Northern Technologies International Corp (NTIC) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by and welcome to the Northern Technologies first-quarter 2014 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 may be recorded.

It is now my pleasure to turn the floor over to Mr. Lynch. Sir, the floor is yours.

Thank you. Good morning. I am Patrick Lynch, NTIC's Chief Executive Officer, and I'm here with Matt Wolsfeld, NTSC's Chief Financial Officer.

Please note that our fiscal 2014 first-quarter financial results were included in a press release issued earlier this morning, a copy of which is now available at NTIC.com.

During this call, we will review various key aspects of our fiscal 2014 first-quarter financial results, give a brief business update, comment on our fiscal 2014 annual guidance, 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 the actual results could differ materially from those stated or implied in our forward-looking statements due to certain risks and uncertainties including those described in our most recent annual report on Form 10-K. We suggest that you read this report and other future filings that we will make with the SEC. We disclaim any duty to update or revise our forward-looking statements.

During the first quarter 2014 of fiscal 2014, which ended on November 30, 2013, our total net sales continued to show strong improvement both year-over-year as well as quarter-over-quarter. At the same time we achieved additional key objectives in all three of the market segments that NTIC serves. Furthermore, I would also like to point out that our competitive position, operations, and balance sheet are all stronger today than they were either a year or a quarter ago.

NTIC's total net sales increased more than 19% in the first quarter of fiscal 2014 to $6.3 million compared to first quarter of fiscal 2013. This growth is largely attributable to the sales of our industrial ZERUST products to new and existing customers in North America as well as new sales in the oil and gas market. Furthermore if you compare our first-quarter net sales for fiscal 2014 to each of our five consecutive prior quarters, you will note that our $6.3 million in net sales for this first quarter exceeds our consolidated net sales for each of the four consecutive prior quarters.

While we are certainly pleased to see this healthy and sustained sales growth in North America, we are also very encouraged by an almost 8% increase in the total net sales by NTIC's joint ventures to almost $30 million along with a corresponding 18% increase in our joint venture operating income. We are cautiously optimistic that this rebound in sales and profitability by our joint ventures is the sign of a broader European economic recovery.

All said, NTIC earned $0.19 per diluted common share during the first quarter of fiscal 2014 as opposed to $0.09 per diluted share during the fiscal -- first quarter of fiscal 2013, which is more than 120% increase. Our oil and gas team continues to expand the sales of our proprietary corrosion solutions for protecting the bottom plates of oil storage tanks, which are highly susceptible to aggressive corrosion and leaks. Consequently over the past few months, our team has been exceptionally busy with multiple new installations in North America. Having seen the need for and acceptance of these innovative solutions, we anticipate this pace to continue throughout fiscal 2014.

We also are working with certain government agencies to expand the recognition of these ZERUST solutions as industry requirements and standards.

These recent new successes in a growing number of countries bolster our confidence that our expansion into the oil and gas market will continue to grow stronger. However as this remains a relatively new market for us, we expect any associated benefits to our financial results will not be immediate and may be choppy with spikes in sales when opportunities are converted and revenue is recognized over the next few years.

Now turning to our Natur-Tec bio plastics business, net sales of Natur-Tec products increased 12.8% during the three months ended November 30, 2013, compared to the three months ended November 30, 2012. This increase was due to increased sales to Natur-Tec distributors in the United States as NTIC has continued to strengthen and expand its US industrial and distribution. Additionally, NTIC has continued to target key national and regional retailers utilizing independent sales agents.

North American demand for finished bioplastic products continues to flourish in fiscal 2014, driven primarily by organic waste diversion initiatives expanding across municipalities nationwide. Natur-Tec finished bioplastic products such as compostable bags and cutlery, facilitate the efficient collection and segregation of the food and yard waste generated by large corporations as well as institutions such as universities and school districts.

On December 1, 2013, we commenced operations of NTIC's Indian Natur-Tec subsidiary. All future sales of Natur-Tec in that region will be made through this new entity as more manufacturers implement Natur-Tec compostable packaging across their supply chains. We expect this application segment to be an area of strong growth in fiscal 2014 and beyond as we continue to target and convert additional manufacturers to use Natur-Tec sustainable packaging solutions.

