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Hill-Rom Holdings, Inc. (NYSE:HRC)

F09Q01 (Qtr End 12/31/08) Earnings Call

February 5, 2009 8:00 a.m. ET


Andy Rieth - Vice President, Investor Relations, Communications and Global Brand Development

Peter Soderberg - Chief Executive Officer and President

Greg Miller - Senior Vice President and Chief Financial Officer


Joshua Zable - Natixis Bleichroeder

Kristin Stewart - Credit Suisse

David Roman - Morgan Stanley

James Hillary - Independence Capital

Matt Miksic - Piper Jaffray

Ian Zaffino - Oppenheimer & Co

Gregory Halter - Great Lakes Review


Please stand by, we’re about to begin. Good morning and welcome to this Hill-Rom conference call. (Operator Instructions).

Before we begin, I'd like to provide Hill-Rom's usual caution that this morning's call may contain forward-looking statements such as forecasts of business performance and company results and expectations about the company's plans and future initiatives. Actual results may differ materially from those projected. For an in-depth discussion of risk factors that could cause actual results to differ from those contained in forward-looking statements made on today's call, please see today's press release. Also, you may reference the discussions under the heading Risk Factors in the company's annual report on Form 10-K for the period ended September 30, 2008 filed in December.

If you have not received today’s release, it’s available on Hill-Rom’s website at

On today’s call will be Peter Soderberg, CEO and President of Hill-Rom, Greg Miller, Hill-Rom’s Senior Vice President and Chief Financial Officer, and Andy Rieth, Vice President, Investor Relations, Communications, and Global Brand Development.

And now at this time, I’d like to turn the conference over to Mr. Andy Rieth. Please go ahead sir.

Andy Rieth

Thank you Melissa, and I thought you almost gave me a promotion there for a moment. Good morning everyone. I’d like to personally welcome you to our conference call and webcast for the first quarter of our fiscal year 2009.

First, some quick ground rules to make the conference a little bit more efficient. We’ve scheduled an hour for the call, and plan to leave plenty of time for Q & A after our prepared remarks. During the Q & A period, please limit your inquiries to one question plus a follow up per person. If you do have additional questions, please rejoin the queue.

Along with our remarks, we’re also displaying slides, real time, that should amplify our disclosure. I would encourage you to follow along with us. Also, as has been our usual practice, these same slides were posted last night on our website. The slides and the reconciliations will also be a part of the archive of this call.

The telephonic audio replay of this call will be available for a week, and the webcast and the accompanying slides will be archived on our website for approximately one year.

Also, I want to note that our 10-Q for the quarter will be filed later today, and will serve as a good compliment to today’s materials.

With that, I’ll turn the call over to Peter.

Peter Soderberg

Thank you Andy. Good morning to everyone, and welcome to our third earnings call since the spinoff with Batesville Casket.

Let’s take a quick look at our agenda for today’s call. I’ll begin with an overview of Hill-Rom’s first fiscal quarter performance, and discuss the impact of the pull back in US hospital capital spending on our quarter. Then I’ll outline the adjustments that we have made to our strategies and outlook going forward in response. Greg will present a more thorough financial review and discussion. After some brief, concluding comments, we’ll take your questions.

Let me start with first quarter revenue. On a consolidated basis, we grew our revenues 3% to $352 million, in spite of the head winds we began to feel in the second half of the quarter in our North American acute care segment.

On a constant currency or operational basis, revenues were up 5.9%, or about even with the prior year, without the impact of our October acquisition of Liko, which contributed $18 million to capital revenue.

The growth of capital sales and rental revenue was about the same, at approximately 3%. Turning to our three operating segments, let’s begin with North America Acute Care where we saw our only material revenue weakness.

Sales declined $204 million, or 2.7% on a constant currency basis. Capital sales declined to $140 million, or 7.5% in constant currency. This is where we’re feeling the impact of the slow down in hospital capital spending.

Patient Support Systems, our core hospital bed business, saw an upper teen’s percent decline. As recently as mid-November, we had a pipeline of probable orders and shipments that would have put us in a very solid growth position for the quarter, however, we saw roughly 30 significant opportunities frozen by hospitals and health systems try to cope with the credit crunch and other factors impacting their willingness to fund capital purchases.

During Hill-Rom’s October Investor Conference, and our November Earnings Call, we noted that we had not yet seen softness in hospital CapEx spending, but discuss multiple economic drivers that could well lead to a significant slow down. High credit markets and the higher cost of credit, deepening recessionary pressures leading to declining elective procedures, deteriorating patient mix with higher incidents of Medicaid and private pay and/or no pay patients, operating margin and cash flow pressures due to the above, significant declines in revenues from philanthropy and endowment funds, the potential for federal and state payers to reduce reimbursement levels, and finally, uncertainty as to the continued depth and breadth of the recession.

Unfortunately, these drivers began to influence our business in mid-November. It’s difficult to know how long customers will freeze or limit their purchases of technologies such as ours to facilitate the safer, and more efficient and effective delivery of patient care.

On the positive side, our market research suggests that there are several key considerations that will influence capital spending priorities in the near term. Does the product generate incremental revenue for the hospital? Is there a rapid ROI for the technology? Does the product enhance by patient or caregiver safety profile, in light of public data reporting, and pay for performance requirements. And, does the technology provide for meaningful cost avoidance.

We believe we can demonstrate that our products can satisfy at least three out of four of these drivers, and if reduced length of stay is considered as a revenue generating item, we satisfy all four. Our mandate is to make this case credible and compelling to our acute care customers.

On a more positive note, North American Acute Care rental revenue grew 8% to $63 million, lead by a mid-teams increase in therapy support systems. Our capital sales of these systems grew half again this amount. These capital and rental products include surface technologies that provide wound management, as well as patient and caregiver safety advantages. We have had considerable success in convincing customers with clinical and economic rationale for these technologies.

Finally, we are increasingly dealing with the Chief Information Officers and their teams of hospitals, as our products get smarter and more connected. Consequently, our health IT business was up over 20% during the quarter on the strength of our launch of the Navicare Nurse Call platform.

In a few minutes, I will discuss our response to the weaknesses that we are seeing in our core North America Acute Care capital market. However, let me continue with our segment review.

In our North America Post-Acute Care segment, revenues grew to over $50 million, an increase of nearly 5%. Our capital revenues were up 27%, driven by sales of Liko products in the post-acute care environment, along with the growth in the direct consumer area.

