Wesco International Inc (WCC) 2004 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter Earnings Conference Call. My name is Kelly and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating the question-and-answer session towards the end of this conference. If at anytime during the call you require assistance, please press "*" followed by "0" and a coordinator will be happy to assist you. I would now like to turn the presentation over to your host for today's call, Mr. Dan Brailer, Treasurer and Director of Investor Relations, please proceed sir.

Thank you Kelly. Good morning, ladies and gentlemen, thank you for joining us for WESCO International's conference call to review the third quarter financial results. This morning Mr. Steve Van Oss, WESCO's Senior Vice President and Chief Financial and Administrative Officer will review an overview of the earnings press release issued this morning. Means to access this conference call via webcast was disclosed in the press release and was posted on our corporate website. Replays of this conference call will be archived and available for 7 days through midnight Eastern Time, October 28th. Following the commentary of Mr. Van Oss, we will open the session to your questions.

This conference call may include forward-looking statements and therefore actual results may differ materially from expectations. For additional information on WESCO International, please refer to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2003, as well as other reports filed with the SEC. The following presentation may also include a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be obtained via WESCO's website at www.wesodist.com.

I would now like to turn the conference call over to Steve Van Oss.

Thank you, Dan. Good morning everyone and thank you for participating in our call. I'd like to start the discussion with an overview of a few items in order to put this quarter's results into perspective. I'd like to start with a couple of comments about the economy and the dynamics of WESCO's business. WESCO's business generally the lags the overall economy; said differently, we typically would experience a recovery in our business a couple of quarters after the general economy turns positively.

Conversely, we'd typically lag a downturn by similar number of quarters. We saw this lag effect in our business with sales increases beginning in the fourth quarter of 2003 and since that time we have been gaining momentum in substantially all of our reserved markets over the last three quarters. We are clearly growing at a rate greater than the overall economy and contributing to this increased activity are the strength of our local and national sales and marketing programs, particularly in industrial markets.

Further, we believe we are in the first phase of the three-phase recovery in WESCO's markets and what I call a cycle within the cycle. In this first phase we have seen an accelerating pickup in our day-to-day MRO activity and what is often called fill-in business. This was reflected in our stock sales. Stock sales began strengthening in the fourth quarter of 2003 and were up 20% in the third quarter of this year. Our mid-cycle business or second phase is reflected in our small and medium-sized project business which began to show signs of strength in the second quarter of 2004 and in the third quarter was up double-digits over last year. This increase was aided by material price increases in copper and steel products which were prevalent in our project business. Our late cycle business or third phase is reflected in large complex longer lead time projects and is yet to kick in. While there are different dynamics as it relates to gross margin characteristics, we view the three phases of our business cycle as cumulative and additive to improving our earnings power.

We have worked hard to improve the efficiency and earning power of our organization. A key measure of overall operational efficiency is the ability to convert a high percentage of incremental gross margin dollars to operating profit and net income. We refer to this as pull-through to the bottom line. For the full year 2003 and the first two quarters of this year, we had pull-through ranging from 50-73% of incremental gross margin dollars to incremental operating profit. Net income in each of the previous three quarters more than doubled.

Let's now look at a summary of the third quarter 2004 results. Growth in sales coupled with the margin and cost initiatives produced outstanding operating results. Our sales increased $149 million and the Company produced an additional $29 million of gross profit with the pull-through of $16 million or 56% to incremental operating profits. Net income more than doubled as $10 million or 35% of the incremental gross profit was pulled-through to the bottom line.

Earnings per share increased by 24 cents to 42 cents, a 133% improvement over last year's earnings of 18 cents per share. Working capital performance improved by 5 days from last year's third quarter and liquidity remained high at a $184 million. Our strong liquidity position was utilized to retire $9 million of high costs senior subordinated debt and our leverage and interest coverage ratios improved significantly during the quarter.

LEAN enterprise initiatives continued to be expanded throughout the Company with more braches getting involved in basic programs, while we launched additional programs targeting high-cost or service improvement opportunities. These new initiatives supplement and expand programs touching virtually all aspects of our operations from sales, margins, inventory, and transportation to accounts receivable and order processing. The results are encouraging. Our productivity reached record levels in the quarter as sales per employee increased 18% over last year's third quarter and by 4% over last quarter, which was a great accomplishment and previously our historical best.