I will now turn the call over to Matt Wolsfeld to summarize in more detail our financial results for the first quarter of fiscal 2014.

Thanks, Patrick. Sales of NTIC's ZERUST products increased across all market segments in first quarter. Sales of industrial ZERUST corrosion-inhibiting products increased 12% as we saw demand increase at existing customers and also introduced ZERUST products to new customers. The sales of ZERUST oil and gas solutions increased over 200% in first quarter as we increased sales in Brazil and completed implementations at several new customer sites in North America.

It's also important to note that our gross profit percentage increased almost 4% during the first quarter of fiscal 2014 compared to first quarter of fiscal 2013.

The sales of ZERUST corrosion-inhibiting products to our joint ventures increased almost 35% in first quarter over the same quarter last year. This increase was a function both of the timing of several large shipments as well as an overall increase in joint venture sales of 8% during the quarter as Patrick noted earlier. Additionally, income provided by our joint venture operations increased almost 18% to over $3.5 million during the first quarter of fiscal 2014 compared to the same period of fiscal 2013.

Lastly, sales of Natur-Tec products increased almost 13% to $560,000 during the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013.

Our total operating expenses increased 12% to $4.2 million for the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 due primarily to an increase in selling expenses, general and administrative mistreated expenses, and expenses incurred in support of joint ventures and overall reflect our efforts to support our new business efforts.

Overall net income attributable to NTIC increased 120% to $858,000 or $0.19 per diluted common share for the first quarter of fiscal 2014 compared to $0.09 during the first quarter of fiscal 2013. As of November 30, 2013, our working capital was $13.2 million including $3.9 million in cash and cash equivalents compared with $13.3 million at August 31, 2013, which included $4.3 million in cash and cash equivalents. As of November 30, 2013, NTIC had a term loan with a principal amount of $914,000 outstanding from PNC Bank, which it repaid in full on January 3, 2014. Additionally, as of November 30, 2013, we continue to have no borrowings outstanding under our $3.0 million revolving line of credit.

Turning to NTIC's annual guidance for the fiscal year ending August 31, 2014, NTIC continues to expect its net sales to range between $27.5 million and $29 million inclusive of sales made by NTIC's majority-owned subsidiaries in Brazil and India and expect net income attributable to NTIC of between $4.1 million to $4.7 million or between $0.95 and $1.05 per diluted share.

With that financial update, Patrick and I will now answer any questions you may have.

(Operator Instructions). Connor McMahon, Sidoti & Company.

Could you guys give a little bit more color on the Petrobras contract? I don't know if you said it or not. Did we receive any more from that?

We did receive more from the -- there are sales related to Petrobras. We kind of went through a slight change in the way that we are showing individual sales where we are -- when you get the Q tomorrow and is filed, you'll see in the MD&A section that we now break out sales by -- kind of by market segment where we will say NTIC's oil and gas sales are X and NTIC's industrial sales and NTIC's joint venture sales and Natur-Tec's sales are broken out.

And so we break it out that we were -- you can see the increase in (technical difficulty) individual customer sales and so it will show what total sales are. I can tell you that we are -- there were several hundred thousand dollars worth of sales to Petrobras relating to the Flange Saver contract. But we are trying to get away from the focus on individual customers due to kind of competitive positioning and other issues that have popped up with that.

Would you say you are getting a lot of inquiries about the new oil and gas products and are any newer large customers coming on board in the next year or so?

Are we getting a lot of what please?

Inquiries about the new oil and gas products.

Absolutely. As I mentioned earlier, our team has been exceptionally busy as -- we are not only getting new orders from new customers in oil and gas but we are already getting repeat orders from certain customers that we did applications in just the first quarter.

Okay. Great. Thanks, guys. That's all I've got.

Tim Clarkson, Van Clemens.

Hey, Pat, hey, Matt, great quarter. I think that's probably as good a quarter as I have seen across the board since I've been involved in the Company. And I've been involved in the Company a long time, so it's a great quarter.

Just drilling down on my obsession with this potential tank business, are there any customers now -- you don't have to give me the names -- but any customers that have gone beyond just one or two tanks or have an indication that they are going to do five or 10 tanks?

