Executives
John Gilbertson - President and CEO
Kurt Cummings - CFO
Marshall Jackson - EVP
Analysts
Matt Sheerin - Thomas Weisel Partners LLC
Jim Suva - Citi
Joe Wittine - Longbow Research
Ingrid Aja - Bank of America and Merrill Lynch
Mark Hasenberg - Nottingham Capital
John Kohler - Oppenheimer & Close
Shawn Harrison - Longbow Research
AVX Corp. (AVX) F3Q08 (Qtr End 12/31/08) Earnings Call January 22, 2009 10:00 AM ET
Operator
Good morning. My name is Tasha and I will be your conference operator today. At this time I would like to welcome everyone to the Third Quarter 2008 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session.
Thank you. I would like to now turn the call over to John Gilbertson, President and CEO of AVX Corporation.
John Gilbertson
Good morning. I would like to thank you for attending the AVX conference call regarding the results for the third quarter of this fiscal year that ended in December. I am John Gilbertson, and with me today is Kurt Cummings, our Chief Financial Officer; and Marshall Jackson, our Executive Vice President in charge of Sales and Marketing.
The sales in the quarter were $320.6 million. Obviously the economic climate has been dynamic in the last few quarters, but we feel we are faring reasonably well in this difficult time. Our early actions to address costs have helped in this changing market. Clearly the end market demand slowed considerably during the December quarter, and certain market segments such as automobile production came to a virtual standstill.
The currency markets also saw dramatic swings and a stronger US dollar had the effect of reducing the reported sales from the European region on a sequential basis. Europe was particularly hard hit this quarter. Despite these challenges, gross profit margin increased in the quarter. The gross profit margin excluding restructuring cost in the quarter increased to 17.1%. Our cost-saving efforts are showing results and restructuring accomplished during the past quarter will help subsequent quarters.
We continue to aggressively implement a number of cost-saving initiatives, including headcount reductions throughout our operations in order to address the overhead cost in light of the level of the overall demand decrease. We feel there are additional cost-saving opportunities to reduce these costs in the coming quarters as we further rationalize our manufacturing and product strategy.
SG&A expenses also declined during the quarter to $29 million with much of the drop for the result of cost reduction actions. We have been successful in attacking these costs and expect this cost to drop further in the following quarters.
The profit from operations was $22.9 million, including $2.8 million in the restructuring cost, income before tax also reflects a $1.9 million write-down related to securities transferred to the Company from an impaired Bank of America enhanced cash investment fund. We earned $0.14 per share with these expenses or $0.16 when you take out the unusual expenses. Also during the quarter, we continue to generate positive operating cash flow. The issue obviously going forward is revenue and spending at the consumer level. Much of the shortfall to normal revenue is concentrated in several market segments.
Consumers globally have reduced spending as the availability of credit in the marketplace has been limited. While this consumer spending fell, the defense and medical segments held up reasonably well. The medical and military markets showed improving trends during the quarter and now represent a combined total of 15% of our overall sales. The mobile handset producers appear to have achieved close to 5% unit growth this calendar year. This is a positive indicator of the consumers' desire for greater functionality and this is driving Smartphone growth. The Smartphones have been strong these last two quarters and remain strong this quarter. Our position tends to be stronger in this market segment.
The automobile segment represents the major shortfall in the quarter and continues to be very difficult because of reduced automobile production. The industrial sector dropped, but only modestly. Thanks in part to an energy conservation program. Energy costs continue to be a key factor, and this is driving wind and solar system growth where our power capacitor has been increasingly in component demand. We expanded that production in an effort to reduce lead times and address the new developing market in China. In addition, the energy exploration business has continued strongly and has demanded sophisticated electronics in oil exploration. Both of these product lines are in the Advanced Products Group.
The Advanced Products Group continued to perform well and increased its position with 35% of our overall orders and 31% of our overall sales in the December quarter. Customers were very cautious this quarter, particularly in the distribution channel, as they ordered only what they had an immediate need for. The overall company backlog decreased in the quarter. Our distribution customers appear to have seen reasonable demand and flow through during the quarter, but they have not built inventory or resale products as they remain cautious in these uncertain climates.