North America Post-Acute Care rental revenues were flat, with continuing strong respiratory care and home care revenues all set by the revenue impact of a loss of two extended-care contracts at the end of the prior year quarter.

We expect solid growth for the remainder of the year in post-acute as Medicare is the largest payer for our post-acute rental products, it should represent in the near term, a stable source of revenue.

Further, we expect new products launched in this year, coupled with some sales force editions we are currently making, and the Liko product line to improve post-acute performance. This business remains on track to achieve it’s low double-digit growth goals.

Turning to our international and surgical business, we recorded an unexpectedly strong quarter, with total revenues of $99 million, up 18% or 28% on a constant currency basis. About half of this growth was due to the addition of Liko revenues.

Substantial growth occurred in Europe and Latin America, while declines were seen in Asia, Australia, the Middle East and Africa. We feel this softness was timing related, and expect these regions to deliver good growth for the balance of the year.

Capital revenues were up 23.7% on the strength of Liko sales, new products and sales channel initiatives. International rental revenues declined 7% due to the impact of currency movements. However, on a constant currency basis, rental revenues rose 5%.

We are pleased with the continued growth of our international business. Yet, with such a high concentration of sales in Europe, we have concerns that the recessionary challenges there will begin to negatively affect our momentum.

Over the next month or so, European national health programs will begin to announce their budgets and tender programs for 2009. This will be a critical determinate of the opportunities for the remainder of the year, which has certainly gotten off to a fast start.

Moving beyond revenues, gross profit was up slightly versus last year, but gross margin fell by 110 basis points. Reduced volume in North America Acute-Care of higher margin capital products, along with faster growth of lower margin international sales contributed to a mixed ribbon margin decline of 260 basis points in capital sales; although international and post-acute margins themselves improved nicely.

A one-time inventory step up of acquired Liko inventory, and a non-recurring union ratification bonus are also reflected in cost of (inaudible) for the quarter. Rental margins expanded by 180 basis points thanks to strong volume growth, and cost cutting in North America Acute-Care.

Operating expenses were down 3.6% without incremental Liko costs. The streamlining actions we announced in August, and other cost containment measures account for the majority of this decline. None of the benefits of further streamlining, capacity adjustments, or facilities consolidations announced in January, impacted the first quarter.

Operating profit from continuing operations was down by $400,000, and net income was up by 14.5%.

Not reflected in operating expenses was any of the $12 to $14 million annualized benefit, or the further staff reductions and operational consolidations I just alluded to.

EBITDA for the quarter slightly increased to $51 million, and totaled $237 million for the trailing 12 months. Earnings per share for continuing operations, adjusted for the one-time charges associated with the step up of inventory evaluation related to Liko and the integration expenses was $0.25 on a fully diluted basis, compared to $0.22 per share the prior year. This represents growth of 13.6%.

Free cash flow for the quarter was $21 million, down from last year primarily due to the elimination of prior year cash flows from Batesville Casket, and inventory growth related to the late quarter’s softness in North America Hospital CapEx spending.

Before I turn this call over to Gregg, let me share with you our approach to managed business in these unprecedented and difficult times, while continuing to follow the strategic directions we have shared with you since October of 2006.

We saw the fruits of success with this strategy clearly demonstrated over the last two quarters of our 2008 fiscal year, and we will do so once again when better balance is restored to our sector and our economy.

Having said this, here are some of the new actions we are taking to ensure we emerge from this recession a stronger company then we were when we entered it. First, to better partner with our capital constraint customers by reducing their risk and accelerate their returns, we began rolling out last week a program that uniquely leverages our rental and capital footprint and capabilities. Earlier results have been very positive.

Next, we are moving to heightened contact with our customers, and are in the process of reorganizing our field sales team to increase direct sales territories by over 25%; a change that should be in place by March 1.

Next, our guidance reflects maintaining, but not increasing our spending on product development and sales and marketing at 2008 levels. On the other hand, we have cut general administrative expenses by 8%, and are continuing to relentlessly pursue further efficiencies.

We will continue and intensify our efforts to achieve operational efficiencies in the supply chain, as is evidenced by last month’s announcements concerning certain facilities consolidations. During the next 12 months, we will be taking our next two product platforms down to Monterey, Mexico, to more fully leverage the cost of operations at this new plant.

Finally, the impact of integrating Liko has not yet been felt, and this too will emerge as we move through the year. From a balance sheet and cash management perspective, as Greg will discuss further, we are tightly controlling capital spending, and do not anticipate drawing further on our revolving credit facility under the scenarios reflected in our revised, 2009 guidance, which I would now like to discuss.

Given the difficulty in predicting the depth and breadth of the current economic situation, and the impact that US hospital capital spending will have on our ultimate performance, our outlook will be predicated on some key assumptions related to US hospital capital spending.

We are now forecasting that top line sales will range from $1.375 to $1.470 billion dollars. The low end of our revenue range assumes a 30% decline in North America Acute-Care capital sales. While the upper end of our range assumes a 15% decline.

The mix of revenue, given this reduction in North America Acute-Care capital will also have implications for our margin picture. We have also made adjustments to reflect the impact of changes in foreign currency. Accordingly, our adjusted EPS guidance will range from $0.82 to $1.18 per share. Greg will provide further information on cash and cash flow.

Now I’d like to turn the call over to Greg Miller.

Greg Miller

Thank you Peter. To start with, please note that all amounts presented in these slides are presented on the basis of our continuing operation. They exclude not only the impact associated with the former funeral services business, but also, most costs associated with its separation last April.

All continuing operation amounts included in the slides are presented as adjusted to remove the impact of one-time, non-recurring items that are not representative of our on-going business. A reconciliation to our reported US Gap numbers is included in the appendances to the slide deck.

Now let’s move forward. As Peter reviewed revenues by segment, I will quickly cover revenues on the next three slides, showing quarterly performance trends on a year-over-year basis.

As a result of the economic downturn, and its impact on US capital spending, our revenue growth moderated during the quarter of 3%, or 5.9% constant currency basis. This compares to double-digit growth over the past three quarters.

The decline in North America hospital capital spending was offset by the incremental revenue from our acquisition of Liko, growth in our rental business revenues, and continued strong, international growth.

Looking at global capital sales, first quarter sales increased nearly 3% year-over-year, or 6.1% on a constant currency basis. A large portion of this growth was realized from our acquisition of Liko, which contributed an incremental $18.4 million to our first quarter capital sales.

