Northern Technologies International Corp (NTIC) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Northern Technologies International Corporation second quarter 2012 earnings conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr Patrick Lynch, CEO. Please go ahead.

Good morning and thank you for participating in this call. I'm Patrick Lynch, NTIC's Chief Executive Officer and I'm here together with Matthew Wolsfeld, NTIC's Chief Financial Officer. To start, I would like to note that NTIC's fiscal 2012 second quarter results were included in a press release issued earlier this morning. A copy of which is now available on our website at NTIC.com. During this call, we will review various highlights of these second quarter 2012 financial results, add a brief business update and then conclude with a short question-and-answer session. As part of our discussion, we will be making certain forward-looking statements regarding NTIC's future financial and operating results as well as our business plans, objectives and expectations.

Please be advised that these forward-looking statements are covered under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the Safe Harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties including those described in our most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q. We suggest that you read these reports and other future filings that we will make with the SEC. We disclaim any duty to update or revise our forward-looking statements.

We are encouraged by the continued growth of our net sales which increased 11% to $9.8 million during the first 6-months of fiscal 2012 compared to $8.9 million during the first 6-months of fiscal 2011. This growth was primarily due to increased demand from our existing customer base in the domestic industrial sector for both established and new ZERUST brand products as well as the addition of new customers in new market sectors. Despite a weakening of the Euro and other currencies compared to the US dollar as well as general economic concerns in Europe, sales at our joint ventures still increased 3% to $54.8 million in the first 6-months of fiscal 2012 compared to $53.4 million in the first 6-months of fiscal 2011. Strong sales growth outside the Western Hemisphere is proving to be illusive as the ongoing sovereign debt crisis in various European countries have adversely affected sales in not only that region but also in other key supplier countries like China and India. We are being exceptionally cautious as we watch for firm signs of recovery in both Europe and worldwide.

Please note that the sales by our joint ventures are not included in NTIC's consolidated net sales and are not combined with NTIC's sales in our consolidated financial statements or in any description of NTIC sales. Rather, the sales and ultimately our portion of profits by our joint ventures is reflected in the total income provided to us by our joint ventures in the form of both equity income and fees for services provided to our joint ventures. For the first 6-months of fiscal 2012, we earned $0.35 per diluted share which is a decrease from the $0.42 per diluted share earned during the first 6-months of fiscal 2011. This decrease is mostly attributable to the decreases in total income from our joint ventures and the timing of sales to the oil and gas sector at our Brazilian subsidiary. As we anticipated and as we alluded to in our January earnings call, we did not have significant sales by our Brazilian majority-owned subsidiary to Petrobras during the first 6-months of fiscal 2012.

We had sales of $150,000 during the first 6-months of fiscal 2012 compared to $600,000 during the first 6-months of fiscal 2011. At the same time, we are happy to announce that during the second quarter of fiscal 2012, Petrobras informed us that it was expanding its $2.4 million Phase II contract by $657,000 bringing the total Phase II contract value to $3.1 million. Furthermore, we are pleased to report that subsequent to the end of our second quarter in March 2012, our Brazilian subsidiary delivered $2.5 million in products to Petrobras which was the entire remaining balance of the Phase II contract. Accordingly, this incremental revenue will be reflected in our third quarter of fiscal 2012 results when we report these in July 2012.

Please note that as evidenced in the past two years, the sales to Petrobras, while contractual, tend to be rather volatile. We anticipate that this volatility will continue in future periods as our ZERUST products are utilized by Petrobras. We remain heavily focused on selling our ZERUST corrosion prevention solutions and products into the oil and gas industry and we believe this market sector represents a much greater growth potential than our core but mature industrial ZERUST market. NTIC continues to progress with oil and gas industry clients with additional new product trials at both Petrobras as well as at other large perspective customers in various countries around the world. Larger scale orders that involve the adoption of these new technologies by large oil and gas institutions; however, continue to take considerably more time than we see in other industrial sectors. Consequently, as we have stated before, growth and expansion into the oil and gas market will continue; however, we believe that the effect on our financial results from sales in the oil and gas industry will not be immediate and may be choppy with spikes in sales when opportunities are converted and revenues are recognized, especially during the next 18 to 24 months.

