Varian Medical Systems Inc
Q3 2010 Earnings Call Transcript

Published: 29 Jul 2010

[Operator:]

Good day ladies and gentlemen, and welcome to the Q3, 2010 Varian Medical Systems’ earning conference call. My name is Tony, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) I’ll now like to hand the call over to your host for today Mr. Spencer Sias, Vice President of Investor Relations and Corporate Communications. Please proceed.

[Spencer Sias:]

Thank you. Good afternoon and welcome to Varian Medical Systems’ conference call for the third quarter of fiscal 2010. With me, are Tim Guertin, President and CEO; Elisha Finney, CFO; and Tai Chen, our Corporate Controller. Tim and Elisha will summarize our results and we’ll take your questions following the presentation. To simplify our discussion, unless otherwise stated, all references to the quarter or years are fiscal quarters and fiscal years. Quarterly comparisons are for the third quarter of fiscal 2010 versus the third quarter of fiscal 2009. All results are for continuing operations only. Please be advised that this presentation and discussion contains forward-looking statements. Our use of words and phrases such as could, will, may, believe, planning, hope and expect, and similar expressions are intended to identify those statements which represent our current judgment on future performance or other future matters. While we believe them to be reasonable based on information currently available to us, these statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of the important risks relating to our business are described in our third quarter earnings release and in our filings with the SEC. We assume no obligation to update or revise the forward-looking statements in this presentation and discussion, because of new information, future events or otherwise. And now, here is Tim.

[Timothy Guertin:]

Good afternoon and welcome. I am please to report a strong third quarter which built on the performance of our first half. North American orders grew strongly after a year of decline and the overall international market including Europe continue to perform well. Net orders for the company grew 14% driven by a double-digit order growth in our oncology systems and x-ray product businesses. Our quarter ending backlog grew 7%, revenues rose 13% and operating earnings rose by 28% with the help of a healthy gain in our gross margin. Even with an expected substantial increase in our quarter-over-quarter tax rate, earnings per diluted share increased by 9%. New products played a major role in the success of this quarter and I will focus now on some of our operational highlights. Oncology systems third quarter net orders grew by 10% to $507 million with a 12% increase in North America and a 9% increase in international markets. International markets are countered for 52% of oncology orders during this quarter. Our cautiously optimistic view of the North American market was born out this quarter with order growths driven by hospitals. It is gratifying to see a large number of smaller orders demonstrating broad-based spending activity. While one quarter does not make a trend, we feel better about the North American market than we have for many quarters. In Europe, net orders increased 11% even with a stronger U.S. dollar versus the Euro as customers across the region continue to invest in new clinical capabilities and services. Growth in this region was led by the Netherland, Switzerland, Spain, Italy and the Middle East. And as you may have noticed from our early press release, India also contributed to this growth and our European region with one center placing an order for TrueBeam and five Unique. Far East orders grew by 9% mainly driven by good gains in China, Korea and Thailand while orders in the rest of the world declined by 6% primarily due to Latin America. New products played a major part in our growth. Our TrueBeam platform for advanced image-guided radiotherapy and radiosurgery was a major contributor to order growth this quarter. More than 60 TrueBeam units have ordered since its introduction in April with the bulk of the orders coming from the U.S. We also booked multiple orders in Europe and our first order in the Far East. A significant number of the TrueBeam orders were upgrades from other machines already in backlog, but more than half were new orders. After years of development, it is very gratifying to see the strong interest and demand for this new platform, which we continue to believe will reach 30% to 50% of our new machine orders over time. We exhibited TrueBeam at the American Association of Physics and Medicine Meeting in Philadelphia last week and customer reaction continues to be extremely positive. This response reinforces our commitment to providing clinics with versatile radiotherapy and radiosurgery tools that both advanced the quality of care and lowered the cost of treatment. As you know, installations have been completed at several sites around the world and TrueBeam is already treating patients. For example, at the University of Alabama and Birmingham, doctors took just seven minutes to deliver a complex image-guided IMRT treatment for a sinus cancer patient to shrink his tumor and reduce the extent of surgery needed to treat his condition. With conventional platforms, this treatment would have taken 40% longer. Doctors there are expecting to complete treatment even more quickly as they gain experience with the platform and use more of its features; they plan to commence long radiosurgery within a matter of weeks. We hope over time that TrueBeam could also be a gain changer for liver patients as well. During the quarter, we also saw growing interest among international clinics in Unique, our new accelerator for fast, affordable image-guided RapidArc treatments and we continue to believe that this will be a major contributor to oncology’s international growth. Oncology service business increased 18% in the quarter. As systems become more sophisticated and use more accessories for IMRT, IDRT and surgery, customers are increasingly calling on us to ensure clinical uptime, maintain their investment and keep their software capabilities current. Service now represents almost a third of oncology business and we see an opportunity to increase it further through geographic expansion as our installed base grows in international territories. To give you some basic facts about it, the oncology service unit employs more than 1700 people around the world; we have the highest density of clinically trained resources for education and clinical support for radiation oncology. Our primary education center at Las Vegas is the largest in the industry and we have two additional centers in Beijing and Zug, Switzerland. We are holding a grand opening for another center in Mumbai in August. Our service parts and technicians are within hours of every Varian machine in the world, thanks to an extensive network of strategically placed depots and service centers, this is key to ensuring system performance and giving customers the confidence they need to buy Varian technology. Service is a tremendous asset for our oncology business as a growth driver and as a competitive advantage. Let me turn now to our x-ray products business, which had one of the best quarters in its history. This business achieved record operating earnings with the help of high shipment volumes, product mix and improved factory efficiencies, a stark contrast to a very challenging year ago. Revenues were up 52% and orders were up 26%, both driven by more than a 50% gain in our flat panel business. We are enjoying very strong demand for our new line of radiographic panels. We believe our customers are gaining market share and therefore stepping up production of new and retrofitted radiographic imaging systems using our panels. We were also pleased to see strong growths for the panel business among dental, veterinary and industrial imaging equipment manufactures. X-rays performance together with positive reports from diagnostic imaging manufactures reinforces our belief that the global imaging industry may be recovering. In our other business category including our SIP, Security and Inspection Products business, our particle therapy business and our Ginzton Technology Center combined net orders for the quarter were $20 million, an increase of $11 million over a weak year-ago quarter. SIP net orders increased due to demand from international border security market. In the U.S., the business continued to experience lackluster demand caused primarily by ongoing delays and did award challenges among competitors or a large government project. We believe that our SIP business will continue to face challenging conditions in the short term. The news was mixed for our particle therapy business in this quarter. On the positive side, Varian has been named as the equipment supplier for a new proton center to be built and operated in San Diego; once our customer completes his financing for this project, we will book the order. On the other side, the [Candy] and proton therapy center project in Sweden was awarded to a competitor and another competitor are now contesting this award. So now I’ll turn it over to Elisha for review of the numbers and then I will come back to you with our outlook for the full fiscal year 2010.