Excluding Liko, we’ve experienced a decline in our capital sales of 5.2%, or 1.9% on a constant currency basis, directly resulting from the significant and rapid decline in North America hospital capital spending. In fact, North America Acute-Capital sales decreased 8.3% primarily on weakness in our patient support systems and architectural products.

The effect of capital spending pressures on these products was offset by continued strong growth from international surgical segment, including Liko, up 28% constant currency, as well as accelerated growth from the recent launch of our all new, digital Navicare Nurse Call System.

Looking forward, as we apply the assumptions noted in Peter’s remarks, which includes North America Acute-Care, capital sales declined a range of 15% to 30%, as well as the recent strengthening of the US dollar against other currencies, capital sales for the year are now expected to decline 5% to 13%.

Rental revenues were higher in the first quarter, with 3.3% growth year-over-year, or 5.6% on a constant currency basis. Our main driver of this growth was from our North America Acute-Care segment, with the impact of higher volumes from new products lead investments in bariatric and wound care, and the impact of strategic adjustments made to our sales channel over the last fiscal year.

Revenue rentals from our other segments are essentially unchanged, excluding the effect of foreign exchange.

Looking forward, this slight decline from our prior rental revenue guidance relates entirely to the impact of foreign exchange rate movements. Rental revenues are now expected to grow 1.3% to 4.3%.

Now let’s move on to gross profit and margins. During the first quarter, adjusted gross profit, which excludes the effect of the purchase accounting step-up in the valuation of the acquired Liko inventory of $1.9 million, showed a slight increase of 1.6% on a year-over-year basis.

Adjusted gross margin, as measured in percent of revenues, declined 60 basis points compared to prior year. This margin decline is a reflective of 180 basis point decrease in adjusted capital margin, offset by 180 basis point improvement in rental margins.

Let’s take a closer look. Capital gross profit in the first quarter, decreased 1.7%, directly related to the lower volumes in our North America Acute-Care segment. The incremental gross profit from the acquired Liko products, and the continued strong performance by the international surgical segment partially offset these lower volumes.

First quarter adjusted capital gross margins, as the percent of sales, once again, excluding the effects of the step-up in the acquired Liko inventory, declined to 38.7% due to unfavorable geographic mix, resulting from higher then expected growth of our lower margin international sales, along with the decline of our North America Capital sales, and lower North America Acute-Care capital margins.

The year-over-year decline of North America Acute-Care capital sales margins results from a number of items. First, a $0.9 million bonus paid in the first quarter upon the ratification of a four-year union contract agreement with employees in our Batesville manufacturing facility.

Second, unfavorable capital product mix, reflective of lower sales volumes, of higher margin, patient support system products. Also, year-over-year higher commodity costs as prior period purchases worked through the supply chain, and start up inefficiencies of a new universal production line in our Pluvigner, France, manufacturing facility.

Looking forward, prior period purchases will work their way through our supply chain midway through the second quarter, leading to the benefits from recent decline in commodity prices, and the effects of the start up inefficiencies of the new universal line will diminish.

Further, as announced in January, to better balance our capacity with the projected lower demands we are now seeing, as well as to continue to reduce the overall cost structure of our business, over the next few quarters, we are executing on the consolidation of select facilities, and a reduction in work force. These actions will start to yield benefits in the second quarter, and help offset the reduction in volume.

Unfortunately, the current economic impacts on hospital operations and lower commodity cost trends, it will be a difficult year to realize the full price increases we had planned. The overall reduced volume also creates a negative pressure on our margins.

Finally, and on the positive side, our Monterey, Mexico plant continues to improve its yield and product costs, and we are further benefiting from the strength of the US dollar versus the pesos.

All-in-all, we have reduced our capital margins to reflect these items on an on-going basis. We will continue to look for new opportunities to combat this negative pressure on gross margins, including the movement of additional production to our low-cost manufacturing facility in Mexico as discussed earlier by Peter; executing on manufacturing cost-out projects on key products, and other continuous improvement activities.

Moving to rental. Rental gross profit increased 6.8%, led by high, single-digit growth, and therapy rental revenues within our North America Acute-Care segment. We are realizing continued revenue growth of higher margin, new product lead editions, overall increased rental volumes, resulting in approved leverage of our field service network, lower fuel costs, cost reductions from numerous, continuous improvement actions taken over the past year, within our North America Field Service Network, and reduced appreciation expense, resulted from the actions in house last year to improve profitability in our medical equipment service business. The rental gross margin realized during the quarter represents our strongest margin performance in the last 12 quarters.

Looking forward, for the reasons noted above, we are increasing our rental margins guidance approximately 50 to 100 basis points for the whole year, from the previous guidance.

Moving and operating expenses. We saw a slight increase at 2.4% to $129 million, compared to the prior year first quarter. As a percent of sales, first quarter total operating expenses improved from 37% to 36.7%. This includes incremental expenses related to Liko of $7.6 million. Excluding Liko, operating expenses were down 3.6%, and were 36.5% of revenues.

As you know, we have been very focused on cost reductions as part of our multi-year strategy. The overall decline in core operating expenses, and improved leverage despite slowing revenue growth, is as Peter mentioned, primarily resulting of the streamline action announced last August, and other spending reduction measures.

The majority of these reductions were in general and administrative expenses, with a decline in R&D as well. A slight increase in sales and marketing spending was limited to the carryover impact of prior year investments into the sales channel. We also benefit from foreign currency exchange rates.

As mentioned earlier, these reductions were offset by incremental Liko operating expenses.

The next slide shows the quarterly trends related to our R&D expenses. Although there was a slight decline in year-over-year spending in R&D, our level of spending remains relatively consistent, and we continue to be committed to spend in this area.

As a percent of revenues, our R&D expenses stabilize and have remained relatively consistent over the last 12 months. We realize that in order to emerge from this downturn stronger then we entered, we need to continue to invest in innovative, new products to meet the needs of our customers.

While we have lowered total R&D spending from the original guidance to maintain the 2008 levels, with the recent changes in leadership and process improvements as well as spending efficiencies achieved in our new Singapore location, we believe our yield for R&D investments will increase substantially to offset this lower investment.

Looking forward a few quick comments related to operating expenses. Consistent with our strategy, we will continue to make prudent investments and improvements in select areas of our sales channel and in new product development with a focus on insuring that our competitiveness remains strong during and after these tough times.

