Perrigo Company PLC (PRGO) 2003 Q2 法說會逐字稿

Good morning. I will be your conference facilitator today. At this time I would like to welcome everyone to the Perrigo second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If would you like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you.

Mr. Gibbons, you may begin your conference, sir.

Thank you very much. Good morning, everybody.

I'm pleased today to report our good operating results for our fiscal second quarter and for six months ending December 28, 2002. In the quarter sales were $228 million versus $229 million for the second quarter last year. Net income was $16.8 million or 24 cents per share versus $15.2 million or 20 cents per share last year. Beginning with the second quarter and in the interest of full disclosure we've elected to expense stock options. We think it's the right thing to do and the right time to do it.

In the second quarter before adoption earnings were 25 cents per share compared with 22 cents per share last year. Doug is going to discuss this further in his comments.

Looking at sales in the second quarter it was similar to the first quarter in our core store brand healthcare businesses with mixed results. Analgesics, laxatives, and contract sales were down. Cough, cold, feminine hygiene and vitamins were up.

Our Mexico subsidiary, Quifa, saw sales bounce back from their weak first quarter and Wrafton in the UK had an excellent quarter with sales up double digits. Gross margins over all of our businesses were also up very nicely by 90 basis points.

All in all I think it was an excellent quarter. And Doug will now walk you through the line items.

Thanks, Dave. Good morning, everybody.

Before I review the detailed financial results I will remind you these conferences include our views of where the business is going. We will make forward-looking statements we believe to be reasonable, but we give no assurance that those statements will prove to be correct. We have prepared a detailed discussion of the many factors we believe may have a material affect on our business on an ongoing basis and have included this discussion on page 23 to 27 on our form 10-K for the year ended June 29, 2001.

Let me start off with a little discussion on expensing stock options. As Dave said, we began expensing stock options with the issuance of our second quarter 10-Q. We did that by restating historical results rather than using a perspective method. The option expense was 1.3 million in fiscal 2003 and 1.5 million in fiscal 2002.

For the first six months it was 2.7 million in 2003 and 3.0 million in fiscal 2002. This had a one cent per share negative effect on our second quarter results and a three cent per share negative effect for the first six months. It's completely explained in the attachment that's included with the press release. Because we have historically issued qualified options, which have little tax effect for Perrigo, the expensing of options raises our tax rate approximately 1.4 percentage points to somewhere between 37 to 37.5%.

Let's move to the second quarter. As Dave noted, sales for the quarter of 228 million were down approximately one million or 1% from a year ago's 229 million. If you look at our store brand healthcare segment, it declined 2% from 208 million to 205 million. Within this segment our OTC business was down 4%. And our nutrition business was up 9%.

We recorded gains in sales dollars this quarter in our cough, cold, feminine hygiene and vitamin categories and experienced declines in the analgesic and contract manufacturing categories. A modest increase in sales in Mexico and a double-digit increase for Wrafton combined for an increase of 10% in the all other operating segment. Looking at IRI point of sale data, as you know, excluding Wal-Mart this quarter for sales dollars it indicates the following. The cough cold market was up 3%. The store brand was down 1%. And Perrigo was up 3% much Perrigo experienced seasonal inventory restocking and also benefited by some of our more recent products such as NBE's to Advil Cold and Sinus, NyQuil Cough and Alka-Seltzer Cold tablets.

The analgesic market was down 2%. Store brand was flat. And Perrigo was down 9%. And Perrigo was down 5%. I'm sorry.

Perrigo comparison reflects competitive pressure and lower prices for ibuprofen. It includes gastrointestinal category, that includes antacids and laxatives. That market was up 1%. Store brand was up 5%. And Perrigo was down 1%.

We saw lower volume and lower pricing compared to last year when we had fewer competitives for our Famotidine product.

The vitamin market was up 2%. Store brand was up 3%. And Perrigo was up 11%. It was led by the bone, health, and women's health products. And that overall vitamin market is now up for the second consecutive quarter.

Gross margins of 64.3 million was an increase of 1.6 million compared to last year. And it was 28.3% of sales compared to 27.4% on the same basis in the second quarter last year. The increase in gross margin was due to lower inventory obsolescence expenses and a favorable product sales mix with a little bit of improved net realized pricing year-over-year.

