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Executives

Donald W. Duda - Chief Executive Officer, President and Director

Douglas A. Koman - Chief Financial Officer, Principal Accounting Officer and Vice President of Corporate Finance

Analysts

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

Jimmy Baker - B. Riley & Co., LLC, Research Division

Methode Electronics (MEI) Q3 2013 Earnings Call February 28, 2013 11:00 AM ET

Operator

Welcome to the Methode Electronics Fiscal 2013 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

This conference call does contain certain forward-looking statements, which reflects management's expectations regarding future events and operating performances and speak only as of the date hereof. These forward-looking statements are subject to the Safe Harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statements, to conform the statements to actual results or changes in Methode's expectation on a quarterly basis or otherwise.

The forward-looking statements in this conference call involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, which is our annual and quarterly report. Such factors may include, without limitations, the following: dependence on small number of large customers, including 2 large automotive customers; dependence on the automotive, appliance, computer and communications industries; further downturns in the automotive industry or the bankruptcy of certain automotive customers; the ability to successfully launch a significant number of programs; ability to compete effectively; customary risks related to conducting global operations; dependence on the availability and price of raw materials; dependence on our supply chain; ability to keep pace with rapid technological changes; ability to improve gross margin due to a variety of factors; ability to avoid, design or manufacture defects; ability to protect our intellectual probably; ability to withstand price pressure; the usage of a significant amount of our cash and resources to launch new North American automotive programs; location of a significant amount of cash outside of the U.S.; currency fluctuations; ability to successfully benefit from acquisitions and divestitures; ability to withstand business interruptions; income tax rate fluctuations; ability to implement and profit from newly acquired technology; and the future trading price of our stock.

It is now my pleasure to introduce your host, Don Duda, President and Chief Executive Officer for Methode Electronics.

Thank you, Mr. Duda. You may begin.

Donald W. Duda

Thank you, and good morning, everyone. Thank you for joining us today for our fiscal 2013 third quarter financial results conference call. I am joined today by Doug Koman, Chief Financial Officer; and Ron Tsoumas, Controller. Both Doug and I have comments and afterwards, we will be pleased to take your questions.

Methode's third quarter and 9-month sales grew nearly 10% to $123 million in the quarter and $371 million in the year-to-date period. In both periods, improved volumes were driven mainly by increased sales of the Ford center console program, lead frame assembly products, new product launches in our European Automotive business, torque-sensing products sales for e-bikes, motorcycles and ATVs, as well as higher appliance sales. These sales improvements were partially offset by softness in our European industrial operations and Power Products segments.

As we announced this morning, we received the second half of the $20-million litigation settlement in January. We recorded the entire gain in the second quarter in the income from settlement section of the income statement.

Methode's third quarter net income was $3.3 million or $0.09 per share compared to $0.8 million or $0.02 per share in the same period last year. Excluding the impact of the litigation settlement, Methode's 9-month net income was $11.4 million or $0.03 per share compared to $2.6 million or $0.07 per share last year. The third quarter earnings improvement was primarily driven by higher sales along with lower third-party inspection, premium freight and overtime expenses in the Automotive segment, higher-than-anticipated income from our torque-sensing business, MFT, lower stock or amortization, selling and administrative expenses and legal expense.

Third quarter earnings were negatively impacted by higher costs related to the design, development, engineering and launch of the General Motors center console program, cost related to the delayed launch of the laundry program and manufacturing inefficiencies due to lower sales and unfavorable product mix within the Power Products segment. Costs related to the design, development and launch of the General Motors center console program lowered third quarter net income by approximately $1.8 million or $0.05 per share and lowered year-to-date net income by $5.2 million or $0.14 per share. Last quarter, we anticipated total launch costs for the program would be approximately $4.5 million in fiscal 2013. However, costs came in higher than anticipated in the third quarter due to higher-than-expected testing costs and product design changes requested by the customer. The majority of these costs will be recovered through price increases negotiated this year, which will be recouped over the 5-year course of the program.

