ION Geophysical Corporation
Q4 2010 Earnings Call Transcript

Published: 17 Feb 2011

[Operator:]

Good morning, ladies and gentlemen, thank you for standing by. And welcome to the ION Geophysical Fourth Quarter Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today February 17, 2011. I would now like to turn the conference over to our host Jack Lascar. Please go ahead, sir.

[Jack Lascar:]

Thank you, Alicia. Good morning and welcome to the ION Geophysical Corporation fourth quarter earnings conference call. We appreciate you joining us today. Your hosts today are Bob Peebler, Chief Executive Officer and Brian Hanson, Executive Vice President and Chief Financial Officer. Before I turn the call over to management, I have a few items to cover. If you would like to be on our e-mail distribution list to receive future news releases or experience a technical problem and didn't receive yours yesterday, please call us at 713-529-6600 and let us know. If you would like to listen to the replay of today's call, it is available via webcast by going to the Investor Relations section of the Company's website at www.iongeo.com, or via a recorded instant replay until March 4. The information was provided in yesterday's earnings release. I should also point out that we will be using some power-point slides to accompany today's call. They are accessible via a link on the home page of ION's web site. Information reported on this call speaks only as of today, February 17, 2011, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay. Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company's unable to predict or control, but may cause the company's actual results or performance, to differ materially from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors, disclosed by the Company from time to time in its filings with the SEC including in its annual report on Form 10-K and its quarterly report on 10-Q. Furthermore, as we start this call please refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday and please note that the contents of our conference call this morning are covered by these statements. I will now turn the call over to Bob Peebler.

[Robert P. Peebler:]

Thanks, Jack, and good morning. We had a very strong finish for the quarter and experienced many positive developments. For example, we saw a return to a more normal buying pattern from our customers for a multi-client Data Library sales. We completed the final testing and shipment of the DigiSTREAMER system that was purchased by BGP. We experienced a significant increase in the bid velocity of data processing projects after the slowdown caused by the Gulf of Mexico oil spill. And we generated a significant increase in our cash position. Also, even though we report our land equipment joint venture INOVA with a one quarter lag, we are encouraged that INOVA has seen a slow, but steady strengthening in their business. And INOVA recently was a beneficiary of a significant increase in spin from BGP, which is an encouraging sign for land equipment activity going forward. In fact, BGP became INOVA's largest customer in 2010. During the quarter, we also continued to see positive signs from most of our international oil company customers related to increasing exploration spending plans for 2011. It is clear that oil prices have been hovering at or above $80 a barrel sufficiently long to build confidence for an even stronger year in 2011. One year ago, we were in the process of completing our INOVA joint venture, we had a very weak capital structure, and both our oil company and contractor customers were dealing with major market uncertainties. That being said, we were confident that we would complete the INOVA transaction on schedule and the market would most likely heal during the year so we expected our business to gain momentum as 2010 progressed. We set an early goal that we would break even for the year including covering the operating losses from INOVA. We did accomplish all of our critical goals for the year including not only returning to profitability, but beating our own internal goals. Our main highlights for the year were, the successful launch of the INOVA joint venture, winning and shipping the 12 streamer BGP order, another record year for a data processing business, completing significant Artic multi client projects, which helped cement our leadership in that important market, a remarkable recovery in our Data Library business including a record quarter in Q4; a strong balance sheet with our net debt approaching zero which is a very different situation than we found ourselves in near the end of 2008 and through all of 2009. And we achieved significant progress underwriting a large multi-client program in a Marcellus shale play that will leverage both INOVA's FireFly and recording the full wave field with VectorSeis. We are optimistic that this first large shale project will only be the first of many going forward if we build a highly differentiated technology offering to help oil and gas companies develop the shale plays more economically. This is a big need considering the lower price of natural gas is likely to linger for a long time. These are only a few of the highlights of the year, but in summary I am very pleased with 2010. We executed well throughout the year. And our execution combined with the general improvement in industry spend resulted in excellent results in many aspects of our business. Looking forward, we have entered 2011 with a little momentum and believe that we should continue to see a strengthening in all of our businesses. For the first time in a while, we did see our data processing business pipeline slow down during the second half of 2010, due to the impact of the Gulf oil spill and although that did cause us some concern, we are now seeing the effects of overall expiration spending and a significant increase in the velocity of processing proposals. We are confident that this will translate into another growth year for data processing. We also have several new venture projects in our queue and expect library sales to continue to resume to a more normal seasonal pattern with the stronger sales occurring during the second half of the year. The successful execution of the Marcellus program has a very high priority for us and I'm confident that we will be successful and that will lead to more shale programs for ION. The focus for our marine business is a continued expansion of both our steerable streamer market, via DigiFIN and Orca, the successful launch of the 12 streamers with BGP as already mentioned and getting back into the ocean bottom cable business with VSO2. Our Geophone business is continuing to strengthen, which we view as a leading indicator of the land acquisition business improving. One thing is certain and that is the trend to hired higher channel and source point count. This is a long-term trend that bodes well for INOVA as it drives, that is driven by continued demand for higher resolution imaging. Our INOVA team is in place and operating the joint venture and with the slowly improving land acquisition business, we should expect INOVA to continue to grow in 2011. We expect for them to return to profitability during the second half of 2011, and both through the combination of improvements in the land market, and launching new products with BGP's help in 2012, INOVA should be on solid footing going forward. The direct feedback from BGP on future product requirements and the willingness to help field test new technology all bodes well for INOVA's future. In summary, what a difference a year makes and we look forward to more successful 2011. With that, I will turn the call over to Brian for his comments.