Further we continue to focus on costs and process improvements in G&A and other back office areas, reducing discretionary spending throughout the company, and in the execution of the Liko integration.

The impacts of January's restructuring and continuous improvement actions will begin to benefit and improve leverage on operating expenses as we move into the second quarter. With this in mind, our revised guidance for fiscal 2009 operating expenses reflects a 60 million or about 10% reduction from the previous guidance and excluding the incremental Liko expenses we'll be down mid-single digits as a percentage versus prior year.

This reflects R&D, sale and marketing held flat to prior year with high single digit reductions in G&A expenses.

Moving down to the income statement, adjusted operating profits for the first quarter was $25.2 million slightly down from the prior year. As we have covered our operating profit was most directly impacted by the decline in North America Acute Care capital sales and the related lower capital sales gross profit and margin.

This was offset with continued strong performance of our rental revenues and margins, as well as, the solid performance of our Post-Acute and international Surgical businesses. As illustrated in the various streamlining, restructuring, and cost improvement actions, we have announce since our separation last April, we have and will continue to focus on operating profit improvements.

As I mentioned earlier this year due to the nature of our rental business and the related amount of capitalized rental assets, EBITDA is an important metric to consider as we review our results.

As noted in this slide our trailing 12-month EBITDA is $237 million representing approximately 16% of revenues. This represents three-quarters of increases in solid mid-teens as a percent of revenues.

It's interesting to note that as of yesterday's close our market capitalization represents a trailing 12-month EBITDA multiple of only 3.6 times. Looking forward we expect our EBITDA for fiscal 2009 to be in the range of $170 to $210 million. This still only reflects 4.5 times multiple at midpoint.

There were no special charges in the first quarter, however, as I mentioned earlier we announced a number of actions on January 14th to better balance our capacity with the projected lower demand, as well as, to continue to reduce the cost structure of our business.

These actions will result in special charges of $7 to $10 million for severance and benefit relate expenses as we execute on facility consolidations and workforce reductions in the second and third quarters along with some additional yet to be quantified charges for other components of these actions.

We will begin to realize benefits from these in the second quarter with annual estimated savings estimating $12 to $14 million on an ongoing basis. Half of these savings are directly related to the volume decline.

The current year impact of these actions have been fully considered in our revised guidance. In regards to our tax rate, the affected income tax rate for the company for the first quarter was 32.4% comparable to 39.8% the prior year comparable period.

The lower rate in the first quarter of fiscal 2009 is due to an overall lower foreign tax rate, as well as, the recognition of 1.3 million in discreet tax benefits in the quarter primarily related to the catch up of the retroactive and reinstatement of the R&D tax credit from last year.

Looking forward we continue to forecast our tax rate in a range of 34% which is lower than the prior year due to the restatement of R&D tax credit, a lower foreign tax rate differential and a number of other initiatives.

Adjusted earnings per share was $0.25 for fully diluted share of the first quarter of fiscal 2009 for a 13.6% increase compared to $0.22 per share last year.

Taking a look at cash flows, our first quarter operating and free cash flows remains solid as we once again had strong receivable collections in the quarter following a strong revenue performance in the fourth quarter of fiscal 2008.

This was partially offset by significant increase in inventory and the timing of various liability payments specifically our trade accounts payable and compensation accruals saw large swings in the year-over-year cash flow due to the timing of payments.

The inventory build experience was a direct result of the impact of reduced demand for North America Acute capital products in the last half of the quarter. We are focused on bringing inventories back in line with demand as we move throughout the year.

The prior year comparable cash flow amounts were much higher than those of the current year as at that time we were achieving significant improvements in the collection of past due receivables and the improvement in DSO which has now leveled off somewhat.

In addition whereas in the current year we saw sizable increases in inventories on softening demand in the prior period we saw slight decline in inventory levels as we started accelerating sales growth during this prior year quarter.

As evidence in the reduced capital expenditures year-over-year we plan to prudently manage cash flows over the remainder of the fiscal year.

Taking a quick look at liquidity, we have cash and cash equivalence of $49.5 million on hand at quarter end. The reduction compared to the $222 million at September 30, 2008 year-end is directly related to the acquisition of Liko.

As a reminder we borrowed $90 million on a revolter right before year-end to complete this purchase on October 1, 2008.

Even after this transaction, we still have borrowing capacity of over $400 million in our line of credit. That said, based on our view today, we believe that even at the lower end of guidance we will generate enough cash flow from operation to fully fund our revised capital expenditures, our current level of dividends and the required long-term debt payment of $26 million due in June with some cushion, without additional borrowing from our revolving credit facility.

Lastly, let me summarize our revised 2009 guidance. Again, emphasizing the difficulty in predicting the depth and breadth of the current economic situation and the impact the U.S. hospital capital spell we have in our ultimate performance, our outlook will primarily be predicated on the assumptions related to U.S. hospital capital spending that Peter alluded to earlier.

With the assumptions we have discussed, consolidated revenue is expected to be in the range of $1,375,000,000 to $1,470,000,000 which represents a year-over-year decline of 2-1/2% to 8.8%.

Adjusted earnings for fully diluted share from continuing operations are expected to be in the range of $0.82 to $1.18. This compares to final 2008 adjusted earnings per share of $1.40 or $1.28 if you consider the third quarter's large benefits from discreet tax item.

Additional details of our updated guidance provided in our slides and our press release.

With that, I'll turn the call back over to Peter for concluding comments. Peter?

Peter Soderberg

Thank you, Greg. Let me wrap up the prepared portion of our remarks with some final thoughts.

We believe that during these difficult times, we are striking a prudent balance between cost control and cost structure adjustments, and maintaining our focus on the future. Because of Hill-Rom's longstanding position as a leading supplier in North America of capital equipment to hospitals, our business has been unusually, but only temporarily impacted by hospital capital spending constraints.

When conditions improve, hospitals will face an even taller hill to climb to bring their patient support and related technologies up to the standard of care offered by today's systems. We have also done a nice job of diversifying beyond this core business to strengthen our franchise around the word and across the continuum of care.

For example, in 2006 North American acute care capital sales represented 51% of global sales. And this number declined to a little more than 45% in 2008. Our rental business is doing well and is continuing to show us more growth opportunities than we had expected.

We are striving to manage our cash and cash flows conservatively so as to remain capable of fully supporting the operational needs of business, maintain our dividend and to give us some cushion in the event that this recession is longer and deeper than our assumptions anticipate.

