泰利福醫療 (TFX) 2007 Q2 法說會逐字稿

Good day, ladies and gentleman and welcome to the Second Quarter 2007 Teleflex Incorporated earnings conference call. My name is Candace and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's conference, Vice President, Corporate Communications, Ms. Julie McDowell. Please proceed, ma'am.

Thank you. Good morning. I'd like to welcome you to this conference call to discuss Teleflex financial results for second quarter 2007.

Teleflex issued a news release last evening. The release and accompanying slides are available on our website. This call will also be available on our website and a replay will be available by dialing 888-286-8010. For international calls, 617-801-6888. And the pass code is 60978925.

Throughout the conference call today and our presentation, we will be using non-GAAP financial measures including adjusted operating income, adjusted net income, and adjusted EPS. These non-GAAP measures are adjusted to exclude the impact of destruction costs and again, the loss of other sales of assets and any one-time tax adjustment.

We believe that these non-GAAP metrics provide investors with a better sense of what's happening in the business and isolate our core operations from some of the extraordinary measures we've taken to refine our operating platform and business portfolio for the long-term benefit of the Company.

A reconciliation of these non-GAAP measures included in the appendices of this presentation in the investor relations portion of our website at www.teleflex.com.

Participating on today's call are Jeff Black, Teleflex's Chairman and Chief Executive Officer and Kevin Gordon, Teleflex's Executive Vice President and Chief Financial Officer. Each of these gentlemen will make brief prepared remarks and then we will open up the call to questions. As our usual practice, please keep your questions to one and a follow-up.

Before we begin, I'd like to remind you that some of the matters discussed in this teleconference contain forward-looking statements regarding events including statements regarding expected revenues, earnings per share, cash flow from operations, special charges, wages, restructuring, and other costs, expense to implementation, the anticipated closing or acquisition or economic terms that expect in performance of the merger. The integration of businesses, employees, and Company processes, anticipated synergies in the merger or other merger-related benefits, our future operating results and strategic goals, conditions in the markets that we serve, economic assumptions, expected volumes and the like.

We wish to caution you that such statements are in fact forward-looking in nature and are subject to risks and uncertainties and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include but are not limited to economic conditions and conditions in our markets, delay in the closing transaction, starting the integrated assets and employees and processes of the Company, the actual amount of transaction expenses associated with the acquisition, inability to realize such synergies and other benefits. Additional factors that can cause actual results to differ materially from those in these forward-looking statements are included in our press release as well as our filings with the SEC.

With that, I'll turn it over to Jeff.

Thanks, Julie. And good morning, everyone.

This was another good quarter for Teleflex. We maintained some of the momentum for the first quarter and delivered revenue growth, good cash flow, and significant year over year improvement in operating profit and margins. We completed acquisitions in the commercial and medical segments that add to our product offerings and we invested in a joint venture in aerospace. During the quarter we also announced the authorization of a share repurchase program and yesterday we announced an authorization of a dividend payment.

In general, we're benefiting from the actions we've taken over the past few years to position Teleflex for future growth. Portfolio and product line changes, operational excellence initiatives, consolidating infrastructure, and changing the global footprint.

We had the usual puts and takes in the quarter and there is always a lot more work to be done. With that said, Teleflex is building on the foundation we have created, delivering good results, maintaining a strong balance sheet, and more importantly, investing for the future. Overall, it was a very strong first half.

Last week, we announced the agreement to acquire Arrow International and to evaluate strategic alternatives for businesses within the commercial segment. I describe it as the next step in our transition that we've been undergoing for some time. The acquisition of Arrow will dramatically change the composition of our portfolio, expanding medical technology to represent roughly 70% of our operating profit in 2008.

But for today, let's focus on the quarter. On this slide you'll see a high level comparison of results for the second quarter and the first half compared to prior year. Double digit earnings growth, operating margin improvement, continued strong cash flow. On an adjusted basis, diluted EPS from continuing operations for the quarter was $1.14 and for the first half, $2.23, up 31% and 35% respectively. Revenue across all three segments were up in both periods. Overall, core growth was impacted by the expected decline in revenues from automotive product lines and in medical by the phasing out or exiting of product lines and the continued difficulties that we have in our OEM, orthopedic instrument markets.

