Teledyne Technologies Inc (TDY) 2003 Q3 法說會逐字稿

Ladies and gentleman, thank you for standing by and welcome to the Teledyne Technologies Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a questions and answer session. Instructions will be given at that time. If you should require assistance during the call, please press "*" then "0," and as a reminder, this conference is being recorded, I will now like to turn the call over to the host Mr. Jason VanWees. Please go ahead.

Thank you and good morning. This is Jason Van Wees Director of Corporate Development and Investor Relations at Teledyne Technologies. I would like to welcome everyone to Teledyne Third Quarter Earnings Release Conference Call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Chairman, President, and CEO, Robert Mehrabian; Interim CFO, Vice President and Controller Dale Schnittjer; and Senior Vice President, General Counsel and Secretary, John Kuelbs. After remarks by Robert and Dale we'll answer your questions. However, before we get started our attorneys have reminded me to tell you that all forward looking statements made this morning are subject to various assumptions, risks, and caveats as noted in the earnings release and our periodic SEC filings and of course actual results may differ materially. In addition, in order to avoid potential selective disclosure this call is simultaneously being Web cast and a replay both of both by our Web cast and dial in will be available for about one month. Yes Robert.

Thank you Jason. Good morning everyone. Before I elaborate on the details of the quarter, I would like to make a few introductory comments. As noted in the earnings release, I'm pleased with Teledyne's performance, not only the third quarters, But the continuous year over year improvement demonstrated in the last seven quarters. There are two drivers for these improvements. First is our relentless emphasis on operational excellence in everything we do. For example, in our mean manufacturing processes we set specific goals and continuously measure our progress towards these goals. Second is our disciplined approach to acquisitions and their subsequent rapid integration to realize, identify synergies. We make four built on acquisitions in the past two years and expect to continue. Perhaps, at a more accelerated pace. Given our strong balance sheet and financial flexibility, we will continue to pursue acquisitions in our electronics, instrumentation and government systems engineering strategic businesses. Summing up the third quarter performance, Teledyne made significant progress both in revenues and earnings.

Overall revenues grew 12.5% GAAP earnings per share were 30 cents, which included a onetime 7 cents per share tax benefit compared to 21 cents in the third quarter of 2002. Excluding the onetime tax benefits and non-cash pension income and expense, third quarter earnings were 26 cents per share at 30% increase from the third quarter of 2002. This is excellent progress when we note that excluding non-cash pension income and expense, third quarter earnings per share in 2002 had already increased 43% over the third quarter of 2001. We also generated significant free cash flow of $20.7 million during the third quarter of 2003 and ended the quarter with $26.6 million of cash on hand. Excluding the book tax benefit in the third quarter, year to date free cash flow was 132% of net income. In the remainder of my comments, I will elaborate on the operating performance of our business segments. Dale Schnittjer will then discuss more details about our financial performance and comments on our outlook for 2003 and 2004.Turning to our business segment, third quarter sales in our electronics and communications segments increased 25% compared to last year and operating profit increased 9%. Excluding pension expense operating profit increased almost 30% with operating margin 34 basis points greater than last year. As I further discussed, our electronic and communication businesses, which have total annual revenue of approximately $460 million.

I will break up my comments into three market categories. Defense electronics, which currently represent approximately 35%, electronic instrument which currently represents approximately 25% and avionics and other commercial electronics currently contributes approximately 40% of our electronics and communication segment sales. Third, as a reminder, our defense electronic products and services includes traveling way tubes for electronic warfare, satellite communication and radar applications Micro electronic modules with a variety of applications including secured communication, rigid flexible inter circuit boards, ejection seat sequences and contract manufacturing of military electronic assemblies. In the third quarter of 2003, sales of defense electronics increased approximately 30% compared to third quarter of 2002. Sales of microelectronic modules that are employed in military aviation and secured communication applications continued to increase. Sales of fiberoptic transmitter and receiver modules for the F22 were steady during the quarter and the development of similar modules for the F35; joint strike fighter has been successful. In addition, many of our microelectronic modules were secure communication systems, employ specialized secure codings that make it difficult to reverse engineer or otherwise pamper with them. We are excited about the long term opportunity for such component. During the third quarter also, sales and orders were traveling way to increase as a result of both sustainment of existing military radar, electronic and counter measures and communication systems and for support of system upgrade. During the quarter we also received $2.5 million award from Raytheon missile systems for (inaudible) printed circuit assemblies for a new version of (inaudible) missile. Turning to our instrumentation business, we manufacture a range of instruments used in industrial process control that is for chemical manufacturing, semiconductor manufacturing, energy exploration and production and environmental analysis and emission monitoring. In the third quarter of 2003, year-over-year sales of electronic instruments almost doubled as a result of the acquisition of Monitor labs that occurred at the end of the third quarter of 2002 and Tekmar Dohrmann that occurred in May of 2003.

