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Mentor Graphics (NASDAQ:MENT)

Q4 2011 Earnings Call

February 24, 2011 5:00 pm ET

Executives

Gregory Hinckley - President, Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Executive Director

Walden Rhines - Chairman of the Board and Chief Executive Officer

Joe Reinhart - Director IR

Analysts

Saket Kalia - JP Morgan Chase & Co

Paul Thomas - Roth Capital Partners LLC

Thomas Diffely - D.A. Davidson & Co.

Richard Valera - Needham & Company, LLC

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 '11 Earnings Release. [Operator Instructions] I'll now turn the conference over to your host, Joe Reinhart. Please go ahead, sir.

Joe Reinhart

Thank you very much, Kathy. Good afternoon, everyone. Welcome to Mentor Graphics Fiscal Fourth Quarter 2011 Conference Call. I'm Joe Reinhart, Director of Investor Relations and Corporate Development for Mentor. This afternoon, Walden Rhines, CEO and Chairman, who will open with the discussion of key trends in our business. Greg Hinckley, our President, will then provide operational and financial highlights, along with guidance. Wally and Greg will then take your questions.

As a reminder, this conference call contains forward-looking statements. While these statements reflect our best current judgments, they are subject to risks and uncertainties that could cause actual results to vary. In addition to the factors noted later, these risk factors can be found in our most recent 10-K, 10-Q, annual report. For a reconciliation of GAAP to non-GAAP measures used in this presentation, please refer to today's financial release. This information is available online at the Mentor website.

Also, earlier this month, Mentor received Director nominations from Icahn Capital and Casablanca Capital. The board's nominating and corporate governance committee comprised of independent directors, will review and consider the individuals proposed to determine whether they would improve the composition of our board. We've also received an unsolicited conditional offer to acquire the company from Icahn Capital. The company's Board of Directors will review the Icahn Capital conditional offer and make a recommendation to shareholders in due course. Mentor Graphics shareholders are advised to take no action at this time pending the review of the conditional offer by the Mentor Graphics board.

With that said, the purpose of this call is to discuss our fiscal fourth quarter and full-year results and outlook. We will not be making comments regarding Icahn Capital or Casablanca Capital or their activities. Wally?

Walden Rhines

Thanks, Joe. Well, Mentor's Q4 '11 and fiscal year set all-time records in almost every category. Bookings in the fourth quarter grew 45% and for the year, 30%. Revenue grew 30% in the fourth quarter and 14% for the year, the fastest growth rates of the big three EDA companies. Established customers continue to purchase more Mentor products than ever, with growth in the annualized run rate of our 10 largest contract renewals at 30%.

Non-GAAP earnings per share for the year increased 49%, after a 135% increase the previous year. And Mentor's position as the second-largest provider of EDA software and support, as reported by Gary Smith, EDA, continued this year and likely improved. While the past year has shown very broad strength in bookings, revenue, cost control and earnings, it's just one step in the continuing payback for the Mentor strategy of the last decade, but it's fundamentally different from other major EDA companies. What's the difference and why does it allow us to continue to grow revenue without proportional increases in operating expense? The strategy has been based upon focused investment in the areas of EDA, where Mentor has the number one or near number one market share.

In addition to growing existing strengths, it's mandated early investment in new emerging areas of need like design for manufacturing, electronics system level design and embedded software that's on totally new applications of EDA in new markets like automotive and aerospace. Mentor's strategy of investing heavily in the businesses where we have number one market share has caused us to prioritize investments in system design, including new applications in transportation industries, which now comprises more than 1/3 of Mentor's revenue. Through most of the last decade, we invested in these Systems businesses at a higher rate than our overall footprint R&D spending. Today, the Printed Circuit Board business generates office operating profit that's nearly twice the level of the overall company.

Bookings for total Integrated System Design grew 85% in the fourth quarter and 40% for the year. The transportation part of our new and emerging segment was an area of significant investment throughout the last decade, both in R&D and in the development of a whole new distribution channel. Bookings for our Cabling and Wire Harness products grew 110% this past quarter and 95% for the total year in this profitable business.

Throughout this decade, Mentor's market share of the Systems business has grown, hitting 45% in fiscal 2010 and continuing the growth momentum this past year. Customers for our System Design Software are also experiencing strong growth in their businesses. Contract Assemblers grew 33% in calendar 2010 and are continuing to grow at a faster and more stable rate than the semiconductor industry, as evidenced by both the growing popularity of consumer electronics products like tablet computers and Smart cell phones and by a strong recovery in the automotive industry.