And aerospace continued to deliver double-digit core growth with cargo systems deliveries up. We were successful added growth and expanding on our recent product acquisitions. New product and platform launches and R&D efforts will be at the forefront to allow us to continue the positive trends that we have recently experienced. All in all, a good quarter and we are on track to deliver on our 2007 objectives.

Slide seven provides some perspective on the current business dynamics in each segment. In the commercial segment once again we had a nice up tick from new product and program launches for truck and bus, both driving controls and fluid handling systems. Stronger truck markets outside of the U.S. played a large part in the strength and overall we believe this trend should continue. We don't see the same strength in North America. In the second quarter, total unit sales for auxiliary power units for the truck after market were up over last year; however, we anticipate a softer second half due to weakness in this market.

Marine sales have held up remarkably well in a tough market. The strength here came largely from the after market products and our international sales. This is similar to what we experienced last quarter. New products in after market, products have enabled us to overcome a generally soft North American marine market. In automotive, as expected, revenues declined in part due to the products and platforms that we are phasing out or have exited. We expect the normal customer shut downs in the third quarter and then the usual pick up in the fourth.

As we've said, this is a transition year in automotive as we invest in new programs that will launch in 2008 and 2009. We also continue to log some nice new contract wins. 2006 was a good year for new contracts and through the first six months of 2007, we are already well ahead of that pace.

Shifting to our medical segment, we had nice growth for disposable medical products, particularly in the European markets and our expansion in Asia has progressed very well. While still relatively small, Asia, Canada, and Latin America sales also increased double-digits in the quarter. In North America, surgical device sales slowed somewhat, partially the result of a reduction in sales from products we are phasing out or have exited combined with new products that have launched a little later than planned.

In the medical OEM business serving device manufacturers, once again we had strong sales of diagnostic and therapeutic devices and sutures but the disappointing conditions we have experienced in the orthopedic instrument business continued. Looking ahead, we expect a benefit in the second from new product launches in sleep, respiratory care, surgical devices, and legation. No single product is expected to be individually significant, but the contribution of each will add to the second half.

We've been quite successful in extending the market penetration and growth of our products we acquire. So new products, acquired products, and the normal flu season strengthen our opportunities in the second half of the year.

In aerospace, once again, the major contributor to the quarter's growth was in cargo systems. Deliveries of wide-body systems were up, sales of narrow-body cargo loading systems increased compared to last year and we still have nice pick up in the after market spare sales in the quarter.

During the quarter, we expanded opportunities for our repairs business by signing a joint venture agreement with Snecma Services. We are a minority partner in this unconsolidated joint venture which adds new repair service capabilities to our offerings along with a strengthened relationship with a very important customer. And at the end of the quarter we completed the sale of the Precision-Machined Components business to GKN plc, resulting in an after tax gain of nearly $49 million.

In the second half, we'll be focused on delivering consistently while executing on strategic initiatives. Full launch of the new IT platform in medical is scheduled for the early fourth quarter. We're in the late phases of the program now with testing and training well underway. As always, execution will be the key across our operations as we meet our commitments to customers while improving our cost and productivity.

New product and program launches, on time and managed cost effectively over the next few quarters, we're looking to launch new products in the commercial and medical that should add to our growth including new products I mentioned in medical, throttle controls and gauges for popular engine manufacturers in marine, as well as new global programs in the automotive market. And we will begin working to complete the acquisition of Arrow International and begin the integration program.

All in all, a strong first half and we're continuing to position the Company for future growth. With that, let me turn it over to Kevin Gordon for more details on our financials.

Thanks, Jeff. And thanks, everyone, for participating in today's conference call. Let's take a walk through the financials. Please note the slides that have been posted and the commentary that will follow discuss continuing operations excluding special charges and loss on sales of assets unless otherwise noted.

For the second quarter of 2007, revenues were $679.7 million, up 4.5% from $650.2 million last year. The results of our restructuring and portfolio realignment program are evident in the margin improvement. Gross profits were up 8% to $212.8 million and gross margins were up 100 basis points in the quarter. Likewise, adjusted operating income was $75.8 million, up just under 9% from $69.6 million for the same period last year.

Net interest expense decreased by $1.6 million compared to the second quarter of 2006 due to lower overall borrowings and an increase in invested cash. Adjusted net income was $45.1 million, a 28% increase from $35.3 million last year and adjusted EPS of $1.14 per diluted share was up 31% from last year.

