Oceaneering International Inc (OII) 2003 Q4 法說會逐字稿

Good morning. My name is Tonya, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the fourth-quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). In consideration of other participants, please limit your questions to two or three per queue. You may queue in again for additional questions. A maximum of three questions per person, please. Thank you.

Mr. Huff, you may begin.

Good morning, everybody. This is Jack Jurkoshek. I would like to thank you for joining us on our 2003 fourth-quarter earnings conference call, and I would like to particularly welcome those of you who may be participating in the webcast of this event.

Joining me today is John Huff, our Chairman and Chief Executive Officer, who will be leading the call this morning; Marvin Migura, our Chief Financial Officer; and Bob Migoya (ph), our Treasurer.

Just as a reminder, remarks we make during the course of the call regarding our business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

I am now going to turn the call over to John.

Thank you, Jack. Good morning, and I appreciate everyone joining us for the call this morning. The financial results for the quarter met our expectations. Our earnings, at 25 percent, matched the guidance that we gave last quarter and earlier in the year, and it matched the First Call consensus estimate. Considering the below-average oil service market conditions, we believe our overall performance for this quarter was quite good. Our subsea products group booked nearly 56 million in new orders, more than any other quarter in over two years. This enabled us to increase our products backlog, to 47 million at year end, up from 17 million at the end of the third quarter. Our products backlog is now higher than it has been in some time, and I think it is adequate.

As you know, the lack of orders and operating performance of our products segment was the primary culprit for our earnings decline in 2003 from the record that we achieved in 2002. For the past several quarters, I have been discussing with you our marketing plans to correct this situation. I believe our performance in the fourth quarter has demonstrated we have now turned a corner, at least in this regard.

Several significant events occurred during the quarter that either have or will have the potential to significantly benefit Oceaneering's future financial performance. In late November and early December, we announced our intent to acquire ROV-related business operations from Subsea 7 and Stolt Offshore. As noted in our earnings press release, we expect to close the Stolt transaction for an estimated $50 million shortly, and hope to finalize Subsea 7 by the end of the first quarter. Our acquisition of these ROV fleets will significantly increase our international market presence, particularly in West Africa, Brazil and the North Sea. They will also increase our present worldwide ROV leadership position from an estimated 28 percent market share to 48 percent. And I think controlling half of the third-party ROV market is a great place to be. We obviously are very excited about these pending deals and their future potential earnings contribution to Oceaneering.

In mid-December, we finalized our investment to acquire an ownership position in the Medusa spar. For the year 2004, we expect the net income benefit from this investment to be in the range of $3.7 to $5 million. This enabled us to increase our 2004 earnings guidance to $1.55 to $1.60 per share.

In late December, we selected a Florida location as the new facility for our U.S.-based umbilical manufacturing operations. We are now in the process of installing $25 million worth of state-of-the-art equipment in this plant, which is now anticipated to be operational by the fourth quarter of this year. The steel tube cabling machine on order for the our Brazilian plant is expected to be operational in the second quarter.

And finally, to provide the necessary funding to support our contemplated capital expansion program, we obtained at year-end a $250 million revolving credit facility. This revolver provides us medium-term capital at favorable cost, and coupled with our anticipated strong cash flow, preserves our financial flexibility.

In summary, our fourth quarter was very productive, and we are looking forward to 2004. Before I move on to '04, I would like to briefly review '03. For the year '03, we achieved the third-highest earnings in the Company's history, despite a tough market for oil field services and products in general. A record profit contribution was achieved by our inspection business, due to the OIS acquisition we completed in January. ADTECH achieved near-record performance on the strength of increased work for the U.S. Navy, including the contribution of our Nauticus acquisition in April. Finally, our ROV gross profits were the second highest in history, despite a persistence of mediocre demand for drill support services.

During the year, we completed or initiated acquisitions and major capital investments which totaled about $300 million. These new initiatives will position the Company for dramatically increased profitability in the years ahead. If the two pending ROV-related acquisitions close, the $300 million addition to our asset base will equal nearly 85 percent of our net long-term assets at the beginning of 2003. This is a remarkable statistic, and I am very proud to be part of an organization that can nearly double the size of its assets and yet maintain a very clear focus on a niche market strategy.

