AptarGroup, Inc. (ATR) Q3 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen thank you for standing by. Welcome to AptarGroup's Third Quarter 2011 Results Conference Call. [Operator Instructions] Introducing today's conference call is Ralph Poltermann, Executive Vice President and Treasurer for AptarGroup. Please go ahead, sir.

Thank you, Jonathan. Before I make my usual introduction, I want to be sure that you all are aware of a change taking place relating to our Investor Relations activities. I'm approaching my 30th anniversary with the company and I had decided to retire at the end of this year to start a new chapter of my life. So this call today will be my last one. Matt DellaMaria is taking over my Investor Relations responsibilities and worked very closely with Matt over the past couple of years and many of you have already had the opportunity to meet him. I'm confident that it will be a smooth transition for you. I've enjoyed and will certainly miss the engaging discussions we have had over the years and I wish all of you continued success in the future. Turning to our discussion of the results, I would like to point out that the information that we'll be discussing in the call today includes some forward-looking comments and that the actual results or outcomes could differ materially from those projected or contained in the forward-looking statements. To review important factors that could cause actual results to differ materially from those projected or contained in the forward-looking statements, please refer to AptarGroup's SEC filings. The information of this conference call is relevant on the day of this live call, although the company will post the replay of this conference call on its website as a service to those investors who were not able to listen today, the information contained in the replay will be dated and should be used for background information only. The company undertakes no obligation to update material changes in forward-looking information contained therein. Participating on this call today are Peter Pfeiffer, President and Chief Executive Officer of the AptarGroup; Steve Hagge, Executive Vice President and Chief Operating Officer; and Bob Kuhn, Executive Vice President and Chief Financial Officer. I would now like to turn the conference call over to Peter.

Thank you, Ralph. Good morning, everyone. I will begin now the discussion with the review of our consolidated results for the third quarter, our expansion in India and our outlook for the fourth quarter. Afterwards, I will briefly comment on the results of our Beauty & Home segment. Steve will follow me with his comments on the Pharma and Food & Beverage segments, and then Bob will review our financials in more detail. Looking to at our quarterly performance, we are pleased to report record third-quarter results. All 3 segments continued strong core sales growth. Currency translation effects also contributed to our sales growth. We also achieved record third-quarter earnings per share, primarily on the strength of our Pharma segment. As you saw in our press release, we are expanding our presence in India, which is an important and growing market for us. The acquisitions allows us to better serve our Personal Care and Food + Beverage, and Personal Care and Food + Beverage customers. And the clean-room facility will enable us to provide locally produced delivery devices to our pharmaceutical customers. Looking ahead, while we are pleased with our strong year-to-date performance, we are seeing some caution on the part of certain customers as we look ahead to the fourth quarter, primarily due to global economic uncertainties. We believe this is a temporary situation until there is a more stable economic outlook, particularly in U.S. and Europe. However, we are encouraged as we look ahead for 2012. We have a lot of project activities and our market-focused organization continues to discover many new market applications for our unique delivery solutions. Also with our strong balance sheet and broad geographic presence, we are well-positioned for any temporary slow down in any one particular region. Currently, earnings per share for the…

Thanks, Peter, and good morning, everyone. I'll provide my comments on the Pharma and the Food + Beverage segments and then turn the call over to Bob to review our financial results. First looking at the Pharma segment, we had another strong quarter in Pharma and the momentum we saw on the first half of this year continued into the third quarter. Reported sales increased 25%, changes in currency exchange rates accounted for 10% of the growth, with tooling sales actually declining on a year-over-year basis and had a negative impact on the top line of about 3%. On a constant currency basis, sales to the prescription market increased 8% and that includes about a 4% decrease coming from reduced tooling sales. And sales to the consumer health market increased significantly and were up 32% over the prior year and tooling sales did not impact the sales growth in the consumer market -- or the consumer healthcare market. Now looking at new products. As you're probably aware from our Analysts Day event last month, our new ophthalmic preservative-free devices on the market with TRB's VISMED eye lubricant product. We continue to be very excited about the opportunities in the ophthalmic category. In Europe, Zambon Pharma launched a spray form of their successful flu treatment called, Fluimucil, using our throat spray delivery system. Also 2 skin treatments, one for dermatitis and one for acne were launched in Europe using our lotion pumps. And finally a Brazilian pharmaceutical company recently launched a nasal-saline project using our nasal spray device. Now looking at our Food + Beverage segment. Reported sales in the quarter increased 25%. Movements in currency exchange rates accounted for 4% of the increase and higher tooling sales contributed 3% to the top line. The pass through of higher resin costs…

