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Axion Power International Inc. (NASDAQ:AXPW)

Q4 2012 Earnings Conference Call

March 25, 2013 11:00 am ET

Executives

Thomas Granville - Chief Executive Officer

Charles Trego - Chief Financial Officer

Rudy Barrio - Allen & Caron, Inc., Investor Relations

Operator

Good morning and welcome to the Axion Power Results for the Year End 2012 Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions).

I would now like to turn the conference over to Rudy Barrio of Allen & Caron, Investor Relations. Please go ahead.

Rudy Barrio

Thank you, [Yusuf] (ph). Hello everyone and thank you for joining us today. The purpose of this call is to supplement the information provided in Axion Power press release announcing the Company's financial results for year ended 2012, which was disseminated this morning. If you did not receive a copy of the press release, it is posted on Axion Power’s website at www.axionpower.com and in the 'Clients' section of our website at www.allencaron.com. It is also posted on Yahoo Finance and most financial sites. You may also call our office in New York at 212-691-8087 and we will email it to you. Speaking on today’s call are Chairman and CEO, Thomas Granville; CFO, Charles Trego; and COO, Philip Baker.

Before we begin, I would like to remind you that some of the statements made during this call, including those about Axion’s projected future financial results, economic and market trends, and the Company’s competitive position may constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements made on this call today, speak as of today and Axion Power does not undertake any obligation to update such statements to reflect events or circumstances occurring after today.

Please refer to today’s press release and Company’s annual report on Form 10-K for the year ended December 31, 2012 and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results. As a reminder, today's call is also available as a webcast which can be accessed from Axion Power’s website and clicking on the 'Investors' tab. A replay of the webcast will be available shortly after the call and will continue for 30 days.

I would now like to introduce Axion Power's Chairman and CEO, Thomas Granville. Good morning, Tom.

Thomas Granville

Good morning, Rudy, and good morning ladies and gentlemen. Well here we are, another year in the books, a very productive year in the books. We left the designation 'development stage company' in the dust in 2012 and there's no slowdown in sight. But before we get into the battery story, let me introduce Chuck Trego, and Chuck is going to report on the financial story for 2012.

Charles Trego

Thank you, Tom, and good morning to all those who joined us today on this call. Last Friday, March 22, we filed our Form 10-K for 2012 with the SEC and we encourage everyone to read it as it discloses relevant investor information about Axion Power International. I want to point out again, as was noted in today's earnings release and that Tom just commented upon, with the filing of our 10-K for 2012, we are no longer a development stage entity. Therefore, as you read our 2012 Form 10-K, you will notice some changes in the presentation of our financial statements and footnotes compared to our filed Form 10-K for 2011 that reflects this change.

This morning, we released our operating results for 2012. I would like to review with you some of the key drivers of our operating results and cash flow for 2012 compared to 2011 as well as our liquidity situation as of March 22, 2013, last Friday. Product sales for the year ended December 31, 2012 were $9.8 million compared to $7.6 million of the same period in 2011. We have one customer that accounted for 81% of the product sales in 2012 and the same customer accounted for 84% of product sales in 2011. The increase in product sales in 2012 compared to 2011 is due to a series of orders for the production and immediate delivery of specialty flooded lead-acid batteries with the purchaser financing the cost of inventory and providing the raw materials required. There were no service fee sales for the year ended December 31, 2012 compared to $0.5 million for the same period in 2011.

Total sales for the year ended December 31, 2012 were $9.8 million compared to $8.1 million for the same period in 2011. Product costs for the year ended December 31, 2012 were $9 million compared to $6.8 million for the same period in 2011. The increase in product costs resulted primarily from increase in product sales. I want to point out that the increase in product costs as a percentage of product sales, to 92.5% in 2012 from 89.1% in 2011, was due to changes in product mix and the anticipated higher cost resulting from the planned sale of PbC products for two different pilot project PbC applications with two different customers.

Research and development expenses for 2012 were $4.9 million compared to $5.1 million in 2011. Selling, general and administrative expenses were $4.4 million in 2012 compared to $4.5 million in 2011.

