Rogers Corp (ROG) 2014 Q1 法說會逐字稿

Good morning. My name is Steve and I will be your conference operator today. At this time, I would like everyone to the Rogers first-quarter 2014 earnings conference call. (Operator Instructions).

Thank you. President and CEO, Bruce Hoechner, you may begin your conference.

Thank you, Steve. Good morning, everyone. Thanks for joining us today. The slides for today's call can be found on the Investors section of our website, along with the news release that was issued yesterday.

With me today are Dennis Loughran, Vice President Finance and Chief Financial Officer; and Bob Daigle, Senior Vice President and Chief Technology Officer. I will now turn it over to Dennis to dispense with the formalities. Dennis?

Thank you, Bruce. I would like to point out to all our listeners that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement.

Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call that can be found on our website's Investors section.

I will now turn it back over to Bruce.

Thank you, Dennis. I am very pleased to share with you today Rogers' first-quarter results for 2014. Over the past two years we have reported on the transformational efforts we have undertaken to deliver greater value to our customers, shareholders and employees. Those activities, together with growth in our key markets, have helped us realize positive results in recent quarters. Today, I am pleased to say that the momentum we saw in the last half of 2013 clearly carried forward into the first quarter of 2014.

In Q1, Rogers set a first-quarter sales record, achieving $146.6 million in net sales, which is an increase of 16.4% over quarter one 2013. I'd like to take a moment to recognize the all-time revenue record quarter our Printed Circuit Materials division achieved. This was a simply outstanding performance that I will discuss in greater detail shortly.

In addition, as a Company we achieved earnings of $0.79 per diluted share, a 102.5% increase over our Q1 2013 performance. This comparison, as well as those that follow, are to the prior period's non-GAAP measures, which exclude special charges.

We also demonstrated continued improvement in our gross margins, moving to 36.8% from 32.8% in Q1 2013, driving our overall operating margin to 14.6% from 8.6% in Q1 2013. Dennis will share more with you in detail on our financial performance in a few minutes.

Overall, we are very encouraged by our performance and realize more opportunities lie ahead. We attribute our Q1 results to increased demand in our megatrend categories of Internet connectivity and clean energy, as well as substantial sales increases in safety and protection applications.

In particular, we saw orders increase for applications in telecom infrastructure, variable frequency motor drives, and automotive safety sensors. Growth in these key categories, in combination with our cost management discipline, enabled us to exceed our earnings guidance. Overall, we are very pleased with the strong start to 2014, which makes this the fifth quarter in a row where we have achieved year-over-year quarterly sales growth.

Moving on to slide 4. You will see an overview of first-quarter revenue performance by market. For the quarter, 62% of our sales were in our strategic megatrend categories, as we continue to provide our customers with specialty material solutions that support their robust -- their pursuit of growth in these global megatrend categories.

In the clean energy category, sales were up 29.8% over Q1 2013, with growth across all major segments. We saw particular strength in demand for power modules for variable frequency drives, automotive x-by-wire systems and solar applications. The continued global buildout of telecom infrastructure contributed to an impressive 33.4% growth in year-over-year revenues and Internet connectivity. We continue to see the benefit of the increase in 4G LTE-base station deployment around the world and especially in China.

In addition, growth in certain new applications enabling wireless connectivity for mobile Internet devices for one major OEM also helped boost demand for Rogers' high-frequency Printed Circuit Materials. We experienced modest growth in mass transit with a 3.2% increase in sales over Q1 2013.

Outside of our strategic megatrend categories, demand for radar-based automotive safety systems continues to drive growth for Rogers' Printed Circuit Materials division. We believe we will see further adoption around the world as governments increase their mandates for automotive safety measures, and as consumers become increasingly aware of the benefits of such systems.

Turning to slide 5. We will look at the Company's performance by business segment. As I mentioned earlier, the Printed Circuit Materials division achieved all-time record sales in Q1 2014. Sales were up 34.4% over Q1 2013. This was driven by the previously mentioned global growth of 4G LTE wireless infrastructure, as well as wireless antenna and automotive safety sensor applications. Overall, this performance was the result of strong market demand supported by outstanding work from our Printed Circuit Materials team. And I thank the PCM team for their dedication to excellence.

