Ultra Clean Holdings Inc (UCTT) 2012 Q4 法說會逐字稿

Good afternoon. My name is Matthew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ultra Clean Technology fourth quarter fiscal year 2012 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Joining us today is Mr. Casey Eichler, Chief Financial Officer; and Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to Mr. Eichler. Sir, you may begin.

Thank you, Matthew. Welcome to our fourth quarter and fiscal year 2012 financial results conference call. Presenting today is Clarence Granger, Ultra Clean's Chairman and Chief Executive Officer; and Casey Eichler, Ultra Clean's Chief Financial Officer. I'll begin by presenting the financial results for our fourth quarter and fiscal year 2012. Clarence will follow with some remarks about the business.

A few moments ago we issued a press release reporting financial results for the fourth quarter and fiscal year 2012, ended December 28, 2012. The press release can be accessed from the Investor Relations section of Ultra Clean's website, along with the information for the tape delay and replay of the live webcast at uct.com. Together with our recently issued press release, this conference call enables the Company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the Company's official guidance for the first quarter of fiscal 2013. Investors should note that only the CEO and CFO are authorized to provide Company guidance. If at any time this call, we communicate any material change in guidance, it is our intent that such updates will be done officially via public forum, such as a press release or publicly-announced conference call.

The matters that we discuss today include forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments, and industry growth. Investors are cautioned that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission. The Company disclaims any obligation to publicly update or revise any such forward-looking statements, or to reflect events or circumstances that occur after this call.

Now, here are the fourth quarter and fiscal year 2012 results. Revenue for the fourth quarter was $90.1 million, or a decrease of 11% from the prior quarter and an increase of 4% when compared to the same period a year ago. For fiscal year 2012, revenue was $403.4 million, compared to $452.6 million in fiscal year 2011, a decrease of 11% year over year. Semiconductor revenue for the fourth quarter was $76.5 million, a decrease of 12%; and non-semiconductor revenue was $13.6 million, a decrease of 4% when compared to the third quarter. Semiconductor revenue was 85% of total revenue for the quarter and 86% for fiscal year 2012. Revenue outside the US was 18% in the quarter, compared to 25% in the prior quarter and 28% for fiscal 2012. Four customers had revenue over 10% for the quarter and two customers had revenue over 10% for the fiscal year. Gas Delivery Systems represented 51% of our revenue for the quarter and 54% for the fiscal 2012.

Gross margin for the fourth quarter decreased to 12.8%, compared to 14.2% in the third quarter and 11% in the same period a year ago. For fiscal year 2012, gross margin was 13.8%, compared to 13% in fiscal year 2011. Operating expenses were $13 million, or 14.4%, a decrease of approximately $2.8 million for the prior quarter, due to less acquisition-related charges. Our operating expenses as a percent of revenue will move back into the range of 12% to 13% in Q1 of 2013. We incurred an operating loss of $1.4 million, or 1.6%, before interest expense and income tax, compared to an operating loss of $1.4 million, or 1.4%, in the third quarter.

Excluding M&A-related costs, the amortization of intangibles, our operating income was $630,000, or 1%, in the fourth quarter. For fiscal year 2012, operating income was a $8.3 million, or 2.1%, including $6.6 million of one-time charges related to the AIT acquisition, compared to operating income of $23.5 million, or 5.2%, in fiscal 2011. Interest expense for the quarter was $716,000, a decrease of approximately $97,000 related to debt incurred to finance the merger with AIT. An income tax benefit of $398,000 was recorded in the fourth quarter.

Our effective tax rate for the fiscal year 2012 was 23.1%, bringing the Q4 effective tax rate to 18.7% in order to adjust for tax expense already taken during the year. The tax rate for Q1 should be modeled at 27%; however, the tax rate for the year should be modeled at 24%. With the addition of AIT, the tax provision calculation is higher, due to the increase profit within the US; but we continue to maximize our overall global structure.

Fourth quarter net loss was $1.7 million, or $0.06 per share. Excluding transaction costs and amortization expense related to the merger with AIT, fourth quarter net loss was a breakeven of $0.00 per share. This compares to net income of $1.7 million, or $0.06 per share, in the third quarter. Fiscal 2012 net income was $5.2 million, or $0.20 per share, compared to net income of $23.7 million, or $1.01 per share, for the full fiscal year 2011. Net income for fiscal year 2011 included the tax benefit of $6.4 million, or $0.28 per share, resulting from the reversal of the valuation allowance reported in the results of the fourth quarter of 2011.

