TransDigm Group Incorporated (TDG) Q1 2008 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the First Quarter 2008 TransDigm Group Incorporated Earnings Conference Call. My name is Shikwana and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of this conference. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Sean Maroney, Director of Corporate Accounting and Investor Relations. Please proceed, sir.

Thank you. Good morning ladies and gentlemen. I would like to thank all of you that have called in today and welcome you to TransDigm's fiscal 2008 first quarter earnings conference call. You should have already received our earnings release that was issued yesterday. If you have not received the release, you may retrieve it by visiting our website at transdigm.com. A replay of today's broadcast will be available for the next two weeks. Replay information is contained in the release. Before we begin, the company would like to remind you that statements made during this call which are not historical in fact are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in the forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the information regarding forward-looking statements and risk factors included in the company's latest filings with the SEC. These filings are available through the Investors section of our website or through the SEC's website at SEC.gov. The company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA as defined and adjusted net income, both of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measure and a reconciliation of EBITDA as defined and adjusted net income to that measure. Now having taken care of the necessary disclosures, let me introduce Nick Howley, our Chairman and Chief Executive Officer, who will provide an overview of the business for the first quarter. Followed by Nick, Ray Laubenthal, our President and Chief Operating Officer, will provide a brief overview of operating activities followed by Greg Rufus, our Executive Vice President and Chief Financial Officer. And now with that, I'll turn it over to Nick.

Good morning and thanks again to everybody for calling in to hear about our company. As I've done in the past, again, because we are a relatively new public equity, I'll give a very short overview of TransDigm. To remind everyone, we completed our initial public offering and our shares began trading on the New York Stock Exchange in March of 2006 under the symbol TDG. At the time, we sold about 12.6 million shares or 28% of the equity at a price of $21 a share. During Q3 of 2007, we completed the sale of approximately 11.5 million shares or about 26% of our outstanding shares in a secondary offering. That transaction closed in May of '07 at $35.25 a share. In late November and early December of 2007, Warburg Pincus distributed about 7 million shares or about 15% of the equity to their limited partners. The Warburg Pincus ownership is now about 30% and we are no longer a controlled company under the New York Stock Exchange rules. Our shares closed last night at about $44.15 a share I believe and are balancing around this morning here. TransDigm is a supplier of highly engineered aerospace components. The components are used on almost all commercial and military aircraft in use. We estimate that about 95% of our sales are generated by proprietary products, which means we own the intellectual property. Similarly, we estimate that about 80% of our sales come from products for which we are the sole source provider. Commercial business currently accounts for about three-quarters of our revenue with the balance being defense-related. We generate about 60% of our revenue from aftermarket sales this year. Aftermarket revenues have historically produced a higher gross margin and been more stable than the OEM sales. Because of the large installed base of products' high margins and relatively low capital expenditures, TransDigm has historically generated very strong free cash flow and this has given us a lot of flexibility both in area of our debt and our acquisition pursuit. We have a very consistent, value-based operating strategy focused around what we refer to as our three value drivers: New business development, continual cost improvement and value-based pricing. We stick to these concepts as the core of our operating management methodology. This consistent approach has allowed us to continuously improve and increase the intrinsic value of the businesses. A key fourth element of our value proposition has been active in acquiring businesses, or we have been active. We acquire proprietary aerospace product businesses with significant aftermarket content. We have in total acquired 21 such businesses with 4 of them... 4 businesses and 3 transactions in 2007 fiscal year. Now let me turn to our latest financial performance. I will remind you that this is the first quarter review for fiscal year 2008. Our fiscal year started on October 1, 2007. As I have said in the past, quarterly comparisons can be significantly impacted by differences in the OEM aftermarket mix, large orders that occur from time-to-time, transient inventory fluctuations, seasonality and other factors. In spite of some timing issues, we had a good start to the fiscal 2008 year. Revenues were up about 33% on a year-over-year basis, organic growth was a little under 8%. If I review the revenues by market segment, and this on a pro forma basis versus the prior year, that is assuming we own the same mix of businesses in both periods. In the commercial segment, which makes up about three quarters of our revenues, our commercial OEM revenues were about flat on a quarter-over-quarter basis. Commercial transport segment revenues were up modestly and regional and biz jet revenues were down modestly. We believe this is just a timing of shipment issue versus the prior year. Just to give us some increased confidence in that, our incoming orders in the quarter were up about 20% in the commercial transport segment and just under 15% in the regional biz jet segment. We still expect our pro forma commercial OEM business to be up about 10% for the full year. Commercial aftermarket revenues were up about 9% on a year-over-year basis. If we remove the impact of a one-time shipment in the prior Q1, our core aftermarket was up about 13% on a year-over-year basis. As we mentioned before, we continue to be cautious regarding the sustainability of last year's high rate of growth in the commercial aftermarket. We still anticipate pro forma commercial aftermarket revenues to be up over 10% for the full year. Our defense segment, which makes up about a quarter of our business, revenues were up 8% on a quarter-over-quarter basis. Defense business is always difficult to predict in the near term. We remain cautious. Always somewhat subject to the political wins and budget uncertainties, but absent any significant change, we still expect pro forma defense revenues to be up in the 5% to 10% range versus the prior year. Moving on to profitability, and on a reported basis I am going to talk primarily about our operating performance or EBITDA as defined. I will point out that total adjustments to EBITDA are almost identical from year-to-year, so it's not really much of an issue. On Q1 versus the comparable basis, the prior year, our EBITDA as defined of $75.9 million was up 35% versus the prior Q1. Significantly, the EBITDA as defined margin is 46.5% for Q1. This is about half a point higher than the prior Q1 at 45.9% in spite of the dilutive impact of acquisitions which totaled approximately 2 margin points. The margin expansion is due primarily to strong aftermarket pricing, our ongoing productivity efforts offset somewhat by higher development expenses as the 787 program stretches out a bit. Greg will review the financials in more detail. With respect to our acquisition pipeline, we continue actively looking at opportunities. We have a typical pipeline of possibilities, more small than large opportunities. We remain disciplined and focused on value creation. Predicting the timing is always difficult. As a general rule, we are not going to give specifics on any acquisitions until they are closed. Regarding the latest stretch out of 787 deliveries, we will likely see some higher development expense, but in total we do not believe it will have any material impact on our 2008 financial performance. With respect to our 2008 guidance, we see some potential upside to our guidance both in lower interest rates, and, though there may be quarterly variations, we may see a higher full year margin. To a lesser extent, and though we haven't seen this yet, there may be some potential downside in the possibility of general economic softening and defense buys. However, on balance after only a quarter... one quarter of the year gone by, we are still comfortable with our previously issued 2008 guidance. I am going to ask Ray Laubenthal, our Chief Operating Officer just to give you a short operating overview and then Greg will get into the financials in a little more detail. Ray?

