Teledyne Technologies Inc (TDY) 2007 Q1 法說會逐字稿

Good morning, good afternoon. Welcome to Teledyne's first-quarter 2007 earnings conference call.

At this point, we do have all of your telephone lines muted or in a listen-only mode. However, after the executive team's prepared remarks, there will be opportunities for your questions, and those instructions will be given at that time. (OPERATOR INSTRUCTIONS). As a reminder, today's call is being recorded for replay purposes. (OPERATOR INSTRUCTIONS).

With that being said, let's get right to this first-quarter agenda. Here with our opening remarks is Teledyne's Vice President of Corporate Development and Investor Relations, Mr. Jason VanWees. Good morning, sir, and please go ahead.

Good morning, everyone. This is Jason VanWees and I would like to welcome everyone to Teledyne Technologies' first-quarter 2007 earnings release conference call. We released our earnings earlier this morning before the market opened.

Joining me today are Teledyne Technologies' Chairman, President and CEO, Robert Mehrabian, Senior Vice President and CFO, Dale Schnittjer, and Executive Vice President, General Counsel and Secretary, John Kuelbs. After remarks by Robert and Dale, we will ask for 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.

Also, in order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay, both by webcast and dial-in, will be available for about one month.

Here is Robert.

Thank you, Jason, and good morning, everyone.

I will start with some introductory comments about the overall performance of the Company during the quarter. Next, I will make some more detailed observations about each for business segments and markets, as well as our recent acquisition of assets of D.G. O'Brien.

Regarding the Company's overall performance, sales increased 16.8% and earnings per share increased 11.8% compared to last year. Overall operating margin increased 160 basis points. Even including the non-recurring payment from Honda in the first quarter of 2006, overall operating margin increased 85 basis points. Furthermore, operating margin increased in each of our business unit segments (inaudible).

Our overall GAAP operating margin has increased from 5.6% in 2003 to 9.6% in the first quarter of 2007. This is due, first, to our operational excellence program, and second, improved margins in acquired businesses as a result of successful integration.

While overall organic growth during the quarter was 1.4%, our book-to-bill ratio was 1.15; that is orders exceeded sales by 15%. Organic growth was primarily affected by reduced sales of geophysical sensors and defense electronic manufacturing services, both of which are expected to improve relative to the first quarter in the remainder of the year.

Free cash flow of 24.2 million was very strong, even though first-quarter cash flow is often seasonally weak compared to other periods. Furthermore, we achieved this strong free cash flow despite relatively large capital expenditures of $12.3 million during the quarter.

I will now elaborate on the operating performance of our business segments, followed by Dale Schnittjer, who will discuss in more detail our financial performance and comment on our outlook for the second quarter and the full year.

Turning to our business segment, first-quarter sales in our Electronics and Communications segment increased 22.9%, compared to last year, from 202 million to 248.3 million. Segment operating profit increased 32.2% from 23.2 million to 30.2 million. Segment operating margin increased 68 basis points from 11.5 to 12.2%. Organic sales in our Electronic segments were flat during the quarter, due in part to the forecasted year-over-year decline in shipments of geophysical sensors for the oil and gas exploration market, as well as weakness in our defense electronics manufacturing services. However, the segment book-to-bill ratio of 1.2 was even stronger than the overall company. In addition, as I mentioned earlier, we expect improved revenue in both of these businesses as the year progresses.

As I further discuss our Electronics and Communication businesses, I will break my comments into three separate categories -- first, defense electronics, which represents approximately 40% of the segment; second, electronic instrumentation, which represents another 40% of the segment; and third, avionics and other commercial electronics, which represents the remaining 20% of the segment.

In the first quarter of 2007, sales of defense electronics increased approximately 46% compared to last year. Excluding the acquisition of Teledyne's scientific and imaging and Teledyne's KW Microwave, organic sales growth of the defense electronics was 2.2%. While defense electronics had strong organic sales growth in proprietary products, including microwaves (inaudible) system and specialty connectors, this was partially offset by a decline in defense electronic manufacturing services. However, due to the strong first-quarter orders in this defense-manufacturing services business, we currently expect full-year 2007 sales of these services to increase compared to 2006.

