RBC Bearings Incorporated (RBC) Q2 2009 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today's RBC Bearings second quarter fiscal year 2009 earnings conference. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Michael Cummings. Please go ahead, sir.

Thank you, Stacy. Good morning and thank you for joining us today for RBC Bearings fiscal second quarter 2009 earnings conference call. On the call today will be Dr. Michael J. Hartnett, Chairman, President and Chief Executive Officer, and Daniel A. Bergeron, Vice President and Chief Financial Officer. Before beginning today's call, as many of have noticed, we did file the 8-K with our full release at 8:37 this morning, where we had some technical with the financial tables in our press release. We have resolved these issues and the full release including tables has now been issued and is also available on our website. We do apologize for any confusion. Let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's web site. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's web site. Now, I'd like to turn the call over to Dr. Hartnett.

Thank you, Mike. I would like to welcome each of you and thank you for taking the time for joining us this morning. As always, we appreciate your interest in RBC Bearings. Today, we are going to follow the same format. Dan Bergeron and I will be sharing the duties. I will try to point out some of the highlights of our preceding quarter and Dan will talk about some of the accounting treatments. This morning, we released our results for the second fiscal quarter of 2009, and we are happy that we performed well during the second fiscal quarter. Sales were $94.3 million, up 20%, reflecting double-digit year-over-year growth in our segments. We were slightly lower than our guidance on revenue, most of which can be traced back to the affect of the Boeing strike, the currency changes that we didn't expect, and the effect of Hurricane Ike. The combined the effects on revenues was about $1 million from those three sources. Our core markets of oil mining, aerospace, defense, and industrial aftermarket performed well, even though some pockets, slowness existed in a few sectors. We witnessed top line improvements in most of our major markets, highlighted by aerospace and defense, which grew 31% to $51.8 million for the quarter. This market now represents 55% of our total company sales. The man the strongest from our aircraft OEM sector, where our initiatives to increase booked plane content continued to bear fruit. Defense was steady and aircraft distribution was lower than last year. In the aerospace industry, the expansion of the commercial fleet continued. Bookings for the four major airplane builders on a calendar year basis for Boeing, Airbus, Bombardier, and Embraer were up 1620 planes, with approximately half that number shipped in the first nine months of the year.…

Thank you, Mike. Since Mike has already discussed sales and gross margin, I'll jump down to SG&A. Our SG&A for the second quarter of fiscal year 2009 was $14 million compared to $11.9 million for the same period last year. As a percentage of sales, SG&A was 14.8% for the second quarter of fiscal 2009 compared to 15.2% for the same period last year. The increase of $2.1 million was mainly due to an increase of about $1 million for personnel costs and expansion plans, about $400,000 for higher stock compensation expense, and about $700,000 due to the inclusion of three acquisitions. Other, net for the second quarter of fiscal 2009 was $1.1 million, compared to $0.4 million for the same period last year. This mainly included $0.4 million of amortization of intangibles, $0.4 million of facility moving and consolidation expenses, and $0.3 million on disposal of fixed assets, both relates to consolidation of our South Carolina operations. The company expects to incur additional $0.6 million of costs associated to the consolidation in the third quarter of fiscal 2009. On the first quarter conference call, we had an estimate of $1 million to $2 million for this consolidation, and it looks like we are coming in at the low end of that expectation. Operating income was $15.2 million for the second quarter fiscal 2009, an increase of 8.4% compared to operating income of $14 million for the same period in fiscal 2008. Operating income, excluding the facility moving and consolidation costs of disposal of fixed assets and start-up costs associated with expansion to new bearing products was $16.6 million, an increase of 15.1% compared to adjusted operating income for the same period last year of $14.4 million. Operating income, excluding these items, for the second quarter of fiscal 2009 was…