[Elisha Finney:]

Thanks Tim, and hello everyone. As usual I will walk you through the income statement, as well as cover a few balance sheet items. While Tim has already covered net order, I want to briefly talk about the constant currency growth rate. Net orders for the total companies were up 14% in U.S. dollars and up 15% in constant currency. Similarly Oncology net orders were one point higher in constant currency bringing its growth rate to 11%. In Europe, Oncology net orders were up 15% in constant currency and 11% on a reported basis as a result of the weaker Euro. However, on a global basis the impact from currency this quarter was fairly minor as a weaker Euro was largely offset by strong on Japanese, Australian, Canadian and Swiz currencies. The company’s third quarter revenue of $578 million increased 13% on both a reported and constant currency basis. Oncology systems posted an increase of 6%; x-ray products posted a gain of 52%, and revenues from businesses under the other category increased by $5 million or 37%. Third quarter gross margin for the company increased by 160 basis points to 44%, bringing the year to date gain to about one point, oncology systems third quarter gross margin declined slightly to 45.1%, due primarily to geographic mix ship for lower margin international deliveries. Year-to-date Oncology systems gross margin was up by more than a point to 45.6%, due largely to service volumes and product mix. X-ray products third quarter gross margin growth more than three point to $40.3%, due primarily to higher total revenues coupled with a higher mix of panel revenue and improved quality costs. Year-to-date, x-ray has increased its margin by about half a point to 40%, again due largely to a higher panel mix. Third quarter SG&A expenses were $85 million or 15% of revenues, and R&D expenses with $39 million or 7% of revenue. On a combined basis, operating expenses at the percentage of revenues improved by about one point for the quarter and for the year to date. Moving down the income statement, third quarter operating earnings rose 28%, to $131 million or 22.6% of revenues, up two and half point from the year ago quarter. Year to date operating earnings were up 19% and operating margin was up two points. Depreciation and amortization totaled $12 million for the quarter. Net interest expense for the quarter was $900,000 up from the year ago quarter due to lower rates on our cash balances. The effective tax rate was 29% for the quarter, up from the 17% rate in the year ago quarter, but still lower than we expected due largely to the timing of certain tax items. Year to date, the tax rate was 32%, up about four points from the same period last year. And for the full fiscal year2010, we continue to estimate that the tax rate will be 31% to 32%, bringing the fourth quarter tax rate to about 31%. Fully diluted shares outstanding were $124.5 million for the quarter. Diluted earnings per share from continuing operations rose 9% to $0.74. During the quarter the company recorded a $6.4 million charge related to a discontinued research instruments business. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $588 million, debt of $23 million and stockholders equity of $1.4 billion. (DSO) days outstanding for the quarter was 80 days, an improvement of three days from the year ago quarter. Third quarter cash flow from operations was $68 million bringing the year to date cash flow from operation to just under $300 million. Primary uses of cash were $116 million to repurchase 2.3 million shares of stock under our repurchase program and $31 million for capital expenditures, which included the final payment for a building on our campus. Now, I will turn it back over to Tim for the outlook.

[Timothy Guertin:]

Thanks Elisha. All together, we feel that quarter three was an excellent quarter and we are feeling better about the overall environment. In the third quarter of fiscal year 2010, the company’s net earnings benefited from a shift and timing of certain tax items, but we continue to believe that tax rate will be 31% to 32% for the year. For the fourth quarter, we are now expecting net earnings from continuing operations to be $0.80 to $0.83 per diluted share bringing the total for the full fiscal year to $2.90 to $2.93 per diluted share. We continue to believe that total revenues for the fiscal year could grow by about 6% to 7% like last year. I will give you guidance for fiscal 2011 next quarter. Thanks for your attention and we are now ready for your questions.

[Operator:]

(Operator Instructions) And your first question comes from the line of Amit Bhalla of Citi. Please proceed.

[Amit Bhalla:]

Hi, good afternoon everybody.

[Timothy Guertin:]

Hi Amit, how are you?

[Amit Bhalla:]

Good, thanks. I wanted just to know about TrueBeam and want to see Tim if you could expand a little bit about what you talked about, you said some of these are backlog upgrades. Are these Trilogy upgrades and are you getting a significant price list from these upgrades?

[Timothy Guertin:]

Well, yes. There will be an increased price when people go from a Trilogy to a TrueBeam. I don’t have the exact, whether they were all Trilogy’s. I would imagine that most of them were, but I don’t actually know that. I just was breaking out the units that got an upgrade, so it’s not a guarantee that all of them were Trilogy’s, but most likely it was Trilogy buyers who were interested in getting the upgrades.

[Amit Bhalla:]

Can you quantify that price list?

[Timothy Guertin:]

No, I don’t have a quantification of the price, but it is higher.

[Amit Bhalla:]

Okay and then question on oncology orders overseas. The 9% growth was clearly good against a tough comp, but on a quarter-to-quarter basis it was down in absolute dollar, so was rest of world a little bit weaker than expected, maybe you could talk about that and also give the constant currency order growths for Far East and rest of world?

[Elisha Finney:]

Amit, hi. Let me start with the growth rates in dollar versus constant currency. In Europe, it was 11% in dollars and this is for oncology versus 15% in constant currency. Just given the stronger U.S. dollar. In the Far East, it was 9% in dollars and 6% in constant currency, and rest of world was down mid-single digits in dollars and down around 15% to 16% in constant currency. So what happened is obviously the Euro was a higher growth rate in constant currency, but that was largely offset by a much stronger Yen, Swiss Franc and Chinese exchange rates.

[Amit Bhalla:]

But just on a quarter-to-quarter basis, is there any change in demand in these regions, because year-over-year you did grow but quarter-over-quarter, it looked a little bit weaker. So are there any dynamics you can tease out?

[Timothy Guertin:]

No, I mean you are comparing quarter three with quarter two.

