Cubic Management Discusses Q2 2013 Results - Earnings Call Transcript

| About: Cubic Corporation (CUB)

Cubic (NYSE:CUB)

Q2 2013 Earnings Call

May 02, 2013 4:30 pm ET


Diane Dyer - Director of Investor Relations

James R. Edwards - Senior Vice President, General Counsel and Corporate Secretary

William W. Boyle - Chief Executive Officer, Director and Member of Executive Committee

John D. Thomas - Chief Financial Officer and Executive Vice President


James Ricchiuti - Needham & Company, LLC, Research Division

Brian Gesuale - Raymond James & Associates, Inc., Research Division

Kenneth Herbert - Imperial Capital, LLC, Research Division

Josephine Lin Millward - The Benchmark Company, LLC, Research Division


Welcome to Cubic Corporation's Second Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to turn the floor over to Diane Dyer, Director of Investor Relations. Please go ahead.

Diane Dyer

Thank you, operator. Good afternoon, everyone. And thank you for joining us.

Today after the market closed, we issued a press release reporting the company's financial results for the quarter ended March 31, 2013. A copy of the press release is available on the Investor Relations section of our website at We encourage everyone to read today's press release and refer to our most recent reports on Form 10-Q and Form 10-K. These documents are available from the SEC and from our website.

An archive of this call will be available later today on Cubic's website at the Investor Relations tab under Webcasts and Events.

On the call today are William Boyle, Chief Executive Officer; John D. Thomas, Executive Vice President and Chief Financial Officer; Mark Harrison, Senior Vice President and Corporate Controller; and James Edwards, Senior Vice President and General Counsel.

Now I'd like to turn the call over to Jim Edwards for the Safe Harbor disclosure.

James R. Edwards

Thank you, Diane. Please note that certain information discussed on this call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that during this call, Cubic management will be making forward-looking statements.

Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements should be considered in conjunction with and are qualified by the cautionary statements contained in Cubic's earnings press release and SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q.

This conference call contains time-sensitive information that is accurate only as of the date of this broadcast, May 2, 2013. Cubic undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

Also, please note that the management will discuss certain non-GAAP financial measures. A reconciliation between the GAAP financial measures that correspond to these non-GAAP financial measures is contained in our earnings press release and our SEC Form 10-Q report for the quarter ended March 31, 2013. Any discussion of non-GAAP measures is not intended to detract from the importance of comparable GAAP measures.

With that said, let me turn the call over to Bill Boyle, our Chief Executive Officer.

William W. Boyle

Thanks, Jim. Good afternoon, everyone, and thank you for joining us today. For those of you who are listening for the first time, Cubic Corporation is a leading international provider of cost-effective systems and solutions for the mass transit and global defense markets. I'd like to begin today with the summary of the second quarter results.

Sales for the quarter were $364.3 million, an increase of $24.7 million or 7% over the same quarter last year, and an increase of $50.9 million over this year's first quarter. Both product and service sales increased during the quarter with services growing a bit faster. The main reason for the sales increase during the quarter were our strong shipments from our Defense Systems business and the 2 acquisitions we recently completed.

For the 6 months ended March 31, sales were $677.7 million, a 3% increase over the same period last year. The acquisitions added $10.6 million to sales in the quarter and $11.1 million for the 6 months.

Operating income in the second quarter was $34.6 million, which exceeded last year's second quarter of $32.5 million by 6% and increased 90% from this year's first quarter of $18.2 million.

For the 6-month period, after our weak first quarter, operating income was $52.9 million, down from the $60.3 million a year ago. Net income for the quarter was $27.2 million, $1.02 per share compared to $23.4 million last year, $0.88 per share, a 16% increase. The second quarter earnings per share of $1.02 more than doubled that of this year's first quarter.

For the 6-month period, net income this year was $39.6 million compared to $44.1 million last year, down 10% due to the lower operating profit in the first quarter. Adversely affecting net income were higher interest expenses and lower investment in other income.

Versus last year, the second quarter's lower effective tax rate of 21% relates to the reinstatement of the federal research and development credit -- tax credit, which was enacted in January of this year. For the full year, we anticipate an effective tax rate of 25% compared to 29% last year. The overall tax rate is lower than statutory rates because much of our foreign income is taxed at international rates.

