Standex International Corp (SXI) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Standex International Corporation earnings conference call. My name is Marcia and I will be your coordinator for today's call. At this time all the participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Roger Fix, President and CEO, and Mr. Tom DeByle, CFO and Treasurer. Please proceed.

Good morning and thank you for joining us. Please note that our fourth-quarter financial results news release, which we issued earlier this morning, is available on Standex's website at www.Standex.com. This quarter we have added a presentation to accompany our prepared remarks which you may access through our website. Once on our website access the Investor Relations tab, then Conference call, and then finally Webcast. As we discuss the various components of our business we will provide prompts so you can follow along with the slides.

On this morning's call, Tom will begin with a review of our fourth-quarter and year-end financial results, then I'll follow with an update on our operating groups; and after that, as we usually do, we'll be happy to take questions. Let's start now with our financial review. Tom?

Good morning, everyone. Thank you for joining us today. I'll start by reviewing our Safe Harbor passage on slide 2.

Matters we are discussing on this conference call include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to our recent SEC filings and public announcements for a detailed list of the risk factors.

With that let's turn to slide 3 and our full-year results. For the fiscal year 2008 revenues were up 12.3% over last year and came in at $697.5 million. Operating income outpaced revenue growth, once more demonstrating the leverage in our business model. Operating income for the year increased by 29.3% to $38.9 million in fiscal 2008 versus $30.1 million in fiscal 2007.

Full-year 2008 net income for continuing operations increased by 21.1% to $19.3 million or $1.55 per diluted share compared with $15.9 million or $1.28 per diluted share for fiscal 2007. Full-year 2008 net income was $18.5 million or $1.49 per diluted share compared with $21.2 million or $1.71 per diluted share for fiscal 2007.

Net income for fiscal 2007 benefited from the sale of two of our companies, discontinued consumer group businesses by approximately $0.43 per diluted share, while net income in fiscal 2008 was affected by a loss of approximately $0.06 per share from discontinued operations.

As you know, depreciation and amortization have a significant effect on Standex's net income due to our acquisitive nature. Therefore, I would like to begin discussing EBITDA on our conference calls, an additional metric for the investment community to use to measure and assist in understanding our performance. We believe this will allow investors to gain a better sense of the Company's cash generation capability which is a key to our future growth.

As you can see from slide 4, we generated $56.4 million in EBITDA continuing our history of solid EBITDA performance. We have provided a reconciliation of EBITDA to net income in our press release and as an addendum to this presentation. Please keep in mind that our EBITDA numbers are as reported for each respective year and are not restated for operations that were subsequently discontinued. As I mentioned earlier, our EBITDA performance relates directly to our ability to generate cash.

Please turn to slide 5. In fiscal 2008 our free cash flow was exceptional. We generated $52.3 million in free cash flow even in a weak economic environment that several of our businesses faced during the year and converted EBIT to free cash flow at a rate of 133%.

Historically we have been very consistent in our free cash flow performance. On the slide you can see that our free cash flow has exceeded 100% of our EBIT for the years presented with the exception of 2006. In 2006 we built and facilitated our Nogales, Mexico operation and had an unusually high level of capital expenditures as a result. By driving free cash flow above EBIT we have been able to consistently invest in our businesses through both organic initiatives and acquisitions while consistently paying our dividend to our shareholders.

Over the past 18 months our strategy has been to use our strong free cash flow to de-lever our balance sheet following the acquisitions we made in January of 2007 in order to create balance sheet capacity to complete additional acquisitions. On slide 6 you can see how we executed on this strategy.

Since we completed the two major acquisitions in the food service equipment group in January of 2007 we have reduced our net debt by approximately $40 million, while at the same time paying dividends of $18 million to our shareholders and expending approximately $[15] million in capital expenditure projects to facilitate growth and improvement in our operations.

On a related note, I wanted to update you on Standex's new financing agreement. Just last month Standex executed a series of one-year and two-year interest rate swaps for a total of $88.5 million that, based on our current leverage ratio, have a blended effective rate of 4.01%. We executed the one-year swaps on $28.5 million with an effective interest rate of 3.72% and the two-year swaps on $60 million with an effective interest rate of 4.14%. The swaps allow us to reduce the impact of potentially rising interest rates, reduce rate volatility and lock in historically low effective interest rates in an uncertain economic environment.