As we announced in the press release this morning, the General Motors center console program was originally scheduled to launch this April. Due to delay by the OEM, the truck portion of the program is now expected to launch 1 month later in May. And the SUV portion of the program is expected to launch in late January of next year. However, the production releases we are currently seeing thus far for our first quarter, is of course the volume ramp we have been projecting for fiscal 2014. Because of the delay in the launch of the General Motors program, along with the costs I just mentioned, we anticipate incurring approximately $1.8 million in launch costs in the fourth quarter, bringing total launch cost to approximately $7 million for fiscal 2013.

Consolidated gross margin fell about 1% in the third quarter and 0.5% in the first 9 months compared to the same periods of last year. The decrease was due primarily to increased design, development and engineering costs for the General Motors center console program as well as increased sales of the Ford center console program, which has carried a higher prime cost due to the high purchase content. Additionally, the delayed launch of the laundry program in the Interconnect segment, as well as manufacturing inefficiencies and unfavorable product mix of the Power Products segment negatively impacted our third quarter and year-to-date gross margins. The development and launch costs for the General Motors center counsel program lowered the automotive gross margins by 2.3% in both the third quarter and 9-month periods.

At the end of the third quarter, we were successfully producing all of the decorative components for Ford's D Car and U Car platforms. However, because we were still being treated as a new decorative painting vendor by our customer, we continued to incur mandated third-party inspection costs during the third quarter. We anticipate minimal inspection costs in the fourth quarter.

In our release today, we also announced that the last 3 phases of the laundry program, which was scheduled to launch in the first quarter of fiscal 2014, has launched in the fourth quarter of this fiscal year. This launch, coupled with fourth quarter launches in our European Automotive business, which had been delayed by the customer, and the fact that our fourth quarter is a full 13 weeks with no holidays and what is generally stronger OEM demand in our fourth quarter, should produce sequentially higher sales in the fourth quarter compared to the third quarter. And therefore, for fiscal 2013, the company anticipates sales in the high end of the guidance range of $470 million to $500 million. However, because of lower-than-anticipated sales in the second half of the year, the company's higher-margin businesses, namely, Hetronic and European Automotive, and higher costs related to the launch of the General Motors program, we believe earnings per share for fiscal 2013 will be at the low end of the guidance range of $0.45 to $0.60, exclusive of the income from the legal settlement.

Now turning to a review of our individual segments. Automotive segment net sales increased nearly 13% in the third quarter and grew 15% in the first 9 months due to higher sales of the Ford center console program and our transmission lead-frame products, as well as new product launches in Europe. While our European Automotive sales did increase, I should point out that due to economic conditions in Europe, they did not grow to the level originally anticipated.

Automotive segment gross margins rose slightly in the third quarter results, 0.5% in the 9-month period. In the 9-month period, Automotive gross margins were negatively impacted by the higher prime cost for the Ford center console program, as well as costs related to the launch of General Motors program, partially offset by lower costs related to the third-party inspection, premium freight and overtime expenses and a favorable commodity price adjustment.

Moving to Interconnect sales. They increased almost 8% in the third quarter and nearly 4% year-to-date, driven mainly due to improved appliance and data solution sales partially offset by lower sales of radio remote controls, as well as the planned exit of a product line in our Asian operation. Appliance sales improved in the first 9 months due mainly to the successful launch of the first phase of the laundry program in October. And as I mentioned a moment ago, the remaining 3 phases of the launch of the product kit now launched, we anticipate this program to be at its full run rate in the second half of our fiscal 2014. And I've mentioned in the last few calls, radio remote control sales decreased in Europe due to overall ongoing weakness in the European economy and we anticipate this will continue into our fourth quarter. Interconnect's gross margins declined in both periods due mainly to development costs for the laundry program, as well as lower Hetronic sales, which carry a higher gross margins.

With the launch of all 4 phases of the laundry program in the fourth quarter, Interconnect earnings should improve. However, we're still anticipating lower sales at Hetronic in Q4, which is, as I said, typically a higher margin business. Therefore, margins are likely to be flat in Q4 compared to Q3. In order for Interconnect margins to improve, we need Hetronic sales to improve.