The Power Electronics Solutions division achieved another strong quarter, with 19% sales growth over Q1 2013. Demand was strong across nearly all of our major clean energy application areas. As a reminder, we are now reporting our earnings for Power Electronics Solutions as one core strategic element that is comprised of two main product lines, RO-LINX power distribution systems and curamik direct bonded copper substrates.

High Performance Foams revenues were down 2.9% versus Q1 2013. Growth across many of our HPF segments was offset by the continued affect of design changes in the applications for mobile Internet devices. We saw continued strong volume in hybrid electric vehicle battery applications and consumer applications for advanced support impact protection.

Turning to slide 6. I want to highlight our growth enablers. The Innovation Center at Northeastern University is now officially open, and our teams are actively collaborating on new engineered solutions that we can take to our customers in the global market. In the short term, we continue to take an outside-in view, collaborating closely with our customers to build a high-quality pipeline of solutions.

At the end of the first quarter in our targeted megatrend categories of clean energy, Internet connectivity and mass transit, we were tracking a cumulative total of 781 major design opportunities, with 458 in the design-in phase of the selling process.

During the quarter we moved 20 megatrend opportunities from design into production. The key message here is that we continue to take both a long-term and short-term approach to building a robust sales pipeline that we will continue to refill as we convert projects into sales.

Finally, we continue to invest in activities to standardize processes and systems, and we remain committed to our investments in operational improvements across the organization. Here, too, we are taking an outside-in view, ensuring these improvements reflect industry best practice across all departments.

I will now turn it over to Dennis to report our financial highlights.

Thank you, Bruce, and good morning again to everyone. As reported in the press release, we achieved earnings for continuing operations of $0.79 per diluted share. That result put us $0.08 or 11% above the midpoint of the range. Sales for the quarter came in at $146.6 million, well above our guided range and more importantly, 16.4% better than last year's first quarter. The combination of stronger sales and higher production produced better-than-expected gross margins at 36.8%.

Higher commercial expenses, primarily related to increased incentive and equity compensation, required environmental accruals and higher professional services, offset some of the margin gains. However, we were still able to deliver a significantly improved operating profit as a percent of sales at 14.6%.

That performance as compared to previous non-GAAP results is 500 basis points higher than the first quarter of 2013, 290 basis points better than the fourth quarter of 2013, and 142 basis points better than the midpoint of our guidance for the quarter. It also represents the best performance in the last two years and reflects the benefit of our profit improvement efforts which began in 2012.

A portion of that improvement is due to our continued focus on better operating efficiency as we grow sales which we accomplished in the quarter, with top line up $20.7 million or 16.4% in comparison to last year's first quarter.

We also achieved net sustainable SG&A cost reductions in the quarter totaling approximately $3.2 million, resulting from profit improvement efforts undertaken in 2013. Overall, our operating profit increased by $9.4 million as compared to non-GAAP operating profit for the first-quarter 2013, or a 78% increase.

On slide 8, our gross margins and operating profit percentages for the last five quarters are depicted. Gross margin was 36.8% for the first quarter of 2014, an improvement of 380 basis points as compared to the 33% non-GAAP gross margin reported in the first quarter of 2013.

Approximately 48 basis points of this improvement is a result of $0.7 million in streamlining benefits realized this quarter as compared to last year's first quarter. We also gained 240 basis points related to the addition of incremental volume at our average portfolio's 50% contribution level and an additional 92 basis points as we continued to leverage our existing manufacturing capacity to support higher sales volumes.

We also continue to implement continuous improvements in the areas of supply chain, product quality and procurement. Operating profit margins improved by a full 500 basis points as compared to the non-GAAP operating profit percent for the first quarter of 2013, on the strength of gross margin increases, as well as lower SG&A as a percent of sales.

Controllable SG&A contributed 216 basis points of improvement in operating profit percent, offset by a 178 basis point decline related to increases in incentive accruals and non-cash equity compensation.

Turning to commercial expenses on slide 9. Selling and administrative expenses as a percent of net sales for the first quarter of 2014 were 18.8% compared to non-GAAP of 19.2% for the first quarter of 2013. The net decrease was primarily the result of substantially higher sales, offsetting the impact of higher overall expenses related to incentive compensation, inflation, and strategic investments in growth-focused efficiencies and marketing and sales investments.