While sales from our recent acquisition of Teledyne's Scientific and Imaging are not reflected in organic growth, I want to highlight some recent successes in this business. First, while timing helped contribute to the following, orders for Teledyne's Scientific and Imaging during the quarter were almost twice as great as sales. As an example, during the quarter, we were awarded a $6.8 million contract for laser eye protection spectacles. This contract is for a Block One full-rate production and includes 3000 spectacles and positions us as a world leader in military laser eye protection.

In addition, as you may know, Teledyne is a leader in defense microwave components and subsystems. Through Teledyne Scientific and Imaging, we acquired key technologies which may improve our market position. During the quarter, for example, two high frequency development programs in Teledyne Scientific and mm-wave silicon-based transceivers, and a low-noise, indium-phosphide amplifier were featured in (inaudible) weekly activity reports to the Pentagon.

Turning to our electronic instrumentation businesses, first quarter's of 2007 year-over-year sales in electronic instruments increased approximately 20% from 75.4 million to 90.4 million. This was due primarily to prior acquisition of a majority stake in Ocean Design, which is part of our marine instrumentation growth strategy. Organic sales of electronic instrumentation were relatively flat, as organic growth of 8% in environmental, chemical monitoring and industrial instruments was more than offset by a previously mentioned decline in shipments of geophysical sensors. However, orders for geophysical sensors exceeded sales by 80% during the quarter, and we expect higher quarterly sales of these sensors in the remainder of the year. Nevertheless, we expect our full-year 2007 sales would be less than the full-year 2006 sales.

In the end of the first quarter, building upon our previous acquisition of RD Instruments, Benthos, and a majority stake in Ocean Design, or ODI, we acquired assets of D.G. O'Brien, or DGO. DGO, headquartered in Seabrook, New Hampshire, is a leading manufacturer of highly reliable electrical and fiber-optic interconnect systems primarily for subsea military and offshore oil and gas exploration.

In our current commercial and military subsea applications, connectors must withstand great pressure due to increased ocean depth, as well as higher temperatures from increased electrical [part] requirements. DGO's connectors, which utilize proprietary metal-to-glass seal technology, are well-suited for such applications compared to other alternatives.

Having acquired four marine instrumentation businesses since 2005, our annual (inaudible) sales in this market are expected to be about a $200 million or approximately half of our total instrumentation revenue. We now provide an extensive line of sensors, communication devices, interconnect systems for harsh marine environments ranging from oil and gas exploration and production to military subsea systems. Furthermore, through the acquisition of DGO and our majority ownership of Ocean Design, Teledyne will be able to provide end-to-end undersea interconnect solutions to our customers.

Finally, I will discuss our avionics and other commercial electronics businesses. In the first quarter of 2007, sales from these businesses collectively exceed 3% compared to the first quarter of 2006. Sales growth in avionics and electronics relay was more than offset by a decline in commercial microwave assemblies using cellular infrastructure applications and other applications.

In our avionics businesses, orders were very strong, 50% greater than sales, due in part to continued demand for our wireless, ground-linked data acquisition system which is used to transmit aircraft flight data information directly to an airline's operations center.

Turning to our Government Systems Engineering segment, if in the first quarter of 2007, revenue in this segment increased 7.3% compared to last year. Organic growth was 1.4% as growth in our defense and space program was partially offset by year-over-year declines in some of our chemical weapons and militarization programs. However, segment operating profit increased 10.2% from 5.9 million to 6.5 million, and segment operating margin increased 22 basis points, primarily due to reduced pension expense as Teledyne's pension plan is currently over 90% funded.

Turning to our Aerospace Engines and Components segment, sales in this segment increased 9.4% due to increased sales of aftermarket aircraft system engines as well as (inaudible) increased turbine engines sales. In addition, operating profit increased 22.2% while operating margin increased 139 basis points.

As a reminder, the first quarter of 2006 segment and operating profit included a non-recurring payment of 2.5 million from Honda Motor Company. Excluding the payment from Honda last year, segment operating profit more than doubled.

Finally, in our Energy Systems segment, revenue in the first quarter of 2007 increased 14.5% compared to last year, primarily due to decreased sales of commercial hydrogen generators. However, we currently expect increased sales of hydrogen generators, again in the remainder of the year.