Just looking at a little bit more down specifically in our third quarter results, sales were $974 million for the third quarter and were up $149 million or 18% from the third quarter of last year. Sales were up $43.5 million over the second quarter of 2004 and were approximately 19% over the 2003 full year average.

Activities levels in the majority of the major industrial groups that are heavy users of electrical equipments and MRO products strengthened further during the third quarter although not yet at the historical high levels of 2000-2001. Strength in the recreational vehicle and modular construction markets of our manufactured housing operation and increased market penetration resulted in sales to this market being up more than 20% over last year. Our utility operations were up approximately 20% improving upon the positive trends that started in the third quarter of 2003. Improvements in day-to-day MRO activity, certain OEM segments, and increased sales activity in small and medium-sized construction projects resulted in our sales to customers in these large market segments being up in the aggregate approximately 19%.

International operations were up over 10%, helped somewhat by the strength of the Canadian dollar. On the strength of new programs and improving MRO activity, sales to customers through our national accounts and integrated supply programs were up approximately 17% and 8% respectively continuing the positive trend from last quarter and last year. The daily sales rate improved throughout the quarter with the strong finish in September. The daily sales rate of $15.9 million achieved in September was the highest daily sales rate experienced since December 2000.

While the industry does not publish discrete market share data, successes in our integrated supply, national account and alliance programs and routine feedback from our supplier base give us confidence that we are growing market share by a meaning amount. A portion of the increase in the cost of certain products was pushed through the customers. On an overall basis, pricing had an estimated favorable $22 million or 2.3% impact on sales.

The third quarter gross margin at 18.7% compares to 18.6% in the third quarter of 2003. Billing margins improved year-to-date and were essentially flat to the third quarter of 2003. As projected last quarter, we experienced lower billing and gross margins as compared to this year's second quarter record results due to less favorable impact of inventory profits from higher commodity prices on copper and steel products. Additionally, with return of more historical general price increases across much of our product and supplier base, we are working to push those increases throughout our customer base and expect to see margins improve going forward.

On a year-to-date basis, gross margins are up 60 basis points and consistent with our overall expectations for the year. SG&A as a percent of sales improved to 14.2%, a 90 basis point improvement over last year's third quarter expense ratio of 15.1%. We also achieved a 40 basis point improvement over this year's second quarter reflecting efficiency gains resulting from our LEAN initiatives and the positive leverage of the increase in sales.

Our management and personnel have done an outstanding job in improving the efficiency and effectiveness of our organization. Despite an 18% increase in sales with more labor-intensive stock sales increasing over 20%, our headcount rose less than 1% for the quarter and year-to-date. Since March 2001 when our staff rebalancing program was initiated, fulltime headcount has been reduced by 14.5%.

SG&A expense for the quarter at $138 million is up $13 million or 10.7% over the third quarter of 2003 on a sales increase of 18% due to the variable nature of certain components of our compensation programs. Total payroll expense was up approximately $11 million over last year's third quarter, primarily due to increased performance incentive accruals and higher commissions associated with higher margin performance along with higher healthcare benefit cost.

Our third quarter operating income was $40.1 million or 4.1% of sales verses $23.8 million or 2.9% of sales last year. Operating income increased 68% over the third quarter of 2003. Interest expense and other costs totaled $12.7 million for the third quarter of 2004 compared to $12.1 million in the third quarter of 2003 and $13.1 million in the second quarter of 2004. The increase in interest expense over last year resulted from an increase in debt levels and slightly higher interests rates.

Income before taxes of $27.5 million for the third quarter of 2004 compares to $11.8 million in last year's third quarter and $29.8 million for the second quarter of 2004. For the third quarter, our effective tax rate was 32.5% compared to 28.9% for the third quarter of 2003, which benefited from favorable foreign tax credit carry-forwards and IRS audit adjustments, and 36% for the second quarter of 2004. We expect to see the effective tax rate for the entire year to be approximately 34.5% as we benefit from our foreign tax planning initiatives implemented in the third quarter of this year.

Third quarter net income of $18.5 million increased by $10.2 million or 121% over the third quarter of 2003, due primarily to the gross margin improvement. EPS for the quarter was 42 cents and compares to 18 cents for the third quarter of 2003 and 44 cents for the second quarter of 2004.