Mentor's System Design business strength has also been an important factor in making Mentor number one among EDA companies in the important, fast-growing China market, where Mentor has 45% share of EDA revenue according to the EDA Market Statistics. Mentor's substantial internal investment in emerging design technologies has also had an increasing impact as these new technologies become necessary for leading-edge design. The chip design world has headed this continuity in verification that has become increasingly evident. The companies designing large chips at 45 nanometers and below could no longer perform Full-Chip Verification without hardware acceleration or emulation. This has caused a dramatic increase in emulation revenue throughout the industry, which shows every sign of continuing in the coming year and accelerating far into the future. After significant investments through more than a decade, Mentor's Hardware Acceleration bookings more than doubled this past year. At the same time, total industry growth in emulation had been so rapid that the major companies are scheduling new orders into the second quarter of calendar 2011. And while Full-Chip Verification at the leading edge has transitioned to hardware acceleration, even the major blocks that make up the design are straining the limits of simulation technology. For that reason, adoption of advanced verification techniques like formal methods and intelligent testbenches has accelerated, nearly doubling over the last three years the percentage of designers using these technologies. This was evident in Mentor's Scalable Verification segment, with 100% year-to-year growth in bookings in the fourth quarter and 65% growth for the year. It's not just the design verification of chips that's hitting the limits, but also the ability to test them. Mentor's number one position in design for tests drove soaring demand that grew bookings 55% this year after a 100% growth last year.

The other important element of Mentor's focus on number one market share positions has been our applications of EDA to totally new markets. I've already talked about the success that Mentor has achieved from our long period of investments in the application of EDA to the transportation industry. Mentor was also the first major EDA company to invest in the product development and distribution channel needed to support the increasing share of embedded software in most chip and system-level products. Typical chip design teams today are dominated by embedded software developers, making Mentor as the only major EDA company with a significant capability for this part of the design problem. More than 40% of the cell phones sold in the world today contain Mentor's Nucleus Realtime Operating System. The microprocessor companies like FreeScale and NetLogic recommend Mentor-embedded software development tools for designers that use their microprocessors.

Developers of system products, like automobiles, take advantage of Mentor's unique Android and open-sourced Linux development capabilities. And Mentor's hardware software verification products like Codelink and Vista continue to accelerate our growth. Industry-leading growth this year is a part of Mentor's story, but the real story comes in the years ahead, as system-oriented design methodologies permeate the design of chips, boards and bigger systems. New applications like automotive and aerospace design will continue to grow rapidly with very little EDA competition. And emerging countries like China will continue to outstrip global growth rates of EDA adoption.

Now that the investment has been made, the products developed and the new distribution channels built, our investors won't have to wait to see the return on their prior investments. This past fiscal year is just the beginning and the momentum into the present fiscal year is already evident. Greg?

Gregory Hinckley

Thanks, Wally. I have said in the past, that all fourth quarters are special. With that said, this one was really, really special. Let's start with the numbers. Bookings were up 45% for the quarter and 30% for the year. Book-to-bill was significantly greater than 1.0. Revenue was $307.3 million, up 30% from last year, and 5% ahead of guidance. EPS, non-GAAP, was $0.48 for the quarter and $0.70 for the year, ahead of guidance by $0.02 and $0.03, respectively. Non-GAAP operating income was 23% of revenue for the quarter and 12% for the year. In fiscal year '10, non-GAAP operating income was 8.7% of revenues. In fiscal year '09, 3.8% of revenues. Cash flow from operations was $75 million for the quarter and $82 million for the year.

All the leading metrics that Wally and I use to track the business are exceedingly healthy. New customers, excluding PADS, were up 7% in number and more than doubled in value. Bookings from our marketing program for venture-backed electronics companies were up 25% in value for the entire year compared to fiscal year 2010, and the fourth quarter alone reached the highest level in the past two and a half years.

Consulting bookings were up 60%, while training more than tripled. Both bookings were by far, all-time records. Support reinstatements were up 70%, which have been tripling, leading the way, while the clients again dropped down 15%. Parenthetically, momentum is carrying into the first quarter, as we see our PADS distribution bookings, quarter-to-date, double the average of our prior four quarters, and our hyperlinks distribution PCB analysis bookings more than tripling.