In summary, we believe our annual 2003 earnings performance, in what has been a lackluster market for the past two years in the oil service business, has set us apart from many companies involved in the offshore sector. We continue to have a positive profit contribution from all of our operating business segments, which speaks well for our niche market strategy. Our focus on providing products and services services for deepwater and subsea completions is a good way to play the entire offshore lifecycle, from exploration through production. Offshore and especially deepwater is definitely one of the best frontiers for the industry to lower its finding and development costs. When you compare us to larger, diversified services and products companies, we do extremely well in virtually every financial metric, except for having modest valuation multiples for earnings and cash flow. All in all, I think we have created an excellent business model, and have executed our strategies very efficiently and effectively.

Our balance sheet ended the year in great shape. At year end, we had debt of $122 million, equity of $359 million, and our debt-to-cap percentage was 25 percent. During 2003, we invested $143 million and repurchased over 500,000 shares. In total, we spent $156 million to improve the value of Oceaneering stock. We had $230 million available for future borrowings under our new revolving credit facility, and $18 million more in cash. Our balance sheet and liquidity are in great shape.

If you add depreciation back to our operating income, we generated $111 million in cash flow for the year. When you take a look at the cash flows our technical niche market strategy is generating, you should see an excellent business model being well executed. We have a strong Company, with significant resources consisting of unique, technically advanced assets and excellent people who have the ability to significantly leverage these assets as the offshore markets improve.

So now, on to 2004. As we said in the press release, we're now estimating 2004 earnings per share of $1.55 to $1.60. This estimate is based on expected earnings from our existing business operations, including our equity participation in the Medusa spar and the announced expansion of our umbilical plant manufacturing capacity and capability. Our estimate is predicated on flat markets for ADTECH in four of our five oil field segments, with the growth in earnings coming from subsea products and Medusa. Even after expensing an anticipated $1.5 million associated with moving our U.S. umbilical facilities, we believe the growth in product profits will occur, due to increased umbilical sales and more specialty hardware from our OIE group, including a full year's benefit from the Reflange and Rotator acquisitions. We continue to believe in the strong growth prospects for our products business segment, driven by a rise in the use of subsea completions. This is because there has been a strong historical correlation between the aggregate number of annual tree orders and the follow-on orders for umbilicals, which we expect to persist in the future. The number of subsea tree orders, based on information from Quest Offshore, is now expected to increase from 226 in '03 to at least 335 in '04, nearly 45 percent growth, and additional growth is anticipated during 2005 and 2006. This is comparable to the tree order market assessment we gave you last quarter.

Umbilical contract awards in '03 were for 1145 km. In '04, umbilical contract awards are forecasted to grow at a rate commensurate with the tree orders, to approximately 1650 kilometers, with further growth expected in '05 and '06. 75 percent of the expected market during the '04 to '06 period is for a steel tube designed product, and most of this is forecast to occur in the Gulf of Mexico and West Africa. Consequently, we are acquiring the world's largest steel tube umbilical manufacturing equipment for installation in our multiplex facilities located in the U.S. and Brazil. New cabling machines for these locations will quadruple our annual steel tube umbilical capacity.

In summary, given the ambiguity surrounding the general 2004 market outlook for oil services, we like our position. Earnings growth in 2004 of at least 30 percent is well within our grasp, and we are positioned to achieve additional upside earnings contributions from, one, either a better market than we have allowed for, which should enable us to use our existing extra capacity and operating leverage. At some point, in my mind, $30 to $35 dollar oil and $6 gas must have a positive impact on our customers' spending habits. Or, two, potential further acquisitions, particularly including the pending Subsea 7 and Stolt Offshore transactions, the timing and magnitude of which will be announced as the investments are made.

Only time will tell, although I believe 2004 could well turn out to be another record year for Oceaneering. For specific quarter one guidance, we're projecting earnings of approximately 20 cents for the first quarter. This is admittedly a slow start to what we envisioned as a very good year. The sequential decline in quarter one earnings from what we just reported for the fourth quarter is expected to come primarily from lower profit contributions from our subsea projects, inspection and most likely a small shortfall from the ROV business. We expect the quarterly profit margin contribution from our ROV business to return to the $10 to $11 million level during the first quarter, down slightly from the nearly $12 million we reported in the fourth quarter. For the rest of the year, we will see what happens with the pending ROV acquisitions and improvements from our marketing and cost containment programs.