Now let's turn to slide 7 and our quarterly results. We performed well in the fourth quarter delivering good top-line growth and a substantial improvement in profitability. For the fourth quarter of 2008 net sales were up 5.2% to $180.8 million from $171.8 million last year. The increase was driven by solid growth across three of our operating groups -- Food Service, Engraving and Engineered Products. Once again ongoing weakness in our new residential construction and off-road heavy construction vehicle market negatively affected sales volumes of our ADP and Hydraulics Groups respectively.

Turn to slide 8, please. Fourth-quarter income from operations grew 39.4% to $10 million compared with $7.2 million in the fourth quarter of last year. Operating income as a percent of sales was 5.5% compared with 4.2% in the fourth fiscal quarter a year ago. Interest expense for the quarter was $1.8 million compared with $2.9 million in the prior year. Fourth-quarter net income from continuing operations was $5.8 million or $0.47 per diluted share compared with $3.3 million or $0.26 per diluted share in Q4 of fiscal 2007.

Our fourth-quarter net income from continuing operations reflects a tax rate of 36.8%, this compares with a tax rate of 32.8% in the corresponding quarter of last year. The higher rate in the current year relates to -- in part to a non-renewal of a federal research and development credit which expired December 31, 2007.

Net income for the fourth quarter of fiscal 2008 was $5.4 million or $0.44 per diluted share. This compares with net income of $3 million or $0.24 per diluted share in the fourth quarter of fiscal 2007. Net loss from discontinued operations was $386,000 for the fourth quarter of 2008 versus a loss of $290,000 in the prior year. Fourth-quarter fiscal 2008 EBITDA was $15.6 million compared with $11.8 million in the fourth quarter of fiscal 2007.

As you can see on slide 9, net working capital was $124.5 million at June 30, 2008 compared with $131.4 million at June 30, 2007. We define working capital as Accounts Receivable plus inventories less Accounts Payable. Working capital turns increased to 5.8 turns from 5.2 turns in the prior year quarter.

On slide 10 we have selected balance sheet items. Our net debt, which we define as short-term debt plus long-term debt less cash, decreased to $106 million at June 30, 2008 from $127.6 million at March 31, 2008. The Company's balance sheet ratio of net debt to capital was 32.2% at the end of the quarter compared with 36% at March 31, 2008. For the fourth quarter depreciation and amortization expense was $4.6 million, up from the prior year $4 million. Capital expenditures during Q4 totaled $3.3 million.

I wanted to provide a brief update on where we stand with the accrual we had booked regarding our participation in the cleanup activity at a site located in Cleveland, Ohio where the Company leased a building and conducted operations from 1967 until 1979 for our Club Products and Monarch Aluminum Divisions.

Recall that as part of our fiscal 2008 third-quarter results we recorded a $2 million pretax charge to discontinued operations in anticipation of expensing that we would occur related to the cleanup of the site. During the fourth quarter we signed an administrative order of consent which formally obliges Standex to clean up the site and we hired a project management firm, expert in environmental cleanup efforts, to assist us with the effort.

We have also put several insurance companies on notice that have provided liability coverage to Standex during the years in question. It is still very early in the characterization and cleanup process at the site, so we are not able to make a more accurate estimate of the cost to clean up the site and therefore have not modified our accrual during the fourth quarter.

One final item before I turn the call back to Roger. Since the end of fiscal 2008 we closed ADP's Barton (sic), Illinois facility to reduce our fixed cost structure and improve factory utilization at ADP. As a result we expect to realize an annual cost savings of $2.2 million. We anticipate recording a $4.3 million pretax expense which equates to roughly $0.22 per share related to the shutdown which will be primarily incurred in the first quarter of fiscal 2009.

This expense includes employee severance and other employee benefit termination costs, expenses associated with the relocation of the plant's production capacity to other facilities and the anticipated loss on the sale of the Bartonville real estate. So with that I'll turn the call back to Roger and you can turn to slide 11.

Thanks, Tom. We're pleased with our overall performance in fiscal 2008. In the face of headwinds from the severe recession in the US new housing construction market, and the slowdown in the off-road heavy construction equipment market, we grew sales by 12% and operating income by 29% in fiscal 2008 over the prior year.

