宣偉 (SHW) 2004 Q3 法說會逐字稿

Good morning, and welcome to the Sherwin-Williams Company's Third Quarter 2004 Earning Results Conference Call. Today's call is being recorded. At this time for opening remarks, I would like to turn the call over to Conway Ivy, Senior Vice President, Corporate Planning and Development. After his remarks, Chris Connor, Chairman and Chief Executive Officer; Sean Hennessy, Chief Financial Officer; John Ault, Vice President, Corporate Controller; and Bob Wells, Vice President, Corporate Planning and Communications will be available for questions. Now I would like to turn the conference over to Mr. Ivy. Please go ahead sir.

This conference call is being webcast simultaneously in listen-only mode by Vcall via the Internet at www.sherwin.com. An archived replay of this webcast will be available approximately 2 hours after this conference call concludes. It can be accessed at www.sherwin.com and will be available until Monday, November 1 at 5 PM Eastern Time. Before proceeding, I would like to remind you that during this conference call we will make certain forward-looking statements as defined under the US Federal Securities Laws with respect to sales, earnings, and other matters. And these forward-looking statements are based upon management's current expectations, estimates, assumptions, and beliefs concerning future events and conditions.

Listeners are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risk, uncertainty, and other factors many of which are outside the control of the Company, and these could cause actual results to differ materially from such statements and from the Company's historical results and experience. A discussion of these risks, uncertainty, and other factors are described from time to time in the Company's reports filed with the Securities and Exchange Commission. Any forward-looking statements speaks only as of the date on which such statement is made and the Company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events, or otherwise. After the review of our third quarter results, we will open this session to questions. In order to allow more time for questions, we have provided balance sheet items and other statistical data on our website at www.sherwin.com under Investor Relations third quarter press release.

Summarizing, our overall Company performance for the third quarter of 2004 versus third quarter of 2003, net sales increased to 11.6 percent to $1.7 billion. These sales results include the revenues of three acquisitions completed at various times since the third quarter of 2003 and two larger acquisitions, Duron Inc. and Paint Sundry Brands Corporation that closed on August 31, 2004. Combined the acquisitions accounted for 4 percent of the consolidated net sales increase in third quarter. The remaining core growth reflects continued strength in architectural paint sales to contractors, improving sales and market conditions, and industrial maintenance and product finishes markets, and improving international sales in the automotive finishes and international coating segment. Consolidated gross profit increased $64.9 million for the quarter.

Gross margin decreased to 44.3 percent of sales from 45.2 percent for the third quarter last year. This was due primarily to an increase in the cost of certain raw materials. Third quarter selling, general and administrative expenses as a percent to sales decreased from 31.9 percent in the third quarter 2003 to 31.4 percent this year. This was due to the improvement in sales and tight expense control. Interest expense for the quarter increased by $750,000 to $10.2 million as a result of borrowings to fund the acquisitions. Other expense net increased by $2.2 million over the third quarter of 2003, this was primarily due to an increase in environmental provisions. Net income increased by $12.6 million or 10.4 percent to $132.9 million from a $120.3 million in the third quarter of 2003. Our acquisitions accounted for $2.5 million of the increase in net income. The remaining increase was due to the sales improvement and reduced tax rate, which were partially offset by an increase in raw materials. Diluted net income per common share for the quarter increased 12.2 percent to $0.92 per share compared to $0.82 in 2003 third quarter.

I will now review our performance by segment for the third quarter of 2004 versus third quarter of 2003. Sales for our paint store segment in the third quarter 2004 increased 13 percent to $1.1 billion. The acquisition of Duron Inc., increased sales for the segment 3.2 percent in the third quarter. Comparable store sales that's sales by stores open more than 12 calendar months, grew by 8.9 percent. Sales growth for our stores was driven primarily by gains in architectural paint sales to contractors and do-it-yourself customers and to stronger industrial maintenance and product finishes sales compared to the third quarter last year. Regionally, in the third quarter of 2004, our Southeastern division led the sales performance followed by Southwestern division, Midwestern division, and Eastern division. The Southeastern division sales performance was primarily helped by the Duron acquisition. However, it's core sales performance remained positive despite the impact of the hurricane season in Florida.