Liquidity and capital resources. As we have stated before, our primary source of liquidity has historically been cash generated from issuances of our equity securities. From inception through December 31, 2012, we have generated revenue from operations that was not significant enough to produce an operating profit. We believe that currently available funds at December 31, 2012, which includes the net proceeds of $8.6 million from our February 2012 registered direct common stock offering and internally generated funds from product sales, provides sufficient financial resources for our operations, working capital, and both fund our anticipated growth in sales in traditional batteries and PbC products and maintain our anticipated CapEx through April 30, 2013.

In keeping with our funding strategy developed in 2011, subsequent sources of outside funding are now required to fund the Company's working capital, capital expenditures, and corporate operations beyond April 30, 2013. However, no firm assurances can be given that the Company will be successful in arranging the further funding needed to continue the execution of its business plan including the development and commercialization of our new products, or if successful, on what terms.

Failure to attain such funding will require management to substantially curtail, if not cease operations, which will result in a materially adverse effect on our financial position and result to the operations of the Company. We make reference to Note 3, Going Concern, and the notes to the consolidated financial statements in our 2012 Form 10-K. With that said, management, with the advice and consent of our Board of Directors, has continued to plan to raise additional funds from sources that are in line with our business objectives and strategies, and in order to continue operations beyond April 30, 2013.

At year-end, December 31, 2012, and 2011, we had $2 million of cash and cash equivalents. At December 31, 2012, working capital was $4.8 million compared to working capital of $4.3 million at December 31, 2011. In 2012, $7.7 million was used by operating activities. Of the net cash used in 2012, $6.8 million was used to fund operations of the business while $900,000 were used to fund changes in operating assets and operating liabilities.

Net cash used by investing activities for the year ended December 31, 2012 was $900,000 compared to net cash used by investing activities of $3 million for the same period in 2011. In both years, investing activities were for the purchases of property and equipment.

Net cash provided by financing activities for the year ended December 31, 2012 was $8.5 million compared to net cash used by financing activities of just under $100,000 in 2011. As we stated before, the primary driver of financing activities for 2012 was the registered direct common stock offering that was completed in the first quarter of $8.6 million after expenses of the offering and placement fees.

In summary, cash flow when considering all the cash flow activities, the net change for 2012, excluding the net proceeds of the registered direct common stock offering of $8.6 million, was a negative $8.6 million compared to a negative $11.3 million in 2011. That resulted in a decrease in net cash burn of $2.7 million or 24% for 2012 compared to 2011.

And now, I will turn the meeting back over to Tom.

Thomas Granville

Thanks, Chuck, and thanks again for the excellent job you and your finance team have done to reduce cash burn in 2012. We promised significant reductions as highlighted in our Q3 earnings call, and you carried it through for all of 2012 and delivered. 24% is a very significant reduction.

We have made reference to Axion moving out of the 'development stage company' status into real commercialization. One real evidence of that transition was the fourth quarter sales and shipment of PbC batteries to Norfolk Southern for their first hybrid yard locomotive. That shipment, and the subsequent $475,000 payment for PbC batteries by Norfolk Southern, underscores our emergence as a commercial entity, and our need in accordance with SEC accounting standards to move away from the 'development stage' characterization.

We have discussed in the past the reason that Norfolk Southern selected PbC as the chemistry of choice, but it nevertheless warrants mention again. Our long cycle life, fast recharge ability compared to other technologies, and our batteries' natural affinity for string equalization make it a natural choice for the hybrid local – the hybrid locomotive application as well as many other applications that require similar characteristics. One such application is the PowerCube, whether used in a grid connected configuration or utilized in standalone applications, such as remote solar and wind, all of these applications require or work best with an energy storage solution that contains the aforementioned battery characteristics.

We feel that the success we have had in deploying our on-site cube into the PJM utility network and the success of our net-zero energy cube in the Washington Naval Yard, we feel that these successes are partially responsible for the huge increase in quotation requests we have been receiving for projects in the U.S. and for projects in many countries outside of the U.S. Our sales force has been hard-pressed to keep up with these requests and to properly service the opportunities. As you might suspect, we have already made plans to staff up in this important segment of our Company.

So I said partially responsible for the increase in RFPs. Another major component is our more newly found competitiveness in the market. It's not just our batteries, and I'll talk more about cost reductions there later in the call, it's the entire Cube product, especially the electronics. We have implemented design changes and we have established ourselves with electronics manufacturers that can satisfy our specific needs for the PbC product, and they can do so on a quantity as opposed to a one-off basis. These strategic relationships carry over into our residential energy HUB.