Thanks Nick. As Nick mentioned, first quarter results were strong. Our acquisition integration and productivity improvements continue to add solid value. Also, new business order activity was strong and new product development activity made good progress. And finally, new pricing was enacted as planned, and let me explain each of these in a little more detail. As you may recall, we acquired four businesses under three separate transactions during fiscal 2007. These four businesses, CDA, Avtech, ADS/Transicoil and Bruce Aerospace are performing well and operating as expected. During Q1, we continued to make good progress integrating our proven value drivers into these acquisitions operating culture. Productivity projects continue to progress favorably at our operating units. Of significance, at our new Bruce Aerospace unit, we reduced the head count by almost 18% while increasing the sales volume by over 20% versus the prior quarter. At Avtech, we successfully completed our first full quarter of operations after closing the West Coast Specialties plant and moving its operations into the Seattle location. In accordance with our plan at acquisition, this consolidation further reduced ATI headcount and eliminated the redundant separate facility cost at WCS. We continue to be very active finalizing our Boeing 787 design and manufacturing processes. The development activity and spending continues to be particularly high on our new composite fuel and hydraulic isolator product at Adel Wiggins and our digital flight audio systems at Avtech. We expect development and expenses on these projects to begin to reduce during the second half of the year, assuming there is no more schedule slips by Boeing. In addition to these new programs, pricing at our operating units is improving consistent with our past actions and current year plan. Now let me hand it over to Greg Rufus, our CFO who will review our first quarter financial results in more detail.