Expense increases related to incentives and stock compensation costs were $2.6 million for the quarter, which was higher than the prior year first quarter which had lower accruals based on timing of bonus and grant recognition in 2013. In addition, as previously described, SG&A spending is being impacted by our higher costs totaling approximately $2 million related to investments in key strategic areas, including IT, sales and marketing, and other organizational initiatives that we have said would be incurred as we earned our right to invest through profit improvement efforts.

All other controlled expenses were favorable to prior year's first quarter by approximately $1.2 million, net of normal inflationary and annualized payroll merit related increases.

Research and development expenses were 3.3% of sales in the first quarter of 2014, slightly lower than the 4.2% rate experienced in the first quarter of 2013. The lower rate is primarily related to the impact of substantial quarter-over-quarter sales growth and a lower base of quarterly R&D expenditures at the post-2013 streamlining levels that went into effect after the first quarter of 2013.

After a slight construction related delay, our new innovation center is now open, and we expect new innovation efforts announced in 2013 to begin increasing our R&D investment with our annual rate as a percent of sales achieving the 4% level by year-end 2014.

Turning to slide number 10. Rogers ended the first quarter with a cash and cash equivalents position of $216.5 million as compared to $191.9 million as of December 31, 2013, and $126.4 million at the end of Q1 2013.

As represented in the slide, we also improved our net debt metric to a positive $142.7 million, representing a $111.8 million improvement versus the first quarter of last year, providing added liquidity reserves and support of future strategic needs.

In the first quarter of 2014, the net increase in cash was primarily attributable to strong cash generated from operations of approximately $17.8 million. The quarter was impacted by a nominal increase of $2.0 million in net working capital, primarily related to volume-based increases in accounts receivable at $9.8 million, offset by a net increase in short-term liabilities of $3.7 million, and a slight decrease in inventory of $2.6 million, and cash received from the exercise of stock options of $10.5 million.

These amounts were partially offset by capital expenditures of $2.2 million and long-term debt repayments totaling $3.75 million, representing a schedule repayment against our long-term loan facility. We currently have $73.8 million of outstanding debt, down from $95.5 million at the end of the first quarter of 2013.

Turning to slide number 11. For the second quarter of 2014, we forecast net sales between $143 million and $148 million, and net income from continuing operations on a GAAP basis of between $0.68 and $0.77 per diluted share. At the midpoint of the range, this guidance represents a $13.7 million increase for a 10% sales improvement versus Q2 2013 net sales.

In operating profit as shown in the table at the bottom of the slide, at the midpoint of our range we expect to deliver $6.8 million in margin improvement with contribution on the increased sales at approximately 50%, in line with our expectations, as the benefit of $0.7 million in improved cost performance related to 2013 streamlining efforts was offset year over year by approximately $0.7 million related to lower than average mix contribution.

All in, we expect the quarter's gross margin will improve to a level approaching 35.4% from last year's 33.9% non-GAAP level in the second quarter of 2013. This is down 140 basis points sequentially, primary related to a mix issue expected to be isolated to our second quarter, with a slightly higher proportion of sales growth being below our corporate average contribution margin.

That contribution is expected to be offset by the accrual of an additional $1.4 million in costs related to incentive and stock compensation in the second quarter of 2014, as compared to the second quarter of 2013, which had a lower than target incentive compensation accrual. You will also see we are estimating $2.9 million of cost savings, offset by annual inflation impacts of $0.3 million, as well as strategic investments in IT and growth initiatives totaling approximately $2 million.

Overall, we expect that the midpoint of our guidance should deliver a 44% improvement in operating income compared to Q2 2013. That should achieve an operating profit of 13.1% as a percent of sales compared to the 10.1% GAAP level reported in Q2 2013.

Below operating income, we project approximately $0.2 million of net unfavorable impact primarily from improvements in joint venture performance at $0.2 million, offset by $0.4 million in unfavorable foreign currency impacts. We are currently projecting a slightly favorable Q2 2014 tax rate at 28.5% versus the 29% in the second quarter of 2013, resulting in a favorable impact of taxes of approximately $0.1 million.

Lastly, on a comparative basis, we are projecting share count at approximately 18.7 million shares or 1.2 million higher than the prior-year Q2 count, lowering current year EPS by approximately $0.05 per share compared to last year.