Our Power Products segment saw lower sales in the third quarter and first 9 months due mainly to significantly reduced military spending, a major project with Cisco going end-of-life sooner than we planned, as well as the delay of several new programs, and in general, much lower volumes than we originally anticipated. At this point, we anticipate continued softness in the fourth quarter for this segment. Power Products gross margins decreased in the third quarter and year-to-date periods, mainly as the result of manufacturing inefficiencies, lower sales and unfavorable product mix, as well as the Eetrex new product development costs. Without the new product development costs, gross margins would have been 21% and 20% in the third quarter and first 9 months, respectively.

Now let me summarize some of the new business awards and opportunities that occurred in the third quarter. In our North American Automotive segment, we have been awarded the trailer brake switch for all of the General Motors K2XX platform. This is a carryover design with cosmetic changes from the GMT900 program. This program represents approximately $3 million in annual revenue beginning in the second quarter of fiscal 2014. We also anticipate the same switch being used on the 31xx platform.

In our European Automotive segment, we are excited to announce that we were awarded the center console program with a French OEM. While this is not our first center console program with a European OEM, it is our largest thus far, representing approximately $100 million in total revenue over the life of the program. The program will launch in fiscal 2016 at approximately $6 million in annual revenue, ramping to $20 million at full launch. The panel integrates the display with controls for the radio, infotainment and climate functions in a stylish package with very innovative decorative finishes. In our Power segment, we were awarded several bus bar, cable assembly and custom connector programs, which represent over $3 million in annual -- average annual revenue beginning in fiscal 2015.

Overall, we are pleased that the quarter came in higher than expected on approved sales in our Automotive segment and that the laundry program has now launched. We are also very pleased that our European team has booked our first major center console program in that region. We congratulate the team on this very important win. And finally, we look forward to the launch of the General Motors center console program in May.

Now I will turn the call over to Doug, who'll provide further details regarding our financial results. Doug?

Douglas A. Koman

Thank you, Don. Good morning, everyone. Let me just add a few additional comments to those Don has already made. The effective tax rate for the third quarter was 20.7%, which resulted in income tax expense of $900,000 for the third quarter. For the 9 months, the effective tax rate was $12.9%, which resulted in an income tax expense of $4.5 million. Earnings per share would have been $0.30 for the 9-month period if the Delphi settlement were excluded from the pretax income and from the effective tax rate calculation. The effective tax rate would have been 24.6% and would have resulted in an income tax expense of $3.7 million for the 9-month period.

For the first 9 months, we spent $30 million for capital expenditures. As we have said previously, most of our capital spending would be in the first half of the year. So for the full year, we expect capital spending to be between $32 million and $33 million. Depreciation and amortization expense for the first 9 months was $12.9 million. For the full year of fiscal '13, we expect depreciation and amortization to be between $18 million and $19 million as we place more assets in service in the last quarter of the fiscal year.

As Don mentioned, consolidated net sales for the 9-month period were up $32.8 million or 9.8% over last year. Nine-month sales were negatively affected by $4.6 million or 1.2% due to currency fluctuations, primarily due to the weakening of the euro against the dollar. The FX effect on sales in the third quarter was negligible.

We had less Other expense in the quarter of $100,000 compared to $600,000 last year. This was primarily related to currency rate fluctuations and the company actively manages this exposure. For the 9-month period, the FX expense included in other expense was $600,000 compared to about $1.2 million last year.

Operating cash was $32.9 million for the 9 months compared to $11.9 million last year. This was primarily due to the $20-million Delphi settlement. As Don mentioned earlier, we received $10 million of that settlement in the second quarter and the remainder in the third quarter. Lastly, we brought, I think, debt down $6 million in the quarter to $40 million at the end of the third quarter.

Don, that's all of my comments.

Donald W. Duda

Thank you, Doug. I think we are ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Steve Dyer with Craig-Hallum.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Just before I get into the K2 delay, question on guidance. In the release, you indicate Q4 you expect to be the best revenue level of the year, which if you do that, actually pushes you above the guided range. How do I kind of marry those 2?