Excluding transaction costs and amortization expense related to the merger with AIT, fiscal year 2012 net income was $10.2 million, or $0.39 per share. The fully diluted share count was 27.9 million, an increase of 198,000 shares from the prior quarter. Non-cash charges for the fourth quarter were $1 million related to FAS 123R and $2.8 million related to depreciation and amortization.

Turning to the balance sheet, cash was $54.3 million, a decrease of $4 million from the prior quarter. Cash net of third party debt was $21.3 million, a decrease of $1.8 million during the period. We anticipate that cash will be up slightly next quarter.

Accounts receivable was $50.1 million, up $2.5 million from Q3, and days sales outstanding increased to 50 days from 42 days. Accounts payable of $24.1 million decreased approximately $10 million quarter over quarter. Days payable outstanding at the end of the fourth quarter decreased to 28 days from 35 days at the end of the third quarter. Net inventory was $54.5 million, a decrease of $8.8 million over the prior quarter. Inventory levels are projected to decline slightly during the first quarter of 2013.

Now Clarence will discuss our operating highlights for the fourth quarter. Clarence?

Thanks, Casey.

As anticipated, due to semiconductor equipment industry weakness, we experienced revenue and earnings declines in the fourth quarter. As Casey previously stated, our revenue for Q4 was $90.1 million, and our adjusted earnings per share were $0.00, excluding merger and amortization charges. On our previous earnings call, we had guided to Q4 revenue of $94 million to $99 million, and $0.01 to $0.05 adjusted earnings per share. In early January, we issued revised revenue guidance of $88.5 million to $90 million. We were successful in meeting our revised guidance, while still being able to break even with the significant decline in revenue.

For fiscal 2012, revenue fell year over year by $49.2 million. Despite this revenue decline, we were able to increase our margins by almost a full point from 13% in 2011 to 13.8% in 2012. This year-over-year increase is due to the continued operational focus and efficiency of all UCT sites. We are confident that we will see further margin increases as industry conditions began to improve. As Casey mentioned earlier, we anticipate that we will grow cash over the next quarter, along with continuing our focus on inventory reductions. During Q4, UCT was successful in bringing our inventory levels down, with inventory reducing by $8.8 million quarter over quarter. Operations have been heavily focused on reducing inventory and improving margins, and that focus will continue into fiscal 2013.

I'll now review highlights of our activities for the fourth quarter. In Q4, 18% of our total revenue came from our Asian manufacturing operations, a decrease from 25% of total revenue in Q3. As a result of the AIT acquisition, we increased our percentage of manufacturing within the US. While we expect the majority of manufacturing to remain US-based, during 2013 we do expect to resume our trend of increased manufacturing in Asia. This is consistent with our customers' plans, and will continue to have a favorable impact on UCT's margins. The fourth quarter also continued to be a period of transition, as we move forward with the merger between AIT and UCT. We have identified cost savings between the two companies, and we'll be working during the next fiscal year to realize most of those savings.

As mentioned last quarter, we have been able to obtain cost savings through combining freight contracts and closing a small AIT facility in Santa Clara, California. We are also evaluating the use of AIT-manufactured frames and sheet metal in current UCT products. Finally, we have recently restructured headcount within our operating expense groups in order to get better efficiencies across the Company. The combination with AIT adds several new customers, new manufacturing capabilities, and new business opportunities. We continue to be very excited about the new potential that the addition of AIT brings to UCT.

Although we have been experiencing an industry decline over the last several quarters, as a Company we have continued to work on several new exciting opportunities with multiple new and existing customers. For many years now, we have been building robots for the medical equipment industry. This has been a very successful and growing portion of UCT's business. I am pleased to announce that during the fourth quarter of 2012, we were awarded robotics business with one of our largest semiconductor equipment customers. This is our first penetration of this market, and is a very exciting opportunity for UCT. We expect revenue from these products will reach $2 million per quarter by the end of Q3 2013, achieving a run rate of $8 million to $10 million per year. In addition, we have recently been awarded a contract to build robots for a smaller publicly traded medical device company. This will be a $1 million to $2 million opportunity in 2013, with growth potential as that company grows. Overall, our pipeline of new business opportunities remains very strong.