The HUB units are something that were introduced in September. Axion and our strategic partners, both achieved UL standard certification in the fourth quarter of 2012 and the subsequent first quarter of 2013. This is clearing the way for a path forward in marketing the product with Rosewater Energy in the U.S. and marketing the product offshore in several applications that include the HUB as a building block, applications like electric vehicle charging stations, community storage, small commercial powering, and others. We have previously mentioned that the HUB product won awards at the CEDIA show last September, best of show for one, and we are looking to build on that recognition. All in all, we expect 2013 will be a very good year for the residential energy HUB.

One of our early initiatives was in the area of transportation with the likes of BMW and other OEMs pushing stop-start technology. The work continues but it is also expanded into the area of larger trucks, trucks employed in fleets of various sizes and for various uses. This is a natural application for the PbC battery and one that allows us to leverage our work and experience and our test results achieved in our endeavors with passenger car OEMs.

In another truck application involves our initiative with hybrid truck retrofitter ePower engine systems. We put out a press release in the fourth quarter related to our initial PO with ePower. We shipped them batteries to retrofit their first truck and they have done so. We also signed an exclusive agreement with them in the fourth quarter of 2012 which was announced in the first quarter of 2013 along with a positive update regarding how the road testing of this truck was proceeding. That testing, now with load, continues to do well and we are looking forward to adding PbC batteries to the ePower retrofitted fleet in 2013.

So, we now have product in place, stationary product, on-the-road product, new testing with new entities, and numerous requests for proposals and process. How did we get here? It wasn't just an accident that things are beginning to dovetail after some significant time I know, but nonetheless, they are beginning to take shape. It happened through the reasons already discussed and it happened because of other improved processes along the way. We're where we are today because we have been able to improve the battery plant by retrofitting, refurbishing, or outright replacing manufacturing components. At the same time, we installed advanced quality control that did not exist in the past.

We improved the proprietary carbon electrode, we improved raw material sources, we improved production processes, we automated, and then launched a fully robotic full carbon electrode production line. We recently commissioned a continuous roll process carbon sheeting line. Along the way, we installed quality controls for the lines and we will continue to work these quality controls as we seek to make a better product with better cost-containment through economics of scale and through improved processes, and those steps forward will come about through the hard work of our dedicated team.

We need the team to move forward on the path we have planned. To that end, we have taken steps to retain that team for the next three years and beyond. But we aren't stopping there. We have second quarter plans to improve our supply chain processes, especially as we look to go beyond the domestic market. Engineering help will be required as we continue to sell products and design products for new application, and there's more, much more, but I don't want to talk all day, so I'll open the floor to you for your questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from [Matt Chambers] (ph).

Unidentified Analyst

I think a year ago or so you had mentioned working with other railroad companies. Are any doing laboratory tests or any kind of testing at this point, any other ones besides Norfolk Southern?

Thomas Granville

We're working with others, is really about all I can say about that.

Unidentified Analyst

Okay, that's good. And with the Rosewater cube, I guess that power HUB, do you see any changes happening in order to get sales here or are you okay with the way things are right now, do you foresee any dynamics or is it going to evolve, I'm not sure?

Thomas Granville

Yes, we feel confident in it now that our strategic partners – we designed this HUB and we had a different manufacturer in mind. We are working with a manufacturer, continue to work with a manufacturer that we've worked with for years, but for this particular product, we really thought we were going to utilize someone else. That didn't turn out as well as we would have liked, so we're with our long-term manufacturer here and that long-term manufacturer has achieved UL certification along with us. So we think the process is really going to move forward in a much faster pace in 2013.

Operator

Our next question comes from [David Perry] (ph), another private investor. Please go ahead.

Unidentified Analyst

Good morning and thanks for taking the call. I have several questions. To begin with, I would like to ask how much capital do you anticipate raising this year and for what purposes? Then I would ask about the reference to working with another power cube vendor, does that reflect a failure of Rosewater to meet volume minimums in their exclusivity agreement with you or does it reflect the change in the technical specifications of the cubes that you were talking about working with on this new vendor?