Cost control remains an intense focus. Over the past three years, we have reduced our non-GAAP G&A fixed cost as a percentage of revenues by about 0.5% of revenues per year, and our sales and marketing expense by between 2% and 3% of revenues per year. On a GAAP basis, our SG&A expense, as a percentage of revenues, compares unfavorably by approximately two percentage points to a universe of about 20 software companies with revenues between $750 million and $4.5 billion, and to the entire EDA industry by about 4% of revenues.

We have aggressive, I repeat, aggressive plans to make up about 50% of the difference with our EDA peers by the end of this fiscal year, and we are committed to making further progress in fiscal year 2013 and 2014. Likewise, if we can outpace our revenue guidance by merely 2%, we will have the same effect on profits, as reducing SG&A by a similar percentage of revenues. Both ways, we are confident of delivering value to our shareholders.

Now for more detail. Bookings were up 45% from the fourth quarter last year. Services, a historically sensitive barometer to the health of our customers, saw our bookings doubling from Q4 of fiscal year '10 which in turn, was up 45% from the previous fourth quarter. All product categories, with the exception of our pure IC category, showed remarkable growth. Integrated System Design was up 85% for the quarter and 40% for the year. Strength was across all products, including simulation analysis, layouts, capture and FPGA synthesis.

Seven of our top 10 accounts for the quarter and four of our top 10 accounts for the year were system accounts. Average annual contract payments put the seven systems companies in the fourth quarter through a very respectable 30%. Scalable verification was up 100% for the quarter and 65% for the year, with simulation due to a series of competitive replacements, say, for semiconductor, for example, up 75% for the quarter and 45% for the year.

Emulation, obviously a highlight this year, more than quadrupled bookings for the quarter and more than doubled for the year. Looking forward, we like what we see in our Emulation benchmarks and evaluations. Analog Simulation was also strong. New and emerging was up 20% for the quarter and 45% for the year. Within new and emerging, we include our embedded software, automotive, electronic system level and design for test products.

Embedded continues to benefit from the acquisition of Wind River by Intel. Bookings more than doubled in the quarter, as we concluded an agreement for an Android-based infotainment system for a major European automotive manufacturer, and signed an important OEM contract with Freescale for our Inflexion product, an advanced 3D graphics and user interface designer.

Transportation continued strong, up 50% for the quarter and 60% for the year. Notable customers included Lear, Ford, Shanghai Automotive, and the Japanese company, Mitsubishi Fuso.

Test was down 20% for the quarter but up 60% for the year. LogicVision, now part of the test product line, has been a wonderful success for us. Mentor purchased the product line in calendar 2009 for about $10 million net of cash. In its last year as an independent company, LogicVision reported about $10 million in revenues. Revenue this year were almost $30 million. Bookings for our electronic system-level product more than doubled.

Lastly, Design-to-Silicon was flat for the quarter, and down 5% for the year, with quarterly strength in Calibre, offset by weakness in other product lines. All regions showed growth for both the quarter and the year, led by North America, up 80% for the quarter and 30% for the year. Europe was up 35% and 30%, respectively. PacRim was up 25% and 45%. Japan, 10% and 5%. Bookings were 80% term based, 15% perpetual and 5% subscription compared to 80%, 10% and 10% last year.

Top 10 deals in the quarter made up 60% of total bookings for 3.5 years in length, reflecting the concentration this quarter of mil-aero accounts. Q4 2006 showed an identical booking term, as most of these mil-aero contracts were last booked in that quarter. Mentor has a practice of limiting contract lives for three years for semiconductor companies and four years for the mil-aero companies. The average annual fees grew 30% for the top 10 transactions.

Quarterly revenue was up 30% to $307 million, an all-time record. Revenue mix by geography was 50%, North America; 25%, Europe; 15%, Japan, and 10% PacRim.

Currency. Currency favorably affected Q4 revenue by about $3 million. Acquisitions completed in the year, Valor, Pixus, CodeSourcery, Zealan and DVS contribute less than 2% of total annual and about 10% of quarterly revenue because of purchase accounting effects. For the entire year, revenue was up 14% with product up 17% and services and support, up 9%.

