Modine Manufacturing Co (MOD) 2006 Q1 法說會逐字稿

Good morning everyone, and welcome to the Modine fiscal 2006 first quarter earnings conference. Today's conference is being recorded.

For opening remarks and introductions, I'd like to turn the conference over to the Director of Investor Relations, Mr. Dave Prichard. Please go ahead, sir.

Thank you operator. Good morning and welcome to Modine's fiscal 2006 first quarter earnings and cash flow conference call. I'm Dave Prichard, Director of Investor Relations for Modine. Joining me on the call today are Dave Rayburn, our President and Chief Executive Officer and Brad Richardson, Vice President, Finance and Chief Financial Officer.

As you know, Modine issued it's first quarter results yesterday morning and held it's 2005 annual meeting of shareholders yesterday as well, for which a replay is available via webcast. Our results and press release issued yesterday are available on first call, as well as the Modine website at www.modine.com.

A reminder that today's conference call will be available as an audio replay through Modine's website as well as by telephone, through Friday, August 5, by calling 719-457-0820 and using confirmation code 3488622. We will follow our normal agenda for quarterly conference calls this morning. First, Dave Rayburn will make some opening comments to be followed by Brad Richardson, who will give additional perspective and greater detail on our financial results, including some segment comments.

Dave Rayburn will then close our comment section with an outlook for fiscal 2006 before we move to a Q and A session. At this time, I would like to inform you that all participants are in a listen mode only. Before we get started, I would like to review Modine's safe harbor statement.

This conference call may contain forward-looking statements that involve assumptions, risks and uncertainties and Modine's actual results, performance or achievements may differ materially from those expressed or implied in these statements. A detailed discussion of factors that could affect Modine's results are on page 36 of the Company's fiscal 2005 annual report to shareholders and in recent public filings with the US Securities and Exchange Commission. Modine does not assume any obligation to update any of these forward looking statements.

I am now pleased to turn the conference call over to Dave Rayburn, Modine's President and Chief Executive Officer. Dave?

Thanks Dave and good morning and welcome to our call.

Our first quarter is typically one of our strongest quarters and I am now encouraged with the start we have had in this first quarter for fiscal year of '06. Our momentum continues. Modine reported a 50% net earnings increase to 20.8 million, or $0.60 a share versus last year's $0.40 per share. Sales of 451 million was a record for a quarter of 29 % from last year, which was supported by our acquisitions in Asia, Airedale and our OE business, heavy duty business, that were not in last year's results.

We are also enjoying a very strong truck market and heavy-duty ag and construction markets and the ramp-up of multiple new business programs. This was the 12th straight quarter of year-over-year revenue growth. Earnings were also significantly helped by a much lower tax rate 33%, which Brad will discuss in greater detail. Equally important was our continued improvement in operating cash flow, up to 22.3 million from 2.7 million last year.

Our returns on average capital employed grew to 9.7 compared to 6.7 for the same period in '04 and 9% at the end of the fiscal year '05, and closer to our cost of capital of 10.5% and our stated target of 11 to 12 % through the business cycle.

Yesterday at the annual meeting, I talked about fiscal '05 and our first quarter in regards to our strategic activities in support of our four corporate priorities -- improved profitability, financial stability, strategic planning and business development, and finding new products and technology.

Our company continues to transition in regards to geographic and market sales mix. I do refer you to those actions in the details of that report that are highlighted in the presentation which is located on our website under investor relations. Part of our strategic journey has been finding a solution for our Aftermarket business.

Tomorrow we expect to complete the spin-off and merger into Transpro, ending a three-year effort to find and implement an optimum strategic solutions for our customers, our shareholders and our employees. Now let me turn it over to Brad so he can discuss the first quarter in greater detail. And I will close with some comments in regards to fiscal '05 outlook.

Thank you very much Dave and good morning to everyone. As Dave mentioned we are very pleased to get a very strong start to the new fiscal year which began on April 1st. Net earnings rose 50% to 20.8 million, or $0.60 per share versus 13.8 million or $0.40 per share in 2004. This represents an after-tax margin of 4.6 % of sales versus four point -- 4 % last year.

