Enpro Inc (NPO) 2008 Q3 法說會逐字稿

Good day and welcome to the EnPro third-quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Don Washington. Mr. Washington, please go ahead.

Thank you, Lesley, and good morning, everyone. And again, we welcome you to EnPro Industries' quarterly earnings conference call.

Steve Macadam, our President and CEO, and Bill Dries, our Senior Vice President and CFO, will review the events of the third quarter on the call, our financial results, and our outlook. In addition, Rick Magee, our General Counsel, is present and prepared to participate in the Q&A.

Before Steve and Bill make their prepared remarks and we the lines for your questions, I would like to remind you that you may hear statements during the course of this call that express a belief, expectation, or intention, as well as those that are not historical fact. These statements are forward looking and involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties are referenced in the Safe Harbor statement included in our press release and are described in more detail, along with other risk and uncertainties, in our filings with the SEC, including the Form 10-K for the year ended December 31, 2007, and the Form 10-Q for the second quarter of 2008.

We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances on which such statements are based. Like to remind you the call is also being webcast on EnProIndustries.com and a replay will be available on the website shortly following the call.

If your questions aren't answered or if you have any follow-up questions, please contact me after the call at 704-731-1527. And with that, I will turn the call over to Steve.

Thank you, Don, and good morning, everyone. Thanks for joining us today. As our earnings release reports, our performance in the third quarter reflects continued benefits from acquisitions and from organic growth in certain of our industrial markets. However, as I'm sure you realize, many of our end-use and geographic markets are growing increasingly soft. Bill will provide the details of the third quarter shortly, but here are a few highlights.

Sales were up about 10% compared to the third quarter of last year, with more than half the increase from acquisitions and organic growth. At the bottom line, we reported improved earnings both on a GAAP and adjusted basis. Under GAAP we earned $0.62 a share in the third quarter, an improvement of about 15% over last year. Adjusting our earnings for asbestos-related expenses and other selected items, we produced income of $1.02 a share, or about 19% better than last year.

Our cash flows have been extremely healthy this year, giving us sufficient liquidity to spend about $62 million on share repurchases through the end of the third quarter, plus another $74 million on capital projects and acquisitions.

I will have more to say about our outlook at the end of the call, but it's clear that we have entered challenging times in many of our markets. We are fortunate to have sound operating practices, strong brands, a stable base of activity generated in the aftermarket, participation in a diverse set of markets, and a healthy balance sheet. Each of these factors should continue to benefit us in current conditions.

We will remain disciplined in the execution of our strategies and look for opportunities to grow and strengthen our Company through acquisitions, new products, and market expansion.

Looking briefly at recent developments, we completed one deal since our last earnings call. We bought a small compressor service company for our CPI business in a transaction that closed after the end of the third quarter. We are currently in discussions with several prospects which we believe will lead to completed transactions later this year and early next year.

Earlier this week, we announced that Fairbanks Morse Engine has signed a letter of intent to supply emergency diesel generators for nuclear power plants designed for the US market by AREVA. Construction of these plants is still in the planning stages, but this is an important win for Fairbanks Morse. FME supplied diesel generator sets to nuclear power plant 40 years ago; and although, as we all know, there has been no new construction in this market for many years, with this letter of intent and a growing interest in construction of nuclear power plants in North America, FME is well positioned to participate in a market that appears to be heading for growth.

Our largest capital project, the modernization of Garlock's Palmyra, New York, facility, continues to move along nicely. We completed the relocation of the Gylon product line to a new building in the third quarter, and the demolition of the buildings that previously housed the product line is complete.

Finally, I would like to update our share repurchase activity. Since the end of the third quarter, we have spent $7.1 million to repurchase just over 250,000 shares under our 10b5-1 planned. That brings the total number of shares repurchased this year to 1.95 million at a cost of about $69 million. The 10b5 plan allowed us to be in the market for our own shares given price volume and other parameters.

At the time we put the plan in place, we clearly didn't anticipate the dramatic changes in the credit markets and the increasing levels of worldwide economic uncertainty that we've seen over the past several weeks. Given those events, we have decided to end our share repurchases in favor of conserving our cash for investments in new opportunities that we believe will arise in this environment and will support the growth of our businesses.

With that, I will turn the call over to Bill.