Solid year-over-year improvement in financial performance at our Food Service equipment group was a very significant contributor to the top- and bottom-line growth for Standex in fiscal 2008 as we continue to drive market share gains and leverage sales synergies across the hot and cold sides of this business.

Our Engraving and Spincraft business units also turned in impressive growth and double-digit increases in operating income for the year. The performances of our Food Service Equipment, Engraving, and Engineered Products Groups were partially offset by the ADP and Hydraulic Groups which were affected by the market factors that I just mentioned.

Let's dive right into the details of our quarterly performances for each operating group starting with Food Service. Please turn to slide 12. Food Service Equipment fourth-quarter revenues increased 8.1% year-over-year to $98.8 million in the face of a slowing market. This growth was driven by higher sales across all but one of our food service businesses with especially strong growth demonstrated by our cooking solutions businesses which include the APW Wyott, Baker's Pride, BevLes and BKI brands.

fourth-quarter operating income grew 16.1%. We did not fully leverage the reported top-line sales growth during the quarter for three reasons. First, material cost inflation negatively affected our operating margins. The Food Service Group did achieve an effective price increase across the entire Group of 3.6%. This price increase went a long ways towards offsetting higher material costs incurred during the quarter. However, price increases used to counter material cost increases do not leverage incremental profit to the bottom line, therefore diluting margins.

In addition, we experienced an unfavorable change in customer mix, primarily in the refrigerated solutions portion of the business as we saw a greater sales -- portion of sales to buying groups and certain large chains which generated lower margins.

We also recorded unusually high recruiting costs in the quarter as part of the management transition process underway in the Cooking Solutions Group. The double-digit revenue growth reported by the Cooking Solutions businesses during the fourth quarter was a result of sales growth at YUM! Brand restaurants and dealer buying groups. We also saw solid growth in Canada in the quarter through our Refrigerated Solutions Group.

As you might recall from our Q3 conference call, we had shared with you that one of our major competitors in the Canadian market went into receivership, thus freeing up a significant amount of volume on the cold side of the business. We moved aggressively to expand our manufacture rep and dealer sales channels into Canada and we've already begun to see a positive effect on revenues. Our Nor-Lake walk-in cooler and freezer business did especially well in Canada during the quarter.

Another factor that helped drive growth in Food Service this quarter was our PROCON business which delivered double-digit top- and bottom-line growth. We saw sales growth in both the beverage and industrial market segments. The margin improvement at PROCON was a result of volume leverage as well as the move of production to Mexico and material cost reductions resulting from low-cost sourcing.

In Q4 we did see some softness on the cold side of the Food Service business as a result of several restaurant chains slowing their rate of store openings. In addition, our American Food Service business had lower sales than a year ago due to the timing of several key projects.

Going forward we'll continue to drive market share gains by leveraging sales synergies and customer relationships across our Refrigeration and Cooking Solutions businesses while also developing products for new market segments. We will also continue to focus on margin improvement by improving our cost structure through procurement cost reduction programs, price management initiatives, low-cost manufacturing in Mexico and low-cost sourcing from China.

Turn to slide 13, please. Engraving Group sales grew by 18.1% year-over-year driven by Mold-Tech's rising businesses which experienced strong demand from our global automotive OEM customers as well as foreign exchange gains. The lean manufacturing initiatives we have implemented, cost reductions and higher sales volume, enabled us to generate a 215.8% increase in operating income in the quarter.

Our international Engraving operations really fired on all cylinders in the quarter. We saw an increase in demand from our automotive sector in Europe as French and Italian OEMs launched several new project platforms through our facilities in Italy and Portugal. Our Mold-Tech operations in China also performed well growing sales and improving the bottom line.

Management and organizational changes that we made over the past year at our European operations, specifically in the UK, Germany and the Czech Republic, are having a positive impact on our performance. We're pleased with the team's results and we expect continued growth from our international operations.

On the domestic side of our business, our results were mixed. Although we experienced good demand from our Mold-Tech mold texturizing business, our roll and plate engraving businesses continue to be soft as a direct result of the housing market crisis. This business produces engraved rolls used in the manufacture of such products such as siding, wallpaper, linoleum and decking construction materials, primarily used in residential home construction.