I'd now like to shift to our guidance for the first quarter of 2013. We anticipate that industrywide demand will begin to recover during the quarter, bringing UCT back to revenue levels of Q3 2012. Our revenue guidance for the first quarter is $96 million to $101 million. Our Q1 earnings guidance is for earnings per share to be in the range of $0.02 to $0.06, excluding amortization charges. As Casey discussed earlier, the tax rate for the first quarter should be modeled at 27%.

In summary, during the fourth quarter of 2012, we continued integration activities related to combining AIT into UCT. This integration is proceeding very smoothly, and we have continued to identify several areas of cost savings during this process. Our gross margins improved by almost a full point year over year, and our inventory levels continue to decline with increased operational focus. We are pleased that our new business pipeline continues to be strong and growing.

In closing, 2012 was a challenging year from an industry perspective, yet an exciting one through the addition of AIT. We are confident that 2013 will be a year of growth and further margin improvement as we continue to manage our business.

With that, Operator, we would now like to open the call for questions.

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster. Edwin Mok.

Thanks for taking my question, and congratulations for good guidance. So, first question I have is if I take a look at your guidance, it implies your gross margin will bounce back to the mid-14%. Am I correct on that, and what is driving the recovery margins?

As you know, Edwin, we don't guide to margin, but clearly more revenue is helpful in that regard. So obviously our guidance and revenue is up, and that helps, as well. Clarence talked about a number of the operating programs that we have going on over the last few quarters, and I think that's helpful. Some of that also can be mix, not only product but geographic mix, as well. But those of the things that are probably the major things that our factoring into that.

I see. So you do expect your non-US mix to increase in the coming quarter?

Yes.

Great. That's helpful. I guess second question is, just to be real clear on the guidance, right. The semi versus non-semi, does the rebounding revenue all come from semi? Do you expect some increase in the non-semi side, as well?

It's mostly in semi. Give me a second here and I'll check. It looks like it's mostly in semi, but there's some increase in other areas, as well.

I see. But then on the two points that you mentioned, Clarence, on the call. Are those starting to contribute to top line in the first quarter? Or are they mature in the first quarter?

Again, the one on the medical company, that's pretty small. Like I said, it's $1 million to $2 million for the entire year. So it's not a huge factor. The one on the robots is probably on the order of $1 million run rate by the time we are in Q1, or as we make progress in Q1. So we expect by the end of Q3 to be at around a $2 million run rate. So it's about a 1% factor.

I see. And then kind of stay with the non-semi side, have you seen improvement in orders for the flat panel display [within] the end market, or is that still pretty slow?

We are starting to see improvement in orders. We won't see shipments for a while on those. They're relatively long lead time, but yes, we've seen an increase in orders.

I see. And then lastly, I know typically you guys have low visibility, but on the semi side, are all your customers talking about a more linear year, or a stronger second half of this year? Are you guys kind of getting indication from your customer on Intel's expectation for this year? And based on just your answer on flat panel displays, it sounds like your kind of seeing similar trend in displays well? Am I correct on both sides? Or can you give some color on that?

I'm not sure what the second part of your question was relative to display, maybe you can -- but the first part relative to semiconductor, yes, I think most of our customers are saying more linear. I mean, I've seen, obviously reports by you and other analysts, and it seems to be consistent with what we're hearing from our customers, where they're, certain specific customers are placing orders now, and other specific customers are anticipated to place orders in the second half. So the general feeling we're getting is that it's likely to be more linear.

I see. I guess I have one more question for, I guess, for Casey, right --

On the flat-panel side, what was your question on the flat panel? I didn't quite understand it.

All I'm asking is, based on your comment on flat panel, are you suggesting that you start to see orders in terms of revenue? You don't expect until second quarter or even the second half of this year?

That is correct.

I see.

There won't be any revenue associated with Q1 to speak of.

I see. And then lastly, I guess a question for Casey. If I go back to kind of the early part of 2012, or even 2011, right, where you revenue run rate is higher than where it is at right now. I'm trying to understand how we should expect operating margin to trend if revenue gets back to those level, given that you guys have acquired AIT. So I imagine OpEx is higher, because you guys are doing a bit better on the gross margin side. Is there any way you can offer some color on that, Casey?

