NewMarket Corp (NEU) 2007 Q4 法說會逐字稿

Greetings, ladies and gentlemen and welcome to the NewMarket Corporation 2007 earnings conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Fiorenza, Principal Financial Officer for NewMarket Corporation. Thank you, sir, you may begin.

Thank you for joining me to discuss our fourth quarter and total year performance. With me today is Teddy Gottwald, our CEO. I have a few planned comments, after which we will open the lines for any of your questions.

As a reminder, some of the comments we will make today are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We believe we base our statements on reasonable expectations and assumptions within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control. A full discussion of these factors can be found in our 2006 10-K and the update in our third quarter 10-Q.

We released earnings last night after the markets closed. The highlights include recurring 2007 earnings up 42%, recurring fourth quarter 2007 earnings up 64% over fourth quarter last year. We recorded record petroleum additives earnings in 2007. During '07 we repurchased $83 million of our stock without any borrowing. We began the construction on our office complex for MeadWestvaco. And in October the Board significantly increased the dividend. Obviously we are very pleased with these results.

Our earnings do contain a few unusual items that make the report a little more involved, so I will take some time to cover those. You may recall that when we terminated the marketing agreements with Innospec early last year, we stopped reporting our TEL activities as a reportable segment. This decision meant we had to recast all of the previous earnings under those agreements as discontinued operations.

Our results included the benefit of some onetime tax events this year and quarter. The majority of my comments will focus on our earnings from continuing operations before those onetime favorable effects, so you can better understand how our underlying and continuing business is performing.

Earnings from continuing operations, excluding special items in the fourth quarter, improved to $15.4 million or $0.96 a share, which is a 64% increase over last year's performance for the same quarter. Including all items, net income for the fourth quarter of '07 was $27 million or $1.68 per share, compared to net income in '06 of $4.5 million or $0.26 a share.

Earnings from continuing operations for the total year '07, excluding special items, improved to $69 million or $4.07 a share, an increase of 42% over earnings on the same basis last year of $48.5 million or $2.78 a share. Including all items, net income for the year was $95.3 million or $5.62 a share, compared to net income for last year of $57.5 million.

Net income for the fourth quarter in years '07 and '06 included significant special items. The 2007 special items include the gain of $16.8 million associated with the termination of the TEL marketing agreement with Innospec. It also includes a tax benefit of $9.5 million primarily associated with the adjustment of taxes previously provided on the undistributed earnings of certain of our foreign subsidiaries.

We had been providing for the taxes we would have incurred when earnings from subsidiaries that had lower tax rates than the United States were dividended back to us. We determined that certain of our subsidiaries would not be able to make those payments, as the funds had been reinvested in the local businesses. This allowed us to unwind the provisions for taxes that had been build up over several years. This is a non-cash benefit in the sense that no extra funds will be coming to us.

We have also determined that those subsidiaries will not be in a position to dividend future earnings back to the United States, as they satisfy their capital needs from their earnings. This determination means that we will not be providing additional taxes as their lower tax earnings are included in our results. This will have the effect of lowering our effective tax rate on a go forward basis. We anticipate that the full year 2008 tax rate will be around 33%.

As I mentioned earlier, our primary focus is earnings from continuing operations excluding special items. We believe this is the most meaningful measure of how our business is performing. This is also the primary metric that our management team is measured against. As a reminder, that comparison has us earnings $4.07 a share this year and $2.78 a share last year.

The petroleum additives operations continued its excellent performance in 2007 with sales increasing to $1.4 billion, an increase of 9% over last year's sales of $1.3 billion. When we split the sales, about 50% came from changes in prices and currency, and the remainder from volume and mix improvements.

Operating profit for '07 was $129.4 million, which is 29% higher than last year's performance. Petroleum additives operating profit for the fourth quarter of this year was $28.7 million, which represents an increase of 46% over last year's fourth quarter.

The fourth quarter results did show a drop in operating profit margin of about 200 basis points when comparing the fourth quarter to the third quarter. There are quite a few items that contribute to that margin drop. The major favorable item was the impact of foreign exchange on comparative results. The unfavorable factors were rising raw material costs and increased spending in the plants in GS&A in this comparison. The non raw material costs changes are simply timing, and the spending was in line with our plans.

The increases in raw materials are the result of continued escalation of petroleum-based materials. Crude oil and other key feedstocks ended 2007 at record highs. We have been in that marketplace raising prices to offset this increase, as well as the increase in certain other costs. We believe we have been successful in this effort. The result of this effort should show in the first and second quarter results as the price increases become effective throughout the quarter. We will also see the continued rise of raw materials in this period, as all the raw material increases did not happen in the fourth quarter.