Operating profit for the segment increased 19.6 percent to $168.5 million in the third quarter of 2004. This was due primarily to the increase in sales and tight SG&A control. The paint stores group ended the quarter with 2954 stores in operation compared to 2071 stores at the end of the third quarter last year. During the third quarter of 2004, we added 250 net new stores, 233 of these were by acquisition. Year to date through September 2004, we added 33 net new stores excluding acquired stores. For calendar 2004, paint store group remains on track to add approximately 65 net new stores excluding the acquired sites. This would entail the addition of 32 stores in the fourth quarter.

Turning now to the consumer segment for the third quarter of 2004, sales increased 5.1 percent to $345.8 million. Acquisitions completed since the third quarter of 2003 accounted for a net sales increase of 7.8 percent for the segment during the quarter. This increase was partially offset by sales declines due to inventory adjustments at some retails accounts and the elimination of a paint program by one customer. Operating profit for the consumer segment decreased 14.3 percent in the quarter to $54.3 million from $63.4 million last year. This reduction in an operating profit was due primarily to increasing raw material cost that could not be offset by favorable manufacturing absorption related to manufacturing volume increases or operating profit from acquisitions.

Going now to our Automotive Finishes segment in the third quarter, sales in US dollars increased 13.6 percent to $130.8 million. This improvement resulted primarily from new product introductions, improving sales by the segments of international operating units and the April 2004 acquisition of a majority interest in a Chinese automotive coatings company. For the quarter, currency exchange fluctuations had only a minor effect on sales. Operating profit for this segment during the quarter increased 19.7 percent to $14.8 million from $12.4 million in the third quarter of last year. Stronger sales volume, sales of higher margin products, improvements in the Segments International business units and profits from the foreign acquisition more than offset the effect of rising raw material cost during the quarter.

Turning now to our International Coating segment in the third quarter. Sales in South America improved compared to the third quarter last year and sales momentum in the UK remains strong. Third quarter net sales for this segment in US dollars grew 18.2 percent to $80.7 million. The effects of favorable currency exchange added 3.8 percent to sales for the quarter. Operating profit for the quarter in US dollars increased 38.9 percent to $4.5 million compared to $3.2 million in the third quarter of 2003. This was due primarily to volume increases and tight expense control.

I would now like to comment briefly on our balance sheet items. You will find, as I mentioned before, more balance sheet information on our Website. The working capital of the 2 companies acquired during the third quarter caused a slight increase in our working capital ratio at the end of the quarter. Our working capital ratio, which is accounts receivable plus inventories less payables to sales came in at 14.7 percent versus 13.5 percent for the third quarter of 2003. This ratio is based on 12 months sales in average working capital.

The working capital ratio for our core business was 12.7 percent of sales, an improvement of eight-tenths of 1 percent. Our total debt on September 30, 2004 was $877.5 million including total short-term borrowings of $368 million incurred for the acquisitions. Total borrowings to capitalization were 38.8 percent at the end of the quarter versus 26.5 percent at the end of the third quarter in 2003. In the third quarter 2004, the Company purchased 1.8 million shares of its common stock in the open market bringing the total share repurchases for the year to 5 million 150 thousand shares. At September 30, the Company had authorization to purchase approximately 11.9 million shares of its common stock. We expect to continue from time to time our opportunistic purchases of Company stock for treasury since we continue to believe our stock is a good value.

In the third quarter of 2004, we spent $23.4 million on capital expenditures. Depreciation expense was $27.9 million and amortization expense was $3.9 million. For the full year 2004, capital expenditures will be approximately $110 million. This is down from our previous estimate of $130 million due to the timing of certain projects. The predominant share of these capital expenditures will continue to go toward expanding our store network, plant productivity improvement, and maintenance and distribution infrastructure. Depreciation for the year will be about $108 million versus $104.8 million in 2003. Amortization will be $12.4 million versus $11.8 million in 2003.

I would like to now give you a brief update on the status of our lead litigation. There have been essentially no changes since our conference call last quarter. No new cases have been filed for 2 years. A tentative date for the retrial of the Rhode Island case is set for April 2005. The New York City and St. Louis Government cases are in discovery as are the cases in Mississippi. As a reminder, since 1987 no lead lawsuits brought against former lead pigment manufacturers has been lost or settled by the defendants and only one has come to trial, that's Rhodes Island which ended in a mistrial. This completes my review of our of our results for the third quarter 2004.

Now, I would like to turn this session over to Chris Connor who will make some general comments and highlight our expectations for the fourth quarter and full year. We will then open the call to questions. Chris?