Sales in the quarter through the distribution channel continued in the 37% range of our overall sales. As we have indicated for the past year, we believe that the product inventory in the distribution channel is lean, and we will see increased stocking orders when the market demand increases. As stated on previous calls, the issue we believe is the end market demand and not an inventory issue with components. As a percentage of overall revenue in the quarter, Asian sales decreased to 44% of the total, from 47% in the September quarter, mainly on weakness in consumer demand.
The European region decreased to 22% of the total due to a general slowdown in the region and a recent strength of the US dollar. While the American sales increased to 34% of the total due to the strength in the medical and military segments. The commodity pricing remained competitive in the December quarter and prices declined approximately 2%, overall compared to the prior quarter. This is in line with historical trends. We believe that capacity utilization declined somewhat during the quarter.
The future market activity is difficult to predict with current economic situations. Some customers who took extended production shutdowns during the holidays have indicated that they have extended these shutdowns into January, especially in the automotive sector. Our sales activity will also be impacted by the Chinese New Year holiday in Asia late in January. Since the visibility is so unclear, all we can say at this point is that we expect the March quarter sales to decline from the December quarter. It is our impression that the March quarter will represent the bottom of this market correction.
Operating margins are expected to remain in the range we have seen in the last couple quarters assuming certain volume, mix and selling prices. As mentioned previously, it is our intent to implement additional cost saving programs during the next two to three quarters to continue to improve margin. This quarter, we paid $6.8 million in dividends and repurchased $2.4 million worth of AVX stock on the market. Our overall financial position remains strong with $766 million in cash and security investments at the end of December, or approximately $4.50 per share of outstanding stock.
The preliminary cash flow statement indicates that we have generated approximately $7 million of cash from operations during the quarter. We reduced our overall inventories by $11.4 million sequentially and spent $13.7 million for improvement and equipment expansion. Depreciation totals $17.4 million. We had the financial strength to continue to make investments in our strategic product lines, where we expect to spend approximately $40 million in capital this year which will put us in a good competitive position as the economy recovers.
There are uncertainties in the general economy and the abilities of companies to access credit as widely reported. However, we remain confident we will be able to continue to introduce new products that serve our customer needs for greater functionality and attack aggressively our operating costs.
I would now like to open it up for questions.
Question-and-Answer Session
Operator
Your first question comes from the line of Matt Sheerin from Thomas Weisel Partner.
Matt Sheerin - Thomas Weisel Partners LLC
Thanks. Good morning, John and Kurt. So my first question, John, is obviously you don't have a lot of visibility. You expect the business to be down. What gives you confidence that operating margins can be flat if revenues will be down in the quarter, is it just a mix issue?
John Gilbertson
I think a little bit was a mix, Matt, but you got to remember, during the December quarter, particularly in December, we shut down plants all over the company. We had extended shutdowns. We took vacation time. We worked part-time in some areas. So we got very little volume absorption in that December quarter, and we still had a pretty good operating margin. So our view right now is that those plants are starting to come back up now and we think that that will offset any other issues we might have. But right now we are also going to see some in this quarter, some of the cost relief that we did in the December quarter. So March has a good shot at staying in that same range.
Matt Sheerin - Thomas Weisel Partners LLC
Okay. I know SG&A is coming down but how much of it is actually taking down production and impacting cost of goods sold in a beneficial way?
John Gilbertson
That is a hard number to come up with, Matt, but let me say a couple of things on that. First, we have consolidated and we started earlier, it's not the mid-year, consolidating several operations and shifting down the smaller operations into larger units. The other thing we did which was equally beneficial, is to get out of these marginal product lines. We had marginal product lines and we decided in the summer months to start getting out of those. Let's see what the price will take on these more legacy type products, and if it won't take the price increase, we essentially got out of them to shut those operations down. That has helped our margin in this quarter and it will help us further go into the next year.
Matt Sheerin - Thomas Weisel Partners LLC
Okay. And you've been through a bunch of these cycles, John, and what normally seems to happen as volumes start to come back, we do see increased pricing pressure. Are you expecting to see that at some point, if not March but in June when things do start to come back?
