TransDigm Group Incorporated
Q2 2015 Earnings Call Transcript

Published: 5 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Second Quarter 2015 TransDigm Group, Incorporated, Earnings Conference Call. My name is Crystal and I will be the operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host for today, Ms. Liza Sabol, Investor Relations. Please proceed.

[Liza Sabol:]

Good morning and welcome to TransDigm's fiscal 2015 second quarter earnings conference call. With me on the call this morning are TransDigm's Chairman and Chief Executive Officer, Nick Howley; Chief Operating Officer, Kevin Stein; our Senior Executive Vice President, Greg Rufus; and Terry Paradie, our new Chief Financial Officer. A replay of today's broadcast will be available for the next two weeks. Replay information is contained in this morning's press release and on our website at transdigm.com. Before we begin, the company would like to remind you that statements made during this call which are not historical in fact are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company's latest filings with the SEC. These are available through the Investors section of our website or at sec.gov. The company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA As Defined, adjusted net income, and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and a reconciliation of EBITDA and EBITDA As Defined, adjusted net income and adjusted earnings per share to those measures. With that, now let me turn the call over to Nick.

[Nick Howley:]

Good morning and thanks again to everyone for calling in to hear about our company. Today, I'll review as usual our consistent business strategy. I'll do an update on our recent acquisitions, I'll go through the financial performance and the market summary for both this quarter and year-to-date, I'll review our guidance for 2015, and also introduce Terry Paradie, our new CFO. To restate, we believe our business model is unique in the industry, both in its consistency and in its ability to sustain and create intrinsic shareholder value through all phases of the aerospace cycle. To summarize some of the reasons why we believe this, about 90% of our net sales are generated by proprietary engineered product and around three-quarters of our net sales from products for which we believe we are the sole source provider. Over half our revenues and a much higher percent of our EBITDA comes from aftermarket sales. Aftermarket revenues have historically produced a higher gross margin and have provided relative stability in the downturns. Because of our uniquely high EBITDA margins and relatively low capital requirements, TransDigm has year-in and year-out generated strong free cash flow. This gives us a lot of operating and capital structure flexibility. We follow a consistent long-term strategy. First, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we have a simple, well-proven value-based operating strategy based around our three value driver concepts, that is, steady cost reduction, profitable new business generation and value-based pricing. Three, we maintain a decentralized organization structure and a unique compensation system with executives and senior managers who think, act and are paid like owners. Fourth, we acquire proprietary aerospace businesses with significant aftermarket content where we see a clear path to PE, or private equity, like returns. And lastly, we view our capital structure and capital allocation as another means to create significant shareholder value. To remind you, we basically have four alternatives for capital allocations, and our priorities are typically as follows

[Gregory Rufus:]