This concludes my remarks, and I will now turn the call back over to Bruce.

Thanks, Dennis, and this concludes our prepared remarks. We will now open up the call for questions.

(Operator Instructions) Dan Moore, CJS Securities.

Good morning and congratulations. Obviously, it was a very strong quarter.

Thanks, Dan.

As you mentioned, obviously Q1 revenue came in well above your guidance range. Wondering if there's any way to tell how much of that may have been a little bit of pull forward from Q2 versus just really strong command across the board in your end markets?

I believe the answer is stronger demand across all the end markets. I don't believe I saw any reports where there was any unusual quarter-end pull forward.

No. And Dan, the way we are looking at this -- and I was just out in Asia and in Europe -- we are seeing demand in the PCM area in 4G LTE to continue, certainly in Q2. And when we look at the buildout, particularly in China but also we are seeing it in North America as well, we anticipate throughout the year that we will see strong 4G LTE buildout which, of course, propels us in the base station as well as the antenna systems.

Excellent. And then, Dennis, you mentioned the gross margin outlook for Q2, that there was a mix issue which was sort of isolated. Can you elaborate on that at all, and what gives you confidence that gross margins will start to return to expansion as we look into the back half of the year?

The second quarter issue is basically we have 3 major business units that all have different contribution margin profiles. In the second quarter, we have ACM that is up only slightly. We have our PES business that is growing fairly substantially, and HPF's guidance is slightly down versus their first quarter.

At that contribution margin profile, we achieve a slightly lower average gross margin. The underlying profitability of each of those business units is as strong as ever, which gives me the confidence that as the growth profile averages out over the year, we return back to the levels we have seen.

Very good. Then maybe just looking at kind of more globally, you've talked about obviously the three megatrends. It is clear recently that Internet connectivity and clean energy are maybe pulling ahead of the pack a little bit.

As you look forward, particularly given the strength in automotive, is it maybe more -- and more generally safety systems -- is it more of a four-legged growth engine? And maybe just talk a little bit about the outlook for mass transit and if you expect that to continue to start to pick up again through the remainder of the year.

Dan, let me address the automotive side. We participate in a number of different ways in automotive. We have the safety radar, the blind spot detection, the adaptive cruise control, and that continues to grow at very high rates for us. Auto radar in the first quarter was up 37% for us.

Also, we see continued strength in the x-by-wire, and this is in our Curamik product line, particularly in the power modules. As we see internal combustion engines, the systems that historically have been driven by the fan belts and mechanical systems like power steering, air-conditioning and so forth, a lot of transition there to electrical systems which, of course, the Curamik direct bonded copper is used in.

We also in the clean energy area see a lot of benefit moving forward in EVs, particularly in the United States where one of the leading manufacturers in electric vehicles continues to grow rapidly. But also while I was in China, I visited a manufacturer there, and there is a lot of demand right now in China for alternative energy cars.

So HEV, EVs, and we are participating quite aggressively there with our power modules in their designs. That's being driven, quite frankly, by the government mandating levels of alternative energy vehicles because of the environmental concerns that they have going on there.

We also with HPF see our phones being used in the EVs and HEV automotive space, particularly in the battery separators, and that continues to grow for us. So that is a very strong segment for us. It covers essentially all of our major businesses.

And I think the other side in mass transit, we are starting to see some pickup in locomotive demand. We saw that with our RO-LINX busbars, some new orders coming in. We anticipate throughout the year to see some recovery there.

And we also continue to see with our BISCO silicone phones, materials being used in some of the major aircraft manufacturers for sound deadening effect, also for insulation effect and so forth. So across the board, we are starting to see some pickup also in the mass transit. It certainly won't be like what we are seeing in 4G LTE, but it is certainly moving in the right direction.

Thank you for the color. I would jump back in queue.

Sure. Thanks, Dan.

Avinash Kant, D.A. Davidson & Co.

Good morning, Bruce, Dennis, and Bob. Two questions. The first one, you did see very strong growth in the clean energy side, and you talk a little bit about the EV/EDV. Could you give us some idea what percentage of the revenue in this segment are coming from EV/EDV versus the wind and other segments? Or maybe if you could quantify that maybe more in terms of growth, what percentage of growth is coming from this segment?