Douglas A. Koman

No, I think Q4 is usually our -- a strong quarter is what we meant there.

Donald W. Duda

Pushes us above the revenue guidance or the...

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Yes, if I -- yes, for revenue. If I make that the best quarter of the year, so at least $130 million, it pushes you to like $501 million. So it's close but I just want to make sure I get the spirit of that right.

Donald W. Duda

No, that's accurate.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Okay. And then on the K2 delay, I'm assuming this is pretty new news given that you're in April fiscal year. Do you anticipate material impact to you guys in fiscal '14? I wouldn't expect much from the truck portion. The SUV portion, I mean is that just -- that's essentially a quarter pushout or a quarter of lost sales for the SUV portion? Is that...

Donald W. Duda

The truck income [ph] -- first on the truck portion of it. I view that as a slight delay. We were going to have just a couple weeks of manufacturing in April; it's been pushed to May. I would be concerned but we have loaded, I think, over $20 million of product sales into our manufacturing system. I mean, our manufacturing will start in late April. We won't be shipping anything until May but we got the releases from the automaker now loaded in our system so the impact on our fiscal 2014, short of -- for sale by the automotive OEM should come in as planned. Now on the SUV, we had been aware that. That was likely pushed out in the numbers that we presented at the various conferences. That was already taken into account. We just couldn't officially say that it had been changed because the automaker hadn't said that. So the pushout of SUV is taken into account in our projections.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Okay. So no need to change anything that you've presented to date. Is that fair?

Donald W. Duda

No, no.

Operator

[Operator Instructions] Our next question comes from the line of David Leiker with Robert W. Baird.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

This is Joe on the line for David. Don, the $20 million you have loaded in the production system, is that a fair estimate for what Q -- fiscal Q1 incremental revenues could be?

Donald W. Duda

Too soon to tell. I would say as we progress through the fourth quarter, those will firm up. I would say they're pretty firm for the first -- for May. So we'll just have to see how the releases is going. I'm not willing to say that that's firm yet because we're still -- we're just coming into March now.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

Okay. Congratulations on the center console award in Europe. I'm wondering would it be fair to think that that award is probably with your largest French customer at the moment?

Donald W. Duda

We have 2. I'm not sure, which 1 is larger. I would -- very likely.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then, I guess, there's a lot of incremental new business coming through the pipeline. You've had Ford, you're getting GM, you're getting the French customer. Just wondering, how much of your revenue base goes end-of-life each year? So as we think about these new revenue numbers, what is rolling off on the other side?

Donald W. Duda

In our -- the numbers that we presented in the conferences where we're showing, '14 and '15 and '16, those take into account anything that's going end-of-life. Usually, about 3% to 5% goes to end-of-life each year and sometimes it's as high as 10%. But we've, again, we've included that in our projections. And there is a -- in the coming -- certainly in '14, there's nothing major going end-of-life and going by memory, I don't think there's anything in '15. I think in '16, we see one of the Ford programs -- it doesn't go totally end-of-life but it does slow down.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

Okay. And that actually brings me to my last question. You're basically in your 2 0s [ph] doing the Ford center consoles. Generally, I think of a platform life being, call it, 5 to 6 years. So where are you in discussion of either retaining current models you're on, of maybe expanding to different models or even thinking internationally since you're producing on global platforms for Ford, maybe taking that business to Europe or elsewhere?

Donald W. Duda

That's a difficult one to answer just because of the competitive nature of the business when we're pursuing new business with -- along with our competitors. So I'm going to kind of take a pass and say we're actively having discussions but generally, we don't say much until we actually announce the awards. And so I'd like to give you more color on that but I just think that should be about all we can say there.

Operator

Our next question is a follow-up question from the line of Steve Dyer with Craig-Hallum.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

A couple questions, additional ones. As you think about kind of future center console wins, is fiscal '16 sort of the earliest that we may see anything incremental, just given design cycles? Or is it possible certain people that maybe have been in the -- in design process and planning for a while, I mean is it possible that they -- I mean, could Ford add a capacitive screen sooner than that, for example? Not that they what would, but -- or is that sort of the first incremental revenue -- new revenue that we may see?