Okay, thanks Dan. In closing, I want to take a moment and share our thoughts on our position heading into the second half of 2009. This next quarter is a fairly difficult projection to make for a few reasons. Let me explain to you what those are. Boeing just came back from a 60-day strike. And normally, there is a considerable amount of products in the quarter that they or their subcontractors would take. However, we are not expecting them to recover their full production rates before January. Once the strike was announced, our plan was to adjust our schedule, assuming that there would be a 60-day strike. And there was a 60-day strike and so, now we have to readjust our schedules and ramp up the operations accordingly. So there is some educated estimates that we are working into our numbers here and on how much product that sector will take and this is in part reflected in our guidance. Secondly, there is a currency shift that is occurring between the dollar and the European currencies, and that just creates some additional calculus and some small uncertainties in our numbers. And finally, same as last year, this is normally a slow period because of the number of holidays and those affects our production capacity. So, in some cases, where our markets are very strong, we probably won't be able to produce everything that is required. So given those factors, we expect ourselves to be in the range of $87 million to $92 million, and adjusted operating income to be between $14 million and $16 million. So I would like now to turn the call back over to the operator and answer any questions that you might have. Thank you.

Thank you. (Operator instructions) We will take our first question from Andrew Obin with Merrill Lynch.

Okay. Just Mike, just going back to a question we asked a while ago, we are in the middle of the quarter and you still talked about some uncertainty as to what the quarterly numbers are. As I think about your outlook versus where you came in, can you just give more color -- how much of what happened in the quarter were externally driven and how much of it has to do with your internal planning process, as I said, because you give these outlooks almost halfway into the quarter and we are not hitting the upper end of the estimates, and I appreciate the difficulty of running the company in this environment. But could you just give us more sense, is it more external or internally driven? Thank you.

Sure, Andrew. I think it is definitely more externally driven. There is an internal component. The defect is that Boeing did come back from their strike this week. I think everybody is sort of reworking schedules and requirements and so we have some uncertainties from a fairly diverse customer base, although there is a strong cradle on where the product flow is with regard to how much product will be taken. So, to some extent, that part of it is external. The internal component is that we are going to start up on a few programs that we haven't made the production progress to date that we had planned to make. And so, we are a bit delayed on the revenue side.

All right, I appreciate it. And just to follow up question; in terms of free cash flow for the second half of the year, last year, it was the use of cash, the year before we where strong cash generators into the second half. What are we thinking about in fiscal 2009?

I will let Dan –

Just give me the use of cash already going to generate cash (inaudible), I will appreciate it.

I think we're definitely going to generate cash in the second half. Once again, it depends how -- the biggest key thrust is ARM, we have a very strong March shipment, obviously, that turns around invested money and working capital. But I think we will be in good shape in the second half, and I really don't have a number now, Andrew, but I will develop one and –

But it should be basically -- company generating cash, even using cash.

Yes.

Thank you very much.

We will go next to Edward Marshall with Sidoti & Co. Edward Marshall -- Sidoti & Co.: Good morning, guys.

Good morning, Ed. Edward Marshall -- Sidoti & Co.: Generally, your third-quarter revenues are stronger than the second quarter revenues on a seasonality basis, and I know you are guiding lower for the next quarter, and I understand the economic headwinds that we have here and the potential to be conservative due to Boeing; but is there something else going on in there, is there something that -- from a pricing perspective or (inaudible) business that we can kind of point to as to the lower revenue?

No, I think there is nothing going on in the pricing side. Edward Marshall -- Sidoti & Co.: Are your pricing still increasing?

Yes, I would say through September it was, I didn't endorse any major changes in our policies there and I told you so. I can't imagine that it has -- that anything major has changed there. I think what we are anticipating is a -- not as robust, an industrial aftermarket sector as we have seen in past quarters, and so we are adjusting our outlook down for that factor. We're expecting some moderation in the industrial OEM sector, although we haven't seen that yet. And, we're expecting the aircraft sector to be strong, and the defense sector to be strong. So that is -- all that is worked into our guidance. Edward Marshall -- Sidoti & Co.: Now, in the release it said -- robust acceptance of the new products that should turn into revenues in the months ahead, and if you are guiding lower, wouldn't those offset each other, the lower for the industrial aftermarket and the industrial OEM? Wouldn't that offset any of the extra pressure that you are feeling in those markets due to the new product introduction? Or is that going to take a little longer?

It has the potential to do that, I think it is a matter of timing. Thank goodness these bearings are very hard to make, so there is a tremendous technical barrier to entry, they are hard for us to make too. So we are getting through all that. Edward Marshall -- Sidoti & Co.: And then the large diameter bearings you were discussing?