Okay. Thanks Nick. I'd like to correct one of Nick's earlier statements about our CFO transition. I'll only listen to the positive comments; the negative comments can go directly to Terry. I'm very pleased with the addition of Terry to our team and I can assure you we'll have a seamless transition. As disclosed in this morning's press release, our second quarter sales were $619 million and approximately 5% greater than the prior year. Our organic sales were approximately 3.5% higher than last year, primarily driven by growth in the commercial aftermarket, offset by lower growth rates in commercial OEM and defense. Our second quarter gross profit was $342 million, an increase of 11% over the prior year. The reported gross profit margin of 55.2% was three margin points higher than the prior year. Excluding all acquisition-related accounting adjustments, our gross profit margin in the business versus the prior-year quarter improved approximately two margin points. The operations continue to expand margins as a result of the strength of our proprietary products and continually improving our cost structure. Also, there was a decrease in non-operating acquisition-related cost versus the prior year and this contributed an additional one margin higher to the reported margin. Selling and administration expenses were 12% of sales for the current quarter compared to 12.1% in the prior year. Excluding acquisition-related expenses and non-cash stock compensation expense, the SG&A expense was about 10.3% of sales compared to 10.5% of sales a year ago. Interest expense was $100 million, an increase of approximately $18 million or 21% versus the prior-year quarter. This is a result of an increase in the weighted average total debt to $7.5 billion in the current quarter versus $5.7 billion in the prior year. The higher average debt year-over-year was primarily due to the amount borrowed to fund the $25 per share special dividend paid in the third quarter of last year. Also in conjunction with that dividend, we refinanced $1.6 billion of existing notes to a lower interest rate. This refinancing helped lower our weighted average cash interest rate to 5.1% compared to 5.4% in the prior year. Our lower effective tax rate in the quarter was primarily due to the impact of our foreign earnings being taxed at a lower rate, resulting from the new structure formed in conjunction with the Telair and Franke acquisitions, as well as favorable discrete adjustments relating to finalizing our IRS audits for both fiscal years 2012 and 2013. We estimate that our current tax structure will help lower our effective rate. For fiscal year 2015, our effective tax rate will be below 32%. We now expect our cash taxes to be approximately $175 million for fiscal 2015. Our net income for the quarter increased $20.5 million or 23% to $110.9 million, which is 18% of sales. This compares to net income of $90.4 million or 15% of net sales in the prior year. The increase in net income primarily reflects the increase in net sales, improvement in base margins, the decrease in acquisition-related costs and amortization expense and a lower effective tax rate. These items were partially offset by the higher interest expense just discussed. Our GAAP earnings per share was $1.96 per share in the current quarter compared to $1.49 per share last year. The current EPS growth of 32% is higher than net income growth due to the dividend equivalent payment made in the comparable quarter last year that did not repeat. Our adjusted earnings per share was $2.11 per share, an increase of 13% compared to $1.87 per share last year. Again, please reference table three in this morning's press release, which compares and reconciles GAAP to adjusted EPS. Switching gears to cash and liquidity, first, I want to remind you that during the quarter, we paid $725 million for Telair and borrowed $75 million on our existing revolving credit facility as part of that transaction. After these activities, we ended the quarter with approximately $393 million of cash on the balance sheet. A few days after our quarter ended, we closed on the Franke acquisition and paid $75 million in cash. Adjusting our cash balance for the acquisition of Franke, our adjusted cash balance would be approximately $318 million. The company's net debt leverage ratio was 6.1 times our pro forma EBITDA As Defined, including both Telair and Franke, and gross leverage was 6.4 times on a pro forma EBITDA. As Nick mentioned, this morning, we announced our plan to finance $900 million worth of proceeds to be used to pay for the acquisition of Pexco for approximately $496 million and almost $400 million added to the balance sheet to be used for general corporate purposes. Assuming the completion of these transactions, and absent any further acquisitions or capital market transactions, we expect to end the year with over $900 million of cash on the balance sheet and our net leverage to be near 5.8 times pro forma EBITDA As Defined. With regards to our guidance, we estimate the midpoint of our GAAP earnings per share to be $7.69. And as Nick previously mentioned, we estimate the endpoint of our – or the midpoint of our adjusted earnings per share to be $8.62. The $0.93 of adjustments to bridge GAAP to adjusted earnings per share includes the following assumptions

[Liza Sabol:]

Thanks, guys. In order to give everyone the opportunity to ask questions, I'd ask that you'd limit your questions to two per caller. If you have further questions, please re-insert yourself into the queue and we'll answer those as time permits. Operator, we are now ready to open the line.

[Operator:]

Our first question will come from the line of Carter Copeland from Barclays. Please proceed.

[Carter Copeland:]

Hey. Good morning, Nick, and welcome, Terry and Greg. Thanks for helping us all this time and congrats on not having to put up with us anymore.

[Nick Howley:]

Not quite. He's got to hang around 15 months.

[Carter Copeland:]

Yeah. I know. He just doesn't have to listen to us on this every quarter.

[Gregory Rufus:]

Still got to listen to Nick.

[Carter Copeland:]

Couple of questions. One from a high level, Nick. When you look at the three recent transactions and compare them to some of the others you've seen, whether it's Airborne, EME, I wonder if you might compare and contrast those and how you feel about these. They certainly look like some of the transactions we've seen in the past, obviously, Franke and Adams Rite or Pexco and Schneller. I wonder if you might just give us some color about how you think about how you think about these acquisitions versus some of the others you've done in the past couple years.