Operating expense in total declined slightly in the quarter as a percent of sales they were 16.7% versus 16.8% last year. Declines in distribution expenses and R&D expenses were offset by an increase by approximately $3 million in selling and administration expense due mainly to rise in liability and insurance costs and strategic initiatives around our validation process. The $2 million restructuring charge for fiscal 2002 was for the loss of the sale of the LaVergne warehouse.

Our effective tax rate for the quarter was 37.4% versus last year's 37.6%. Net income was $16.8 million in the quarter compared with $15.2 million last year and diluted earnings per share was 24 cents compared to 20 cents last year. That is one cent lower this year and two cent lower last year due to the expensing of stock options.

Turning to the six months results, sales were 441 million, down 1% compared to sales of 446 million last year. The store brand healthcare segment declined 2.7% from 411 million to 400 million. The sales volume declined approximately 25 million resulting from discontinuing lower margin products at certain customers and exiting sales of low volume products. The net sales decline was partially offset by a favorable mix of products sold and improved net realized pricing. Sales of the all other segment increased 17% or $6 million due to increased volumes at Wrafton year-over-year. Gross profit of 126 million was an increase of 11 million or 10%. As a percentage sales, this was 28.6% compared with 25.8% last year. Up almost 300 basis points.

The increase in gross margin was due to lower inventory obsolescence expenses due to lower finished goods inventory levels and improved inventory aging, improved production efficiencies, and an improvement in the product mix and improved net realized pricing.

Moving to operating expenses. The major difference year-over-year were, R&D was 10.8 million compared with 11.7 million last year due to the timing of development projects. Administration expense increased 4.3 million or 9% in the first half reflecting rising insurance expenses and strategic initiatives around the validation process. I would remind you that we recorded 3.1 million in vitamin litigation settlement income in the first quarter of fiscal 2003. In the effective tax rate 37.3 versus 38% a year ago.

Net income for the six months was $35.6 million compared with $27 million last year. Earnings per share was 50 cents compared with 36 cents last year. That's a decline of three cents in both fiscal years due to the expensing of stock options.

Now some comments on the balance sheet. Working capital excluding cash at quarter end was 127 million versus 130 million last quarter and 166 million at this time last year. That's a decline year-over-year of 39 million. Despite our stock buyback for 33 million in the first six months our cash balance declined only slightly from 77 million at year end to 72 million at the end of December.

Accounts receivable were 103 million compared with 112 million a year ago, reflecting improvement in DSO from 45 days to 40 days. Inventories were 153 million, a decrease of three million from year end and a decrease in eight million a year ago almost entirely due to reduction in finished goods inventory.

Customer service was above last year, continuing to meet our better than 90% goal. Cash flow from operations for the first six months was 37 million versus a negative two million last year. We continue to believe operating cash flow for the full year will meet our expectations of 60-70 million.

Capital expenditures for the first six months were 12 million. And we anticipate spending 23-28 million for the year.

I want to remind you what I said at the first quarter conference call. Year-over-year we picked off three to four cents per share in the first quarter of this year for better managed finished goods inventory. Last year, that's in fiscal 2002, we brought the inventory in line in the third quarter. And in that third quarter last year we picked up three to five cents per share which will not happen in the third quarter this year.

In summary, we are pleased with the first half results and feel good about our strong financial position. Our improving operational efficiencies puts us in great shape to take advantage of opportunities going forward. With any growth at all, it will truly be leveraged and hopefully we will have an opportunity to see that leverage if the cough, cold flu season rebounds in the third quarter.

With that, let me turn it back to Dave.

Thanks, Doug.

First let me review the developments since our last call on Loratadine and comment on our Loratadine announcement today. On November 27th, the FDA approved all five forms of Claritin for over-the-counter. There was no marketing exclusivity awarded to Schering-Plough. They did do their first shipments on December 9th. Late in December Wyeth launched Alavert, a proprietary product containing Loratadine. No store brand products in any of the five forms have shipped yet. It's really way too early to comment on sales or trends. And I would expect we would have a better picture next quarter to give you more detailed update on how things are going thus far.