[R. Brian Hanson:]

Thank you, Bob, good morning everyone. Let me start by sharing a few of the financial highlights from the fourth quarter. First I am pleased to report that we achieved our goal of being profitable in 2010 and ended the year with a strong fourth quarter finish across the board. We delivered $0.14 per diluted share for the fourth quarter and $0.16 per diluted share for the year on net income of $23 million after excluding special items. Fourth quarter revenues were $159 million with year to date revenues of $444 million, compared to $420 million for the prior period. Excluding the revenues of our Legacy Land business, annual revenues increased 25% to $428 million, compared to $342 million for the prior year. Our Solutions business set a record year of $277 million in revenue with record data processing revenues of $108 million. In addition, the multi-client business had a record fourth quarter with $78 million in revenue, driven by strong Data Library sales in basins across the world, including East and West Africa, Brazil and the Artic regions. For the year, the multi-client business posted its second highest historical annual revenues of $169 million. In addition, our Concept Systems software business delivered a record performance year, for the year on a pound Sterling basis of 24 million pounds, due to the strong demand for our Orca software program. Operating cash flows, including cash flows from working capital, for 2010 of $133 million was up 156% from $52 million for 2009, with free cash flow generation of approximately $62 million. Year to date EBITDA of $140 million doubled compared to $72 million from the last year. With that overview, I will now discuss our year-to-date revenues followed by an in-depth look at each of our segments. Excluding the impact of our Legacy Land business, year to date 2010 revenues were $86 million higher than 2009. Solutions Segment revenues increased 54% with higher sales of data processing services, new venture projects and data libraries each contributing to the overall performance of this segment. Software segment revenues increased 9% or 11% on a pound Sterling basis. Systems segment revenues were down 11%, compared to the prior period. Primarily due to the continued softness in our Geophone string product sales and a decline in ocean bottom cable system product revenues. Our Solutions Segment set a record year with full-year revenues of $277 million including record full-year data processing revenues of $108 million. Data processing revenues increased 31% over prior year. The -client business delivered a record quarter with $78 million and its second highest full-year revenues of $169 million. Data Library revenues increased 231% year to date, driven by strong fourth quarter spending by our E&P customers as year end budget spending patterns returned and we recognized $59 million of Data Library sales from programs all over the world. This is a great reflection on the breadth and quality of our Data Libraries as our oil company partners continue to invest heavily and consistently in new venture programs during the down turn, creating a robust and regionally diversified library for ION today. New venture revenues increased 14% year-over-year, primarily due to the third quarter completion of key surveys included in our ArticSPAN program. Our solutions backlog grew by 5% over prior quarter, with backlog for both periods falling within the typical range of $70 million to $90 million. On our third quarter call, we mentioned that current backlog for our data processing business, specific to the Gulf of Mexico, was down approximately 20%, compared to year end 2009, and that bid activity in the third quarter had dropped in half. Since Q3, the sales pipeline related to the Gulf of Mexico more than doubled and the aggregate bidding activity level globally has substantially increased reaching the highest levels we have seen since 2006. We currently expect full-year CapEx related to our multi-client business to increase from 2010 levels to a range of $90 million to $110 million, which is more in line with 2009 levels. Our CapEx spend for 2010 of $64 million was lower than anticipated as we did not complete one sanction survey in the Artic during the 2010 shooting season, due to a mechanical issue with a vessel late in the season. This next slide slows the trend of Data Library sales over the past several years on both an annual and quarterly basis. What's interesting about this slide is the relationship between Data Library sales and new venture activity. From 2008 through 2010, we were able to sanction $80 million to $100 million of new venture work each year. Even during the global recession our oil company partners continued to invest in new venture activity even though they shied away from Data Library purchases as illustrated by 2009 activity. By the end of 2009 we began to see a pickup of Data Library sales and in the first quarter of 2010 was better than the last half of 2009, which is both unusual for the first quarter of a year, and a good indication of the overall healing of the business. And then the condo occurred and the second and third quarters of 2010 were representative of oil companies rethinking their spending plans and looking at other