Thanks, Conway and good morning everybody and thanks for joining us. I think these past 3 months have once again demonstrated the underlying strength of our business and the soundness of our business model. During the quarter, as Conway commented, we were able to sustain the strong sales momentum we established in the first half and generate solid profit improvement in what's proving to be an increasingly challenging cost environment. We completed 2 strategically important acquisitions for the Company. We purchased 1.8 million shares of our stock on the open market. We continue to improve the operations of our core business and maintain the strength of our balance sheet.

Let me comment on first on the Duron and Paint Sundry Brands acquisitions. Those of you who have followed or been part of the paint industry for a while certainly appreciate this strength and success of these 2 organizations in their respective markets. Both of these companies have built solid reputations over the years by consistently delivering high quality products and great service to the market, particularly to the professional painting contractor market.

I've often commented on our interest in acquiring companies that either expand or control distribution platform or provide us with a highly differentiated product and brand. By these criteria, both Duron and Paint Sundry Brands are right in our warehouse -- their strong businesses with exceptional talent and good potential synergies. I am confident they will contribute to our profitable growth in coming years and position us for accelerated growth and profitability in the years ahead.

Despite the significant cash investments we made during the quarter in closing these 2 acquisitions as well as repurchasing our stock for treasury, our balance sheet remained strong. As Conway pointed out, our total debt-to-cap increased a 35.7 percent in the third quarter. However, we expect to end the year with total debt-to-cap in the range of 32.0 percent. Given the strength of our cash flow with our debt-to-cap in that range, we still have significant financial flexibility to support our growth both organically and by acquisitions as well as to continue to purchase our stock on an opportunistic basis. On the strength of the financial results for the Company, yesterday our Board of Directors approved a regular quarterly dividend of 17 cents a share, keeping us on track towards our 68 cents dividend for the year, which I remind you will be our 25th consecutive year of increased dividends.

Last quarter, I talked about the mounting pressure on raw material cost caused by rising crude oil and natural gas prices as well as growing global demand for commodities like steel and titanium dioxide. Our outlook for the coating industry at that time call from annualized year-over-year raw material price increase of 4 to 6 percent for calendar year 2004. Given this steady rise in crude oil pricing since July and the mounting demand for other basic materials used in manufacturing and packaging paint, we have revised our raw materials outlook. We now anticipate that the coatings industry will experience an annualized year-over-year raw material price increase of 5 to 8 percent for the year. These market forces have put pressure on our consolidated gross margin, and we anticipate this will result in further gross margin compression in the fourth quarter. We have taken many proactive steps to ensure our continued earnings improvement in this difficult environment.

We will continue our efforts to offset as much of these increases as possible through manufacturing efficiencies, higher fixed cost absorption from volume growth, and importantly tight expense control. Although these efforts have helped to mitigate the marginal pressure, we believe the market conditions that are driving up the raw material cost will remain in effect for the foreseeable future. We are, therefore, in the process of implementing price increases across every segment of our Company. We're also working closely with our suppliers to ensure uninterrupted supply of key raw materials, as global inventories continue to tighten. To the combination of these efforts, we are confident that we can continue to improve our profitability going forward, which brings me to our guidance for the fourth quarter and full year 2004.

We anticipate that fourth quarter net sales will increase in the low double-digit range versus last year's fourth quarter, helped in part by the recently completed acquisitions. With sales growth at that level, we expect diluted net income for the common share for the fourth quarter to be in the range of 48 cents to 52 cents per share, compared to 48 cents per share for the fourth quarter of 2003. Back on July 22, we commented that we expected our sales for the year to increase in the high single-digit range over 2003 and diluted net income for common share for the year would be in the range of 258 to 266. We now expect our annual sales increase to be in the low double-digit range over the last year, and diluted net income for common share for the year to be in the range of $2.62 to $2.66 per share compared to $2.26 per share in calendar year 2003. Planning for next year 2005 is currently in progress and we will be prepared to provide you with sales and earnings expectations for the next year during our year-end 2004 conference call.

That concludes our formal remarks and now, at this time, we will be happy to open the floor for your questions.

(OPERATOR INSTRUCTIONS) Jeffrey Zekauskas, J.P. Morgan.

Can you talk about how much your average price has increased during the quarter on a consolidated basis?

The price increases that Chris referred to were really being made effective on October 1. So, there was very little pricing in the third quarter.

If I can just follow up on that, I mean, that seems a little bit puzzling given the sort of the expansion of margins in the paint business and the contraction of margins in the consumer business, it's sort of seems as though prices in stores went up and prices in consumer either didn't go up or didn't go up as much. Is that all right?