Now turn to the balance sheet -- for discussions on debt, working capital, and cash flow, our accounts receivable program will be described as if it were on book. Total debt net of cash increased $101 million from last year's third quarter and decreased $18 million from the second quarter of 2004. Since last year, significant improvement in cash generation from increased earnings and working capital days performance was used to fund acquisition earnout payments, working capital associated with the increased sales and higher commodity prices for copper and steel, and the accretive equity transactions.

Free cash flow for the third quarter was $18 million and $10 million year-to-date. Working capital days improved by 5 over the third quarter of 2003 and by 1 day over the second quarter of 2004. Leverage, which stands at 4.7 times, improved by 1.7 turns from the third quarter of 2003 and by 0.6 turns over last quarter. The components of net debt, including the accounts receivables securitization program at September 30, were senior subnotes and other of $328 million, finance receivables $300 million, real estate financing at $50 million and acquisition notes payable at $50 million, and cash of $19 million.

Liquidity, defined as readily available borrowing capacity and invested cash, was $184 million and compares to 186 million in the third quarter of 2003 and $197 million at year-end. Capital expenditures for the third quarter of 2004 were approximately $1.7 million versus $2.1 million for the comparable period in 2003.

Separately, the Company announced the intent to file a $400 million universal shelf registration statement. The purpose of this filing is to provide the Company with substantial flexibility with regard to planning and executing improvements in our overall capital structure in conjunction with favorable market conditions. Any funds raise will be used for general corporate purposes including, but not limited to, reduction in the Company's high yield subordinate notes, an acceleration of the Company's move toward investment grade status, providing additional capacity for accreted acquisition opportunities, and providing a potential partial liquidation opportunity for selling shareholders.

In summary, we had an excellent quarter. Higher sales coupled with continuing improvement in gross profit margins and significantly improved SG&A expense rates resulted in a 68% increase in operating profits and a more doubling of net income. Further progress was made in working capital initiatives. Leverage and interest coverage ratios improved to our best levels since our recapitalization in 1998 and liquidity remains strong. With our LEAN enterprise initiatives providing additional emphasis in all areas of the Company, we are well positioned to make further earnings gains and improve our balance sheet in an improving economic environment.

Let's turn now to the outlook. The Company will not be providing specific point estimate guidance for sales and earnings; however, we will provide you with the fundamental tentative direction and commitment objectives we provide to our management leadership team in driving our business over the next few years. Our industry has historically grown 1-2 full points above GDP growth rates. WESCO should grow at a rate of at least 1-2 points above the industry growth rate based on our extensive local sales and marketing programs, coupled with our unique position and current market penetration in our national accounts and integrated supply programs.

With current economic projections calling for a 3-4% increase in GDP for 2005, we expect to see industry growth in the 5-6% range and our growth should be in the range of 7-8% or better. Our LEAN initiatives affecting all aspects of our business are expected to drive a 150-200 basis point improvement in operating margins over the next 36 months. We intend to drive growth in net income in excess of 20-25% on an ongoing basis. Recognized at any given quarter may exceed or fall short of these metrics given discrete events in the economy or company dynamics. Regardless, we expect our management to drive initiatives to deliver superior results on an ongoing basis.

As for the fourth quarter, based on the continuation of positive macroeconomic trends in end market activity, similar to what was experienced last quarter and market share gains, our expectations for top line growth for the fourth quarter are in the realm of 10% over the fourth quarter of 2003 which was our strongest quarter in 2003. Historic seasonality in our [third] end markets generally results in a 4-6% decline from our third quarter sales results. Based on current momentum and continuing operational improvement projects, the gross margins are expected to improve slightly from last quarter. Working capital productivity is anticipated to be maintained on a days supply basis, and free cash flow over the next several quarters will be directed at debt reduction.

Again, we had a strong quarter. We have delivered strong year-to-date results and had good momentum entering into to the fourth quarter. We will continue to focus on programs and initiatives designed to deliver organic growth in excess of the market growth and to improve operating margins and strengthen the Company on an ongoing basis.

I will open the call for question and answer session.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press "*" follow by "1" on your touch-tone telephone. If your question has been answered or you wish to withdraw your question, please press "*" follow by "2". Questions will be taken in the order received. Please press "*" "1" to begin. Your first question comes from Rob Damron of 21st Century. Please precede sir.

