Trex Company Inc (TREX) 2011 Q1 法說會逐字稿

Welcome to the Trex Company first-quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. (Operator Instructions). As a reminder, this conference is being recorded May 2, 2011.

I would now like to turn the conference over to Harriet Fried of LHA.

Thank you, everyone, for joining us today. With us on the call are Ron Kaplan, Chairman, President and Chief Executive Officer, and Jim Cline, Chief Financial Officer. Joining Ron and Jim are Brad McDonald, Controller; Brian Bertaux, Director of Financial Planning and Analysis; and Bill Gupp, General Counsel.

The Company issued a press release this morning containing financial results for the first quarter of 2011. This release is also available on the Company's website, as well as on various financial websites. The call is also being webcast on the Investor Relations page of the Company's website, where it will be available for 30 days.

I would now like to turn the call over to Bill Gupp, Trex's General Counsel. Bill?

Thank you, Harriet. Before we begin, let me remind everyone that statements on this call regarding the Company's expected future performance and condition constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These statements are subject to risks and uncertainties that could cause the Company's actual operating results to differ materially. Such risks and uncertainties include the extent of market acceptance of the Company's products, the costs associated with the development and launch of new products and the market acceptance of such new products, the sensitivity of the Company's business to general economic conditions, the Company's ability to obtain raw materials at acceptable prices, the Company's ability to maintain product quality and product performance at an acceptable cost, the level of expenses associated with product replacement and consumer relation expenses relating to product quality in the highly competitive markets in which the Company operates. The Company's report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2011 discusses some of the important factors that could cause the Company's actual results to differ materially from those expressed or implied in these forward-looking statements.

The Company expressly disclaims any obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. With that introduction, I will turn the call over to Ron Kaplan.

Good morning. It has been only two months since our last earnings call, but we have been hard at it since, so we have much to report today. Let me start by saying that I am pleased with the financial results we posted in the first quarter, reflecting higher margins and a strong balance sheet.

Sales in the first quarter continued at a good pace, rising 4%. Over the past two quarters, which encompass our full preseason sales program, they rose 23%. Our ultra-low-maintenance product, Trex Transcend, contributed greatly to these sales. We believe that Transcend has solidified its position as the leader in high-performance deck and railing.

Equally important, after a year of making this technologically advanced product and fine-tuning our processes, we are benefiting from throughput rates and yield for Transcend that are now comparable to Accents. In fact, as a result of our continued focus on manufacturing efficiencies, our total decking manufacturing yields in the first quarter hit an all-time high.

We continued to invent innovative products that respond to evolving consumer preferences and that strengthen Trex's position as the leader in outdoor living. In the first quarter, we began shipping two new Transcend tropical colors that offer the look of Brazilian hardwoods, complete with color variation streaking, as well as ultra low maintenance features.

From a performance, aesthetics, cost and environmental perspective, the Transcend topical offering gives consumers a compelling alternative to Brazilian hardwood.

Our LED DeckLighting collection also began shipping in the first quarter. Consumers are responding well to the full decking and railing solution that Trex now offers. So are category experts. In April, we won Design Journal's 2011 Platinum Award for design excellence for both our DeckLighting collection and our Transcend decking and railing system.

ADEX, as it's known, is the largest and most prestigious award program for furniture, fixtures and finishes marketed to the design trade. This year, there were 2000 entries from 500 different companies.

International sales is another area of strategic focus. We expanded into new countries during the quarter and are beginning to get repeat orders from countries we originally entered. We continue to believe international markets represent an important long-term opportunity for Trex, and we are deploying resources systematically against this effort.

Our outdoor furniture collection, sold through a licensing partnership with Poly-Wood, is now available through stores and the Internet. As you will recall, the furniture is designed to withstand the most extreme weather so consumers can spend time relaxing, not refinishing. We are encouraged by the progress we are making in expanding Trex's brand and presence into this new segment of the outdoor living arena.

Last week, we moved into still another segment of the ultra low maintenance category, the $1.9 billion deck substructure market, with our acquisition of Iron Deck Corporation. Iron Deck framing systems are made of coated, galvanized steel, offering better durability, longevity and stability than traditional wood substructures. While we haven't announced the terms of this transaction, I can say that we expect the acquisition to be accretive to earnings in the first year. We'll manufacture the steel deck framing at our Nevada and Virginia facilities, marketing it under the brand name Trex Elevations.