John Gilbertson
Matt, I think we will see pricing pressures. There is a strange thing going on here. As hard as it is to say, there are inflationary pressures still out there in the market. They are kind of being held down somewhat, but you are still seeing cost adjustments that have not been made in freight, for example. Everybody moved their freight prices up, now that the oil and gas prices are going back down. We haven't seen that reduction back to the level it has gone to. So there is some inflationary pressure out there, and we do expect pricing pressures as we move into the March-June time frame. If I can expand just a little bit on this, and I'll quote Marshall Jackson, with whom we were talking before the call. Marshall said that, he believes the December quarter was the bottom for bookings. And you have to realize what we ran off a little bit in December was backlog. So we are going to see, we believe right now, better bookings in the March quarter than the December quarter, but you have to build up backlog before you get the revenues. I think that March will look much better than it does today. January is going to be very, very difficult for the industry, and I think the entire sector will probably have a difficult March. But I think in the March month, we will start seeing some improvement in order activity.
Matt Sheerin - Thomas Weisel Partners LLC
Okay. That's helpful. And just lastly, you talked about some of the markets and how you are doing there. Could you give us a more precise breakdown of the revenue trends or percentage of revenue for those markets?
John Gilbertson
Right. Automotive was about 9% of our revenue in the third quarter. Cellular was about 12.5%, Computer was about 20%, Consumer was down around 11%, Industrial was about 12.5%, Medical was about 7%, Military was 8.5%, Networking was 2.5% and what we call Telecom was 16%.
Matt Sheerin - Thomas Weisel Partners LLC
Okay, great. Thanks a lot, John.
John Gilbertson
Thank you, Matt.
Operator
Your next question comes from the line of Jim Suva with Citi.
Jim Suva - Citi
Thank you very much. First on your outlook for March to be down. Can you give us a little bit of more clarity as far as -- do you expect to be down more than normal. When I look at, you know, the last few years, last year it was down 5.5%. And for most years it has fluctuated up and down in single digits. Are you expecting it to be down more than the seasonal norm?
John Gilbertson
Yes, I think, Jim Suva, it will be down more than what we have seasonally seen. You can't be in this sort of environment that we are in right now. There is so much uncertainty, but I do think that it will be down in revenue, but I think that some of the things that are being done will help pick up particularly on automotive. We have got to have automotive pick back up. And you are aware, Toyota, across the board, everyone has been having difficulty. But both, France and Germany have put in incentives for automobile purchases, but they won't kick in, until late in the quarter. So the quarter will be worse than seasonality, I just don't know at this time what it is going to be, basically because we don't have the visibility that we normally have this time.
Jim Suva - Citi
All right, that's very fair. I think you said that you think that March may be the bottom of the correction. And then later on in the call, you mentioned that you intend to proactively cut costs for the next two to three quarters. It seems like if March is going to be the end of the correction, that maybe you need to reinvest or not be cutting for two to three quarters.
John Gilbertson
We are going to continue, Jim, to invest in new products. We will spend about $40 million, $45 million this year. I think what we are doing is, we started on a plan in this down time to consolidate into increasingly larger facilities in order to get that leverage. We will continue to do that. In this world that we are in today, we have got to move away from smaller facilities. So we are doing more consolidations of the larger operations. And that's something we are going to continue to do the next couple of quarters.
Jim Suva - Citi
Okay. A quick housekeeping item. Tax rate, what should we expect since it looked like it was a little bit lower this quarter than anticipated?
Kurt Cummings
Jim, it is Kurt. As indicated in the notes to the press release, we adjust cumulatively to 22%.
Jim Suva - Citi
All right.
Kurt Cummings
So I would assume that for the fourth quarter as well.
Jim Suva - Citi
The 22%. Okay. And then last thing, can you give us a brief commentary on kind of the competitive landscape. One of your customers, Kemet is really struggling financially. Does this present an opportunity for you to gain some share or pick off some of their jewel assets or something like that at a cheap price. How do you see the competitive landscape?
John Gilbertson
Well, this has always been a very competitive environment. And truthfully, we do not do as well as other people might expect when one of our competitors has difficulty. They are under pressure that we would not like to see as far as pricing and so on, and when a competitor gets in difficulty it hurts the product line a little bit. For instance, all large multinationals want to keep two or three viable suppliers. So, I think the difficulty that any competitor has would actually hurt the segment more than you might imagine. I don't see having any influence on us directly. And I think that, again, whether it is here or in Asia, now there will be some consolidation in Asia. There are several competitors there that are having some difficulty, and there are rumors in Japan that there will be some consolidation there. And again, I think that will help the industry in a consolidation basis there.
Jim Suva - Citi
Great. Thank you and congratulations on great results.
John Gilbertson
Thank you.