For the six months ended in June, revenues were $1.35 billion, up 8% from $1.25 billion last year. Gross profits were up 12.3% to $422.2 million and gross margins improved 120 basis points to 31.3% for the six month period. Adjusted operating income was $154.4 million, up 21% from $127.8 million for the comparable period last year.

For the six months of the year, the income tax rate on income from continuing operations approximated 26%, the expected effective income tax rate for the full year. Adjusted net income was $88 million, a 32% increase from $67 million in last year's second quarter and adjusted EPS of $2.23 per diluted share was up 35% from last year.

Looking at the commercial segment, for the second quarter revenues were up 3% to $345.9 million. Core growth was negative 2% while currency was positive 4% and the acquisition of Southern Wire contributed 1% to the growth total. Excluding automotive, the balance of our commercial segment would've grown 8% with over 2% core growth. Operating profit was down slightly to $23.6 million from $25 million last year.

For the six months, revenues were up 5% to $676.1 million. Core growth was 1% while currency contributed 3% to growth and the acquisition of Southern Wire contributed 1%. Again, operating profits for the commercial segment was down slightly to $43.6 million for the six months from $45.3 million in the same period last year.

The overriding factors impacting commercial segment results year to date are the tough automotive market and the impact of escalating material costs, something Jeff touched on in his prepared remarks. We continue to see many of the trends that have impacted these industry segments overall. Customer price reductions and discontinued programs in automotive, material cost pressures, et cetera.

Despite these challenges, through continuous improvement and plant efficiencies, the commercial segment has sustained its gross margins year over year; however, as Jeff said, we are also in a transition year for the Teleflex automotive business as many of the new platforms we have won in recent years are scheduled to come on line in mid-2008 and later.

On the expense side of the equation, our commercial businesses are investing this year in new platform launches, increasing engineering spending. This is negatively impacting operating margins in 2007 but is expected to pay off in 2008 and beyond.

In the medical segment, revenues were up 4% to $226.4 million in the second quarter. Core growth was negative 2% while currency added 3% and the acquisitions of Taut and SMD contributed 3% to the growth total. Jeff outlined the contributing business to market dynamics in his remarks. Operating profit for the quarter was up 16% to $43.2 million from $37.3 million last year.

For the six months, revenues were up 8% to $453.3 million. Core growth was 2% while currency contributed 4% to growth and the acquisition of Taut and SMD contributed 2%. Operating profit for the medical segment was up 36% to $91.8 million for the six months from $67.6 million in last year's comparable six month period when we had significant delivery issues that impacted operating profit.

As you can see, the second quarter operating margin for medical was 19.1%, a bit below our 20% bogey. But there were several non-recurring items that impacted this, including expenses associated with the closure of a facility, non-cash purchased accounting adjustments related to the acquisition of SMD, and costs related to the purchase of the minority interest holdings in SSI Surgical Services. Excluding these items, our operating margin in medical would've been 20%. In addition, Q2 represented our highest quarterly spend for the ongoing IT consolidation project, $1 million higher than Q1. Despite the impact of these charges on a year to date basis medical segment margins exceeded 20%.

Turning to the aerospace segment, revenues for the quarter were up 13% to $107.3 million. Core growth was 11% while currency was positive 2%. Operating profit for the quarter was up 48% to $12 million. For the six months, revenues were up 16% to $217.6 million. Core growth, 14% while currency contributed 2% to growth. Operating profit for aerospace was up 43% to $24.6 million for the six months from $17.2 million in last year's six month period.

Obviously the aerospace segment continues to perform well and has led the way for Teleflex as a whole for several quarters now. As the extended cyclical upswing continues and we capitalize on our strong market position, one of the questions we get from investors is "How long can this continue?" We have worked hard to limit the cyclicality across the portfolio and this is evident in the aerospace business where we are now well positioned in the cargo systems, repairs, and after market businesses.

As we've discussed, the cargo businesses in particular is well positioned because the new system installs over the past couple of years will lead to spares and repairs business going forward. In fact, during the second quarter, we saw some traction in this area although it's too early to say if this is the start of a trend. In addition, we continue to invest in margin enhancing businesses in this segment as evidenced by our partnership with Snecma Services in the PT joint venture.