We think the combination of Iron Deck's superior product technology and Trex's industry leadership position will enable us to drive meaningful growth for wood alternatives in the deck substructure category.

All of these strategic initiatives contribute to our paramount objective of gaining market share. The introduction of Trex Transcend in 2010 was a key building block in this effort. We are moving steadily toward our objective of 50% market share by the end of 2012.

Before I hand to call over to Jim, I want to provide our outlook for the second quarter. The bad weather that has been prevalent in many parts of the US has delayed the start of the decking season in many regions. Therefore, we are forecasting second-quarter sales in a range of $115 million. Jim.

Thank you, Ron. Good morning. As you know, the press release with Trex's first-quarter financial results was issued this morning. The numbers I will reference are contained in the tables headed Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flow.

The Company recognized net sales of $69 million in the first quarter of 2011, a 4% increase compared to 2010 and consistent with the guidance we provided in February. The first-quarter sales volume was approximately 3% less than 2010, which was offset by favorable sales mix and price, related primarily to Transcend.

The Company recorded net income of $5.1 million or $0.30 per share in the first quarter of 2011 compared to a net loss of $5.5 million or $0.36 per share in 2010.

The Company's results for the first quarter of 2011 and 2010 included $2.3 million and $1.9 million, respectively, of non-cash interest expense related to our convertible debt. This reduced earnings per share by $0.14 and $0.13, respectively.

Gross margin was 33.4% in the first quarter of 2011, a 1050 basis point improvement from 2010. Our capacity utilization was consistent with the second quarter of 2010. Our financial results reflect elimination of the earnings drag related to the Transcend startup in 2010, including the favorable effects of the 2011 Transcend price increase and improved manufacturing efficiency.

SG&A for the first quarter was $16.7 million compared to $17.1 million in 2010. The decrease in SG&A was due mainly to timing of certain branding initiatives that will be recognized in the second quarter.

[Net] interest was $4 million in 2011, a $200,000 increase from 2010. The increase was due primarily to the non-cash interest related to our convertible debt of $400,000, partially offset by the elimination of borrowings on our line of credit in 2011.

The first-quarter 2011 effective income tax remains low as a result of the valuation allowance against our deferred tax asset. In addition, we recorded a $2.6 million favorable non-cash adjustment to taxes related to the favorable resolution of certain uncertain tax positions.

At March 31, 2011, The Company had $12 million of cash on hand and no borrowing on our revolving line of credit. In addition, during the quarter, the Company used its excess cash to pay off $2.7 million loan related to our property in Nevada. Our only remaining borrowing is the $97.5 million convertible note due in July of 2012.

Total net debt to total capitalization at March 31, 2011 was 40% compared to 49% at March 31, 2010. Inventory was $40 million at March 31, 2011, a $4 million year-over-year increase.

The Company had free cash flow of negative $11.7 million in the first quarter of 2011, which was $29 million better than 2010. The increased free cash flow was primarily driven by payments of accounts receivable compared to last year. This was principally the result of a very high percentage of our customers choosing the early payment discount compared to extended payment terms.

Capital expenditures for the first quarter of 2011 were $2.3 million, a $400,000 decrease compared to 2010.

I'd like to highlight several significant achievements that we accomplished during the first three months of 2011. First, we have demonstrated that the earnings drag related to Transcend's startup is behind us. Additional improvements and efficiency continue to be realized on the production of Accent and Transcend products. The decking yield in the first quarter of 2011 was the highest of any quarter in the Company's history. Our cash flow management is clearly evident, with an improved year-over-year free cash flow of $29 million.

Finally, turning to our second-quarter guidance, I would like to reiterate our sales guidance at $115 million, which is consistent with the strong second-quarter sales of 2010. For the trailing three quarters, this would equal an 11% year-over-year increase.

We believe the adverse weather conditions experienced in March and April, primarily in the northern states, have delayed the start of the deck-building season. We anticipate that because of that delay, we will experience a shift in some sales from the second quarter to the third quarter. We expect SG&A to be up a few million dollars compared to the second quarter of 2010, due primarily to timing of the branding spend.