Non-GAAP gross margin was 88.1%, consistent with guidance, but down 0.5% from last year as a result of higher Emulation and Service revenue. The fourth quarter non-GAAP operating expense was up $30 million last year. Acquisitions contribute about $10 million of that expense, and expenses associated with $100 million increase in revenue accounted for the remainder. Q4 non-GAAP operating expense was also $9 million ahead of guidance, again, due in part to exceeding plan and incentive compensation. Currency is favorable to expense by about $2 million.

Our annual 123R expense, that having to do with stock options and employee stock purchase plans dropped by 15% for last year. As we've mentioned several times, we are focused on expense reduction in the operation of our business. For example, we have recently negotiated 10% in annual worldwide data voice spend. In fiscal year 2012, we are on track to reduce outside IT services by 35%, and our continued policy of coach-only travel for all employees, including executives and in particular, all executives, reduces annual spend on air travel by $4 million.

Quarter-end headcount was 4,701, up 275 from last year, and all due to acquisitions. Other income and expense net was an expense non-GAAP of $4.4 million, up $1.4 million from last year. The change reflected increased interest expense, resulting from our purchase of our Fremont, California facility and minor FX improvements of foreign currencies. Special charges of $2.2 million resulted from cost-cutting initiatives.

Cash flow from operations was a $75 million source in the quarter. With the acquisition of CodeSourcery, the completion of the Fremont facility and the receipt of funds from the employee stock purchase plan, cash and equivalents essentially doubled in the quarter to $133 million. In the quarter, we factored $13 million worth of receivables. Trade receivables, trade accounts receivable were $154 million, up $50 million sequentially. Short-term unbilled receivables were $193 million, down $4 million sequentially.

Net of reserves, Mentor has no receivables more than 60 days past due. Trade DSOs were 45 days, up six days from last quarter and up three days since last year. Total DSO were 102 days, down 11 days from last quarter and down eight days from last year. Capital expenditures were $10 million for the fourth quarter compared with $18 million in the third quarter and $28 million in last year's fourth quarter. Much of the capital expenditures in the third quarter in last year were due to payments related to building our new Fremont facility, which will save us $4 million in facilities expense this year. Depreciation and amortization was $8 million for the fourth quarter, same as the third quarter and last year's fourth quarter.

Now onto guidance. Fiscal year 2011, as we have said today, was a tremendous year, rewarding for our shareholders, our employees and our customers. Many of the initiatives that we began in earnest over the last five to 10 years, including Emulation, Embedded Software, Transportation, Electronics and Systems Design for manufacturing have matured and are combining to accelerate our growth and leverage our profitability.

Two years ago, in the midst of the recession, we were pleased to remain profitable, with non-GAAP operating profit of 3.8% of revenue. Last year, we more than doubled that rate of profitability to 8.7% of revenue, and this year, we took it to 12%.

Momentum. Momentum is strong in our business. All of the metrics that we have told our shareholders, our leading indicators, are more favorable than either Wally or I have ever experienced at Mentor. Bookings in the first few weeks of the first quarter 2012 support a optimistic outlook. Quarter-to-date base business transactions are running at 12 ½% greater in number than the same period last year. Our PADS and Cabling business are well up. With that as background, for the entire fiscal year 2012, we are forecasting revenue up approximately 9% to $1 billion and non-GAAP EPS up 43% to $1 per share.

With these results, Mentor will drop down about 50% of incremental revenue to operating income, and we'll report non-GAAP operating income at about 15% of revenue. Excluding the effect of acquisitions, and revenue recognition model changes for our peers, we believe that Mentor will be the fastest-growing EDA company in calendar year 2011, just as we were in calendar year 2010.

For the first quarter, we are forecasting revenue of about $225 million, up 25% from last year, and non-GAAP EPS of approximately $0.15 per share, well ahead of our $0.02 loss last year. Incremental operating income fall-through will be in excess of 50%, and operating income will touch 11% of revenue, a record in our traditionally seasonally weak first quarter. Wally?

Walden Rhines

Thanks, Greg. Mentor Graphics Board and Management team are focused on delivering shareholder value. As of the close on Friday, February 18, before Icahn Capital's conditional offer, the company share price had grown 70% over the last year. It improved by more than 90% during the prior-year period for a two-year growth of over 200%. These results represent significant out-performance versus our peer group, technical indices and the market. Mentor's strength in the fastest-growing areas of EDA, including new applications of EDA, make possible the 9% organic growth in revenues and the more than 40% gain in non-GAAP earnings per share. This momentum is driven by the investment we've made over the last decade, an investment that provides a basis for continued momentum far into the future. Joe?