And as Dave noted we benefited from a strong truck and heavy-duty market, new business programs and accretive acquisitions. Our effective tax rate in the quarter decreased to 33 % from an unusually high 41 % last year. As we stated at that time, last year's rate was negatively impacted by the relative strength of our U.S. operations, which is taxed at a high rate -- higher rate, plus additional taxes due from the repatriation of cash from Europe in preparation for our acquisition of WiniaMando's ACC business in Asia.

We did guide to about 36 % for the fiscal 2005 rate and we ended the year at 36.3%. For fiscal 2006, we expect our effective tax rate to be slightly lower at about 34, to 35 %.

Sales of 451 million, a new quarterly record, rose 29 % versus last year's 349 million, or the 12th consecutive quarter of year-over-year sales growth. Excluding net currency rate changes, sales rose 26 %. Our underlying sales improvement was 6% without the impact of acquisitions in Asia, the OE heavy-duty business and the Airedale Air Conditioning International purchase in May.

Income from operations of 29.8 million rose 26% versus 23.7 million last year. Our operating margin was 6.6% in the quarter, essentially flat with 6.8% last year. The operating market was impacted by a negative mix of products and higher raw material cost, in particular, copper. As mentioned in the press release, effective with this quarter and retroactive by quarter we have reclassified certain items from other income expense to operating activities, to provide a more meaningful and inclusive presentation of operating performance and information.

This reclassification increased last year's reported operating margin of 6.1% to 6.8%. We saw better SG&A leverage in the quarter, reflecting, in part, strong cost-control programs. SG&A as a percent of sales fell to 14.9% from 16.2% last year. Our efforts remain focused on leveraging our SG&A base which includes R&D expenditures to support higher revenues going forward. We note here that since the Aftermarket business is a more SG&A-expensive intensive business, we expect a favorable impact in this area following its spin-off.

A positive currency exchange rate, essentially the Euro, added only $1.4 million to pre-tax earnings in the quarter. In several previous quarters, we've noted the favorable currency transaction impact from the Korean won that impacted Modine Asia's contributions. At March 31, Modine had recorded 5.3 million in currency transaction gains from the date of our initial foreign denominated inter-company loan to Modine Korea. On April 6 we entered into a zero cost (caller) to hedge the entire amount to the Modine Korea loan.

Despite a less than robust Korean economy Modine Asia provided positive operating income contribution in the quarter. We remain optimistic about the strategic importance of this acquisition to Modine, in part due to the opportunities for cross product pull-through. As discussed in our last conference call, we had secured four programs. I am pleased to report that we have secured a (follow-on) HVAC program for (Hyundai), which we assumed would not be renewed in our original acquisition model.

Our heavy-duty OE business that we acquired from Transpro and the Airedale acquisitions were also positive contributors in the quarter. Just as important as our strong EPS and sales gains, are the continuation of improved return on capital and strong cash flow generation we achieved in the first quarter of fiscal 2006. As Dave mentioned, our return on average capital employed, which we believe is the critical all-end measure of our performance improved to 9.7 %, compared with 6.9% for the same period last year, and sequentially, versus 9% at the end of fiscal 2005.

Better after-tax margins and increased asset turnover drove the improvement. Modine's stated return on capital employed target is 11 to 12 % through a cycle, and as we've noted before, the spin-off of the Aftermarket will favorably impact return on capital employed going forward by one to one and a half percentage points, as we take $100 million worth of under-performing capital out of the company.

Attached to our press release is the definition of how we calculate return on average capital employed, which I would stress, is used for our management incentive programs, reinforcing our alignment with shareholders. With regard to our strong cash flow story, after achieving record operating cash flow of 155.7 million in fiscal 2005, the fifth consecutive year in excess of $10 million, Modine reported operating cash flow of $22.3 million in the first quarter, a sharp increase from just 2.7 million a year ago. Stronger underlying operating results and better working capital management contributed to the improvement. Our inventory turns improved to 9.3 compared with 7.7 last year and 8.8 at the close of fiscal 2005. Days sales outstanding rose slightly to 53 days from 51 last year. It fell from 54 at the end of fiscal 2005.

The important trend is that, when one excludes the impact of the customer base from the Asian acquisition -- typically longer payment terms -- days sales outstanding are actually down from a year ago. Indicative of the progress we have been making in managing our working capital, by reducing our accounts receivable and arranging for more parallel payment terms with our suppliers. Our cash balance at the end of the quarter stood at 65.5 million versus 60.3 a year ago and 55.1 million, sequentially from year-end fiscal 2005.