Operator, we would now like to open the call up for questions, after which Ron will provide his closing statement.

(Operator Instructions) Trey Grooms, Stephens Incorporated.

Jim, I guess one question would be on the margins. I mean, the margins this quarter came in ahead of what we kind of thought you would do, and very strong, in our opinion. Would you mind breaking out, looking into the second quarter and even third, what the exact impact was of the Transcend-related startup and any other kind of one-time or extraordinary type hits to the gross margin that you reported last year, just kind of so we're on the same page?

If you will recall, I think we've talked about the underlying adjustments related to the delamination of a bit of our production at our Fernley site. That was the largest adjustment. That was about $15 million.

We also had about -- that was in 2010. We also had an adjustment related to the contracts that were take-or-pay, and the total of that was approximately $4 million.

With regard to the Transcend, I'll give you a breakdown by quarter, because that is probably the most significant impact in 2010. In the first quarter, that was just a tad under 8%. In the second quarter, it was around 5%. Third quarter, it was a negative drag of about 3%. And the fourth quarter, about 5.2%.

Okay, perfect. That's real helpful. And then also, you mentioned that you expect the acquisition -- the Iron Deck acquisition to be accretive in the first year. Should we expect any type of short-term drag in the second quarter to margins from that?

No, I don't think you will see any drag related to the acquisition in 2011.

Okay, and can you give us any other detail on that acquisition as far as how it is currently being sold or distributed and any synergies on that front?

It is being sold through two-step distribution, and now, it will be sold through the Trex distribution footprint.

Okay, and then just one last question. Looking at -- Ron, I think in the past, you've mentioned from time to time the potential for -- you, I think, mentioned it briefly here on the prepared comments -- about new products and things like this. And I think there was some anticipation of you guys potentially rolling something new out, or you guys were considering some new products sometime this year. Could you give us an update on anything there?

Well, of course, I've already made reference to two of the new products, the LED lighting and the tropical colors. I think you are probably referring to comments that I made about working on a new category.

Right, the category. I'm sorry.

Right. And we continue to work on a new category. I think I have indicated previously that we will be working on it through the summer. We will be at certain decision points over the course of the summer. So we may have something to say sometime in the fourth quarter, if we are going to -- it may be the fourth quarter, it may be earlier, it maybe later. But we continue to work on it.

Okay, great. Thanks a lot. I'll jump back in queue. It was a good quarter.

Robert Kelly, Sidoti.

One point of clarification, Jim. I believe you said utilization during 1Q was on par with 2Q '10. Is that correct?

It should have been -- I should have referenced first quarter of 2010.

So utilization has not changed year-over-year?

Correct.

All the improvement you saw in the gross margin line, that was from Transcend startups dropping away?

Transcend startup dropping away was the biggest impact. But the improved efficiency and yields associated with our production of the rest of our deck boards was an additional contributor.

And then was price and mix also a positive contributor there?

Mix certainly was, and price was as Transcend was a strong contributor in the quarter.

Okay. Last year during 2Q, you had a fairly strong utilization number. Should we expect something similar for this coming quarter, just given that you have flat sales?

I think the guidance we would give you is that the utilization will be -- the profitability you would see would be consistent with what you saw in that quarter. The second quarter is typically a stronger quarter for us than the first quarter, and I would expect that you would see a similar type of --.

So when you say that, you are talking about what you did last year plus the add-back of the Transcend costs?

Capacity utilization in the second quarter will be comparable to what we had in the first quarter.

Fair enough. Just on the acquisition, is that going to be margin accretive?

Would you repeat the question?

The acquisition that you've done, is that coming at a higher or lower margin than the existing (multiple speakers)?

We aren't going to disclose what the margins are. I mean, if you just think about the fact that the acquisition is just completed, we have certain ideas on changes we can make relative to the acquisition, but we do view it will be accretive in the first year of operation.

One final one on the acquisition. Is it sold and branded as a system?

It could be -- theoretically, you could use the system on someone else's deck. But we expect that most likely, it will be Trex decks that will have Trex Elevation systems with it.

Okay. Thanks a lot.

Keith Hughes, SunTrust.

A couple questions, I guess first on pricing. Did the full amount you asked for on the Transcend increase, do you think it stuck in the quarter? And was it all in for the full quarter or was it phased in during the quarter? Any kind of detail on that would be great.