Joe Reinhart

Thank you, Wally. I'd like to remind everyone that the purpose of this call is to discuss our fiscal fourth quarter and full-year results, as well as the outlook that Greg just provided, and we will not be making comments regarding Icahn Capital, Casablanca or their activities. Kathy, if you could open the call up to questions, please?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Tom Diffely with D.A. Davidson.

Thomas Diffely - D.A. Davidson & Co.

I was wondering if you could just talk about your views of the industry at this point. And if you think over the last few quarters, you've got a little more positive on the overall long-term growth drivers.

Walden Rhines

Well, let me just tell you for the industry, certainly, the industry is turning up, and you would expect that because typically, EDA strengthens about a year after a semiconductor recovery, as they bring out their -- as semiconductor companies bring their R&D in line with percents of revenue that they feel comfortable with. There have been other effects here in addition to the recovery of semiconductors. As I highlighted earlier, the systems companies are particularly strong. Assemblers show that, but the end markets themselves, particularly, Consumer Electronics and Transportation have been particularly strong, and I would expect that to reflect more broadly than just Mentor, but Mentor is key in this because of our high percentage of our business that comes from System Design. And lastly, I'd note the dramatic increase in the average annual run rate on contract renewals, which was 30% this last quarter, but has averaged over 25% for the year. With numbers at 45% in the second quarter, suggests that people are just using a lot more software than they have in the past, and they're willing to make commitments for it.

Thomas Diffely - D.A. Davidson & Co.

So if you look at the $1 billion guidance you gave, the 9% growth, how much of that do you consider organic versus this one?

Gregory Hinckley

It's Greg Hinckley. In our case, we would view it as all organic.

Thomas Diffely - D.A. Davidson & Co.

If you look at that -- how do you think it splits off from a market share gain point of view for this kind of deal?

Walden Rhines

The market share gain during the current year is very likely, because we grew quite a bit faster than the other major companies. For next year, hard to say. The net growth rates of the big three are all within a point or two of each other. And a lot will depend on whether we see a recovery in the smaller companies in EDA, and we'll just have to see how that goes.

Operator

Your next question comes from Paul Thomas with Bank of America.

Paul Thomas - Roth Capital Partners LLC

Maybe first on the 15% operating margin guidance, Greg, you highlighted a few activities you guys are taking to reduce expense a little bit. I just wanted to confirm that, but there's no headcount reduction based in there. You guys are going to get there based on sort of non-headcount related reductions?

Gregory Hinckley

Tom (sic), we've been tight on headcount for years now. Just last year, despite the fact that our business grew by 14% and acquisitions only added 2% to our revenue, our headcount was flat net of acquisitions, so we're careful, have been for years. We'll continue to be careful. Sorry, it is Paul.

Paul Thomas - Roth Capital Partners LLC

Then on the full-year guidance to last quarter, you commented that it looked like kind of a level-loaded year. But your Q1, the guidance is pretty strong. Should we still be thinking sort of kind of flattish for the year, is second half is bigger than the first half, or how does that look?

Gregory Hinckley

The second half is always bigger than first half. But what we think here is we're trying to be more linear, so that we can accommodate Rich Valera's request. So I would guess that this next year, the split will be more like 45%, 55%, which is, as I said, more linear than we past had. And clearly, we're starting off the year very well.

Operator

We'll go next to Rich Valera with Needham & Company.

Richard Valera - Needham & Company, LLC

I just wanted to ask a couple of questions, first about Emulation, Wally. I kind of missed some of your comments in your opening remarks, when you were talking about why you think Emulation is on a sustainable growth path. As you know, it's historically been a very cyclically sensitive item and yet sort of goes up during the up cycle, and goes down to almost zero during the down cycles. What makes you think it's different this time?

Walden Rhines

So there is a real difference that popped up that was I think even surprising to us, and that was that somewhere in the 40-nanometer range, we got to the point where people could no longer reasonably simulate a Full-Chip Verification. They could do the blocks with simulation, but they had to go to Emulation for the full chip. Some companies are trying to go ahead and go without full chip. Most of them that do complex designs have adopted some portion of Emulation, and this became particularly interesting when we got our first order of an Emulator from a system company that does FPGA applications, and their FPGAs had passed 20 million gates, and they decided they just couldn't debug the design. And without any appreciable sales effort on our part, they concluded they needed an Emulator. So that's sort of one other anecdotal input that supports the fact that Emulation has just become a necessary part of the flow. And I think you heard this from at least one other major competitor, that the orders are now being backlogged out into the second quarter.

