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Zhongpin Inc. (ZHNP.OB)

Q1 2007 Earnings Call

May 10, 2007 9:00 am ET

Executives:

Crocker Coulson - President of CCG Elite

Xianfu Zhu - Chairman and CEO

Yuanmei Ma - VP and CFO

Baoke Ben - EVP

Michelle Tong – CCG Translator

Analysts:

Daniel Lee – Roth Capital Partners

Bill House – Pinnacle Funds

Graham Jones – Klaris, Thomson, & Schroeder

Presentation

Operator

Hello, and welcome to Zhongpin’s Q1 2007 conference call. My name is Angelique and I will be your coordinator for today. At this time, all participants are in a listen only mode. We will conduct a Q & A session towards the end of this conference. If at any time during the call, you require any assistance, please key star followed by 0 and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Crocker Coulson. Please sir, you may begin.

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China Direct (ticker: CHND.OB) is a diversified management and consulting company. Our mission is to create a platform to empower medium sized Chinese entities to effectively compete in the global economy. As your direct link to China, our organization serves as a vehicle to allow investors to participate directly in the rapid growth of the Chinese economy.

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Crocker Coulson

Thanks a lot Angelique. Good morning Ladies and Gentlemen for those of you in the US, good evening to those of you in China, and welcome to all of you to Zhongpin's Q1 2007 conference call.

I'm Crocker Coulson, President of CCG Elite, Zhongpin's Investor Relations Firm, but with us on the call today are Zhongpin's Vice President and Chief Financial Officer, Ms Yuanmei Ma, and also the company's Executive Vice President, Mr. Baoke Ben, who are joining us from China. And CCG Elite's Michelle Thong will be providing translation for your questions and answers at the end of the call.

I'd like to remind our listeners that in this call certain prepared remarks do contain some forward looking statement. They are subject to risk and uncertainties and we may make additional forward looking statements in response to your questions. So therefore, the company claims the protection of the Safe Harbor for forward looking statements contained in the private security's litigations format of 1995. Actual results may differ from those discussed today, due to various risks including, but not limited to unanticipated changed in product demand, interruptions in the supply of live pigs and raw pork, downturns in the Chinese economy, delivery delays, freezer facility malfunctions, poor performance of the retail distribution network, changes in regulations, and other information detailed from time to time in the filings and future filings of the Company with the SEC.

Accordingly, although the company believes the expectations reflected in these forward looking statements are reasonable, we can provide no assurance that such expectations will ultimately prove to be correct.

In addition, any projections as to the company's future financial performance represents management's estimates as of today, May 10th, 2007, and Zhongpin assumes no obligation to update these projections in the future, due to changing market conditions.

For those of you who are unable to listen to the entire call at this time, we are going to make a recording available, it'll be a webcast, and you can find the link for that for 90 days, and you can find the link in the press release we issued earlier today.

And now I'm going to represent the management's discussion section on behalf of Zhongpin's Chairman and CEO, Mr. Xianfu Zhu.

We are pleased to announce that we've started the year 2007 with our sixth consecutive quarter of record revenues. The strong growth represents our continued success in building awareness in the Zhongpin brand and extending both our production capacity and our distribution channels. First quarter revenues also benefited from the Chinese New Year Celebration during February, which is a seasonally high period for pork consumption.

First quarter revenues increased 83% over Q1 of 2006 to a record $55.8 million. On a sequential basis, revenues increased 17% from the fourth quarter of 2006, revenues of $47.7 million.

Gross profit for the first quarter grew by 69.1% to $7.7 million, and net income grew by 77.6% to $4.6 million for $0.22 per fully diluted share. Our strong first quarter results show that our management team is on track with its strategy to build a leadership position in the pork industry to China.

We continue to believe that the changes in the consumption patterns, food retailing, transportation and diet are creating an exceptionally attractive growth environment for a company that can operate to the highest standards in the industry.