[Amit Bhalla:]

Right.

[Timothy Guertin:]

Yes, no that’s just normal fluctuation in international territories. We did as well as we expected to do in the quarter and I’m feeling good about international territories. The only international territory that I am a little worried about is Latin America where we just seen business get delayed, I think that’s a general economic condition for Latin America, but so far I think the concerns that people have about European and Asian markets haven’t been played out and I think China is looking quite strong.

[Amit Bhalla:]

Okay, thanks.

[Elisha Finney:]

Yes, and Amit just let me add, Europe was actually up from Q2, so it was largely other territories that did not grow as fast.

[Amit Bhalla:]

Okay, great.

[Operator:]

And your next question comes from the line of Joshua Jennings of Jefferies Incorporated; please proceed.

[Joshua Jennings:]

Hi, good afternoon. Thanks for taking the questions here.

[Timothy Guertin:]

Hi Josh.

[Joshua Jennings:]

Just a first on North American order building, quite a turnaround. A lot better than I expected or I had modeled. Just curious, you mentioned Tim on the call that it was primarily hospitals, but can you touch on what you are seeing in terms of capital equipment spending? What you are expecting, now that some of the fiscal ‘11 budgets are reset, and then also touch on any expectations for return of the freestanding centers after that reimbursement decision last November and where we are at there?

[Timothy Guertin:]

Yeah. Well, just broadly, we are feeling better than we have for many quarters and I sort of made a few remarks about TrueBeam and RapidArc helping that, so we saw lots of small orders and that of course makes us feel good. The funnel is looking healthy. Hospitals are growing a lot, I mean that’s where we saw the strength, but freestandings grew up sequentially, but when you compare to year-over-year they have not recovered, but sequentially they did show strength. So I would have to say sequentially all the segments of this market showed strength, but we have yet to see freestanding come back to where it would. But as I said the funnel is healthier. We’ve looked at diagnostic radiology companies and they are showing better results in the North American market and as I’ve indicated in past meetings, that’s a good harbinger for us. Usually we experience a nine-month to a year delay from diagnostic radiology companies. So this is a little maybe faster than we have seen in the past and we are seeing a lot of activity in the marketplace, but having said that, one quarter is not a trend and I would like to see another quarter or two of this kind. Well, I would like to see this continue for the rest of my life, but before I make any long-term predictions, I want to see at least another quarter to get a good feeling for it and I have to remember that a lot of the orders that we got a year ago where we were experiencing the problems in North America, those will now turn into shipments and so revenues are still going to be challenging for us, for I think a quarter or two, until we get past this. So this is very nice to see and I am hoping we see a lot more of these turn into early shipments. In the past, you get these substantial delays between the time we get an order and the time we get a shipment and I’m hoping that if there is any kind of pent-up demand maybe it will turn into earlier shipments, but we will have to see and that’s one of the reasons why I’m sort of -- I know that a lot of people would like to see me give guidance, but I really want to see another quarter and I want to see those delivery dates before I talk too much about 2011.

[Joshua Jennings:]

Maybe just touch on TrueBeam. You mentioned 60 total orders now, 15 in the first quarter. I just want to verify that there are 45 orders in the second quarter. Then secondarily, obviously that’s a big number and have you driven any competitive wins where you’ve sort of stolen customers post the launch of TrueBeam for one, and then for two, I’ve been thinking about a run rate for TrueBeam. Is this sort of 45 per quarter something that we should think about or sort of a range of sort of 30 to 45 or how should we be thinking about order rate for TrueBeam?

[Timothy Guertin:]

Well, I think that TrueBeam, there is certainly a substantial number of upgrades in the backlog. I don’t think that that will continue at that rate. I think that new orders for TrueBeam will rise and I’m not making any prediction for any particular quarter, but I think that any time you see a large bolus, a backlog upgrade, that’s probably a bolus. So if you just think about the number that we gave you, I think that for new orders I think that I’m optimistic that that kind of thing is sustainable.

[Joshua Jennings:]

Then maybe just one more for Elisha, just in terms of gross margin expansion here sequentially and year-over-year, was there any impact from currency in that gross margin expansion?

[Elisha. Finney:]

There was very little in Q3. Again as the Euro was largely offset by the Yen and the Chinese and the Swiss, so very, very little impact in the third quarter. Again we expect full year to see margins up, gross margin up, close to about 50 basis points year-over-year and that’s driven primarily by the mix of products.

[Joshua Jennings:]

Great. Thanks a lot guys.

[Operator:]

And your next question comes from the line of Mark Arnold of Piper Jaffray; please proceed.

[Mark Arnold:]

Great quarter guys.

[Timothy Guertin:]

Thank you.

[Mark Arnold:]

I guess just to follow up on something you just said Tim. It appears from your numbers and also from our channel checks that the early orders you are getting on TrueBeam may be shipping a little bit faster than your usual timeline, is that a fair characterization?

[Timothy Guertin:]

I think the backlog conversions are shipping faster. The new machine orders are probably shipping roughly on usual schedule. It’s just that I’ve got my fingers crossed that we’ll see that improve, because I think there is just strong interest and usually when you see strong interest, users will hustle a little bit harder to get those machines installed and so my experience tells me that that will happen, especially among the early doctors, but right now the change that we are seeing, the speed-up that you are seeing is mostly due to people who upgraded orders that they had already placed with us.

[Mark Arnold:]

Okay and then on the comments earlier about the freestanding centers in the U.S., it appears from our conversations with operators in that space that the acquisition environment there has improved quite dramatically, that the outlook is pretty positive to see some consolidation here in the back half of the year. Has that historically been a driver of technology upgrades and system sales?

[Timothy Guertin:]

Well, I think there is a couple of free-standings that are the primary buyers for us and of course the largest ones I don’t see as acquisition candidates, but maybe amongst some of the minor ones. I don’t really know the answer to your question. I haven’t really seen that as a factor in the past. Certainly, the reimbursement plays well for these folks and they just got to be doing well. So, we are kind of surprised that they haven’t actually strengthened more than they have. We keep expecting them to strengthen more than they have, because they are in every position to strongly invest. So, they seem to be waiting for something and maybe that is related to acquisition behavior, maybe it’s related to just wanting to see this year’s reimbursement numbers, I am not sure but free-standings really ought to come back more bullish than they have based upon the environment that they have.

[Mark Arnold:]

Okay. Just a couple of other questions, one on TrueBeam, other than the U.S., can you just give us an update on where you have approvals to sell that TrueBeam right now?