The market outlook for our subsea project segment is difficult to forecast, due to the short leadtime nature of our customers' demand requirements for mostly production-phase remedial work. That being said, based on the lack of bookwork, and vessel utilization to date during January and February, we're forecasting a significant gross margin decline from this business segment in the first quarter, as compared to the fourth quarter. This is due to a very competitive pricing environment for diving and vessel-based project jobs we perform in the Gulf of Mexico, as well as a slack period during the winter weather months.

In inspection, we expect to see a relatively low level of revenues and gross margin from this business in the first-quarter, mostly due to the seasonality of the demand for such services in Europe, where over half of our activities are located. As a result of our increasing products backlog, our outlook for an increase in gross profit from our subsea products segment during the first quarter, compared to what we reported in the fourth of 2003 is upon us. This is attributable to an increase in profit contribution, principally from our OIE group. The multiplex contribution will be about the same quarter to quarter, as this division is presently engaged in the front-end engineering and ordering materials for the orders they received last quarter, primarily in the month of December. We expect our current high-level backlog overall and for umbilical, specifically, to increase even more throughout the year, and to have an outstanding product contribution from these operations for the full year.

For our MOPS business, we're anticipating comparable revenue and gross margin, as all three of our 100-percent-owned units are under contract. The financial effect of our ownership in the Medusa spar will be reported in other income. In the first quarter, we're anticipating this contribution will be about $1 million to pretax income, as production from a third well is anticipated to commence in early March. Our ADTECH business for the first quarter is anticipated to be slightly up from the fourth quarter. This is primarily due to timing of work on hand.

In order to kind of summarize our current status, I think I'll just make the following few points to you. Our results for the fourth quarter, I think, again demonstrated our ability to generate good earnings in a tough market. Our cash flows are strong. Our niche market business strategy is clear, and is working very well. Our strategy is not based on a waste on a one-trick pony. The market conditions we operate under vary widely, and it is our intent to be profitable in virtually any market scenario, and able to grow under a variety of market scenarios.

I believe our hidden assets are our untested operating leverage and the ability to convert our immediate financial resources and balance-sheet strength into 2004 EPS. We have clear objectives to improve our operations, outstanding people to execute our activity, and we will not be satisfied with mediocre results. We are focused on offering our customers more value-added solutions for their offshore needs and, in some cases, the only solutions available for deepwater operations. We intend to profitably grow our Company, to help our shareholders increase their returns. We believe 2004 will be a very good year. Should we close at least one of the two pending ROV acquisitions, we should have record earnings in 2004.

I appreciate your forbearance with the prepared remarks, and we will look forward to answering any questions and, certainly, entertaining any suggestions that anybody may have.

(OPERATOR INSTRUCTIONS). Justin Tugman.

I wanted to talk a little bit about your EPS guidance for the full year '04. It looks to me like about 80 percent of the EPS in '04 is going to come from the second quarter through the fourth quarter, and it appears that most of that is predicated upon the successful timing of the implementation of your steel tube capacity. Can you talk a little bit about -- in terms of how confident you are in terms of the timing of those projects coming online, and if those slip a little bit, I mean, how tight are these numbers with your guidance?

Let me -- you know, I don't normally like to do this, because it reminds you guys of peak earnings and not peak earnings and stuff, and we are not growing the Company just to sit here. But I think the best statistic I can give you, and that's what I have been trying to say in plain English, is that going from $1.20 to $1.40 is really not that big of a hurdle for us. We had a clean $1.20 in '03. We made less than $4.5 million from operations in our products segment in '03. We made almost $20 million from our products segment in '02.

So, if we get back to anything that is more realistic or reasonable, we're going to swamp to (ph) $1.40. And $1.55 to $1.60 is essentially incremental earnings with no overhead increase to operate the Medusa facility. So I am very comfortable with it; I don't think there's a whole lot of issue here. It's not based on a big rush of steel tube orders at the end of the year; it's just -- I mean, we have got a lot of thermoplastic orders that we are bidding. I think we have done a good job. That's why I spent six months letting you guys look under the skirts of the product marketing strategies and understand where we were. I think we closed out the year basically doing what I said we would do six or eight months ago.

So I don't think there's a lot of downside to the earnings estimate we have had. I certainly understand anybody's concern about 20 cents and how you get to $1.60 when you start out with a slow amount? Hey, that's just the way our business operates. So if four of our five segments stay flat, and we get any kind of rebound at all, without even, really, a lot of help from steel tubes in the products segment, we should be in good shape.