It did stick, and it is in for the full quarter.

And you didn't go up anything else other than Transcend, correct?

Any of the price increases we had in other products were offset by additional discounts that were offered.

And on the acquisition, I assume that product is substantially more expensive than a pressure-treated lumber infrastructure. Can you give us any idea how much that adds to the cost of the deck?

We will just say it does have some additional cost in acquisition, but not on an installed basis. It's easier to install than a typical pressure-treated wood. So on a net-net basis, we think it is marginal.

Okay. Finally, as you look around the industry here in April, are you able to get a sense of how the season has begun or has the weather just clouded the whole issue?

As I made reference, we think the weather has clouded the issue. You guys all read the same newspapers and watch the same television I do. But if you're out with contractors, like I have been, you can see that there has been an effect of pushing back some construction through the whole mid-section of the United States and in the Northeast. Between the tornadoes and the constant rain on weekends and through the week, it has pushed it back a little bit.

All right. Thank you.

Morris Ajzenman, Griffin Securities.

Any further thoughts of price increases, looking out the remainder of the year?

No, there are no further thoughts of price increases this year.

Okay. And any impact of cost of goods sold impacting margins as the year looks out?

Morris, we don't anticipate that the run-up that we are seeing in the virgin polyethylene market will impact us this year. I think any changes to our cost structure relative to the polyethylene, which generally doesn't track the virgin polyethylene and petroleum products, would be offset by the changes in the polyethylene type that we purchase.

Okay. Getting back to the previous question on capacity utilization and taking it one step further, you are targeting 50% market share by year-end 2012. We could probably do the math, but what sort of capacity utilization would you be at that point, and what would be your sweet spot as this recovery unfolds and the housing market finally starts kicking in, which it really hasn't. What sort of capacity utilization would be a sweet spot, and, again, where do you think it would be by the end of next year?

Well, we're not going to talk about where it's going to be by the end of next year, because we continue to improve our manufacturing process. So we continue to get more out of the same factory with each passing year.

What I can tell you is that it would be great if we could get to 60%, 70% capacity utilization; I think the leverage impact would be very, very material.

Okay, thank you. And the very last question, on the SG&A, always trying to model -- I guess your revenues are very seasonal. They were up sequentially about $1.2 million; clearly down year-over-year. What sort of overall SG&A as a percent of sales should we be looking at on an annual run rate?

Morris, as the top line improves, we don't anticipate that you would continue to see the same percentage of SG&A expenses. For example, if you looked at the underlying in 2009, the full year ran at 24%. 2010 ran about 20.5%. So I think it would be fair for you to anticipate that there would be further improvement as a percent of sales in 2011.

I would also encourage you to just look backwards over the course of this administration to 2008. This management team has very strong cost controls and a very high sense of administrative discipline. So I think you can expect that if we have -- if our sales increase, an increasing amount of it will fall to the bottom line.

Thank you.

Eric Prouty, Canaccord Genuity.

Thanks and good quarter, guys. First question is on the tax rate, actually. Any anticipation of needing to pay taxes for the remainder of this year? And then by 2012, are you going to start paying a more normalized tax rate?

Eric, is your question actual cash tax or from a book perspective?

From -- what you will be booking from a tax standpoint, that's correct.

Okay. From a book standpoint, it will be de minimis this year, maybe in a couple of percentage points, on average. Next year, we will have to address that; it depends on the income level. If you recall, we had about a $50 million loss carryforward at the end of 2010, and we'll get into that evaluation sometime around the middle of the second quarter.

Okay, great. And then secondly, just back to the gross margin question, just I guess a little more detail. Since you are assuming similar utilization rates as you did in Q1 of 2011, should we assume a similar gross margin or will there be other programs you have in place that would enhance the gross margin a bit from the 33.5% approximately that you saw in Q1?

Well, two things. As Ron mentioned, we continue to make improvements with regard to our yield and our throughput. And we continue to make progress on our cost reduction efforts. I would anticipate that you would see an improvement compared to the first quarter of 2011.

Okay, great. Thank you very much.

Alan Mitrani, Sylvan Lake Asset Management.