Let me leave it as I just mentioned before. We already did certain installations in the first quarter and we are expecting to do initial installations for those same customers in the coming quarters, so we are getting repeat business out of customers we have already worked with.

Okay, all right, I guess that's fine. Thanks.

Gregg Hillman, First Wilshire.

Good morning. Maybe you could just talk about the cash flow from operating activities. I know some of the swings -- I know the fees for services provided to joint ventures changed quite a bit. What was that due to?

I'm sorry, are you talking about on the cash flow or on the income statement?

The cash flow statement. In the press release, fees for services provided to joint ventures, there is kind of a big swing. What was going on there?

That just has to do with collections in the timing of when payments came in from August 31 in one quarter. We tend to get paid by our joint ventures. Usually some of them pay the first month or two and then some of them are up to 90 days in lag and what you have is a situation where the amounts came in or didn't come in after November 30 but there's no real issue we have with collections from fees for services at the joint ventures. It kind makes more sense just to look at the change in the fees provided on the income statement.

Okay, fine. I'll take a look at that. Patrick, you alluded to government regulations for oil tanks in various municipalities and how do -- is cathodic protection already spec-ed into these rigs and how important is it for you to get government approval to go forward with some of these customers and how is that going?

First of all, yes, in a lot of places cathodic protection has been spec-ed in and spec-ed in for a long time and what we are working here is as an alternative to or a supplement to cathodic protection depending on the situation. Certainly the recognition helps us, but in a lot of cases what we are doing is creating a supplement to cathodic protection. In certain cases we are replacing cathodic protection outright. But again to do a complete outright replacement, we do need to change certain governmental regulations to allow for that. That's what we are working on. Actually already putting in place, sorry.

Okay, so does that need to occur in every municipality or does it depend on where you are at?

It just depends on where you are at.

Okay. In the oil and gas division, how many people work there now or how many full-time equivalents?

It still relatively small. I would say about 15 people at this point.

Okay, and is any of that related to exploration or anything like that or is it just all pretty much related to production?

I'm not quite sure what you mean. In terms of installation work, we subcontract the installation work to third-party companies that are licensed and bonded to work in refineries and other oil and gas facilities. So we provide the supervision and direction and work off of our plans but we are not actually using our own employees. So you actually have a force multiplier in terms of when we're looking at just 15 people. Some of these are in R&D and the other ones are just right now implementation and project managers. And certainly are already planning on hiring additional people to fulfill those roles in the coming months.

Right, but Patrick, what I was trying to get at is for the oil tanks, that has for oil that is already been produced. Are any of your products such as Flange Saver -- I guess the Flange Savers are used in --

Mostly offshore (multiple speakers) yes.

In offshore and I was wondering so the business you have should be stable. It shouldn't follow the vagaries of the price of oil, because it's more for production that has already occurred or in the distribution of oil. Is that correct?

We're just talking about the long-term maintenance of infrastructure and the price of oil may go up, it may go down, but they still need to maintain their infrastructure over the long term and it becomes very problematic to a tank farm operator that if they all of a sudden have a leak in their tank, no matter how much is in there, they have to shut the whole tank down if their bottom starts leaking and fix of replace the bottom. So it's got a great incentive to worry about their corrosion problems on an ongoing basis.

Okay, is it your expectation this division will become the largest division of the Company within five years?

I would say we would love to see if it did happen in five years, but certainly I would be more patient than that. Certainly we think that it has the prospect of becoming the largest division of the Company in the not-too-distant future.

Okay, within a much shorter period than five years if things work out the way -- that they could, then it could become the largest division within one or two years? Is that what you are saying?

Gregg, if you look at it, when we look at the industrial group internally, we also include our joint ventures in that -- in kind of the overall framework of how we look at it includes the joint ventures. So we look at the ZERUST traditional industrial business as being more of a $140 million business. So if you are talking about the oil and gas business becoming $140 million in revenue, I don't think anybody sees that happening in the next four or five years. Especially if the $140 million in revenue continues to grow at 15% during that time period.

But if you are looking at just our -- what we are showing as topline ZERUST sales on our financials, I certainly think it's reasonable given the size of the market out there that it could happen, that oil and gas sales would become that big in a five-plus-year period.

Okay, that's what I was trying to get at. Thanks very much.

Brian Yurinich, Craig-Hallum Capital.