Thanks, Steve. To reiterate what Steve said, both sales and income improved over the third quarter of 2007. Sales amounted to $279 million and were up 10% from last year. Acquisitions and organic growth account for 7 points. Favorable foreign exchange contributed the other 3 points.

We recorded this double-digit increase in sales even though sales in our Engine Products and Services segment (technical difficulty) 27% below last year. Sales in our other two segments were up 15% in total, 12 points of that increase coming from acquisitions and organic growth; 3 points coming from foreign exchange.

I will review the individual segments (technical difficulty) As we reported in our release, earnings before interest, taxes, depreciation, amortization, asbestos-related expense, and other selected items were $44.7 million or 16% of sales. That's a modest increase over last year. As a percent of sales, margin declined from 16.7% (technical difficulty) describe as I talk about our operating performance.

Gross margins were 35.5% in the third quarter, largely identical to the third quarter of 2007. However, they declined from the first and second quarters of this year, as we saw normal seasonal decreases in activity (technical difficulty) changing conditions in some markets.

Total SG&A spending increased by $7.5 million (technical difficulty) $65.3 million. Most of the increase in spending (technical difficulty) associated with acquisitions (technical difficulty) the effect of a stronger euro. As a percent of sales, SG&A was up 0.5% to (technical difficulty) 23.4%.

Asbestos-related expenses were $13 million in the third quarter, or about $1.5 million higher than last year. In part, the difference reflects the collection last year of a small amount of insurance from carriers that we classify as insolvent.

Operating income in the third quarter amounted to $20 million, slightly higher than the $19.4 million we reported in 2007. This represented 7.2% of sales in 2008, down 0.5% from the 7.7% reported in 2007.

Our effective tax rate in the third quarter was 28% compared to 38.5% in the third quarter of 2007. There are a couple reasons behind the low rate. One was the benefit of reductions in foreign statutory income tax rates. The other was the reversal of reserves that were no longer required following the settlement of tax audits.

As a result of the low tax rate in the third quarter and a return to a more normal tax rate in the fourth quarter, we now expect an annual effective tax rate in 2008 of about 34%, compared to 35% in 2007.

That brings us to net income, which was $13.1 million in the third quarter, an increase of 7% over 2007. This translates to $0.62 per share fully diluted, a 15% increase over the $0.54 we reported in 2007.

Before asbestos-related expenses and other selected items, net income was $1.02 a share. That is up 19% or $0.16 from the $0.86 a share we reported last year. The improvement was a result of a couple of factors. The largest contribution came from the lower tax rate, which added about $0.09 to our third-quarter earnings. A smaller contribution came from a lower share count. The accelerated share repurchase completed last March reduced our diluted share count by 1.7 million shares and added about $0.06 to our pre-asbestos earnings.

Looking briefly at the first nine months of the year, we generated sales of $879 million, 16% higher than 2007. Acquisitions and organic growth contributed 12 of those 16 points in equal proportions. The remaining 4 points came from favorable foreign exchange rates.

Both the Sealing Products and Engineered Products segments reported strong double-digit percentage gains in sales over the first nine months, while the Engine Products and Services segment was essentially flat.

Net income of $47.4 million resulted in earnings of $2.22 a share, or 30% higher than our (technical difficulty) 2007 GAAP earnings. Before asbestos-related expenses and other selected items, we earned $3.47 per share or 23% more than in 2007.

Now let's look at our third-quarter segment results, beginning with the Sealing Products segment. Deals in that segment, sales in that segment were up 13% and profits improved as well. The increase came primarily from organic improvements in our Sealing Product markets and acquisitions. Profits in the segment were up compared to 2007, but margins declined primarily because of lower profits at Stemco's legacy business and at Plastomer Technologies. EBITDA margins for the segment were 19.8% for the quarter or 180 basis points below last year.

Garlock continued to benefit from strength in several markets, including nuclear power and land-based turbine power generation, aerospace, and oil and gas. On the other hand, some of its hydrocarbon processing markets were affected by the hurricanes on the US Gulf Coast.

Stemco's heavy-duty truck markets remain weak, but that business continues to benefit from the Kaiser acquisition. We acquired Kaiser in the first quarter of this year, and it has made nice contributions to both sales and margins for the six months we have owned it.