Thank you. I just want to be clear, because I think we've said a couple things that have been a bit confusing. You're saying that your manufacturing capacity utilization was roughly 46% in the first quarter, which is consistent with where it was in the first quarter of 2010. Is that correct?

It's in that neighborhood.

Okay. And you're expecting the second quarter, which is normally your busiest quarter, to be consistent with the first quarter, so roughly mid-40s?

It will be in that area.

So what you're really saying is you defer -- you are expecting a lot of these sales to really defer to the third due to weather for some reason, right?

Well, we know that in the first quarter, March and April, the entire northern tier of the United States experienced either heavy snows, flooding or significant rainfall. And we know based on the sales into that channel and also from our distributors to the dealers that that has moved slowly in the early part of April and in March.

That is in contrast to the Southern tier, which is seeing a fairly robust decking season. So yes, we believe there will be some movement.

Okay, and then was it several million you expect -- SG&A last year, and you adjust for any, I guess, whatever you had -- it was roughly $18.8 million in SG&A. You said you were expecting it to be up several million from last year?

Yes, a few million.

A few million, okay. We talked about, I think, on the prior calls about SG&A, I guess, not being up much or at all this year, or dependent on sales, simply because your branding was going to stay consistent, your R&D was up a bit; but otherwise, you guys, like you said, keep costs fairly low. And given that sales don't look like they are going to be up much this year now, why is it that SG&A -- either your back-half SG&A is going to be down a lot or SG&A is going to grow faster than sales. Am I doing that math correctly?

Number one, we haven't given guidance on the full-year sales, so I won't comment whether the sales are going to be -- whether they will be or how much higher they would be than 2010. But the guidance we gave you was that we expected SG&A to be approximately the same as 2010 and that guidance is unchanged.

Okay. On your deck acquisition, how big is it in revenues, roughly?

It is modest. It is -- think of it as -- I mean, it is really a startup company that we bought. They do have sales. They have been shipping. Clearly, when it becomes part of Trex, I expect that the sales will go up significantly. But it is a modest-sized company that we purchased.

Okay, so less than a few million dollars or something. So it's nothing we should adjust our models for, really, at this point.

I can't give you guidance on that.

Okay. And on the share count, I guess you came out with 16.8 million shares this quarter. I know off the cover of your 10-Q -- or 10-K, you didn't have that many. Could you just walk us through the share count? You had 15.2 million as of the end of the year, and I know the convert will factor in with several million shares come next year. Was there just some factor that indicated that -- or changed that?

The biggest thing that changed is the impact of the converts. And in rough numbers, that was about a 900,000 share increase by itself.

Okay. So how many basic -- maybe the question is how many shares do you have outstanding now, before the converts?

Before the converts -- the convertible notes were just under 900,000, so the total shares would for the first quarter was about 15.9 million.

Great. Thank you.

Later today, you will see more details on that, when the Q is released.

Okay. Actually, just one last thing. You had said at the end of last year that basically the impact of all these startup costs and everything was that our starting point should be for fiscal year '11, assuming you got rid of all of them, was sort of mid-30s gross margin. Is that correct?

I think if you eliminate the effect of the Transcend startup, that would give you something in the 33%, 34% range.

I think it was 34% -- 34% gross margin sort of as a starting point this year, and hopefully you would improve as you go. Okay. Thank you.

Edward Okine, Basso Capital.

On the Iron Deck framing systems, how long has that been on the market, and what has been the performance of the warranties?

It has been on the market for a year or two, and the effect on the warranties has been de minimis.

Okay. So [I would expect] there is no history there. So one could consider that as a risk, since you have a 25-year warranty on this product. I mean, is that a fair assumption to make?

What was the -- I didn't quite hear that.

This carries -- it carries a 25-year limited warranty, and how does that compare with your warranty on the deck (multiple speakers)?

It is a similar warranty; we also have a 25-year warranty on our decking. This is a steel substructure that is coated, it's galvanized, and we are comfortable with the warranty.

Okay. Thank you.

Sean O'Malley, WEDGE Capital.

Good morning. Thanks for taking the question. Regarding the Iron Deck acquisition, you mentioned that you are going to be manufacturing the product in your existing facilities. And obviously, I think this material would require a different process than the Trex materials require.