areas of future opportunity to explore. Then in the fourth quarter, we saw our customers put unspent budgets to work, as they tapped into the breadth of our Data Library offerings. We will continue to grow our multi client business both off shore and on shore in strategic locations around the world and expect to see continued growth in Data Library sales as our customers work to supply oil and natural gas resources to meet global energy demands. The software segment had a record year on a pound Sterling basis with 24 million pounds in sales, up 11% from prior year. The software segment continues to grow primarily due to steady demand for our Orca software platform. During 2010, we converted 42 of the estimated 119 vessels from the seismic fleet, which represents approximately 35% of total vessels. We also installed Orca on two rental systems during 2010. While the majority of these conversions involved high-end treaty vessels including BGP's new 12-streamer vessel, we also started to achieve success in converting vessels in the mid to low 3-D and 2-D categories. System segment revenues were down 11% to $114 million for 2010, compared to $128 million for the prior year. This decrease was primarily due to the continued softness in our Geophone string product sales and a decrease in OBC product revenues. However this softness was partially offset as we saw continued interest in our towed streamer products. One highlight for the systems segment was the successful delivery of a large order of marine positioning equipment for BGP's new 12-streamer vessel, for which revenue is recognized in the fourth quarter. Additionally, we have shipped the 12-streamer system to BGP for which we expect to recognize revenue during 2011. Our fourth quarter results were impacted by three one time adjustments. The first adjustment relates to a $24.5 million gain associated with net cash received from a lawsuit we won over a year ago that was on appeal, and settled in the fourth quarter. The second adjustment involves the impairment of an investment we had on our balance sheet resulting in a charge of $7.7 million. The last adjustment is a $9.5 million charge representing our 49% share of a one-time write down of component inventory determined to be in excess based on accounting tests, largely due to low sales volume during the last couple of years by INOVA Geophysical. Excluding these one-time items fourth quarter net income increased by $1.2 million and diluted EPS increased by $0.01. Operating expenses as a percentage of revenue after excluding the impact of our Legacy Land business declined from 31% in the fourth quarter of 2009 to a more normalized level of 20% in the fourth quarter of 2010. Now, let's move from results of operations to review of our balance sheet, liquidity and cash flow. The asset side of our balance sheet continues to illustrate our asset life strategy with the bulk of our investment in working capital and Oil Company funded multi-client projects, which results in a Data Library with a net book value of $113 million. We finished the year with $90 million of cash on hand and a net-net of $19 million. This week our cash position increased to approximately $114 million, exceeding our debt balance. As of the end of the quarter, we had $190 million of liquidity comprised of $90 million of cash and $100 million of undrawn credit on our revolving credit facility. The primary component of our long-term debt is $99 million of outstanding term loan indebtedness and both our revolver and term loans have long term maturities of March 2015. Operating cash flows, including cash flows from working capital increased over 150% in 2010. During 2010, we invested $64 million in our prefunded multi-client data libraries and $7 million in PP&E. Free cash flow increased to $62 million in 2010, compared to a negative $40 million of free cash flow in 2009. This next slide shows the trend in our shares of common stock over the past few years. In the second quarter of 2008, we had approximately 94 million shares outstanding. In the third quarter of 2008, we issued 3.6 million shares in connection with the acquisition of ARAM. Shortly after the acquisition, we witnessed the bankruptcy of Lehman Brothers followed by a severe economic down turn and the collapse of the credit markets. It was in this challenging economic environment that we issued 18.5 million shares of common stock to pay down a $49 million bridge loan to Jeffreys, which was originally scheduled to mature in January of 2010 and which had an effective interest rate of approximately 25%. In the third quarter of 2009, we announced our plans to form a land equipment joint venture with BGP. This joint venture provided us with the opportunity to pursue our long-term strategic plans related to our land equipment business while also providing short-term relief for our liquidity and balance sheet challenges. In addition to the joint venture BGP also purchased an equity interest in ION of approximately 15% whereby we issued 23.8 million shares. As we saw in the previous slide the end result of our debt refinancing and these equity issuances was a significantly more deleveraged and strengthened balance sheet. Most recently in the second quarter of 2010, our share count increased by 9.7 