American Vanguard Corporation (AVD) Q1 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the American Vanguard Corporation First Quarter 2015 Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow our formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bill Kuser. Thank you. You may begin.

Well, thank you very much Scott and welcome everyone to American Vanguard's first quarter 2015 earnings conference call. Our speakers today will be Mr. Eric Wintemute, the Chairman and CEO of American Vanguard; and Mr. David Johnson, the Company’s Chief Financial Officer. Before beginning, let’s take a moment for our usual cautionary reminder. In today’s call, the Company may discuss forward-looking information. Such information and statements are based on estimates and assumptions by the Company’s management and are subject to various risks and uncertainties that may cause actual results to differ from management’s current expectations. Such factors can include weather conditions, changes in regulatory policy, competitive pressures and various other risks that are detailed in the Company’s SEC reports and filings. All forward-looking statements represent the Company’s best judgment as of the date of this call and such information will not necessarily be updated by the Company. With that said, we turn the call over to Eric.

Thank you, Bill. Good afternoon and thank you for joining us. During the first quarter of 2015, we experienced soft market conditions in the Midwest U.S. corn market and somewhat lower sales in our international division. As a result, our first quarter revenues were approximately 18% below those of first quarter 2014. Despite of these reduced sales through our management of manufacturing costs and operating expenses, we posted breakeven earnings for the quarter. Further, we have continued to work at improving manufacturing efficiency and during the first quarter, achieved a run rate that we expect could reduce our annual unabsorbed factory overhead costs by up to 25% as compared to 2014. Similarly, we continue to control our operating expenses and expect to maintain recent levels of expenditures, even with the addition of newly acquired products. As reported yesterday afternoon, we completed the second of two recent acquisitions that together will help to expand our international business by more than 25% and give us an increased presence in Europe, Asia, Central America and Brazil. Earlier in the month, we purchased the European Nemacur product line from Adama. This completes our global ownership of that insecticide following our 2010 acquisition from Bayer CropScience marketing rights in other world regions and all intellectual property. In this transaction, we have secured additional ten registrations in countries for this well established nematicide, which should continue to provide steady and consistently profitable business for AMVAC. With this acquisition, we now have Nemacur registrations in 51 countries worldwide. Just yesterday, we acquired the Bromacil product line from DuPont for territories outside the United States and Canada. Bromacil is an important broad spectrum residual herbicide used for weed control on pineapples, citrus crops and other applications. Its largest markets presently are Japan, Thailand, Mexico, Costa Rica, and Brazil. With product registrations in 25 countries, Bromacil offers expansion potential. I would point out that both Bromacil and Nemacur carry profit margins well above those of our other products on average. As I mentioned in my opening comments, our quarterly results were driven in part by our performance in the Midwest corn market. Soft market demand in U.S. corn is incited by some of our industry peers and commented on by many expert observers in the U.S. agricultural sector. Lower corn commodity prices that inevitably reduce grower profitability have prompted purchasing the strength through the agricultural input distribution channels. These conditions have affected the procurement of equipment, seeds, fertilizer and crop protection products. Despite these conditions, and mindful that corn comprises about one-fifth of our total revenue, I want to assure you and our customers that we remain committed to the corn market. We have been closely monitoring distribution channel inventories and stand ready to fill customers' requirements during 2015 and into 2016 planting season. During the balance of the year, our performance domestically will be defined not only by corn but also by sales into potatoes, cotton, peanuts, vegetables and other non-crop markets like public health. While many factors can affect the strength of these markets, on the whole, they have been relatively stable for us. David will now provide an overview of key financial information for the quarter. Then I will conclude with a few comments about our future directions. David?