And assuming that four of your five oil service segments are flat in the year, can you help me to understand how much of the bridge between the Q2 numbers, which would indicate a sequential increase of about 25 to 30 cents, comes from the addition of the steel tube capacity?

Probably not a whole lot of that is steel tube. We do have one order, but it's not -- it's not very much a steel tube at all. If you kind of go back in, and you say that in Q2, we should have some possible pickup in the ROV segment, we will definitely have a pickup in the project segment, we will definitely have a pickup in the inspection segment, MOPS is flat. We should have the income flowing by the second quarter at an acceptable rate from the Medusa, so we are talking about $250,000 is a penny. So we don't have to make too many $250,000 numbers to get there. And then have already kind of talked about the products segment. I am not betting that the whole ranch (ph) on subsea products is going to be steel tubes. I am betting the future, next five years, is going to be predominantly steel tubes. And that's why we are making this big investment in it. Definitely, it's going there. And we have got to get there, and we have got some new designs and we have got some new ideas about how to do it better.

And Justin, to illustrate John's point, I think in the press release, we said that EPS for the second quarter is 45 to 50 cents, and the new steel tube facility in Florida is by no means operational at that time.

Final question -- regarding the potential accretion from the ROV or the pending ROV acquisitions, I believe in the initial press release on the Subsea 7 acquisition, you had indicated 15 cents in '04 and 20 to 25 cents in '05 are potential numbers. Do you still feel comfortable with those? And also, what would be the potential accretion from the Stolt acquisition?

As John said in his prepared remarks, we will be announcing our earnings or expected earnings accretion from the ROV acquisitions as we do them. And if that includes any revision to Subsea 7 expectations, we will be doing it at that time. We expect to close Stolt shortly, and we hope to close Subsea 7 before the end of the first quarter. And I think, right now, with the due diligence process where it is, it would be premature to modify or reconfirm our expectations when we entered into the agreement with Subsea 7.

George Gaspar.

First question -- on the ROV business, that's a pretty impressive number for the fourth quarter on revenue stream. Can you identify any special projects that you were involved in? Is it a better mix of construction? You had a pretty good margin. And where might you be looking at a revenue stream for the first quarter on ROV?

Actually, George, we may be a little conservative on the shortfall in ROV; I mean, that's possible. When we hit the $12 million, I was a little surprised that we did that. So I didn't want to get bold enough to say that that was going to continue. We didn't have any spectacular kind of job; it was just a grind-it-out, improve what you're doing type of business. I think our ROV guys -- and I think I have mentioned this in most every quarterly call -- they really have done a good job in '03, and I have been very pleased with the cost containment that we have been able to achieve, the ability to avoid downtime and maximize our revenue. As you know, it's a day-rate business. We have some penalty if we are not operational, and we have had upwards of 99 percent uptime in our business. So that has just been a kind of a gradual, continual improvement. We are getting ready for absorbing some more ROVs. And I think they're doing a good job getting ready for that.

And on the subsea products area, relative to the dip in volume in the fourth quarter, there, can we expect that right off in the first quarter here, that your sales volume might pick up some momentum to, let's say, like the third quarter's level, which was in the 29.7 million range?

I think so, and maybe higher.

In the first quarter?

Right.

And you had a very impressive margin, I must say. That was -- with the decline off of the third quarter to the fourth quarter, coming out with the margin you did was very impressive. Can you hold that margin and improve it in the first quarter?

I think we can hold it. We have got some good things going on in the products group, and you will be hearing about some of those things on that.

And then a question on G&A. It was considerably higher, and we know that there was $500,000 from an ADTECH hit there, and maybe some added accruals for a bonus that maybe was not tallied earlier. Can you give us any guidance as to what we maybe should be looking at on a G&A for the first quarter, relative to fourth quarter?

George, let me correct an assumption that the ADTECH settlement had any effect on G&A. It did not. We take those type of charges at the gross margin line. So the 500,000, while I could except that explanation, because it would work for me, would not be appropriate. And I think -- one of the things that we are adjusting to is the new SG&A run rate for Oceaneering with the acquisitions. And we're still sorting through that, but I think we expect the first quarter to be down from the fourth quarter, and more in line with somewhere between the fourth quarter and where we were in the third quarter, closer to the third quarter, in the $15 million range.

So, if we were correct, we assume that some of this G&A was maybe associated with the work that you're doing on acquisitions that obviously may have cost you something?