Thank you, Steve, and good morning, everyone. I'll provide my comments and then Peter, Steve and I will be happy to answer your questions at the end. First commenting on the results for our quarter. As announced in our press release, our reported increased 16%. Excluding currency changes, sales increased 10%, higher tooling sales accounted for about 1% of the overall top line growth. From a geographic standpoint, sales to customers by our European operations represented approximately 57% of sales this year versus 56% of sales in the prior year, while sales to customers by our U.S. operations accounted for 27% of sales versus 29% last year. Reported diluted earnings per share increased 6% to a third quarter record of $0.72 per share compared to $0.68 per share in the prior year. Free cash flow, which we defined as cash flow from operations, less capital expenditures, was approximately $71 million for the quarter versus roughly $26 million in the prior year. Our cash flow from operations for the quarter was approximately $119 million compared to approximately $53 million in the prior year. Capital expenditures were approximately $48 million in the quarter compared to $27 million in the same quarter of last year. Regarding our repurchase activity during the quarter, we spent about $38.8 million to buy back approximately 800,000 shares of our stock. The mix of that at the end of the quarter is roughly 65% fixed versus 35% variable and the average interest rate is slightly -- is around 3.5%. On a gross basis, debt to capital is about 23%, while on a net basis, it is roughly 2%. Taking a look at the first 9 months. Similar to the quarter, our year-to-date reported sales increased approximately 16% and changes in exchange rates accounted for 6% of the increase, resulting in an organic sales increase of 10%. Once again, custom tooling sales represented about 1% of that increase. Reported diluted earnings per share year to date, increased 9% to $2.08 per share versus $1.90 per share last year. Looking forward, presently we expect depreciation and amortization for 2011 to be in the area of approximately $135 million with capital expenditures expected to be in the area of $170 million. I'd like to point out that these amounts could vary depending upon changes in exchange rates. The effective tax rate for the full year of 2011 is expected to be between 32% and 33%. And lastly, we currently estimate that diluted earnings per share for the fourth quarter of 2011 will be in the range of $0.57 to $0.62 per share compared to the record fourth-quarter results of $0.59 per share reported in the prior year. At this time, Peter, Steve and I will be glad to answer any of your questions.

[Operator Instructions] Our first question comes from the line of Ghansham Panjabi from Robert W. Baird. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Relative to your original guidance for the third quarter, I guess I'm trying to get a sense as to volume trajectory and whether it was in line with your internal expectations, and more specifically on the pharmaceutical side because it was up quite a bit relative to the second quarter?

I think, overall, we were a bit higher in the Pharma part of the business and frankly, as Peter talked about, we saw a bit of a drop off in the Beauty + Home side in the last part of the quarter that we hadn't anticipated at the beginning, so those 2 bid offs set each other. So we ended up coming in to a -- pretty close to where we expected from an the overall earnings perspective. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: And then on India, can you just touch on the strategy difference between building a platform for pharmaceuticals in Mumbai and the acquisition you announced yesterday. I guess, what I'm trying to get at is whether the Pharma capacity is for product that ultimately gets exported out of the region and whether the acquisition is to serve the local region?

Most of the capacity we are building in India is for the local market. There will be some in smaller amounts being exported but always staying within the Asian region. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Including the pharmaceutical business?

Including the pharmaceutical business.

Ghansham, I just -- I want to follow-up on that. I think it's important to know, while Peter is exactly right, we sell to local customers in the Indian market, but some of our customers' business is an export business. So indirectly, it's actually being produced in India and being sold in different areas of the world, particularly in the generic market.

Our next question comes from the line of James Armstrong from Vertical Research.

You commented that certain customers are becoming cautious, do you think that this -- it's just customers destocking into the end of the year, meaning it might reverse into the first quarter? Or is it just a general slowdown that won't reverse but just will normalize as the economy starts to normalize back out?