million, due to the conversion of 43,000 shares of preferred stock, held by Fletcher International. During 2005, we entered into an agreement with Fletcher to raise capital through the issuance of cumulative convertible preferred stock. Between 2005 and 2008 Fletcher exercised the right to purchase a total of 70,000 preferred shares, which were convertible into a maximum of 15.7 million shares of ION common stock. After the conversion in the second quarter, Fletcher holds remaining 27,000 preferred shares, which are convertible into approximately 6 million share shares of common stock. Going forward, our current expectation is for our share count to remain fairly steady, aside from a normal level of stock-based compensation awards and the potential conversion of the remaining Fletcher preferred shares. INOVA estimates for fourth quarter revenues to be in the range of approximately $45 million to $47 million with an operating loss of approximately $2 million to $4 million and a net loss of approximately $3 million to $5 million. Similar to last quarter, we would expect to book 49% of this estimated net loss in our first quarter results. These numbers are estimates, which we believe offer some visibility into the impact we expect the joint venture to have on our financial results, however, these are not final audited numbers. This makes four consecutive quarters of revenue growth for this land business and the turn to positive EBITDA generation in the fourth quarter of 2010 generating positive cash flow. In 2010, INOVA saw significant inventory reductions as 2010 sales were largely delivered using existing inventories. In addition, INOVA has in place a $40 million line of credit with $30 million of remaining capacity to support growth in 2011. We are starting to see improvements in overall land seismic market as we enter 2011. The velocity of activity is picking up and we have observed a year-over-year increase in equipment quotation levels. We see increased focus on contractor shooting seismic data in North American shale plays. In addition, North American contractors continue to work to stacked equipment and are focused on growth through international expansion, specifically in Latin America. Russia and the former Soviet Union continue to be challenged for access to capital. Local contractors expect crew counts for 2011 and 2012 to be flat with 2010 levels in this region. Additionally, late contracting by state companies representing approximately 50% of seismic activity in the market has added pressure to local contractors, and some crews are achieving full utilization of equipment and then renting extra channels. In the Middle East and North Africa, there is a continued drive to using super crews leading to increased channel demand. Normal 3-D crew channel counts ranges from 7,500 to 15,000 channels while super crew channel counts are 30,000 up to 100,000 channels. With that overview of the general land seismic market I would like to share some specific examples of operational success we are seeing of INOVA. In January, INOVA announced the sale of 13,000 channels of ARIES ll, including 39,000 SM-24XL Geophones by ION Sensor Geophone business, to be used by Dubai based [terasize], which is currently ramping up to be one of the largest operating crews in southern Iraq. Iraq holds a promise to be a solid emerging market for seismic work in 2011 and 2012. We have now seen three consecutive quarters of increased purchases of the land seismic equipment by BGP from INOVA. In the fourth quarter, BGP purchased approximately $15 million of equipment, including 20,000 channels of Scorpion, several VIBROSEIS trucks with upgrade kits, and [helping] source controllers. In addition, INOVA has completed a series of successful field trials with BGP to test the high productivity VIBROSEIS capabilities, including simultaneous sound source and slip-sweep operations currently being embraced in the Middle East. Finally, FireFly was successfully used to complete a series of surveys in the Mendosa province of Argentina by Apache Corporation. Meanwhile, INOVA continues to remain focused on R&D as a key investment area with R&D spend of approximately $20 million for 2010 and with comparable levels of R&D spend expected for 2011. While we are not providing earnings guidance we are providing guidelines of certain items for 2011. As previously mentioned we anticipate customer underwritten investment in our multi-client new venture programs for 2011 to be between $90 million and $110 million. We estimate interest expense for 2011 to be between $5 million and $7 million and we expect our effective tax rate to be between 24% and 26%. Finally I'd like to encourage you to visit our Investor Education Center or IEC, which can be found on ION's website at www.iongeo.com. There are now two ways to experience the IEC and learn more about our business. We have added the virtual Analyst Day, which is a continuous video slide show lasting approximately 75 minutes and covers our strategy, as well as our various business units, while you may choose individual presentations for an overview on a particular topic. We hope you'll take advantage of our IEC resource to better understand our business. And with that we'll open up the call for questions.