[Nick Howley:]

Well, if I compare that to say Airborne, these are more right down the middle of the plate kind of acquisitions, proprietary, aerospace, commercial aerospace, kind of things. I would describe them as I think that's the best way to do it, right down the middle of the plate. I would say – which by the way is what Arkwin was like and what the GE business was like, which were the previous ones we bought. As I mentioned to you, I think there's the – let me stay off Pexco. I think that's just because we don't own it yet and we're restricted in what we can say.

[Carter Copeland:]

That's fair.

[Nick Howley:]

But I think it's a significant value generator. The Telair one, I think there's good upside, though as I said, Carter, I don't know that it gets up to the average at least for the next three years or so. There's just some contractual issues there.

[Carter Copeland:]

Are those basically agreed to long-term prices?

[Nick Howley:]

I don't want – I can't really talk – confidentiality agreements with your customers. But that'd be a pretty good guess. I don't know what else would do it.

[Carter Copeland:]

Yeah, exactly. Just a quick follow-on. Last quarter, you talked about being some distributor destocking. I didn't know if you saw any more of that or if you were past that or...

[Nick Howley:]

I don't think we saw any meaningful change there this quarter.

[Carter Copeland:]

Great. Thanks, guys, and congrats on the deals.

[Nick Howley:]

Yeah.

[Operator:]

Our next question will come from Noah Poponak from Goldman Sachs. Please proceed.

[Noah Poponak:]

Hi. Good morning, everyone.

[Nick Howley:]

Morning.

[Gregory Rufus:]

Morning Noah.

[Terrance M. Paradie:]

Morning Noah.

[Noah Poponak:]

Greg, congrats on the retirement and the run you had here.

[Gregory Rufus:]

Thanks. I feel old.

[Noah Poponak:]

Can you guys walk us through why cash from ops was negative in the quarter and how you see it playing out the rest of the year?

[Gregory Rufus:]

Terry, you want to handle this one?

[Terrance M. Paradie:]

Yeah, Noah, I think the biggest driver for cash from ops being negative is kind of three areas. There was a big income tax payment made during the quarter of over $80 million, as well as you're also seeing interest payments of over $140 million during the quarter and then just plainly the working capital changes during the quarter, which drove the negative cash from operations for the quarter. But it's just timing. I think we're comfortable and confident that we'll generate the planned free cash flow for the full year.

[Noah Poponak:]

And can you remind us what that plan is?

[Terrance M. Paradie:]

Well, in my numbers, that by the end of the year, we'll now have $900 million in cash on the balance sheet.

[Nick Howley:]

Assuming we'll put $400 million from that financing....

[Liza Sabol:]

That's right.

[Terrance M. Paradie:]

That's right.

[Noah Poponak:]

Okay.

[Nick Howley:]

So $500 million without the financing, $400 million because we'll probably throw in there from the financing.

[Noah Poponak:]

Got it. Can you tell us how much of the commercial OE and aftermarket revenues that you report are helicopter?

[Nick Howley:]

It's a small – I don't know the exact percent. It's a small percent. It's surely in the single digits, well in the single digits. And the only reason that they register on the meter is because they drop off so much.

[Noah Poponak:]

Yeah. And that's all oil and gas I assume?

[Nick Howley:]

I think so. I think so. Nobody gives us a reason when they don't order, but that's surely what we surmise.

[Noah Poponak:]

And then in the full year commercial aftermarket growth target revision, is there any change to the large commercial aerospace piece of that?

[Nick Howley:]

I don't know that I can call it exactly that close. I mean, clearly, the trends in the commercial transport look good. However, the comps get pretty tough. If you remember, the second half of last year was up 17%, 18%.

[Noah Poponak:]

Right.

[Nick Howley:]

So the comps get tough. It's clearly going in the right direction. And absent anything else, it might well get there, but we're getting some down drags on the other pieces of it. And just when I'd put them all in a stew, it makes me feel like that high-single-digit number's a little risky. Now we get a spike like we did last year at the end of the year, we'll be fine, but that seems to me more of a sort of a hope than a plan.

[Noah Poponak:]

Okay. Thanks very much.

