and the economy. But [far as] optimism.

They have done a great job of booking new business in other areas, and if you look at their history, they were owned by Shot Glass who literally insisted that they stay in the appliance market because they wanted to put these controls on their glass, made perfect sense for them to do that. But we, when we acquired them, we said hey, this can be used as level sensors, this can be used, you can enter the European market. So they have done a very good job of, and it doesn't necessarily have to be on glass when it is used on the appliance either.

So that $6 million of, that's first quarter wins. So I was, I talked to GM this morning and said geez why don't you repeat that for the second quarter because that just lessons their dependence upon some other customers. So, I, while the appliance business is down and they're feeling impact of it, I have been very pleased with what they have done in terms of expanding their business.

Okay. Good. Looking just kind of reading the Q this morning, you say that you are expecting another ten to 15 million of restructuring charges over the rest of the year. Is that expected to bunch into any one quarter or should it be fairly even?

Yes, I mean as somebody said, it depends on the accounting rules. But I think some of it also depends on just when Chrysler actually transitions their product out. So, just as it is difficult to say when the price increase impact is going to diminish, same thing with the restructuring. So as that business rolls out we are able to take some moves then we will be able to under the accounting rules take those charges.

Okay.

We are behind schedule in where we thought we would be but we are not dramatically behind.

Okay. And then, with there's some obviously reduced head count and other debt, that is associated with that. Is there going to be any meaningful impact to the down side in SG&A?

Because of the restructuring?

Yes. You are left with lower head count at the end of the day. So if you are citing stock comp expense and other things that flow into SG&A, is it then reasonable to assume that, that you have got somewhat of a downward bias to overall SG&A?

No, not necessarily, Jeremy.

I mean this is -- this is production facilities.

Okay.

So the impact would be minimal I think on SG&A.

Okay. One last one for me and then I will jump out. Cash balance keeps climbing. You guys aren't levered. What level, what kind of cash balance do you need to manage the business appropriately and are you getting to a point where you might have, have to take into some considerations that you have excess cash if so?

Boy that's a hard one to answer.

We have said a number of times our focus is on acquisitions. I, I feel we made the right decision in exiting Chrysler. But if you think the Chrysler revenues, that's hard to replace with home grown business. Power is growing but it can't grow fast enough to displace that, and if you look our Ford revenues are down as well.

So, we are very much focused on acquisitions and we did for Methode a fairly large one, when we did our touch sensor business. And what I was very pleased about we replaced that cash fairly quickly. So Methode's strategy of going after acquisitions, expanding our global presence, expanding the customer base we use or work with is a key strategy. We think, I am not saying we are exiting automotive, we are exiting certain legacy products, but we are focused on auto, but we want less dependence on the automotive industry. How you get that you use your cash to acquire companies. So that is really going to be the biggest use of our cash going forward.

And again I suppose it could build up to the point where you go geez I need to do something different. But I don't think we are at that point yet.

Okay. One kind of, one last one I guess on the heels of that then. Given what's going on global economy, are you seeing acquisition opportunities become relatively more attractive? Be it smaller companies that are just a little bit more pinched by what's going on, or and need to involve themselves with someone with larger scale or otherwise?

I'll make two comments there. I think clearly the pendulum has shifted to the strategic buyers away from the financial buyers. I might be stating the obvious there. That has helped. Valuations they have come down. Have they come down to where I would like them to be? No but they're down.

And we are seeing, I can't really say if we are seeing more opportunities because we focused people full time on it or it is just that there's more opportunity. I don't know how to, how to gauge that, but this is a good time for Methode to be in the market for acquisitions. We have, we have always watched our cash, generated cash and so this is probably the best time in the last five years.

Okay. Thanks, guys.

Thank you.

(OPERATOR INSTRUCTIONS). Our next question comes from the line of Brian Crawford with Perimeter Capital Management. Please proceed with your question.

Good morning, gentlemen.

Good morning.

I had a quick question for you on the interconnect business maybe if you could give a little bit more color there on profitability. Even if we exclude the restructuring charge, it is still below where it was a year ago and wanted to try and understand a little better about what's going on there for profitability and kind of what your outlook is going forward?

Okay. The, again the main driver is the touch sensor business being down a bit. We have also had, we have exited some legacy products where we had the benefit of price increases we gave or a couple of years ago. So those I don't know, Doug if there's anything you would add to that, but I I don't know what I would say more than what we did on an earlier question.

No, and I guess just in that segment as we go through the restructuring, you are also going to -- not everything you do qualifies for restructuring. So we do have a little strain on the business.

We also have the increase, we didn't mention the amortization costs of the touch sensor acquisition.

Yes, that's right. That's right.

That was not in last year's quarter.

Right.

And those,.

Well, it is not a, a not linear.

That's right.

So,.

Yes because the customer relationship intangible is pretty much front end loaded. And given the projections that we used for the acquisition, last year's quarter didn't have as much as we see this quarter. So, that would be a big part of it.

It seems like each quarter you guys have a number of new program wins to announce, but it, if I am read thing right it looks like the next 12 months is going to be pretty difficult. But if and when you get through that period assuming the auto industry stabilizes a bit you have got a number of new launches in 2010 and 2011. Am I reading that right? I mean are you guys optimistic if we get through the next 12 months?

How do you answer that without giving guidance? Cautiously optimistic. I --

We have announced a lot of products, programs for 2010 and 2011.

What I two years ago would I have predicted a $5 million drop in Ford business in the quarter? No. I mean that's a significant -- I don't think anybody predicted $4 a gallon gas. So it is dependent on what goes on what goes on in the auto industry.

We are seeing on the down side we are seeing some slowing in Europe although we have taken programs so you have probably taken market share away so you get growth from that. But it is a difficult 12 month period I think for any company that is involved in these markets.

And again I'm pleased that Methode has been able to exit really a couple of very large customers here without hurting ourselves. We have to go back to 120, $125 million with Chrysler years ago and even more, not even more, but a significant amount with Ford.

What we have done with our acquisitions, what we have done with power, what we have done with our European business and even what we have done with technology, we are well positioned. I just, I am just very reluctant to say hey I think we are turning the corner because again what is going on in the US automotive business.

Okay. Thanks.

You're welcome.

Gentlemen, there are no other questions in the queue at this time. I'd like to hand it back to you for some closing comments.

Thank you, Doug. With that we will wish everyone a very pleasant day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.