As this cash is primarily located in our foreign holdings, Modine is currently analyzing the cost and benefits of the repatriation of foreign earnings under the American Jobs Creation Act of 2004, which, as you know, provides for a one time special dividend received deduction for certain qualifying dividends from controlled foreign corporations. We are considering repatriation of between 70 and $85 million of foreign earnings, which would result in a tax liability of between 3 and $6 million.

Our evaluation is expected to be completed by the end of the third quarter and its factored into our EPS and tax right -- rate guidance that we're providing today. Total debt to cap at the end of the quarter was 18% compared with 12.7% a year ago and 13.8% at the end of fiscal 2005. During the quarter, Modine financed with debt our $38 million acquisition at Airedale, Air Conditioning International.

We would note that our net debt, or total debt net of operating cash at the end of the quarter was only 77.8 million versus 25.6 million for the same quarter and last year, despite the combined acquisition costs of approximately 137 million between July, 2004 and May, 2005 for the three acquisitions that we made. This net debt result is reflective of the strong cash flow we have been generating.

We are pleased to report that following our announcement of a dual-purpose share repurchase program on May 18, both a 5% buy-back over 18 months and an anti-dilution program we began, we began to implement the program in about two weeks beginning on May 31st. Through July 15th Modine had repurchased 268,696 shares of common stock for cancellation at an average price of $32.27 or about 8.7 million. Finally, I would note that 2006 capital spending should approximate depreciation in the range of approximately 75 million including the impact of recent acquisitions.

Let me now turn to a summary observation about our operating segments results which are attached to our earnings release and discussed in detail in that release. It is clear that our diversification strategy continues to be our strength with some of our businesses up and others facing challenges.

The original equipment segment posted the largest revenue increase among our three segments, up 56% to $223 million, aided by the results from Modine Asia and our recently acquired heavy duty OE business and double-digit and single-digit revenue growth respectively in our truck and heavy-duty and industrial units. The truck unit had yet another quarter of solid operating income gain in the double-digit range due to the strong class A truck build rate and our strong market share.

Although our plan was based on 302,000 fiscal 2006 year class A build rate, we now see a build rate in the 320,000 unit range, up sharply from 265,000 units last year.

Sales rose, but the operating loss grew for the distributive product segment, while HVAC&R's profits increased double-digit, and the electronics cooling business loss narrowed slightly. The Aftermarket business swung significantly to an operating loss, versus a profit one year ago.

European operations had the best quarterly operating income performance of our three segments, as operating income jumped 47% to 21.2 million, driven by a triple-digit increase in income from the heavy-duty business reflecting the contribution from multiple new programs, strong markets, and currency exchange rate benefits.

I would note that during the second quarter of fiscal 2006, Modine intends to review our operating business segments structure, in light of the expected spin-off in the next several days of the Aftermarket division, which is part of the distributive product segment.

Before I turn it back to Dave, let me comment on our Aftermarket transaction. As most of you know, today is the record date for the spin-off of our Aftermarket business on a tax-free and debt-free business to our shareholders and immediate merger into Transpro to form a combined new company called ProAlliance International. The merger is subject to approval by Transpro's shareholders who will vote on it tomorrow at Transpro's annual meeting.

Assuming a favorable vote, the transaction is expected to close late tomorrow night. The New York Stock Exchange is advised that Modine's at the (ex-) dividend date for our common stock will be July 25th, the first trading day after the closing date. This marks the culmination of the three-year journey to find the best solution for all stakeholders for our Aftermarket business.

As we have previously said, Modine intends to classify our Aftermarket business as a discontinued operation in the second quarter, the quarter in which the transaction closes. We will record a non-cash after-tax charge as discontinued operations of about 40 to 55 million to reflect the difference between the value of Modine's common stock in the new company, ProAlliance, a function of the stock price of Transpro at the closing, and the asset-carrying value of Modine's Aftermarket business.

We note that the spin-out of the Aftermarket will squarely establish Modine as a predominantly OE supplier to technology-driven OE suppliers, and that our pre-tax margins and return on average capital employed will both improve. With that let me turn it back to Dave for some closing comments.

Thanks, Brad. Let me comment on our priorities and outlook for fiscal 2006. Our priorities for the coming year is, launch our many new programs that we've secured both here in North America, in Europe, and in Asia. We certainly don't want to do them for practice. We have to focus and stay focused on the continue integration of the three acquisitions that we've enjoyed this last year. Strong focus on product development -- it is the primary vehicle for us to differentiate versus price. We will continue to focus on our globalization efforts.