[Timothy Guertin:]

We can sell it in Europe, as well as the United States, it’s going to take us longer for Japan, China and some Latin American Countries and I guess we can sell it in India as well.

[Elisha Finney:]

Yes, anywhere were either FDA or CE market is recognized.

[Timothy Guertin:]

And Canada will take a little while.

[Mark Arnold:]

And then just one last question, can you just give us any update on the proton therapy order in San Diego, are you still thinking that might be something that’s booked in the - before the end of the fiscal year here and assuming that goes through the financing is in place, kind of what’s the tentative schedule for booking that revenue?

[Timothy Guertin:]

Yes. Well, I would love to book that in the fourth quarter, I’ve made the decision based upon what happened to me at [scandium] that I’m going to be cautious and so I’m going to wait until the user has their financing in place, they are making good progress, this is a good customer, this is associated with scripts. I mean, they have every reason to go quickly, but I really wouldn’t want to anticipate what their final schedule would be, we do have a substantial down payment from them. We’ve commenced work in terms of our part, so I’m feeling good about it, but exactly for the timing, I have to wait for them to walk in the door and say that everything is signed up before I will be comfortable giving you that estimate.

[Mark Arnold:]

And just one more question on protons. At our cancer summit earlier this month, we had another operator announce that they are going to use your system when they get the final go-ahead and financing in place to open up another proton center in the Midwest. Can you just talk about how you think over the next few years, is it something where you think we might see one of these a year, two of these a year booked and what’s your thought is about the growth of protons?

[Timothy Guertin:]

Yes, I am expecting two per year. It’s a number that’s achievable and I am expecting that some years it will be three and some years it will be one, but I am hoping that on the average I am going to get two for the next few years, and then we’ll increase it I think to three and four as we get out of this economic climate that we are in, as its easier for these people to put their capital programs together.

[Elisha Finney:]

And importantly with each of these we’ll end up with a multi million-dollar service contract that will be an ongoing revenue as well.

[Timothy Guertin:]

There is a good tail for these businesses. So, we have lots of partners that are potential partners that are talking to us. They are enthusiastic about what we’ve accomplished. They like the technology and the RPTC is now treated. It has been very successful. Even though we haven’t finished all the work that we plan to do there. In terms of numbers of patients, it’s over 200 at this point. So we are feeling good about the progress in that center. We have been named as the preferred supplier at two European sites, Nester in Italy and Delft in the Netherlands and so I am hoping that those will close sometime next year and we can get going on those projects as well.

[Mark Arnold:]

Great, thank you guys.

[Timothy Guertin:]

Thank you.

[Operator:]

And your next question comes from the line of Dalton Chandler of Needham & Company please proceed.

[Dalton Chandler:]

Good afternoon and congratulations on a nice quarter.

[Timothy Guertin:]

Thanks Dalton.

[Dalton Chandler:]

On a number of the conference calls with other medical technology companies there has been a fair amount of concern expressed about Europe in the second half and the governmental sturdy measures and so forth. Obviously you had a very good result in Europe this quarter, but could you just talk about your outlook there?

[Timothy Guertin:]

Well, as we indicated it was a strong quarter for us, especially in India, Switzerland, the Netherlands, Spain, Middle East Italy and you notice I mentioned Spain in there. So countries that have economic difficulties are still buying and I think they consider health care priority, governments consider health care priority. So although I do expect some, and we are seeing news reports of posterity programs, I think health care is one place where countries want to make sure that they don’t act in a way that harms public health. So I think we have every logical reason to worry about the behavior of certain countries in Europe next year. I don’t think that you should necessarily assume that because certain countries are having a problem that all countries in Europe will behave in this way, but I do believe that the growth in European economies would have been better if they hadn’t have these sturdy programs, but I am not expecting these places to fall off the edge of the world. Also, we’ve done a lot in terms of speeding up our machines. These machines are faster and easier for customers to use, so that they can get more patients in a day. So for a lot of reasons I think we’ve lowered the cost for patient on new machines, and a lot of these nations you have to remember have been less eager to replace old machines, than people in the US have been. I think the replacement rate for all the machines in US faster and I think that there are a lot of machines in Europe that are old and if we can get those machines out and replace with these new faster machines, I think it will make a big difference, plus the disruption is not as great as it use to be. We’ve now can shown that we can. The premium installation, that we’ve installed these machines in two weeks, and that is I think a record for us and I think it makes it easier for customers to switch from an older generation machine to a new generation machine. Because they are no longer going down for two months while that happens.

[Dalton Chandler:]

Okay. Thanks a lot and congratulations again.

[Timothy Guertin:]

Thank you.

[Operator:]

And your next question comes from the line of Jeff Johnson of Robert Baird; please proceed.

[Jeff Johnson:]

Thank you. Good afternoon all.

[Timothy Guertin:]

Good afternoon Jeff.

[Jeff Johnson:]

Hi, Elisha. Tim let me start with you, just on the True Beam side, not to beat that topic to death I guess, but historically what have you seen with RapidArc and maybe going back to OBI and all that. You asked kind of the driver for several quarters before Europe ramps up or how should we be thinking maybe how the gating of that plays out on a geographic basis?

[Timothy Guertin:]

Generally in the past, when we introduce a new technology Europe follows about two years later. Now not the leaders the leaders they are not followers, they act immediately, but the early adaptors, but what I am saying is a number of countries act after two years. The reason for that just simply is their budgeting cycles contend to me multi year in character. So they have budgeted for a certain machine and even if we introduced a new machine they can’t necessarily switch over. So I would expect that if we’ve introduced TrueBeam here in 2010 that we’ll start seeing a wave of TrueBeams in Europe 2012-ish. Asia as you know, it various widely country by country, but I would expect in Japan, TrueBeam after we get approval, and where we can start actually taking orders in Japan, I think that you’ll see that strengthen in 2000. Maybe if the winds blow with us and we get our approval at a reasonable time, you may start to see that in 2011 otherwise it will be 2012. I think we’re okay in Korea and I am not sure about Thailand and of course we have to get approval in China as well. So China will probably be mostly a 2012 impact, but the mix will be more towards TrueBeams in Europe, than it will be in China and most of Asia. In most of Asia I think that mix will change more towards 2013.

[Jeff Johnson:]

Alright, and I haven’t thought of this, but what you describe in the two year lagging cycle in Europe, is RapidArc just still a ramping kind of driver of growth in Europe right now?