Looking at the Engineered Products segment, sales were 17% higher than a year ago, with most of the increase coming from acquisitions and organic growth. Although sales increased, segment EBITDA was about flat with last year and EBITDA margins were down by 280 basis points to 17.6%.

GGB Bearing Technology continued to benefit from activity in automotive and power generation markets in Brazil, but its US and European markets were soft in the quarter. Environmental initiatives, which resulted in changes in processes and suppliers of GGB's European operations, also affected performance, as did material costs, which have continued to increase more quickly than selling prices.

At Quincy Compressor, energy and medical markets remain strong, but Quincy's general and industrial markets in the US are showing signs of softness. Market conditions led to a less profitable product mix at Quincy, as sales of lower-margin products increased. Quincy also experienced cost increases and competitive pressure on margins.

Compressor Products International performed very well, as it benefited from acquisitions and generally favorable market conditions. Activity increased in Canada and Europe, although CPI's US markets experienced some disruption because of hurricanes on the Gulf Coast.

In the Engine Products and Services segment, sales were 27% below last year. Because of changes to customers' schedules, there were no engine shipments in this year's third quarter and sales were down. However, EBITDA margins in the segment were 11% higher than a year ago, and EBITDA margins improved to 19%. The improvement in margins reflects a very strong parts business in the third quarter. As we have pointed out in the past, parts and service generally carry higher margins than engines.

Backlog at Fairbanks Morse remained very healthy. We expect several engines will be shipped in the fourth quarter of this year, which should result in a substantial increase in sales in the third quarter.

Now let's look at cash flows. Operating activities generated cash flows of $69 million in the first nine months of 2008, down from $75 million in the first nine months of 2007. The difference was due to higher working capital requirements in 2008 and higher net outflows for asbestos.

In the case of working capital, we experienced an increase of $25 million in the first nine months of 2008, all of which occurred in the first half of the year. As we've noted in the past, our normal seasonal pattern is to see significant working capital buildups the first half of the year followed by a reverse during the second half. Following that seasonal pattern, working capital decreased by about $4 million in the third quarter.

Working capital increase in the first nine months has tracked with the increase in revenues. As a result, our balance sheet metrics, including days working capital and days sales outstanding, were in line with a year ago.

Looking at our asbestos-related cash flows, the total paid for settlements and expenses declined to about $79 million for the first nine months of 2008 from just over $91 million in the first nine months of last year. However, insurance collections were lower, and as a result net cash outflows were higher at $20 million compared to $14 million in 2007.

As we have mentioned in the past, we expect total payments to come down this year, but will collect less insurance. As a result, net asbestos cash outflows for the full year of 2008 should be in the range near the level of 2006.

We spent $60 million on investing activities in the first nine months of 2008, including $37.4 million in acquisitions. As Steve mentioned, we also spent about $62 million on our accelerated share repurchase. That includes the $50 million initial payment made last March, plus a payment of $12 million in the third quarter in connection with the final settlement of the ASR.

After capital expenditures, acquisitions, and the ASR, our cash balance was $72 million at the end of September compared with $129 million at the beginning of the year.

In summary, our results year to date improved nicely over the same period last year. However, it's clear that conditions in our markets began to change in the third quarter. Steve will have more to say about our outlook in a moment, but first I would like to address our liquidity in light of current events in the credit markets and weakening economic conditions.

As I mentioned a moment ago, we had $72 million of cash on hand at the end of September. We also have a $75 million revolving credit agreement with three large national banks, which we believe will be readily accessible if and when we need to draw down on it. While we will continue to be prudent, we believe that between our available cash resources, our unused credit line, and the cash flows that our businesses will generate in the future, we should have sufficient liquidity to pursue our strategic initiatives for growth.

In short, we are confident our operating strategy and our financial condition put us on solid ground. With that, I will turn the call back to Steve.

Thanks, Bill. Before we open the lines for your questions, I will wrap up with a few comments and our outlook.

EnPro has experienced six years of solid, stable growth as an independent company. Over that period, a substantial amount of effort has gone into improving our operations, strengthening our product lines, building a strong team of employees, and capturing opportunities for growth.

The benefits of those efforts are evident in the improvement in sales and profits we have reported in 2008. But as everyone knows, the economic direction of many worldwide markets has changed and we are entering a period that is likely to differ significantly from the recent past.