We've done some very good things externally in regards to expanding our footprint. We will continue to evaluate that. And a very high priority internally is the globalization of our company in regards to product design, processes, our business systems, financial systems, et cetera. We think that can, and has differentiated us in the marketplace, specifically in product design. We need to better leverage our global purchasing opportunity, respond to and manage the ever presence of our customers' high expectations for price-downs, and certainly some very aggressive competition. We are going to continue to focus on our electronics business, dealing with their short-term profitability and long-term strategy, and rollout our new corporate continuous improvement initiatives which will continue to improve value for our shareholders.

From a financial outlook standpoint, given our first quarter results, we have become more optimistic about the magnitude of our fiscal 2006 EPS growth. While growth this year will be more modest than last year's rate, we need now see high single digit to low double digit EPS growth in fiscal 2006, from the $1.79 we achieved last year and with the corresponding higher operating cash flow and improved returns.

We will review and update these outlooks in future quarters. We have discussed many of the positive drivers for our full year. I do need to comment on some of the significant challenges that we face in this business -- higher raw material costs and the lag effect and recovering those with our customers; oil cost impact, directly and indirectly, on our business; the ongoing pricing pressure that I just mentioned; launch performance; telecommunication recovery; and exchange rates. So with that, operator, we will be glad to take some questions.

[OPERATOR INSTRUCTIONS] We will take our first question from David Leiker with Robert W. Baird.

Alright. Good morning, all.

Good morning Dave.

The guidance you provided -- does that include the Aftermarket as a discontinued operations?

Yes. Let me clarify that. The guidance basically assumes an apples to apples meaning that the Aftermarket is assumed to be part of the business through closing, to closing tomorrow, so that's kind of the -- it's an apples to apples comparison.

Obviously, we will need to go back and restate our history to pull the Aftermarket out and show that as a discontinued operation. So -- and I should probably just clarify again that that guidance obviously excludes the impact of the after-tax charge that we will take. Again, that after-tax charge simply represents the difference between the value of the stock that our Modine shareholders receive and the carrying value of the assets on Modine's books, which again, we estimate between 40 and 55 million. So again, the guidance, David, is just simply an apples to apples. And it does assume that the Aftermarket is part of our operations up until closing, but excludes the non-cash charge.

Okay, so what -- how did that business perform in the first quarter for you then?

That business was not profitable in the first quarter.

So, on a discontinued basis -- I mean, that probably moves the number higher?

Correct, correct. As it would last years, of course.

Right. Did it lose more this year than last year?

Well, are you talking quarter or are you talking annual, now?

First quarter.

No, last year it was profitable in the quarter versus this year -- it swung to a loss position.

Okay, great. And just an update on where you are in the BMW launch, the three series ramping up here and whether you are over the curve -- that that's accretive to earnings at this point or not.

Dave, the launch has gone very well. The team that supports the -- the Series One and the Series Three launch is, you know -- the same facilities support both those vehicles, although the designs are different. It's gone very well and that is behind us.

So that's -- you had a normal level of profitability?

We'll still have some ramping up in the second quarter on the Three Series. The One Series, and again my reference to what we planned versus -- I'm not sure what BMW's public plan was, but what we've built into our operating plan -- the One Series is actually launched more rapidly in a higher volumes than we anticipated. The Three has been a little slower but we think by the end of our first half we'll actually be up about 6% from where we originally planned in the combination of the two programs. But we're pleased with the launch.

If you take --

Pardon?

If you take your current operations with BMW versus what it was doing last year, is that up or down, or is that still a drag on earnings?

I would say we're up because if you remember last year we talked about the (pale-off) of the old Three series volumes. The (pale-off) was more rapidly than we have anticipated. And certainly we are enjoying the One Series volume that we didn't have in last year. There's a partial offset in that the X-Three volumes are down on a year-over-year basis. But off the top of my head I don't know, I would say net, we're up, but I'd have difficulty guessing to what degree.

Okay, so that still is a incremental profit driver here through the next several quarters?

We should be fully up to the plan volumes by the end of the second quarter.