[Timothy Guertin:]

Yeah, I have…

[Jeff Johnson:]

We’ve been about two years into that now right, two and a half?

[Timothy Guertin:]

I am trying to remember where we are with RapidArcs in Europe. Yeah, we are two and a half years into it, you are right. I am looking at somebody who’s sitting here with me. We are seeing RapidArc continue to rise, but I don’t have a number for you for Europe. But we are seeing it rise, but I think we still our ways to go and also we are seeing interest in the developing world. China and India we are seeing a lot more interest there, because the speed of this really matters. I mentioned those unique orders in India, and this is why I think RapidArc is going to be important for locations like that. So I think RapidArc still has a lot of growth potential, but I should have come prepared with that number, but I don’t have it.

[Jeff Johnson:]

Fair enough, and anecdotally didn’t here anything at all. On the patient demand side I know you wouldn’t typically think about that with cancer, but it sounds like diagnostics even has slowed down a little bit. That might be slowing that funnel down into the system. Anything at all on demand side?

[Timothy Guertin:]

Patient demand, in terms of patients asking for RapidArc.

[Jeff Johnson:]

Patients just being treated for cancer. Again, you wouldn’t think that that would be something that changes or slows with the economy, but we heard anecdotally maybe it have a bit?

[Timothy Guertin:]

Well, I certainly think radiation therapy is a huge potential to grow. In the United States there is for example, for prostate there is a continued argument between those people who want to have radical prostatectomies and those are will have radiation therapy. But the fact is radiation therapy is the least invasive, least toxic way to cure cancer that there is of all of ones that are available and its extremely affected. So I think we are going to continue see that happened. In terms of patients, what was seeing is and these tell us that they are able to do things with RapidArc, that they wouldn’t be able to do for those patients any other way. I am not sure how that affected patient decisions, because all that clinicians are reporting to us is, that it enabled them to do something they weren’t able to do, that they were able to give that patient a better treatment. In some cases the patient was able to be treated with the radiation and they wouldn’t have otherwise been able to be treated with radiation. So those are all good signs, but I don’t have anything other than anecdotes to really flush that out for you.

[Jeff Johnson:]

Alright, fair enough, and then Elisha, two currency questions for you here. Just embedded in your kind of 6% to 7% revenue growth guidance for the year. Has the currency assumption just that you are thinking about within that number changed at all or is there a greater headwind from currency in that 6% to 7% reported growth than you maybe were thinking last quarter or has that stayed about the same?

[Elisha Finney:]

Its about the same Jeff, so every time we would give an update on annual guidance, we are kind of looking at where have the euro and the yen been up to that point. So in Q2 ’10, let’s see we are at about 140 and the third quarter 130. So we are assuming somewhere around the 130 or so as we go into Q4 to get to that six to seven.

[Jeff Johnson:]

Okay and in Q4 EPS guidance, the 80 to 83, relative to my model that gating of the tax rate had about a nickel impact or so about. Is currency or is there anything else in that Q4 maybe acting as a couple of penny head wind or anything at all that we should think about besides getting the tax rate, that gating issue.

[Elisha Finney:]

Well, it’s a tougher comparable, as particularly x-ray started to come back in the year ago fourth quarter, oncology saw pretty significant growth as well, but I will bring you back to the year where we expect the gross margin to be up close to half a point. We are expecting about a point leverage on operating expenses, so we should be somewhere around the 23% ROS for the year, which would bring us up by close to one and a half points or so. So again, we feel like we are heading into Q4 and it’s on a strong note, it’s just a tougher comparable and the euro is tougher. It’s 1.30 today. In the year ago period I believe we were at 1.42. So that is having somewhat of an impact.

[Timothy Guertin:]

The international mix was decidedly more international in the fourth quarter of this year than it was last year and payment terms internationally also effect the revenue recognition. So we have a number of head wins in the fourth quarter that are causing us to behave the way we are.

[Jeff Johnson:]

Alright, that’s very helpful. Thanks El.

[Operator:]

And your next question comes from the line of Tycho Peterson of JP Morgan; please proceed.

[Tycho Peterson:]

Good afternoon.

[Timothy Guertin:]

Hi Tycho.

[Tycho Peterson:]

I just wanted to dive into some of the other dynamics for the oncology business. I know you commented a minute ago about RapidArc in Europe. Can you just talk a little bit about where we are in the adoption curve here in the US for RapidArc specifically, and then if you can just comment on Trilogy and Novalis and whether those have seen kind of a drop off post the launch of TrueBeam.

[Timothy Guertin:]

The RapidArc is heavily being adopted in the US and TrueBeam of course. RapidArc is pretty standard on the True Beam machine. So we are seeing a lot of activity in terms of RapidArc in the US. We aren’t giving you at this call, we are going to reconsider that in a future call. We are not giving you a take rate on this call for RapidArc, but all I can tell you is it’s just that the acceptance of RapidArc is enormous. We get constant and continuing and ongoing feedback from physicians that they love it and that they are embracing it and some of our customers of course that didn’t use our treatment planning system have had to wait for other people’s treatment planning systems to do it and I still think we have a huge lead there in terms of the performance of the cliffs, and RapidArc planning versus volume metric modulated Arc therapy planning for some competitive systems. So I think our system works really well and those people who adopted it on the treatment planning side and on the clinic side are doing extremely well. But as I said, RapidArc will be standard on the TrueBeam and so I expect that as TrueBeam grows it will just increase the acceptance of that. In terms of the impact on trilogy and Novalis, we will have a Novalis version of the TrueBeam product and so I don’t think we have hurt that, and I think that the trilogy, I would expect that some people who wanted the trilogy will now -- you could say that hurts the trilogy, it doesn’t hurt us if they go from a trilogy to a TrueBeam, but in terms of the absolute numbers of trilogy, I would expect that number to go down and the numbers of TrueBeams to go up.

[Tycho Peterson:]

Okay, and then can you talk a little bit about the mix of application area, your clinical treatment area for the early adopters of TrueBeam. I think you mentioned liver in your comments, but how do you think about prostate versus potential lung longer term and where are you seeing the early utilization of this system.