In conclusion, Teledyne is off to a great start in 2007. We believe our continued focus on operational excellence, our investments in organic growth, and our complementary acquisitions to date have allowed us first to build a significantly stronger commercial and government business, and second, to generate substantially better financial results.

I will now turn the call over to Dale Schnittjer.

Thank you, Robert, and good morning.

I will first discuss some additional financials for the quarter not covered by Robert. Then I will give you an update on pension costs and discuss our 2007 outlook.

In the first quarter, cash provided from operating activities was $36.5 million, compared with cash provided from operating activities of $8 million in the same period of 2006. The higher operating cash flow in the first quarter of 2007 was primarily due to the improved working capital management, higher net income, lower pension expense, and operating cash flow from acquisitions. Free cash flow for the first quarter was $24.2 million, despite greater capital expenditures of $12.3 million compared to $4.4 million for the same period of 2006. Approximately $5 million of increasing capital expenditures was due to the ongoing relocation of our avionics business and the recent completed relocation of our corporate headquarters. Overall, we believe these relocations will result in a modest reduction in lease cost for the Company.

We made one acquisition in the first quarter for $36 million, and we ended the quarter with $228.2 million of net debt. Our balance sheet remains strong with a net debt-to-cap ratio of 33.3%. As noted in our press release, depreciation and amortization expense for the first quarter of 2007 was $7.7 million, compared to depreciation and amortization expense of $6.1 million in the first quarter of 2006.

In the first quarter of 2007, FAS 87 pension expense was $3 million or a negative earnings per share impact of $0.05. This compares to FAS 87 pension expense of $4.1 million or a negative earnings per share impact of $0.07 in the same period of 2006. Pension expense allocated to contracts pursuant to CAS was $2.5 million or a positive earnings per share impact of $0.04 in the first quarter of 2007, compared to $2.4 million or a positive earnings per share impact of $0.04 in the first quarter of 2006.

As we have mentioned before, starting January 1, 2004, new hires have been added to an enhance defined contribution plan as opposed to the Company's existing defined benefit plan.

Now, moving to stock option compensation expense, in the first quarter of 2007, further requirements of SFAS #123R stock option compensation expense was $1.7 million or a negative earnings per share impact of $0.03, compared with $1.4 million or a negative earnings per share impact of $0.03 in the first quarter of 2006.

Now, let me turn to our 2007 outlook. Management currently believes that GAAP earnings per share in the second quarter of 2007 will be in the range of $0.58 to $0.61. The full-year 2007 earnings per share are expected to be in the range of approximately $2.42 to $2.48, compared with our previous outlook of $2.33 to $2.38. Our full-year 2007 earnings per share outlook reflects anticipated sales growth in our defense electronics -- and electronic instrumentation businesses, due primarily to contributions from the acquisitions made in 2006 and 2007.

Our second-quarter earnings outlook also reflects some additional expenses, including intangible asset amortization, as a result of acquisitions completed in 2006 and 2007. Furthermore, while sales of geophysical centers are currently expected to increase sequentially in the second quarter, we continue to expect year-over-year declines in 2007, especially in the first half of the year.

For the full year of 2007, we currently anticipate approximately $12.2 million or $0.22 per share in pension expense under FAS 87, or $2.1 million, which is $0.04 per share in net pension expense after recovery of allowable pension costs from our CAS-covered government contracts.

Full-year 2006 earnings include 15.4 million or $0.27 per share in pension expense under FAS 87, or $4.9 million, which is $0.09 per share in net pension expense after recovery of allowable costs from our CAS-covered government contracts. The decrease in full-year 2007 net pension expense reflects pension contributions made in 2006, the impact of favorable market returns on pension assets, and changes to the Company's pension assets and liabilities resulting from the merger of the Rockwell Scientific Company LLC pension plan with the Teledyne Technologies pension plan. The Company's 2007 earnings outlook also reflects $6.7 million or $0.12 per share in stock option compensation expense, based on current assumptions regarding stock option issuances during the year and estimated fair value of stock option grants.

I will now pass the call back to Robert.

Thank you, Dale.

Before we take questions, I wanted to correct an error which was pointed out to me by my colleagues that are around the table. In our small Energy Systems, I said our revenues increased 14.5%. That was wishful thinking on my part; they actually went down 14.5%. But as I mentioned, we expect that to improve since we have some good orders for our commercial hydrogen generators.