Okay, great. And one last thing, on a post-spin basis here on the Aftermarket -- We've seen this as other companies who spin off a business unit, and then are (lost --) overhead at the corporate level that now have the lower revenue base. How are you addressing that issue that a portion of that Aftermarket business that was covering fixed costs at the corporate level? Are you planning any actions to help mitigate a negative impact on that?

Well, certainly we have enjoyed the volume ride we are having in total for the company on SG&A and we have been very prudent in regards to not allowing the organization to become too aggressive or overly agressive in support of this new volume.

We have been very pragmatic in reviewing the direct overhead that supports this business and with the change, there will be some resource impact that is taking place with the divestiture at the corporate level.

And are those costs included in your guidance?

Yes.

Okay, great. I'll come back. Thank you.

Operator?

We have no further questions in the queue at this time.

Mr. Leiker has a follow-up question.

Yes, Dave. You should have just stayed on. A private call this morning!

These expenses that you reclassified -- Brad, can you talk a little bit about what -- what they are? I'l like to get my arms around it a little bit better.

Yes. Basically we have reclassified, for example, discounts on our purchases, which were down in Other Income. They are now up in Operating Income. Our royalties that we received for the various licenses that we have issued on our patents -- again, those were part of Other Income, they are now up in Operating Income.

Any gains or losses on our tooling that we have in support of our various programs, again, has been moved up. And finally, asset dispositions -- this isn't business dispositions, which would be down in Other Income, like the sale of Modine Canada, but asset dispositions are also up in Other Income. And, quite frankly, we're basically trying to make our presentation in line with how others report.

Great. And then the -- what's left in other income?

What's left down in Other Income clearly will be the interest income -- and expense -- on our cash and our debt and, also, foreign currency at transaction gain or losses.

Okay.

Oh and David, one another -- sorry -- is our joint venture earnings from our holdings in Japan, France and South America.

Okay. Great. And then obviously you had a very strong first quarter. If you could give us some perspective of how that came in relative to what your expectations were three months ago?

I'll give you -- my perspective is that in our Asia business, Asia came in stronger than we had anticipated, driven by volume. If you remember, the Korean economy took quite a downspin and we took a very -- at this point, I think -- a conservative view of those volumes. They ended up being stronger and we were very pleased the way the organization converted on those volumes, which was very pleasing and encouraging. Certainly our classic truck market was stronger than we anticipated. We knew were in a strong market.

If you remember, our plan was at three-oh-two. We had ratcheted it up. But its continues to be stronger than we anticipated. And the other piece that we've been very pleased with and a piece of business that, candidly, we struggled with four or five years ago was our heavy-duty business in Europe, which is a combination of track and off-highway.

Right.

And we've worked very hard strategically over there on our cost base and our factories and also our relationships to our customers and securing new programs. And that organization is performing very well and that's candidly why we feel stronger in regards to the full year -- is we expect that organization to continue to convert on their incremental volume very strongly.

Okay.

Yes. And David clearly there are some positive factors. I think some things that surprised us quite frankly -- is the continued basics of supply and demand logic is the copper prices, which were less effective today than we were a few years ago. But the copper prices were a drag on the business in our heavy-duty and industrial business.

Okay. You have a couple of fairly large pieces of business that are up for replacement. Are there any updates you could give relative to where you are in that process?

There's a number of pieces of business in North America, specifically with Chrysler. Those decisions have been delayed. There is an interesting phenomenon that's going on in our automotive business not just with Chrysler but with others -- is whether the businesses are going to be component sourced, system sourced, or front-end module sourced. And so candidly, all of that is creating a lot of exercise in the market as the customers on both sides of the pond evaluate those alternatives.

I know GM's been public about going back to more component optimization versus the systems approach. While we see others becoming very aggressive -- at least, evaluating the front-end module approach. And, candidly, I think it has delayed some of the sourcing decisions on some of these platforms.

Is it just the sourcing decision that is delayed?

I don't know. Are you talking about maybe the vehicle? I don't have a feel for the vehicle. It certainly has impacted some of the sourcing decision process.

Okay. And the last thing is -- you've made a number of acquisitions here fairly recently, a fairly reasonable size. Give us a sense of where you are in integrating those into the business. Are you past the risk of something popping up in surprising you in that regard?

Well, certainly the Korean acquisition was a very large acquisition in a new region for us. We've got a very strong management team that we've put over there both from Brad's side -- the financial side and also from the operating side.