Organic sales also grew by 13% driven by stronger sales of environmental monitoring instrument and geophysical sensors were petroleum exploration market. In September we received a new $9 million order for our latest geophysical sensors and solid streamer cable technology. As we had mentioned in our past, over half of our instrumentation revenue is now derived from environmental instrumentation market. In addition to environmental monitoring, we are targeting other high growth, such as food and beverage quality control, which are outside our historical industrial process analytics market. Finally, in this segment I will discuss our Avionics and other commercial electronics businesses. In the Avionics market we develop and manufacture data acquisition and communication products for domestic and international airlines as well as for business aircraft. We also manufacture electronic components including relays and connectors for commercial aviation, telecommunication, data storage and semiconductor test market. And we provide manufacturing services for sub assemblies used in medical instrument and implantable medical devices. In the third quarter sales from all this other electronics market collectively increased slightly from the third quarter of 2002. Both the air transport and business jet market remained quite weak. Our Avionic sales increased by approximately 12.5% driven by the acquisition of Aviation Information Solution businesses known as AIA's. However, Avionics saw sales on an organic growth basis declined approximately 18% compared to the third quarter of 2002. Our strategy to keep our business healthy during the current commercial aerospace down cycle is three fold. Gain market share includes just new products and entered new market. In our traditional business for example, we continue to increase our share of data acquisition systems, our new airbus single isle and long-range aircraft. While our forward speed chair was less than 10% in the year 2000. we have now revised our year end 2003 market share target to 40% from 30% that we had earlier and we continued to anticipate being the leader supply of search systems by the end of 2005. The acquisition of AIA's at the end of the second quarter added the number of new products and markets for our traditional business. For example AIA's new electronic flight bags, which provides pilots with immediate access to navigation charge and other information will be of considerable interest to the 200 worldwide airline that are Teledyne controlled customers. Other key products airborne flight servers, cabin displays for business aircraft cabin, surveillance system, flight animation software and software based training systems for military pilots.

The integration of AIA's is progressing very well and by the end of the year, we expect that all manufacturing operations will be consolidated into our west Los Angeles control facility. In other commercial electronic markets, sales of broadband wireless assemblies for cellular back haul applications serves on increased demand from a large international customer. However, sales of relays using wireless infrastructure and semiconductor (inaudible) remain weak. Turning to our government systems engineering segment, in the third quarter, revenues on operating profit in this segment decreased compared to last year. The expected year over year reduction was the result of cost comparison to our core aerospace and defense programs primarily as a result of especially exceptionally strong work is related to the ground based (inaudible) contract received in the third quarter of 2002.

One area of strength over that past two years has been a strong recovery in sales related to systems engineering and practical assistance for (inaudible) contract. Such contracts in general relate to assisting government agencies with highly technical evaluations of strategy, program management and technical performance. Teledyne for example has served as one of US. Armies primary cedar contractors for strategic missile defense for over 30 years. We currently believe that there will be increased demand for cedar work as government agencies seek a greater demand of independent technical evaluations at the tax formation of our military and government agencies continues. While the performance of our systems engineering segment has been outstanding over the past two years, we do not anticipate maintaining the recent level of Profitability over the next few quarters. Warranties for work performed on certain contracts, which have boosted sales and profitability will likely decline since actual (inaudible) negotiations have not been completed. For example, during the fourth quarter of this year, we expect that profitability will return to the normalized levels of approximately 8% to 9% of sales.