Zhongpin has focused not only on delivering strong financial results but on building an excellent company that delivers value to all stakeholders over the long term. This includes delivering high quality and nutritious products for our customers, building a leading national brand with consumers, achieving outstanding logistics capabilities to make sure our product is always fresh and delivering industry leading financial performance to our shareholders.

By operating at the highest standards, we seek to ensure that all parties, including our suppliers, retail partners, consumers and investors come out ahead.

During the first quarter we continued to expand our meat processing capacity to fill both current and anticipated demands. We increased our capacity for our higher margin prepared meat products by 10,800 metro tons or 75%, to reach 25,200 metro tons annualized. This additional capacity was added as of the end of March.

We're also in the process of constructing two additional facilities for chilled and frozen pork. The first facility, located in the Southern Henan Province is expected to add 72,000 metro tons annually at a cost of $14 million, and will come online at the end of the second quarter of 2007.

The second facility, located in the Northern Henan Province is expected to add 63,000 metro tons of annual capacity and will become operational by the third quarter of 2007, at a cost of about $13.5 million.

Together, these two facilities are expected to increase our capacity for chilled and frozen pork by 76% to 312,480 metro tons by the end of 2007.

This is just as we announce plans to build a third new and chilled frozen facility in the Heilongjiang City, the second largest City in Western Henan Province. This facility is expected at about 70,000 metro tons of chilled and frozen pork capacity, at a cost of $14.5 million, and should become operational in early 2008.

The new facility will be designed with a balance capacity of 60% chilled pork and 40% frozen pork. Once in place, this new capacity will give us ample supply of high quality pork, to continue to grow our presence in Henan and also in neighboring provinces, in Central and Eastern China, including Heilongjiang, (inaudible), Dubay, Yangzi Provinces, and I've already name all those too.

We also continue the expansion of our retail network during the first quarter, by adding 92 retail outlets, which brought us to a total of 2,813 retail outlets as of March 31, 2007.

The new outlets included nine new showcase stores, 29 new network stores, and 54 new supermarket counters. We believe our strong presence with those, especially boutique stores and supermarket counters is critical to our ability to build brand recognition as the leading premium brand in pork products, delivering consistently high quality and excellent taste.

We continue to see attractive opportunities to increase our penetration in smaller cities. During Q1, we increased our presence from 75 to 81 second share cities, and from 226 to 246 third share cities. The number of provinces for the first share cities remained unchanged, at 24 and 29 respectively.

In addition, our non-retail distribution customers increased to 1,602 outlets from 1,407 as of December 31, 2006. This now includes 17 major international or domestic fast-food companies, 39 export register processing factories, and over 1,546 school cafeterias, factory canteens, army posts, and national departments.

We continue to sharpen our key advantage and logistics and supply chain management by implementing the first phase of our new advanced planning and scheduling or APS system, and the logistics management information system or MIS.

The APS system quickly integrates a customer's orders with current market data on the price, origin, and greater pause, which is then instantly incorporated into the purchasing plans for our raw materials.

The whole process is now executed in less than one minute. The second and third phases are scheduled for implementation in the second half of 2007, and through 2008, and will then integrate production, sales, and logistics.

We also implemented our new logistics management information system: A browser rate system that integrates the management of clients, vehicles, routes and prices. This enables us to monitor our distribution process used in real time as its powerful reporting functions, makes it easy to obtain and analyze metrics such as freights, loading ratios and on time arrivals.

We also continue to invest in keeping our product lines fresh and exciting. In the first quarter we launched 31 new products and we now have over 140 products that are under development.

As many of you know, (inaudible) products increased sharply in the second half of 2006, which contributed some compression in our gross margins during that period and not all the prices could be immediately passed on to consumers.

We are encouraged to note that the price of live (inaudible) has since moderated and in fact have declined industry wide by 7% from January to March of 2007, according to the China Animal Agricultural Association. However, we continue to expect and experience high pressures in the future. Therefore we're taking several steps to optimize our margins, while we continue to expand our market share.