The overall year was successful due to the factors we previously discussed -- focused efforts to deliver the goods and services to our customers that our customers need to succeed in their marketplace, the introduction of more effective formulations, better mix of products, and price increases to restore margin from rising raw materials. Of course if the raw materials continue to rise, we will be repeating this process again.

Contract manufacturing and other for the quarter was a loss of $2.3 million. We continue to believe that this portion of our business will be in the negative to positive $1 million on an annual basis. The higher loss for this quarter relates to the adjustment of certain reserves associated with some old manufacturing sites.

The year and the fourth quarter continued to benefit from our debt restructuring that we completed in December of 2006. The benefit of the lower debt costs was about $3.5 million before taxes for the year.

The Company repurchased $83.2 million of its common stock during 2007, which was 1.7 million shares at an average price of $47.82 dollars a share. At year end we had 15,600,000 shares of stock outstanding. 622,596 shares were repurchased at a cost of $33 million during the fourth quarter. The average price purchased in that timeframe was $53.31. The purchases were accomplished with no additional borrowings. At year-end we had $17 million remaining on our repurchased authorization.

On the cash flow side of our business, we ended the year with $72 million of cash compared to $60 million last year in '06. We were able to build the additional cash, fund capital expenditures of $31 million for our business, excluding Foundry Park, pay dividends of $6.6 million, repurchase $83 million of stock, and contribute $7 million to Foundry Park. The year benefited from the cash we generated in our business and the proceeds we received when we terminated the TEL marketing agreements. The changes in our working capital on a year-to-year basis were small.

We expect to spend about $35 million to $40 million on capital expenditures in 2008, excluding Foundry Park. These funds will be used to fund our ongoing normal needs to satisfy environmental, maintenance, debottlenecking and systems and facility upgrades.

In October of '07 the Board declared the dividend in the amount of $0.20 a share. That dividend represented an increase of $0.075 a share, or 60%, over the previously paid dividend.

Also during '07 our wholly-owned subsidiary, Foundry Park I LLC, began the construction phase of the multistory office building for MeadWestvaco. The project is proceeding well. It is on plan and schedule. Our project financing is in place, which will allow us to borrow about 85% of the cost of the project. The development is projected to be completed by the end of '09, and begin making a positive contribution to our earnings at that time.

During '08 we expect to have total outlays of $60 million, with $6 million being contributed by NewMarket and the remainder being borrowed under the construction loan facility.

The year '07 was an outstanding one for our business. As we have communicated in the past, we intend to leverage our financial strength to increase shareholder value by growing the business, with acquisitions being an area of primary interest. Our primary focus in the acquisition area remains in the petroleum additives industry. It is our view that this industry will provide the greatest opportunity for a good return on our investment, while minimizing risk. We remain focused on this strategy, and will evaluate any future opportunities.

Nevertheless we're patient in this pursuit and intend to make the right acquisition for our Company when the opportunity arises. Meanwhile we believe we have many internal opportunities for growth in the near term, both from geographical and productline extensions. Until an acquisition materializes, we will build cash on our balance sheet and we will continue to evaluate all alternative uses on that cash to enhance shareholder value.

In the petroleum additives segment we were are beginning 2008 with a lot of momentum, and expect to be able to benefit from the many gains of '07. We have a solid business base, a good technical product offering, and an excellent team who is dedicated to our customers and our business. Nonetheless, like many industries, the petroleum additives market continues to face many challenges. Raw material prices are once again rising, and there is uncertainty in product demand should a recession in the United States or other parts of our marketplace become a reality. We continue to monitor the raw material situation closely and are committed to attempting to recover any margin erosion caused by increasing raw materials.

Except for the possible impact from an economic slowdown, we expect that the petroleum additives segment will perform better in 2008 than in 2007. It is our plan to file our 10-K during the last week of February. I encourage you to read it to get a fuller explanation of several of the topics that I have highlighted today.

Thank you. And now we will open the lines for any questions.

(OPERATOR INSTRUCTIONS). Saul Ludwig, KeyBanc.

Could you give us the components? Your revenues were up 18.7%, what was the split between volume, price and FX?

For the year?

For the quarter.

For the quarter?

And then for the year.

I have the year. I didn't do that split on the quarter. For the year it roughly 50-50 price and volume mix. Then on the price side about half of that was currency, and half of it was price. So 25 currency, 25 price, 50% volume.