Brent, if you would -- if you are ready to proceed with the questions and answers, please go ahead.

Indeed, I'd be happy to. Ladies and gentlemen, as you just heard, at this point, we do invite and encourage any questions or comments that you may have. (OPERATOR INSTRUCTIONS). Mark Jordan, AG Edwards.

First, I'd like to talk about the Aerospace Engine segment. The 13.3% and operating margin is clearly phenomenal. I had to look back and you had to go back to the fourth quarter of 2000 to see a better return than that. Could you address how sustainable that is and what should be kind of a normalized assumption moving forward?

Secondly, related to that, what impact might your annual insurance renegotiation in May impact the opportunities there?

Thank you, Mark. 13.3, you are absolutely right -- that was a very high margin for us. We expect some moderation of that margin in the remainder of the year, perhaps getting closer to 11% total for the year. I think that's primarily due to the fact that our turbine engine business had a very strong first quarter, and we expect that in the subsequent quarters' sales of our turbine engine business would decline somewhat, especially since the next (inaudible) JASSM engines would not be built until early next year.

As far as the insurance is concerned, we are right now in the process of renewing our insurance and making presentations to insurance companies. At the present time, our expectations are that it will remain relatively flat, but of course we hope to do better than that.

Okay. You mentioned the tax rate, about an expected $3 million refund in the third quarter. Should we, in constructing our models, just have the 37.5% rate versus 37.6% rate for all the quarters, and then just throw in a $3 million benefit in the third quarter, which would inflate that quarter's earnings?

Yes, the adjustments should just be in the third-quarter earnings.

The Systems Engineering group has shown relatively low organic growth. Is there an opportunity for that to accelerate over time, especially given your heavy exposure in Huntsville and that's supposedly a geography that should benefit from BRAC?

Yes, that's a good question. I don't believe that's going to happen, primarily because what -- maybe in 2008 -- but primarily what's happening is more and more of the government programs are being directed towards small businesses, which of course we don't qualify for. So we kind of are getting squeezed between the primes at the high end and directed programs to small business. So we kind of are weaving our way through this maze, trying to hold our own at the present time, and hope that, in the next year or so, we can stabilize that business and get back to growing it.

A final question, if I may? Other income was a $400,000 loss this year and also a loss in the fourth quarter, but I think for the couple of years preceding that, it was either a breakeven or positive number. Could you shed a little light on what's caused those losses in the last two quarters and what should be viewed as more normal moving forward?

I think, the last year, we had two other incomes. One, we had an insurance benefit in the first quarter and of course, I mentioned the Honda payment, which was a one-time payment. In the last two quarters, in the small losses, I will turn to Dale Schnittjer.

We had some deferred comps expense in that category in the last couple of years.

Is that something that should reoccur, or should we look at that as a neutral number moving forward?

We will probably see that reoccurring because there's also some of the minority interest in that particular [entry].

Okay, fine. So for that instrument acquisition where you've got a partial ownership, that's where you'll flow-through the equity interest of the minority shareholders?

That's correct.

Michael Lewis, BB&T Capital Markets.

Good morning. Solid quarter. I wanted to follow up on Mark's question with regard to the margin profile, because it was strong across all the business segments. More specifically, I'd like to focus in on how sustainable do you feel the Electronic Communications margin will be throughout the rest of '07 as well as the systems engineering which came in well above what I was looking for.

Thank you for the kind comments, Michael. On the Electronics and Communication, I think we're going to do okay. We should be able to maintain that margin for the rest of the year.

In the Systems Engineering segment, we are experiencing some pressure, especially in one-time award fees. So, if we can hold that margin, that would be exceptional. I expect to get some margin compression especially in the second quarter. We may see some erosion of that margin somewhere between 25 and 50 basis points. And I of course addressed Aerospace engines.

Okay. Robert, would you be able to discuss what your internal plan with regard to topline internal growth for '07 -- what are you looking for, as an internal growth target?

Always modest, and then hope to do better. But I think it's going to be flat because -- internal growth -- because the emphasis we have right now is to ensure that we've built cross-links between some of our best, new and largest acquisitions, such as Scientific and Imaging, and some of our businesses to get synergies.