Now, turning to our Natur-Tec bioplastics business. Sales of our Natur-Tec products increased 84% to $783,000 during the first 6-months of fiscal 2012 compared to $425,000 during the first 6-months of fiscal 2011. Natur-Tec represented roughly 8% of NTIC's consolidated net sales during the most recent period. Customer demand for Natur-Tec's compostable products continues to grow quickly driven primarily by legislative demands in Northern California, the Pacific Northwest, and states such as Minnesota that require the diversion of organic waste from landfills to centralized composting facilities. The demand is increasing for finished bioplastic products and therefore, we continue to strengthen and expand our North American distribution network for finished Natur-Tec bioplastic products. We continue to market our patented Natur-Tec bioplastic resin compounds to manufactures of plastic products around the world, especially in the key markets of North America, Italy and India.

As previously noted, during fiscal 2011, NTIC entered into an agreement with Italy-based Naturfuels to distribute our Natur-Tec bioplastic materials in products in the Italian market. This relationship was driven by the Italian legislation banning the use of non-biodegradable plastic shopping bags. In March 2012, however, it was announced that broader enforcement of this Italian law will be delayed until late 2012 to allow Italian bag manufactures to exhaust their current supply of conventional plastic resins before switching over completely to certified compostable resins. We are still optimistic that we will see a ramp up of resin sales to Italy starting in the second half of fiscal 2013.

In 2011, the Indian government enacted legislation banning the use of certain non-biodegradable plastics for laminate packaging for tobacco and food products. As a result, Harita-NTI, our joint venture in India, has already seen significant growth in demand for Natur-Tec compostable resins in this potentially large market for laminate packaging. We also expect our alliance with ITC Paper to translate into new opportunities in the consumer goods packaging market in India and for certain export market segments in Australia and North America. I will now turn the call over to Matt Wolsfeld to summarize the first 6-months of our fiscal 2012 financial results.

Thanks, Patrick. Starting with ZERUST, our net sales of ZERUST products increased 6.8% to $9 million during the first 6-months of fiscal 2012 compared to $8.4 million during the first 6-months of fiscal 2011. This sales growth was primarily due to increased demand from the domestic industrial sector and the addition of a number of new customers in a range of market sectors. Partially offset by a decrease in oil and gas sales in Brazil during the first 6-months of fiscal 2012 compared to the same period in fiscal 2011 as previously noted. Net sales in Natur-Tec's products increased over 84% to $783,000 during the first 6-months of fiscal 2012 compared to $425,000 in the first 6-months of fiscal 2011.

Cost of goods sold as a percentage of net sales increased slightly to 68.2% in the first 6-months of fiscal 2012 compared to 64.2% in the first 6-months of fiscal 2011 primarily as a result of a slight increase in production overhead and a higher percentage of Natur-Tec product sales which generally carries smaller margins than ZERUST products. As previously mentioned, our joint ventures showed slight revenue growth over the first 6-months of fiscal 2012; however, equity and income of the joint ventures was $2.6 million during the first 6-months of fiscal 2012 compared to equity and income of $2.8 million during the first 6-months of fiscal 2011. This decrease was due to the unusually high profitability of our joint ventures during the first 6-months of fiscal 2011.

We also recognized a slight 3% decrease in fee income for services provided to our joint ventures which amounted to $2.7 million during the first 6-months of fiscal 2012 compared to $2.8 million during the first 6-months of fiscal 2011. This is primarily due to the weakening of the Euro and other currencies compared to the US dollar partially offset by a 3% increase in total sales of NTIC's joint ventures. Our total operating expenses remained stable at $6.7 million during the first 6-months of fiscal 2012 compared to the first 6-months of fiscal 2011 primarily as a result of efforts to hold expenses stable given the uncertainties in the global economy. Overall, net income was down $0.08 per diluted common share to $0.35 for the first 6-months of fiscal 2012 compared to $0.42 per diluted common share for the first 6-months of fiscal 2011.