Was your volume actually up for the year?

There is no simple answer.

Your volume was down 10% in the first quarter. It was down 6% in the second quarter, up only 6% in the third quarter. So you were sort of a negative cumulative for nine months. Do you have any idea what your volume was in the fourth quarter?

Yes, we know what the volume was. It was a good mix is what it really boils down to. We just look at everything --.

So maybe price mix is one component, but what was the volume?

The volume component on a high level, the units were flat, but that is not a good comparison in our business.

I understand. And that is for the fourth quarter?

Yes.

But flat volumes for the fourth quarter?

For the third quarter, yes.

For the fourth quarter?

Yes.

Then price mix, how much was currency?

In which period are you asking?

In the fourth quarter your revenues were up roughly 19%. How much of that 19% was currency?

Hold on a second. Currency for the quarter to quarter was about $3.5 million. I don't know the percent.

That is on FX?

Yes.

Okay, $3.5 million. And so the difference -- volume was -- so $3.5 million would be on a base of $300 million about 1.1, 1.2%. It would seem like price mix would have been up like 18% or something like that, a pretty big number.

Yes.

Then on the cost side of the equation, do you have any idea what your unit raw material cost may have increased?

Percentagewise?

Yes.

I don't have the weighted average. I know that when you look at December and you compare it to October, if you took a look at that.

The December compared to September maybe.

End of October to the end of the year. So what happened in the fourth quarter basically -- base oil was up 13%, PIB was up 10%, crude oil finished the year at record highs. So our whole raw material basket was going up in the end of the year. And we are seeing that follow through in the first quarter of this year.

Do you think that when we look at your margins in the first quarter, do you think -- which in the fourth quarter your margin was at 7.9%, and you appropriately explain why it was less than the 9.4% that you had in the third quarter because of the raw material costs. From the first quarter you're going to be comparing against a margin of 9.4%. Do you think we are going to see that margin tilt up or tilt down versus the 9.4, or do you think we're going to see it be about the same?

I think it would be about the same.

Which means you'll do better than the margin in the fourth quarter?

Unless raw materials keep going up after we hang up this phone.

As you see it today. I will appreciate that no one has got the perfect crystal ball.

That is a correct statement. I would expect (multiple speakers).

The other more high-level question I had, a year ago you talked about the growth opportunities for the business. Now when we look back on 2007 those opportunities, to the extent that they were achieved, were more in the mix because the volume was relatively benign. When you talk about the growth opportunities for 2008, are you talking about a resumption of unit volume growth? And if so, where are those opportunities going to come from? Or are those opportunities, again, related more to mix, and that we would not expect to see much in the way of volume?

I think that we will probably continue to see more of the same. Just as a reminder, you can't look at absolute volume levels in our business and draw a direct conclusion from that because of the reformulations that are constantly going on in our productlines. It often means less volume (technical difficulty) same result.

We are operating flat out in our plants right now. I think most of the industry probably is. We don't have big volume growth ambitions. But we will continue to expand geographically, continue to expand our productlines into new areas, and continue to look -- to get the most out of the pounds that we do sell.

You are running full out, does that imply you are sort of selling everything you can in terms of the number of pounds, or gallons or however you measure it, and since you didn't really have any growth in your units, is that because you didn't really have any more capacity? And what you tried to do is say, well, if we've got limited capacity, and we could only make let's say 100 units this year versus 100 units last year, we want to make the 100 units a more productive 100 units than the same units a year ago?

You could say that and be accurate, but we are pretty pleased with our growth in 2007.

Which was on the mix side and not so much on the volume side.

Again you can't make that direct comparison because of the reformulations that are constantly going on.

Ian Zaffino, Oppenheimer.

A very good quarter here. A couple of questions. The size of the price increase that you had implemented this past quarter, can you give us an idea of what that was?

The price increase was sufficient to cover the raw material and other costs. There is no one number. I wouldn't even want to give you a range. Every customer is different, different circumstances, so we will leave it right there.

But I guess if you say that your raw materials were up in the low single digits to recoup that, you would have to raise prices by kind of the high single digits. Is that in the ballpark? Am I thinking about that right?

I think you might be a little high, but anyway, single digits.

The second question would be, as you look for uses of your free cash flow, I know you had said that you are looking at some acquisitions. What size acquisition are you looking at doing? What is kind of the maximum you would do, or that you would feel comfortable with? And would it just be from the cash balance or do you look to lever up? If you could give us some detail on that, that would be great.