It is both large diameter and it is aircraft. So there are a couple of major programs underway right now. Edward Marshall -- Sidoti & Co.: And is that $600,000 charge included in the operating guidance for the third quarter?

It is excluded. We gave you adjusted operating this time, so everybody's clear that we excluded those charges. Edward Marshall -- Sidoti & Co.: So, to be clear, assuming those charges hit, we will see that somewhere between 13.4 and 15.4, is that right?

Right. Edward Marshall -- Sidoti & Co.: Okay. And the tax rate was a little bit lower in the quarter. What are we looking forward for the year now?

I think for the year we are still looking around that 33.5% to 34%. Edward Marshall -- Sidoti & Co.: And at the head of the call, you had said there was three events that affected the quarter about $3 million in the revenues; Boeing strike and Hurricane Ike, and I missed the third, I'm sorry.

Currency. Edward Marshall -- Sidoti & Co.: Currency, okay. And do we have an inventory balance? That is the last question.

Yes we do. Inventory is at $131.1 million at the end of September. Edward Marshall -- Sidoti & Co.: Thank you guys very much.

Thanks, Ed.

We will go next to Peter Lisnic with Robert Baird.

Good morning, it is actually John Haushalter on for Pete.

Hi, John.

Could you just talk on that large diameter bearing? Looks like you guys got a little bit behind schedule, is that just delays in getting equipment for that stuff or ramping up production or is it actual orders not going through from some of the end markets we had looked for?

That is a good, insightful question. We are not short on orders; that is for sure. That is the least of our problems. It is -- we have been delayed in getting the equipment that we needed in order to produce some of these products and the equipment now is on our floor and operational. So, we have been attempting to use equipment that really wasn't suitable for both the large bearing project and the aircraft project.

Okay, thank you. And then I guess switching gears a little bit, the acquisition of the recently acquired businesses dropping margin, the impact of that I expect was kind of mitigated as you guys continue to make progress in immigrating those and bringing their margins up to more of a corporate number. Is that progress in according to plan with the demand environment potentially being a little bit slower, is that going to take longer to realize?

I say it is progressing more favorable than my expectations. So I would say we are a little better than plan.

Okay. And then just -- final question I guess. Just with Boeing with the strike, there is worry potentially about deferrals or cancellations with them, and they have kind of said it is not an issue, but it is something where your visibility kind of regarding their production schedule for 2009 is really not going to occur before January, is that what I can grab from what you guys are saying?

Well, I think their production schedule for 2009 is pretty well published. Our theory is that that 60-day strike probably didn't cost them anything. And our theory is that they catch up the production on the mature planes over the next 12 to 15 months. So I think that sector is going to accelerate a little bit to make up for 60 days of production that was carved out on everything but the 787. So we would expect Boeing’s Skyline chart, which they published on their webpage, which gives us production by shift information, would be strengthened shortly. Now I think the issue is Boeing probably has probably 100,000 subcontractors, I can't imagine how many they have, but we probably have 200 people that we ship products to, and everybody is in a sort of a re-planning mode right now and trying to assess where they should be moving their MRP. I think the good news is the fact that for the most part, that whole sector, most of it continued to produce airplane parts, because I think Boeing was very constrained on being able to build at the production rates that they needed to build. So they really didn't turn off the aircraft part production fully. So I think they will be in a very good position to accelerate the schedule next year.

Okay, and then I guess switching gears to their competitor Airbus, just you guys have talked and they had talked in the past about in the past that with the dollar falling, that they were kind of looking to increase their dollar-based cost for components. Is that something you guys with the dollar reversing in the last 60 days, you have seen Airbus kind of shift away from purchasing dollar-denominated components or subcomponents?

We haven't seen that, no. We haven't seen it.

Okay, thank you. I get back in queue.

Okay.

(Operator instructions) We will go next to Walt Liptak with Barrington Research.

Hi, thanks. Good morning, everyone.

Good morning, Walt.

My first question, Dan, as wondering the $1.4 million in charges, if you can just -- we know that $600,000 of that is for the facility moves that recurs, but how much of the startup costs, how much is disposal of fixed assets or other employment costs?

The startup costs are $645,000, and then of the remaining costs, the majority of that is for the consolidation and majority is non-cash. And so on the second page of the -- I mean, about the fourth page of the press release, we break that out for you, how much was actually disposal of fixed assets, that is $370,000; and about $389,000 of consolidation and movement expense. And some of that were (inaudible) payments and inventory valuation changes and things of that nature.