Thank you Eric. From my perspective, the financial issues are paramount important and similar to those discussed last quarter and are first, understanding the drivers of our sales and margin performance; second, what we've done to manage the under recovery of our factory costs; third, what actions we have taken to curve operating expenses; fourth, what are we doing about the inventory levels; fifth, what impact does this on our liquidity and finally, what are the drivers for interests and tax. First, on sales performance. Overall, our sales were down 18%, with crop sales down 19% and non-crop sales down 11%. Within our crop sales, we continued to see our key corn market customers hold back on replenishment orders and as a consequence, our corn insecticides, corn herbicides and our associated equipment sales were down approximately $10 million in comparison to the same quarter of 2014. As we have mentioned on previous quarterly calls, the soft condition of the corn market arose in part from the buildup of in-channel inventory in 2012 and 2013. We monitor this inventory on a weekly basis, tracking our products as they move from the Company into distribution and using EDR reporting to track our products as they move from distribution to retail. Through these means we can follow product moving through the channel towards the farms. We will not have a definite picture of on the ground usage this season until close to the end of the third quarter of 2015 when growers and retailers will have finished returning unused products through the channel to distribution. However, at this point, end channel inventories are as about a third of the level they were at in September of 2013. We see this as an indication that our direct customers are carefully rightsizing their working capital in a challenging business environment. If we now take a different cut at the sales numbers, we see that our domestic sales were down 15% and our international sales were down 25%. The domestic sales reduction is predominantly about corn as I've just discussed. In addition, in the USA, we recorded reduced sales of our cotton products as a result of lower forecast cotton makers, offset by higher sales of products like our market leading fumigants, our specialty vegetable herbicides and our growth regulators. Internationally, we had a couple of factors that acted to reduce our 2015 Q1 sales as compared to the same period last year. First, there was an annual contract for one product into a plantation in Central America that did not materialize. Second, we have some euro denominated sales that were affected by the rapid drop in the euro dollar exchange rate. Fortunately, the Company's euro denominated sales do not represent the large percentage of annual global sales though they were significant for Q1. The balance of the reduction in international sales was timing related. We talked last quarter about the impact of international business on our overall margin performance. In the quarter, we generated 38% gross margin on our international sales, which was broadly in line with our overall business. This is a good performance for our international group, which in certain territories is subject to intense competition. Furthermore, our international effective tax rate is very attractive and there is a consequence this part of our business is making a strong contribution to our consolidated financial performance. Overall, when looking at profitability on sales, both our selling prices and cost of goods have remained stable and generated margins before factory costs under absorption that were in line with last year. On the second subject of factory performance, we had a better quarter this year in comparison to 2014. Overall, the combination of lower factory costs and improved efficiency despite restrained output generated a 29% improvement in overhead cost absorption. Putting this another way, under absorption improved by $2.5 million in comparison to last year and somewhat mitigated the reduced sales that Eric and I have both just discussed. Third, we continued to work hard to manage our operating expenses. In Q1 2015, we ended at $24.3 million, as compared to $24.9 million for the same period of the prior year. Our sales and marketing spending dropped about $800,000 as we employed more targeted media campaigns. Our admin and technical cost categories were essentially flat, our freight costs have actually increased despite a lower sales level. The main drivers for this adverse variance are higher warehousing costs as a result of inventories which were up 10% on average compared to the prior year and the mix of products, for example, in Q1 2015, our bulk fumigant product sales were about 16% higher than last year. Fourth, as I just mentioned, our average inventory levels for Q1 of 2015 were higher than during the same quarter of 2014. This first quarter has been challenging as we have worked to reconcile the competing pressures of insuring that we have positioned to supply our customers well, at the same time, holding down on manufacturing. While the absolute level of inventory increased, as you'll note from the cash flow statement attached to our earnings release, the increase of $1.4 million in Q1 of 2015 was much more restrained than the $18.6 million increase recorded during the same quarter of the prior year. Also, we continue to improve our inventory forecast ending at $167 million versus a forecast of $169 million. As I commented last quarter, prior to making these two new acquisitions, we anticipated holding inventory about at this current level through the next couple of quarters and then see a reduction in Q4 to the $130 million to $140 million level we are targeting for the end of the year. The fourth quarter reduction is as a result of the startup of the new 2016 season. With the addition of new product lines, we anticipate an additional amount of $4 million to $5 million in inventory at year end. Fifth, what does they say about our liquidity. We are maintaining a very close watch on our cash as we work our way through this period. If we look at our cash flow statements, you will see that in the first quarter of 2015, we generated $20 million from our operating activities as compared to using up approximately $42 million in the first quarter of 2014. Comparatively speaking, that is a $62 million improvement. Also, as I said before, we keep close contact with our bank group in order to make sure that they know exactly where the Company is heading. Leadership about senior lenders is with Bank of the West who has been our banker for more than 30 years. In addition, we have other great banks in the lender group. These relationships remain key as we work our way through business environment such as we are seeing currently, ensuring that we have the liquidity we need to operate both our daily business and also to implement our strategy of buying key bolt-on product line acquisitions. As a result of carefully managing our balance sheet, we were able to improve our debt position by $14 million during the quarter. At $85 million, this was our lowest debt balance for the last 12 months. As a result of this performance and as a result of our longstanding excellent relationship with our lenders, we have been able to make these two key acquisitions with a limited adjustments to covenants. The covenant changes were a movement up on our leverage ratio from 3.25 to 3.50 for the next three quarters and the reintroduction of a covenant called the modified current ratio, which sets the requirement that our current assets are at least 120% of our modified current liabilities, including long-term debt. Further details of the facility amendment will be published in an 8-K filing on the subject. As we look forward over the next four quarters, we believe that having made these acquisitions and secure the amendment, we have the liquidity necessary to support our business. Finally, a few words first on interest and then on tax. You will see in our 10-Q that our average borrowings were higher in the first quarter of 2015 than in the comparable quarter of 2014. However, our closing debt was lower than this time last year. That was due to the high level of receivables, which were due in the last half of March 2015. Interest expense was essentially flat year-on-year despite higher borrowings. This was due to the fact that we do not have an interest rate swap in place this quarter. Looking forward, having completed two key acquisitions, we are likely to have relatively higher debt balances for the rest of the year. We do not have a requirement of putting place a swap contract on the low, but we will be giving thought to that over the next quarter or two. On tax, you will see that we have reported an unusual effective tax rate of 87%. In this case, a benefit for the quarter ended March 31, 2015. This arises from the fact that the tax benefits on domestic losses exceeded the tax liability on international profit. In summary, we are managing our way through headwinds in the Midwest core market. Channel inventory levels of our corn products are moving in the right direction and should presage better sales as the 2016 season starts. In the short-term, we are taking appropriate actions to drive down our factory and operating costs in order to minimize the impact of a soft market on our net income performance. We are holding firm on in-house inventory levels and controlling cash very closely. In the midst of all this, we are keeping a close relationship with our lenders and successfully following through on our strategy for bolt-on acquisitions, which are a key Company longer term performance driver. With that I will hand back to Eric.