Sure. Yes, so I think that as we talked in the past, the operating -- I'm sorry the gross margin side is helped by AIT, but it's also helped by the things I talked about earlier, the operational improvements and some of the things we've done, and so we feel pretty good about that. Clearly, when we acquired the company we had their operating expenses and our operating expenses combined, and revenues came down through the combined entities. And so that percentage has gone up over the last couple of quarters. One of the things, again, that Clarence touched on, is we are continuing to look over this year ways to streamline and make the operating expenses more efficient.

It does take a certain amount of time, because we have a certain amount of systems and things that are longer lead time to deal with. But I do think over the course of time, we should be able to get the operating expenses down as a percentage of revenue. But this year is a year when we're going to be trying to work on that in particular, like I say, from a systems and other standpoint. Facilities-wise, we didn't have a lot to do. Clarence mentioned we closed a small facility, and there really isn't anything else that was duplicative. And so, we're hoping that as we continuing to build the business that will get our capacity utilization up and be able to use all those facilities efficiently. But we don't anticipate in closing any other facilities. We've already gotten that done.

I see. Great. That was very helpful. Thank you.

You bet. You're welcome.

Dick Ryan.

Hi, good afternoon, guys. Casey, what should we look out for amortization for 2013?

Well, the amortization and depreciation number that we've been running at is about $2.7 million, $2.8 million, something like that. Of that, the amortization is just a little shy of $2 million, and so depreciation of the balance, as you know we've run the depreciation at around $700,000, $800,000 over the last few quarters. So that's how that combines up, and I think that will be pretty consistent.

Okay. And, maybe this, just another question on the OpEx side. Have you -- you talked about cost savings with the AIT and recognizing those synergies. When do you think those hit? I mean second half of the year, obviously, should be more momentum than the first half, but will we be seeing those in the second half of the year? Are they more of a 2014 story?

Well again, I think they're going to be a continuing story throughout the course of this year. OpEx as a percentage is also obviously a function of the revenue rebound that we're starting to see. So, that will bring down the percentage, but also there are some operational efficiencies that we're still hoping to get throughout the course this year, and as you referenced into next year. But it's not like going to fall into a specific quarter. I think it's going to be continued as we go forward.

With the loss of business to the one semi customer that was doing some insourcing, are there any conversations, people looking more towards doing some insourcing, or as we're coming out of the trough here, isn't that a concern going forward for you guys?

Yes, Dick, this is Clarence. I mean, obviously there's certainly unknowns in terms of what happens in the long-term future, but I think in the case of all of our customers now, we're beyond any dialogue associated with insourcing. I don't think any of the other customers, we have contracts with all of our customers, and none of the other customers are talking about any insourcing or any plans to insource, other than what I've already described.

Okay. And you probably had some corporate actions, mandatory time off and such in Q4. Is there any of that going on in Q1? Or have you kind of reversed that with a little better outlook here?

Yes. It does continue to some degree, at a lesser degree than we had seen in the second half of last year. We haven't had any corporate profit-sharing or bonuses for the last several quarters, and we have had, as you referenced, mandatory time off. We will have some mandatory time-off this quarter, and then getting into the middle and second half of the year, we hope that we will continue to see the type of revenue trend that people are talking about, and that will give us the ability to not do that, and at some point to be able to pay bonuses to our employees.

After all, that is kind of the goal is to run a company where people are able to take time off when they need to, and that they can share in the success of a company, and so we would hope that would happened, but right now there is a reduced amount of MTO in Q1, and we haven't made a decision for Q2.

Going from $90 million to roughly $100 million is a nice increase from Q4 to Q1. But, it's a far cry from where we think we should be operating, and hopefully as business continues to improve, we'll be able to grow with that. And that's a reason why we've focused on some level of mandatory time off to reduce our costs, and still retain the key employees, anticipating business recovery later on in the year, continued business recovery.

Sure, sure. Okay, thank you.

You're welcome, Dick.

Jaydi Iyer.

Jagadish. Yes, hi.

Hi, Jagadish.

Hi, Jagadish, how are you?

I'm okay. So just three questions I wanted to find out. First, how much was the AIT contribution to the total revenues in calendar '12, please?

We aren't doing segment reported or calling things out per segment reporting. Obviously from an accounting standpoint you have to be sensitive to that. We look at AIT as being yet another location for us, or their locations being a location for us, and so we haven't, since the combination, nor are we going to the future, report AIT separately.