Thanks for your interest, and we will now be pleased to take your questions.

Question-and-Answer Session


Thank you. (Operator instructions) We'll take our first question from Joshua Zable with Natixis.

Joshua Zable – Natixis Bleichroeder

Hey, guys, congrats on a good quarter here in a tough environment and thanks for taking my questions here.

Just kind of general ones, I know, obviously, you're talking about the environment in the U.S. Can you just give us a little bit of color? I know you said you had about 30 opportunities frozen. Can you give us a little bit more color to the extent that you know, maybe December versus January, A, and then B, sort of if things are being delayed, and they're eventually going to do them, or they're saying, "Hey we're not going to upgrade the beds right now. We'll do it later, or we'll sort of revisit it"? Or is it really a function of, "We just want to wait for the budget to kind of come through?"

Peter Soderberg

Well, Josh, this is Peter. And first let me thank you for initiating on us this week. I hope you feel your timing was appropriate.

We are looking at the situation from a variety of angles. So let's talk about, first, the backlog. Now, we entered the quarter, quarter two, with a backlog of almost identical to what we had the prior year. So that's good news.

We track order trends as a leading indicator, of course, closely an indicator. And order trends continued to deteriorate through mid-January, but have now stabilized. So we're reaching, I think, relatively consistent valley here. So we're not getting the kind of dramatic swings that we saw during the last you know late part of December.

We are seeing a level of quota activity that has began to increase significantly in January. If we look at the last 13 weeks of dollars quoted, we are seeing a slight decline versus 2008, but a significant improvement versus 2007.

Having said that, we certainly saw it took a while for pessimism in the C Suite to trickle down into behaviors in the purchasing office. So we don't take anything for granted at this point.

We continue to track those 30 orders, and as I mentioned that are frozen. And I mentioned in my script, we think we've come with a way to incent those hospitals to unlock those orders. We don't see these disappearing forever. They're just clearly in a capital freeze.

We have seen, at the high end, some of the orders that come through do reflect a slight mix-down in the number of features purchased or if it's a modular product, the willingness to buy a little less configured product for addition of features at a later time.

The pessimism that we constantly get from some of the reports that we all read, like the American Hospital Association report, kind of lead us to introduce this broader range, and kind of share with you our assumptions. Because I don't think any of us know exactly where this is all going.

But at the end of the day, the infrastructure in hospitals continue to age the gap between the products that support patient care today and the products available today is going to ever widen. So when we get out of this, it's our opinion that there's going to be strong upward momentum. But it could take some time for that unlocking to happen.

Joshua Zable – Natixis Bleichroeder

Okay, great. And then as far as Europe goes, obviously you talked about sort of expecting weakness there, just taking sort of the conservative stance. So safe to say that in your outlook you're also accounting for that?

Peter Soderberg

Yes. Frankly, we keep underestimating the international growth. Certainly Europe can't continue at a blistering pace that we've seen. On the other hand, we've done a lot of things outside of Europe to lay the groundwork for growth.

And by the way, we're not the only ones plowing those fields. There certainly should be very, very good sustainable growth in less developed areas. But Europe clearly concerns us and we've allowed as best we can for some softening.

Joshua Zable – Natixis Bleichroeder

All right, great. Well I'll get back in queue. Thanks for answering my questions here, guys.

Peter Soderberg

You bet. Thank you.


We'll take our next question from Kristen Stewart with Credit Suisse.

Kristen Stewart – Credit Suisse

Hi, and thanks so much for taking the question here. I just wanted to talk a little...

Peter Soderberg

Hey, Kristen, good morning.

Kristen Stewart – Credit Suisse

Good morning. I just wanted to get your thoughts on these you know the 30, I guess, contracts that were held up. Is it your belief that a lot of these are more based upon the overall access to credit? Is it the operating environment within the hospitals? Is it just reductions of new expansions? Can you give us a little bit more color there? I know you talked just a little bit about it, but maybe dive a little deeper to the underlying reasons?

Peter Soderberg

Well I think most of them we would characterize as being impacted by a broad freeze within the hospital system on capital projects. And I think that one would certainly understand a board and a management team of a hospital facing high uncertainty, depending on what their health is and their access to credit.

One can certainly taking a pause and assessing the situation. And clearly we think that part of this is due to buying some time so that they can understand what operating environment they're really in. You know what's happening to their operating margins, what's happening to their non-operational cash flow and finally, what's happening to the availability of cost to credit.

But we don't think that our orders have been selectively earmarked for freezing while most other orders are flowing through. I've been a little surprised at listening to all the calls I have on people who do business with hospitals and capital items. There seems to be more optimism that we're feeling, so perhaps there's some discrimination. But I don't think, as we look at a case-by-case basis, that we are unusually singled out for a hold.

Kristen Stewart – Credit Suisse

All right. So it sounds like it's not just the credit markets having issues, but just the operating environment and maybe some of the endowment funding that these hospitals receive. That's fine.

Peter Soderberg

Wait, some of these orders are held by institutions with a lot of cash on hand.

Kristen Stewart – Credit Suisse


Peter Soderberg

And I think it's just a question of being conservative and waiting to see what kind of environment they're really in.

Kristen Stewart – Credit Suisse

Okay, perfect. Thanks so much for taking the question. I appreciate it.

Greg Miller

Thanks, Kristen. One other thing I'll add is that we certainly are not seeing hospitals reflecting any change in the underlying fundamentals and demographics of patient demand, patient complexity, obesity and other comorbidities that come through their doors.

They obviously are struggling with treating those patients, and that doesn't change. That's one of the reasons we feel like when some of this capital availability frees up, that there will be a rebound in this. And it's just a question of when, not if, in our judgment.

Kristen Stewart – Credit Suisse

Thanks very much.

Greg Miller

You bet. Next question please.


We'll take our next question from David Roman with Morgan Stanley.

David Roman – Morgan Stanley

Good morning, everyone. Thank you for taking the question. I just wanted to follow up on some of the commentary about the 15% to 30% projected decline in North American acute care. Can you give us, maybe, for 2008 the drivers of growth if you look at that share and market, and then if you look at the declines for 2009 and break that up share and market?

Peter Soderberg

David, it's Peter. Thank you for asking the question.

In 2008, as you know, the business saw one of its strongest growth years in memory. And I think we would characterize it as pretty balanced growth. The rental business that we saw grow beyond our expectations was due, I think, to a fine effort on new products, some good decisions on the channel and the recovery into the momentum that the company used to enjoy when it was a real innovator in the sector.