The second quarter results were impacted by several factors. On the positive side, $13.2 million of added revenue and operating income was included based on ridership levels on a major transportation contract. This is not a one-time event, although the computation of the annual fee is done once a year and reflected in March. Last year's fee on this agreement was $12.2 million.

On the negative side, more in the nature of -- I was going to say one-time events, but I guess more correctly more in the nature of infrequent events. The quarter included a $6.1 million restructuring charge as I've mentioned in Defense Systems. $700,000 in expenses incurred in connection with the filing of an S-1 registration statement for a possible secondary offering to enable the Zables [ph] heirs to handle estate taxes and $600,000 in acquisition costs.

We had mentioned in our last call that we will consider borrowing long-term capital. Since then, we have entered into a 12-year, 10-year average life, fixed-rate agreement of $100 million with what we feel is an attractive fixed rate of 3.35%. During the second quarter, we closed on the first tranche of this borrowing totaling $50 million and after the quarter ended, closed on the second tranche for the remaining $50 million.

During the quarter, cash flow from operations was a negative $29.9 million and we used an additional $20.2 million for acquisitions. For the 6 months, cash flow from operations was a negative $56 million and we used another $53.3 million for acquisitions. The negative operating cash flow is primarily related to contractual payment terms on several large defense and transit systems contracts, along with the capitalized cost for the Chicago Open Standards Transit project.

We anticipate cash flow from operations to improve and be positive for the balance of the current year and turn significantly positive as the major transit system projects are completed through fiscal year 2014.

During the quarter, we continued to invest in research and development in both our Defense and Transit businesses at about the same level as last year. We're optimistic that these investments would generate additional growth for the company as we believe innovation is a key to maintaining leadership in our key markets as well as expanding them.

Thus far, the impact to Cubic due to the Department of Defense cutbacks has been somewhat mixed. On the negative side, we have experienced delays and slowdowns on some contract awards by the U.S. government that we had anticipated receiving.

However, in spite of that, we have experienced some positives. And recently we've received over $400 million of potential new work related to virtual training on the 2 variants of the littoral combat ship and a multi-year Navy and Marine interactive training services contract. Both of these contract wins further diversify our defense business away from the U.S. Army to a broader spectrum of military services, which we believe will make us less susceptible to any future slowdown.

In this regard, it's worth mentioning that our total backlog decreased in the 6 months by $27.6 million to $2,804,000,000 from the beginning of the year. This included a reduction of $22.8 million due to currency changes. The total backlog does not include the $298.5 million contract for the littoral combat ships because that's an indefinite-delivery/indefinite-quantity contract.

Our policy is not to include IDIQ contracts in backlog even in cases where it's a sole-source contract as is the case on littoral combat ships. This will go into backlog as task orders are received.

Due to the delays in contract awards and in order to become more cost-efficient, we've implemented a significant effort this quarter to realign our Defense Systems workforce. This realignment resulted in a charge in the second quarter for $6.1 million for severance benefits. We believe the realignment will result in enhancing the profitability of our Defense Systems business and we anticipate seeing an improvement in their operating margins to more normal levels during the remainder of the fiscal year.

We continue to feel that our focus on training, intelligence, secure communications and special operations for both the U.S. and international markets is a key differentiator for Cubic. Our pop -- pipeline rather of defense bids has a very high component of international work across both systems and services. We anticipate finishing the fiscal year with key contract awards, especially in the international marketplace, offsetting the potential for our continued slowdown in the U.S. Department of Defense market. Overall, we remain positive on the prospects for our defense business for the rest of this fiscal year.

During the quarter, we made progress on our transportation systems Nextcity vision, with an important competitive contract win for realtime passenger information systems for the New York City's MTA. With this $27 million contract and the acquisition of NextBus, we feel we've made important strides to expand our addressable transit market beyond fare collection into the intelligent transportation marketplace.

We're focused on expanding our Transportation System's addressable market from $2 billion to approximately $5 billion by focusing on opportunities involving fare collection, intelligent transportation, toll and parking. If we are successful this should lead to a significant growth in this operating segment.