That's correct.

Brad Handler.

Could you please speak a little bit more to be -- maybe it's the backlog in subsea products, split out umbilicals versus other? I'm sorry; that's just sort of an obvious question. Maybe we can start there.

No, that's a great question. Over half of that was in the umbilical product line, and so the rest of that would be in our OIE product line. I don't know what else you need; I mean, it's the thermoplastic work.

What does that say about -- or maybe just a different way to ask it -- what do you expect for delivery of that specific backlog? Is it all in '04?

Yes, that backlog will be all in '04. I think it probably delivers third and fourth quarter, something like that.

And I guess my last question, sort of on the same topic -- can you give me a sense, please, for what you expect in terms of umbilical delivery in '04, maybe in terms of kilometers, versus 2003?

That is a good question, and I apologize that I can't answer it, because we should be able to give you that. We gave you the marketing kilometers, and we probably should be giving you some kilometer statistics for MOPS. I don't have it broken out in links like that. I guess, really, the telling thing -- and you can sort of hear this, I suspect, in my voice; at least, it should be confident, I don't know. But if you go back and you look at what products has contributed, and what it ought to be contributing, we only need $7.5 million to get from $1.20 to $1.40, with everything else being flat. And I think we are even a little conservative on things being flat. But the change in operating income from products from '02 to '03 was $15 million. The change from '01 to '03 was $7 million.

So that doesn't include any of the new acquisitions that we made, either Reflange or a ATG (ph) or Rotator, and that certainly doesn't include any of the steel tube capacity, which we will have some additional capacity on that should help us by midyear. And then we will have pretty much the whole thing onstream by the end of the year. So I am pretty confident that we have straightened out a few things that we needed to do, and we should be hitting at more of a full-stride operation in our products segment.

And, Brad, we don't usually report on backlog broken down between umbilicals and other. But the increase, the $30 million increase from the third quarter to the fourth quarter, somewhere between two-thirds and three-fourths of the increase was umbilicals in multiplex..

That's more than half.

That's (indiscernible). That's all very helpful.

Well, it's nice when the CEO and the CFO are (multiple speakers).

George Gaspar.

John, on the Medusa, you indicated a pretax range of $1 million in Q1; is that correct?

Right.

And that is on the basis of how many wells running (technical difficulty) platform?

Three.

Three? And is the target still to be at six like in July, or that early?

I'm sorry; say that again, George?

The total of six, I believe, would be the initial --

Yes. I think that's by midyear.

Midyear?

Yes.

Okay. And so can we assume, then, at a fixed well rate, that the run rate on here is at least 2 million per quarter, then?

Yes, I think so.

And can you describe a little bit about what you're doing in terms of opportunity -- that is, to do some additional work on the Medusa area, in terms of additional drilling activity or some subsea work? Are there any wells being planned that would be of a subsea nature now, as opposed to these being directionally drilled from the platform area?

Yes, that's correct. We're working with the operator currently at a step-out. I don't know that that step-out would occur in '04 or not, but definitely there is -- -- the one thing I have noted about these explorations is you guys are ultimate optimists. But there are -- in that Medusa area of mutual interest, there are several opportunities. And I think the planning is pretty well underway for at least one of them.

And the question, again, going back to the umbilical backlog area at 47 million. I believe I heard you say that there was one steel order in that number?

I think we have a steel order, but it's not a huge steel order, so I don't want to get excited about it. I mean, it's not a big deal.

How does this backlog break down, as far as the three plants -- Brazil, U.S. and the UK or Scotland? Can you give us any guidance on that?

Yes. I would say that Scotland is going to be more full than everybody else. We're in the process now of being sure. We have got a nice order in the Gulf of Mexico that we're going to be doing a project around, and so we are timing the move of our facility; that's probably one reason that we are a little bit -- I was hoping we would get a third-quarter, really big-time start. And we are delaying that a little bit in order to get this product out and do a project sort of second/third quarter in the U.S. So there's a lot of timing going around that. But I think fourth quarter fully functional operating is going to be good. And we will be moving into full swing in the next -- well, we already are. But I suspect by the second quarter, what we should be having is some additional steel tube orders that we can fulfill in Brazil. And then, by the end of the year, we will have the U.S. online.

Now, this Gulf of Mexico business you're talking about -- is that in the backlog now?