Okay, all right, I see it now.

Okay.

Okay, great. And then the recurring is a facility move, and the startup cost, I imagine, was that incremental or is that the employment cost that we would see again in the next couple of quarters or forever now?

Some of it was incremental and some of it we will continue to see, until we start making product in that facility in 2010.

Okay, and then second question is for Mike on the $240 million in backlog, which I feel pretty good about, you must feel pretty good about too. I wonder if you could talk about the breakout of aerospace defense versus industrial and then maybe talk about the industrial portion and if some of the sectors that you had talked about previously, the ones that are weak, heavy truck, semiconductor, et cetera is that the same sort of trend that you are seeing in the backlog and if you have seen any order cancellation?

Sure. I think the predominant component of the $240 million is going to be sort of segregated around the aerospace defense business because of the lead times associated with the production of that product. And although there is -- in fact, I would say this probably 70/30 in terms of that split, with 30% being the industrial side of the business.

Okay, got it.

and we haven't seen any order cancellations at all, I mean, it is just in the way the business normally upgrades, there is push-outs and pull-ins which are sort of a normal consequence, no one has reported here that there is anything outside the normal day-to-day activity going on there. Heavy truck and semiconductor continues to be soft, I think the heavy truck market, it appears from everybody that is a specialist in that market has the ramp up for those production units are basically postponed to about a year until the larger volumes incur, which is definitely as we -- those haven't really participated very heavily in our training quarters. So, whenever that does occur, it will be upside for us.

Okay, and you -- if I recall, about 60% of your business is aftermarket, is that right?

That is correct.

Okay, a lot of that goes through distribution?

It goes through either distribution or it goes to an OEM who is servicing his distribution, his aftermarket.

Okay, and that is the -- when you talk about caution in the coming quarters outside of the Boeing, are you seeing a slowdown in the distribution or that OEM aftermarket?

Yes, on the industrial side, we saw a slowdown in October, which was about 10% or 15% downward adjustment. But we all think it is -- October was a sort of an overreaction, because nothing really happens that fast in our industry. So, we are adjusting schedules and that is reflected in our guidance.

And then last question, in the backlog, is there a wind order?

Good question. I don't believe there is.

Okay.

No, there isn't.

Okay, all right, thank you.

We will go next to Steve Barger with KeyBanc Capital Markets.

Hi, good morning.

Good morning, Steve.

I just wanted to follow up on some of your October comments. On the industrial side of the business, did the market start slow and accelerate or start strong and decelerate; in terms of selling cadence can you just kind of give us a sense for what kind of activity you are seeing right now as we exit and go into November?

Overall, in total, our book to bill for the company-wide for October was well above 1. So we saw some sectors strengthen and some sectors weaken, and the sectors that we saw weaken were the industrial distribution market, and that weakening was in the 10% to 15% range.

Right. And how does that come back as we have exit at October or is that still weak going into November?

No, we are not far enough into November to be able to answer that question. But when I listened to the other conference calls for the major industrial distributors that we service – and for the most part, they expect their fourth quarter to be as strong as their third quarter, with the exception of AIT, who is a little bit more concentrated I think in the Midwest. So, that is to some extent our -- a large part of our customer base. I would say that the customer base that is not reflected by them has been very normal, very steady, and probably up over the period. So I think the big guys are probably looking at -- there is some management of working capital going on.

In the sense that they are de-inventorying for the time being?

Yes, I think they are just being cautious on placing orders and trying to evaluate the (inaudible) industrial demand.

Okay, switching to the last diameter stuff, I know you are early in the build out and you are working to get those machines in place. But there have been stories about wind projects potentially slowing down through 2009, due to credit concerns and the late passage of the production tax credit. As your sales force goes out and talks to those customers trying to line up for your FY10, what are you hearing? Is it a more cautious outlook for wind or what are you guys hearing?

No, we are hearing basically that it is normal. We are having very good conversation with the turbine producers. And for us, things are pretty much on track. I think we worried about the delay in the production tax credit and -- but I think the industry saw that as inevitable and treated it accordingly. You know, I just came back from Europe and personally spoke to those people myself, and they are expecting the 50% growth rate and adding hundreds and hundreds of people to their business, and very confident in where their future lies. So, -- guess there is a dark cloud now over Germany or Denmark.