As of February 29, 2012, our working capital was $11.9 million including $3.3 million in cash and cash equivalents compared to working capital of $9.1 million including $3.3 million of cash and cash equivalents at August 31, 2011. As of February 29, 2012, and August 31, 2011, we had no borrowings outstanding under our $3 million line of credit. With respect to our financial guidance for the current fiscal year ending August 31, 2012, we expect sales to continue to range between $23 million and $24.5 million inclusive of sales made by our Brazilian majority-owned subsidiary and we continue to expect net income of between $4.7 million and $5 million or between $1.08 and $1.14 per diluted share. Additionally, we continued to anticipate both sales and profits will remain volatile from quarter to quarter during the remainder of fiscal 2012 and 2013. This is largely due to the financial performance of our joint ventures and the financial performance of our newer businesses, including our ZERUST oil and gas business and our Natur-Tec bioplastic business which fluctuates more on a quarterly basis than our established ZERUST industrial business. This is primarily why we continue to provide only annual financial guidance.

As we grow, we anticipate some of this volatility to dissipate eventually in future periods and our earnings per share to be more predictable on a quarterly basis. Please also remember that a very high percentage of our earnings are derived from our joint ventures in Europe. Given the current European sovereign debt crisis and the related political and economic issues facing Europe and the ultimate impact that could result in the rest of the world, we still anticipate decreasing our guidance in the event of a slowdown or if a recession occurs in Europe or any other parts of the world in which our joint ventures operate. With that update, Patrick and I will now answer any questions you may have.

(Operator Instructions) Aaron Martin, AIGH Investment Partners.

Just a quick question, on Natur-Tec. Are we expecting any ramp up on the overall revenues despite the Italian push out? Or was the whole expectation of increased revenues entirely dependent upon Italy?

No. Actually, we have a lot of opportunities pending. Certainly, the Italian one was the single largest, but we have several smaller opportunities that in combination if we can get them all brought in, it should nicely ramp up our Natur-Tec sales as well.

Okay, but no where as close to being breakeven for the year, is my understanding?

At this point, because of the Italian delay, we don't expect to be breakeven this year, this fiscal year, no.

Okay, got it. And then just understand that in terms of why you think those revenues are going to be pushed out all the way to the second half of fiscal 2013 despite the implementation at the end of this calendar year, any understanding there?

Well, we expect that we'll start to see certain ramp up sales in to the second half of this year in the Fall but we won't see the full implementation of that until the spring of next year.

Okay, so then even after they start implementing, it will still be sort of a ramp up in terms of the implementation?

That's our expectation.

Okay, got it and then if I'm viewing this correctly, obviously the guidance for the year has not changed and you've always had it that you could hit the guidance multiple ways, but it's almost -- seems like some of the shortfall revenue here is going to be made up by Petrobras. As I understand it, that is slightly higher margin business than the Natur-Tec business, so we're still hitting the revenue lines. Why hasn't the -- maybe think that the net income line would have gone up a little bit since the revenue is coming from a slightly more profitable business. Does that make sense?

I understand exactly what you're saying. Yes, the margins on the sales to Petrobras are significantly higher than the margins to -- in anything that we sell in Natur-Tec. And there's some other opportunities that are coming along -- also with the increase -- with the increase in the Phase II contract we have at Petrobras that will make up a small portion of the increase in revenue that's lost from the sales of not having the Italian sales. Then we also have other items in our standard ZERUST industrial business where we anticipate very strong sales coming in the third and fourth quarter.

In North America.

In North America, not oil and gas related or Natur-Tec related.

And the gross margin over there are lower than the Natur-Tec ones?

No. The margins on our ZERUST industrial products are higher than Natur-Tec and our margins on our oil and gas products in Brazil, the Petrobras that we're talking about are also higher than Natur-Tec. All of the margins of all of our products are higher than Natur-Tec.

If the shortfall in revenue is being replaced with higher margin business, would it make sense that the net income would increase to some degree?

Well, we'll see how it pans out. Yes and no, it depends --

I'm not asking to change the guidance. I just want to make sure I'm thinking about things in the right sort of way, that's all.

We're also trying to be conservative based on the potential volatility with our revenues from our joint ventures, specifically from Europe, and until we have a clearer picture of how that market is going to pan out over the next 6-months, we're still being fairly cautious in how we manage our expectations.

I think we've said at least to the last 6 to 8 months that we anticipated our fiscal year 2012 to be very back loaded, meaning that third and fourth quarter were always going to be from an earnings per share standpoint, the quarters that will have the most impact and so we still certainly continue to see that. Our sales guidance has a range -- a $1.5 million range where we may now be at the lower side of that range compared to where previously felt we were going to be at the higher side of that range; however, the net income we feel we can still fall directly in the middle of it.