Donald W. Duda

For new complete programs, '16 would be the first year we would -- we could do with that. The program we just announced would start in '16 and then ramp beyond that. Now could an automaker switch from a resistive screen to our capacitive screen and do a mid-program change? Yes, that could happen. I think we have to have the screen out there and launched, I think, before that would happen. But we're certainly talking to all the OEM that have resistive screens and presenting our technology to them. And again, that's a planned launch with the SUV and then a rolling [ph] change with the trucks. So we got our first major award there and we continue to pursue others. So that could happen. And of course we would announce as that occurred.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Okay. And then just the delay in the SUV platform, making it more of a staggered rollout, does that sort of ease your any potential concerns in terms of executions, make it a little bit easier from that standpoint? Or am I looking at a 2 glasses half-full?

Donald W. Duda

The launch has changed, but the launch schedule has not. The product introduction date has changed. The launch schedule has not. So we're still being held to our deliverables as if schedule hadn't changed. Now what it does is that if there is some issues, we have to do another design validation or something, you got a little more leeway to do that. But we assume that we have to hit our original dates and we move to that. But we do take some comfort in that. It puts a little distance between the K2 launch and the SUV launch.

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Okay. And then last question, I guess for me. Just as it relates to capital allocation, as you get kind of the end of a lot of these launch costs and a big CapEx year, as GM rolls on, you should start generating a pretty significant amount of cash. How do you think about that vis-à-vis acquisitions, buybacks, dividends, et cetera?

Donald W. Duda

Okay. Our first priority with cash is to continue to invest in our businesses in select vertical integration where that make sense, where we can save money by vertically integrating or improve our quality systems. And then as we've said, acquisitions are a big part of our strategy. We haven't done one since '08, but as we launch -- we get the launch of K2 behind us, our attention is going to -- and it has been, on looking at acquisitions. We haven't seen anything we wanted to pull the trigger on but that would be the second use of cash. The dividends, we say that's a decision that the board makes every quarter, and that's just a quarter-by-quarter decision but it's one that's been made for, I think, 35 years. And then, aside buyback, we've said when we can we like to buy back stock. That's at least a number of shares that have been issued as far as LTI or anything like that. I think that would be the order of things.

Operator

Our next question comes from the line of Jimmy Baker with B. Riley Caris.

Jimmy Baker - B. Riley & Co., LLC, Research Division

Don, I just have a real high-level one for you. When it comes to electronics, infotainment, the evolution of connectivity in the vehicle, I'm sure you've heard a number of your competitors speak to a need for increased scale, frankly, a need for consolidation in that space. So I'm just hoping maybe you can speak to how Methode, a smaller player, is able to, not only continue to be very successful in that segment, but to actually win increasingly significant platforms. And maybe you can also just speak to your views on potential consolidation in the space [ph].

Donald W. Duda

Okay. Our strategy of vertical integration, of almost one-stop shopping for our customers, being good at the electronic thing, or the software, being good at contemporary designs, we added decorative painting, which is not an easy process to add. And now we've added capacitive touchscreens. So to a large degree, we've done a lot of that consolidation over the last several years. But I also think, how does a smaller company like Methode end up with some major awards? These programs are not easy to launch. We've -- you've heard us talk about the issues we've had with the Ford launch. For the most part they've been transparent [ph] to Ford, but -- plus there's some headaches in our factory, but that was pretty much viewed by the industry as a very successful program. Ford is pretty much maxed out on the projected volume. So the combination of the vertical integration, staying on our -- I mean, you've heard me talk about it in the presentation. You got to stay on your technology roadmaps and continue to add features to the center console. So that, coupled with good launch systems and just paying attention to the detail, that's what causes us to book business. The automakers certainly look at price, there's no question about that, but then they look at capability. So jury is still out on K2, but we're -- we've done our run up [ph] rates and are about ready to flip the switch. So the combination of all of that, I think makes us a very viable player, someone for the competitors to contend with and somebody that the OEMs want to do business with, again, all things being equal. In consolidation, if you're talking about some of the applications into the center console itself, right now, we're seeing the automakers keeping that separate, the map programs and so on. And I don't necessarily see that changing. I can see them relying more on some of the consumer products that are out there today. But in terms of the integration of the panel, I mean, I think we've -- we'll continue to add features to it but I think we're as contemporary as anybody else there.