Thomas Granville

Well, it certainly doesn't reflect a failure on Rosewater's part, that's not what we were referring to. We were referring to the manufacture of the components of the equipment. Just to be clear, we utilize different manufacturers to make this product. When this product is made with our batteries in it, then it moves through Rosewater for marketing. So Rosewater would not be the failure mechanism here whatsoever. It really was – fortunately we went in parallel paths on the manufacturing, we were hoping for some competitiveness, if you will, but that didn't work out as well as we would have liked because they're still hung up with some UL issues, so we've moved to the manufacturer that's already resolved those issues.

Operator

The next question comes from [Ken Gorman] (ph), a private investor.

Unidentified Analyst

I'd like to congratulate you and your team for taking this company to the next step.

Thomas Granville

I thank you on behalf of the team. That's all, that's all I had to say, just thanking you on behalf of the team.

Unidentified Analyst

Okay. I was interested in hearing the answer to the first question, the gentleman before me asked, about how much you anticipated raising during this financing that's coming soon?

Thomas Granville

Well, we're really not in a position to talk about that, but the use of the proceeds would certainly be for working capital, for CapEx as we moved forward, and for some operating capital. Suffice it to say that we've been planning for some time and we aren't interested in taking too much or too little.

Unidentified Analyst

Sounds good. I have one another question, going back to automotive, in the conference call 7.5 months ago, I guess it was the second quarter conference call in August, you had mentioned fleet testing should start within six months. So I was curious whether or not fleet testing with anybody had started and whether that new Asian automaker that we talked about six months ago has started some kind of in-car testing?

Thomas Granville

That was the fleet testing that we were referring to and that has not happened to this point. We continue to work with them and are working with them and expect to continue to work with them in the future, but their schedule didn't quite dovetailed with what they thought it was going to.

Unidentified Analyst

So BMW as well nobody has started fleet testing yet?

Thomas Granville

BMW has done in-car testing, yes.

Unidentified Analyst

Right, but of small volumes I believe is what you said in the past?

Thomas Granville

Yes exactly, exactly.

Operator

(Operator Instructions) Our next question comes from [William Blanchard] (ph), a private investor. Please go ahead.

Unidentified Analyst

Good morning. I'd also like to offer congratulations to you and your team, particularly on commissioning the automated continuous roll carbon sheeting process. I know it's been a long hard road and I know shareholders get frustrated at how long it takes to transition from an R&D company, I also know that a lot of good people are working really hard to make it happen, so thank you.

Thomas Granville

Well, thank you for the praise.

Unidentified Analyst

Okay, my first question is, what can you tell us about the unusually high finished goods inventory of $1.677 million at year-end?

Charles Trego

This is Chuck speaking. Actually that's a good question, and I appreciate you opening the comment on our inventory composition at the end of 2012 compared to the end of 2011. We have worked very hard this year not only to spend our cash wisely but also to rebalance our inventory to prepare it for the strong growth that anticipate going forward in PbC products. If you look at our inventory balance, it's almost the same year-over-year, $2.8 million this year, $2.7 million last year. But last year, less than one-third of our inventory was in PbC products. This year, two-thirds of our inventory is in PbC products.

So, that's two good things from our standpoint; one, we've got our inventory in place to support additional PbC growth ready to go in-house and we have significantly reduced our inventory in our non-PbC product line to better manage the flow of orders and inventory buildup to support our legacy lead-acid business as well as the other business we have from the other large customer that we've been dealing with for two years. So, that's a good question and we rebalanced out inventory is the answer to your question to support growth and reduced our investment by managing our inventory very tightly in the non-PbC categories.

Unidentified Analyst

Alright, thank you. What is your current visibility on the flooded battery contract?

Thomas Granville

We're continuing that contract, it's had some growth in it year-over-year. It's pretty consistent, amazingly so, as we were told when we got into it, the month-to-month orders year-over-year-over-year, it's pretty amazing, but I guess when you consider that some of the specialty products are used for things like tractors and construction vehicles that have a pretty well-defined lifecycle to them, maybe it isn't all that unusual, but the revenue and the orders continue on pace as you can see from our sales from 2011 compared to 2012.