Turning to our aerospace engines and component segments, sales during the third quarter of 2003 for our aircraft piston engine business increased approximately 4% relative to the third quarter of last year. Although after market sales decreased in the third quarter of 2003, sales of engines for new OEM piston engine aircraft increased at almost 20%. Due to strong demand for new composite OEM piston aircraft for which we are the sole source engine supplier, we continued to increase OEM market share. In addition to gaining market share at a higher power end of 35 piston engine market, we continued to work with Honda Motor Company in evaluating a new engine primary to targeted at the lower rate power end of the market where we do not have a strong position at the present time.

In the turbine engine business, sales increased over 10% primarily due to increase shipments of our (inaudible) missile engines in the third quarter. In 2002, similar sales occurred in the fourth quarter. While sales of JASSM cruise missile engines were down year over year, we are pleased to see that JASSM cruise missile has recently been certified and is now ready for operational use. Full rate production may being as early as January 2004 with the US Air Force expecting to procure approximately 2400 JASSMs over the life of the program and the US Navy's initial procurement of 450 JASSMs to start in 2007.

Finally in our energy system segment, revenues in the third quarter of 2003 were flat compared to the third quarter of last year and operating margin was break even. In the third quarter, we were awarded a 4.3 million contract to develop and deliver a Proton Exchange Membrane PEM, Fuel Cell Power System to NASA blend research center. This award coupled with over 60 million of new long-term government contracts received in the second quarter significantly enhanced the long-term outlook of this segment.

In the energy technologies market place, we continued to believe that we possess a unique business, one which encompasses both the growing base of long-term government contract as well as a portfolio of tangible commercial energy technology products suggest Fuel Cell Test Station, Systems and Hydrogen Refueling System. To conclude, I would like to emphasize that we remain committed or focussed on operational excellence as we continue to seek acquisition in our core electronic instrument and systems engineering business. I will now turn the call over to Dale Schnittjer.

Thank you Robert and good morning, I will first discuss some additional financial for the quarter not covered by Robert, plus had some full year highlights when wanted. Then I will give an update on pension and discuss our 2003 and 2004 outlook. In the third quarter, cash provided from operating activities total $26.8 million compared with the cash provided from operating activities of $25.1 million for the same period of 2002. The primary difference year-over-year in cash provided from operating activities was lower income tax payment and lower payments for aircraft product liability settlements firstly offset by an increase in working capital in 2003. This increase in working capital in 2003, was primarily driven by a higher receivables for the third quarter of 2003 resulting from higher sales in the quarter. We continued to see operating performance and improvement in our manufacturing operations. Inventory levels were reduced by $5.8 million in the third quarter and we anticipate additional inventory reductions in the fourth quarter. After obtaining $20.3 million for two acquisitions earlier this year, we continued to be debt free with $26.6 million of cash on hand.

Capital expenditures for the third quarter of 2003 were $6.1 million compared to $3 million for the same period of 2002. For the full year of 2003, we continued to expect total capital expenditures of approximately $20 to $21 million slightly below depreciation of approximately $22. As we have previously stated, this years capital includes approximately $6.5 million for the expansion of our defense oriented traveling ways to facility in Sacrameto, California. As Robert mentioned, EPS in the third quarter of 2003 included a 7 cent per share tax benefit due to the reversal of an income tax contingency reserves established in 1999 that was determined to be no longer needed during the third quarter of 2003. As we have said before, in the past few years, declines in the capital markets have resulted in an increase in pension expense and a requirement to make pension contribution in future years. In 2003, pension expense will be approximately $7 million or a negative EPS impact of 13 cents compared to pension income of $2.3 million or a positive EPS impact of 4 cents in 2002.

Looking forward to 2004, assuming changes in current pension assumptions, pension expense will be in the range of approximately $9 million to $11 million or a negative EPS impact of 17 to 20 cents per share. Additionally, assuming the capital markets do not significantly improve in the remainder of 2003, we currently anticipate making pension cash contributions in 2004. Subsequent to November 29, 2004 the company will begin to recover certain pension cost from the U.S. government under various government contracts. Based on our current pension assumption, we expect pension expense in that of a recoverability to begin moderating after 2004. Now let me turn to the 2003 and 2004 outlook.