However, because of our successes over the past six years, we believe we enter this period as a strong company. Our strategic direction is sound and we are committed to the pursuit of excellence in all facets of our business.

Our Total Customer Value lean manufacturing program continues to be effective in improving our operational efficiency, which will benefit us even more in weaker markets. To move the benefits of TCV beyond the manufacturing floor, we are expanding the program to include a commercial excellence initiative. By employing the techniques of TCV and dedicating additional resources to commercial excellence, we expect to improve the way we source materials, the way we go to market, and the way we interface with our customers.

We are focused on growth. We have a healthy balance sheet and liquidity sufficient to pursue opportunities for acquisitions that support our corporate strategies for products and markets. We will also continue to support new product development and market expansion which offer us additional avenues for growth.

Finally, we will continue to prudently manage our cash flows, optimizing the deployment of cash in ways that will create lasting, long-term improvements in value.

Looking at the remainder of 2008, sales in the Sealing Products and Engineered Products segments will continue to benefit from acquisitions made over the past 12 months. However, both of those segments are entering softer market conditions both in the US and in Europe, which are likely to limit opportunities for organic growth.

In the Engine Products and Services segment, a number of engines are scheduled for shipment before the end of the year, which should lead to strong sales in the fourth quarter for that segment.

Based on our performance through the first nine months and our outlook for the fourth quarter, we expect our record of consistent year-over-year improvement will continue for the full year of 2008. Thanks for your attention these past few minutes, and now let's open the lines for your questions.

Thank you. (Operator Instructions) Joe Mondillo, Sidoti & Company.

Good morning, guys. First, you mentioned that you are expecting a solid fourth quarter for your Engine Products. I was wondering if you could give any outlook for 2009, how you are seeing those orders come in, and what you're expecting for '09 in that segment.

Yes, Joe, the backlogs are good for FME; and as we've said in the past, the engines for FME are extremely long lead-time items, many for the Navy. The aftermarket parts and service business has been strong, and we expect that to continue. So we are pretty bullish on how the engine, FME business will look next year as well.

Okay, great. Also, could you just give some more color in terms of what you're seeing as far as aftermarket sales versus your OEM sales? What you're seeing now and what you are seeing in the fourth quarter right now.

Yes, again, I think it really, really depends on the segment and business you are talking about. It also depends on the geography. Many of our aftermarket segments are very solid -- nuclear energy, oil and gas, the engine business that we described. So there's many, many segments that quite frankly are not affected by the current economic environment, and we believe are not likely to be.

Then there is also a group of our businesses that have been in tough times for quite a while. We've spoken in past calls about the Stemco business selling into the commercial truck environment, which has really been -- in the US has been in a pretty much the bottom of the cycle now for 18 months. So it's not great, but it is certainly not getting any worse quarter-over-quarter.

So would you say it is fair to say that the Sealing segment could perform better in '09 than the Engineered Products, just because of the higher aftermarket sales exposure?

Relative to the previous year, I think that is correct.

Okay. Then, just to look at the share count outlook, it seems like you are buying back stock, but it just seems like the share count is not decreasing as much as I thought it would. Do you have an outlook for the year at this point?

Bill, do you --?

Well, Joe, we retired 1.7 million immediately, and we bought over 200,000 in the month of October. So we are down close to 2 million. So our share count is down to about 20 million, and that is down a couple of million from where we have been.

Okay, okay, great. Then finally, before I jump back in queue, could you just talk about currency? It seemed like you benefited in the third quarter. What are you seeing now and what do we expect for the fourth quarter in terms of that?

Well, I think you can probably run the math as easy as we can. Plug in a euro to the dollar number, and it's whatever you think. Obviously, we've seen a little bit of a rebound in the dollar in the last couple of days.

So I'm really not going to predict whether we think the dollar is going to strengthen or weaken in the fourth quarter. I really don't know.

Okay. All right, great. Thanks a lot, guys.

Todd Vencil, Davenport.

Good morning. Looking at the cost in Sealing and in Engineered Products, you talked last quarter about the fact that costs were running a bit ahead of price, but you thought you had price increases put in place to cover that.

Can you give some color on maybe what happened there? If this is consistent with what you would have thought, or maybe costs ran up more than you would have expected; and let us know broadly what kind of price increases you guys did put in.