Directionally we don't mind levering up for the right acquisition. We have stated that our focus in the acquisition arena is almost exclusively on the petroleum additives industry, that remains the case today. We do look some outside the industry, but generally our interest and our efforts lie within petroleum additives. In that space the acquisition opportunities, such as they are, tend to be smaller rather than larger. But we're not afraid of debt, if it is to expand in an area that we know, where we can get a lot of synergy.

The way I look at it is I think there's a big opportunity in the engine oil additives from an M&A standpoint. I was just wondering how you felt about that?

I am sorry?

I said there is an opportunity in the engine oil additives business that is quite a large opportunity. I was wondering how you felt about that, doing a deal of $1.5 billion to $2 billion?

I'm not aware of any large business that is for sale today.

Robert Felice, Gabelli & Co.

Congrats on the very nice finish to the year. A couple of quick questions. I guess if we look back historically, 1Q of the following years is always a bit stronger than the fourth quarter of the previous year. I was wondering if there was any pull into 4Q ahead of the price increases that you implemented such that, I guess, we wouldn't expect that tend to continue into the first quarter. Or do you think that the historical pattern will hold and first quarter '08 revenues will be higher than the fourth quarter of this previous year?

I don't have any data that would tell me there was a pull forward of demand.

I can't think of anything fundamentally that would lead our expectations to be different from historical patterns.

We should expect then that first quarter revenues will be in excess of fourth quarter of this past year?

I think that is reasonable, yes.

David, you also mentioned that base oil costs are up 10 to 12% or so since the end of December, and you have raised prices a bit. As we look to 2008, I'm just curious where you stand relative to your price cost gap. I know if we assume that raw materials are flat here on out through the year, have you implemented enough price to maintain margin, or will you need additional pricing?

We believe that raw materials today, where they are today, our actions are sufficient.

We also believe it is unlikely that they will stay, because the rate of acceleration in the fourth quarter and the last couple of months has been troubling.

Relative to that dynamic, Teddy, do you expect to feel on an overall basis margin compression through the year, or do you think that relative to pricing you will be able to maintain margins?

I think we will be able to maintain margins. As David said, we're okay where we are at this -- February 1. It is rapidly changing, but I don't, again, see anything fundamental that would lead me to believe we can't recover the increases in our cost.

You have had this really positive mix dynamic over the last couple of years as you reformulate product. To the best you can, and I know it will probably be a little difficult to answer, I guess what inning in this process would you say we're in? And I know it is an evolutionary process and it is going to continue to change, but relative to the amount of your units you have seen convert to this higher margin, how much is left to go?

I really wouldn't compare it to a -- it is hard to put it in those terms. It is not simply reformulation -- that is a big part of it and will continue to be -- it is also the result of many, many years of dedicated effort on our researchers to expand our knowledge and to really strengthen our expertise in some of the more specialty areas. That is what we have seen over the last couple of years really pay off.

Do you think that will likely continue over the next 18, 24 months to the same magnitude as that which we have seen over the last 18 to 24 months?

Yes, I think our commitment to research and development in this area, and our spending in this area, is certainly the same as it has been. It is absolutely critical to our strategy that when our customers need solutions in these very high-tech areas that we have those solutions for them, not just for today, but for their next generation of product.

Then I guess lastly, if I look back over the last couple of years, petroleum additives has been able to expand EBITDA margins in excess of about 100 basis points per annum. As I look to 2008, if we assume that you can maintain margin relative to your price cost gap, and then we overlay this mix factor in there, is it fair to assume that you could achieve a similar kind of margin expansion, or do you think that relative to the raw material cost challenges that will be difficult?

The raw material question is just so unknown. Put that aside. It is our stated goal to bring higher value, higher performing products to our customers, which would have the impact of making our margins better.

It sounds like, given where we stand today, if we don't see any dramatic rise in raw material costs or further rise relative to where they are today, you should be able to expand margins by a similar magnitude?

That is our goal, but we will know together. There is no way we can deliver -- promise to deliver that.

Ross Berner, Weintraub Capital Management.

A couple of quick questions. When do you think you'll start to be able to get some indication of the economic impact of Foundry Park?

Everything is going to go on the balance sheet for all of '08 and '09.

I'm talking about the earnings stream.

It won't be until early '09 we will be talking about that. It is going to be a small contributor to earnings is what we see today.

You mentioned there deals out there are small, but large for the most part. I am just curious if you have heard any thing about the Infinium transaction, and if that is even out there?