Thank you, David. Looking forward, we are placing a renewed emphasis on technological innovation, operational efficiency and growth. As part of our commitment to technology, we identified a number of attractive opportunities, including obtaining new active ingredients from sources in industry and research institutes, expanding market access on our natural oil product line, including raising our ownership stake in advance from 60% to 87% and acquiring distribution and/or licensing rights to biological and other crop protection products. Also, as part of our technology development activities, we have recently begun market testing our new high concentration granular soil insecticides and have received very positive feedback thus far. These products represent a first stage in the development of a multi-functional at [ph] plant seed treatment system that will include enhanced versions of our industry-leading closed delivery equipment, which we refer to as SIMpass. Several specifically -- I’m sorry, severally specially focused teams within our organization are working extensively on these objectives. These efforts should provide AMVAC with a significant pipeline of new products, enabling us to diversify our portfolio and expand our global market reach. In the area of operational efficiency, we have implemented process improvements and insourced a number of operations that we had previously outsourced to other contract manufacturers. We believe that over the balance of this year, we can position ourselves to further reduce our unabsorbed manufacturing costs in 2016. In the area of growth, we are very pleased to have acquired two well established international product line. This reaffirms the acquisition business model that has provided highly profitable growth for American Vanguard for over two decades. Also, the market for product line acquisition is very promising. To conclude, as David mentioned in the short-term, faced with the challenging market environment, we are managing working capital, costs and expenses while executing on market opportunities and integrating our new product line acquisitions. In the longer term, we are committed to a strategy of technological innovation, operational efficiency and global growth. We believe with this strategy, we’ve reinforced our position as a market leader in crop protection and pest control technology. Now, with that we’ll be happy to answer any questions you may have. Scott?

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from the line of Tyler Etten with Piper Jaffray. Your line is now open, you may proceed with your question.

Hi, guys. I was wondering, after your Analyst Day, you have mentioned that full production might be possible in the fall of 2016, excuse me. I was wondering if that’s still a reality or if maybe it’s pushed back or what you guys are thinking about that.

[indiscernible] what production?

Full production in the fall of 2016.