On the capital side, we started to see good capital growth in post-acute and tremendous growth in international, thanks to a combination of product development and channel development. Certainly we outpaced the industry on the international side.

On North America acute care capital, I think in 2008 we probably lost some share points. Not to the extent we had in the past, and I think that has leveled off. It's awfully difficult to deconstruct, to get much information on some of the key competitors. But we're feeling pretty good about where we are from a competitive perspective.

On pricing we got some very modest price last year. We were able to put price clauses back in most of our GPO contracts. But it's fair to say that every supplier in the industry, given what hospitals facing, are under a lot of suasion to roll back price increases that had been put in place when we were facing a high inflation environment. And we're certainly starting to see, as everybody would anticipate, some reductions in inflationary pressure.

So I would think, and part of our guidance anticipates that we are probably not going to get much price as contemplated in our original forecasts.

David Roman – Morgan Stanley

But it does contemplate unit share remaining relatively static?

Peter Soderberg

Well, that's a very wide range that we've given you. And you know I'm not going to characterize – I can't be as precise on what the share is, I'm just saying as it looks to us, this is the kind of volume impact.

We have done a lot of things, I think, to improve the competitiveness of the product. We've talked about it a lot in terms of the portfolio and the investments we've made. So the sales force – more feet on the direct street. So I'm pretty confident that domestically we'll get our fair share of a pound of flesh.

David Roman – Morgan Stanley

Okay. And then maybe just a more general question. If you look at replacement cycles for some of your key products, can you sort of give us a sense of what they were five years ago, what they were two years ago, and where you think they're going to be if the average hospital's replacing beds every "X" years. Five years ago, where did that go in sort of the last two years and where do you think that'll be this year and next year?

Peter Soderberg

Well unfortunately, I don't think we have the kind of data going back that far we have today. But it was probably five years ago we were taking beds in trade that were 15 years old on average. Let's make it a little broader range.

But that has come down dramatically. I think now we're seeing ten to 12 year old beds in trade. And one of the reasons is that we have materially increased the gap between the install base, what's out there and what's available today. And we've, I think, started to clarify the return on investment proposition.

We were helped by the CMS no-pay ruling that went into effect last October, where hospitals don't get compensated for facility acquired pressure ulcers or for falls. So I think that kind of double-whammy, plus for the new consumer and the demand to put a better product in the in-patient environment. A more comfortable product and one that takes workload off the nurses' back and increases their safety.

I think all these factors have accelerated the movement in the swap-out cycle.

David Roman – Morgan Stanley

Okay. Thank you very much.


We'll take our next question from Ian Zaffino with Oppenheimer.

Ian Zaffino - Oppenheimer

Great, thank you.

Peter Soderberg

Good morning.

Ian Zaffino - Oppenheimer

Just wanted to get a little bit more into the value proposition of the rental business you're talking about. I would assume if you're seeing capital sale cancellations, there would be an opportunity to capture that on the rental side. Are you actually doing that and you're losing other rental business? Or is that just not happening?

Peter Soderberg

Ian, it's Peter. What was the last part of that question? Is it...?

Ian Zaffino - Oppenheimer

Are you seeing some shift from capital sales into rental? And if that's the case, if that's not really reflected in the guidance, are you really seeing that shift, but you're losing some of the rental business, so net is there's no change?

Peter Soderberg

Well, first place, we had a plan. As acuities increase and as utilizations of products like our bariatric ICU bed as hospitals use more and more of those products, there is a strong ROI for them to purchase the product instead of rent it. And our original outlook for this year was purposely to be increasingly moving rentals to capital.

The other thing that's happening is as we build more technology into our surfaces and they're offered on our frame product – we eliminate the need for rentals so we kind of move ourselves out of the rental market.

Now what's happened is, of course, as capital gets limited, the rental-to-capital switch rate has declined. So what we're seeing is probably a true reflection of the merits of the technology and the growth in market share, and the growth in the market.

We are going to see in the second quarter less of this kind of torrid performance because we have what appears to be a very light flu season. And last year you saw a tremendous growth from most of us dealing with hospitals because of this flu season. And the numbers at this point, although we're right at that jumping-off point, but the CDC numbers don't look like we're going to see the kind of big demand we saw last year.

So it's kind of a mixed bag. But the fundamentals are, again, I'll stress they're more attractive than I certainly thought when I showed up here 2-1/2 years ago.

Ian Zaffino - Oppenheimer

Okay. And then the second question would be, you expressed some caution in Europe. Are you actually seeing data points or are you just really, not taking a guess, but just being cautious for the sake of being cautious? Or are you actually seeing some data points coming out of Europe which would suggest that it's going to slow after the U.S. will?

Peter Soderberg

Ian, I keep asking the same question, and I can't understand why I don't get an answer that we're not seeing a slowing. But it could be we're where we were in U.S. in September, October.

But you just read the data that's coming out of Europe. It's got to have some impact. On the other hand, I think that most European countries are not as vulnerable to the economic swings that we are in the U.S. because the government is the principal funder of healthcare. And I think, just as we're seeing in our post-acute business, I think that introduces in and of itself some stability.

Greg Miller

Ian, one other thing that we monitor is the schedule for tenders and bid processes coming out of the governmental single-payer systems. And to date, we have not seen a fundamental shift in that schedule. We've not seen fundamental reductions or things of that nature.

Now that's not to say it couldn't happen in the future, but in the current environment we are not seeing any changes there.

Ian Zaffino - Oppenheimer

Okay, great. Thank you very much.

Ian Zaffino - Oppenheimer

Thank you.


We'll take our next question from Greg Halter with Great Lakes Review.

Greg Halter – Great Lakes Reveiw

Good morning, guys.

Peter Soderberg

Good morning.

Greg Halter – Great Lakes Reveiw

You spoke about the commodity fuel inflation and so forth. I just wonder if you could characterize that on a dollar basis for the quarter. And then I know you had commented that you should see that abate in the current quarter that we're in presently.

Greg Miller

Yes, thanks, Greg. On a quarter-over-quarter basis we saw a couple million dollars of inflation. And just a reminder, we didn't see inflation really peak or start going up till middle of last year. And it went up very fast in the last half of the year. And as I said, we're still have some purchases out there that are at a higher price than what we're currently negotiating at right now, and we'll start seeing in the second quarter.

But on a year-over-year basis, we are higher than the first quarter of last year from a commodity perspective, by a couple million bucks.