Management believes that full year 2003 earnings, excluding 7 cents per share tax benefit will be in the range of 78 cents to 82 cents per share. Approximately a 12% improvement compared to the previous guidance range of 68 to 74 cents per share. We believe 2003 EPS excluding pension expense and the tax benefit in the third quarter of 2003 will be in the range of approximately 91 cents to 95 cents compared to 73 cents in 2002. Although earnings visibility in 2004 is limited, management believes that 2004 EPS will be in the range of 73 to 83 cents. We expect that EPS in 2004 excluding pension expense of 17 to 20 cents will be in the range of 93 cents to a dollar per share as shown in the release. I will now pass the call back to Robert.

Thank you Dale. We would now like to take your questions. Louz (ph) if you are ready to proceed with the questions and answers please go ahead.

Thank you. Ladies and gentlemen if you wish to ask a question please press "*" then "1" in a touchtone phone. You will hear a tone indicating that your have been placed in queue and you may remove yourself from the queue at anytime by pressing the pound key. If you are using a speakerphone please pick up your handset before pressing the number. Once again if you have a question or comment, please press "*", then "1" at this time. Our first question is from the line of Mark Jordan with A.G. Edwards. Please go ahead.

Good morning gentlemen. Could we talk about the aircraft engine business for a moment. Could you give us a breakdown of what you think will be the commercial versus military for this year and next year and then a second question, currently the commercial aircraft business is I guess break even and it has been a struggling area here for a couple of years now. When do you feel there will be some resolution either from an operational standpoint that you know can get this business on track or you know you will have to carried out your review of alternatives.

Good morning Mark. Thank you for the question. In the engine business in general, we are somewhere between 75% and 80% commercial, 20%-, 25% Military in the total segment. In terms of the improvements in the business, the most difficulty we have in that business is not the performance of the production or the sale of our products as you well know is the significant cause that we bear in our insurance. And until insurance market soften, we think we are going to have a head wind in terms of being able to reach the kinds of profitability levels that we enjoyed in the past. As we said previously Mark, we are looking for strategic alternatives in this business. On the other hand, we want to ensure that when we do exercise such alternatives they are in the best interest of our shareholders.

You had mentioned the ongoing work with Honda. When do you think there will be some form of resolution of that process that will give you sense of either you are going at a production with him, doing something with him or they will take an alternative path.

Mark, we are hesitant to release any further information on our relationship on the development of the engine at this time. However, having said that our relationship with Honda has been excellent and we are hopeful to release some additional information regarding the program, perhaps before the end of the year. The engine in question that under development is both being pas pit at the present time, we have had some flights with it. We have also incorporating our new electronic control systems on that engine. So, so far, the engine looks good and the strong interest from the customer base.

Could you look at the operating margin in the electronics and communications group really had a very strong quarter here and by working back through the guidance, it seems to assume that -- tapering back of the operating margins in that group in the fourth quarter in next year. Question why was it so strong this quarter and then secondly, why should we assume that you know we should revert back to more historical lower levels?

In the electronics and communications business, when we look at the electronics part of the business, I think the higher sales that we had helped drives some of our higher margins obviously because we are spreading our fixed costs over the largest base of our sales. We also had some slight not large gradual pickup as we noted in the release because of our reduction in inventories. Going forward Mark, we are cautious primarily because at this time we feel that the commercial aerospace portion of that business specifically in the airlines and business jets that the recovery is going to take a while to come. Even though we are gaining market share, as I mentioned with Airbus, and the other thing is we do have a set of new products that we have got into our acquisitions of avionics information solution, we think it will take us a little time to really introduce those products and cross selling to our customers, our existing airline customers. Over the long-term however, I must note that we are quite optimistic about this segment, especially since we said, we are also going to make additional acquisitions in this segment.

I guess the final question if can following up in that last phrase, could you tell us what is your pipeline of activity is in the MNA area, to date, you have tended to focus primarily on instrumentation companies, do you have other targets in your sites in that area and what might we expect over the next quarter or six months or so?

We have made acquisitions in the instrumentation area, but we are also looking at the acquisitions that enhance our communication especially Military communication products. We think there is room for us to do new things there especially since we have a pretty strong presence in our traveling ways to business and I think you will see hopefully as we go forward that we will have some new announcement around BOLTON acquisition around the core of our electronic business including defense.

And also finally, I am sorry, could me refresh me as to what your debt capacity is at this point in time in terms and duration of the line?

Our line of credit is for $200 million, which as you know is on debt right now. Our first five years goes in other year or so if its cost charges liable plus about 55 basis points or so at the bottom of the grid.