[Operator:]

Thank you sir. (Operator Instructions) Our first question comes from the line of James West with Barclays Capital. Please go ahead.

[James West:]

Good morning, Bob. Good morning, Brian.

[Robert P. Peebler:]

Good morning.

[R. Brian Hanson:]

Good morning James.

[James West:]

Congratulations on a very strong finish in 2010.

[Robert P. Peebler:]

Thank you.

[James West:]

I was curious about your data library sales during the fourth quarter. Obviously a very strong, but how much of that do you attribute to just a stronger budget flush this year from the major oil companies and how much of that is really the fact that your data libraries have grown so substantially over the last three years?

[Robert P. Peebler:]

James, I don't think we can completely separate those or quantify those. I think that the facts are that we do have a much more and growing Data Library so we have coverage around the world. I think what was encouraging to us when we look at the mix of sales they were clearly from many of our different libraries so I think the breadth of our portfolio is truly helping us in kicking in. The other is no question that it was also just a real strong year-end spending by oil companies which is really returning back to our more normal patterns.

[James West:]

Okay. And then on your systems business at this point, a lot of the new build vessels from last cycle have been delivered. Is revenue in this level, is this mostly just aftermarket work or is there still some new equipment in there? I guess what I'm getting at, is this our base level revenue on which you are going to lever off of because of the higher installed base of equipment?

[Robert P. Peebler:]

Yes, I think if you look at the new builds and the history of new builds, we started seeing those really started winding down as far as the peak in the latter part of 2008 and then through 2009 it was pretty small. And so I would say that the, sort of that revenue is sort of, it would represent a few new builds that we still see going forward and just a broader base. Also you can't discount the fact that you should include the fact that we're penetrating the market with DigiFIN so we have a new product line out there, and DigiSTREAMER which is two new product lines for us. Effectively in the market that we've had. So, yes, I think the last year's number is sort of a base line kind of number that we're building off of.

[James West:]

Okay. And then for your ocean bottom cable business, have you seen a pickup in interest in that equipment following the RXT relationship that you had that was, I guess dissolved at some point in the recent past, or do you see more interest from your traditional customers?

[Robert P. Peebler:]

Yes, we do. I think the real encouraging thing is that just the OBC business in general we see increasing as we have been sort of predicting and they are very large projects, so as the volume of projects goes up I think that bodes well for the market. And we are out there, as you can imagine, actively promoting BSO-2 which has not really ever been used to its full capability. So that's another segment that's been dormant for us for a couple of years, and our expectation is for us to start moving back into that segment.

[James West:]

Okay. Great. Thanks, guys.

[Operator:]

Thank you. (Operator instructions). Our next question comes from the line of Daniel Burke with Johnson Rice. Please go ahead.

[Daniel Burke:]

Good morning, guys.

[Robert P. Peebler:]

Good morning.

[R. Brian Hanson:]

Good morning, Daniel.

[Daniel Burke:]

On the software side, could you talk about the potential as 2011 and 2012 advance for continued convergence to Orca or at this point are you close to bumping up against the ceiling there in terms of vessel conversions to the system?