(Operator Instructions) Tim Clarkson, Van Clemens.

Just a couple questions on some of the new stuff. I know at the annual meeting you mentioned that you're coming out or you came out with a new line of super proprietary rust resistant packaging. How has that been received so far?

Ah, okay, I know what you're talking about now. Well, we've started initial launches of that. So far, the interest is proving to be good. We still have no expectations into how high those sales might be but it's certainly in conjunction with our existing product line has allowed us to acquire I think 2 or 3 new customers that could promise some significant growth. So we don't know by itself how much that these new products will bring to us, but in combination with our existing product line, they are giving us access to new opportunities.

Okay, in terms of -- in the traditional ZERUST area, you mentioned that you have new opportunities outside of just the oil and gas. Can you just talk a little bit about that? We get all obsessed with the oil and gas, but what are some of the new applications beyond automobile applications?

I really would prefer to keep a good secret, secret.

Okay, I know that there's -- okay, that's fine. In terms of the Indian opportunity, has that developed more in the last 3 to 6 months than you expected or was that part of your game plan and how significant is that opportunity?

Which Indian opportunity are we talking about?

Now, we're talking -- now, I'm switching to the compostable -- stuff.

Oh, okay. Well, in the Indian opportunity specifically in the laminate packaging, to the best of my knowledge, actually at this point, ramping up a little bit faster than we had initially anticipated. So if the switch is particularly in the food packaging area, if the transition and adoption continues at this pace, it would wind up being a nice boost to our Natur-Tec resin sales.

Okay, one last question. Any further developments outside of Petrobras in terms of the oil and gas? Are there any other countries that are looking like they're closer to getting business?

Well, we started to get smaller orders from a few more major oil companies, which is promising that we'll expand those. But certainly nothing yet on the horizon on the scope and scale of what we have with Petrobras.

Joe Furst, Furst Associates.

Can you expand a little bit more on what Tim just asked about in the oil and gas industry about how long has things been going on in some other companies and how many different companies are you working with in that area?

Sure. Let me put it this way. Even at Petrobras, despite the fact that four of the one product -- the primary product we're selling to Petrobras today has been in effective use there now for 3 years. The fact that we recently won a NACE, which is a National Association of Corrosion Engineers Innovation Award for that particular technical development and that was announced last month. Still the one division in Petrobras has been using it, like I said for 3 years and the second division of Petrobras has been continuing to test it for 3 years. My understanding is now that those trials have also been completed successfully and that we are now starting discussions of implementation in this second Petrobras division. But I'm trying to manage your expectations that it does take quite some time to convince a very conservative industry or even multiple branches of the same entity in order to adopt a new technical solution.

I understand, but I was talking about other companies like how long have you been in testing with some other companies?

In testing with some other companies, at this point somewhere between 12 to 18 months.

Okay, so it's like you said it takes a long time but you are 12 to 18 months closer in some of these companies, so that's a big plus. Thank you.

We're past the testing phase with some of these companies and we're starting to get some initial orders, again but they have not indicated to us how quickly they are planning on expanding the broader implementation. Even when we started with Petrobras and they had committed to starting placing orders with us, it became a very large logistic problem for them to figure out exactly when they were going to purchase it, how they were going to get the product delivered to the staging area onshore, how they were going to get it to their various offshore locations, when they get the offshore locations, where are they going to store them, which maintenance operators are going to install the products on what date. So it's not as -- it's quite a complex logistical issue on how to get all of this rolled out.

Brian Yurinich, Craig-Hallum Capital.

I just had a quick question. Since you guys delivered this product to Petrobras in March, how long would that typically take them to go and install all that on the rigs?

My expectation -- and actually, I have absolutely no clear idea, my expectation is probably they are going to be implementing it over 6 to 9 months. Before -- and interestingly enough just as an anecdotal story, this delivery to Petrobras was certainly the largest single order that NTI has ever fulfilled for any customer and it was such a high value order in Brazil that we actually had problems getting shipping companies to pick up all of the product and deliver it. Ultimately, we had to ask Petrobras to send their own trucks to pick it up and take it to their facility. So at this point, my understanding is that all the product is in the Petrobras warehouse in Mecalux which is an onshore city on the coast of Brazil that supplies the offshore industry and that over the next 6 to 9 months they will be shipping these products out to the offshore installations and installing them.