[Operator:]

Our next question will come from the line of Myles Walton from Deutsche Bank. Please proceed.

[Myles Alexander Walton:]

Thanks. Good morning. I wanted to pick up on that cash flow question for just a second. So I think that the guidance had been $475 million. Cash taxes are now about $5 million lower and then you have another $32 million of EBITDA. So is free cash flow going to be closer to $500 million? Because if that's the case, it seems like your year-end cash balance should be closer to $1 billion than $900 million.

[Gregory Rufus:]

I don't reconcile all of the pieces, but I could tell you that our cash flow is what it is and our operating capital is pretty good. Our DSOs are in good shape, our inventory is in good shape. It's in the noise range, but we may spend like $10 million in transition service agreements, which wouldn't be part of the EBITDA, but that's only like $10 million with the two acquisitions. So I don't know to your starting point, or we have so many moving pieces with everything we just threw at you, but we think it's more like $900 million and everything's clicking in the right direction.

[Nick Howley:]

I just think we don't foresee any other acquisitions, we don't see any difference in our operations than we have...

[Gregory Rufus:]

No. No.

[Nick Howley:]

...on the cash generation.

[Myles Alexander Walton:]

On the free cash flow side?

[Gregory Rufus:]

Yeah.

[Nick Howley:]

Yeah.

[Myles Alexander Walton:]

Okay. And then, Greg, you also mentioned the tax structure improvements that you were making and it sounded like some of those may actually be more permanent and sticky. So is that 32% – I guess I couldn't quite discern what was discrete from prior years and what was more permanent in terms of tax structure going forward. So...

[Gregory Rufus:]

Well, the discrete items were – we finished up an audit and did that. That was only $0.06, the discrete item.

[Myles Alexander Walton:]

Okay. Yeah.

[Gregory Rufus:]

And then as we go forward, we think the rate will be below 32%. Of this tax structure stuff, we won't give you an effective tax rate that we're going to forecast in 2016, but we think on an annualized basis, it's between $10 million and $12 million of tax savings from this restructuring – from this new structure we've set up with the former operations (37

[Myles Alexander Walton:]

Okay. Good deal. I'll take the two. Thanks.

[Operator:]

Our next question will come from the line of Robert Stallard from Royal Bank of Canada. Please proceed.

[Robert Stallard:]

Thanks so much. Good morning.

[Gregory Rufus:]

Good morning.

[Robert Stallard:]

And congratulations on your retirement, Greg.

[Gregory Rufus:]

Thank you.

[Robert Stallard:]

Nick, I thought we'd kick it off on the acquisition front. With Telair having a lower margin and Pexco having a higher percentage of OEM sales, does this indicate that you're not seeing as many of your classic targets out there as you maybe would have seen in the past?

[Nick Howley:]

I don't know that I can say that. As I've always said, we're die everyday and the ones that look like they work, we take a swing at. I would say on aftermarket, Telair is a pretty hefty aftermarket. Franke's pretty hefty aftermarket. I think as we told you, the Pexco one is about 35% now, but just by natural occurrence, it's going to drift up to 60% just because the planes going in have much more content than the planes coming out. So I don't know that I would say that they're proprietary aerospace businesses with a fair amount of aftermarket. They don't – now, they see a clear path to that.

[Robert Stallard:]

Okay. And then second, you mentioned that bizjet aftermarket was a bit weak in the quarter. What's the driver of that? Is it lower flight activity or some destocking...

[Nick Howley:]

I don't know enough – I really am not sure. I think it's a transient because the bookings look pretty good.

[Robert Stallard:]

Okay. So we should expect that to accelerate maybe in the second half?

[Nick Howley:]

We give a guidance in total. We don't give it by each one of those segments. But with the bookings good, you would hope to see some pickup.

[Robert Stallard:]

Great. Okay. That's all from me. Thank you.

[Nick Howley:]

Yeah.

[Operator:]

Our next question will come from the line of Robert Spingarn from Credit Suisse. Please proceed. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Good morning. Welcome, Terry. Congrats, Greg.

[Gregory Rufus:]

Thanks, Rob.