As we bring our new production capacity on line in the second and third quarters, we would expect to reduce our reliance on OEM partners. We also plan to continue to adjust our product mix to increase the portion of high-margin prepared meats, and chilled pork products. As we've noted, our plant facility for chilled and frozen pork are all designed for 60% chilled pork and 40% frozen, which is the reverse of our historical product mix.

Finally, we will be enlarging our frozen warehouse, which should give us more flexibility to adjust our inventory according to fluctuations in hog prices.

With those comments out of the way, it's now my pleasure to turn the call over to Ms. Yuanmei Ma, who is going to discuss the first quarter's financial results in greater detail.

Yuanmei Ma

Thank you, Crocker. I am pleased to announce that the first quarter of 2007 was our sixth consecutive quarter for record revenue at $55.8 million, up 83% from $30.5 million in the first quarter of 2006, and up 16.9% over the fourth quarter of 2006.

Demand for pork consumption was favorably influenced by the Chinese New Year holiday, as this is an important Chinese celebration, with traditional family meals, similar to the Thanksgiving holiday in the United States.

Revenue growth was driven by sales of chilled pork, which grew by 175% to $28.5 million, or 51% of revenue in Q1 of '07, comparing to the Q1 of 2006. Revenue from frozen pork grew by 25% to $20.3 million, or 36% of revenue. I should note that chilled pork and frozen pork made up 34% and 53% of sales, respectively, in Q1 of 2006.

We believe this increase the growth of popularity of chilled fresh meat among Chinese consumers. Processed meat contributed 10.5% of revenues, and fruits and vegetables contributed the remaining 2.1%.

Turning to each of our distribution channels, branded stores generated $26.1 million, or 46.8% of revenues, up 75% year-over-year. Restaurants and non-commercial organizations contributed $14.3 million, or 25.6% of revenue, for an increase of 86% year-over-year.

Food-service distributors grew 110% year-over-year to $10.5 million, or 18.9% of revenue. (Inaudible) pork came in at $4.9 million, or 8.7% of revenues, up 59% year-over-year.

Gross profits for the Q1 2007 were $7.7 million, an increase of 69.1% over the first quarter of 2006. Gross margins for the quarter were 13.9%, compared to 15.0% for the same period a year ago. The decrease in gross margins were largely attributable to the increase in hog prices, compared to the first quarter of 2006.

For the quarter, general and administrative expenses were $1.4 million, or 2.5% of revenue, compared to $0.9 million, or 2.9% of revenue in Q1 2006. The increase in G&A expenses was primarily the result of the expansion of our operation, and the additional expenses were occurred as a public trade company.

Operating expenses were $1.1 million, or 2.0% of revenue, compared to $0.8 million, or 2.6% or revenue for the first quarter of 2006. The decline of operating expense as a percentage of revenue was attributable to increased operating efficiency.

Net income for the first quarter of 2007 was $4.6 million, up 77.6% from the net income of $2.6 million in the first quarter of 2006. Fully diluted earnings per share for the quarter were $0.22 compared to fully diluted earnings of $0.13 per share in the first quarter of 2006. Fully diluted weighted average shares outstanding increased to 21 million shares, from 19.3 million shares in the first quarter of 2006.

Now turning to our balance sheet. We had $25.9 million in cash and cash equivalents, and $62.4 million in total liability as of March 31, 2007. Net cash provided by operating activities first the first quarter was $4.6 million, and shareholders' equity stood at $57.8 million, up from $52.7 million at year end of 2006.

Our average accounts receivable turnover days decreased from 36 days during the first months ended March 31, 2006, to approximately 25 days for the three months ended March 31, 2007. Our average inventory turnover days increased from 12 days for the Q1 2006 to 20 days for the Q1 of 2007.