But frankly, the most difficult period for us has been in geophysical instruments. Even though we are [gunning] through the rest of the year, I think year-over-year, total year, we're going to see some decline there because we are introducing a totally new product, gel-filled cables and they are going through extensive testing by our customers.

So would you assume that we will see a reacceleration of internal growth in 2008, once geophysical sensors start to ramp back up?

Yes, I would expect that.

Okay. Then just one final question -- as a percent of your total -- of your expectations on guidance for the full year, what is related to new business or recompete awards that have to go your way in order to get to the numbers that you have put out?

Well, I think, in general, Michael, when we put out numbers, we take the low side of the numbers, in this case which is 242. That would be if things go our way but there's some risk in there. If you take the risk out of it, then we get up to the 248. We do have an assumption in there that we will win one of our major programs in our Systems Engineering, but that's really later in the year, so it shouldn't affect things. So I think what we do is we take the risk and put it between the 248 and reduce it to 242.

So the 248 assumes the one large IT

Yes, but I don't think that's going to affect it a lot. I think there are risks across our businesses. We do a risk analysis in each business, and we think we have some rebid businesses. So overall, that's the best we can do at this time.

Okay, that's very helpful. Thank you very much.

Karl Oehlschlaeger, Banc of America.

Congratulations on the quarter. Just a couple of quick questions on the guidance -- you increased it by $0.10 and maybe you can provide just kind of walk-through how you got there versus the prior guidance.

Yes. I think, Karl, the easiest way to get there -- I will ask Dale if he wants to add to this. $[0.07] of that is in the first quarter, based on the fact that we improved $0.07 over our prior guidance, so that leaves about $0.03. We are kind of measuring that on strong orders that we received in the first quarter. As I mentioned before, we are putting a little risk in there also so that's why the guidance has the range of 242 to 248.

Okay. In the areas that you saw some decline, the geophysical sensors, I guess and also in the government systems engineering business, what portion -- like how big is that? How much was it down, year-on-year?

Geophysical sensors was down over 5 million in the first quarter. The government IT business actually was a little up year-over-year. Where we saw the decline was in our electronic manufacturing services, especially on the military side. I think we saw somewhere around 3 million or $4 million, maybe as much as 5 million in that area, year-over-year. But we are hopeful because of our improved orders in that domain.

What's happening in the military outsourcing is there are a number of things that have happened that are helping us in electronic manufacturing services. A lot of the primes or outsourcing their products in that area. Some of the primes have decided to reduce their number of suppliers. We've been fortunate to be selected by two of our primes to supply a product to them as they reduce their suppliers somewhere between 50 down to 6.

Okay. Just kind of finally on M&A, you've done a couple of deals. You did this other D.G. O'Brien, (inaudible) remainder of the year, you think you have another one or two like on your plate, you think?

Well, we have them on our plate; I don't know if we can consume them. You never know. We always are looking at things, but that's an unpredictable business. But I can assure you, we are always looking at acquisitions.

John Harmon, Needham & Company.

On the same topic of defense electronics manufacturing, I think you said a couple of quarters ago that you wanted to exit commercial manufacturing and really orient the business towards defense. When would the commercial contracts end? Was that a bit behind the decrease year-over-year in the business?

First, on the commercial contracts, we basically have gone -- we expect to go down from somewhere in the $25 million range down to closer to 10 million. We closed down one of our facilities in Mexico and consolidated it into another facility, but we don't find that a very attractive business for ourselves. The margins get squeezed. It's the one business that we have that we get some overseas pressures in manufacturing, and obviously we don't like that. That's not what our strategy is. So a very significant decline there.

Flipping back to the military sourcing, there are large quantities of proposals that we have put forth, and we've received some significant orders in the first quarter. We are now spacing them for production in the remainder of the year. As I said, we've been downselected among -- by our customers to be one of their favorite suppliers, so we are positive about that area.

Okay, thank you. I apologize; I missed the answer. What happened that caused systems integration margins to tick up so much sequentially? Is that something seasonal, or was it just due to the expiration of lower margin contracts?

I think primarily that was reduced pension expense.

Okay, thank you. Finally, you talked about some of the research projects that are being worked on at the former Rockwell business. When could some of these translate into revenues?