[Terrance M. Paradie:]

Thank you. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Nick, on helicopter, since it's so weak, is there a way to frame where it is relative to its peak and its trough? I mean, how much more downside could there be both OE and/or aftermarket?

[Nick Howley:]

I don't have the number in front of me, Rob. I don't think it's big enough to have a material impact on the business through the year, but it drops off enough it can sort of make some quarterly comparisons look funny. But I don't know the – as I sit here, I just don't know the exact numbers. It is far and away – it's way smaller than commercial transport as I'm sure you know and it is significantly smaller than business jet. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) But it could continue to impact? In other words, we could see similar commentary next time?

[Nick Howley:]

Yes. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Okay. And then going over to Telair and the three years till the margins – well, I want to make sure I understand you correctly. Are you saying you can get there eventually, it's three years away or you're not going to get there?

[Nick Howley:]

No. I'm saying right now, as I sit here today, we are not figuring we can get there. Now as contracts run out over time, our view on that may change, and hopefully – we tend to be somewhat conservative in our acquisition models, so hopefully we can do better. But we don't – we want to be sure we have a model that we can meet and get our PE-like returns without making too many wild assumptions. So, I'd figure it doesn't get there right now. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Okay. And then just the last thing, on the air transport aftermarket, or large aircraft aftermarket, and your comments earlier, understanding part of it's helicopter, part of it's bizjet. But just what the airlines are doing, do you think that just flight activity is so robust that we've maybe seen a slower sales demand or spares sales demand than we might see at some point? You mentioned a spike last year. Is there a bow wave that might be out there?

[Nick Howley:]

I mean, you know that's always a possibility. Right? Because if you take the, probably the last couple quarters, add them up and adjust for price, it probably isn't quite keeping up with RPMs. Now you also have the confounding variable of the six months before that, it was up 18% or something like that. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) (42

[Nick Howley:]

Yeah. So I don't exactly know how to parse that out. But, Rob, clearly there's some chance. But as I said, if we get a fourth quarter spike like we did last year, all will be well, but we're just not figuring on that. Now whether that comes or it doesn't come along, will have no effect or impact on that. It either will or it won't. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Okay. Thanks very much, Nick.

[Operator:]

Our next question will come from the line of Ken Herbert from Canaccord. Please proceed.

[Ken G. Herbert:]

Hi. Good morning and congratulations, Greg, and welcome Terry again. Just wanted to first follow up on the defense market, if we could. Now, do you get a sense, Nick – I mean this is the second quarter in a row where you've talked about better bookings. Obviously, you raised the guidance a little bit. Have – you get a sense that we've hit an inflection point and this is sort of now what to expect moving forward? Or do you get a sense there's still some one-time issues perhaps that you're seeing in this market?

[Nick Howley:]

I'm very reticent to speculate on that since for the last three years or four years, I usually have been too pessimistic and it's done better. I will say, if you look through the data, it's still not clear. You got product lines all over the map

[Ken G. Herbert:]

Okay.

[Nick Howley:]

I think the chances – let me back – I think if you asked me four years ago, me and many people would have said, you could be looking at a 25% dislocation. I don't – I think the risk of that is likely behind us.

[Ken G. Herbert:]

Okay. So it sounds like, at least moving forward here, with the bookings you've seen, there's a little more confidence perhaps in the outlook than certainly – I mean, I know you outperformed relative to your pessimistic expectations. But it sounds like there's just more confidence or visibility in the business.

[Nick Howley:]

Surely for the next six months.

[Ken G. Herbert:]

Yeah. Okay. That's great. And if I could, just on the commercial aftermarket, did you see – throughout the quarter, did you see any trends where maybe the year started a little softer and picked up through March that's maybe continued into April? Or was there any noticeable difference coming out of, calendar-wise, coming out of the fourth quarter December into January within commercial, specifically on the transport side with commercial aftermarket purchasing?

[Nick Howley:]

Yeah, I don't think I can sort of slice the onion that thin. March always looks better to us because it's a five-week month for us in our accounting system.

[Gregory Rufus:]

Plus, we have all the holidays in the first quarter.