Regarding our revenue plan for 2007, we have increased our capital expenditures over the next 12 months to be approximately $27.5 million. This includes the $18.5 million partial costs for the three new facilities, and an additional $9 million for the construction of our low-temperature logistic and IP system. We believe our existing cash and cash equivalents, cash from operations, together with our available line of credit, will be sufficient to finance our current planned level of the investment and operating requirements.

Additional capital will be required to fuel the anticipated continued accelerated growth of the company's business and the rapid expansion in China.

Now, Crocker Coulson will provide some final remarks before we open up the call for the questions and answers. Crocker?

Crocker Coulson

Thanks Yuanmei. In summary, Zhongpin began 2007 with a very successful quarter, marked by record revenues, gross profits, and net income. Given the stronger-than-expanded demand, we have recently stepped up our capacity expansion plan, with a goal of reaching 382,480 metric tons of chilled and fresh-pork capacity by early 2008.

We believe our newly implemented advanced planning and scheduling system, and our logistics management information system, and our growing chain of branded retail outlets provide important competitive advantages in this competitive marketplace. We've been able to consistently increase our market share, both domestically and internationally, as we continue to build recognition for Zhongpin as China's premiere brand for pork products.

Despite the elevated prices of live hogs, we feel comfortable that we have a solid strategy to stabilize and, in the future, enhance our margins. We remain excited about this unique opportunity as Chinese consumers move away from the traditional wet market to the more conventional and modern supermarket and convenience stores for their meat products, creating an opportunity for Zhongpin to rapidly expand our geographic footprint and grow our market share.

I'd like to thank all of you for your interest in Zhongpin this morning, and we're now going to open up the calls. Any questions you may have for either Ms. Ma or Mr. Ben, and Michelle Fong will provide translation. Operator?

Question-and-Answer Session

Operator

Ladies and gentlemen, if you would like to ask a question, please press star one on your touch-tone telephone. If your question has been answered, or you wish to withdraw your question, please press star two. Questions will be taken in the order received. Please press star one to begin. We'll pause a moment while questions compile.

Your first question comes from the line of Daniel Lee of Roth Capital Partners. Please go ahead Mr. Lee.

Daniel Lee - Roth Capital Partners

Congratulations, another strong quarter!

Crocker Coulson

Thank you.

Daniel Lee - Roth Capital Partners

I know you utilizations have been running high already in Q4. Can you talk about what percentage of the revenue was from OEM business?

Baoke Ben

[Translated] Well, you're right that according to the industry average level, the utilization rate of our company was pretty high. But as you probably know, that due to the huge demand from the market, there is a gap between supply and demand, so need to have the extra supply to fulfill the gap between the supply and the demand. That's why need the support from our OEM partners.

So for the rest of the fourth quarter 2007, about 20% of the revenue comes from the OEM.

Daniel Lee - Roth Capital Partners

OK, great. Thank you. Can you also talk about the capacity ramp going forward for the two new plants this year? For example, for the Zhumadian plant, what type of utilization do you expect in Q3?

Baoke Ben

[Translated] You know, it takes time to go from the trial period to full capacity, and according to the industry average, it usually will take one to two quarters, which means three to six months to run into the full capacity.

So back to your question. In Q3 this year, we anticipate that the overall utilization right might be increased, because we are still in the process of ramping up the new facilities. But, once again, we think after one or two quarters, the capacity utilization rate will run through 100%, which will reach the production capacity that we designed.

Daniel Lee - Roth Capital Partners

OK, great. Thank you. Can you provide some data points on the average sale price, and also metric tons for the three pork-products groups: chilled pork, frozen pork, and processed pork?

Baoke Ben

[Translated] For the ASP of those three products, obviously the ASP of prepared meat is the highest. Then comes the chilled pork, and afterward is the frozen pork. But the ASP between chilled pork and frozen pork, in general, the difference is quite minimized.