Thanks, guys. Good quarter. I was wondering how or if you could give us an update on how many people do you guys have or how many companies or customers do you have looking at the tank solutions now?

I don't have a set number in front of me. I would guess we have done implementations at about 10 different companies at this point and we are looking at certainly a multiple of that for future implementations.

Okay, then of that 10, how many people have already come back and reordered?

All three.

Okay, then if I kind of look at what you guys did --.

Let me qualify that last statement. You have to understand also that some of those of implementations we're talking about of the initial implementation, we just finished last month or like a few weeks ago, so they almost haven't had time to breathe to evaluate what the work we've done in order to come back and order more. So I wouldn't necessarily make any inference from what the reorder percentage is based on what I just told you.

All right, I totally understand. If I kind of look at what you guys guided, R&D of $3.8 million to $4 million and doing just over -- it seems like R&D kind of is going to trend down throughout the rest the year. What should I think of for SG&A? SG&A is a little bit high this quarter. Are we just spending to kind of grow the business or what's going on?

No, there's a little -- there were some one-time expenses that we had that went through SG&A in the current quarter, probably a couple hundred thousand dollars worth of expenses that went through that I wouldn't anticipate repeating in second, third, and fourth quarter. There's always going to be one-time expenses that pop in but it was unusually large in Q1.

All right, perfect.

(Operator Instructions). Dick Feldman, Axiom Capital.

Good morning, guys. Good quarter. I've got two questions. In the oil and gas tank area so far has all the business come pretty much from North America?

No, we did some installations in the Middle East.

Is the principal focus of your marketing efforts worldwide or North America?

Right now it's North America primarily as we learn what kind of scope and scale we need for all the installation work. It's easier for us to be concentrated in this geographic region so we can manage our installation teams better.

Okay, are there any meaningful physical constraints on the rate at which you can meet demand if it were to suddenly surge?

We'd have a few growing pains in terms of hiring and training additional installation supervising crews. But other than that in terms of manufacturing capacity and all of that, nothing that would really limit us going forward.

In terms of raw material, there's no real constraints that we would have on producing enough product. As Patrick said, kind of the only real constraint that we would have are the -- and what we are kind of dealing with now is the number of people that are working to get proposals out the door. And it would bring in sales people and people that can provide that service.

It's a good problem to have. Switching gears, it sounds as if the oil and gas ZERUST business is going to grow more rapidly than your traditional industrial business. As that shift in mix takes place, what are its implications for gross margins?

Certainly I would say it would improve our gross margins.

Would it also improve the operating margins? I assume that there would not be -- are there terribly different selling expenses involved?

No, it's going to be similar to what's in there and you also need to consider, as Patrick talked about, those 15 people that are working in the oil and gas group right now. That group of people should be able to handle a significant amount of call it topline sales and so as the business grows, we are not going to need to step up operating expenses at the same rate that sales would be growing. There's going to be a multiplier in there. So I would hope that -- there's obviously going to be some increase in operating expenses just given that we are looking to hire a few additional people and a few additional expenses but as that revenue comes in, we would expect to be able to leverage the existing what I will call fixed expense associated with the oil and gas group that we've already been spending over the past eight, nine years.

How large a difference is there in the gross margins in the oil and gas compared to your traditional business?

Certainly the gross margin in our traditional business has come down over the past 10 years as the products -- I would say it's more competitive and so gross margin has come down slightly there. We generally don't want to put out exactly what gross margins are by product and -- but it certainly is an easier -- it's new products to market new markets and we've put an awful lot of time and investment into this, and so we are certainly able to get a little bit more profit out of it. So it's a healthier market.

Okay, so just in general direction you would expect as the shift in mix to oil and gas proceeds you will see better gross margins and better operating margins?

Yes.

Okay, switching to Natur-Tec, which you did not talk about that much, I wonder if you could us more details as to particularly what's going on overseas. You focused most of your comments on the North American organic recycling market.

Sure, in the past we've talked about two specific markets. One obviously was India or the Indian region as well as Italy. As I mentioned, we have just commenced operations on December 1 of 2013 with a majority-owned subsidiary in India specifically to focus on selling Natur-Tec finished products and resin compounds as the demand grows into that general region, specifically targeting the applications of compostable plastic packaging solutions for manufacturers. We are seeing increased demand and we are acquiring new customers in that sector, so we certainly expect to see healthy growth in that -- from the Indian subsidiary.