Operator
And our next question comes from the line of Joe Wittine with Longbow Research.
Joe Wittine - Longbow Research
Do you hear me okay?
John Gilbertson
Good morning, Joe.
Joe Wittine - Longbow Research
Hi. Thanks. My first question relates to inventory levels. You gave some pretty detailed commentary that, it seems distribution continues to kind of destock where they can. My question is: are you seeing that in the direct sale customers as well and then maybe more importantly, what are your thoughts on those phenomena continuing into the March quarter here and really how long until customers essentially have to start restocking?
John Gilbertson
Well, my view tends to be a little bit more bullish there than most people. They are getting their turn situation pretty well in line, and they are watching distribution specifically, watching their turns very closely. I think we will see more activity from distribution in the March quarter as compared to the December quarter, and we will see much more activity in the June quarter. We are helped with a lean inventory and distribution also, because obviously when you have the inventory and the distributors come back in, there are some distributors that will come in early and some late. When the distributors see the market turning a little bit, the aggressive ones will come in early because they get better prices than the ones who come in later. So I think we will see more activity there, particularly in the distribution level. As far as the OEMs, I don't see the biggest issue just in market demand. We don't see as much inventory hesitation there as perhaps we are seeing in distribution. But I think the end market demand will be the biggest influence on OEMs and their general market conditions.
Joe Wittine - Longbow Research
But you are seeing some continued kind of reductions in the current quarter, just to be clear?
John Gilbertson
I wouldn't call it reductions. I am just saying they are not restocking at the levels that they had typically done. Let's take an old legacy product, and I won't mention its name. It is normally run, something that's been made around here for 30 years. It will run about four months in inventory and distribution. Well right now, that inventory is up about 5.2 months which is, it's an uncomfortable position for them based on their POS. So, once their POS continues to move, and their POS was reasonable during December, the inventory number of days will drop right to the bottom line and you will see quicker restocking efforts.
Joe Wittine - Longbow Research
And then switching gears now. I wanted to quickly touch upon the input cost environment. You mentioned in some instances it is kind of still an inflationary environment with regards to freight and any other costs that are moving. We have spoken about tantalum powder over the last couple of calls and is there any potential risk to maintaining those flat operating margins as it relates to input costs of the current quarter?
John Gilbertson
I would say no. I think that, that's probably a good environment for the next two or three quarters. And copper is another example we use on the connectors. Copper has come down quite a bit. We haven't seen all of that price reduction turn back to those, but we think we have got that under control, and we are in good shape. The energy thing is starting to come down in some areas better than other areas, but that is probably our biggest unknown as we will let this oil price thing translate into the energy cost. But in general I would say we don't see that right now for the next couple of quarters, and true of tantalum powder also.
Joe Wittine - Longbow Research
Okay. And then just lastly, just a clarification comment. I didn't know in your earlier comments if you alluded to additional, product line pruning going forward. And if you had that on table, is there any additional details on what kind of lines those would be?
John Gilbertson
Generally what those tend to be, is more legacy products. Products that have been around a long time and in some cases we have kept them operating because the big OEM also buys other newer products for us, and some of those legacy lines will be shut down in the next two quarters. Because in this environment customers are more understanding than they have been in the past; and we just can't afford those break-even type product lines anymore.
Joe Wittine - Longbow Research
Okay. Just one more housekeeping kind of question. You usually provide sales by segment. I think that was the last remaining one, capacitors, connectors, et cetera.
John Gilbertson
Roughly, ceramics was about 13%. Panel and components were 9%. Advanced products as I mentioned are 19, pardon me. Kurt corrects me and I said 9. It was 19. The Advanced Products Group is 31%. Our resale business was about 26%. And connectors were about 11%.
Joe Wittine - Longbow Research
Great, thanks a lot.
John Gilbertson
Thank you.
Operator
Your next question comes from the line of Ingrid Aja with Bank of America and Merrill Lynch.
Ingrid Aja - Bank of America and Merrill Lynch
Thanks. I just wanted some clarification on the margin issue. If you were looking at pure volume impact, it would have looked like it hurt gross profit by $25 million but only came down about $12 million. So are you saying that you offset half of that volume impact by this cost cutting? Was there any mix impact as well?
John Gilbertson
Yes, I think grid, there was a mix impact. We offset quite a bit of it by cost cutting, but there is a positive mix account. And one thing you have to consider in this as I mentioned that consumer wasn't that strong during the quarter and automobile wasn't strong, and the two lost leaders in this industry are consumer and automotive.