Regarding our announcement today we really are pleased to announce the alliance with Andrex Corporation on three forms of Loratadine. That would be the D-12, the D-24, and the quick dissolve tablets. Upon labeling approval, Andrex expects to receive first-to-file marketing exclusivity which would be 180 days once they get it on the D-24 product. Final approval is expected on the D-12 and quick dissolve forms upon expiration of exclusivity of other manufacturers and those products have not begun to ship yet at this point from anyone other than Schering-Plough. The importance of this alliance is that it really is the quickest path to market. Perrigo is the leader in Rx to OTC switches in the store brand area. And we have an excellent opportunity here to partner with Andrex to continue that. But let me reiterate.

The timing of our first shipment of the D-24 product will be sometime around midyear. It's hard to say exactly when. But it should be sometime around midyear, calendar year this year. We'll have little impact on FY '03 and the D-12 and quick dissolve products will be fiscal 2004 introductions.

Moving on to our first half. Looking at the results I'm very pleased with our first half results. The best six months performance ever for Perrigo. We've done so without any sales growth. I certainly would like to have had some sales growth in the mix contributing to that. But I do have to compliment our operations folks for continuing to do a terrific job. Plant Four productivity is up through many of the initiatives that we've talked about in the past. The business simplification initiatives, bright stocking, packaging automation, etc.. In addition, our inventories are in great shape.

Service levels remain high as we have those inventories in great shape. And we are prepared despite our good inventory position to meet a seasonal up tick in demand if it will arrive here in this cough cold season.

Our outlook as we look forward, I would reiterate our initial thoughts on the year which was relatively flat, top and bottom line. Perhaps a little bit better on the bottom line. We still feel that way. A little impact this year from new products. The only major new product introduction is the national brand equivalence to Claritin or Loratadine products. We have restructuring in Mexico we've talked about that is eliminating a number of SKUs down there. We have increased pricing pressure on our analgesics, particularly ibuprofen.

And as we've also talked about, we take a terrific hit this year on our insurance costs. And that hit will not be taken every year. We'll stabilize at the currently higher costs pretty much.

As Doug has explained, it does become difficult in the second half to offset these issues entirely through what we expect to be the continuation of our operational efficiency improvements.

We've talked a little about the could have, cold, and flu season. I don't like to dwell on this because it sounds like an excuse maybe. But the fact is it is another weak cough and cold season. It's the third one in a row. It has turned down in the past couple of weeks a little bit. Hopefully this cold weather will help. And any pickup in seasonal indications would be a nice plus for us.

Additionally we do anticipate some lost business due to the termination by one of our suppliers of a contract for gelatin enrobed acetaminophen tablets. We're looking at alternative sources for similar products. But the timing of any alternative is uncertain at this time. We know we will lose a significant portion of our $36 million sales in the short-term. But without minimizing the potential impact of this lost business, which we're being very forthright about, I do want to make it clear that our long-term focus is to continue to make ourselves more cost competitive. It may be a challenge at times in the short-term, but we're going continue to look for new alternative sources where we feel we need to to make us a stronger company going forward.

In summary, we're confident that our operational excellence will continue to pay off. And we also feel very good about the path we're on to market with store brand Loratadine.

Two topics I'll cover before we open it up for questions very briefly. Corporate governance and our dividend announcement.

As you have heard, we are looking at different corporate governance initiatives. We've started expensing stock options. And we have also added new outside directors over the last few months. We have brought three new outside directors onboard. And in fact, Folsom Bell and Dick Hansen two very strong contributing directors, voluntarily stepped down because as insiders they wanted to accelerate the process that we were on to meet all of the standards of independence that are out there today. And the actions that we've taken clearly do support those new standards and increase the independence of our board.

Regarding the dividend announcement, that's the first ever for Perrigo a quarterly cash dividend of two and a half cents per share at an annual rate of ten cents per share. That represents our ongoing commitment to our shareholders. And it certainly also illustrates our management and our boards' confidence in our long-term prospects.

Thank you. And we'll now open it up between Doug and I for any questions you have.

Okay, and at this time I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for a moment to compile the roster.

Your first question comes from the line of Chuck Ferancosi of McDonald Investment.

Good morning, gentlemen.

Hey, Chuck.

First question. I just want to touch on the dividend. I guess this might be your area, Doug. Why did you start off with a ten cent payout? What kind of payout ratio are you comfortable with? And what kind of time frame are you looking at in working towards that time ratio -- or payout ratio?