Hi Steve, hi Dan. I just wanted to ask you a couple of questions. First of all, on the gross margin, the gross margin in percentage declined sequential, you had anticipated that, but I was wondering if there was anything else in that gross margin decline sequentially other than the inventory profits that we didn’t see in the Q3? Was there any large one-time orders that may have been a little lower gross margin? And also if we move in to the mid-cycle and late-cycle business, is that business is going to be or would you anticipate it to be a little lower gross margin?

Rob, the quarter basically came out as we thought it would. There was no discreet single item that would indicate any loss momentum in our margin improvement initiatives. As we've stated before we are continuing to work those programs and would expect to see improvements in each aspect of our business. On a go forward basis, as you mentioned the project business, that could have some impact on the dynamics of the total gross margin percentage in that project business of our gross margin standpoint is generally somewhat less than our stock business, but we would -- in that type of the scenario, we would expect to see our operating margins continue to improve because it generally have the much lower cost of delivery associated with project business. So, pretty much on track of what we thought. We have got a lot of confidence in our programs, on our margin initiatives, and we expect to continue to make progress as we go forward.

Okay and I did want to talk about the operating margin, obviously, the productivity improvement has been phenomenon last couple of years and you have made incredible headway. If we look forward into 2005, obviously, you are anticipating some additional improvement in productivity and operating leverage, where specifically in the organization do you anticipate additional savings?

Well, Rob, Roy Haley here.

Hi, Roy.

Productivity is really a function of the entire organization being affective in many different initiatives. I think Steve pointed out that since the third quarter last year, we had 18% sales growth and less than 1% growth in our employment level. And that’s indicative of the kind of overall aggregate productivity that we are seeing and it's coming in lots of different areas. For example, I have mentioned before that WESCO has been over the year's fortunate to have a very productive selling organization and our sales per employee on an aggregate basis are considerably above industry levels and we have seen a substantial increase or improvement and the simple to do the calculations is just the total sales growth without increasing our personnel and you can see the kind of driver that we are getting in that area. Now, that’s an aggregate measure because it measures selling personnel, it measures our delivery and warehousing personnel, it measures all of our information processing and other people in the organization also. So on an aggregate basis that’s probably the best overall measure of productivity. And for this quarter, we have jumped beyond what historic for us been a little bit of a magic threshold over $700,000 on an annualized basis in sales per employee, in fact approaching $750,000 per employee in sales performance. So, overall we are seeing excellent results.

Now, second part of your question is where does this go? I think I have mentioned in our last meeting that one of our LEAN projects was targeting delivery and transportation costs and efficiencies. It's our second highest expense in the organization and if you look at it on an accounting basis and we have got some new initiatives that have been launched in the last quarter that I am very optimistic, will improve our service levels, increase our utilization of the equipment and facilities and we will also see a big improvement in overall personnel productivity.

Okay, excellent, and again congratulations on a great quarter.

Thank you.

Your next question comes from Dan Whang of Lehman Brothers.

Yes, good morning everyone.

Good morning, Dan.

Yes, my first question is regarding any indications that you are getting out there that these long-term projects might be closer than what you though in the -- one quarter back?

Dan, we believe that we will see that pickup as the year goes along, of course, we've only got 2 months left, but also into 2005. And this has been our posture really for the last year or so. I will comment or kind of put into perspective why we continue to be optimistic about these kinds of projects coming along. If you go back and look at some historical data, our company, WESCO, has been known for its success with large and complex construction projects in a wide range of industries and locales. In 2000, in fact it was the second quarter of the year 2000, we hit our peak in terms of that type of business and for that quarter it was on the order of magnitude of $470 million of that type of business for the quarter. We are still running at rates of 25% below that. So our expectation is that even with the outstanding results that we have had, we have got some big opportunities that are going to come along as the economy strengthens and as there is more confidence in various segments of the economy -- commercial, governmental, and the industrial markets as well.

Okay, and second question regarding, you know, you mentioned you had good growth in national accounts and integrated supply. I think we have talked about this previously, but in terms of where it stands now, the sales generated from those two programs, their operating margins versus the Company overall, is it about the same or --

Dan, it's Steve. From an operating margin, both those type of programs in our delivery model to those customers gives about the same operating margin for the Company. They are quite different in the dynamics of how you get there, our national account business generally would carry margins similar to our branch-based stock business which would tend to be a fair degree higher than what you would see in the integrated supply model. Having said that, the integrated supply model is a very concentrated logistical outsourcing model, it's highly automated and has a significantly lower operating cost to it. So both models deliver very good operating margins to the Company, but are quite different in the impact they might have on our gross profits percentage and our SG&A expense rate.