[Timothy Guertin:]

Well, you know I think that people are going to use TrueBeam for lung more often, because of the capability on it. It’s called IMR, which is the ability to take images while the patient is on the table and see whether or not we are staying on target and the way that we plan. So I think for both liver and for lung, that capability would be useful and we’ll start to see more and more applications for that. I also believe it will be useful for prostate. Whether or not it will be clinically valuable remains to be seen I think it will prove to be clinically valuable for us. In prostate we will have to wait to see what the studies have to say, because we are already pretty good at positioning the prostate, and the results for radiation therapy for the prostate are really very good. So it’s quite hard to believe that we’ll see a huge improvement there in terms of survival. In terms of toxicity however I am kind of interested, because one of the things that our customers would like to do is be able to conformably avoid the rectum. Recto toxicity is one of the things that physicians would like to avoid and I think that a number of clinicians that we talked to are interested in seeing if they can use the capability of TrueBeam to attack that problem, so I think that would be interesting. Then we will have to see, the TrueBeam is so fast that for hypo-fractionated treatment that enables you to treat those relatively quickly. The papers really that we would like to see for hypo fractionated prostate haven’t happened yet, and when those papers start to come out we’ll know whether or not there will be a large shift there. If there is, that’s good, because I was talking to somebody just yesterday, who was talking about a relative who chose to have a radical prostatectomy rather than radiation therapy, because they lived an hour away from a major city and they didn’t want to have to go in for 30 or 40 times to be treated, so they chose surgery instead even though surgeries will keep them from driving and will have numerous other side effects that were nastier, but that was the decision that they made. So if we can discover that hypo fractionated radiation therapy for the prostate treatment is five days, six days, ten days, something like that turns out to work really well, then we may see a lot of those patients, especially early stage patients chose radiation therapy, because the other toxicities are just so low compared to surgery.

[Tycho Peterson:]

And then one of the things you noted at the launch was the developer mode function. I guess how do we think about new application from users as part of the developer role?

[Timothy Guertin:]

We have a huge amount of interest and this is a constant topic of conversation around here. People, they want to go as quickly as possible from developing something and doing physics test on it in the clinical mode and so they are putting tremendous pressure on us, that take the things that they learn in developer mode and put them in the clinical side of the machine. So it’s painful for us to have to delay the clinical availability of any feature, but that’s what we have to do. We have to be prudent when we introduce new things. So we have unlocked the imagination of our customers with the developer mode and I expect them to put a lot of pressure on us, to speed up the way in which we move those features into clinical modes of the machine.

[Tycho Peterson:]

Okay, two other quick ones, maybe one for Elisha, on margins as we think about mix of upgrades and new placements on TrueBeam, are you able to comment on margins on the relative contributions from both upgrades and new systems for TrueBeam. How should we think about it contributing to margin in the next year or so?

[Elisha Finney:]

Yeah, well looking into Q4, looking for the fiscal year Tycho again about half a point, we are going to see improvement in both oncology, that’s going to come primarily from product mix. Improvement offset somewhat because the geographic mix is actually hurting us a little bit in oncology, as they international has been growing on the revenue side much stronger than the US. X-ray margins will be up about half a point as well. We are going to see some margin decline in our SIP business. So going forward I mean True Beam and software and service are all enhancer to our growth margins. So it will be heavily dependent on mix as we move into FY11.

[Tycho Peterson:]

Okay and then just lastly, anything coming out of DC from kind of the regulatory prospective, you know going back to some of the quality issues that were raised earlier in the year. Are you seeing any pressure from our oversight just for medical physicist and how do we think about where you’re headed in to DC.

[Timothy Guertin:]

Well, there were a number of meetings that were held this quarter to discuss this problem and what might be done to improve quality the assurance and the safety and design, and I think the field is still in the phase of trying to figure out what all of the approaches they should take. What we have recommended is that over time we need to make the process of quality assurance just before a patient is treated to be more complete. That is, we propose some sort of time out that occurs. Time out is a term that’s used by surgeons. What it means is that everybody sits down with the patient and just before the surgery begins, and we would do the same thing for radiation and look and make sure that everything is consistent with what they thought and the question is what software tools, can we in hardware capabilities can we put on the machine that will make that process easier for them to do. So, we are in discussion with APM and other organizations to see how that might be done. Radiation therapy is I think if you look at the medical field overall you will see that our customers have done a very good job, but nonetheless incidents continue to happen, and none of us are ever going to happy until that incident read as zero, and to do that, I think we have to recognize that radiation therapy planning and treating is a very complicated process and that by putting more QA at certain points in the process, especially just before patients are treated with a new plan, I think we can make a lot of progress towards improving safety. So, that’s what we focused on, we talked to the FDA about it and they are very receptive to this idea and they are encouraging us to proceed with it and we have talked to users about it and they are encouraging. I think that as our customers are not monolithic there is obviously going to be lot of opinions about this and some of them are going to want more from us and others feel that we have already done enough, but we will never be satisfied as long as there is even a single injury reported to us.

[Tycho Peterson:]

Fair enough. Alright, thank you very much.

[Timothy Guertin:]

Thank you

[Operator:]

And your next question comes from the line of Amit Hazan of Gleacher & Company. Please proceed.

[Amit Hazan:]

Good afternoon guys. Maybe, I’ll just start with guidance in the fourth quarter, just looking at the revenue guidance kind of the imputes implied revenue guidance if you will. It doesn’t look like there is much improvement there year-over-year even though you have a new comp, for say it doesn’t look too thought for you from last year. Is there anything going on there that we should be thinking about?

[Elisha Finney:]

Amit I apologize, I missed a little bit about our volume, didn’t seem to be up. Let me take a stab at it and come back if I don’t answer your question. On the revenue side, it’s really just a function of the orders decline in the year ago period. Again it’s still 6 to 7 for the full year, but it’s going to be in the low single digits in Q4 once you pencil out the guidance there. We saw a recovery in the year ago fourth quarter, x-ray started to grow; oncology had a strong quarter as well. So, a little bit of it has to do with the comparable, the dollar and the Euro exchange rate plays into that, but it’s really just looking at customer requested delivery dates and I think more of a reflection of orders decline in a year ago period. So it’s going to take us a quarter or two to work through that, because as you know the average timing backlog is about 12 to 15 months or so.

[Amit Hazan:]

Then just to push a little bit on the operating margin side, it’s been very good all year. I recognized the comp issue from the prior year, but even if I am looking at the quarter that you reported this fiscal year, it doesn’t look like you are looking for much of an improvement in operating margin, even though obviously in the September quarter your revenues are going to be significantly higher than they were anytime during the year. So, I am wondering the higher revenues are not turning in terms of guidance, they are not looking like they are turning into better operating margins for the fourth quarter than it’s been in any quarter this fiscal year and why that might be.