Thanks Ray. Good morning everyone. Again, thanks for calling in. As you have just heard, Nick's comments centered on pro forma comparable results, Ray gave a brief summary of our value drivers and the acquisitions we made in 2007. For those of you who have listened to prior calls, please be [ph] aware of the various accounting charges associated with our past acquisition activity. As we started FY08, we still have purchase price amortization for both backlog and inventory step up along with some start up expenses that are still with us in '08. These items will come into play when looking at GAAP financials results compared to prior year comps during this year. My comments will focus around GAAP reported result. And it's a pleasure to start our new year and report to you that we had a very successful first quarter. Quarter one sales were $163.1 million, up $40.4 million or 33% from the prior year. Organic sales were up $9.2 million or a 7.5% increase over the prior year. This growth rate is being compared to a relatively high prior year comp and it was within our expectation. The quarter-over-quarter comps were negatively impacted by a $2.6 million one-time commercial aftermarket shipment made in the prior year first quarter. Adjusting for this single shipment, the organic growth rate on a GAAP basis would have been 10%. As we've said in the past, quarterly comparisons can be impacted by singular events such as large orders, transient inventory fluctuations and other factors. This is a good example of that singular event. Our recent acquisitions, ATI and Bruce, contributed $31.2 million or the balance of the growth versus prior year. Reported gross profit was $88.1 million or 54% of sales. This $24.5 million increase is 38% greater than the prior year and it is also greater than our sales growth of 33%. The reported gross profit margin increased approximately 2 percentage points versus the prior year. This significant expansion in margin was attributable to the strength of our proprietary products which allowed favorable pricing and continued productivity efforts from both our recent acquisitions and our more mature operating units along with operating leverage on the higher sales and a slight favorable aftermarket product mix versus the prior year quarter. Selling and administrative expense was 11% of sales for the quarter. This compares to prior year expense of 9.9% of sales. Research and development expense, which Ray just spoke to, is the primary driver of the increase in expense as a percent of sales. As Ray mentioned, we expect these costs to reduce in the second half of our year as the 787 development finalizes. Amortization of intangibles increased by $1.7 million to $3.3 million for the quarter. This $1.7 million is primarily attributable to the acquisitions of ATI and Bruce. Almost half of this increase is attributable to order backlog amortization, which is amortized over 12 months, and this will wind down over the next two quarters. Net interest expense was $24.5 million, a net increase of $6.7 million versus the prior year quarter one. This increase in interest expense reflects the additional $430 million of debt associated with the ATI acquisition made last February. For the quarter, our borrowing is at $1.36 billion versus $930 million a year ago while the average interest rate between the quarters was flat at approximately 7.5% for both quarters. Regarding our tax provision, our effective tax rate was 36.4% for the quarter. This tax rate reflects the favorable impact of our legal entity restructuring which took place in the fourth quarter of last year. The prior year tax rate of 36.6% included the benefit of a retroactive R&D tax credit, which lowered the prior quarter rate by 1.5 percentage points. We are forecasting our '08 effective tax rate at 36.5% for the year and we anticipate our 08 cash tax payments to be approximately $45 million. Quarter one net income was $27 million or 16.5% of net sales compared to $20.3 million in the prior year first quarter, a 33% improvement. With the net income improvement on a GAAP basis, quarter one diluted EPS was $0.54 per share compared to $0.43 per share a year ago, a 26% improvement in this quarterly comparison. Our adjusted diluted EPS was $0.58 in the first quarter, which was also a 26% improvement versus a year ago. This quarterly improvement comparison was dampened somewhat by higher common shares outstanding this year versus the prior year. Cash flow from operations was unusually strong at about $60 million for the first quarter. We ended the quarter with $170 million of cash on our balance sheet. The strong performance is attributable to several factors. We experienced unusually strong accounts receivable collections which didn't follow our historical holiday pattern. Usually, with the timing of a holiday and other company December year-ends, our cash collection has been historically low. Overall, we had good performance in other areas of the balance sheet and they were mostly favorable. At the end of the first quarter, our net debt leverage ratio to EBITDA as defined was 4.0 times compared to 4.3 at September. Regarding our debt structure, I would also like to point out that in January we entered into a three year interest rate swap in the amount of $300 million at a fixed rate of 5%, which will become [ph] effective in April. Interest rates on our total debt are approximately now 75% fixed and 25% variable. Assuming current [ph] interest rates and structure, our blended interest rate is just under 7%. This concludes our prepared remarks. We will now open the phone lines for questions. Question And Answer

[Operator Instructions]. Your first question comes from the line of Robert Spingarn with Credit Suisse. Please proceed.