Okay, great. And in terms of your LEAN implementation, how many branches are currently participating in that and I think in the last quarter's call you talked about expected savings at about 10 million this year and do you still expect that or that will be changed?

Dan, the program continues to be extended in lot of different areas of the Company. The question you asked is complicated a little bit by the fact that we have for the [packaged duck] for implantation in our branch network, now 10 or more different initiatives and while we have started the first group of branches that went through that process, we can clearly say we have a 100 or more that have been introduced to basically all of the programs. Many others have been introduced to parts of the current program. So I am confidant in saying that well over half, may be two–thirds, of our branch operations are participation at some degree or another with the LEAN initiatives and programs. As an example, as you are aware, companies of all types are responding to the Sarbanes-Oxley internal control for viewing assessment and this kind of an activity really fits well with what we have been doing in LEAN because LEAN focuses on process control, process standards, training, simplification, reporting and the like. So, the branches that -- virtually all of our branches had to be introduced to and held accountable in terms of control aspects and so this also is – we're linking it with our LEAN programs and activities to get maximum benefit.

Okay, great, and my final question was regarding some of the detailed statements that you used to describe the shelf filing. I think one of the potential uses of the source were, you know, acquisitions and could you make any sort of additional statements around that, perhaps timing or the type of businesses that you might be looking for?

Dan, before Steve responds to that, let me first say that our finance team -- Steve and Dan and others in the organization in the finance and treasury function -- have done a great job of removing risks from our balance sheet through a continuous program of extending or creating an overlapping structure with various types of facilities and moving our cost of debt down. So it's been a very good and continuous program over the last several years and we periodically report on our progress in this regard. This filing of the universal shelf is really a continuation of that type of looking ahead, trying to anticipate what the needs are, and preparing for an propositioning the Company to have the kind of flexibility that will allow us to respond on a timely basis to market conditions, to opportunities or to other company needs. And I will point out again that it is a universal shelf that gives us the flexibility to issue at a point in time in the future to issue a variety of debt or equity type securities. So with that, let met let Steve respond to your specific question.

Dan, as relates to acquisitions, I think I would kind of tee-up the whole process before we talk anything about the shelf registration because that’s just an another resource that the Company might take advantage of, but the WESCO has in the past been an acquisitive company. We have used that on a very accretive basis to go after particular product lines that augment and compliment our existing business as well as geographical adds to the business. We vacated or slowed down that process when the economy was very difficult and following a period of time when the internet phenomena and some the European distribution companies were coming into the United States and had driven multiple purchase multiples up below -- above where we believe we should be. We have a very disciplined approach that we go after when we look at an acquisition, both from a tactical and strategic standpoint as well as an innovation and funding and looking at the leverage of our company. We have made great strides in improving the leverage in WESCO and looking in that with acquisitions, our position will be -- we would not want to see our leverage regress as we go forward on an acquisition. I'd also point out on past acquisitions have generally been funded with the cash flow from the acquired company and the rest of WESCO, as well as being able to facilitate any short-term needs to our existing financing conduits that we have today -- our revolver and our securitization provide, what I call, a little bit of a self funding mechanism. As you bring in the assets from an acquisition, those also would go into our assets base and allow us to fund from our existing facilities. Having said all of that, we are beginning to look at potential acquisition candidates, there is nothing that eminent, there is nothing that is significant at this point in time, but it has been a part of the strategy of the Company to grow our business, we acquired some 25 companies in the past and as we continue to strengthen our balance sheet, we will look at adding that as a growth engine in the future.

Okay, great and thank you very much.

Once again, ladies and gentlemen, to ask a question, please press "*" followed by "1". Your next question comes from Joe Garner of Emerald Asset Management.

Good morning. I just had a question, Steve, forgive me if somebody has already touched on this, but going through the comments you made on the 2005 outlook, if looking at the -- with the operating margin increases there, that would seem to put you well above a 20-25% profit growth trajectory. I am just wondering if there is something we should be looking at for an increase in the expense line somewhere between the operating line and the bottom line?