Full production -- full in 2016. I think what we said was that we have typically been running at a run rate of about $10 million of under-absorption since we had started going to standardized costs in 2010 that we had gone up I think at the time we thought that’s closer to $27 million, but I think it was -- we round up about $24 million, $25 million and target was to try to reduce that down to $15 million for 2015 and maybe closer to the $10 million in 2016. So, in the first quarter, we reduced as David mentioned about $2.5 million and if we are consistent in doing that over the course of the next three quarters, then we would hit that target and we do have some plans, of course, depending on market demand for 2016 that we hope we would reduce that further was I think what we were saying.

Okay. Yeah, I understand that. I was wondering if you could talk about the demand and pricing for impact. We’ve seen at least on the retail level, herbicide pricing falling a bit.

We’ve seen -- I’m sorry, what was the last part of your question?

We’ve seen herbicide pricing falling a bit. I was wondering if you talk about the demand for impacts and if pricing is stable or has come down for it.

We have seen competitive pressure on the herbicides. I think everybody is trying to position their products to move as much as possible. So we've probably seen about 5%, maybe somewhere in that range.

Okay, so the demand or the pricing.

For the pricing.

Okay. And then my last question, I will get back in line. Are these new acquisitions that you guys have completed also facing the same headwinds or -- not the same headwinds, but some sort of agricultural headwinds, maybe not on the same level as rare crops?

No, these are kind of niche markets. Again, the raw material is for kind of in Japan it's largely right away herbicide use and then in most of the other countries pineapple and citrus, so they are key drivers. And so we aren't really seeing an issue. The Nemacur over in Europe where we are looking for some expansion there. Europe has gone through reduction of a member of active ingredients over the last few years and we see some nice growth opportunity for nematicide in the European market.

Okay, thanks. I will get back in queue.

Thank you. Our next question is coming from the line of Chris Kapsch with BB&T Capital Markets. Your line is now open. You may proceed with your question.

Yeah, good afternoon. Just a follow-up on I guess more generally on your technology and product acquisition growth strategy. With the amendment of the covenants that you referred to just how much capacity do you feel like you have right now in this environment to do additional sort of product tuck-ins like the ones that you've talked about here, Nemacur and Bromacil?

Well, each time we do like an acquisition, I think of anything over $20 million. I think it requires bank approval, although we would, for more acquisitions, we would talk with the bank group regardless. And of course we can always do accretive acquisitions, so that's not a limit to us.

Okay. And then just more generally like with all the consolidation that's sort of taken place in the industry, there was a period of time when most companies were selling and then there is the last few years when there has been this consolidation and I am just wondering how that's really affected the availability of attractive looking properties. Maybe these last two acquisitions speak to that, maybe there is more things available and less buyers going after these one-off product lines. I mean, can you provide any color on that?

Yeah, obviously when you do consolidate, there are less people to make acquisitions. We also of course see within those acquisitions, every time there are consolidations, there are product lines that needs to be rationalized, but I think each of the larger companies each year or every couple of years kind of looks at what products maybe are no longer strategic for them. And as we've said in the past, the market is -- there are plenty of opportunities for us to make acquisitions. There was a period of time where we did not think the right strategic acquisition was there for us. We've participated in several, but we are very pleased with these two acquisitions and we think they fit strategically with us as well as financially.

I see. And then just on these two specific lines, obviously the product, the customer list, the registrations come with those. Did these also come with any sales people or did you have to drop this into your existing sort of commercial infrastructure and sell through that team?

There are no personnel that came with either one of these acquisitions, although Adama will be distributing for us in Europe as part of this transaction, so they obviously know the business well. For the Bromacil business, we may pick up additional person to maybe help handle the Asia business, but I think the rest of the business we can manage with our existing personnel.

Got it. And then, if I could, just one follow-up on the -- more back on the corn business and the inventory situation. I think what you said was that based on what you can see through EDI and your intelligence there, the inventory levels are -- I think you said like a third today what they might have been in September 2013. Just wondering what's normal. Are they back to normal levels now or I guess with this sort of thrifty farmer backdrop maybe the retail channel, the new normal might be something below what we've seen in the past. So just if you could provide some color on where you think inventories are relative to where you would like them to be going into '16 season with hopes that maybe 2016 is somewhat more normal?