Chuck, we took a look at about a hundred comparable companies. We looked at gross rates, etc.. We looked at payout ratios, yield ratios, and at least most important one to me is the percent of operating cash flow because you are making that commitment as you go forward. If you look at that ten cent a share, it falls right in the middle of that range. It's probably slightly on the low end as we start this process. We just want to make sure we understand how it works and be a little conservative with it but the current yield, if the stock were at 12.50, sort of the average over the last five days, that yield is about .8% or 80 basis points, which is pretty close to what some of the -- or the median of the companies we looked at. So we tried to focus on what the market was doing.

Do you have a time frame where you'd like to get to a higher payout ratio? Or a sexier yield?

We have not identified that. We know we will look at this probably every six months. And it will be reviewed at the board level at least annually. So we have made no commitment to that. But I can tell you that it will be reviewed on an ongoing basis.

Okay. What's behind the loss of the -- I saw it in the 10-Q, the third party that puts the gel coating on the acetaminophen tablets. It says in the Q, you could expect to lose about half that business in the remainder of the fiscal year what are your option there's?

We basically have a number of alternative sources we're looking at. We have been looking at alternatives, that supply contract for a while. As we've absorbed price increases without being able to pass them on to our retail customers. And based on the work that we've been doing that supplier decided not to continue partnering with us effective March 31st of this year.

We had not made any commitment to moving to a new technology. So we do have to move forward pretty quickly now to make sure that we -- faster, perhaps, than intended to look at alternative sources to the gelatin-coated tablets the supplier has been providing.

Could you eventually do this in-house?

That would be one possibility, Chuck. But we're certainly not ready to say that today.

Okay. Doug, can you quantify what the dollar increase is in your insurance expense fiscal 2003 over 2002?

Yeah. If you remember, we talked about $5 million of an increase for casualty and DNO and another three million for not really insurance but benefit costs.

Health.

Health costs for the employees as those rates went up.

Okay. I'll let somebody else ask some questions. I have some further follow-ups later.

Thanks.

Your next question comes from Bill Seal of Banc of America Securities.

Thanks. Good morning.

Good morning, Bill.

I want to follow up on Chuck's question regarding the supplier issue. It sounds to me as though it was the supplier's decision?

Yes. Correct.

Okay. And that's -- without playing 20 questions, was that as a result of something you initiated some sort of change that they disagreed with and then just decided to part ways?

They were concerned at some of the alternatives that we were looking at even though we hadn't made a decision to go with any of those alternatives and they decided to partner with someone else.

And is it fair to say that's a nine million per quarter run rate?

That's in round numbers, certainly, yeah.

Okay.

It would be a little bit seasonal, Bill.

But in round numbers.

Okay. Within reason. And I heard a little bit of pricing down in the discussion on market shares. Yet when we talked about gross margin, we heard about pricing up. Can we reconcile that?

Just from a -- it's more from a timing standpoint, Bill. As we are now going into a period where we will get hit negatively on our gross margins with the impact of pricing. We did have some positive pricing that had been put into effect a year ago. But that kind of has anniversaried itself and now we're feeling the pressure on some of the ibuprophen and other product pricing as we go into quarter three here.

Back half of the year. And then just talking a little bit about the third quarter. You mentioned that last year the inventory adjustment added three to five cents to earnings if we just take the middle of that, let's call it four cents. If I were to exclude that from last year, is there anything different that's going to occur in the third quarter of this year? Is it s your spending behind the manufacturing efficiency, is that going to be as strong in Q3 or Q2? I'm just kind of wondering if there is any sort of mitigating factors in the third quarter?

The only differences in that obsolescence number as it is reflected the year-over-year. So we would anticipate the operational efficiency gains to continue. Really when you look at inventory and you look at both of those, they have done a terrific job. So it's how that came through it came through this year in the first quarter because it didn't go up, versus last year. We had a pretty high expense in the first quarter and it came back around in the third.

But in terms, just so I'm clear, your cost structure in Q3 and Q4 is going to be the same. You're still going to continue to spend against manufacturing gains, still have the high insurance costs.

Yes.

Okay.

That hasn't changed.

That's great. Okay. Thank you very much.

Thanks, Bill.

Your next question comes from Linda Bolton-Wiser of Fahnestock and Company.

Hi. Thank you very much.

Can you just clarify with regard to Claritin and what's going on there in terms of the competitive landscape? I guess I'm a little confused. My understanding was that Geneva Pharmaceuticals would be expected to receive the first-to-file status for introduction of the first generic version. Can you just explain what's going on competitively and how that fits with your announcement regarding Andrex?