Yes, it varied a lot across the segments. What you see in the third quarter is many of those increases were put in place during the third quarter, particularly in August. So -- and then you've always got the difficulty of driving them through and coverage that you give and whatnot.

So in general, you -- and I think we said this in the call last time. We didn't expect that the third quarter per se would reflect complete recovery of those material costs. But we felt like the price increases that were put in place, once we got to a run rate following those, that we would have recovered all those material cost increases.

And we still believe that, because they were phased in over the third quarter, many of them, which were in August. So you are already halfway into the quarter.

Right. When do you think you will hit that run rate?

Oh, I think we are there now.

You're there now?

Yes.

Okay. Then thinking about the lower volumes, when you're talking about lower volumes in some of these businesses, can you kind of quantify what you're seeing and what you're expecting maybe for the fourth quarter? Just in terms of your various businesses.

Well, it's really tough to do because of this diversity of end markets that we sell into. Even in the segments we've got pretty significantly different businesses.

But I think the best way I could describe it is to break the business up into the categories that I was describing to Joe, which is ones that we think are pretty solid end-use markets. Our belief is that oil and gas, the exploration end in particular, will still be pretty strong as long as oil stays above $45 to $50 a barrel, which obviously it is today.

Nuclear energy; other power generation stuff; the engine business, because of the markets it serves. So there is a solid chunk of our business that -- in the order of magnitude of 25% -- that we think is a pretty solid situation both at the OEM and aftermarket level.

Then on the other end of the scale is the businesses that have already been hit pretty hard and is already really reflected in our numbers. That would be GGB's automotive business, which is both in the US and in Europe, the commercial trucking business that we described. So these businesses have been pretty dramatically affected, and that is probably another fourth of our business, plus or minus.

Then the other half is mixed. It is in businesses that we've seen some weakening and it varies, really. I would say of that half, it is probably also split 50-50 between OEM and aftermarket. We certainly are seeing more weakness on the OEM side than the aftermarket.

The problem is, as you guys know -- I mean you listen to a lot of calls, you follow the news. There is a cloud of uncertainty in the industrial world. Everybody is kind of a bit taking a pause to kind of see how the thing is going to shake out. So it's a very, very difficult time to actually look forward about what is going on. Because when you talk to customers in the channel, they don't know either.

So we feel pretty good about where we are, simply because we do have the mix of aftermarket, which even in a declining environment won't go down that much, is our view. And we are hoping that this will provide some nice opportunities for acquisitions as we go forward, so.

Okay, fair enough. As you think about these lower volumes, how should we be thinking about margins? Is there a historical period that we should look back to think about the impact?

I know you guys have been consistently making improvements to efficiencies. So how should we think about the impact that that is going to have on profitability?

Bill, you want to take a cut at that?

Well, obviously, as the markets slow down and the unit volumes fall off in certain of our businesses, there are a fixed cost base on a number of those units, so we will lose something on the absorption side.

I think that by and large we have seen moderation in material price increases fairly recently. So on the selling price side, some of our businesses with declining markets, there will be some competitive pricing pressures.

So I don't think that -- you know, I think we are poised. Each of our units have looked and are ready to take actions if we see continued weakness in our outlook in our markets, to maintain and hold margins as high as we can.

But again, it just depends on the length of time and the depth of the markets and how slow they get. So it's hard to predict.

Fair enough. Then you sort of preempted my next question, which was going to be actions that you guys are taking to deal with that. Have you started implementing any of those efforts to offset weaker volumes? Or are you just anticipating and we maybe haven't seen quite seen them as much yet? Or where do we stand on taking action?

We are definitely taking action. Again, it varies a lot across the businesses, because we are seeing different demand patterns.

But we are very, very focused on trying to drive material cost down now, taking advantage of the turn in many of our commodity products like steel and bronze, copper and whatnot. So we are going after that very aggressively.

We are also working really, really hard to manage our costs and flex labor and those kinds of things.

Nothing on the fixed cost side, though, yet?

No, I mean, we don't -- our facilities are still pretty full. We don't really have the opportunity for any major facility rationalization. So, no, I don't think you can expect any major adjustments in fixed cost.

Okay, thanks a lot.

(Operator Instructions) Todd Vencil, Davenport.

Well, guys, I thought I would give somebody else a chance to ask a question, but I guess I'm in at the moment anyway.

Welcome back.