Or the U.S. as far as you can tell?

Yes, or the U.S., right.

Okay, and is -- if I am remembering right, I think you had talked about maybe a wind contribution of just $5 million to $10 million in your FY09, is that still true in the wind business?

Yes, it might be on the lower side of that range. I mean, we just you know -- we are just breaking ground now and – the hurricane has delayed us and our plant is in Houston and so we have probably been offset 60 days.

Okay. On the acquisition front, has the credit crisis really caused deal multiples to come down for some of the smaller companies that you typically go after?

Yes.

So no -- as you are thinking about it, has there been any change to your acquisition philosophy, given what is happening in the broader economy?

Yes. Yes it has.

And so how are you thinking about it now?

Well, we're thinking that there seems to be many businesses available that are potentially very good fits with us and we're looking at those businesses that strengthen our market position, and we think we are good enough manufacturer that -- after making bearings or light components, we will be able to deal with their programs. And so the issue really is what is the -- how does the company help us be a stronger supplier in our core markets and that is the major weight that we are giving all the acquisitions that we are currently evaluating.

But if I am hearing you right, if anything the macro weakness is making you more optimistic about your ability that calls on acquisitions over the next -- if you look forward one year versus back?

Yes, absolutely, you know -- a lot of these acquisitions are levered and the financing is difficult for them and we have a very strong balance sheet and a very good bank group and so we can be very selective on our choices right now.

All right; and last question; kind of a longer-term look, but from time to time I see stories about Japan and China developing regional jets, trying to get into that market. Will you have an opportunity to get involved with some of those manufacturers via direct sales?

Yes we will, and we have people that represent us in China that we work with on a day-to-day basis, and Korea, and Japan, and we intend to strengthen that part of our organization.

Very good, I will get back in line. Thanks.

Okay.

We will take our next question from Gary Hadden [ph] with Glennehan & Smith [ph]. Gary Hadden -- Glennehan & Smith: Hi, Mike, Dan.

Good morning, Gary. Gary Hadden -- Glennehan & Smith: Just two housekeeping things. You have probably said this -- what was the internal growth and what was acquisition related growth in the quarter?

For the quarter, our total growth was 20.5 and our organic growth was 14.2. For the year, our total growth rate is 18.1 and our organic growth is 12.7. Gary Hadden -- Glennehan & Smith: Okay, thank you. And then, Dan, can you repeat the numbers you gave on operating cash flow and how you used that cash in the quarter?

Sure. For the first six months of the year, we had generated $23.9 million in cash from operating activities. We used $11 million for capital expenditures, $6.6 million for the acquisition of PIC Design, $6.7 million to pay down debt. And we are going to file the 10-Q in about two hours after the conference call, so you will see the full cash flow in there in the balance sheet. Gary Hadden -- Glennehan & Smith: Okay, great. And then last one, Mike, is – just kind of following up on the wind question, I am just curious how you see the election impacting tax credits and added to wind domestically here?

Well, I just hope the new administration doesn’t put more holidays in our third quarter. It is already too difficult to manage the third quarter. You know, I think the new administration seems to be anti-coal and if you are going to be anti-coal you have to be pro something else. And probably their relationship relative to the green parts of energy generation is positive and supportive of a bigger wind program. So I think – Gary Hadden -- Glennehan & Smith: Does the anti-coal concern you, given that mining is an important part of your business?

I think it is totally unrealistic. Gary Hadden -- Glennehan & Smith: Okay.

I mean, how do you replace 50% of the electrical power generation in the United States, it is just silly. But I do think that their emphasis for the green initiative will favor wind. Gary Hadden -- Glennehan & Smith: Okay, thanks a lot.

And we will take a follow up question from Edward Marshall with Sidoti & Co.

I just wanted to be clear on something. You said the industrial aftermarket slowed down in October from about 10% to 15%. Did that deceleration pick up through the quarter or at the end of October was it actually getting a little bit better than it was in the first of October?

I think it was getting a little bit – it started recovering at the end of October.