Good morning everyone.

Good morning Rob.

Nick, you referred to the stock moving around a bit today. I think people are perhaps reacting to the organic growth, and you touched on that. Are you seeing any change in the buying behavior on the part of your customer base, particularly the airlines? Is there a capacity issue that we should be looking out at?

I would say, Rob, not that I can see yet. As I said, our underlying aftermarket growth, if you strip out the one-time thing was 13%. I think we would enter the year saying that it would be somewhere in the low double-digits. I mean it's running about where we expected. I don't see any change in pattern yet.

But when you --

As always, if the economy softens, that concerns you a little. But I will say we don't see any indication of that yet.

So nothing in the schedules out there or the buying activity? Have you seen any pressure on pricing? I guess Ray spoke to this a moment ago, but anything that's notable?

Rob, I would say business as usual.

Okay.

Haven't seen any particular impact there. I would say the revenue passenger miles, at least in the last airline monitor that just came out, don't seem to be softening. I mean, I am sure you know. You have seen that --

Yes, we have seen that, but one of the... our thesis is that if they take capacity down, they're going to start with the older airplanes, continue to intake new aircraft and maintain those newer fleets. Could you talk a little bit about your exposure on the newer aircraft relative to those more likely to be retired?

Yes, I would... Rob, as I think you know, but everybody may not, so I'll state it. We are pretty well distributed across the fleet. We don't have any disproportion in exposure to older aircraft or newer aircraft. I mean we are pretty well weighted. If we were a portfolio, we'd be pretty well an evenly weighted portfolio you could think of it. I don't see any substantial exposure there. Now if you get a 9/11 kind of event where there was massive sitting down of airplane, that will always impact you. But I don't see any indication of that.

Okay. That's clearly the case. One last thing on this topic, which is... would you characterize any part of your product line as more discretionary than others? In other words, the airlines could back off or slow down, or is everything mandated by either flight hours or cycles or some other --?

Some of it's as required, but most of it is pretty well driven by cycles or revenue passenger miles. A little bit of our... we make some bin latches. We make bean latches. It isn't a big part of our business. That can be discretionary with retrofits. You can always live it. If it's just dirty and worn out, you can live with it a little bit. But it isn't much, it isn't much of our business. Historically, Rob, the best track of our aftermarket business has been revenue passenger miles.

Okay. Last question for Greg on cash flow. You clearly had a very strong showing in the December quarter. You talked about the receivable. What are you looking for in this current quarter? Is there going to be some reversal on that because of the accelerated collections and how do you think about cash flow for the full year?

Well, as the... we are still sticking with our forecast. We think at the end of the year, we will, barring any acquisitions or any other activity, we will add $160 million of cash to the balance sheet. The second quarter, we will have a half a year payment on our subordinated debt and will also pay about three months of interest. Sometimes we don't pay our interest on the bank debt on a monthly basis. So we have two months accrued right now. So you have quite a bit of that impacting the balance at December. We think that some of it was just maybe good luck, good timing and a little bit of just good work on receivables at the end of the first quarter. But we still feel pretty confident that our cash will be what we said in the first year of generating $160 million on the balance sheet at the end of the year. No need to change it right now.

Okay. Great. Thanks for the color guys.

Your next question comes from the line of Carter Copeland with Lehman Brothers. Please proceed.

Hi, good afternoon. It's actually Joe Campbell. And I don't want to beat a horse on this spare parts thing. It was interesting, though, Nick, that Collins and United Tech and several of the large aerospace companies reported the same kind of... just not quite as strong as they kind of thought it might be. And they are still holding on to forecasts for the whole year based on travel being up and so on. But it doesn't seem to be something that was unique to any one company, but something we saw a bunch across a lot of companies. On your M&A side, I wondered whether the pricing in the equity markets is making things easier or harder or what do you see, if anything, it's been only a month or two of turbulent markets, but how do you see that affecting the flow of deals?

Joe, I really can't say that I have seen any significant change.