Greg Halter – Great Lakes Reveiw

Okay. And can you comment on the status of the shelf that you have?

Greg Miller

Yes, it has expired and we are in the process of putting another one in place.

Greg Halter – Great Lakes Reveiw

Okay and relative to your debt position can you comment on if that's fixed or floating, and what your average rate is for the quarter, and what you expect going forward?

Greg Miller

Yes, our debt is made up of multiple instruments. And you'll see in our footnotes, it'll show you exactly what is fixed and at what different rates it is. I will tell you, on our revolver we have about $90 million borrowed on that. And I don't know if we actually separately disclosed what our rates are on that, but I will tell you we got our revolver prior to a lot of the tightening of credit. And we have very favorable terms to the current marketplace.

Greg Halter – Great Lakes Reveiw

Okay and what is the current status of the auction rate securities? Are you included in the, I guess, UBS settlement?

Greg Miller

We are included in the UBS settlement. We actually put significant detail on that in our 10-Q that we'll file later today. And out of the $38 million of those we ended up having – how much of UBS? About $22 million was related to UBS.

Greg Halter – Great Lakes Reveiw

OK. And...

Greg Miller

There will be more details on our 10-Q filed later today.

Greg Halter – Great Lakes Reveiw

And the other $16 million? Is that also under some sort of agreement as well?

Greg Miller

It is not at this time, but I will indicate that it is made up of AAA rated student loan auction-rated securities. And we do feel that we have the ability, and we intend to hold those assets.

Greg Halter – Great Lakes Reveiw

All right. Well, the credit quality was never in question, it's just the getting your cash back.

Greg Miller

Well, that's right.

Greg Halter – Great Lakes Reveiw

One last question. On the R&D you had mentioned that there was, I think, a 9-1/2% decline. I think you characterized that as "slight." I guess I wouldn't call that slight in relation to the amounts you were putting up there before. But just wondered if you could again expand on your thoughts on R&D spending for the full fiscal year '09?

Peter Soderberg

Well, I think we'll see R&D bump around a little bit because of timing. So I think what was said originally was we had planned to move R&D up as a percent of sales this year. And sales, of course, were going up by a little more than mid-single digits. And now we're going to hold it flat versus prior year.

So that's where it's ultimately going to end up. But I think, as Greg said, we're going to get more bang for our buck because we've made some leadership changes. Singapore is coming on nicely so I don't think you should be as concerned by that temporarily first quarter number.

Unidentified Company Representative

Greg, I might point out too that sequentially, it's flat with where we spent in the fourth quarter. So it's really no reduction from the run-rate that we saw in the fourth quarter.

Greg Halter – Great Lakes Reveiw

Okay. Thank you.

Peter Soderberg

Next question please?


We'll take our next question from James Hillary with Independence Capital.

James Hillary – Independence Capital

Good morning, gentlemen.

Peter Soderberg

Good morning.

James Hillary – Independence Capital

I don't know if you have this data, but do you have – if you do have it – do you have a normal run-rate of global and U.S. hospital acute center CapEx? And how much this year you anticipated being off that normal level?

Greg Miller

I – this is Greg Miller, I would tell you we do not necessarily have that available to us right now but I think our forecasts are relative to what we're thinking in regards to this year.

James Hillary – Independence Capital

So you feel like, globally, the CapEx will be down 15% to 30%?

Greg Miller

In our category we believe that. In the U.S. As we said, internationally we haven't seen it yet, as shown by our first quarter in international. And we think that we'll know more in the next couple months in Europe, specifically.

James Hillary – Independence Capital

And how does the acute care CapEx compare to 2007? How much was it up in 2008?

Andy Reith

Well, this is Andy, we had seen in our served markets, we had projected kind of a longer term secular growth trend of somewhere between 5% to 8% in North America and probably something at or above those levels outside the U.S. in our served market geography. Not driven by Asia or some of the (markets) that we don't particularly penetrate at this point.

We did see and forecast back in October and November a worldwide kind of average growth rate somewhat below, a little bit more conservative than those initial rates. But if you're looking for long-term secular kind of growth trends, we think in our served markets we feel comfortable that we're kind of in that mid-single digit growth rates.

In peak years we've seen that into the lower double digits, but we think that this is temporary in nature and that it would ultimately return to those long-term secular growth rates.

Peter Soderberg

I'd just add that I think now we all, rather than looking in the rear view mirror, I think we're trying to look out the windshield. And there's a whole number of studies out there recently, polls of CEOs. I'd refer you to the AHA study which certainly, if you did the math on that one, you'd get numbers that are probably worse than what we're quoting.

On the other hand, if you look at construction start estimates, they seem to be less pessimistic. So this is a hard crystal ball to look into.

James Hillary – Independence Capital

Of your mid-single digit long-term growth rate, how much of that is new hospital beds and how much of that is the acceleration of the replacement cycle?

Peter Soderberg

Probably 15% to 20% new and the rest is replacements.

James Hillary – Independence Capital

Thank you very much.

Andy Reith

Thank you. We've got just a little bit of time left on our calls, so we'll take two more questions, please.


We'll take our next question from [Steve Savvo] with [Noch Partners].

[Steve Savvo – Noch Partners]

Hi, thanks for taking my question. You mentioned having to update your assumptions based on how deep and long the recession is. Could you discuss what you actually are assuming as far as the recession? That's one question.

And then my second question is, when I look at your DSOs and compare them to the last quarter of your fiscal year, are you including in your accounts receivable from September '08, is part of that from the other segment of the business that was spun off? And if that's the case, what are the accounts receivable in September '08 for your segment of the business? Thanks.

Greg Miller

Yes, this is Greg Miller. In regards to the receivables from '08 first quarter, those did not include any receivables from the other business, in regards to my comments.

My comments more refer to the fact, as some of the longer-term investors might remember, we had some rental billing issues – with the nature of our rental billing system issues that we had. And had built up significant receivables that were aged at that time. We were at the very tail of that at the end of 2007 and that first quarter of 2008. So not only did we get the benefit of collecting aged receivables, we saw our DSOs going down over the past year, quite nicely.

So that was the nature of the comment around the first quarter of 2008 versus our current quarter. We were, quite frankly, more caught up on our receivables, and they were in much better shape and are in much better shape. And therefore, we're more at a rate that we feel is going to be consistent throughout the year.

[Steve Savvo – Noch Partners]

Okay and just...