What we have seen is some significant pickup in clean energy, particularly in variable speed motor drives. We were up 19%, and that is our in our PES business. So we are seeing that continuing to come forward. And also in solar power modules, we were up 83% there year on year.

In terms of the breakout, we don't necessarily have that breakout here, but certainly that is something that we can look into.

Would you say that EV/EDV is a bigger portion of this compared to other segments -- other business segments?

Yes. Well, I would say certainly going forward, we expect EV to be a strong growth driver for us as we see the increase in the adoption of electric vehicles. We saw, in terms of growth, it was 4% growth in Q1 2014 over Q4 2013. You know, it is nominal growth, but I can tell you what we are hearing is that we will see some substantial growth going forward.

And in terms of margins, of course, you were saying a little bit about Q2. How should we think of normality of margins coming in into Q2, which tends to be seasonally one of the better quarters for you?

So let me just comment on that and talk a little bit about strategically where the Company is going. We have set our targets for margins, both gross margin and operating margin, at 40% for gross, 15% for operating. And we have made, I think, great progress over the last year-and-a-half or so.

What we are seeing as we move into Q2, things are not necessarily straight line. I mean, Dennis mentioned some of the mix. We have certainly higher sales, nice growth in PES, which tends to be a lower gross margin business. We have some flatness in HPF. As we go into Q3 and we anticipate HPF recovering during the course of the year here, we should see and we expect to see margins bouncing a little bit up on that.

But again, things don't necessarily go in a straight line. On the bottom line, on the operating margin side, we are making some investments in Q2 in marketing and R&D that are lump sum, in a sense, that we think have to be made. And so that affects us a little bit negatively on the operating margin in Q2.

And final question, on the 4G LTE could you give us some idea of how big it is? The sales that are exposed to 4G LTE, how big are they? And which inning are we in in terms of growth in 4G LTE at this point?

Well, I will answer the second part of your question first. I think we are in about a two to three-year trend here where 4G LTE will continue to be built out. I mean there is a lot of data that we hear from our sources in terms of additional capital investment in China, but we're also seeing that investment coming in the US. AT&T, Sprint, some others are being pressured because of the need for greater bandwidth, greater download capability to expand as well.

So we see this as a multiyear expansion and that strength will certainly continue. We see that also power amps are about 57% of PCM, and we will continue to see that ramp up. But of course, within PCM we also see the blind spot and adaptive cruise control growing very substantially as we continue to see adoption there, as I mentioned earlier, 37% year on year, and we see that continuing.

Thank you so much, Bruce.

Jiwon Lee, Sidoti & Company.

Thank you, good morning. Bruce, could you level it a little bit more about the mobile device connectivity with the one OEM and whether or not that has some potential to spread?

Well, we are working very diligently to continue to talk with folks in the market to see the applications and to understand whether there is other opportunity. There has been a lot of work ongoing with multiple OEMs in this area, and this is all about improving Wi-Fi performance of the mobile Internet devices. Whether it gets adopted more broadly, we are in a lot of evaluation right now, so it is too early to say.

Okay and then in terms of the EV, previously you have given us some type of a, I guess, your dollar content into the unit. I wonder whether that has sort of kind of grown a little bit, or is that just more function of some of the OEMs' own growth?

Well, certainly the OEMs are growing, one in particular, and so we continue to move along with them. We have, I would say, about the same content that we have been talking about per car. And we continue to evaluate and look at other opportunities as some of the designs change. We also have opportunities for some greater penetration.

So it is a moving target but very progressive in the sense that the growth of models, sales of units, I should say, is continuing quite steadily.

Okay. And then the China's investment, anticipated investment in the mass transit again, how do you expect that to trickle down to you?

Well, again in high-speed rail and freight locomotives and so forth, that is where we see the application is, primarily in our RO-LINX busbar business segment, or I should say product line. So that is where we will see it most clearly.

Then lastly for me, in terms of your 2014 $25 million CapEx, there should be some delta in it. In what product lines do you particularly see the potential upside for the investment needs this year?