We've seen a steady trend toward more effective use of our working capital and our asset velocity has shown incremental improvement in every comparable quarter. We ended the second quarter at 15.2% asset velocity an improvement from 16.6% last year and 17.7% two years ago. We strive for continuous improvement in the management of our working capital, much like we do in our operations.

Second quarter was one of our strongest ever for cash flow with $106.6 million of operating cash flow for the three month period. This puts our trailing 12 month operating cash flow from continuing operations at just under $340 million and puts us on track to hit our forecast of just under $300 million for the year. This also demonstrates the ability of the Company to service the debt from the upcoming acquisition of Arrow International.

Our balance sheet continues to improve through the second quarter and with the proceeds of the sales of the Teleflex Aerospace Manufacturing Group, net debt decreased to our $67.3 million and net debt to capital decreased 4.8%. We're estimating that debt to capital will increase to the mid 60% range once we close the Arrow acquisition. Clearly, a significant increase in leverage but we are confident that with our strong cash flow, achievement of the targeted synergies, the application of our disciplined working capital management processes at Arrow and the application of proceeds from any divestitures or asset sales to debt repayment, we can repay debt quickly.

As we noted on our conference call last week, we set some initial financial targets for the Company once we closed the Arrow transaction. We're expecting some dilution to 2007 results from the acquisition, including the one-time largely non-cash charges resulting from purchase accounting. The extent of the dilution is dependent on the timing of the close, final asset evaluations, and final capital structure.

In 2008, we see the Arrow transaction being dilutive to earnings per share on a GAAP basis but it could provide a modest overall contribution on an adjusted basis. In addition, by the end of the year, combined medical margins should return to the 20% range. Keep in mind, Arrow's operating margins were approximately 17% in their most recent fiscal quarter. So this will be enabled by achievement of expected synergies. And by 2009, we expect the deal to be meaningful accretive to GAAP earnings per share. We're forecasting $70 to $75 million of annual pre-tax synergies achievable by 2010.

Last week we reaffirmed the financial outlook we set for 2007. Adjusted earnings per share from continuing operations is expected to be in the $4.05 to $4.25 range for the current operations. Special charges are expected to be in the $0.11 to $0.16 per share range and GAAP earnings per share are expected to be in the $3.89 to $4.14 per share range. As noted earlier, we're on target to hit our cash flow from operations goal of just under $300 million. To give you some color on how we see the year playing out and looking at our forecast for the balance of the year, we see a seasonally challenging Q3 with customer shut downs, uncertainty in the automotive industry, and the usual seasonality in commercial and medical; however, the forecast for a strong Q4 and all told, exclusive of any impact from the Arrow transaction, we expect we will come in toward the upper end of forecasted EPS range.

I'll now turn the call back over to Jeff for closing comments.

Thanks, Kevin. Just wrapping things up, another solid quarter for Teleflex. We've worked hard over the last couple of years to redefine our portfolio and rationalize our infrastructure. The second quarter results demonstrates the hard actions we've taken have enabled strong financial performance even in a quarter when certain of our end markets are not cooperating. We're reaffirming 2007 guidance from current operations and we're looking forward to continued consistent execution for the balance of the year. Finally, we're a very different Company than we were just 18 to 24 months ago and the transformation will obviously continue. Next year at this time, Teleflex will look quite different than we do today.

With that, I'll the questions back over to Julie.

Okay. Operator, before we take questions I'd just like to remind participants that we'd like you to keep your questions to one and a follow-up and then we will cycle around again. We're ready to take questions now.

Thank you. (OPERATOR INSTRUCTIONS) Our first question will come from the line of Jim Lucas of Janney Montgomery Scott. Please proceed.

Thanks. Good morning, all.

Good morning, Jim.

Couple of questions. First, Kevin, can you expand a little bit more on the tax rate just from a timing perspective? What brought the second quarter down? You talked about the 26% for the full year but I also noticed on the balance sheet the income taxes payable took a dip in the first quarter, jumped back up in the second. So can you talk a little bit about what's going on in the tax line?

Sure. On the expected tax rate, Jim, you'll see that we indicated in the remarks as 26%. As you go through the year, when you look at your effective tax rate you're expected to calculate what you expect it to be for the entire year and make such adjustments quarter to quarter. So there's a few to three items that may make that move around quarter to quarter which we've made the adjustment for but the overall rate for the year is expected to be at 26% which is what you see on a year to date basis.