Crocker Coulson

And Daniel, to answer the question on the number of metric tons for the third quarter; for chilled pork we had 23,154 metric tons, for frozen pork it was 16,805, for prepared pork it was 3,357 metric tons, and on vegetables and fruits it was 3,117. And in our 10-Q, you'll see we have a pretty detailed segment of information, including comparisons between the same periods in 2006. And I'd be happy to provide that off line.

Daniel Lee - Roth Capital Partners

OK, great. Thank you Crocker.

Crocker Coulson

Sure.

Daniel Lee - Roth Capital Partners

I'll come back with more questions, thank you.

Operator

Your next question comes from the line of Bill House of Pinnacle Funds. Please proceed.

Crocker Coulson

Good morning Bill.

Bill House – Pinnacle Funds

Thank you, good morning Crocker, how are you? Hello Yuanmei and Mr. Ben. Pass my hello on to Mr. Zhu.

Just a quick question. Crocker, on the $18.5 million for the three plants, is that for over the next twelve months…what the expenditure is going forward?

Crocker Coulson

I'll leave that to Yuanmei to clarify. I believe that's the budget for 2007, as a whole. But I'll leave that to Yuanmei.

Bill House – Pinnacle Fund

Thank you.

Yuanmei Ma

Yes, Bill, actually that $18.5 million, the capital expenditure for three facilities, for Zhumadian and Henan, all have the remaining capital they need to invest. And partially invest in the new facility located in the western side of the Henan.

Bill House – Pinnacle Funds

Thank you Yuanmei. On the total-capacity, Crocker, I think you said you're moving towards 380,000 metric tons by the beginning of next year when we add these couple of plants. And just some quick math on the ASP from the prior quarters seems like it would put the run rate at $500 million or so for the company. Could you talk a bit about, or could the company talk a bit about what preparations they make in advance of adding this capacity, in terms of developing custom demand? So when they put in the western Henan plant and they expect it to ramp rapidly in two quarters or so to 100% capacity, what other things are going on, in terms of how is the demand created? Are the customers just there already and waiting?

Crocker Coulson

I think that's a really important question for Mr. Ben, so Michelle, can you provide a translation?

Baoke Ben

[Translated] OK, as you know, we have been trying very hard to expand our production capacity, try to meet the growth of the overall meat industry growth. As you probably noticed from Q4 of last year to Q1 of this year, we have made a lot of progress in market expansion in terms of the brands to try and make sure that we will generate new demand in the market to try and meet up our upcoming new production capacity.

In the market overall, everyone probably knows that we have a very huge demand in the meat market. So once again, going forward, this is what we are doing now, we will try to optimize our distribution channels, try to gain more customers and try to expand more geographic footprints in a way to generate more demand from this market and try our best and meet the full capacity in future quarters.

Bill House – Pinnacle Funds

Please pass on my congratulations in maintaining those low DSOs and everything else that’s going well. Thank you.

Operator

Your next question comes from the line of Graham Jones of Klaris. Please proceed, sir.

Graham Jones – Klaris, Thomson, & Schroeder

I may have missed it, but I was wondering if you could comment on the previously provided guidance for 2007? You’ve introduced your guidance in the past, but I didn’t see anything today in the press release.

Crocker Coulson

Yuanmei, do you want to take that one?

Yuanmei Ma

Well, um Michelle, please go ahead to translate.

Baoke Ben

[Translated] We disclosed our full guidance for 2007 and we still feel comfortable for the guidance and we think the numbers we provide is pretty conservative.

Crocker Coulson

We have previously disclosed Guidance of $185 million in revenue and $15 million in net operating profits but obviously that’s now become extremely conservative in the trends we discussed on the call today.

Graham Jones – Klaris, Thomson, & Schroeder

Terrific. Thank you very much.

Operator

There are no further questions in the cue. Ladies and Gentlemen, if you wish to ask a question, please press star one on your touch-tone telephone. We do have a follow-up question from Mr. Daniel Lee from Roth Capital Partners. Please proceed, Mr. Lee.