Thank you very much.

Thank you Mark.

Our next question will come from Chris Quilty from Raymond James and Associates. Please go ahead.

Good morning gentlemen. Congratulations on a very good quarter. I have couple of for you - I may have missed some organic growth here. Did you give one for the defense business?

Yes. If I didn't, its an omission on my part in defense electronics, I am presuming your asking that question Chris. It was 30% in Q3 of 03 over Q3 of 02.

OK, and I didn't hear you make much mention of the medical products, which have been in area of strength for the last couple quarters.

No I didn't talk about it. You kind of, its then relatively flat to slightly bound. It is a tough comps with last year's. We are making those products now with increasing manufacture of those products in our Thiouana (ph) plants for General Electric, MRI system, CAT scanners, X-ray systems etc, but in general that's in relatively flat with respect to last year.

OK, and any new products you are working on, in other words, the lack of growth is simply you want a number of programs, they have hit sort of a steady state product while you need to add new products into the next in order to achieve additional growth?

Yes, and you know, first let me address the new products. One new product that we will be making circuit card assemblies for is positron emission tomography scanner systems that they are introducing. In terms of the growth, you know that growth very much depends on the sale of medical equipment that they enjoy and that changes season to season, it is specific for us to predict and add visibility on when you will go up, so I can't say much more than that.

OK, fair enough. And a question; any change in what you are sort of projecting for the cash out pension contribution in '04. I think you have said before in a sort of $15-20 million range?

I think that maybe on the high side now. I am going to let Dale Schnittjer address that please?

Thank goodness for the market rally right?

That is very true and it helps a little bit. We before have mentioned that was in the high teens and it now looks like it will be in the mid single digits or above that.

Wish my 401-K acted. Did the JASSM program, that has obviously been a lot of controversy about the funding levels for that, what is your take on that in terms if it gets funded at lower levels, does that significantly impact your profitability in that business or it is just your feeling that eventually that funding will comeback in?

Well as you know, when we started a few months ago, the funding looked dismal. The cuts both in the House and Senate committees were going to bring the number of missiles in the next lot from 250 a year down to approximately a 100. Fortunately in the committee, and I must say we, myself included spend sometime in Washington. In committee, the funding levels were increased back up to 80% of the President's request so now it looks like we are going to be able to reach a level of approximately 200 over the next year. There is additional possibility of course for supplemental funding, but right now, it is only done 20% from the original target, so we remained optimistic.

OK and I know we have not been shooting all that many harpoons recently. Is that upgrades to those systems or are there actually additional unit being manufactured?

The abysmal units are being manufactured. High (inaudible) is Boeing. The primary sales of those systems are important military sales at the present time. and they would remain fairly steady over the past few years.

OK. Very good. And final question for you on the aircraft engine business obviously there is a much higher hurdle in terms of fixed cost, the insurance cost and what not associated with it. Do you feel at this point, if hit a steady state such that when the revenues comeback you can actually get some operating leverage and if that is in case the fact you are not looking at higher level of variable expense. At what revenue level do you think you can turn that business into the black?

I think in the steady state, our revenues may go up and let me start this because of adaptive market business that we have. In general, if that aftermarket engines and parts. Let's say stay with the engines. If the aftermarket engines that we sell today which had approximately 6-8 per day. If those go up to lets say 10 or 11, which is only a 20% increase. That has a significant effect on our business, because our factories are running pretty well they are very lean, highly modern. The only problem we have is -- even if the market improves there, it is very difficult for us to predict what changes might happen to insurance in the future. We are hoping that the insurance market what's up and this has been the hardest in insurance market that we see in 1980s and terrorist attacks -- this insurance market got very hard, so some of the future of that business and margins in that business returned on what happens to the insurance costs also.

OK, very good. Thank you gentleman, keep up your good work.

Thanks Chris.

Thank you and once again if you do have a question please press star, one at this time, and we do have a question from Scott Hartmerz (ph) from Sidoti. Please go ahead.

Hi good morning. I'm sorry its is a kind of following up on the last question. I don't find this is the organic growth number for the entire quarter, as you know revenue as a whole.

For the entire quarter cross of the company, it was 12.5%.

Organically?

Organically, it would limit just, I have to figure that up with you, just give me a second.

Sure.