Thanks very much. Thank you. A couple of housekeeping things and then maybe a couple of global questions. You gave us a comment, Bill, on the tax rate for '08. What are you thinking for '09 would be the right level?

I think we will likely be down from what we have historically seen, Todd. You know, in the past we've consistently said we ought to be in the 37%, 37.5% range. You know, a number of foreign countries have recently enacted changes and reduced their statutory tax rates. Canada, Germany, the UK, Italy have all implemented tax rate reductions. Hopefully whatever administration gets put in place in Washington is cognizant of those things.

But so I think we ought to be lower. We are also doing some things on the strategic side, planning, that should help us as well. So I'm thinking that we ought to be kind of in that 35.5% to 36% range next year.

Great, thanks. Then you mentioned that the backlogs at FME were good. How do they compare year-over-year?

They are actually up pretty strongly. In fact, I was looking at that the other day; these are the highest backlogs at FME that I recall seeing since we spun off.

Our total backlog's -- what -- north of $300 million at the end of September; and FME accounts for well more than half of that. So their backlogs are in very good shape. They had a very good quarter in Q3 in terms of orders.

Any order of magnitude on the year-over-year increase? Just round numbers for FME.

No. A lot.

Fair enough. Then come a global question, sort of kind of wrap together use of cash flow and strategic initiatives and ideas. If I take two or three things that you said -- and you, too, Bill -- and kind of put them together, it feels as though you guys are -- your primary use of cash is going to be -- if you can find the opportunities -- is going to be acquisitions as opposed to share repurchases.

This feels to me like an uptick in the pace of activity. Are those two observations fair, or what have I missed?

Yes, I think that's very fair, Todd. Clearly that is the priority for us at this point. Look, we're going to close several deals, small but of similar size to what we've done in the last couple of years. We are going to close several of those before the end of the year; and then we've got some teed up that probably won't close until early next year.

We feel very good about them. They are good strategic bolt-ons to what we are doing. Exactly the type of acquisition that we really, really like to do, that add a lot to our existing businesses, are accretive, have really good strong bits, and help us in a product line or a market or a geography, those kinds of things. So we are pretty excited about that.

Now, as we look on out to the future on the horizon, with -- and as you know, most of the stuff that we look at is kind of nonpublic, smaller, bolt-on kind of deals. With any pressure on the environment, we are hopeful that that is going to present a broader set of opportunities for us, and we would like to be positioned to take advantage of that.

Have you started to see that opportunity set broaden out?

I would say maybe a little, yes. But we certainly haven't seen near as much as we anticipate as the economies of the world slow down a bit over the next six months.

Good. In terms of thinking about your capacity, give me a little color on what you think your capacity for deals would be, and what that is going to imply about what you're comfortable with on the balance sheet.

Well, we would still like to be in a position where we don't have to tap our revolver to do acquisitions. Our strategy is to use our own cash to do that.

So, we will -- our game plan is to be able to -- now, we will if we need to, on kind of an interim basis, but we would like to be able to just generate enough cash to do that on our own, so.

What do you think that implies about your capacity over the next, say, 12 months hypothetically?

Yes, I would rather not give you a number because I don't want to get us committed. Quite frankly, part of that is whether the deals that we have teed up for Q4 actually all happen in Q4, or one or two of them slide into Q1 of next year. It is just there is a timing issue there.

But you know, I think that might be something that is more appropriate for the next call or perhaps the one after that, after we get some of these under our belts and we can publicly report what they mean.

Well, I will be sure to ask it on the next call.

Yes, I'm sure you will.

Two more things then I will let you go. Housekeeping. Bill, the segment D&A levels that you've got in the press release, are those going to be kind of stable going forward for the purposes of modeling?

Yes, I think so. What they are running in -- that kind of $10 million, $11 million a quarter range -- puts us kind of in the low mid 40 range on an annual basis. That should be where we are.

Okay. Then final question, Steve, I will give you a chance to look into your crystal ball a little bit. You mentioned that you think you are going to have consistent -- repeat your pattern of consistent year-over-year improvement in EPS or in results. Feel like making that projection for 2009?

Not really.

Okay. Thanks a lot.

Thank you. At this time, there are no further questions.

Okay. Well, thanks everyone, for joining us and we will talk to you again next quarter.

That completes our call. Thank you.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.