Maybe I am probably a little early.

As you say, you don't see much response in a month or two. We have a sort of the typical mix of things in our screen and sort of in our backlog or a pipeline of acquisition. It's a fragmented business, we tend to have more small stuff than large stuff as always. I can't say I see a significant difference.

Yes, sometimes what happens is that the market goes down and the public companies lower their expectations and prices and the sellers have some idea in mind it's more historical than current.

Yes, and you get sort of a bid out [ph] spread.

Yes, sometimes there is a little bit of that, but other times they realize if the market is going to be weak, they are not going to get as much and sometimes they then don't sell or they go like gee, it's going to go down for a while and they get out. So it's a little hard to generalize. But usually it does have some sort of impact and sometimes it makes products more available and other times it has this bid out [ph] spread, but probably too early to ask. Well, it's early in the area as well. So we were optimistic about the rest as I hear you are.

Yes, I mean Joe that's my sense in the M&A world, just too early to draw any conclusion.

Well, thanks Nick.

Yes.

Your next question comes from the line of David Strauss with UBS. Please proceed.

Good morning, thanks. My only question is the cyclicality you think you have in your aftermarket business, what have you seen in power downturns net coming up say you have been with business for a while I mean what have you seen has happened to your aftermarket business in the past is it just really tract revenue passage in your miles on the way down so back in 02 in 03 when probably when your passing miles were flat to down did your aftermarket business actually go negative and maybe comment on the difference in the businesses you have today versus back then? Thanks.

I think in the aftermarket response to the market changes, I don't think the mix of products we have now will respond or act about different than the mix of products we had in the past. I can tell you the best... from quarter-to-quarter or month-to-month there is no exact tracking, but over any significant period of time revenue passed your miles has been the best indication of our underlying growth and why I say as if you strip out the acquisitions, if you want to strip out the pricing if you were strip out new business generation but your time has been significant in the aftermarket and look at kind of the core part number... best indication is as I say revenue pass in your miles in a downturn absence on precipitous events like 9/11 or a war. It's very unusual if it... I don't believe it's ever happened that the growth in a year actually goes negative. Maybe variations, maybe rise and run at the 5%, 6% average, it may be drops down to 2% or 3% or something like that. But absent a precipitous event, we have not seen it go negative for any extended period of time and I wouldn't expect we would again unless there is a real shift in the world

Right. And your business obviously...your aftermarket business has been tracking revenue in passenger miles, but it's actually growing at a quicker pace.

That's right. And as we said when we gave you the guidance beginning of this year, last year's growth which we saw and most people saw, which I want to say was somewhere over 15 and a hair less than 20%, was probably not a sustainable growth rate in the aftermarket.

Okay. So with the way you have characterized, the market is still pretty solid above kind of the normal trend rate but decelerating off of last year?

Yes, what we said is we expect our commercial aftermarket to be up in the low double digits. That was our guidance for the year and we are about the same place now in our view.

Okay, great, thanks a lot.

[Operator Instructions]. And your next question comes from the line of Fred Buonocore with CJS Securities. Please proceed.

Yes, good morning gentlemen. Just with respect to defense, you talked about expecting 5% to 10% growth for this year. Can you talk a little bit more about where the variability comes in there and any specific programs or anything that would be driving that more towards the upside of the range?

The big bulk of our aftermarket... the big bulk of our, excuse me, defense comes out of the aftermarket and we are very broadly spread across the platforms. The variability is primarily just timing of orders. Sometimes in the short term, as I say, it can be tough to predict, particularly with the kind of political winds blowing around. Sometimes you will see delays or spikes in orders for short periods of time that without any great apparent reason for it. I mean that's the risk, it's not that we see any significant change in the underlying demand. We have heard rumors at time that the Air Force is running less training flights, but that's been going on for a while and we haven't seen any big impact from that. So I think it's more just timing of orders and kind of the political wind blowing around that can impact you, so --

Okay, great. And then you also talked about the regional and biz jet sub segment of your OEM biz being down for the quarter but orders up pretty strongly. Could you give us a sense for how big a piece of your OEM those two items are and kind of what your expectations are in those areas for the smaller plane?