[Elisha Finney:]

Amit, it’s a very fair question. Again it’s just looking at the particular backlog and the geographic mix, the product mix, the mid on payment terms, the currency rate, just taking all of those things into account. I think if you were to look back over last year we went from 19% to 22%, 24% ROS in Q4. So we’ve got a tremendous improvement in Q4, so it just makes the comparable pretty tough as we compare it to the year ago fourth quarter. So, again it should pencil out to right around 23%. For the full year it’s getting close to a one and half point improvement. So, I would just encourage you to focus on the year and not to draw too many conclusions from a single quarter.

[Timothy Guertin:]

It’s just a single quarter, there is just a lot of things effecting the single quarter in terms of international mix and in terms of the way people are going to pay us internationally, the particular structure of those deals and how we are going to get paid, and when we looked at the detail from the bottom up, this is how it came out. So, don’t draw any conclusions about 2011, we still think the year came out great, but quarter four is going to be tougher for us than we would have liked it to have been. I think we have a little timing benefited in quarter three that may have hurt us a little bit in quarter four as well.

[Amit Hazan:]

And Tim, may be I can just follow up with you on one question on guidance, which is fiscal year ’11. This has been traditionally the quarter that you give guidance every year, and we recognize last year obviously had a lot of issues, and you chose to wait, but it sounds like the way you are describing your business is a lot better than it’s been in a while. But you chose to delay fiscal ’11 guidance and I think what you said was that you want to see another quarter of delivery date to figure out basically. Can you just expand on that?

[Timothy Guertin:]

Right, I want to see what North America does in the fourth quarter, I want to see what the dates are in those orders. I want to see what the European and Asian numbers look like in the fourth quarter. I think Europe and Asia have held us up this year and so now we are starting to see a disproportionate amount of our business go international versus the U.S. So, the mix in 2011 right now is very hard for me to predict, and if I have another quarter of U.S. orders I’ll understand the mix between U.S. and international. Much, better also I’ll know a lot more about TrueBeam, and TrueBeam pricing going forward and what the rate is and then I want to get some predictions on that we’ll get TrueBeam acceptance and so that we can sell in certain countries that we can’t sell in right now. So, there’s just a lot of things that I’ll know three months from now, but I don’t know today. Let’s face it the world is not all that great yet, and I want to see that how things economically look. But that being said all the indications that I have for us are good, but it’s just better for me to have that backlog to look at.

[Amit Hazan:]

Okay, that’s great. That’s very fair. And I just want to, I guess add my TrueBeam question I suppose, but before I do that, I just want to may be just set it up by first understanding in the U.S. market, if you actually saw unit orders up in North American, if its systems orders were up, you usually give us a sense not a number, but just a sense if there up low single digit or something like that?

[Timothy Guertin:]

Yes, we are looking it up now.

[Elisha. Finney:]

Its up.

[Amit Hazan:]

So, for TrueBeam, I am more interested in the new orders side of that for you, and wondering who the buyers are if they are replacing older SRS systems or actually regular [Linux] number one, and then may be number two, are they buying TrueBeam in lieu of may be having plans by Novalis or Trilogy if you add some color on that or if you actually able to convert folks that we’re going to buy a traditional Linux and are now with TrueBeam really stepping up to buy that new product. I how that makes sense?

[Timothy Guertin:]

We are seeing customers across the board being interested in TrueBeam. We are seeing a mix of early adaptors and clinical pioneers, and clinical pioneers aren’t all at university hospitals. We are also seeing university hospital showing interest, we are seeing international centers that need higher true-put, and what to do clinical research. People, who want to do both traditional radiation therapy and stereotactic radiosurgery, are interested in TrueBeam, and a number of customers who want a market advanced clinical capabilities, see the TrueBeam has something that they can have that will help them competitively, and we are also talking to surgeons who want to offer a lot of more non-invasive options for the patients. As I said, I think that eventually TrueBeam will constitute 30% to 50% of our sales, which means that in units that will go up and the other machines will go down, but in overall terms, I think it’s the best for the company. Did I come close to answering your question or did I mess it?

[Amit Hazan:]

You did. It was good, it was kind of going after something that I always thought it was your biggest opportunity with TrueBeam which is are you getting folks that are perhaps looking at traditional equipment, your regular [Inaudible] equipment in making the leap to buy a TrueBeam which is obviously a bigger ASP benefits. That’s what happening with your new unit sales or if its mostly folks that have been focused on the Novalis or Trilogy in the past.

[Timothy Guertin:]

No, we are seeing people who would have bought maybe a more bread and butter machine go for TrueBeam as well and we have seen some competitive conversions as well. So that’s just very nice to see. I think at the high end of the market this is helping us.

[Amit Hazan:]

Okay great. Thanks very much.

[Timothy Guertin:]

Thank you.

[Operator:]

And your next question comes from the line of Michael Matson of Wells Fargo Securities; please proceed.

[Michael Matson:]

Hi. Obviously I am a little bit new to the story here, so I apologize if this is a question that you’ve gotten and addressed before, but I am just wondering, with TrueBeam having greater capacity to treat more patients in a shorter amount of time, how do we really think about that sort of affecting your installed base overtime, and is it priced at a level from a revenue standpoint, that if you saw few of the systems than you would have some of your other systems that you’ll still make as much or more revenue from that.