So I think around 20% of the corn has actually been planted at this point, so we still have a lot more corn to get in the ground and lot more of our product to be utilized. And David mentioned, we don't get exact counts until September of anything that comes back in the channel and we are seeing orders now of various of our product lines in that that go into that sector. I think we've identified we've probably got one SKU that is probably long from where we might normally see it, but I think the rest of the product lines that go into that market are at or below what we might consider a normal level. You're correct, we are speculating as well that it could well be there may be a new low level instead of 20%, 25%, maybe it’s 15% to 20%. It might be the appetite for -- and recognizing that our inventories of our products may be lower. Insecticides may be low, there may be fungicides that are longer -- herbicides that are sitting along within our customers as well. So, it’s just astute on your part there could be a new low.

Okay, I appreciate the color. Thanks.

Thank you. [Operator Instructions] Our next question is coming from the line of Jay Harris with Axiom Capital. Your line is now open, you may proceed with your question.

David, when you released the preliminary numbers for this quarter, I calculated that you had reduced cost by $4.5 million to $5 million. Did the two segments that you talked about add up to that approximately and will that kind of cost reduction continue in subsequent quarters?

So the cost in the factories were down as we indicated. We don't calculate quite $4 million, but $3.5 million perhaps. With some variability between quarters depending what we're making and there is also some variability on operating expenses. So I think we made the comment that we think that we are heading in the right direction towards the 25% improvement on factory.

How much for your operating expenses then?

In comparison to the prior year, they were down 900.

So there is your 4.5 million.

Right.

And so is that likely to continue or what kind of variance can we anticipate as, let's say, quarterly revenues rise?

I mean if quarterly revenues rise, obviously that would help as far as factories, because we've got inventories, but in some products we need to -- we are in good position and we need manufacture more if we got increased revenues. But it is a function of reducing our inventory.

I'm trying to really get a handle on whether you've reduced annual cost by $18 million to $20 million or whatever that number is. Can you give additional color on that or are there too many moving parts?

I mean operating expenses are probably not going to flatten that much more.

It actually would be addition of new product lines.

A couple of new product lines, I mentioned we may be bringing on somebody for Asia and try to get with -- we are managing to be under 2014 levels.

Not that much on operating. So the factory costs, we are trying to target between 15% and 20% on their absorption, right.

Yeah, so 25, so that would be the savings there.

How would you characterize revenues in April relative to March or the average for the first quarter?

I mean, we typically don’t speak about a quarter until we finish. So we are seeing orders pretty broadly across our product portfolio, but we are not prepared to comment on where we are this quarter as compared to last quarter.

And then finally, could you refresh my memory as to what your annual international sales were in ’14?

Just about 70 million.

Right.

70?

Right.

70.

Okay. Thanks very much guys.

Sure.

Thank you. Our next question is coming the line of Tom Willingham with The Hampton Group. Your line is open, you may proceed with your question.

Thank you, good afternoon. As you were talking about your run rates and that you felt that you’re now at a production level where you could hold around 15% under absorption. But when you look at balancing that versus the headwinds and the inventory levels that you have, what’s your prioritization of driving down the inventory levels to potentially free up cash versus the under absorption in the production rates? In other words, if you – is there any benefit to allowing your under absorption to grow perhaps to drive down the inventory levels a little bit faster to free up some more cash?

So just on the first part 15%, we talked about a target of 15 million of under absorption, not 15%. But with regard to inventory versus under absorption, they are tied together and in fact, we meet as a team every month to discuss because push one down, the other one goes up. So we have got a target in spring, our inventory is down as David mentioned, between the 130 and 140 range, and we have a target of bringing the under absorption down to 15 million. So that’s what we are managing. So as we look at, okay, if we – there is – we don’t have a preference, it doesn’t matter, either one of them drives cash, so they are completely related.

Dual-pronged strategy as opposed to focusing on one?

Correct.

Okay. Thank you.

Our next question is coming from the line of Chris Kapsch with BB&T Capital Markets. Your line is now open, you may proceed with your question.

Yeah, my question is also a follow-up on this inventory picture. Just a couple of things, one the 135 million target, does that include the recent two product acquisitions? And then secondly, I guess that’s the target that you decided you could balance with your focus on operations this year. But if you look back historically, on average the company has kind of run with inventories, I am just eye-balling it, but 60 million, 70 million, maybe 80 million. So I was wondering what – do you have a target beyond getting through this cycle. I don’t know if the end of 2016 is the right timeframe, but any sense for what realistic inventory level might be looking out past this year into 2016? Any sense of what the target might be looking a little bit further out.