With respect to Italy, we are getting inquiries and promises of orders although we haven't actually gotten the orders for finished Natur-Tec products from the Italian market, but given all the past promises from Italy that have then disappeared because of the uncertainty regarding the regulations, we are basically putting no faith in that until we actually have documents in hand, purchase orders in hand, and the money has cleared the bank.

Okay, do you think you have a shot at Natur-Tec being profitable in the current fiscal year?

That's our plan.

Once again, thank you for taking my questions and a wonderful quarter.

Charlie Pine, Van Clemens & Company.

Good morning, guys, and congratulations on a really wonderful quarter. I have just a couple questions on your traditional -- the traditional ZERUST business and the effects that you are talking about regarding some of the improvement overseas in Europe. Have you -- as you move into the current quarter right now, have some of those knockout effects been -- are still apparent and you are continuing to feel good about where you are seeing Europe as far as stability and sort of your visibility in that area over the course of the next, say, at least over the course of maybe this next couple quarters?

In various meetings with our various European joint venture partners, certainly they are being cautiously optimistic. Let's use that tired and true comment about the prospects going forward. So we generally speaking based on the increase in orders in certain European countries over the last few months, we like to think that we are the packaging and products that go around the components that go into finished products. So we would be one of the first indicators of an improvement in the general economy. So we would like to think that this might be actually the signs of recovery in Europe overall.

We are also seeing significant increase in orders to our Asian joint venture partners for raw materials, etc. and they being supplier countries also to finished products ultimately manufactured in Europe, I think we are kind of seeing a little bit of sunlight on both sides of the world.

Is Germany -- would Germany be probably the best example of where you are seeing some of these rays of hope bursting in a little bit?

Germany did have a very respectable first quarter.

Okay, the other thing I was kind of curious about is a lot of the new ZERUST products that you introduced last year and the contribution about where you are seeing coming from those new product adds, have those started to just sort of hit your internal goals now or do you think there is still a considerable amount of runway left before they start hitting the kind of targets that you guys were looking for?

Well, you have to put those into two categories. One, you are talking about significant applications like for example the ZERUST products that we are applying the oil and gas sector, which are generally completely new and have a lot of room for growth. Some of the products that we've introduced in the industrial sector are not necessarily what we would refer to as expectations for category killers or really being the primary growth driver. They are complements to our existing product portfolio that by having them available in of themselves allow us to sell a significant greater amount of our other existing products.

So it's kind of like -- I'm trying to think of a good analogy -- by having by adding these additional products, the sales of these additional new products might in themselves be small but they are the catalyst that allows us to sell a much broader portfolio to new customers and existing customers.

Maybe I was just under the mistaken impression -- I thought that some of these new products you were going after and targeting some heretofore unexplored new verticals. Is that incorrect?

It's not incorrect but one of the best -- let me qualify this way. Some of the products that in the industrial market might have a small volume demand have potential for very large demand in the oil and gas market. But it's going to take us more time to fully develop and explore those market opportunities.

Okay, that's all I have, Pat and Matt. Thanks a lot. I appreciate all the hard work and stay at it. Congratulations.

Gregg Hillman, First Wilshire.

Patrick, I wanted to ask you about compostable bags. In Pasadena, where I work, they have prohibited all plastic bags at grocery markets right now and you just have to just bring your own or maybe they have paper bags there. But for communities that have prohibited plastic bags for shopping, are compostable bags -- have that been in any community that you are aware of -- have they -- have compostable bags replaced the plastic bags that have been prohibited? Do you get the drift of my question?

Sure, there are into -- to the best of my knowledge when you go into communities where they have banned the use of plastic bags, conventional petroleum-based plastic bags, you are talking that they have been replaced either by paper bags or reusable carryout bags or in some cases, they are using compostable plastic. Generally speaking, when they are -- when you are talking about products sold to individual customers at the retail level, it's not really where we have been focusing our marketing efforts. What we are generally doing especially on the West Coast is we supply industrial distribution companies. Industrial distribution companies in turn wind up supplying larger institutions like universities, the cafeteria services of large manufacturers, especially like in the IT sector, a lot of these very large IT companies they have larger cafeteria services and they wind up diverting their waste in total from those cafeterias to compost sites rather than landfills.