You mentioned at the start of this, the carbon sheeting line, the roll process, and I don't have any compunction about telling you that that was a concern of mine for a long, long time, and not just mine but others that were here and are no longer here and others that are still here. We could not be any more pleased with how that turned out. The speed of the line, without really tweaking it up and without really running it full-bore, far exceeds what we thought we were going to get out of the first continuous roll machine. It's just been amazing how that's worked out. I'd like to be able to say the same thing about some of the other equipment that we've had here that went through long, long shakedowns to get to where they are today, but this one, the one that we thought was going to be the most troublesome, actually turned out the best.

Unidentified Analyst

Outstanding. One more question, then I'll get back in the queue. Your agreement with ePower created some confusion for some of us about the word 'exclusive' and what it meant. Can you tell us a little more about that, is it both directions, one direction, what did you mean by that?

Thomas Granville

Yes, it's the exclusive use of PbC batteries for their hybrid application.

Unidentified Analyst

So it's one way. They have to use you but you – how does it restrict you, if in any way? I mean I know you're doing APU work with other people, and I'm just wondering if there's any restrictions on who else you can work with.

Thomas Granville

No, it really doesn't, and they're not doing that kind of work anyway. The only thing that they're doing is their hybrid design for rebuilds of trucks. So, it does not affect any of the APU work that we're doing at all because it's a completely different issue.

Unidentified Analyst

Okay, but you're also working with other OEMs in the truck field, correct?

Thomas Granville

We certainly are.

Unidentified Analyst

Okay, so that's where my question comes from. I really shouldn't mention APU in that context. I'm more interested in the bigger picture with the other truck OEMs.

Thomas Granville

Yes, there are no other truck OEMs by the way that are doing any of this hybrid work right now. It's patented and the work we're doing with the other truck manufacturers really is different work, it's stop-start work actually. So, it doesn't really conflict. If it ever did conflict, I guess we'd address it at that point in time because we certainly want to be a good partner, but we're not restricted in any way.

Unidentified Analyst

Okay, thank you. I'll jump back in the queue.

Operator

Our next question comes from [Jeff Lewis] (ph), a private investor.

Unidentified Analyst

Can you hear me?

Thomas Granville

I can now. You had a little feedback there but I think it's gone.

Unidentified Analyst

Sorry, I happen to be on Skype. I was wondering if you could shed a little bit of light on how long you can keep a battery within the finished goods inventory before it starts to deteriorate.

Thomas Granville

We can keep it depending on what stage we leave it in. I mean it doesn't make a lot of sense to completely finish batteries. We don't do that with lead-acid batteries, we don't do that with flooded batteries, we keep them in [dubbed] (ph) format. Even if there was loss of capacity in the battery, a simple boost charge returns it.

Unidentified Analyst

Okay, thank you very much.

Operator

Our next question comes from [Albert Marshall] (ph), a private investor. Please go ahead.

Unidentified Analyst

Sorry, this is William Blanchard. What's the number one reason with not obtaining a power cube sale, and what are we doing about it?

Thomas Granville

Well, as I mentioned in the release, there are – I can't even tell you the number of RFPs that are out there with respect to those applications. I mentioned that the competitiveness of the product isn't as much due to the batteries as it is to some of the ancillary items that go along with the sale. Those items, things like the electronics, inverters, racking systems, et cetera, we really were in a one-off position with in the past, and now that we have gone beyond that and we're talking about economics of scale here with more opportunities, and now that we've redesigned some of the electronic needs that we have for our products, which you can appreciate in the early stages was overbuilt because the last thing in the world we wanted to see was a product out in the street that people could point to and say, it doesn't work. We were not going to put ourselves in that position. We look forward to our cube sales in 2013, Vani and his sales force have a lot of opportunities in that area, opportunities that we really didn't have in the past.

Operator

Our next question comes from [Albert Marshall] (ph), a private investor. Please go ahead.

Unidentified Analyst

My question is about the carbon sheeting process. This automation, was there something that happened – a series of incremental changes over time or was it sort of a buying area where this massive increase in productivity took place literally overnight?

Thomas Granville

It was both, but it was more the latter than the former. It was a process that – I have mentioned on the calls before that we started working on this process way back in 2007 and we got various quotes from various sources to provide production equipment. The designs for that equipment were in the seven figure range, just to design the piece of equipment. And then after the design, the particular contractor, and there were only a couple, and none were U.S.-based or even North America based. The design contractor said, we'll let you know what it's going to cost to build it, well give us an idea, is it more than $10 million, we don't know.