Well, let me... I will give you a rough size, and I think we have talked about this before. If you take our commercial OEM business over a cycle, it may swing a little bit from year-to-year. It's roughly evenly spread between commercial transport on one half and regional business jet in the other half. It's about evenly split. That may bounce a little from year-to-year, but doesn't change significantly. As far as the outlook, you mean the outlook for regionals and business jets, is that your question?

Yes, that's right.

I have to say I don't know any more than you new guys know and what the outlook is. It's running at a pretty high rate. I think many people would say that the production rates might peak in 09 and 10 in that. I don't know that I see that any differently, but I also would say I don't have any big insight into it.

Okay, great. I appreciate it. Thank you.

Your next question comes from the line of Bob Franklin with Prudential Financial. Please proceed.

Hi, I just want to make sure, I heard a couple of things right. You've said you're going to add $160 million or you're guiding to adding $160 million cash to the balance sheet at the end of the year, is that right?

160 is the spread for full 12 months from where we ended our fiscal '07 to where we would end our fiscal '08. And I am just reconfirming the guidance we gave a quarter ago.

All right. And at the end of '07, fiscal '07, it was roughly $106 million, so we'd look --

Yes, 105, $106 million... so that's right.

All right.

Absent anything else, it would be about 260 at the end of the year.

Okay. And I think in your prepared comments leading into the call, you gave us how you calculate your leverage number, which if I heard it, I didn't hear ... I could write it down fast enough.

Well the actual formula is a last 12 months LTM of a pro forma adjusted EBITDA to take advantage of the acquisitions you make in the middle of the year divided by net debt.

And what the debt calculation come to you for you?

4.0 at the end of this quarter.

4.0. Okay. And then with a question about your acquisition strategy right now, with the dollar being as weak as it is, this is a two part question. Dollar being as weakest as it is, are you having more competition to buy companies from overseas companies? And with the volatility in the fixed income markets now, how does that affect your strategy?

I would say as far as more competition, I can't say that's change substantially. I haven't seen any significant change in that. With respect to the situation in the credit market, if we had a big acquisition that we needed to go into the credit market for, I mean as you guys know, it's a little tougher now than it was six or nine months ago. I don't think that's a big issue to us. Most of the things we see tend to be smaller. And we still have a fair amount of cash. We have a fair amount of room in our revolver and we have some flex [ph] capability in our credit lines. So I don't expect that would be a big problem for the type of things we typically see.

Okay, thank you.

And you have a follow-up question from the line of Robert Spingarn with Credit Suisse. Please proceed.

I just wanted to touch on two more things if I could. Ray, you talked about the 787 and some of the work you are doing there. Could you give us a little better sense of how that's transacting... design change is coming in, what is exactly is going on?

The 787 program, we don't see that as much different as any other development program right. If you look back historically they all have their bits and starts, these schedule put up by the OEM are rarely ever kept, it usually takes an extra 6 to 12 or 18 months to get the aircraft launch. And we are seeing the same thing on the 787 and of course you have seen it in the media. Our development expense along those lines has crept a bit but not materially in the overall effect in our business this year. As the scope creeps on a little further, we have a little more expense developing the product, but nothing that has derailed any of our new programs. They are all tracking and we expect to finish them up in the next 90 days roughly to 180 days.

Just to delve a little further, are these first article issues or is this production ramp expense?

This is development expense to make the first articles and to test them.

Engineering.

It's engineering.

It's engineering and materials to support engineering and that sort of thing.

We are spending some money on tooling and so forth and other production ramp up, but that's normal, normal course of business. That's all in our plan for the year.

The tooling part would likely be largely anticipated, right? This is just again as you said getting the first article right. And the reason I asked the question is as we all look at this program from a number of angles, only one of which is TransDigm, once we get the first article right, then the ramp should be fairly rapid in terms of volume, right?

Correct, correct. You are correct with this.

Okay. And then a last comment and the last question I have, Nick or Ray is on the PMA side. Anybody getting more interested in your parts?

Haven't seen any change in the pattern there. It's de minimus and we haven't seen any change of any significance.

Excellent. Thanks again guys. Take care.

At this time, there are no further no questions. I would now like to turn the call back over to Mr. Sean Maroney for closing remarks.

Okay. I would like to thank everyone for calling in today and this concludes our first quarter conference call. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.