For the quarter we implemented several cost reduction measures at the engraving group to offset sales declines in our domestic engraving operations and to improve the overall profitability of the group. First, we announced the closure of two roll engraving operations in the US. We are consolidating the business served at those facilities into our Richmond, Virginia plant. By streamlining our operations and eliminating fixed overhead costs we expect to improve utilization and productivity across our engraving footprint.

We're encouraged by the prospects for our Engraving Group heading into fiscal 2009. We have fairly good visibility into this business because of the platforms that are anticipated for the coming year. In addition, we have the broadest worldwide presence in our industry, which gives us a significant competitive advantage in times of market volatility. When automotive OEMs consolidate operations or shift platforms from one geography to another Standex will be very well positioned to capture these business opportunities.

Turn to slide 14, please. Our Engineered Products Group led top-line growth in the quarter with revenues increasing 25.8% year-over-year primarily due to a very strong growth at Spincraft. Operating income increased by 29% year-over-year.

Spincraft performed well from a revenue perspective during the fourth quarter as a result of continuing strength in the energy, aerospace and aviation markets. Three issues did affect operating income performance within the Engineered Products Group.

First, Spincraft negotiated and received a $1.1 million payment relating to the cancellation of the shuttle program to pay for inventory and tooling that was made obsolete by the cancellation of this program. Although there was no profit associated with the payment, we did reduce inventory and increase our cash position.

Second, we achieved a 2.4% effective price increase across the Group which again had a dilutive impact on profit leverage and margin.

Third, as expected, we continue to see manufacturing inefficiencies which were the result of new programs launched in our Spincraft facilities and by the start up of recently installed equipment to support the anticipated top-line growth of this business.

As you may remember from our recent calls, during the first half of fiscal 2008 we began installing the necessary equipment to capitalize on several major contracts that we've been awarded. New machine tools came fully online in the final quarter of the year and we believe we've entered the first quarter of 2009 with the majority of these inefficiencies behind us.

Sales at our Electronics business were slightly higher year-over-year. Although we saw steady growth in customers in the industrial, medical and aerospace markets, this was largely offset by weaker sales from the automotive and housing end-user markets. In the final quarter of the year our Electronics business completed the transfer of approximately 50 positions from our Canadian facility to Mexico and China.

We've also initiated significant material substitution to reduce the cost for precious metals used in the production of reed switches. By using a non-rhodium plating material we expect to significantly lower our material cost. We expect these actions to deliver margin improvements beginning in the first quarter of fiscal 2009 and ramping up throughout the year.

We believe that our margin improvement efforts completed in fiscal 2008 at our Electronics business such as plant consolidations, price increases, material cost reductions and the increased use of low-cost manufacturing in Mexico and China will have a positive effect on our performance in fiscal 2009.

Before we move on to our next operating group, I wanted to update you on a small acquisition we completed earlier this month. We purchased BG Laboratories, a manufacturer of custom designed magnetics for the aviation, aerospace and military end markets for approximately $1.6 million. BG Labs will be integrated into our Engineered Products Group as part of Standex Electronics.

BG Labs serves an impressive list of blue chip customers that uses high reliability products for mission-critical applications. This acquisition expands Standex Electronics' customer base in the aerospace and defense market segments and increases our market share in the higher-margin custom engineered magnetics world.

On slide 15 we discuss the Hydraulics Group. Hydraulic Product Group revenues for the quarter declined by 5% year-over-year and operating income increased by 1.3% as a result of price increases and manufacturing efficiency improvements.

We continue to see the weak demand environment for off-road heavy construction vehicles in the US affect our sales and profitability in the fourth quarter. For the greater part of 2008 we have seen only a slight year-over-year sales decline, so we continue to believe that we are at the bottom of the downturn. That said, the timing of the recovery of the market remains very uncertain.

Internationally we continue to see growth opportunities for our hydraulic cylinders. We're particularly focused right now on the Middle East, South America, Mexico and China. To that end, in Q4 we committed to creating a manufacturing capability at our Tianjin, China plant to produce telescopic hoists for sale in the domestic Chinese market and for export to other Asia-Pacific markets and to Europe. Production at this site is expected to commence in the second half of fiscal 2009. Although we do not expect it to be a significant contributor in fiscal 2009, we should see sales and profitability resulting from this facility in 2010 and beyond.