Linda, this is Dave. You're not alone in being confused. Believe me. There's a lot of confusion out there because there are different people out there with different dosage forms. Geneva and Novartis may be there in the ten milligram but not in the other formats. So there are a wide variety of people who will have first-to-file -- different people -- I believe there's four different people we expect will have first-to-file out of the five different dosage forms. Then there are other people that will be coming out with those products as soon as the exclusivity period up is. It is complicated. Our partner at this point in time is Andrex. They are our alter in on the three dosage forms we talked about. And we expect that they will get first-to-file exclusivity on one of those three dosage forms.

Okay. And then your previous comment -- I believe you said this could contribute $35-40 million of analyzed sales. How does what you've announced now kind of go along with that previous statement?

It gets us part way. But it doesn't get us near the entire amount. That will come as we get an opportunity with the other dosage forms. I'd say the three forms that we have in the -- and I'm again going to toss round numbers out. But somewhere close to half of the total volume in the Loratadine.

Okay.

And they will not all come starting at the same time. We expect that we'll probably have the D-24 first and the other two to follow. And depending on both our own timing or timing in working with a partner. We'll see what happens with the other dosage forms.

Okay. All right. Secondly, you mentioned that Wrafton sales were up double digit. Why was that?

It was primarily continuation of get something very good contract business. Wrafton has an excellent reputation over there with many of the major pharmaceuticals and has gotten some very good contracts recently that are helping them. We have not yet really begun to introduce the new products that we are working on to drive the store brand growth over there.

So the run rate we saw in this quarter is somewhat sustainable over the next couple of quarters?

Yes.

And finally -- well, can you give us for the inventory obsolescence, the exact percentage ratio for this quarter in the prior year?

We don't really track it that way, Linda. The numbers are relatively comparable second quarter to second quarter.

Okay.

It might be slightly favorable this year but that's about it.

Okay. And on the expensing of the stock options, where does that appear in the income statement? Is that in SG&A?

Yes, ma'am.

And is there any balance sheet restatement or anything regarding that?

Yes. The equity section -- I think you'll find it in the footnote in the Q. But the stockholders equity section is reduced by about $14 million as it relates to the restatement back to 1995. There's a piece that goes into deferred tax assets on the balance sheet. So there is a restatement because -- there is a restatement of the balance sheet because we used the historical method.

Okay. Great. Thank you very much.

Thanks, Linda.

Your next question comes from Patrick Forton of Wonderlich and Research.

Good morning, Dave and Doug.

Good morning, Patrick.

A quick follow-up on the release this morning. Is this the first time you guys have partnered up with Andrex?

The first time I'm aware of unless we did something with them some years back. But I think it is. Because I believe that this is their first for a -- ever into any kind of store brand sales. Certainly they've never done it themselves. I think they stated this is the first time even with a partner they chose Perrigo.

Was there any consideration as to the manufacturing being done by Perrigo?

That is part of our discussion with any of the suppliers. And we would look at who would be the most efficient supplier but also who already has the approval to produce in their facility. And will make a common sense decision with our supplier. The goal of both parties is to share in the profitability of the introduction so both parties do have an interest in having the costs as effective as they can be. But at this point with these products it is Andrex.

So it is possible that could you team up with the other three or four companies that will have first file exclusivity on the other dosages?

Absolutely. In fact, we are working hard both to bring our own product to market in those dosage forms but also looking at opportunities to partner if that would make economic sense and get us to the market faster.

Would your deal with Andrex help or hurt or be neutral to partnering up with some of those other companies?

It certainly would not hurt. I would think it would probably be neutral. But you certainly could say that it is a reaffirmation once again of Perrigo's leadership role in bringing new Rx to OTC switch products to the retailer base in food, drug, and mass.

And last question. In the pharmacists that we've talked to, we're hearing that a lot of the docs are -- for people that are covered by insurance are simply switching, writing scripts for like Allegra because it still costs too much to buy the Claritin over the counter. Do you have any idea what the retail pricing might be like? Let's say on the Claritin D-24s when you roll this thing out what the retail pricing will look like?

I don't have it off the top of my head for you, Patrick. I do know that when we look at what Claritin is selling for today, those consumers who are looking for an affordable product will be very pleased when we come out with our store brand versions because they will be significantly less. I mean well under half the price that Claritin is out there with in the dosage forms that I've seen.