Organically would be in the mid to high thing of digits.

OK. In terms of the systems engineering business, can you quantify how much of an impact the incentive awards had in this quarter?

About a million dollar.

OK. And so, going forward, you mentioned we can assume, or we can look for something you know kind of ratcheting down in Q4 to the more normalized 8-9% and so these inceentive awards going to be absent entirely, going forward. Do you expect?

No, what happens as I said the following, we record a crew record a certain level of these accrual record a certain level of the incentive awards based on the performance of the unit, but we really don't learn what the final awards the level is until the annualize year is concluded. So, and that takes place to negotiations near the end. So in this quarter, we had a million dollar pickup over what we though it was prudent to our accrual.

OK.

The next time we do that will probably be about nine months or so from now. So we don't expect any pickups like that or a while if there is going to be any.

OK. Just looking at corporate expenses quickly, housekeeping year. It looks like there was a sequential drop of about 600,000 what can we look for maybe in Q4 and is that a seasonal drop or is a normalized level more around $4 million?

I am going to let Dale answer that question.

It is a normalized expense closer to four. This was just a timing issue we had a little bit -- an increase in other income in the quarter, but we should continue to expect to be around the $4 million.

OK great, and just finally Robert, I heard you mentioned the RPU in sales. I believe that you said that usually happen in Q4 and these kind of got moved up or did I miss hear you is that so these kind of moved up in terms of timing and they are going to be absent in Q4

Yes. To say, what we do it depends on our production scheduling system and how fast we can get this out, you know we are producing three sets of missiles and parts for the Air Force trainers. We produce the JASSM missile of course, we produced the Harpoon missile and we produced an air launch deceit all at the same time, what was this does is because of the scheduling and because of the parts availability we made the Harpoons in the third quarter where last year, we made it in the fourth quarter. This fourth quarter we would make more of the air launch deceit.

OK.

So what we are trying to do is level order factory instead of depending on demand on the pool on our system instead of just getting spikes in our fact study, which is not very efficient.

OK, but net, but I mean it should kind of wash itself out.

Yes.

OK great, thank you.

And our next question is from Howard (inaudible) will you please go ahead?

Good morning Robert just two questions, one is could you give us a little color on what you are seeing in orders from somebody or early cycle business.

Good morning Howard.

Thank you.

We are seeing its interesting Howard, we are seeing a mixed bag in some of our wireless infrastructure business, we firmly think things are coming up, we (inaudible) seen an upturn in our radios that we produce for major international customer. We have seen a significant increase in orders almost doubly. On the flip side, when we look at some of our relayed products, while we see some new orders, it is not as strong yet which seems like while there is some optimism in the market. The book the bill ratio in this industry recently was only at 0.97, which is not that encouraging considering, as you will know. The billings are at the lowest level so the book to bill is around 1 is not that encouraging.

OK. And then the second thing is you talked about to see the contracts and what makes you see in terms of additional opportunities there, I mean clearly national of defense is one priority, but there are a host of other sort of space based opportunities where you may have some expertise to offer the government.

Yes, we are working very hard on that, I can't say -- I can't announce any large new programs for it, but we have been successful in increasing the number of tasks that we have for that contract. We have gotten a few subcontracts that relate to space. The only difficulty that we are experiencing in that domain even though we are doing relatively well is that the government insistence to increase the small business set aside is not helping this very much, because, we don't qualify as a small business and the certified had gone almost to 40% now in some of these programs. So, while we are doing well, we are fighting that battle continuously and of course what we try to do then is partner with small business as a minority partner and provide the engineering talent. We are optimistic nevertheless about our seat of work.

Thank you very much.

Thank you Howard.

And at this time we have no further questions in queue, please continue.

Thank you operator, I would now ask Jason to conclude our conference call.

Thanks Robert and everyone for joining us this morning and if you have any follow-up question, please feel free to give me call at the number listed on the earnings release and all the releases are available on our Web site. Operator if you please conclude the call and give the replay information please.

Thank you. Ladies and gentleman, this conference will be available for replay after 11.30 today through November 23. You may access the AT&T teleconference replay system at any time by dialing 1-800-475-6701 and entering the access code 702267. International participants can dial 320-365-3844, again those numbers are 1-800-475-6701 and 320-365-3844, the access code is 702261. That does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.