Ingrid Aja - Bank of America and Merrill Lynch
Okay, great. And then, can you tell us maybe, Kurt, where you think you can maybe manage SG&A too?
Kurt Cummings
It was about $29 million this quarter Ingrid and I think we can continue to bring that down. Some of it was related to the level of sales where you have got some direct costs attributed to sales, and the rest is our continuing effort to consolidate and prune SG&A costs. So I expect it to come down, not dramatically quarter-over-quarter but we can keep working at it.
Ingrid Aja - Bank of America and Merrill Lynch
Okay, great. And then lastly, have you had any trouble collecting from customers? Are you seeing any change in the aging of receivables?
Kurt Cummings
No. In fact our DSO improved in the quarter. December is always a difficult one to measure because when people take holiday shutdowns, et cetera, the timing of the cash flow can be an issue, but at this point, I don't see any dramatic change in our customers' behavior.
Ingrid Aja - Bank of America and Merrill Lynch
Okay, great. Thank you.
Operator
Your next question comes from the line of Mark Hasenberg with Nottingham Capital.
John Gilbertson
Good morning, Mark.
Mark Hasenberg - Nottingham Capital
You said that the business of distribution was and the sell-through is really where our distributor sales I should say and their sell-throughs fairly good during the quarter in this environment. What is the timing of your information? I know you get a lot of information from them, but is that through December? Can you tell what December was versus October, November? How clearer picture do you have?
John Gilbertson
Mark, we don't get a clear picture until another two weeks, maybe ten days. But, you know, all we can say is anecdotal stories. But I think they did fairly well. Not in this climate. I believe that we will see more activity from them this quarter. Some of them had end of year. We are cleaning up issues with cash, and I think that will get a little bit more liberal as we go into the March quarter.
Mark Hasenberg - Nottingham Capital
And what's happening overall in the aging of your orders? Has it come in pretty dramatically? Is that having a big impact on your book-to-bill and you have your order sizes and things like that?
John Gilbertson
We are seeing smaller order sizes, but in general the distribution of orders or backlog has not changed that much and I think we all thought we would see more of it pulling closer, but, no, we still have long lead time, 90 days or more orders.
Mark Hasenberg - Nottingham Capital
And on the advanced your higher margin businesses, they’re really seem to be coming along well and I assume reflect new products from your customers. How much visibility do you have on that?
John Gilbertson
That tends to be a little longer lead time particularly in the power caps for the solar energy and wind energy. That lead time is out pretty far. We are still booking it out. You are talking about 22 to 24 weeks. So we got pretty good visibility on that and we have a firm forecast. If I can say of all the five business units there, they are perhaps the most solid as far as what they are going to do. And they have been hitting their forecast and they have a strong forecast in that March quarter, perhaps stronger than some of the commodity businesses and the ATC acquisition. Again I will put a plug in for that. They are doing very well also and the spacecraft and military defense application. They continue to perform well both in revenue and also and particularly in margin.
Mark Hasenberg - Nottingham Capital
And from what you said during this call, it doesn't sound like you have had any dramatic change in cancellation, gross net orders.
John Gilbertson
Mr. Jackson is shaking his head. He gets a daily report. We are not seeing cancellations or really push-ups. Particularly we are seeing some expedites in the smart phone. The smart phones are doing very well. I think they surprise everybody. They have surprised us. But they are expediting that product line pretty heavily.
Mark Hasenberg - Nottingham Capital
Nice quarter given the environment.
John Gilbertson
Thank you very much.
Mark Hasenberg - Nottingham Capital
Thank you.
Operator
Our next question comes from the line of John Kohler with Oppenheimer.
John Gilbertson
Good morning.
John Kohler - Oppenheimer & Close
Good morning. It is Oppenheimer and Close. Quick question on CapEx. Wondering if you had a figure?
Kurt Cummings
This quarter or for the year?
John Kohler - Oppenheimer & Close
Both would be great.
Kurt Cummings
Okay. This quarter was $13.7 million. And thus far in the year it is $41.5. So, I expect us to be in that $45 million to $50 million by the end of March.
John Kohler - Oppenheimer & Close
Okay, excellent. And then making a prediction at March that might mark the bottom, what would cause you to change that? Is it that you need significant fall-off?