Turn to slide 16, please. Air Distribution Products Group sales were down by 30.1% as a result of the continued severe downturn in the residential construction market. ADP reported a loss for the quarter due to the sharp decline in sales volume combined with significantly higher material costs.

In this challenging economic environment we remain focused on implementing cost reductions and gaining market share. During the quarter we implemented another round of price increases consistent with the market. We have raised prices approximately 32% in the past two quarters, consistent with increases in metal costs experienced during the same time frame.

As Tom mentioned, we've also recently closed our Bartonville, Illinois ADP facility to reduce our fixed cost structure and improve factory utilization within ADP. The transfer of the sales and production activities of the Bartonville facility to our ADP locations in Minnesota and Georgia has been completed with no customer disruption. We believe that our existing ADP facilities are strategically located to be able to service all of our customers while maintaining the highest levels of customer service.

Turning to slide 17, I'd like to quickly summarize our thoughts on our five operating groups and our prospects for growth. We're heading into fiscal 2009 in an uncertain economy and we continue to face challenging conditions in the housing and off-road heavy construction equipment markets. But even with this uncertain backdrop we're taking every opportunity to gain market share in each of our operating segments. We were successful in this effort in fiscal 2008 and we're even better positioned to do so as we enter fiscal 2009.

In Food Service we have many opportunities to leverage sales synergies and broaden our strong base of blue-chip customers across our business units. At our Engraving Group we expect that our global presence, technological leadership and industry-leading responsiveness will continue to differentiate Standex as we diversify the business and leverage growth opportunities in emerging markets. Our robust sales pipeline for Engineered Products across the aviation, aerospace and energy end markets also gives us reason for optimism.

Although we believe that we've hit the bottom of the market for our Hydraulics business, the timing of a rebound is still uncertain. At ADP we do not expect to see an improvement in the housing market this year, although we're making every effort to achieve profitability in this difficult market.

Across all of our businesses we're focused on improving margins. As we did in fiscal 2008, we'll drive improvements in profitability through price increases, lean manufacturing, increased use of low-cost sourcing and manufacturing, plant consolidations and by making investments in automation.

We look forward to updating you on our progress as the year goes on. We'll now turn to your questions. Operator?

(OPERATOR INSTRUCTIONS). Gerry Heffernan, Lord Abbett & Co.

Congratulations on some of the very strong results here. The first question I have, in regards to the success that you showed during the quarter in breaking into the Canadian market, if you will, or taking advantage of an opening in the Canadian market. Of the market share that was given up by this competitor that went into receivership, how much of that have you gained, what is there left to be gained and is your pursuit into this market complete at this time?

The answer there is multifaceted. First of all, the competitor that went into receivership had annual sales of something just a little bit under CAD40 million. Not all of that CAD50 million is accessible by our products. I would estimate somewhere in the CAD20 million to CAD25 million of that is a market that we can penetrate. On a run rate basis we're approaching about $4 million to $5 million on a run rate basis and we'd like to continue to grow that as we go forward.

That would be an annual run rate basis?

Correct.

Okay. So if one would be looking for you to maximize the fall of that company there's still a lot of room there, although I'm sure there are other competitors that are jumping into it also?

Absolutely. There's a number of smaller domestic players -- I say domestic, domestic Canadian manufacturers in the [walk-in] business who are also, to use your words, jumping in. We've primarily focused on some of the larger chains like Tim Horton's where we believe our experience that we have with similar chains like Subways here in the US gives us a leg up in terms of our ability to perform both on a delivery, quality and service standpoint.

Okay. In regards to the Air Distribution Products, you guys have -- you've raised prices, which is a very difficult thing to do when business is going away from you; you have closed a facility and you were able to do that in the fourth quarter despite a 30% revenue decrease, just call it close to a breakeven. How much longer can we do this with this revenue decline rate that we're experiencing.

How much longer can we do what?

Maintain a breakeven -- an approximately breakeven profitability level?

Well, we don't give forward-looking statements. Our objective is to keep this operation at or around breakeven while we're in this downturn. Clearly the actions we've taken are going to be significant towards that.

The answer to your question, it all depends on just exactly what happens on housing starts and do we see any relief on the material cost side. We think that it looks like housing starts, at least for the moment, have stabilized in that 900,000 to 1 million range; that was more or less the level that we were at during the fourth quarter.