Richard Valera - Needham & Company, LLC

And Greg, I missed the Design-to-Silicon bookings number for the quarter. What was that again?

Gregory Hinckley

Design-to-Silicon was, if I remember right, flat for the quarter, and down 5% for the year.

Richard Valera - Needham & Company, LLC

And what do you think’s going on there? I think it sounded like Calibre was actually pretty solid for the quarter but obviously, something else wasn't. I mean, is this a business that you expect significant growth out of next year, or what's your thoughts on sort of the overall Design-to-Silicon outlook?

Walden Rhines

Well, I mean, there's a variety of answers. There is sometimes that I think in some parts of Design-to-Silicon, we had a unusually strong year last year. It's also, I think, that the pure IC silicon business is really competitive. It's intensely competitive. And we're benefiting in other parts of the business, because we just don't see as much pressure. But, Wally?

Walden Rhines

Well, I'll just note that Calibre was strong as you noted. Most of the weakness was on the place-and-route side, which is fairly lumpy, bounces along based on major orders, and so I wouldn't view it as a trend.

Richard Valera - Needham & Company, LLC

And is it fair to say you do expect some growth out of that business next year or this year?

Walden Rhines

Absolutely.

Richard Valera - Needham & Company, LLC

And just on the quarter itself, you had some pretty significant revenue upside, and it would seem that you dropped significantly less than 50% of that into operating income. Was there anything going on there in the quarter?

Gregory Hinckley

Our incentive pay accruals are in that case, are not linear. So we start off the year with more uncertainty. And as the year progresses, we become more and more certain with our results. So for better, or for worse, our incentive pay, like most of the participants within the industry, is more back-end loaded.

Richard Valera - Needham & Company, LLC

Was it fair to say there were accelerators and sales guys hit their quotas, and got some accelerators that kicked in?

Gregory Hinckley

You’re not kidding.

Operator

And next we have Saket Kalia with JPMorgan.

Saket Kalia - JP Morgan Chase & Co

So first off, what drove the growth in PCB this quarter? I think it was up about 50% plus sequentially, was that mostly the aero military contracts you mentioned?

Gregory Hinckley

Everything that we did that was associated with systems performed really strongly, Saket. So we had a bunch of accounts that were system related. A lot of them were mil-aero. The renewals were up very strongly. And fundamentally, we are happy in taking advantage of product introductions that we've made over the last several years. Our Expedition layout, our concurrent place-and-route engine extreme, our analysis and simulation tools, HyperLynx. We have an offering that is just very, very compelling, and we're beginning to see the results in the marketplace.

Saket Kalia - JP Morgan Chase & Co

You've mentioned renewals. Just kind of qualitatively, to what extent did you see any customers kind of come back and renew earlier than expiration this quarter?

Gregory Hinckley

I can assure you that we took no revenue in the quarter from any early renewals.

Saket Kalia - JP Morgan Chase & Co

And then, I guess, just jumping back to PCB, very helpful column, the press release on that segments profitability. Even qualitatively, how do you view profitability of kind of your other segments, like Design-To-Silicon and Scalable Verification?

Gregory Hinckley

We're not prepared to discuss that.

Saket Kalia - JP Morgan Chase & Co

As you kind of look at the individual segments, in fiscal '12, which ones of those are going to be growing faster than the others?

Gregory Hinckley

We're not prepared to discuss that, either, Saket. But we'll provide more detail as we complete our budgeting for fiscal year '12.

Operator

And gentlemen, we have no further questions. Please go ahead with any closing remarks.

Joe Reinhart

Sure. Thank you, Kathy. Ladies and gentlemen, thank you very much for joining us this afternoon. For follow-up telephone calls, both Greg and I are available. The best way to contact us is by calling Monte Koller at (503)685-1462, and she'll be able to make sure that either Greg or myself will get back to you in a timely fashion. And operator, if you could please provide our listeners the replay instructions.

Operator

Certainly. Ladies and gentlemen, this conference will be available for replay after 4:00 p.m. today through midnight, March 3. You may access the AT&T executive playback Center at anytime by dialing 1 (800) 475-6701, and entering the access code 192453. International callers, dial (320) 365-3844 using the same access code, 192453. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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