I think that, James, this is mainly a reaction of our customers on the uncertainty which is a good thing on the economy today. We know that they are -- they have been filling up their pipeline. They were restocking. And now to the end of the year, they do not want to have to make the same mistake as they did in 2008, 2009, when the crisis hit them. So it's only a cautionary reaction of our customers. I suspect.

Okay, and then moving just slightly, you mentioned underutilized capacity is in the Beauty + Home segment, could you give us more color where that capacity is and what would you need to see longer-term to either close or move that capacity to elsewhere in the world?

Basically, this is a reaction of the more cautionary reaction of our customers. The underutilized capacity is in some areas of this dispensing closures, or also in the Bag-on-Valve area. Just with different reasons.

James, I can expand a little bit on Peter's discussion. Underutilized capacity, we will rarely shift a lot of the production from one region to another because really we're producing for the local customers, anyways. So as Peter said it, it tends to be very product-line specific, in this case, it affected some of our closures, operations. And as Peter said before, there was a little tail off at the end of the third quarter in terms of volume. So while we're making cost reduction decisions and activities, it's not fast enough, if you will, than compared to some of the volume declines.

Our next question comes from Jason Rodgers from Great Lakes.

Congratulations and good luck to Ralph. Looking at the Beauty + Home, I'm sorry missed it as far as the growth in fragrance and cosmetics and personal care for the quarter.

Sure, Jason, I can feel you in on that. The Personal Care business grew about 8% in the third quarter and our fragrance/cosmetic group about 5%, and Household, which is a much smaller base group, about 15%.

It's all excluding exchange rates.

All right. Okay. And looking at the Food + Beverage, it's good to see a lot of activity there. I was wondering about the household product area and the trend to go inverted if you're seeing any acceleration there? Or is that pretty steady?

Overall, I'd say, Jason, and that side is pretty steady. We haven't seen any particular movement to inverted in the household area. It's much more of a trend right now in the food market in particularly with the condiments.

And any early thoughts for CapEx for next year?

Well this year, we're in the process right now of pulling together our 2012 budgets, so I don't have a pinpoint answer for you there. But this year again as we spoke throughout the year, was a bit of an unusual year in terms of high CapEx, so I wouldn't expect that next year we would see that same level, we will probably be at or slightly above depreciation but it wouldn't be similar to this year.

Our next question comes from the line of George Staphos from Bank of America.

It's actually Benjamin Wong filling in for George, who's on another call. Quick question, what are your customers expecting for the holiday selling season on the fragrance side?

We don't have a clear picture there, for out of love from our customers. The information which we are getting from the market -- the Christmas business in Europe and in the United States seems not to be too bad. So it's -- they are not really negative news from this side.

Okay, and has any of the customer caution that you caught out, has that filtered into new product introductions that you should be seeing in the near term?

We are always working with our customers on new products and projects. And then the pipeline for this also in the personal care and the food -- in the fragrance area is pretty good also going into the next year.

Okay, great. And last one, could you provide an early read on trends in October.

Well, we really don't comment at the end of quarters. So I mean, I think you can see in the forecast, we were slowing down in the -- particularly in the Beauty + Home markets at the end of the third quarter. And we expect to be somewhat cautious as we go through the fourth quarter in terms of overall sales activity.

Our next question comes from the line of Mike Hamilton from RBC.

Could you give a little commentary on trends you're seeing through the quarter in emerging markets and notably in South America?

I mean, from a sales perspective, we did very well. I mean, our Latin American operations overall grew about 17% this quarter. In Asia it was up even higher, it was closer to 30% in Asia. So Latin America continues to consistently do well, again, most of that tends to be beauty driven. But as Steve alluded to, we're starting to get some other CHC projects there as well. So overall, we like the momentum that Latin America's bringing.

Our next question comes from the line of Tom Mullarkey from Morningstar.

Your press release touched on the start-up cost associated with the new U.S. facility. I was hoping you could provide some additional color about how the facility is ramping up?

Right now, we're basically on time. Initially, when we got into the facility, we're re-having it. We're looking to start production at the end of this year, but really with going into more production, it's starting at the beginning of 2012. So we're on time and generally we're within budget of what we'd anticipate it to be as we get through end of October.

Good. Good to hear. And then concerning the expansion into India and perhaps all your emerging market businesses, do they typically return -- generate returns in line with the company averages or slightly above to account for higher hurdle rates in those emerging markets?