With respect to the accrual, obviously we would've had timing of tax payments that would've been made in March which would've effected the accrual and obviously with the sale of TAMG and the resulting gain from the sale of TAMG that we experience in the second quarter resulted in the increase in the accruals.

Okay. That's helpful. Thank you. And with regards to the medical core revenue down 2%, you've done a lot of the pruning of profit lines over the last several quarters. Can you help us understand a little bit more in terms of what the decline was in terms of exiting business lines versus weakness in the existing business?

Yes. Jim, I think we've been quite open that we're evaluating all product lines in the organization and I think there were several that we'd looked at either that we'd acquired over the years or the procedures were not going to be that numerous going forward. So we've made some very strong decisions as to what we're going to continue to support and what we're not and I think Kevin can probably add more flavor in terms of framing that in terms of revenue. So let me have Kevin -

Obviously we've been looking at for the past several years, all aspects of the portfolio. We've taken some additional actions as we continue to execute on the overall strategy here but we actually took out two additional product lines in this quarter, Jim, that will have a great impact on the year. All told, on an annual basis, revenues of around $7 to $8 million. As we look at those product lines as what they are from a margin standpoint and the accretion that they can add to our earnings, we made a decision to just exit those.

Okay. And in terms of the IT conversion, you've been talking about this for awhile. Originally if I recall, it was scheduled to go live first week of July and now we're looking at the fourth quarter. Can you talk about that being pushed out as well as where your incurred expenses are versus your original plans?

Sure. On the push out, we -- obviously as we've gone along, we've been investing in this for about a year and half and planning and taking all the right steps to do it. As we've gone through some of the data on the legacy systems, it's taken us a bit longer to make sure that data was to the quality that we want when we launch. So we made a decision to take a little bit more time to put the quality in place and launch a bit later than we anticipated. Those efforts are going along very well and we have a great deal of confidence in the team down there that's executing on this and we're looking to launch it early in the fourth quarter.

With respect to spending on the year, we're pretty much on budget as to where we started out with the spending and I think on the last call we guided you to about $14 to $16 million of expense in the annual expected spend and we would expect to probably be in the $14 to $15 million range. So we're well within that range even with some of the delay.

Okay. And finally, with regards to the cargo business; could you give us some flavor on new systems versus the spare and repair and what the mix is there and how that has compared to what you've seen over the last few quarters?

As I mentioned in the remarks, we're starting to see a little bit of an up tick in the after market spares business. We have increased the units installed in the field, obviously. Over the last three quarters, the number of unit sales are pretty comparable quarter to quarter for the last three to four quarters, maybe fluxing one to two each quarter. But the impact of the spares in the last two quarters in particular is about a 20% run rate over what it was in the fourth quarter of last year.

So when you look at the mix of that business, is it a 70-30, 60-40? Just trying to understand what the composition of cargo is today.

It's probably at this juncture closer to a 60-40 split.

Okay.

And that would consider not only the after market spares but the components business of the cargo business in addition to the systems business.

Okay. Great. Thanks a lot.

(OPERATOR INSTRUCTIONS) Our next question will come from the line of Deane Dray of Goldman Sachs. Please proceed.

Thank you. Good morning. Could we get some further color on the OEM orthopedic instrument difficulties? Just walk us through what the issues are? Is it manufacturing, competitive, and so forth?

Deane, I think it's actually a combination of many of the things you just mentioned. There continues to be some weakness from the OEMs and I think also there's some competitive pressures that are adding to some of the revenue short fall.

And what size is this business for the overall medical today?

Let's say it's 5%. From an orthopedic instrument business that we're experiencing most of the difficulty with, it's maybe a 5% of revenues.

And this, over the next couple quarters, will you be trimming that product line? Taking any charges? What should we expect?

Actually, Deane, we've obviously taken some measures already with respect to that business. I think we've seen -- actually seen some positive trends early in July in terms of order rates picking up a bit in that business. We've had some of the woes that we've experienced, but actually we're seeing a bit of a positive sign in the month of July.

Very good. I'd be interested in hearing what the reactions have been on the Arrow acquisition from you channel partners. Just kind of talk us through if there's been reactions either within the distribution side or on the manufacturing side?