[Nick Howley:]

Yeah. In the first quarter, as you know, we're about eight to 10 days short on shipping days. So it always – the first quarter always looks a little worse. And the last quarter – the last month of each quarter looks good to us. Always looks good, because we're on a 4-4-5 schedule. So I don't know that I can parse that out and give you anything definitive.

[Ken G. Herbert:]

All right. That's helpful. Thank you very much.

[Operator:]

Our next question will come from the line of Gautam Khanna from Cowen and Company. Please proceed.

[Gautam J. Khanna:]

I'd just like to ask if you can comment on the M&A pipeline now. After all these deals, do you still have a number of such opportunities?

[Nick Howley:]

Well, one thing I can say for sure is the pipeline today has three less businesses in it than it had 90 days ago. I think that's about the only thing I can say with certainty. We're still active. We're still looking at things. I have no ability to predict whether we are done buying or not done buying here for the year. Obviously, we think there is – we don't think we're dead or we wouldn't be looking to borrow more than we need to pay out, but time will tell.

[Gautam J. Khanna:]

Okay. And could you comment – the comment on defense bookings up significantly. Was this pretty broad based? Before it was mostly Airborne Systems, right?

[Nick Howley:]

Yeah. I would say it is across businesses, though the Parachute business is the biggest pickup. That one's up very substantially. Others are up, but not to that degree. And it's still – I don't want to say it's a tide rising and all the ships are coming up still. I mean, it's still a mixed picture.

[Gautam J. Khanna:]

Okay. Thank you very much.

[Operator:]

Our next question will come from the line of Michael Ciarmoli from KeyBanc Capital Markets. Please proceed.

[Michael F. Ciarmoli:]

Hey. Good morning, guys. Thanks for taking my question.

[Nick Howley:]

Morning Mike.

[Gregory Rufus:]

Morning Mike.

[Michael F. Ciarmoli:]

Congrats, Greg. Maybe, Greg, just for clarity, the $900 million in financing, I'm assuming that's not embedded in the outlook and I think maybe even perhaps more so I'm asking on maybe the right interest expense for the year. I don't think you gave an interest level for the year.

[Gregory Rufus:]

No, that's not embedded in the forecast right now. I mean, as a general rule until we actually own it, we don't put it in. We were just giving you a little color on leverage.

[Michael F. Ciarmoli:]

Got it.

[Nick Howley:]

So neither Pexco nor the additional debt. Neither one are in there.

[Gregory Rufus:]

Are in there. Right.

[Michael F. Ciarmoli:]

Got it. Just maybe on Pexco and Telair, is there any – you mentioned obviously the margins. Have both of those entities worked out their sort of Partnering for Success agreements with Boeing?

[Nick Howley:]

Pexco, yes. Telair is primarily an Airbus business.

[Michael F. Ciarmoli:]

Right.

[Nick Howley:]

And they don't have the same situation at Boeing.

[Michael F. Ciarmoli:]

Okay. Okay. That's fair. And then just the last one maybe on Telair. Structurally, is it going to be harder to implement your value creation just given a lot of their European operations and labor laws there? And I guess maybe just an add-on to that, how much of a FX tailwind do you guys are going to pick up from Telair this year?

[Nick Howley:]

I don't know what the tailwind is on FX, but it's a tailwind, not a headwind obviously.

[Gregory Rufus:]

I don't know exactly...

[Nick Howley:]

Yeah, yeah.

[Gregory Rufus:]

We're only putting on for half the year from when we bought it.

[Nick Howley:]

Yeah. And it's the change from when we bought it till the end of the year. A lot of the tailwind you saw already. So it isn't a big number. On the European productivity or cost situation, that's one that we understand we're in a different environment and I think we've – we hope we've reflected that appropriately. We're a little more conservative than we might be in a different situation.

[Michael F. Ciarmoli:]

Got it. All right. That's all I had. Thanks, guys.

[Nick Howley:]

Okay.

[Operator:]

And with no further questions, I would like to turn the call back over to Liza for closing remarks.

[Liza Sabol:]

Thank you for participating in this morning's call and please look for our 10-Q that we expect to file tomorrow.

[Operator:]

Ladies and gentlemen, that concludes today's presentation. You may now disconnect. Have a great day.