[Timothy Guertin:]

Yeah. The answer to that Michael and by the way welcome, is different for different areas of the world. I will begin by starting outside the US and pointing out that outside the US the world is still grossly underserved in terms of the number of machines that are required to treat cancer patients today, let alone where we are going. I think I’ve used these numbers before, but in the United States there’s about 13 machines for a million people, in Europe its about 4 to 7 machines per million people and in China its less than half a machine per million people. So China literally needs thousands of machines to be where they need to be and furthermore if we turn out to be effective against more and more types of lung cancer which is of course what we are trying to do and getting them treated with radiation rather than surgery, I think that radiation will be very important for world health outside the US. So I don’t see any other things that we are doing in terms of throughput hurting us internationally. Instead it will encourage people to look at radiation therapy as a cost effective way of treating these patients. The actual cost per patient internationally is quite low. In the US there are multiple things, some winds are blowing north and some are blowing south. In the north, generally yes there are a lot more machines in the US, but a lot of those machine are old, are 10 years old, they have very low throughput, they don’t have a lot of the modern features that we like to see, and of course, we are constantly adding new features that enable patients not just to be treated more quickly, but to make sure that they are treated in exactly accordance with the physicians intent. So I think there is a lot of reasons for people in the US to want to replace those older units. Also, we have done some math that shows, as we see an increase because of the aging of bloomers over the next few years, we might expect this number of machines per million people to raise to 14 or 15 in the US. Now working against that is hyper fractionation and the fact that we can treat people, but what you have to remember a lot about a lot of radiation therapy departments right now is that they run long days. They don’t run eight-hour days, they run ten-hour days or twelve-hour days. People are having to come in at night in some cases to be treated. If we can just get those machines down to where most people can be treated during the day and minimize the overtime for staff, that’s a real cost savings for staff. So don’t think of it in terms of the machine was in use for eight hours and now its going to be use for four. It’s more like these machines were in use for ten hours and now they are going to be in use for eight and so, all of these technologies will I think help there. Also I think that there will be pressure on cost, on hospitals and hospitals are going to be motivated to try and treat people for less cost per patient. So I think that’s very important in terms of people being willing to upgrade these to new technologies. So although the number of machines in the United States is higher than it is anywhere else, and hyper fractionation would encourage you to believe that a certain per certain, not majority, but probably may be 10% of patient could benefit from hyper fractionation, those affects will happen, but I think the other effects will out weigh it.

[Michael Matson:]

Alright, that was very helpful. I guess a question on your guidance. It looks like if my math is correct, on your EPS guidance you beat consensus by about $0.10. It looks like you beat the high hand of your guidance by about $0.11, but your only raising guidance at the midpoint by about $0.05 or $0.06. So is that just, are you just being conservative or do you expect something to sort of change there, that maybe the fourth quarter is going to be a little weaker from a margin standpoint or something.

[Elisha Finney:]

Michael most of that; $0.6 of the beat in Q3 was tax related and it just had to do purely timing of discreet tax items and that will now move into Q4. So Q4 tax rate is going to be lower than we have first anticipated, Q3 was a little higher than we thought, so that’s the main reason.

[Michael Matson:]

Alright, and then just one final question on the non-oncology businesses. Just given that we’ve kind of seen sort of an economic cycle have an impact here, things kind of slowed down last year and they are picking up again. I mean how do we really think about these cycles in the x-ray and other business.

[Timothy Guertin:]

Yeah, it is interesting if you look how the economic cycle affected oncology versus everybody else. Oncology, the economic cycle mostly effected North America, it didn’t affect us internationally really at all, which is one of the reasons why I said we are feeling better this quarter than we have in the past, because as North America comes back we are not seeing the effects in Europe that other people are predicting, at least not so far. X-ray was definitely hurt, because diagnostic radiology was hurt and also people I think reduced their inventories. So as orders were hurt for diagnostic radiology and as people reduced their inventory requirements that we have kind of a doubled whammy for that business. Now as diagnostic radiology comes back, I think we are seeing Bob get more business, which is why you saw this revenue up 52%, orders up to a 26% number. That panel sales themselves are up 80% and tube sales were up 30, so this business is really firing and that would give me a lot of optimism for the behavior of the diagnostic business. Security and inspection I think is going to have a tougher time, especially in the US. I think this is the kind of place where economies are going to pull back. Its on infrastructure development, and weirdly I know this seems counter intuitive, but people are pulling back on security. You would think this is a very dangerous world and they should spend on security. So I think the largest negative wind we are experiencing in this company is going to be in the security business. I am hoping to get past that within the few quarters. I certainly think it’s making it more trying for this business, and then also we often joke with Lester Boeh who runs this business, that he is the Vice-President of business that gets protests. Because every order that we see lately, all of these large orders have huge amounts of protests and so I think it’s been tough for them. So x-ray I think we are seeing a return, I think oncology we are starting to see a return. We’ll see how that goes in the next quarter, but we are starting to see a return. I think security is going to have a harder time, and I think probably protons, this was a head wind in terms of getting financing for proton centers. I think it slowed down the process from what it was in previous years, but it is injected a delay and I think we are starting to see these projects now start to come to a fruition, so that’s good. But in security we have had no incidents. Basically our borders have been pretty safe and there has been nothing in the headlines that has pushed this issue, and if there are more issues in the headline then maybe we’ll be seeing this thing turn around.

[Michael Matson:]

Alright, that was helpful. Thanks a lot.

[Spencer Sias:]

Well, there is going to be one last set of questions here and we will have to close up the call.

[Operator:]

And your last question comes from the line of Sean Lavin of Lazard; please proceed.

[Sean Lavin:]

Congratulation on a very nice quarter

[Timothy Guertin:]

Thank you Sean.

[Sean Lavin:]

I guess my TrueBeam question, I know you gave orders, were you able to give us a number of either installed or upgraded systems?

[Timothy Guertin:]

We have eight systems clinical, is that right? I think that’s the number. Eight is clinical, seven of them are in US, one of them is international. You want to know where they are or just the number?

[Sean Lavin:]

Numbers are good enough for me.

[Timothy Guertin:]

Okay.

[Sean Lavin:]

You’ve hit most of my questions, so my only other one is I guess looking at your guidance it looks like earnings are going to grow about 10% this year and I have assume most of that revenue this year has come from orders that are placed during a very difficult economic. Is it reasonable for us to think that earnings in a normal economy is long term going to be a team grower.

[Timothy Guertin:]

Well, for years and years I felt that this business should grow and can grow north of 10% and can grow as high as 15%. So I would have to say in a normal economy, you will have to tell me when we are going to see normal, but I think it should be possible for us to grow in the 10% to 15% range and when things are stronger, I don’t think normal, but stronger it will be more towards the 15% and normal will be more towards the 10% to 12% range.

[Sean Lavin:]

Great. Thank you very much and congratulations guys.

[Timothy Guertin:]

Thank you and I do want to correct myself. We have eight sites that have completed installation, not all of those are clinical. I missed out when I said that, but several of them are clinical and so just to not make that error.

[Operator:]

Thank you for your questions ladies and gentlemen. I would now like to turn the call back over to Mr. Spencer Syres for closing remarks

[Spencer Sias:]

Thank you all for participating. For listeners who may have come in late, this call has been taped and it will be available for replay beginning at 04

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.