Well, certainly we are continuing to make investments in our PCM business. We just started up a new treater in China. We are looking at putting in more laminating capability into China and actually elsewhere. We also continue to do bottleneck that business across the world in our locations in Asia, Arizona, as well as in Belgium. So we will see some increased CapEx there.

We will also continue as we see increases in the demand for RO-LINX, we will continue to see some capital investment there; as well as some capital investment going forward in the Curamik product line. And we are looking at Asia for that as well.

Okay, very good. Thank you.

Dan Moore, CJS Securities.

Thank you again. In HPF, you mentioned you expect to see perhaps better growth in the back half of the year. Maybe talk a little bit about some of the design changes, whether we are sort of -- we'll be cycling against those sort of more difficult comps by Q3 and Q4, and how you expect maybe those impacts could dissipate and some of the other growth drivers within that segment to pick up the slack?

So certainly, and we have talked about this over the last few quarters, the transition away from some of the gasketing, the foam gasketing materials for the displays, particularly in the tablets going to non-gasket. So that continues to occur, and I think our sense is that we've pretty much hit bottom on that.

Our belief is that going forward, we are looking at other opportunity areas and in particular growth in consumer, in sports, high impact sports apparel, in helmet systems and so forth, and we have had excellent take-up there. We have seen about a 13% growth year on year in our XRD products. And we have a lot in the pipeline in terms of design.

We are also continuing to look at developments of new products in transportation, and this is in aircraft as well as in rail and also in TV. There is some special needs that each of those areas have that are addressed very well by both our BISCO and PORON product lines.

And then in general industrial, our play there is really looking more at geographical expansion, specifically in Europe. We have upgraded and added to our sales and marketing capabilities in Europe over the last six months. So we continue to make investments there in our capabilities, and we believe that there is certainly some upside there for us in general industrial.

So overall, the other thing is that we continue to, in the MID area, we continue to introduce some new products. The back pads, foam tapes -- shock pad, I should say -- that are used now because the gasketing around the displays has been removed gives us some opportunity there as well.

And is the margin profile for those growth opportunities comparable to where maybe you lost a little bit of content?

Well, what I would say is in total as we look at the multiple market areas, we believe that there is substantial opportunity in those other areas that will over time replace some of the MID business that we have talked about.

So it is a running activity for us to continue to expand. And I would certainly highlight the consumer area is one that we believe continues to have higher growth than the industrial one and mass transit or transportation.

Lastly, what are we going to do with all this cash? What does the acquisition pipeline look like, and maybe talk about some potential opportunities there?

So while we can't talk specifics, I will say that we have increased our investments in our skill sets there. We continue to aggressively pursue opportunities, and I will frame it out by saying our strategy is really one of looking at adjacencies and areas that are related to our three major business units. So that is the focus right now.

We are not necessarily looking at the fourth platform, although if something came along that we thought made sense, we would consider it. But I would say the majority of our effort is looking at the three business areas where we can continue to expand our presence and expand our strength, both in the technology and market applications areas.

So we do have a lot of cash, and one of the considerations that is always before the Board has to do with share buyback as well as dividend. And that is a discussion that we continue to have with the Board. But I will say that we believe we have opportunities for substantial growth through acquisition, and that is where our main focus is today.

Very good. Appreciate it again.

Okay, thanks, Dan.

Thank you. There are no further questions at this time. Mr. Hoechner, I turn the call back to you.

Thanks, Steve. In closing, I would like to summarize a few highlights of our call. First, we had a very strong first quarter, building on the momentum we gained in the second half of 2013. We finished the quarter with record-setting sales in our Printed Circuit Materials division, as well as continued double-digit revenue growth in Power Electronic Solutions.

The global demand for Internet connectivity, automotive safety sensors and clean energy drove much of that growth, and we believe that market indicators point to continued growth in these areas.

Secondly, we continue to improve our margins based on the streamlining efforts we began in 2012, and which continue today in the form of operational excellence initiatives.

Lastly, we believe our focus on innovation leadership for both the near and long terms will help us build value for our customers and shareholders. We expect to expand our market share by taking an outside-in approach to understand and converting customer and market opportunities.

We believe our recent performance signifies a new day at Rogers. Together with strong market indicators, we feel we have a sustainable advantage in the marketplace and that we are well positioned for growth throughout 2014 and beyond. Thanks for joining us on our call today. Have a good day.

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