As detailed in our Form 10-Q filed with the SEC today, our transportation segment had a very strong quarter in terms of profitability. Jay Thomas, our CFO, will give more color in his comments, which will follow shortly. And during the quarter, we made continued progress on key large turnkey contracts in Chicago, Sydney and Vancouver. We anticipate completing the system delivery phase on these contracts during the 2014 fiscal year.

Finally, as you'll see spelled out in our 10-Q, the company's initiated a long-term incentive plan consisting entirely of restricted stock units. Now this has been done in order to more align management compensation with shareholder interest. There were minimal costs associated with this plan in the second quarter.

Now I'd like to turn the call over to Jay Thomas, our CFO, who'll review the specific segment results. Jay?

John D. Thomas

Thank you, Bill. Now I would like to review our segment results for the second quarter. I'll begin with Cubic Transportation Systems or CTS.

Sales increased 5% in the second quarter to $138.8 million from $131.7 million last year. The increase was driven by higher sales on contracts in the U.K., which included an annual system usage incentive based on the customers' most recent fiscal year that ended on March 31.

This year, the incentive contributed $13.2 million in the second quarter sales compared to $12.2 million last year. The annual system usage was higher due to an increase in ridership during the Queen's Diamond Jubilee and the London Olympics.

CTS sales for the second quarter were also higher because of a contract with a suburban Chicago bus operator. The operator's bus fleet will be integrated with Chicago Transit's new Open Standards Fare System. We continue to make significant progress on the Chicago open standards payment system. Through March 31, approximately $51.8 million in costs have been capitalized for this project. The new fare system is anticipated to achieve system acceptance in the second quarter of fiscal year 2014.

Once we achieve system acceptance, we will be amortizing the capitalized cost over the remaining term of the contract. CTS operating income increased 38% in the second quarter to $32.2 million compared to $23.4 million last year. CTS operating income is after a charge for amortization of intangibles related to acquisitions we have made. For the quarter this charge was $736,000.

For the fiscal year, we are estimating the charge for amortization of intangibles for CTS will total approximately $2.8 million. The increase in operating profit was primarily due to higher sales on contracts in the U.K., including the annual system usage incentive we mentioned, as well as improved profitability in our Australian operations. Year-to-date, operating profit margins for CTS were $17.6 million compared to 16% last year. Operating margins for CTS are strongest in the first half of the year due to the timing of the receipt of the annual systems usage incentive.

We would expect lower operating margins for the balance of the fiscal year for the segment. In the second quarter, the transportation segment received a strategic new contract from the New York Metropolitan Transportation Authority. As Bill mentioned earlier, the total contract value is $27 million. CTS will provide realtime passenger information to riders using the Internet browser-based map, a mobile phone-based application and a text message-based service. This technology is directly related to our Nextcity vision for the future of intelligent travel and broaden CTS' addressable market beyond automatic fare collection.

Total backlog for CTS was $1.62 billion, down about $47 million from September 30, largely due to negative currency movements.

I'll now review highlights of Mission Support Services or MSS. MSS sales decreased 4% in the second quarter to $122.2 million compared to $126.9 million last year. Lower activity at the Joint Readiness Training Center was the primary reason for the decrease, which was partially offset by higher sales related to contracts for the intelligence community and sales generated by NEK, a special forces training company acquired last December.

In the second quarter, MSS operating income was $3.6 million or 3% of sales compared to $4.6 million or 4% of sales last year. The decrease in operating income was attributable to a loss from a flight simulator contract due to higher personnel costs than were anticipated and the loss associated with NEK for the quarter. MSS operating income is after a charge for amortization of intangibles related to acquisitions.

The charge for the second quarter was approximately $3.3 million and the charge for the 6 months total approximately $6.1 million. For the fiscal year, we are estimating the total charge to operating income for the amortization of intangibles for MSS will be about $12.5 million.

MSS total backlog increased to $806.6 million at March 31, a 9% increase compared to $737 million at September 30. In the second quarter, MSS won a new $134 million, 5-year training and support single award contract from the U.S. Navy. Under the contract, MSS will provide interactive and immersive academic and similar [ph] instructions for basic and advanced flight operations.

In summary, MSS is relatively stable in a challenging DoD market. We believe our efforts to expand into the intelligent market special forces training positions MSS in higher barrier to entry sectors of the military services market. In addition, MSS is pursuing international opportunities, which leverage its broad set of qualifications. If MSS is successful in winning some of these opportunities, this could result in more favorable operating margins than U.S. defense services market.