I think the business in the stores side, Jeff, is always a lot more fluid and then individual contracts for a specific jobs are coming up on a regular basis. So, perhaps our stores were able to be a little bit more reactive. I think also in terms of stores, there were gross margin pressures in stores but through the significant increase in sales volume and control of the expenses, that's how they were able to increase their operating margins. (multiple speakers) of what Chris mentioned.

Just a last thing and can you talk about what raw materials may face shortages? Are these sort of acrylic polymers or is it Ti02 or is it sort of -- it's just different in different areas or does it turn out that you are really not worried about shortages for next year?

I think, supplies are tight but basically and they are particularly tight in the polymer areas due to some shortages in monomers. We are not being constrained there because of we have multiple sources as supply. We also have some in-house manufacturing of polymers. So, those supplies are tight in all of these areas. I think, through our basic raw material purchasing strategy, we think, we will be able to maintain sources of supply as we go forward, but of course the tight inventory situation puts upward pressure on cost.

Eric Bosshard, Midwest Research.

Couple of things. First of all, the consumer business, we've had 6 or 7 or 8 good quarters of results out of consumer business preceded by a number of weaker quarters, what can you do within this business now considering the customer base to reverse what was a pretty significant profit contraction? I guess I am interested from a cost standpoint from a market share standpoint and then from a product pricing standpoint, what do you think you are going to accomplish over the next 6 or 9 months to stabilize the profits from this business?

I think that's the first question Eric, and I think the things that we have been working on to generate the improved results for this segment are the same things that will help us get back. I think your right to point out that we put several quarters together here and you are seeing the impact of an escalating raw material cost impact on this segment and as Conway has commented many times in the past, price increases tend to lag and eventually get in there. So we've talked about that. We've announced price increases for this segment; we are working hard to get that through. But importantly we also mentioned about our continuing efforts for efficiencies in getting cost out of this system and finding opportunities where our increased volume can help drive that. And then we believe also certainly with some of our key customers, they are adjusting inventories and we could see that occurring in September.

Secondly the dilution from the acquisitions, I think, in the release you stated was 2 cents, and I understand you just told them for a month. But can you give us a sense of what these acquisitions are expected to do to 4Q and then some thoughts on what it means once you roll into 2005?

Eric, it's accretion not dilution. It was 2 cents in the quarter; so let me have John just comment a little bit about what our expectations are going forward here.

Eric, on the 2 cents, I just also want to -- that 2 cents was also created by the 5 acquisitions, 3 smaller ones that we finished or completed in the fourth quarter of 2003 and then the 2 larger ones that we have completed. But when you sit there and take a look at the full year, we believe that it will be just about breakeven for the EPS.

And because of the seasonality of the business, we picked up the benefit of higher volumes in September and then as the volumes would decrease, that creates a more of a drag in the fourth quarter.

And so there will be dilution in 4Q than in total for a 2005 there should be some level of fluctuations?

Yes absolutely, slight discretion.

We'll guidance on that in the first quarter.

Okay, and then lastly, in terms of the momentum of the businesses we came out of September and October, I understand that 3Q was certainly influenced by some abnormal weather that looked like may be got a bit better in September and October. Can you give us any flavor for the momentum of the business?

Well I think, in terms of our overall sales with the acquisitions obviously we were picking up momentum as we were going through the quarter with August being higher, July and September being higher than August, but if we backup the acquisition September was lower than August and we think that primary impact was the impact on the weather on the East Coast and also part of this inventory correction we saw, and some retailers which might have also been influenced by that weather pattern.

And how was October compared so far, relative to September?

If you look at October on a daily basis we feel we put guidance out there for the quarter and we don't see any problem in getting that guidance.

Ivy Zelman, Credit Suisse First Boston.

Could you talk a little bit about I guess the new product that you plan rolling out, I know you are planning on rolling, I believe, already to roll out in this fourth quarter and what it can do for volumes related to the troubles or the struggles with higher cost in the consumer segment? And then I will have a follow-up question.

Ivy, we shipped our new Dutch Boy brand, ready to roll container during the second week of October, so we are just now getting into market. Our rollout partner for this program was Home Centers in the Midwest and part of the United States, and there are number of other retailers that will be taking in later in the month. We expect that this will have a very marginal impact on this segment, and I think it just speaks to their continued intervention that we bring to this category into the Dutch Boy brand.