We're aware that Infinium's parents have a strategic review of the business going on. We're not aware that that review has been completed. And we certainly are not aware of the business thing for sale.

Fair enough. Finally, can you just talk about the seasonality drivers from Q4 to Q1 and how that historically has worked and why that happens?

Q1 and Q4 in a lot of ways are very similar, if you want to talk about seasonality. The second and third quarters tend to be slightly stronger than the first and fourth. A lot of times first quarter turns out better than fourth quarter because, despite a lot of our efforts, fourth quarter tends to attract some costs that first quarter doesn't. So there's really no big difference from a demand from fourth and first. First is probably a little bit stronger than fourth historically, but not much.

In terms of just the car part is one of the big drivers obviously for the additives market. But as cars get newer and more sophisticated, less need for additives, is that -- when will when will that register for you?

That is an evolutionary item, and it has been that way for a long time. The newer engines tend to have smaller crank cases and use less oil. Drain intervals tend to get longer between them. But the technology that goes into the newer oils is a lot more intense than in the past. There's a lot of pushes and pulls on that that have been playing out over extended periods. I don't see anything to make a dramatic change in those factors looking out into the near term.

When there are changes in the new engines, it does take a number of years for that to ripple through the entire world car population -- quite a number of years. I guess, as we look at it, we see the demand for lubricants in North America being relatively flat, demand in Western Europe being flat to maybe a little bit negative growth, and the Asia-Pacific region growing quite a bit. You put it all together and you are looking at very low single digits in terms of growth. And that is pretty much our view going forward.

Thank you for that. Just lastly, really impressive use of your cash and cash flow to buy back stock. It shows an amazing amount of confidence in your business, and that is to be commended.

Mike Judd, Greenwich Consultants.

A question on the acquisition strategy. With the private equity guys somewhat out of the market these days, and obviously if you look at the stock market some prices have come down. Do you think that the environment for potentially adding -- and also there are some companies out there obviously looking to divest -- publicly have said they want to divest some of their productlines -- is the environment better today in terms of potentially getting something done?

It could be. It is better in certain ways, as you pointed out. It also means that capital for us is more expensive. But it is an area where there is a lot of change going on right now. It may be a little early to tell, but we're certainly tracking it. And if it continues in the direction it is going, it won't impact our strategy dramatically. Petroleum additives will still be our core focus, but it might lead us to expand our horizons a little bit. We haven't had any interest in competing with private equity firms paying huge multiples for businesses where we don't have an edge over them. We will see. But our emphasis will continue to be on petroleum additives.

Secondarily, the reformulations that you have been doing in the additives business, from a raw material prospective could you help me understand whether -- because maybe there is different chemistry or whatever -- should we be tracking different types of raw material indices or thinking about some of these additives costs? Is there anything that we should be thinking about that is different?

Not really from that prospective. The basic building blocks are essentially the same. And we tend to work with our existing suppliers when we want to modify them.

Then lastly, I guess there was some discussion last year by one of your competitors that there was a potentiality that, at least at some point this year, that there should be some additional base soil capacity coming on, which might help with the escalation in the underlying petroleum price inflation. What is the latest on that?

I'm not fully up to speed on that, but I would have to say directionally that is probably the case.

When do you think we get some relief? Is that more of a second half story, or do you think we could start to see some relief maybe in the first half?

I'm sorry, I can't answer that, but I'm sure there is some published material on that topic.

Bob Robotti, Robotti & Company.

Of course as a long time shareholder, I have to say you guys have done a phenomenal job over the last number of years. Congratulations on that. Of course, people have asked and mentioned Infinium, and of course you say that you understand potentially they're doing a strategic review.

I guess one of the questions we are all kind of asking is, if for some reason the decision was to put that on the block, obviously the size of that wouldn't in any way deter you from evaluating it and potentially being a bidder, of course, dependent if is the right price? Is that right?

First of all, the parents announced that they're doing a strategic review. That is not our understanding. That is what we've read. We have indicated our interest to grow in the petroleum additives field. The business is not for sale. If it did come up for sale, we would certainly take a look at it.

Would there be any way you would envision, if one of the sellers would decide to monetize their investment and the other not -- and I guess maybe it is to speculate to engage in, would you still consider some kind of combination, although not fully as clean as a full acquisition?

I don't really think it is worthwhile to speculate.