Okay. In the past it seemed like we would get -- Phase II would be announced while Phase I was still going on. Does it make sense that we kind of have a 6 to 9 month lag now before we could potentially see a Phase IV?

Phase III.

Yes, sorry, Phase III.

We certainly hope not, but it is possible that we would certainly be -- we hope to be in a position to at least announce a Phase III contract sooner than that but in terms of delivering that would probably be in the 9 to 12 month period.

Richard Dearnley, Longport Partners.

To continue the last couple of question's line of thought. Is the adoption cycle or is the adoption cycle of US companies in the Gulf likely to be greatly different than Petrobras? I would think they're probably more open to new technologies and what not.

To my understanding, at this point, Petrobras is recognized in the industry right now as a leader for adopting new technologies. To a certain degree, they're forced to be a little bit avant garde in their outlook because of the specific technical issues that they face. Petrobras is the current world leader in ultra deep sea drilling. The largest oil reserves that they have are -- they're offshore and they have to at least pass through 2,000 meters of water before they even hit the sea shore and begin drilling. When they drill down underneath that, they're going down another 2,000 to 4,000 meters. So the technical issues that they face force them to be always looking for new solutions. The same is not necessarily true in the more conservative and older industry such as in the Gulf of Mexico, although we have certain trials going in the Gulf. At this point, I couldn't say in what timeframe those would turn in to actual sizeable orders.

(Operator Instructions) Charles Pine, Van Clemens.

I have a bit of follow-ups also on the ZERUST oil and gas aspect and the Petrobras. I was a little bit late on the call. But I'm curious, as far as the amount of Flange Savers that were delivered for Petrobras in this large March order, how many rigs is that anticipated to -- are those Flange Savers anticipated to be used on?

The current contract that we just fulfilled, the Phase II contract supplied 40% --

No the total we've delivered --

The total Flanges that we've delivered to date, in the Phase I and Phase II are accessible by 40% of the total platforms that Petrobras owns.

But doesn't represent 100% implementation of those platforms. So let's say it's on about -- by the time we're done it will be on about 40 rigs.

And what percentage -- what are you hearing from them as far as right now, what percentage of implementation or coverage of Flanges on a typical rig are they doing now, since they've been at it now for a couple of years.

Well, I think by the time you're done, you're looking at having probably 2,000 to 3,000 Flange Savers on each of those 40 rigs.

Have they given you any indications that they anticipate increasing coverage of the scope of Flange Savers on a per rig basis in the future?

Right now, our primary focus is trying to get the implementation expanded to the other 60% of their offshore installations. We anticipate getting access to those within the next 12 months. That's the primary focus of our Phase III implementation. Let's say, in Phase III, Phase IV, we're starting A, to be in a replacement cycle with the Phase I contract as well as an expanded contracts for the rigs that we still have not touched at all yet.

That sort of touched on one of my follow-ups. I was going to ask what's been the experience? How long -- what sort of life are they getting? Are they telling you that they're on average now since they've been in the field for a while, what sort of life expectancy are they telling you they're looking for a Flange Saver in the field?

It's quite straightforward. Within every 2 years by API guidelines, they have to inspect every Flange for fitness for use. So when we delivered the product, one of the specifications was they needed to last at least two years in full operating condition. But Petrobras did not expect them to use any one in implementation for more than two years simply because they had to go and inspect it and then [replace] it.

Okay, I get that. Following up on your comment about that you've had some smaller orders from some other oil companies. Are we to infer that this is -- these are not just pilots and trials but these are commercial orders and are smaller like initial commercial orders and are these -- by the way, are these for Flange Savers? Are they for some other applications that you have ZERUST oil and gas industry?

Good questions. They are smaller, commercial orders. First of all, the trials have been completed. No, it's not always Flange Savers. It generally winds up being a combination. Even our orders to Petrobras, if you recall what Matt was talking about, for our sales for the first 6-months of this year, was while relatively modest as it had $150,000 to Petrobras, that was not Flange Savers we were delivering. That was other products.

Okay, I'd missed that part of the call.