And if I look at your guidance that you provided, I thought it seemed to be a little light if you look at the guidance provided by your two major customers. For the Q1 quarter timeframe, they seem to be showing some big rebound there. So I'm just trying to understand, are you just being conservative here, or are there anything else that we should be noting here?

Obviously you're talking about our two largest semiconductor customers, and I guess what I would say is, I think our increased guidance is pretty consistent with regard to one of those customers, and the other customer, frankly, has a slightly different quarter than we do. And so they tend to be -- their quarter would be February, March, April, as opposed to ours being January, February, March.

And frankly, I would expect to see a bigger increase in that timeframe, as obviously Q4 was a slow down period, and that continued, probably continued into the January timeframe, but we're starting to see increased orders now that will certainly likely carry through to April. I think our increase is -- I feel our increase is consistent with that of our customers.

Okay. I want to also find out how much was LED as a percentage, and are there any comments that you want to make in terms of the recovery in that segment?

Yes. So LED, we said at the end of the last quarter that we are really not expecting any significant revenue from LED customers throughout into the first half of this year. I think that's pretty consistent with what you're hearing from the major players in that space. Over time, we still tend to be enthusiastic about that business, in particular as general lighting plays a bigger and bigger role there. But I don't know that I see anything being said by those customers or by analysts that would give you an indication that there is much, or any, of a rebound or activity in that space, and most of those customers, I think, have been working off of inventory.

Yes. Last quarter we said we expected to be in the 1% to 2% range of total revenue, and it's in the 1%-plus range. So, but we just don't see any significant recovery coming from our side at this point in time.

And finally, I just wanted to understand, on the gross margins for the fourth quarter, was it just purely from the revenue mix? From the revenue, lower revenue, or was there anything else that contributed to the decline in margins? Thank you.

Yes. I mean, certainly it was largely driven by the activity in the quarter. There's always mix issues, and as I mentioned earlier, Asia versus US type of mix issues, product and geographic mix. But primarily it was driven by the revenue.

Okay, thank you.

You're welcome.

Sure, you bet.

(Operator Instructions)

Jay Deahna.

Thanks very much. Good afternoon. A couple of questions. The first one is, from your perspective, do you view the fourth quarter as a cyclical bottom?

Well, trying to predict long-term cycles is a difficult thing, but it's certainly -- we usually try and give current quarter guidance and a general feel for subsequent quarters, and I would certainly say Q1 is obviously -- Q3 going into Q4, Q4 we knew it was going to be down, Q1 we're now saying is going to be up, and I would say it's highly likely that Q2 will be up, as well.

Okay. So what does that mean? Does that mean that you're looking at a minimum of a two-quarter cycle, but yet you're not clear beyond that?

Well, certainly our customers are all indicating more optimism about the year, as well. So I just don't have visibility beyond Q1 and Q2. But my customers, as you well know, are starting to project that while the industry may still be down next year, one of our major customers is projecting it will be up this year, and another customer is projecting that even though it may be down, it won't be as down as much as they had earlier projected. So, I would say everything that we're hearing recently is in a positive direction for the foreseeable future.

As you know, Jay, this thing can move kind of fairly quickly and without much notice. I think coming into the year, there wasn't much indication until one of the major customers in this business for our customers started to get very active in their buying of capital equipment, and that kind of turned the light on and everyone got pretty quickly optimistic. We would like to see the follow-through that people have talked about, but it can change as quickly as it changed the other way. But right now we feel pretty good about the year.

Right. Yes, I understand your commentary, given the fact that there's about three customers driving the whole industry at this point.

Yes.

So they could they could change their mind and change everything, right?

They're all saying nice things, or good things right now.

Okay. All right, I got that. Following up on Jagadish's question. If you look at Applied, which is your largest customer I believe, they guided for -- well, they said that their January quarter orders were up 44% sequentially, driven by semi and flat panel, which is representative of the vast majority of your Business. And they guided April quarter sales up 15% to 25%, and they typically have a pretty tight correlation, shipments to revenue.

Now, you're suggesting that because they have an April quarter and you have a March quarter, that a pretty decent chunk of their business could fall into the second quarter for you, which makes sense, because it's a 90-day lead time on these orders, would certainly represent a pretty hefty backend loaded quarter for them in terms of shipments in the April quarter.