Can you, of course one of the strong factors in terms of fighting increasing raw material costs is the capacity situation, of course. That has been a big benefactor you have had in the last year. As you say, you're close to full capacity, so what you have been doing is being more selective on the product, and therefore the combination of that and the money you have spent on R&D in identifying new niche products have played together perfectly well it would seem, so that you continue to make the same quantity, but of higher priced, more valuable higher margin products. And the driver there is industry capacity.

It is there a spare capacity was out there in the industry that potentially changes that dynamic and would affect the industry's ability for cost recovery? Was it a year or two years ago [the result], had closed that facility in the UK? So are there other facilities that -- there is spare capacity that could be brought online?

I'm not aware of any out there that could be brought online. But I will just remind you that our capital spending in the last couple of years has been pretty high, higher than it has been. And a lot of that is going toward debottlenecking to do exactly what that word says, to eliminate the choke points in our production processes so we can get additional volume to serve the market.

I'm quite sure our competitors are doing the same thing. So it is a bit of a moving target. But I think that when I look at worldwide demand for additives, and I look at what we can all accomplish through debottlenecking, I don't see the need for any significant new capacity. I don't think there's any out there, and I think debottlenecking is the way to go.

Could you talk a little bit more and give us any color on the R&D? Because I guess as I think about it, what you have done is spent time to identify products that have changed your mix, that clearly had better margins in them. Is there -- of course the idea with that would be that you have identified a new product that is a differentiated product with a higher margin that actually has good capacity or good volume capabilities. Are any of the R&D money spent on new products introduced in the last couple of years on products that really have significantly greater volume potentials to them?

So could -- what is the likelihood you could actually accelerate how much the niche product high value, high margin product you might be selling and change even more the mix in terms of the total?

Most of these applications tend to be relatively small volume. I don't see a significant change in the volume margin relationship of our development activity.

Could you then give us some color on the continuing process, and is the identification and introduction of new niche products something that is still accelerating? Is it decelerating? Is it staying constant? Can you give any color in aggregate as a portfolio then what the outlook might be for the next couple of years on that category?

I see it in a general sense being pretty much on par with the kind of introductions we've had the last couple of years. I don't see a significant change in either direction of our rate there.

There is still a lot of opportunities out there for us from a development standpoint. There are still quite a number of niche areas where we have no product, not just ones that may not be very cost-effective. There are some where we we just don't compete at all. So we're excited about the range of possibilities that are out there. Oftentimes some of these applications have a one year or two year field trial associated with bringing -- or entering these smaller areas. Nothing happens really quickly in this industry. I really expect to see more of the same, but we're not running out of opportunity.

Thanks a lot. And again, congratulations on the last number of years and the job you have done.

Robert Felice, Gabelli & Co.

Just a quick follow-up on your all other category. I know it is a pretty small component. But, David, earlier you said you expect that business in '08 to be a loss of $1 million to a gain of about $1 million. And if we take the midpoint of that breakeven and compare it to '07, you lost about $7 million in that segment this year. And if my math is correct, and I want to make sure I am understanding this correctly, that is about a $0.30 per share tailwind that you have coming to you in '08. Is that correct?

If that is what your arithmetic said, yes.

Saul Ludwig, KeyBanc.

A little accounting clarification. I like the table you guys give to separate special items to get the continuing operations in there. What you showed here is that you had $69 million of net income for the year, and $54 million in the fourth quarter. But that doesn't jive with what was reported in the nine month statement. There seemed to be -- for nine months you reported at $3.96 a share from continuing operations, diluted, ex specials. And then you add the $0.90 some odd from the fourth quarter, $0.93, we get a number less than the $4.07.

It seems like there were some other adjustment to the tax provision that was retroactively applied to somewhere in the first three quarters of the year. You know what I'm talking about?

Give me your address. We are going to send you the prize that -- we were wondering if anybody would catch that. Good job. It is a situation where when you have a buyback during the year, when you're retiring stocks, you calculate your year's EPS on the weighted average for the year, which will not be the sum of the quarters.

I'm talking about net income. Let's deal with net income.

You weren't talking about EPS?

Well, let's talk about net income. For the nine months you said that the net income for -- ex specials -- was $51.5 million. And that if you add $15.4 million, which is the net income for the fourth quarter, you would come up with $66.9 million. But you say you have got $69 million.

I will have to call you back, because I don't have that right here.

Okay, that would be great. Thank you.

Seeing as there are no further questions, I would like to turn the call back to management for any concluding remarks.

That's it. Thank you very much for participating. And I look forward to our next call. Bye-bye.

Ladies and gentlemen, this concludes today's teleconference. Thank you all for your participation.