Next I'll provide an update on Cubic Defense Systems or CDS. Sales for the quarter were $103.2 million, a 28% increase over $80.7 million in the second quarter last year. Most of the increase came from air combat training systems and increased shipments of MILES systems. CDS took steps to realign and reduce its global workforce in the second quarter. We recorded a charge in the quarter totaling $6.1 million for the restructuring. We anticipate that operating margins will improve for CDS over the course of the fiscal year and next year with leaner cost structures in place.

CDS operating income for the second quarter decreased 95% to $300,000 compared to $6.1 million in the second quarter of last year. After reflecting the restructuring costs of $6.1 million recorded in the quarter. CDS operating income is after a charge for the amortization of intangibles. The charge in the current quarter was $300,000. For the year, we are estimating the charge to operating income for the amortization of intangibles will be about $1 million.

During the quarter, certain CDS product lines previously recorded as other were reclassified into secured communications due to our management realignment. Prior year amounts have been reclassified to conform to the current year presentation. CDS total backlog at the end of the quarter was $381.1 million, down from $430.9 million at September 30. As Bill mentioned in his remarks, our big pipeline includes a high level of international contract opportunities and we anticipate total backlog for CDS should improve over the balance of the fiscal year.

I will now turn it over to Bill for closing thoughts.

William W. Boyle

Thanks, Jay. After our mediocre first quarter, we were pleased today to report what we feel was an outstanding second quarter. Now being mindful of your time, rather than rambling on, why don't we spend whatever time we have left to hear any questions you might have.


Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Jim Ricchiuti with Needham & Company.

James Ricchiuti - Needham & Company, LLC, Research Division

So if we exclude the incentive in the transportation business, the business looks like it was up about 5% year-over-year.

William W. Boyle

That's true. The incremental value of the incentive in terms of sales was about $1 million.

James Ricchiuti - Needham & Company, LLC, Research Division

Okay. And as we look at the balance of the year, would you anticipate that kind of growth or do you see potentially the momentum from the acquisition and the new contract helping the growth rate in the transportation business in the back half of the year?

William W. Boyle

With the acquisition of the NextBus I think what we said in the last call it would have a contribution of around $10 million on an annualized basis. So it will have -- I think the growth rate is pretty consistent for the rest of the year.

James Ricchiuti - Needham & Company, LLC, Research Division

Okay. And one follow-up. Just with respect to the plans to expand your served market in transportation, you highlighted intelligent transportation, tolled parking and fare collection. Can you sense as to what are the biggest components to go from the $2 billion served market to $5 billion within those 3 areas?

John D. Thomas

Parking and toll, incrementally, are probably $1-billion-plus markets, and then this whole new area of passenger information is probably about $1 billion. And then there are parts of fare collection today that we don't serve and primarily in different parts of Europe and South America. So those would be all the kind of components that add up to $5 billion.

James Ricchiuti - Needham & Company, LLC, Research Division

And to get to those markets, it's going to involve both internal development and acquisitions, presumably?

John D. Thomas



The next question comes from the line of Brian Gesuale with Raymond James.

Brian Gesuale - Raymond James & Associates, Inc., Research Division

I wonder if I could just ask a big picture question. As we look at DoD under cost pressures and austerity measures, are you starting to see any activity whether it's in the RFI stage or RFP stage that shows them having the propensity to really lean on your virtual training versus the more expensive live training measures?

John D. Thomas

Brian, it's Jay, I appreciate the question. Yes, I mean, we've definitely seen a shift because it's much more cost-effective to do the virtual training. So the win we had on the littoral combat ships is actually serving the next generation of virtual training using a lot of gaming type of software. So we are seeing a tilt on some areas there. But there is still the live training, which is where we kind of always had sort of a great market share. That market isn't going away at the same time.

Brian Gesuale - Raymond James & Associates, Inc., Research Division

Right. So overall is maybe these deployments slowed down from an operational type of perspective. We'll see more emphasis on training both the live but also faster growing piece for virtual. And I imagine the margin structure on the virtual's very favorable?