I would say we're in a journey. We're going through labor negotiations right now in Korea, which is an annual event -- it's a national event. They are not like the kind of negotiations that the U.S. is evolved-- they're more like where we used to be. We've got to better understand that and hopefully mitigate this annual process over the long term. So that's going to be a long-term deal for us. How we utilize those assets in Asia, how -- I think we need to do some (inaudible) integration within Korea.

So I'm not disappointed but this is going to be a journey where I would say we're going to be in launch for a couple of years. In regards to the Transpro OE business, I would say we're done. We did a hundred-day model. You know, the old GE model?

Yes.

The organization was very focused. I would say the organization in Jackson Mississippi has responded to Modine extremely well. We have identified a lot of synergy in the purchasing side and we're doing some product rationalization. And I would say that's now back to being a mature business for us. There may be a few dangling participles but not too bad.

In regards to Airedale, I would say we just started the journey. We've got the hundred-day models being implemented. We have Modine management -- both finance and general management on the ground and U.K., first day. We're very active in working through our acquisition strategy. 'Cause if all we did was buy this business for the net returns the business was returning, it would of been a bad buy. It has to -- we have to secure the identified synergies that we are working through and there's a real opportunity on cross selling.

So from an operational standpoint, I think the hundred-day model -- we're a third through. From a business cross selling and integration -- I think it may take us a couple years on that one.

Did you think you are in a position resource-wise to continue making acquisitions or do you need to pause here for a bit?

Well, candidly, we've had a hell of a year.

I know you have.

And couple that with the (inaudible) deal and, candidly, SOX. SOX was an interesting journey. I used the number yesterday in our annual meeting. Our out-of-pocket cost was $2 million dollars for SOX. Plus the internal, and so candidly, a couple of months ago in front of the board, I did say, we are going to continue to look at the acquisition side.

It would be foolhardy for us to not continue to evaluate our alternatives but I need to make sure that we establish credibility with ourselves that we can execute.

Yes.

That was about two and a half months ago -- and I just took you through or at, almost three. I feel pretty good. We've got the balance sheet to do something if we find the right thing. So our committee is active but I would not anticipate as having as much activity this year as we had this last, or I might have my feet up.

And then, one more question popped in my mind here. One of the items that came along with the Korean acquisition was a presence in China.

Yes.

Where are you in terms of expanding your operations there, both from addressing the local market as well as using that as a potential source of components elsewhere in the world?

Yes, it is two-fold. We've established a purchasing office in Shanghai, which, actually that is where our Asian headquarters is located.

And that is being staffed. It is staffed, actually, now, but we still have some ramp-up. And their being very aggressive in source costs, bringing back product opportunities in both castings and other components, both to Europe and North America and that's actually independent of the acquisition.

In regards to the (wholly owned) that is in Shanghai, that's a small business that does assembly work for the bus market and excavators and construction. That business is down significantly. The joint venture we have in Hefei China with a -- actually it is an automobile -- a vehicle manufacturer -- a regional manufacturer -- is growing and we're very encouraged with that.

We are very active in trying to determine how we're going to put a facility into China, whether it be joint venture, acquisition, or Greenfield and I would say over the next year I would hope that we would be able to say we've done something there but the risks are real and we're not going to being naive about doing something there too quickly. The other little piece is that the Airedale acquisition does have a presence in China, although small and we're going to be evaluating how we can leverage that aggressively since they are already on the ground.

That's interesting -- that business over there. My observation is that there is a substantial growth opportunity there for the local markets.

Absolutely.

And my view is, people need to be on the ground over there. Yes. And Dave, we certainly -- automotive opportunity -- especially with people like BMW -- are very real.

Right.

But we would view, at least, where we are at and where our competitors are at. There may be a greater opportunity in the off highway truck market for us as an initial entry for local supplies and automotive. But stay tuned.

And I would agree with that --it is just interesting -- the scale of what's being done over there. It just seems to lend itself very well to your focus -- of how you run your business.

Yes. I would say the key think that we have to do is that we have to manage our appetite.

Okay.

Thanks Dave. Operator, any other question?

[OPERATOR INSTRUCTIONS]

It appears we have no further questions.

Oh, that's great. I do appreciate those attending and we look forward to our next conversation after our second quarter. So have a great day. Thank you.

That does conclude today's conference. We thank you for your participation.