Now compostable plastic tends to cost more than conventional plastics. It's just still a factor of the market but even if you buy -- if the large institutions buy compostable plastic bags, that allows them then to divert their organic waste to these compost sites and the diversion, the disposal cost to a compost site is lower to the end user than it is to a landfill. So in a closed loop cycle, it winds up being cheaper and economically viable. Actually it is not only an environmentally good decision but it is also and economically good decision for the customer.

So the greatest benefits of switching to compostable plastics actually come at the institutional level rather than the individual consumer. Does that kind of answer your question or am I going too deep into the weeds?

No, no, that's helpful but what I was trying to get at is whether like in Italy they are trying to require compostable bags at the checkout line for the retailers I believe. And then has that happened in the United States or is there any appetite for any retailers to use compostable bags in place of the conventional petroleum-based plastic bags? And --?

Sure, I would use as an example, we supply to Whole Foods in certain segments but interestingly enough, Whole Foods in this case is using the bags primarily for their internal waste rather than selling the product on the retail shelves. So if you go into a Whole Foods and they wind up -- and they have a food service operations there, they are collecting their waste from their customers, from their -- I would call it a restaurant operation kind of in their stores as well as their own organic waste when produce spoils on the shelves, they will throw it into our -- some of these locations will throw it into our bags and then divert them to composting.

Okay, so basically you don't really see a retail market at the checkout level being developed for these compostable bags at this point, it's more an institutional product, if you will? Or a different level?

I'm sorry, yes, we do see that market developing. We certainly expect it to be developing eventually in Italy as well. All I am trying to say is that so far it has not been a significant portion of our sales. We've seen faster and more healthy growth at the industrial level than at the retail checkout level but that may change going forward.

Okay but if it were let's say required by a community at the retail level for the checkout level, compostable bags I don't know to take the place of conventional petroleum-based bags, how would that help the environment if individuals took these bags home? What would they do with it? Would it like somehow improve the buyer -- they would just end up in the garbage anyways and then go to a regular landfill rather than compostables?

If anything that goes into a landfill that does not biodegrade -- landfills are not designed to cause any kind of biodegradation of any kind. So if you take a bioplastic, a compostable plastic bag and throw it into a landfill, nothing will happen to it. It will react exactly as the conventional plastic bag will so there's no benefit to the environment whatsoever.

There's only an environmental benefit in you wind up diverting this compostable plastic bag from the checkout point -- from the retail checkout plastic bag if you wind up composting that or sending it to a compost center, only then will it compost as designed, completely biodegrade back to CO2, water, and fertilizer, 180 days and actually show an environmental benefit. So only if you have this closed loop or a diversion to a compost site with the finished plastic waste is there an environmental benefit.

Right and not all communities have compostable space to begin with as opposed to landfills. It's like a rare thing to have a dedicated compostable site for a community.

Yes, and given the lack of general education about the difference in the waste diversion among the general public, a vast majority of any kind of retail -- bags used at the retail level will wind up in the wrong place anyway. A lot of people just assume oh, it says biodegradable on it so it must be biodegradable even if I send it to a landfill. That's what the question that you asked earlier and that is simply not true.

Okay, I got it, okay, thanks. Thanks, Patrick, for the explanations.

(Operator Instructions). Presenters, I'm showing no additional phone questions in the queue. I'd like to turn the program back over to Mr. Lynch for any additional or closing remarks.

I'd like to thank everyone for participating today and in closing, I want to thank all the members of the NTIC global family of employees, joint venture partners, friends and colleagues from across our worldwide joint venture network for their hard work and dedication making our first quarter of fiscal 2014's achievements possible. We believe our strong international presence will continue to serve us as a key competitive advantage in an increasingly interconnected marketplace.

While we believe the economy in certain regions will remain challenging during fiscal 2014, we believe that with our technical strength and marketing reach we are well-positioned to pursue continued profitable growth. Thank you for listening and your interest in NTIC.

Thank you, gentlemen. Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation and have a wonderful day. Attendees, you may now all disconnect.