Yeah, so the target for the following year is a 110 million and we – and to answer your first question, the 130 million to 140 million, so 135 million in mid-point did not include, I think David mentioned, potentially $4 million or $5 million that we might pick up depending on timing with the two new acquisitions. And I think just kind of following, we will as far as factory utilization, we are focusing on picking up more tolling business that has not been a strong driver for us in the past because we have been following that, trying to make sure that we could expand the production run rate at the factories. At this point we have as we said, surplus capacity, so we are actively looking for tolling opportunities.

Okay. Just on the 110 million target for 2016, is that – you view that as still elevated just looking like in 2010, ’11, ’12, for example, the inventory levels were between, call it 70 million to 90 million, so to maintain 90 million.

So that – yeah, and then of course we have got add again the $4 million to $5 million on to these numbers. But yeah, that’s still a number that we would like to improve upon. We will still have inventories with couple of key products that are beyond where we would like them to be that we will continue to work down.

Okay. And then just – I think I understand this, but there is effectively no shelf-life issues with these products, correct?

That’s correct.

Okay, thank you.

Sure.

Thank you. Our next question is coming from the line of Tyler Etten with Piper Jaffray. Your line is now open, you may proceed with your question.

Okay guys, just couple more questions. I was wondering if you could talk about South America, Brazil specifically. It seems like we have heard a lot bad news out of the country or bad outlooks, just kind of what you’re hearing and what you expect out of the country without giving any official guidance.

Okay. So Bob Trogele who is – we have introduced before is the COO, who is here and he might may be comment on what the thoughts are for us with Brazil as we move forward.

Well, you know, besides the political environment and the exchange rate, they have had a bumper crop as far as soy beans and the commodity prices are down, so their income levels are less plus with the supply situation meaning stocks in use ratios globally. Brazil, the Brazil market is always growing by acre expansion, right, putting in more land into production. I think that slowed. And then what we’ve heard from different sources of that – some of manufacturers have also inventory issues in the market. But we don’t – Brazil is not a market in which we play in today, so that’s just an outside view to what we hear what’s going on. So please take it as such.

And again the acquisition we did with Bromacil that has sales down there, again it’s a niche market. So we are not – Bromacil is not a low crop product.

All right. On the North American side, we had a pretty mild winter. Have you guys talked to any I guess, dealers about the potential of more bug pressure this year and what that could mean for possible sales in 2016?

Mild winter, well, it depends on which part of the country you’ve been talking about. Certainly that varies. Bug pressure comes and goes depending on many different factors. But no we’ve not heard – to answer your question directly no, we have not heard any perspective of bug pressure due to a mild winter.

Okay. I just didn’t know if you guys have a more optimistic look in 2016 if there were to be a heavier bug pressure this year with so many people cutting back on corn soil insecticides?

And Tyler, so on that front, yeah, obviously, we’ve had two years I think of corn movement pressure that has been not as robust as maybe it was in the ’11 and ’12, so there probably will be a fair amount of what I would call naked corn out there. And if that pressures go back into the ’10, ’11 or ’12 range, there is likely to be significant failures. So if that happens, obviously that would bode well for us in 2016.

Okay. And then last one for me, on the restocking issue. So you’re saying that you’re expecting the restocking to happen mostly in the fourth quarter. And the commentary coming from the channel what are they saying about the products that’s potentially the issue getting it through retail. Is it the price on it or are the farmers not seeing the value on it, or what sort of color are you getting from them? Thanks guys.

Okay. And we talked specifically to our SmartBox users as well. I think the biggest piece, I mean we can – the majority , vast majority of our SmartBox users are continuing to go forward and then plant all of their acres, maybe down some – they are planning on using our product and so that was the feedback we got. But from – Coleman [ph] asked the whole series of questions, I think number one was just was reliance upon traits. Cost of our product was not cited as a driver, the corn commodity price certainly was maybe in the second or third position. Some people are relying upon rotation and hoping for the best. And with corn at different price levels, again, they are looking at those inputs and trying to figure out if they can skinny down anywhere they can.

All right. Thanks for answering all the questions.

Sure.

There are no further questions at this time. I would like to leave the floor with the management team for any closing remarks.