There is no message there, Joe, targeting any type of fundamental change in our operating strategy that would lead to a significant pick up in SG&A expense. What we we're talking about are kind of the day-to-day operating guidelines we give to our management and we try to drive them very hard in that regard and upon full achievement of everything that was in there, you could -- you would see a potential of being above 25% of a profit impact. These things will come in, I think, in wage, any given quarter is going to be -- could be very high and we could see some another quarter where there will be a little of a pull back, but overtime these are the type of operating results for driving the Company to produce.

Okay the tax rate for next year, would you expect it to be consistent with what we have seen in the last few quarters?

Yeah, it is in the 34-35% range and that's what we expect to see assuming there is no tax legislation changes coming out of Washington in the near future.

Okay and one other question. Your utilities areas has been doing very well. I think you said it was up 20% in this latest quarter. One of your largest suppliers Eden is seeing the opposites, you know, they saw the utilities area soften up for them for the electronic or electrical products in the third quarter. Can you talk a little bit about -- more about may be what you are seeing in, just trying to rationalize the two different sets of comments.

Joe, let me start by saying that the utility industry performance has clearly improved and we see -- we have seen and continue to see long-term growth opportunities in that market segment and we are extraordinarily well positioned to capitalize on that long-term opportunity. In the recent past, I would say that the utilities have been constrained by their own capital spending challenges, but they are working through that. I also saw the Eden announcement and frankly I was not overly surprised by that. There have been several other firms that have made announcements and they also are looking toward some increase in the utility spending on a going forward basis. So we've seen some good recovery, we have got a lot of initiative, we had been successful in picking up some substantial new customers over the last couple of years, and part of what you see in our growth numbers this quarter is a reflection of work that we have been engaged in for some time. I think Steve had a comment as well on utility

Sure.

A piece of that also, Joe, could be as it results to the type of products that Eden provides versus some of the other business we are seeing more focused in the transmission and distribution versus the power generation piece. So there can be some product emphasis on that as well.

Okay, thank you very much.

Once again, ladies and gentlemen, please press "*" "1" to ask a question. The next question comes from Dan Whang of Lehman Brothers.

Hi, just had a couple of quick follow–ups. In the fourth quarter guidance, I think, you talked about sequential gross margin improvement, can you comment to that operating margin trends sequential basis?

It, Dan, will depend on the top line sales level and the continued efficiency we can get on our SG&A costs, but we would expect to see some slight improvement in the gross margin and the operating margin.

Okay, and finally on the free cash flow expectation for the full year --

We had about 18 million for the quarter, 10 million year-to-date. Assuming we would see normal seasonality in the fourth quarter, we would expect to see very strong cash generation in the fourth quarter, really a lot of that will depend on how the month of December shapes up because a big piece, as you know, our working capital is driven by our receivables. So there a little bit of -- depends on a specific month on that, but we would be expecting to see cash generation for the year in the realm of 50 million, assuming the seasonality that we expect in the fourth quarter.

Okay. I think that wraps it up, thank you very much.

Once again, ladies and gentlemen, that’s "*" "1" to ask a question. Gentlemen, we have no further no questions at this time.

Okay, let met just wrap up with a couple of comments. I think Steve again mentioned that in his commentary, our sales and service personnel throughout the organization have really done an outstanding job of responding to the sharp uptick in business compared to a year ago. We are making tremendous progress and it's showing up in a variety of areas. So we believe that we will see continuation of these trends in part due to the foundation and a significant amount of work that’s gone into building that base and establishing the position that we have at this point in time. We have got some excellent programs in all aspects of the business. I have mentioned in a moment ago the terrific work by our finance organization. We have talked in meetings past about the significance in the development of our marketing capabilities and the kinds of results that we are getting by applying what are often times thought of as a traditional consumer marketing tactics and techniques. We are taking the foundations of those same kinds of programs applying them in an industrial business to business mode and we are getting outstanding results and seeing the same kinds of stimulation of the market that drives additional volume when we work on specifically targeted advertising or direct marketing programs. We have got some great work that’s going and in-process in all aspects of working capital and asset management, and we expect that that will continue. Some of our LEAN initiatives are directly targeted at that aspect of our business and as a result, you see that our return on invested capital, return on equity are moving up nicely. So a lot of positive developments over the last year or more and we were seeing those results come through now. We also expect to see that that hard work will pay us some good dividends on a going forward basis. We thank you for your interest and support. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation and you may now disconnect, have a good day.