John D. Thomas

The margin structure right now is probably -- I don't know if we can make a call as to whether it's going to be significantly different just because in the U.S. market, most of the awards are really kind of technically acceptable low priced, whether it's products or services. Definitely the government is looking at using virtual where they can because if they have operational needs for shifting monies around, it may take it away from what they had in the past on services for training and we may see it because it's more cost-effective to do virtual.

Brian Gesuale - Raymond James & Associates, Inc., Research Division

Great. Maybe shifting over to transportation as well. Can you give us an update on where we sit with milestones in Sydney and Vancouver? And maybe how you guys are matriculating and executing through those contracts?

William W. Boyle

So let me see if I can go through the pieces there. In Sydney, we just launched I think it was back earlier in this calendar year, the ferry system for the new card system down there. The next phase of the project then would be to launch a bus and then the final phase will be to integrate the ferry bus with the rail system. So it's probably the hardest part of that project coming up will be, we think, the bus system. In Vancouver, what we're doing there is it's a smart card upgrade to an existing system. And that's just more of a timing issue as to when the customers are comfortable when they want to roll it out. So I think the next phase there is that we will be doing a test pilot on the card system. And then in Chicago, we're getting ready to start doing some pilots sometime later here towards the end of the -- our fiscal year towards the early part of the fall.

Brian Gesuale - Raymond James & Associates, Inc., Research Division

Okay, that's very helpful. And then last question just to jump over to the other side of the business one more time. You guys had won a lot of impressive IDIQ contracts over the last 12 or 18 months or so. A lot of those initially kind of ramped as small business awards coming right out of the chute. Are you starting to see anything where the award activity for full and open competition is kind of beginning to happen at a quicker rate?

William W. Boyle

The simple answer is, it depends on which service. So I think that there's a good case in point with the [indiscernible] contract. The only initial awards on that contract have gone small business, so at some point, we think that it will tip back over to full and open awards. But with that, it's almost like a case-by-case business by service. So it's one of these things we think that once they get caught back up to their goals and some of the services, then will start to see more full and open. So on the Navy side, we have won a couple of contracts there on a full and open basis.


The next question comes from the line of Ken Herbert with Imperial Capital.

Kenneth Herbert - Imperial Capital, LLC, Research Division

First, I just wanted to ask about CTS, and it looks like with the incentive payment you got this quarter if you back that out, you're at maybe mid- to high-teens margin. How do you see that moving over the rest of the year and into '14 as these -- as the other programs start to transition into the more profitable phases?

William W. Boyle

I think at this point, because we're still -- we've kind of alluded earlier in the year, this is sort of a transition year. So quarter-to-quarter, if you look at our first quarter of operating margins in transportation were a little over 11%, and obviously, very strong in the second quarter, which has been the trend in the last few years. I think we're probably comfortable of saying 11% is probably realistic the next couple of quarters. And until we get all these jobs done, it's probably a little uncertain to say that we're going to see a dramatic change in the margin profile.

Kenneth Herbert - Imperial Capital, LLC, Research Division

Okay. And as you cross the milestones specifically then Vancouver, Sydney and Chicago, I guess, 2014 is when a lot of these step-up into the more profitable phase of the contracts, correct?

William W. Boyle

Yes, on those specific jobs, that is correct.

Kenneth Herbert - Imperial Capital, LLC, Research Division

Yes, assuming no change in schedules, obviously? And then if I could on the restructuring you took in the quarter, how -- what's the timing in terms of the benefits of that, I mean, I am sure you will start to see some fairly soon but what's the timing there and how does -- what's the potential magnitude on that particular segment?

William W. Boyle

Well, I think we'll start seeing some impact right away. The third quarter should begin to show a pickup. There'll be a substantial improvement in Defense Systems margins going forward this year. And I think you'll see some immediate results.

Kenneth Herbert - Imperial Capital, LLC, Research Division

Okay. And then if I could just high level, if you look, Jay, at the acquisition pipeline and you've been very -- it seems like selective and done some really nice deals in the last couple of quarters. What's your take now on the pipeline looking out both within the commercial, as well as the defense worlds? And are you seeing any change perhaps in several expectations from a valuation standpoint or are you seeing anything else shift in terms of the pipeline and areas of activity?