So, at that point in time, not having a lot of money to burn, we took a different tact and we brought others in house to try to work with this. We tried to employ some expertise, and I'm getting pretty deep into the story here, but I'm doing so because I think it's important to understand how this thing really came about. And we tried all kinds of methods and the methods did not bear fruit. But we kept at it and we've got some very skilled engineers in-house here and we stayed with it and we began to improve it slowly, still not to production stage, and then we had the final step and the final epiphany in a matter of weeks, not two or three weeks but I mean certainly it wasn't a matter of months. And then once up and running, and once producing product, then we went – rather than try to make changes to the processes, we went along, we then went back and tweaked the process to get more out of various components of the process, and that's where the significant increase in capacity came in just the last few weeks.

Unidentified Analyst

Great, thank you. Will they're going to have a significant impact on their pricing in their quotes?

Thomas Granville

Well, let me put it this way, it will have a significant effect in our cost of carbon sheeting.

Unidentified Analyst

That's great, thank you very much.

Operator

Our next question comes from [Richard Bruno] (ph), a private investor. Go ahead.

Unidentified Analyst

I'm going to talk about the APU units, you had mentioned prior that you were going to have units in the field I believe by the end of 2012, so I'm just curious how the testing is going forward and how long do you expect that testing process, do you have expectations on how long they would need to test the APU or the PbC in that product?

Thomas Granville

I think there's a little confusion there. We weren't talking about the APU units. What we planned on having in the field was the hybrid product that the ePower is providing, where we're providing a number of batteries for that application. The APU application isn't anywhere near that stage, nor was it really. It was the ePower Group that came back to the table last spring and we setup a roadmap with them and it was our intent – I think I may have even said something at the Annual Meeting about it, that we would have something on the road by the end of the year, and we shipped the batteries by the end of the year but they had some other little glitches in their electronics, so they really didn't get it on the road until January.

Unidentified Analyst

I was pretty sure at some time last 2012, I had read some form of a press release or some form of a statement, wherever your battery presentation was put up, that you were working with an APU unit supplier or a large OEM truck builder as far as the APU units for the no-idle situation?

Thomas Granville

We are working with large trucking companies, but you know I can't get into any more than that. It isn't just APU with other applications for them.

Unidentified Analyst

So, are you working with the foreign APU unit?

Thomas Granville

We are working with that application but it really – there is better low hanging fruit out there than that.

Unidentified Analyst

Okay. And I was curious about your pipeline and funnel ideas. Will there be a point where you can start to provide information regarding prospective amounts of business you may have in the funnel and then coming into the pipeline and something that we could start figuring out how to create a possible expectation of measurements going forward?

Thomas Granville

Other than what we've been talking about and I think what you're going to see in 2013, as we've seen in the past and as the shareholders have seen in the past, it's pretty difficult to make meaningful projections on some of these products, simply because they are right now they are not in the marketplace. So it's not as simple as saying, okay, we want to take 5% share of that market or 11% share of this market. The products that we are dealing with really aren't so much displacing other products. They are things like the cube for solar storage for example, wind storage, stop-start application. There's product out there right now that's being used but it's in a different design form. So, it's not a drop end.

So it becomes very difficult to really project what those numbers are or will be. We certainly do a lot of it in-house, not for publication. At some point, when it becomes a little more consistent, for example if we were to talk about our lead-acid battery sales, we could definitely make projections on that based on what we've seen in the past, based on orders that we've gotten in the past, based on historical evidence.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Granville for any closing remarks.

Thomas Granville

Thanks again for listening this morning. It's been an exciting time at Axion for quite some time and it's been building. Let me repeat something from this morning's release. We here at Axion have always believed and continue to believe that PbC is a game-changing, disruptive technology that will serve as an enabler for other products to economically, and in some cases more safely, come to market and deliver the performance and value for which they were designed. We believe that we are off to an excellent start in 2013, a start that will firmly position us for a step-change year. Ladies and gentlemen, as always, thanks for joining us this morning, thanks for sharing your time with us this morning, and thanks for listening to our story. We'll see you next time.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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