Greg Miller

Which is not inconsistent with our guidance.

[Steve Savvo – Noch Partners]

Okay. What are your assumptions about the recession?

Peter Soderberg

I'll just say that we assume, for the remainder of our fiscal 2008, we're still in the tunnel.

[Steve Savvo – Noch Partners]

Okay, thanks.

Peter Soderberg

Next question please?


We'll take our next question from Matt Miksic with Piper Jaffray.

Peter Soderberg

Morning, Matt.

Matt Miksic – Piper Jaffray

Good morning. Can you hear me okay?

Peter Soderberg

Yes, just fine.

Matt Miksic – Piper Jaffray

So thanks for squeezing me in. Just a couple of questions on your comments about the environment. And I think you mentioned the other drivers behind some of the order holds that you were seeing, more of a general freeze or sort of a capital hold by hospitals on their purchases. I'm just wondering how much of that you think is sort of driven around – you mentioned capital projects, but new construction or capital projects in terms of an investment in refreshing a set of beds?

Peter Soderberg

A lot of the construction in process, most of it is still going ahead. So those are not really our worries. I think, certainly, we're seeing some of the orders that were frozen, we've been able to unlock in the quarter. And yet other orders now have come into view which we thought we had and they're still frozen.

So it's not a one size fits all response. In some cases, hospitals are prioritizing what do they need most? And they're working through those lists. So it's a mixed bag.

Matt Miksic – Piper Jaffray

And then on the new hospital construction that's going forward, I guess there's a lot of construction across all kinds of markets that continues to go forward. Maybe in part because it was started and partially financed, I'm not quite sure why. When do you think you'll have any visibility as to new construction starts or things that maybe had not been already spun up and started?

Peter Soderberg

Well, I think there's a little dichotomy between the services that we subscribe to that forecast new construction start, which seem to be more optimistic than some of the surveys we've read. And so that's one of the kind of dilemmas that we have in responding to those last couple questions.

Matt Miksic – Piper Jaffray

Okay. So maybe the visibility may be not that great. And I guess a lot of it depends on the overall environment. But nothing that you've seen affect your orders is coming from new construction, or not much. It sounds like it's more replacement.

When you talk about folks who have held off on an order, what are their alternatives, I guess, over the next six to 12 months, and what are some of the internal pressures that might push them to move ahead on those orders?

Peter Soderberg

Well, I think the in-patient facility renovation improvements are environmental is kind of at the AHA's top list of what gets deferred. So what's really happening is they're just putting up with the existing infrastructure in the in-patient environment in making due.

And the consequences are they're failing to get the return on improved safety and patient outcomes and caregiver outcomes, and in a no-pay environment for a couple of these safety aspects, they're, I think, rolling the dice that they can get through this with a delay.

Our job is to make it palpable as to the economic and clinical benefit of replacing that old infrastructure.

Matt Miksic – Piper Jaffray

Okay. And then last question, just on international. It seems like in the past six to 12 months there's been some difference in the way we think of Europe as sort of this monolithic market, but for example, U.K. seems to be potentially in tougher situation than some of the other countries are, at least right now. Can you talk about that at all, or maybe what your concentration of some of your businesses are over there? Where you're focusing on growth?

Peter Soderberg

Well, our biggest business, by far, is in France. And U.K., we've got a major presence. I mean, it's like everybody. The Big Four or the Big Four. And with our diverse rental and capital model in Europe, we've got a little more flexibility.

So we see the kind of tendering processes continue to move forward. And if anything, we've heard about the acceleration of tendering, perhaps in hopes that countries can lower their cost.

So again it's a mixed bag.

Matt Miksic – Piper Jaffray


Unidentified Company Representative

I might add, too, is that that's one of the beauties of the Liko acquisition in that its footprint is predominantly outside the U.S., and therefore, that gives us some extra strength in another platform from which to build outside the U.S.

Matt Miksic – Piper Jaffray

And last, just another on Europe. We talked about new construction in the U.S. How, I guess, is growth or penetration of those markets different in terms of new hospital construction? Does it play a bigger role in Europe or is that playing a smaller role in what's driving growth there?

Peter Soderberg

I'd say it's playing a smaller role in Europe but a much bigger role in the Middle East and in parts of Asia.

Matt Miksic – Piper Jaffray

Okay, great. Well thank you very much for taking the questions.

Peter Soderberg

Thanks a lot, Matt. Last call, Operator, please?


Yes, we'll take a follow-up from Josh Zable with Natexis.

Josh Zable – Natixis Bleichroeder

Hey, guys, thanks for taking my follow-up here. I know were kind of over time, but just a couple of quick ones here. First, can you just do some housekeeping? On the FX side I know you guys obviously took it down because you have some headwinds there on the top line. Can you just kind of give us an idea of sort of what kind of rate expectations you are just so we can kind of make sure we're all up to speed, as these things tend to be pretty volatile?

Unidentified Company Representative

Yes, I will tell you. Because in October I also mentioned that our 2008 average is around – for the euro, which is the primary currency we deal in – 151. And if you remember in October I mentioned we had guided at around 143. And for this current guidance we're looking at 130, 131.

Josh Zable – Natixis Bleichroeder


Unidentified Company Representative

Which is about the current rate today.

Josh Zable – Natixis Bleichroeder

Perfect, cool. Great. And then, just in terms of – it seems like you talked about some benefit from commodity pricing, obviously just to kind of have it out there in the public forum from a modeling perspective. It would seem like between sort of manufacturing inefficiencies as part of a ramp.

And obviously, commodity costs kind of higher than we would think. It seems like the second quarter you kind of take more of a hit, and then we should sort of see more of a ramp in the back half of the year. I know typically the sort of model is, you guys sort of constantly ramp up throughout the year. But I'm assuming we should see sort of a big stepdown in 2Q and then hopefully 3Q and 4Q are a lot better. Is that the way to think about it?

Peter Soderberg

Well, I think definitely you'll see improvement in the second half versus the first half, primarily because some of the moves we just announced, we're executing on right now and part of the third quarter. So second and third quarter. So we won't get those benefits until that time period. So I think you're thinking of it appropriately.

Josh Zable – Natixis Bleichroeder

Okay, great. Thanks, guys, for taking my follow-up. Congrats.

Peter Soderberg

Thank you very much. That will conclude our call for the day. Appreciate it.


Thank you. Once again, that does conclude today's call. We do appreciate your participation. You may disconnect at this time.

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