So that begs another question. The overall goal with Claritin with whether you're going to be getting consumers who are used to being prescription consumers, which would be, you know, existing users of the product or new users -- and it sounds to me based on pricing going forward that you're looking primarily at the existing users of that product.

I wouldn't say that I think you'll expand the market. All the advertising that Claritin will do will certainly shore up interest in the whole category. I think when the prices are more, you know, prices do come down as they inevitably well, I think you could see a combination of opportunities there.

Okay.

Thanks.

Thank you.

Your next question comes from Derek Lecalle of Barrington Research.

Good morning, Dave and Doug.

Hey, Derek.

How you doing? First question has to do with operating expenses, Dave, I think you mentioned --

Derek, your line is open.

Hi, can you hear me?

Okay. We will go ahead and proceed on to the next question. You have a follow-up coming from Chuck Ferancosi.

Well hello again there, Chuck. Nope? He's disappeared, too.

Yes, Mr. Gibbons, he also disconnected. Everyone, I would like to remind you once again, in order to ask a question, please press star then the number one at this time to ask a question. Derek, your line is open.

Hi, can you hear me now?

Okay. We will proceed on to the next question. Coming from Linda Bolton-Wiser.

Hi. Just a follow-up on the ibuprofen pricing. Would you characterize the pricing pressure in the December quarter as sort of more intense or less intense than in the September quarter?

I don't know if I'd quantify it as radically or materially different. I think it's something that as ibuprofen moves towards monographed status, it will continue to be an issue. I don't think it's radically different, Linda.

Okay. Thank you.

You're welcome.

We have a follow-up question coming from Chuck Ferancosi. Chuck, your line is open.

Thank you. Can you hear me gentlemen?

Yes, sir. You got through again.

All right. I think we got it working.

Doug, what's going to be the option expense run rate going forward? Does the first quarter -- or the second quarter experience indicate what we should expect?

Yeah. I mean, right now the option expense is pretty flat quarter to quarter. So it's about -- it should be running at the same rate going forward as we just talked about. I want to just take a look.

What happens is that every time a new option is issued it will change. And we typically -- options have typically been issued at Perrigo in the first quarter of the fiscal year. So the run rate right now will be as -- as they ramp up in s fairly constant. It's going to run about six cents a share per year. Is what it's running at today.

Okay. But that could change with each issuance depending on the stock price.

That could change based on the stock price, the number of shares, and whether qualifies or nonqualifies our issue. But you can -- basically most companies are -- or always have issued about the same amount. So each year's options probably won't change that number a whole lot.

Okay. Is everybody pretty certain in this Loratadine market, that is the store brand marketers, that they will receive the 180-day exclusivity for first-to-file?

I'm not sure that anybody can count on what's going to happen on that, Chuck. We do feel pretty comfortable that Andrex will get the first-to-file exclusivity on the D-24. I really can't tell you with certainty what will happen all the way through. We do know some of the first-to-file people, we are pretty sure, will be first-to-file. But until it's a done deal I wouldn't be certain about it.

Doug, in the crude expenses under current liabilities, you had a nice source of cash there. I was wondering if you could detail that and anything going on at Kmart or Fleming that we should be aware of?

I'll answer the Kmart/Fleming question. Then Doug will get back to you on the other part.

Nothing has changed really at Kmart and Fleming. They're both customers of ours. They are kind of tied together. And certainly Kmart's troubles have had an impact on Fleming as well as Fleming having had some other issues of their own. But we continue to supply both of those people. And we certainly do pay attention to what is happening. And watch the credit limits and credit allowances very carefully. But we continue to work well with them to help them service their customers and continue to sell through them.

And Doug will get back to you now on the other part.

On the crude expense, I assume you're talking about the source and uses statement, the fund statement. We picked up almost $14 million of cash flow related to taxing and tax payments between fiscal 2002 and fiscal 2001actually. And then we had a pretty large pickup in the change in accounts payable year-over-year with 2003 being not quite as favorable as 2002. So those were the two real drivers of the balance sheet side of the pickup.

All right, thank you.

Thanks.

At this time there are no further questions.

Thank you all very much. Appreciate your taking part.

This now concludes today's conference call. You may now disconnect.