I would say, generally speaking, if you look at -- if you break it down by segment, I mean, our pharma operations in the emerging markets do return very similar margins that I would say Western Europe and U.S. businesses are doing. On a personal trend of food and beverage side, it really comes down to size and scale. So a little bit like Food + Beverage, depending on the size of the business, we have to put some structured costs. But generally speaking, they're increasing margins, but not at where the Western Europe and U.S. would be.

And are your new expansions into India, how far away are they from reaching the size and scale that you want them to eventually get to, a couple of few quarters or few years?

I think at the pharma side that's going to be -- we're going to be moving some businesses and that's probably a year or so away from where we get to scale. Margins on that tend to be somewhat higher from the start. The acquisition that we made, we still actually expect that to be accretive in the first year. We're buying an existing base of business, so that's not a typical start outside on that Tom.

Our next question comes from the line of Chris Manuel from Wells Fargo.

Couple of questions for you, just a few kind of scattered around. But with respect to the slowdown began to see in October, is that kind of broad based across the different pieces that you're in as well as geographically? Are you seeing any differences that you can perceive in customer pool rates between, say, Europe, South America, North America, et cetera?

Chris, basically it's a Beauty & Home area it's North America and Europe where we are seeing a certain slowdown its incoming or the backlog still is reasonably good in the emerging markets like Asia and China and South America, business is still very strong. So we don't see the same slowness in those regions.

Okay. First, give us a moment. As you're -- Peter, as you walk the streets in Europe and we all see the news here every day and hear about more concerns economically and some things there as well, does it feel more like '08 there than it does, say, in some other parts of the world to you?

First of all, I think Europe is not one country. Europe is very diversified. So we have certain areas in Europe where we have some economic problems and the other areas which are still doing very well. So the 2 big economies in Europe, Germany and France, I think still in very good shape. And for me, it's always a surprise. what you read in the media does not really fit what you feel and see on the streets in those 2 areas. There are other countries like Spain, like Italy, like Greece, there are certainly some economic problems. But they are visible and they are a smaller countries in Europe. So there is no consistence, one big job of Europe.

Okay, that's very helpful. And then maybe a question for you Bob. I know that you've been working through starting up some new facilities as well as, I think, some of the activity and down in the Carolinas as well. Were there any more start-up expenses or things this quarter or are there anymore that fades to the remainder of the year?

Yes. Chris, we got -- we still have the ramp up in the general Food + Beverage structure and that combined with the ramp up in the North Carolina facility totaled the quarter was about $1.5 million. And again, we would expect that to be a similar number also into the fourth, as Steve said, is that facility is going to come onstream.

Okay. And then that as we get to 2012, those in theory should...

Should be -- correct, yes. So we will -- won't have the structure cost anymore. It'll be on a comparable basis.

Okay. Last question I had, another quick one is, the tooling levels are beginning to lane a bit. I mean, 1% I think in the quarter. How do you feel about new customers coming to you looking for product launches or components to that nature? I know in an earlier comment you talked about still seeing a good pipeline in the near term. But frequently they come to you and it's something that develops 6, 12, 18 months out. Has there been any -- again, I harken back to 2009 or so, when tooling was negative for you year-over-year and then it took a big ramp up in 2010. Maybe this is just kind of normalization, but I just want to sense the comfort that we're not seeing customer slowing as well.

Chris, let me give you a little bit of color. Because while it was 1% on the consolidated basis, you really got to -- you got to look at the individual segments. So as Steve alluded in his comments, pharma was actually down about $3.5 million, so that negatively impacted their sales by 3%. But if you look to the Beauty + Home that was up about $9 million there was pretty good sizable growth. And Food + Beverage which has been pretty strong as you indicated now for the last 1.5 years was also up about $1.6 million. So overall for the year, if you look at it, were up about $20 million year-to-date over last year. So if anything, I would say, no, we don't see a real slowdown. In fact, we customers particularly in the food side wanting unique devices that are unique to them. So if anything, no, we don't see a slowdown in that area at all. So the pharma side is really more difficult because it tends to be very project based, so it tends to be very lumpy, I would say. Not, I would say, linear as some of the other Food + Beverage and Beauty & home would be.

Our next question comes from the line of Tim Burns from Cranial Capital.

Hey, Steve, I had a question for you. The India situation, are there existing multinational customers in India or are they mostly local separate entities that you've done business with, let's say, out of China or something?