[Robert P. Peebler:]

Actually I think there's some data out there that shows sort of the percent of conversions and so we're a long ways from having all the potential converted. Also, as you know, the way this thing works is that it's mainly subscriptions so that in itself builds because whatever you sold throughout the year then you get the full benefit in the next year. So there's that underlying great model of the subscription model for us. And then as you can imagine we're looking, once you have the install base, looking to sell back into the install base in the longer term. So we see this as just a really good, solid, profitable growth engine for us.

[Daniel Burke:]

Okay. That's helpful. Then Bob, if you could comment on helping me understand the implications of the final award this morning versus CGV and then maybe update me on where you all stand with the suit outstanding against I believe Geco as well.

[Robert P. Peebler:]

Well, on the Sercel suit that's been in the making for a long time. In fact we actually, the jury award was a year ago, and it's taken a year for the court to finally make its final order. What it means effectively is that any of the existing systems we have sold into the market can be used. That is really a part of the calculation in the damages part of the model. Going forward, they really can't sell any additional equipment into the North American market. So it really just shows you the strength of our IP around the digital center which as you know we have led and invested heavily in that. So it's an area we're going to protect. It's important to note that also includes sea bed in the US waters. So that goes into not only land, but sea bed. That's pretty much, our full expectation will be an appeal process will go through, but that doesn't affect the injunction that is in place now. But that's sort of the status of that case.

[Daniel Burke:]

Okay.

[Robert P. Peebler:]

On the western Geco suit it is progressing along. It's just progressing along. Any time you get into these kind of litigations, they last a long, long time. And so just sort of stay tuned on that one.

[Daniel Burke:]

Fair enough. And then maybe just actually a very small one, Brian. I noted the press release mentioned both a potential negative currency impact and some bad debt expense. Were those noteworthy at all in the fourth quarter?

[R. Brian Hanson:]

They weren't very material.

[Daniel Burke:]

Okay. All right, guys, I guess that does it for me. Good quarter. Thank you.

[Robert P. Peebler:]

Thanks.

[Operator:]

Thank you. (Operator instructions). And our next question comes from the line of George Gaspar with Gaspar Consulting. Please go ahead.

[George Gaspar:]

Good morning. Congratulations on a good quarter. Question on micro seismic work for ION. Can you describe a little bit of the technology that you might be working on to track the fracking extensions well to well?

[Robert P. Peebler:]

George, obviously you would expect we would have R&D going on in that area, which we do, and it's not to our advantage to describe in detail. What will I say generally speaking is we are quite confident that we'll have a technical differentiation in the shale play, but it really is not just any one technology. It's really an integration technology, so our belief is that the integration of micro seismic to surface seismic is one important aspect of that. And we are looking at the whole picture. Currently we also believe that full wave will have a significant benefit, at least in some of the shales. What we and the industry is learning is that each shale has its own unique personality. I think the main thing we're seeing is that oil companies are starting to realize at least in many of these shale plays they're really reservoirs. At one time people saw them as homogeneous, just drill the well and you have gas or oil and that is not the case. There is enough variations that they really truly are reservoirs, and so that's the, the geological challenge is to better understand those reservoirs, better understand in a broad way how you narrow down where the most likely targets are and then once you drill how do you more effectively complete those targets. I would say that we're very early, I think the industry in truth is very early into the complete understanding of things like micro seismic.

[George Gaspar:]

Just to follow on, is there any specific geographical areas within the United States that you're concentrating your research R&D in this area?

[Robert P. Peebler:]

Well, we have projects in more than one shale, but the major project we currently are involved with is the Marcellus. We are also looking at other data sets and different approaches. So that's one clearly we'll have a micro, we'll be out there with our R&D microscope because we 're going to have a very large data set.

[George Gaspar:]

Okay. Thank you.

[Operator:]

Thank you. I show no further questions in the queue at this time. I would like to turn the conference back to management for closing remarks.

[Robert P. Peebler:]

Okay. Well, thank you for taking the time to attend the conference call and we look forward to talking to you during our first quarter call. Thank you.

[Operator:]

Ladies and gentlemen, this concludes the ION Geophysical fourth quarter earnings conference call. You may now disconnect.