That one umbilical is, yes.

And again --

Let me add that that is in the $47 million, but all of the ancillary equipment that goes along with that is not in there yet. So that the beauty of this thing, is that umbilical for us -- the dream for us is that the umbilical has service provided with it. The reality is that that is not the case, certainly, in every umbilical. On the ones in the Gulf of Mexico, we have got some opportunity for that -- but every umbilical has got some additional hardware associated with it. So, in some cases, this hardware is almost as expensive as the umbilical, depending on the length of the umbilical. That's the good news, is that we really have kind of lined up, in sequence, all of the things that a customer needs to control a subsea tree, including the service to install it if it's within our size parameters, and our geography. I don't think that we're going to be moving to West Africa with our size parameter to do that; that's the province of the bigger subsea construction companies.

And just another question of the Gulf of Mexico. Now, is that a thermoplastic job?

The one we're doing is, yes.

And what is the water depth on that?

I don't know. I think it's -- I don't know. The answer is, if I told you, I would be lying to you and I would be guessing. I don't know, George; I'm sorry. But I'll get back to you and tell you.

And just to pursue the Scotland, now, where does the output go from there? Is there North Sea in there, or is it West Africa?

Mostly West Africa. What you have got is you have got Stolt and Subsea 7, which are big players with Technik (ph). Technik has got its own in-house supply, so they are not generally a big customer of ours for umbilicals, but Stolt and Subsea 7 -- they generally mobilize from the North Sea. So for them to take reels of the material down there is not a big issue.

Now, one of the reasons we're putting the cabling machine in Brazil is that it's an obviously shorter location, and eventually, my guess is that some of the other construction companies are going to get into the act down there in West Africa, and for them to come pick it up in Rio is going to be easier than -- or certainly for us to ship it from Rio is going to be easier. But right now, the North Sea is -- and Scotland is a good place to build product for installation in West Africa.

Good morning, everyone. The first question I have is just on the ROV business. From what we're hearing from the offshore drillers regarding the deepwater market becoming pretty constructive for the second half of this year and into '05. And I just wanted to ask you guys what that can mean to you, from a utilization standpoint, in addition to the margins, as you have more of your business or potentially more of your business being drill support versus construction?

Well, I think it helps us. There is no question that an increase in demand helps us. You have heard this story from us for well over a year now, that what is hardest is this intermediate water depth -- 1,000 to 3,000 feet of water. We're in great shape in ultra-deepwater, and I think we will continue to participate very, very well in that business. What we need are some 1,000- to 3,000-foot prospects anyplace in the world. We will be able to service (inaudible). So, as we increase our market share, as the growth in that market grows, you would expect our margins to blossom a little bit. So that's the plan. We have just got to execute it.

And just regarding the steel capacity in Brazil and the Gulf of Mexico in the second quarter and fourth quarter of this year, at what point can you guys start taking orders for those two facilities?

We are out beating the bushes. These are leadtime items, and we are ramped up marketing-wise right now; we have been ramped up marketing-wise; we have been selling steel tubes. It's just we ran out of capacity in Scotland to service the whole market, and so adding the capacity and being able to deliver from three points, the point in the U.S. being predominantly focused on the U.S. market, because those umbilicals will be able to be picked up in the U.S. for U.S. installation. So I see the U.S. as sort of a closed market. We tried to, and we have serviced the U.S. out of Scotland. Transportation costs were high, and the hassle factor for the installation contractors was high. So I think the U.S. will be kind of a closed environment. I think Brazil will pick up some of the overflow coming out of West Africa, and I think that Scotland will run at full capacity. So that's where we are headed in the steel tube. And we really don't have a lot of glitches in the plan; the plan should work pretty well. We're moving the plant from Houston, moving everything, all of our thermoplastic manufacturing operations and our cabling operations -- we are going to move it all to where we can do everything in one plant in the U.S. And that will make that business a little more efficient, as well.

So you guys could start building backlog, just say, out of the U.S. facility at some point before, say, in the third quarter or something, before the facility comes online?

Exactly. That's probably a very appropriate statement.

Okay. I think that's about the end of the questions, and I appreciate everybody being on the call, and I assure you that we are working hard to meet your expectations and exceed them. And I look forward to the call next quarter, and we will be well underway in '04 at that time, and I think that will be an important event for us. Thank you very much.

Thank you. This concludes today's conference. You may now disconnect.