Okay. And then, I am assuming will that $72 million that is industrial related or the 30% of the $240 million in backlog, if you don’t have a wind number, I am assuming you don’t have a large diameter number, I mean, assuming they are the same.

Well, let me see. Probably when I look at the large diameter part of that, it is in the $4 million to $5 million range. So it is a real number.

Okay, and now that the equipment is in place, and I believe it is Houston for these large diameter.

Ed, there are three startup initiatives; maybe I wasn't clear on that. One is Houston; and then ultra large - that is bearings with 10, 12 full bore; and then there is the Hartsville initiative, which is bearings up to a meter bore. The startup that I have been talking about for the large industrial bearings have included Hartsville and Houston; and then there is an aircraft component which is in Los Angeles, which is also about the same magnitude as the other two in terms of overall revenue, and undergoing its growing pains.

So the equipment is in place now?

The equipment for the meter bore project is in place, most of the equipment for Los Angeles is in place, and none of the equipment for the ultra large bearings is in place at this stage. We expect that equipment to be in place and operational in April.

Okay. And then, I am going to take a stab at this, you can prefer not to answer it if you do not want to, and I know you wouldn't anyway, but -- gross margins for the year, do you have any kind of assumption guidance or anything that you could provide us with color on that direction?

I think at the beginning of the year, we thought we would be in that 33% to 34% range. I still think for the end of the year we should be getting close to that, at least the bottom, that is 33%. I mean, if you look at our six-month number, unadjusted, we are at 32.6%, and you know, Q3 is always a weaker quarter for us, but then Q4 is always a stronger quarter for us, especially on the margins side.

So you are kind of seeing a kind of 33% range.

Yes.

And then, if pricing is going up, I assume that you are not seeing any raw material pressures as some of these raw materials and commodities are coming down, I mean, would that impact the margins here?

Can you ask that question differently?

Sure. Are you feeling any raw material pressures, I know that that is kind of pushed off to the customers through surcharges as you go through the quarters. Are you seeing that surcharge come down?

We haven't seen it yet, I think we will see it when we round up with operational people this quarter. I think the issue with surcharges is more -- one of the negotiating lows with the customer right now and getting paid for the outstanding surcharges, which is always a difficult project. Nobody seems to like to pay surcharge.

Especially in a declining raw material environment, I would assume.

That is correct.

Okay, thank you very much.

And we have a follow-up question from Walt Liptak with Barrington Research.

Hi, thanks. Okay, Mike, I want to ask (inaudible), you know, the world has changed pretty dramatically with the banking collapse and a lot of industrial companies, it seems pretty abysmal, you know, the way that things have trended in, and it doesn't seem like it showed up for you, but I wonder if in this sort of environment as a business manager, do you look for your cost structure, is it inventory, is it pricing, I mean, what changes in the way that you run the business -- looking out over the next 12 months?

Well, I think we have two separate businesses going, and one is the aerospace defense, which is still strong and on a strong growth mode and expansion mode. And the other is the industrial OEM and aftermarket, and I think the biggest question right now is the industrial aftermarket. And I think the -- this is the point in time where you have to be moved from a process where you are looking to add capacity to a process where you have to manage your costs. And so, certainly the industrial sector businesses have to be into a mode of realistically understanding what their demand outlook is for the quarter and adjusting their cost schedules to support the appropriate level of margins, and this is where we prove that the bearing businesses is a variable cost to us.

Okay, so should we be looking at rationalization, consolidation, cost take-out, over the next couple of quarters, can expenses run into the P&L?

No, I am not anticipating that. I think it is just a normal cycle. I think in running any of these businesses, some businesses are up and some businesses are down and you have to figure out a way to support the growth of the businesses that are in strong economic sectors and you have to determine how to manage the cost base in the businesses that are in weaker economic sectors, it is just sort of a normal part of the capital goods industry. So we are not anticipating any consolidations or shutdowns or anything like that.

Okay, thanks guys.

And there are no more questions at this time. I would like to turn the conference back over to Dr. Michael Hartnett for any additional or closing comments.

Okay, well I would like to thank everybody for participating in today's call, I think there were a lot of good questions asked and I hope we gave you the answers that address them appropriately. We look forward to our next call in February, I believe, and we will try to do the very best job we can for our shareholders between now and then. Thank you.

This concludes today's conference. We thank you for your participation. Have a nice day.