Predictions I've seen would indicate that perhaps material costs could start to temper a little bit during the second half of our fiscal year, which would be the first half of the calendar year. So not to avoid your question, but it is all about housing starts and what did metal costs do. It would appear that there are some at least tempering trends in both of those at this point in time.

Okay. In regards to tempering trends in metal costs, could you be a little bit more specific on that? What did you see as far as the ramp up through this quarter? Did it stabilize at one point in the quarter or was that the beginning of the quarter, the end of the quarter? And I guess your purchase patterns would affect how that showed up in the numbers also.

I can't get into our purchase patterns, but let me just give you some general numbers. And the trends here are not really over the last three months, it's more starting say November/December of last calendar year and continuing on into the current time. We were buying -- and we use 0.10 galvanized as our reference point; we use a variety of gauges, but we use 0.10 as our reference point. And 0.10 was in that $0.44 to $0.45 a pound level.

So let's say during the late second quarter for us, early third quarter, which would be December, January, February timeframe, we saw spot prices which we did not buy at, but there were spot prices out there in the $0.80 range temporarily. More consistently we were seeing prices in that $0.72 range. More recently they seem to have dropped down below $0.70 in sort of the $0.66 to $0.68 range and that's all happened, again, since let's say the first of the calendar year until now.

Okay. But the most recent price would be in the $0.60's level?

Correct.

And that's coming down from the $0.70's that we might have seen in the previous quarter?

Previous 60 days let's say.

Okay. So current situation is a moderate decline in the price, but certainly not to where we were a year ago?

Precisely.

And your market intelligence on that, does it tell you that the $0.60 level, $0.60 range is the new market for this gauge metal or do we see that going to the $0.50's?

I just read the same things that you read and frankly the predictions are all over the map. As recent as a month ago the mills here in the US announced a price increase for September delivery. I read an article yesterday that the mills had backed off of that price increase and didn't expect that price increase to hold at all, and that some of the forecasters are actually indicating it would go down even further.

So again, not trying to avoid the question, but if I was that smart I'd probably not be here, I'd be buying metal and selling metal. It's just very, very dynamic right now. A lot of it is not necessarily demand driven -- that's the part that's a little confusing. You would think with the slowing economy around the world that the general trend would be downwards on price.

What's really driven the (inaudible) cost up has really been the raw materials that go into steel. Scrap steel, for example, going from $100 a ton to like $700 a ton over the last couple of years; iron ore is up three times, four times; of course petroleum, a heavy constituent to the production process, is up, as you know. So a lot of it is raw material driven and so it's kind of exclusive demand and it has to do with more of what do those raw materials do going forward.

Okay. In regards to the balance sheet, certainly you did a very good job through the year of reducing the leverage there; balances are brought down. Can you give us an idea of what you see as an optimal leverage ratio for the balance sheet and what you think you're going to do from this -- just call it the $100 million debt level?

Sure. First of all, we think managing the balance sheet is a critical part of our overall strategy. We believe that we have to grow this company both organically and through acquisitions. We need to grow and we need to grow fairly dramatically. So acquisitions are going to be a key part of what we do. And using the balance sheet as a device to fund that growth is going to be very important.

So to answer your question, we don't see a single optimal point for our debt leverage ratio. You'll see us leverage the balance sheet up to do acquisitions as we did to do the two Food Servicing acquisitions. I think we hit about a 48%, 49% net debt to cap at the time we did those. Six to seven years ago we were at about a 53 to 54 net debt to cap. But we've then driven that down over time. We got as low as in the low 20s a couple years ago.

So I think what you'll see us do is we'll leverage up not crazy kind of leverage, but in that high 40s, maybe low 50s at the outside and then we'll drive it down and then be opportunistic along the way as more acquisition opportunities present themselves.

Okay. So it's fair to say that that being your history, that being what you're looking to as the business strategy of the Company, at this time you would be, given the right opportunity, taking the leverage back up to a 45% to 50% debt to cap?

Yes, for the right opportunities. Exactly.

Thank you very much, gentlemen.

(OPERATOR INSTRUCTIONS). We have no further questions on the line at this time.

Thank you all for your attending the conference call. We look forward to talking to you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Good day.