I think it's really in 2 areas, on Beauty & Home side, it's a heavy and multinational. Unilever, for example, is a very large player in the Indian market with P&G and L'Oreal actually trying to get into the market. In the pharma side of the business, it tends to be kind of that mid-tier generic manufacturers, so it's a little bit different profile based on the segment of businesses, yes.

Got you. And as far as the FDA approval of products that you're participating in, I mean, we all know it's a, God, awful long process. But, I mean, do you at some point get the trigger and begin to ramp up before anybody knows?

Well, actually before that, we do. Because what we're doing is reacting with our customers. So if our customers is getting ready for a launch in anticipation of the FDA, we'll be seeing that, maybe be investing capital for that. So the difficulty is they have to make a calculated bet, whether they get through the FDA. And we've seen cases where, in some instances, they haven't made it and they've actually invested the capital. But we will be having an advanced look, normally from our R&D activities and from the customer's ramp up to get ready for production.

So India's going to become a diversified market? It's going to become pharma as well as personal care, beauty, things of that nature, is that what you're saying?

Absolutely. And we're also look at the Food + Beverage side. So it is a different type of products -- we actually have to be outside of pharma area which they're actually selling more to the Western markets. But in the local markets, we're actually adapting our products to the local styles, the local dispensing needs.

Got you. Well, you're one of the first -- well, I must say first, but a lot of people have viewed India as an enormous opportunity, but also one that you really have to be careful with, and I take it given your export experience and local on-the-ground experience, you know what you're doing.

Well, I would add to this for the nonpharma, the acquisition that we did. It's a partner that we've been working with for more than 12 years. So we've had a long standing relationship, they're our licensee, they understand our business very clearly. So you're right. I mean, we have a lot of good on-the-ground intel, but it's something really that we've been cultivating for a long time.

Okay. And last question for Peter. Over here, people are economizing really aggressively starting with where they shop. In many cases, it's now Wal-Mart or some of the lower-priced chains and then its value purchasing wherever they are. How does that fit in with the relatively highbrow, really, unique products that Aptar brings to the marketplace?

Well, first of all, in Europe we are not seeing this yet. Because I think the client has not yet really hit the final consumer. That is certainly dependency to go for more value for the money. This is a general trend, but there is always also a certain kind of luxury I wanted to spend off especially the high end of the fragrance area. So for the time being, I would say it's normal business.

Our next question comes from the line of Brian Rafn from Morgan Dempsey.

Can -- maybe, peter, you can answer this. If you look specifically at the U.S. and Europe as trading blocks the problem, systemic problem's a little different. Europe's a little behind the U.S., I think, and the reflation coming to the economic cycle. Ours here in the U.S. is a little more of a political election tax budget deficit. Europe a little more a banking system as you -- are you seeing any caution or malaise differentiation between U.S.-based customers versus Europe customers in delays?

Yes, I think there is a certain delay. I think, in Europe we have seen not as big as a drop in the business, the last crisis. I mean, we were out of the crisis a little bit earlier. And then in the U.S., people continue to be very cautionary. So in Europe now the customers are following the trend of the United States. As you said, we are a little late in Europe maybe, in this respect.

Okay. And as you get dovetail on this, you look at that specific malaise shift to value. Steve has always talked about product differentiation, packaging ergonomics, colors, sizes and shapes, does that design become more important or less important during times of economic malaise or is that something that's maybe just delayed?

I think it will be the same as in the normal times. People, our customers, are fighting for shelf space. And they want to differentiate their products. They want to have their specific look. They want to stick out of the shelf. And this battle is ongoing even in times of economic crisis.

Okay. And then anything -- progress in the beverage area and the dairy area?

The only thing, I think, Brian, as you can see the work that we've dealt with International Delights on the creamers and the milk side continues to expand. And we've actually added during 2011 additional capacity to serve that market. So it's a continuing growing segment for us, and we anticipate it to continue through 2012.

Okay. And then just one more, the $170 million you're allocating on CapEx is your -- can you break that up, maybe across Food + Beverage, Beauty + Home, and then pharmaceutical?