Well, I think they are starting to do that in a modest way. For example, I mentioned we produce spectacles, laser eye protection systems now for the Air Force. We just entered into full-rate production, Block One full-rate production. In that area, that's something that the rest of Teledyne (inaudible) manufacturing is pretty experienced in, and some of us personnel from other manufacturing areas are involved in that to help improve the process itself. That really puts us at the forefront of that technology.

In the imaging businesses, they've historically been very good at a focal plane array, both for military application and space application. But now, they've moved up market to camera systems. Again, that's something that we are trying to accelerate and going to a higher level of production.

There are a few other programs between Scientific and Imaging and our various businesses that from marine instrumentation to other businesses like microelectronics which are coming along. So I expect that this process, while it's starting slowly, over the long haul, the acquisition of Imaging and Sensors is going to be the core of our technology development for new products.

I got it. Thank you very much.

(OPERATOR INSTRUCTIONS). Chris Quilty, Raymond James & Associates.

Good morning, gentlemen, and congratulations on the results. Just a question -- I did not hear the organic growth on the defense side.

I think I mentioned it; it's about 2.2%. Primarily, if you take the decrease in manufacturing services out of it, the organic growth was closer to 7 to 8%.

Two different product lines -- you've talked about them already. But on the defense EMS services, you had been on a good uptrend in that for a number of quarters. I'm just trying to understand. Is it really a timing of orders issue as to why you saw the decline in the first quarter?

Yes.

Okay. Likewise, telecom microwave relays, that also is a business that was very strong through last year and seemed to show some weakness in this quarter. Anything you can attribute that to?

Relays, Chris, were okay. They were up year-over-year about 5%.

On the telecom side, I think, if you mean the commercial telecom side, there's two things that are happening there. First, we had some (inaudible) tubes that are used commercially, and a lot of our customers -- that market has become a little softer. A lot of our customers are going to [KA] tubes. And we do; we are one of the leaders in that domain, so we expect to capture that. But that's coming along a little slowly.

The other one was, in our transceivers that are used in cellular backhaul systems, our major customer is going through a consolidation process. They kind of halted receiving product for a few months. We expect that to resume maybe later in this quarter, certainly later this year.

Okay. One final on the defense electronics -- you didn't mention I think one way or another traveling wave tubes, which have been an area of strength. Are you targeting any of the opportunities in IED jamming where you've traditionally had a very core strength in counter-measure systems?

Yes, we have two activities, relevant activities there. In the microwave, we supply microwave filters for the [Crew 2] counter IED system that EDO just received their orders on. That program had been delayed for a while. And as you well know, those awards were received recently, so we expect that business will pick up.

We also have some electronic countermeasure systems that we are working on for the Navy in their attack aircraft, currently electronic attack aircraft, I should say. Currently, it's the EA6b, which is going to be replaced of course with the F-18G. That should also contribute to our bookings in the rest of the year.

Great. Congratulations, and keep up the good work.

Michael Lewis, BB&T Capital Markets.

I'm sorry about that. Dale, would it be possible to provide us with the quarterly revenue for those, KW Microwave, Rockwell and ODI?

Dale is looking for it. We don't break them out that way, so --.

It's about 30 million.

30 million combined? Or was Rockwell about 30 million?

I think Rockwell is about 25 to 30, and I would say Rockwell is about 30 (multiple speakers).

Benthos and ODI were about 20.

Okay. Then finally, Dale, if you'd be so kind with a CapEx expectation for '07?

About 35 million.

Thank you, sir.

With that, Dr. Mehrabian and our host panel, I will turn the call back to you for any closing remarks. There are no further questions.

Thank you, Brad, and thank you, everyone, for listening in and asking the questions that you did. Now, I'd like to ask Jason to conclude our conference call.

Thanks again, everyone, for joining us today. If you have any follow-up questions, please don't hesitate to give me a ring at the number shown on the press release. Again, a replay will be available on our Web site as well. Thanks so much.

Ladies and gentlemen, Dr. Mehrabian is making today's conference available for digitized replay. It's for one full month starting at 11:30 AM Pacific daylight time April 25, all the way through 11:59 PM, May 25. To access AT&T's Executive Replay service, please dial 800-475-6701. At the voice prompt, enter today's conference ID, 870101.

That does conclude our earnings release for this first quarter. Thank you very much for your participation, as well as for using AT&T's Executive Teleconference service. You may now disconnect.