That's okay. So the product mix we're currently supplying to Petrobras is heavily weighted towards the Flange Saver products but it's not the only products we were delivering there. Similarly, with some of these other oil and gas companies we're currently servicing, it winds up being a combination of multiple products.

Could you just elaborate, besides Flange Savers, what would be the most predominant other application that these companies are using your ZERUST labeled products for?

The applications we're targeting are primarily set for the offshore industry where they have a variety of intensive corrosion problems not just with their Flanges. So in combination we're obviously protecting some of their spare parts but also providing other corrosion solutions which I'm not going to expand on right now.

Is that just for -- your unwillingness to expand on it, is it for proprietary reasons at this point or what?

I don't necessarily want to give my competitors a leg up.

Speaking of which, I guess the natural follow on. Are you at all seeing competition in the VCI market from other competitors in the oil and gas arena?

There are a few companies that try to play in that area. None of them are giving us a significant headache. I think we have -- the products we're introducing to that market are either unique enough or have a much stronger performance enough that we are certainly at this point feel that we have a leg up on anybody else out there.

The last thing along those lines, are you aware of anybody else that's out there that some of these other customers that you've been in longer term trials with, I think in the past have been characterized that there's a dozen or so of these other companies. Have any of those other companies been involved in, so to speak, shoot outs or comparison with your ZERUST products versus a competitive product?

I'm missing your question. Please --

Well in the trials, for instance with some of the unnamed companies that you've alluded to over the last year or so that have been in various stages of piloting, Flange Savers and stuff like that, have these companies also been running trials on competitive types of VCI solutions along side yours?

Not for those applications, no. We are pushing primarily in the oil and gas industry, specifically these trials are proprietary patented or trade secret products that to our knowledge no other competitor currently is trying to market in the industry.

Jerry Well, Private Investor.

Following up a little bit on the competition question, I know that being a Minnesota guy that there is one other competitor that you bumped in the past is Core Tech Company, I'm just wondering in what areas where you compete with them and how you stack up with them. I know it's a privately held company but --

Since it's a privately held company I can't speak to their current situation overall. I can say that specifically in Brazil, in the oil and gas sector, they are not a factor. While we ran into them occasionally as a competitor in the regular industrial sector, its been my -- I've been led to understand that the relationship they had with their distributer in Brazil broke in February. Right now, Core Tech is without representation of any kind in Brazil.

Do they compete in the compostable area also, guys?

They have been known to work in bioplastics, however Core Tech does not have, to our knowledge, any unique technology in that sector. What our differentiation is, is the kinds of resin blends and proprietary chemistries that we add to those resin compounds that make the finished product stronger and cheaper to implement. Ultimately, that's how we're competing in that sector. In the North American market, we never run into them in terms of the bioplastics and marketing.

Brian Yurinich, Craig-Hallum Capital.

Just one quick question. We haven't talked about any of the oil and gas products outside of offshore in a while. Can we get an update on the ones that sat in the top of the tanks to prevent corrosion? Is there any update there that you can give us?

Right now, the tank dumps solution for Petrobras -- they're not, we've been intimated that there are no immediate plans to expand that implementation. We're told that their current investment in infrastructure is focused elsewhere and they are also much more interested tank bottom solutions than tank top solutions. We do have an ongoing R&D contract with Petrobras to evaluate tank bottom solutions. We are in trials with Petrobras for tank bottom and we would expect that those technical trials will be completed within the next 12 to 18 months.

Okay, didn't we also have something with PEMEX for those too?

Yes. In both cases. Trials on both the Flange Savers and the tank top. Both technical valuations went very well and for reasons that I don't have a clear answer on at this point, PEMEX is -- how do I put it, not progressing in a nice manner in terms of implementing this. I guess the negotiations have stalled for whatever internal PEMEX reasons there might be.

I'm showing no further questions at this time. I'd like to turn the conference back over to Mr Patrick Lynch for any closing remarks.

I'd like to thank everyone for participating today. In closing, we continue to expect growth in both our net sales and earnings in fiscal 2012 compared to fiscal 2011. Specifically, we are dedicated to achieving revenue growth with our established ZERUST business while expanding the market for both ZERUST oil and gas products and our Natur-Tec bioplastics business. Thank you for listening today and your interest in NTIC.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.