Now on the other hand, historically the subsystem suppliers have had a little bit of a bigger jump than the OEMs at the beginning of the cycle to prime the pump of the manufacturing process, and at the same time you have new mandates that you're winning offset by the loss of the insourcing business. So, if you tie all that together, it still seems like the quarter's a little bit light relative to what Applied is saying. So, are you still sort of working through that insourcing situation, and that's manifested in this guidance? Or, how do you tie all that together?

Yes, with regard to the insourcing situation, I said that it would be ultimately end up being about 7% to 9% by the end of this calendar year. And we said it would be at a run rate of about 2% a quarter. So, you can factor that in. I think that's consistent at about 2% a quarter. I would say if you'd have asked -- obviously back in January, we were still -- early January, we still had not seen significant new orders. So, we didn't have the insight that we have today. So, the increases that we've seen are all very recent, and so for us to say that we're in line with other customers, I think is pretty consistent.

You may want to also look at that other large customer that you talked about, and they issued their guidance a few weeks earlier and it was a little more subdued. So, I really think a lot is transitioning right now and trying to figure out the exact timing of everything is certainly a challenge. But we feel very comfortable that we are getting our fair share of the new business opportunities associated with the start of growth that we're seeing again back in semiconductor.

Now, Clarence, is there a situation where the OEMs have a little more inventory than they have to start cycles in the past where they don't need to prime the pump as much?

I don't think there's much inventory out there. There's certainly been a long time to kind of purge the inventory. They never get it completely purged. So certainly for a few orders, but I would say a fairly limited number of orders, they'll be able to purge used inventory. But it's not a huge thing.

So, if Applied has orders that are up 44% in semi and flat panel in the January quarter, if they ship the vast majority of that by the end of their July quarter, and you look at the concept that you're suggesting, that you feel that you're going to see a lot of that with a one-month delay relative to your quarterly process, that would imply a very substantial increase in the second quarter for your Company to service the rate of growth that that company is suggesting, meaning --

Jay, look. Obviously we're try to give a general guidance saying it feels like Q2 is moving in the right direction. I want to keep our focus on Q1. So again, when we're saying moving from roughly $90 million to $100 million in revenue, that's roughly an 11% increase. I said we'd probably lost a couple of percent associated with that customer that was insourcing. So, that's kind of where we see it today for Q1. And, obviously, I've indicated that we think Q2 is doing well at this point in time. I really don't want to get too far into giving guidance for Q2.

Okay. Than the last question, Clarence, and I appreciate what you're saying, but I'm just trying to understand the physics of the numbers here between your customers and you.

Sure, got it.

I'm not trying to give you a hard time. I just want to understand the physics of the numbers. So, I apologize if I'm grating on you. Last question. If you look at UCT's guidance for 3Q and for 4Q, they both ended up being a little bit on the aggressive side. In order to be, maybe, a little conservative that way, would you say that your Company's guidance for the first quarter is a little bit more conservative versus the forecasts that you're receiving from your customers at this point versus the last two quarters?

I guess what I would say, Jay, is we get a lot of fluctuation within a quarter from our customers. Unfortunately in Q3 and Q4, both of those order adjustments by our customers were in the negative direction. We don't see any indication of that right now in Q1.

Okay. So, I guess the question remains the same, though. Is, you're further into the quarter now, in terms of reporting versus last quarter. Would you say you're being a little more conservative relative to your forecast? Just to alleviate any potential risk of pre-announcement, or is it a system that you're operating in and it hasn't changed?

Yes, I guess what I would say is, I don't think the tone of our conservatism has changed any, quarter-on-quarter. So to your point, if you feel that we're sometimes a little bit overly conservative, then we're probably feeling the same way this quarter, as well. But I don't think the tone of our conservatism or our willingness to lean over the skis one way or the other has changed any. What we're trying to do is take the best information, the best viewpoint we have and bring that out in a way that we think is fair. But I don't think -- we're not thinking about it any differently than we have in past quarters.

Okay. Thanks very much.

You bet.

(Operator Instructions)

And there are no further audio questions at this time.

Great. Well, I appreciate it, and look forward to a great 2013, and I appreciate everybody participating. Thanks.

This does conclude today's teleconference. You may now disconnect.