I think overall, Deane, we've seen a very positive response both from investors as well as employees. So I think as you can imagine, our sales people are thrilled. More products. And when you look at the offering we can walk into a critical care unit, they're very excited. As people know, there's a fair amount of trepidation because we haven't gone through and laid out the integration plans. So we spent the last week going to all the Arrow facilities, talking to their managers and so again our attitude is we feel very good. We think the response from investors who we've spoken to has been very positive and so again I think it's -- it's been said to us that it was really the next logical step in the strategy that we put forth several years ago. So I think -- I don't think people were overly surprised.

Great. And did you say on the announcement regarding the pre-tax synergies, what was the split on the $70 to $75 million between cost synergies and revenue synergies?

I think it's too early for us to say because we did not say the last time we had our conference.

I didn't think you did but I thought I'd give you an opportunity.

Nice try, Deane.

Here's a broader question, Jeff. It's interesting. You mentioned again that 70% of your portfolio would be on the medical side. And a couple issues will come out. One, you may put us out of a job here because it will be covered by medical device analysts. But as you really get that high at 70%, that will beg the question of where are the synergies with some of the non-medical businesses and do they make sense together and so forth? So you've got to walk us through your thinking there.

Yes. Let me just clarify. When we talk about 70%, we're talking about 70% of our operating profits. Just to be clear right up front. Again, I think our attitude is we've been diverse for 60 plus years. We think there are some advantages to diversity. I think, again, our main goal has been for the last few years of less cyclical, higher margin businesses that can also return cash to our shareholders. So again, at this point, we're continuing to evaluate our portfolio. I think we've demonstrated we will be proactive going forward, engaging Goldman Sachs to look at strategic alternatives for aspects of our commercial group is really the next logical step for us and quite frankly we've made no commitments as to what that will be but we think that we're going to continue to be portfolio managers.

Great. And then last question on the cargo business, the comment on backlog and were there any particular order trends coming out of the Paris air show?

Our backlog has been strong for some time and the Paris air show, I wouldn't characterize that as a defining event in terms of orders of cargo systems. Certainly some of the orders of commercial aircraft that were placed at that show provide upside for us, Deane, but as of today, nothing in particular I would say that was particularly remarkable about the show.

In terms of backlog trends of that business, air, rest of the world, we're tracking about the same rate or slightly higher than we were for each of the last four quarters.

And that stuff between narrow body and twin aisle? Is there any different there with what we saw a year ago?

Obviously the wide bodies carry a better backlog.

Sure.

And that piece is up a bit.

Thank you.

Our next question comes from the line of Wendy Caplan: with Wachovia Securities. Please proceed.

Thanks. Good morning.

Good morning.

Jeff, your EPS assumptions for '07, are you continuing sort of with those assumptions that lead you to that estimate, are you assuming a negative growth environment in auto and medical for the balance of the year?

No. I think we continue to see that as we've exited and some of the platforms have ended in auto, so we don't see growth effectively in that market but on the medical we do see core growth through the remainder of the year.

Okay. Thanks. And just to clarify, the $70 to $75 million in synergies that you expect to receive with Arrow by 2010, they are both costs and revenues synergies though included in that number?

Yes. They are.

And finally a question on what we should infer from your comments on new product investment for marine and auto programs. If we're exiting these businesses, can you help us understand why we're investing in these commercial businesses, what that implies?

Yes. First and foremost is we have not made any comment on exiting either of those businesses. We're under strategic review. So again, our attitude has got to be we're investing and it's not just in those segments. It's across the whole organization. We've gone through a fair amount of rationalization and we realized that while I think we have our cost, our business costs in order we've got to get back to driving the top line. So investments we've made in R&D both in the marine, the commercial, a lot of the medical, we hope to start to see some of those translate into revenue as well as drop down to the bottom-line. So there are a lot of new platforms that are taking place in the automotive industry. I think our goal is you've got to support them and that's an investment that is typically going to be 18 to 24 months prior to getting to a launch. So, again, we're committed to the markets we're in and we will continue to provide the engineering service to grow those business.

Okay. Thanks very much.

Ladies and gentlemen, this concludes the question and answer portion of today's conference. I will turn it back to the speakers for any closing remarks.

Thank you, all of you, for joining us. Those of you who may have called in late, the replay will be available by dialing 888-286-8010 or for international calls, 617-801-6888 and the pass code is 60978925. Thank you.

Thank you for your participation, ladies and gentlemen. You may now disconnect. Have a great day.