Should we expect to see some capital investment this year to support the new product lines, and is it safe to assume that your existing footprints in your facilities are large enough to house the new product and so forth?

Well, the existing footprint is large enough. There will be some modest capital expenditure, but most of the CapEx we're requiring comes from the business that we bought. In addition to the assets from the business we bought, we will buy some additional equipment. But it will be modest. It is a different production process, but it will fit within our existing footprint.

So if we look at these investments on an EVA basis, is the capital that we lay out, it will be more than made up for by the returns that we expect, the answer is yes. And so from this moment forward, from when this conference call is over, I will be traveling to Chicago to meet with about 100 sales professionals to get this thing kick-started. So we've owned it for about a day, one business day. And by the end of today, we will be fully engaged in integration.

Okay. And just one quick follow-up. I appreciate you're probably not going to answer it, but any idea of what kind of range of capital expenditures we could see this year in support of bringing the product and the manufacturing in-house?

It is not going to move the needle.

Okay. All right. Thank you very much.

Jeff Bernstein, AH Lisanti.

I just want to make sure I heard you correctly. The increase in SG&A, you're talking about year-to-year being up a couple of million dollars -- a few million dollars?

Operator, we can't hear that caller. We can't hear that caller.

Keith Hughes, SunTrust.

Following up on inventory, the inventory was down pretty substantially year-over-year, up sequentially. Where do you think you stand in inventory now? Is this about where you want to be, over or under?

The inventory level that we have right now is an inventory appropriate for where we are in the season. Coming into the largest part of the season, we anticipate that the inventory levels will decline throughout the year.

All right. Thank you.

Kenneth Smith, Lenox Equity Research.

Ron, just to follow up on this acquisition, how much of the deck substructure market now is made up of kind of material that your acquisition produces?

De minimis. This would be a sea change in the way that decks are constructed. We believe this is the next logical extension of technology with deck construction. So virtually in terms of growth, it will be almost vertical.

Besides the longer life of this kind of substructure, does it have any other advantages -- I mean, from an aesthetic standpoint, a design standpoint?

It has a couple of advantages. One is the ease of installation. And number two is the integrity of the construction of the substructure after the fact. In other words, it avoids twisting. And that is -- a construction challenge sometimes is to prevent a board from appearing as if a -- even though the deck boards are straight, if the substructure settles or is crooked because it is pressure-treated wood, which is imperfect, this avoids that problem and provides for a faster, easier and more consistent deck look post-construction.

Why are you so confident, it seems like, that you will be able to expand the sales of this, whereas I guess it hasn't really done all that much heretofore?

I think because nobody has really given it the try. We've got the ability to produce it and we've got the ability to distribute it. So I think that is the primary difference.

I think if you look at Trex's strength, its brand name, distribution footprint and salesforce -- so the combination of those three will enable Trex to do something with this type of product that couldn't be done with the prior owners of the business. They just didn't have the strength in those areas to be able to support it.

Okay. And just a follow-up on the comment on the international. You say you are starting to get some reorders there.

Yes.

Is the pattern of -- I don't know if there is a pattern yet, since it is so new. But is it likely to have the same seasonality as the domestic market?

Well, it probably will have the same seasonality to it. I mean, I don't want to overplay this. It's important strategically. We are starting from scratch, and we are selling into 11 countries now.

It is difficult to discern exactly how the patternization will play out, and it is going to be conflicted to some extent -- or confused in terms of the seasonality, because we are selling in both the northern and southern hemispheres. So the weather is going to be opposite.

Thank you.

There is one question we wanted to -- that was asked a little bit earlier -- we want to provide a little bit more color on. That was a question about the capital expenditures required for the Iron Deck acquisition.

So we've got some more clarification. I'm going to let Jim provide that clarification.

Just want to clarify the fact that we do have -- have projected about a $15 million capital spend for the year. A portion of the Iron Deck certainly will be covered by that, but we may see a need to increase spending a couple million dollars beyond the $15 million that we've guided you in the past.

I'm not sure if that changes the way you perceive our answer, but we wanted to be abundantly clear on that. I hope that settles it.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Thanks, everybody, for joining us today. As you can see, we are moving forward briskly and purposefully on a number of important strategic fronts. We'll get back to our work now, so we've got more news to share with you next quarter. Thank you. Goodbye.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.