Jimmy Baker - B. Riley & Co., LLC, Research Division

Okay, that's really helpful. And I just have a quick one on your Automotive segment. On your Other segment, could you talk about what drove the sequential margin increase there? And maybe just speak to what's a sustainable gross margin for us to model in that segment going forward?

Donald W. Duda

What's driving it is the acceptance of the e-bike in the Europe, which is the torque sensor. The sales of that have done very well, so increased sales. We also -- probably our first major torque sensor program and we continue to take cost out of the product. We are moving that manufacturing to plants in our Malta, mainly because most of the customers are European. So a combination of the increased sales. They have a very good prime cost which -- if you've got low purchase content, you get a pretty good flow through from the increased sales.

Margin going forward, I would -- those are nonautomotive programs, so really those continue and then we don't have as much availability to those programs as you might with the, I don't know, like a K2 program that runs for 5 years. But assuming those continue, the margins are going to stay, I would say, fairly constant. Now, we've booked a large automotive program. The volume's going to be much higher but the margins will be -- they would be above average for auto but they're not going to be anywhere near what you're seeing today. But we're very pleased that, that technology has come of age. We -- Methode made a significant investment over 5 years with the technology and we're starting to see that take off.

Douglas A. Koman

We're very pleased with it.

Operator

Our next question is a follow-up question from the line of David Leiker with Robert W. Baird.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

It's Joe again. Just on -- 2 last ones having to do with white goods space. Whirlpool issued kind of expectations for North America industry volumes to be up 2% to 3%, so I was thinking about your business. Is that maybe a fair underlying growth rate? And then on top of that, you layer on the phase 2 through 4 launches of the Whirlpool award?

Donald W. Duda

So yes, I would layer on the Whirlpool award. We've not seen the volume increase from our -- either of our 2 major customers yet. And I've read the same report and thus far, we've not seen it. In fact, I think they're -- both of them are down year-over-year in what I would say ongoing -- of business that's already launched. So I'd be cautious about adding 2% to 3% to that because we haven't seen it yet. That doesn't mean that that's a delay, but we haven't seen -- and some of the signs are good. Housing has improved modestly, so perhaps in the second half of '14 maybe we'll see that.

Joseph D. Vruwink - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then just on the margin front and Interconnect. I guess I'm surprised you'd take on incremental revenue on a sequential basis but your margins hold flat. Is that just because you still are occurring kind of launch costs at the initial phase of that launch? And then as we go into fiscal '14 with that incremental revenue, or even if Hetronic kind of doesn't move and stays at current levels, you could be looking at margin improvement?

Donald W. Duda

Hetronic is a big factor in Interconnect. That's a very profitable business for us. It's in the Industrial segment. The -- there's price pressure but not anywhere near what you're going to see in appliance or Automotive. So that being down is really the contributing factor. It's -- the launch of the laundry program is certainly helpful at keeping us -- going to keep us flat at least for the fourth quarter here. You would expect that as we get the laundry launch under our belt that we would see some improvement there. But that also has a very high prime. There's a lot of purchase content in the laundry program so there's not as much room for manufacturing efficiencies there. So it's not going to be exponential. We may see a point or 2, but it's not going to be exponential. As I said in my prepared remarks, we need Hetronic to -- for their sales to increase because of the profit that's made there.

Operator

There are no further questions at this time. I would turn the call back over to management for closing comments.

Donald W. Duda

Thank you, Robin. We will thank everyone for their questions and wish everyone a very good day. Thanks again.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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