There'd be a little bit, I would say, generally speaking, Brian, it follows the sales ratio, if you will, with the one slight exception this year being the additional capital that we've allocated for the Food + Beverage segment. We talked about it on, I think, on an earlier call, the volume of customer project activities. The new plants in Lincolnton. So I would think generally our CapEx follows the size of the overall businesses, but this year the bigger jumping moved to the Food + Beverage market.

Our next question is a follow-up from Brian Rafn form Morgan Dempsey.

Yes. Just interested -- some of the new technology you guys have certainly launched. The bonded aluminum bath, the Began valves [ph], your meter dosages. How much of that new technology that you acquire and develop? Do you have to sell those applications fairly hard through to your customers or are your customers receptive enough to understand the technology in the market and their actually shopping you, actually looking to procure that from you?

Brian it's probably a little of both on that. I mean, on the newest technologies, what we try to do is present the opportunities to the customers, understand the market and the areas they can use them at, which particularly would be for the bonded, the aluminum, to plastic technology. Showing them areas where we think there is -- where they can be able to benefit from that. And then there's other sides we see the customers coming back to us, and having initiate the market that they want us to work on.

The robust demand you guys have seen certainly in Food + Beverage, would you say that, that is related to the organic development of the Food + Beverage area really looking at more sophisticated technology relative to the -- a gap in closure delivery? Or is it just your emphasis to target that area and capture more market share of businesses already there?

I think that it's a market that continues, as Peter said, I think we see this with our customers. They want to differentiate other shelfs and they want more convenience, that market is moving to that. It's not necessarily having very sophisticated or more expensive dispensing systems, but being able to provide on a cost-effective way convenience to the customer. And there we see that in different subset segments of the Food + Beverage market continuing to expand and we anticipate that going forward.

Okay, Steve, are there any areas in the Food + Beverage that some of these more sophisticated delivery systems are not penetrating and might be going forward over the next 3 or 5 years areas of that you could avail yourself to?

Yes, I think there's quite a few. And again, what I would tell you is, somebody made the analogy to the baseball analogy. I think we're in the second ending of a 9-ending game. So we're still early on. We've got lots of projects coming out next year. We'll be getting into different sub segments of these markets that will be able to announce when our customers come out.

And then maybe a question for Peter, you talked a little bit about the Christmas holiday for fragrances. Peter, can you differentiate any differences between the growth, the economic sustainability in the high-end of the fragrance market versus the low-end? Is anyone category better or worse relative to demand that you're seeing?

That's really very difficult to say. I think in both areas will be important for us. It's really very difficult to distinguish between those 2 in this respect.

Okay. Let me ask you maybe a little bit different, Peter. In the fragrance area generally overall, are you seeing more international, national launches, regional launches? Are you seeing product launches that are larger or smaller? Are they in the millions on new launches or maybe the hundreds of thousands, are you seeing anything that anecdotally might be a data point?

Well, I know that this is your special area. You like this question. They asked it already last year. I think it's mostly in the -- the big companies are international and they are launching these products internationally. So I have mentioned the one product which is globally now the perfume, wait a minute it's the first one, Estée Lauder. It's now a global -- a large foot coach. These are the typical large or the big ones. Local areas are, for example, in alerting South America of what [indiscernible]. This is a country which is not internationally active, this other local. It's a rather bit larger than smaller one.

Okay. All right, all right. I think that's fair. And then maybe a question for Steve or Bob, anything you guys are doing relative to international accounting standards? That's been kind of kicked around with FASB and we hear all kinds of dates 2011, 2014.

Yes, we've been following kind of the developments on a regular basis and we participate with all of the update calls and things like that. So we're taking a very, I think, cautious look at it. Where most of our European operations have already adopted IFRS or some form of IFRS. But from our standpoint, we're not jumping the gun on anything, there's no advantage to getting out there sooner. So we'll follow the general progression and see where it leads us.

[Operator Instructions] And I'm not showing any further questions at this time. I'd like to turn the program back to Mr. Pfeiffer for any further remarks.

Okay. I would like to thank everyone for participating on today's call. As I previously announced, I will be retiring at the end of this year. And this is my last earnings conference call as AptarGroup's CEO. The company is in a terrific shape, and this will be a smooth transition. The company will be in the very capable hands of Steve Hagge and our experienced senior executive team. It has been a pleasure working with you over the years and I wish you all the best. Thank you very much and goodbye.

Thank you, ladies and gentleman, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.