Do you think if there is some other large Big Box customers might be looking at it, that's an opportunity or is that something unlikely to happen?

As we've always commented, we have a tremendous regard for all the Big Box customers who are important customers of ours and all the products and innervations that we can bring to the market are always shown to them and that decision will be up to them.

And then with respect to the customer that your line of paint was eliminated, is that related to Purdy or can you say at least what category? Was it one of the acquired companies?

No. It was not Purdy and it was a Canadian Tire in Canada. It was an architectural paint line that we had with them.

Any particular reason why that happened?

Well, basically they decided to revamp their paint department and in terms of what they were proposing to do, we did not want to incur the expense going forward and there was another competitor that was willing to incur that expense and, Canadian Tire is still a very important customer for us because we're selling other lines in there. So, this was just affecting their paint program.

Okay. And then lastly with respect to '05 realizing you will comment after the fourth quarter result, can you just give us an indication whether or not you think you can grow earnings double-digit or is it is too soon for you to make that statement?

If it is too soon, but it will be better I think.

I think Ivy as you can appreciate that there are lot of puts and takes, but you know we are confident we'll be able to increase earnings next year, but we'll give you more color on that on a year-end conference call.

John Roberts, Buckingham Research.

You said raw material costs will be up 5 to 8 percent for '04. We looked at year-end '04 versus year '03 sort of an instantaneous look what's the for these increase that you think you will have at the end of the year?

Be it the high end of that range, John.

It won't be significantly above it?

It actually when you look at the fourth quarter to fourth quarter '03, it will be higher than the 8 percent.

Okay when I think you look at the December over December, it's going to be even higher.

Yes. You are actually right. It just contains increases as the quarter went on -- we believe it will.

If you look at gross profit per gallon rather than gross profit as a percent of sales, it looks to me at least like your gross profits per gallon was probably pretty stable with the year-ago quarter?

Actually probably -- very close to be in stable. Your are absolutely right, the gross profit percent was down, but the dollars were pretty stable.

Okay and then lastly most of your competition is either smaller companies that don't have your sourcing strength, or there are larger companies that are much more dependent on the mass retailing whether pricing is a lot more challenging. Should you be looking for share gain over the next -- is this an opportunity on the volume side even though you have had a little bit of margin compression?

Now it is an opportunity for us to gain share, John. So I would come to work every morning and we think that our competitors have issues as we do; we are dealing with these raw material cost and all of us will be seeking relief in the market.

And I might add its never been part of our strategy to gain share based on a pricing policy. Our strategy has always been to gain share based on product innovation, quality service, and be competitive on price. But, we would not be lagging on any pricing in order to gain a temporary advantage on volume. We would rather have a consistent growth posture.

But do you think sort of the industry out there has got very marginal economic right now?

I am sorry you broke up with that question.

Do you think there is a part of the industry that doesn't relatively core economic right now.

Just to everyone else can hear the question. I guess the question was what kind of economic condition out there? Are competitors in and is there a situation where there are some small competitors that are having some problem and quite honestly we really can't comment on our competitors because you know that they are nonpublic. The information we give is not really -- we really can't comment on that, but we are out there, competing out there every day and they are tough competitors and so forth so.

(OPERATOR INSTRUCTIONS) Barbara Allen, Arnhold & S. Bleichroeder.

I wondered if you could expand a little bit more on your comments about inventory reductions in September. Was it primarily the Southeast or are you seeing at another areas as well?

I believed that you take a look at that comment, really refers to a few larger customers in the discount chain and that this quarter we have being very careful on the inventory that they were put into their stores.

And I think we could see some other beyond the Southeast as well.

Do you have any explanation for why that would be a occurring out of the Southeast?

Possibly caution on the part of consumers, but I don't really have a reason for or the retailers we talked to. I mean because some of their off the door sales slowed and that's what drove the pulling back on the orders.

Okay. What level of debt should we -- are you targeting for the end of the year?

32 percent. That's part for the debt-to-cap. So we feel we are going to be a much of 750 to $800 million range.

Okay. And the tax rate for the year?

We believe that 35 percent will be a good rate for the year as well as next year.

Okay and lastly, what are you seeing on the commercial industrial side of your business? Is it up on a year-over-year basis sequentially any areas, in particular, of strengths or weakness?

Yes and yes, up, sequentially up year-over-year. This has been a year where we have the seen the industrial maintenance continued to strengthen as the years going on. Our industrial coatings or the product finishes coating is also showing signs of the recoveries, Barbara.