John Gilbertson
I think it is a macro issue. If the economy gets much worse than what it currently is, then some of these incentives to help the consumer fall short or they get messed up some way. That would be the biggest issue. It would be a macro question as opposed to the segment.
John Kohler - Oppenheimer & Close
Okay. And then just a follow-up to that if I may. Assuming that March does mark the low point, you are not predicting any massive hockey stick on the other side, right?
John Gilbertson
No, I don't see a hockey stick. I see a slow movement up as the year progresses. The one unknown and I think that everybody should consider this, is, you know, automotive has been so weak for so long. We could see the automotive improve rather dramatically if these incentives somewhat are addressed toward the automotive industry. But I will say that the French and German pay package for automotive has not spurred those sales. France is doing a little bit better, but not really to the level that those incentives should have got it up.
John Kohler - Oppenheimer & Close
Excellent. Thank you very much.
John Gilbertson
Thank you.
Operator
Your next question is a follow-up from the line of Matt Sheerin of Thomas Weisel Partners.
Matt Sheerin - Thomas Weisel Partners LLC
Just following up. I want to ask Kurt a question on currency, particularly given the strength of the yen, and you have got a big resell of business with Kyocera. So, how does that impact your revenue and margins?
Kurt Cummings
Matt, some of our purchases with Kyocera are based in yen and some are in dollars. And then of course the mix of sales will influence how much the movement in the yen against the dollar affects our costs. Right now the strength of the yen is increasing our cost of sales to a degree. On the other side of that currency question, the U.S. dollar has been strong against many of the other currencies, particularly in Europe, and that has helped cost of sales. Some depression on this top line, but has helped our cost of sales as opposed to the last few years where it has done the opposite. So currency affects us all over the place and there was a dramatic swing in the dollar value this last quarter which you will see in the balance sheet when that goes out in detail. It swung quite dramatically because of that. So, at the moment because of our hedging programs, we managed it fairly well, but overtime, I am not sure how that will affect us.
Matt Sheerin - Thomas Weisel Partners LLC
Okay. Fine. And I'm just following up, John, on some of your comments about distribution. It sounds like you are expecting distribution orders to be a little bit better maybe then your direct sales this quarter because you might see some replenishment at the end of the quarter or is it too early to tell?
John Gilbertson
I think it is too early to tell. We are doing a little bit better than our forecast right now. I think that we will see most of the distribution activity in late February or March. So I think January will still be pretty slow for distribution, but in late February or March, we should see some increase, and I think that rate of February or March will be a higher rate than we saw in December.
Matt Sheerin - Thomas Weisel Partners LLC
And do you expect to work down your own inventories on actual dollar base this quarter?
John Gilbertson
Our plan is to do that, yes.
Matt Sheerin - Thomas Weisel Partners LLC
Okay. All right, thank you.
John Gilbertson
Thank you.
Operator
Your next question comes from the line of Shawn Harrison with Longbow Research.
John Gilbertson
Good morning again, Shawn.
Shawn Harrison - Longbow Research
Just two quick follow-ups. Did you actually mention what your point of sale was at distribution?
John Gilbertson
No, we didn't. We don't really know what that is quite yet. Are you talking about percentage-wise?
Shawn Harrison - Longbow Research
Yes, I am trying to figure out the variance between your underlying sales were and kind of what you were seeing at distribution.
John Gilbertson
37% of our total sales.
Shawn Harrison - Longbow Research
Okay. And then, to put you on the spot, you mentioned that there is potentially industry consolidation going on out there, more so in Asia than anywhere else. Do you see yourself as a player?
John Gilbertson
Well, obviously there are certain things we would like to do, particularly in the specialty business. We see ourselves as involved in that. Obviously we have cash available, but we are not on any acquisition hunt. I guess it is another way to say it. There are some opportunities we are looking at, but they are rather modest opportunities, and we would like to grow our specialty business. And that's our direction, to increase that advance products group. I would obviously buy another one if another ATC comes along. I will certainly buy that.
Shawn Harrison - Longbow Research
Got you. Thanks for the candid response to that. Nice job on the quarter.
John Gilbertson
Thank you very much. And we would like to thank everybody. We will see you next quarter. Hopefully will have a good quarter next quarter. Thank you very much.
Operator
This concludes today's conference call. You may now disconnect.
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