John D. Thomas

We are, and actually I think we alluded to this on the last call, that the defense pipeline has definitely slowed down compared to last year. I think last year there was a bit of a rush of people trying to sell companies because of the anticipated change in the tax law. This year we are seeing a much smaller set of opportunities in defense. And we're much more cautious, obviously, in looking at opportunities in that space just simply we have to look at what we really think is a realistic growth rates or win rates on some of the things that are reflected in the pipeline that we're seeing there. Interestingly though we've been seeing more opportunities on the transportation side. And a lot of that has to do with the fact that we sort of increased our aperture of things that we'll look at beyond fare collection. So we're much more active looking at acquisition opportunities on the transit side than we are in defense today.

Kenneth Herbert - Imperial Capital, LLC, Research Division

Okay. And just finally, if I -- based on the earlier comments you made, would you look at the addressable market expanding into parking toll and passenger information. I know passenger information is an area that you've been -- particularly attractive in some ways. Fair to say that you are seeing opportunities in all of those areas or is there an area that continues to be a higher priority?

John D. Thomas

We're seeing stuff in all of those areas. I think the concepts around intelligent transportation is probably at the top of our list. And it's -- we look for places where we crossover with the same customer base. So we can really -- we think there's a lot of synergy in some of these acquisitions where we can leverage what we're doing in our back office systems or capabilities.


[Operator Instructions] Our next question comes from the line of Josephine Millward with Benchmark Company.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Bill, can you talk about how you think sequestration might impact defense business in the coming year? I think previously, you guys have talked about potentially a 5% to 10% downside under sequestration in this case if Congress is unable to reverse sequestration in the coming year?

William W. Boyle

Well, it's hard to be really precise about it. I mean, we've got all kinds of reports from consultants and so forth that everybody else does. And the reality is we don't know precisely exactly what's going to happen. We think versus most people in the defense business, we'll be least affected or less affected than our competition, mostly because a lot of -- most of our profit comes from transportation. And what this means [ph] in defense, half of our business is coming from international sources. So what's left with the DoD, we'll I think clearly be impacted somewhat. There are, I mean, we've already seen delays and slowdowns and -- what makes us feel a little optimistic is not so much any particular contract that we have a pretty big pipeline of business that we're going after. And while some of them clearly is going to be affected, it's not clear which parts of it would be affected but the bulk of it makes us feel like we're going to come out of this okay.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Okay, that's fair. In terms of Mission Support Services, you talked about expanding overseas. Can you extend on that? Do you need the Congressional approval to train foreign forces? How does that work? And if you can talk about some of the opportunities you're going after?

John D. Thomas

So the answer is anything we do overseas is usually subject to some form of Department of State or Department of Defense licensing. And we are active right now, I think you are aware we do a lot of work in what we call defense modernization. And so one of the things we are looking to do is to sort of export some of the skill sets that we have with special forces training. So that's an area that we're focused on. And so there's a lot of activity around that area. We do have service activities today in a number of places that we have done systems work. So that's kind of broadly speaking, that's Europe, the Far East and the Middle East. So there are -- always be a pipeline of activity in all those different places. And those areas we're not really seeing any budget pressures in those markets.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Sounds good. Nice winning New York by the way for transportation. Can you talk about if there are other intelligent city transportation bids in the coming year if you can help us size these opportunities for the coming year?

William W. Boyle

We don't have a specific pipeline I can share with you on the call today. As we've integrated in NextBus, basically what we've done is a [indiscernible] broad across a large or call them smaller cities and then some larger cities. So the first cut is that we would go and take their solution and go and try and sell that into a lot of the larger transit agencies, where we had a big presence and they didn't. And then we'll focus on going at it more as kind of probably a geographic pursuit around where we have some of our key locations. And our key locations are obviously the United States and Canada. And then we have obviously a presence over in Europe, headquartered out of London, and then we have a big presence down in Australia. So those would be the first cut places that we'll focus on.


Mr. Boyle, it appears there are no further questions at this time. I would like to turn the floor back over to you for any additional closing comments.

William W. Boyle

Okay. Well, thank you. That really concludes our call today. And we thank all of you for your interest in the company. And if anyone has any further questions, please don't hesitate to contact Diane Dyer, our Director of Investor Relations, or obviously, if you would call, Jay or I. Anyway, thank you again for your interest. And I guess that does it.


Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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