It's up in both dollars and gallons.

That's encouraging. Thank you very much.

Jeffrey Zekauskas, JP Morgan.

This year has been a remarkable year for coatings growth and in part it's been because customers have really rebuilt their inventories in comparison to 2003. And how much of a volume or a sales benefit do you think that you've received from that? And when you contemplate 2005, how much of a detriment do you think you might face from inventories perhaps going down?

I know the source of your first comment Jeff, the inventories have gone up across our industry.

Sure.

Certainly through our own stores, which is a phenomenon to our coatings and the inventory's yester level have gone down. We continued to get working capital out of the system, and I think the result of the sales in the marketplace have been driven much more by the market demands and by the creation of over inflated inventories at retail. So, I think Conway's comments here about perhaps a little softening that we are seeing in retail whether weather-related or other and some retailers just tightening inventory -- that's a very common trend that we go through with that customer segment on a regular basis, and we wouldn't put any thought into 2005 having a significant change in the structure given what they have done. We would expect as we are getting to our plans here to be prepared in this spring to talk to you about '05 and we expect to continue to make progress.

That is given that your overall growth sort of order of magnitude is about 10 percent enough through the first 9 months maybe even a little bit better when you contemplate 2005. All things being equal, do you think it will be a difficult matter to grow volumes at all? Where do you think that it would be relatively easy to grow them? And to grow them at rate above the coatings industry growth rate on a normalized basis?

I think, it will obviously depend on the demand factors for 2005 and I think when you look at our Company with 70 percent of our sales being through controlled distribution, where we have managed inventory levels, those high sales growth if truly been sales off the door obviously. In terms of the other parts of the business where we are selling to other retail customers, I think, their sales off the door have been strong throughout the year and it was just basically in September, where we just first started to see their order rates fall and that's what led us to believe that there is some inventory corrections. So in terms of the overall sales performance this year, I think, very little of it would be going into building of inventory stocks in terms of the paint in the channels of distribution.

Just sort of a last question, can you just comment in general on the attitude of sort of a variety of Big Box retailers toward paint companies that wish to increase their prices in a rising raw materials environment -- that is do you find them exceptionally accommodative or exceptionally, I don't know, truculent or whatever the opposite of accommodative is or something in the middle. Who is going to eat these costs?

Jeff, we can appreciate -- no one likes a cost increase but you've heard me saying before you can't repeal the laws of economics and all of our competitors in the paint industry coming off with using the same suppliers and that we are all faced with the same raw material cost and so I think it's always a question of the timing of those price increases rolling through and what I've seen, I am not to referring to any particular situation now, but I've seen in the past where retailers in rising raw material cost environments where retailer does not allow a manufacturer to maintain their margins. I've seen other companies would start to cut quality and diminish the product in some way and so we think we will not do that, but we think that can be a defeating strategy in the long term. And so that's why I say I think in our business and many others, you can't repeal the laws of economics that costs are the costs.

Thank you very much.

Ivy Zelman, CS First Boston.

Hi guys, just a quick one. Your expectation for the industry to have -- now raw material price increases up 5 to 8 percent but yet you are raising prices the first of October or just started implementing price increases across all segments realizing that they can help mitigate some of those increases. Do you think if you are successful that you've already incorporated that into your expectations or is that more upside?

No. It's incorporated into our expectation to catch up to where their market's going.

And meaning the fourth quarter so far, that's the only quarter that you are -- okay.

Correct.

And then on the -- I guess just a followup on one of the comments on the acquisitions with Purdy. Have you had -- what is then the reception from customers that our competitors like in ICI that held Purdy products, has there been any fallout as a result of that or has it been hopefully where you'll continue sell those competitors the Prudy products?

I think we've had a very positive response from many of the customers. A few customers and I obviously don't want to talk about

specific customers, but some who may look at us a competitor and it's a small portion are taking a wait and see attitude, but I think we're pleased with the positive response we've received and obviously we want to maintain and service all of their customer base with the high quality products that they are used to.

And gentlemen it appears there are no questions at this time. I would like to turn it back to you for any additional or closing remarks.

Okay. Well, thank you all very much for joining us today and as you know Bob Wells and I will be available after the call and should any of you all have any follow-up questions, Bob and I would look forward to speaking with you. So thank you all very much. Bye.

Thank you and that does conclude our conference today. We would like to thank everybody for their participation. You may disconnect at this time.