Daniel Lee – Roth Capital Partners

This is a follow up on Bill’s question on marketing. Could you talk a little bit about your CCTV advertising campaign? Going forward, are you going to spend more utilizing these national TV campaigns or more through sales questions and distribution networks?

Baoke Ben

[Translated] Our goal is a strong brand and a premium brand in the pork industry in our view. Last year for the CCTV campaign, it is just one approach we used for the brand building in the whole campaign. And based on our results so far we are very confident in the results it will bring to us.

Also, together with our operation level with our market expansion and our market share increase, we probably will use other media platforms to further strengthen our jumping trend. At the same time, we will also try some other platforms, such as seminars and different conferences and so on and probably some intangible advertisements such as the human resources and recruitment to use a comprehensive and overall campaign aiming to build up a very strong and premium brand of Zhongpin in the Pork Industry.

Daniel Lee – Roth Capital Partners

OK, thank you. In terms of your long term strategy in your product mix, I know you’ve been focusing a lot on the chilled pork. Your new plan is for pretty much 60% in chilled pork. But regarding the processed pork, are you going to have more focus in this area being that it’s more of a high margin?

Baoke Ben

[Translated] The prepared and the processed meat, we will not ignore this market, and you've probably noticed that last year, at the end of the fourth quarter, we also expanded our production capacity for the prepared meat, but however in the overall proportion in terms of the turnover, it's relatively low, which is about 10%.

So, in the next step we will further expand our production capacity for both chilled pork and frozen pork, that they will soon be the key focus for Zhongpin, and also in terms of the percentage between chilled pork and frozen pork, because chilled pork relatively enjoys a higher margin, so we will have 60% of the overall for the chilled pork.

Crocker Coulson

OK, great, thank you very much, and again congratulations again on the first quarter.

Baoke Ben

Thank you!

Operator

You have a follow-up question from the line of Bill House of Pinnacle Funds. Please precede sir.

Bill House - Pinnacle Funds

Thank you. Hey everyone. We've seen a bunch of headlines recently about some food safety concerns, and I know the government has a desire to try and improve food safety which would seem to me to be a positive opportunity for a quality focused company like Zhongpin.

Could you discuss what opportunities you guys think exist with regard to some of the government programs to improve food safety, number one, and number two, could you discuss whether there's any concern in the firm maybe due to any disruption in consumer demand due to concerns over food safety.

Baoke Ben

[Translated] This issue is a very big topic and it is also on the top agenda of the Chinese government. So, you imagine, you're absolutely right for a company like Zhongpin we focus a lot on the product quality, the nutrition of the product and also as we are a very well integrated company, so that we can make sure that every single process of the valued share can make sure that the quality of the product.

So to provide healthy nutrition and good quality of the food product is the long term spirit for Zhongpin, and as a matter of fact we have always been following that.

So once again, to benefit from a very well integrated so we can make sure the whole process that we will provide good quality products and also in the big picture, with the promotion of the food safety of the central government, the consumer says food safety has been increased a lot.

So from our point of view, we can really capitalize on this opportunity, so probably we will gain more customers, which we will share more market share overall.

And also which we are closer to reach the premium market, and also we will have the opportunity to fill the market of higher gross margin products.

So, in summary, there are a lot of potential opportunities we see in front of us, and we will try our best to seize the opportunity and try to capitalize the central government promotion on food safety.

Bill House - Pinnacle Funds

OK, I've got another couple of quick questions here, but I want to thank Mr. Ben for his answer.

Can you talk a bit about the margin trends going forward and the contributions that you expect to OEM? I know you're adding some capacity and margins have bounced back nicely, but maybe you could give us some color going forward, of what to expect.

Crocker Coulson

Oh yeah, let’s talk about the OEM. So, as we all know that with the…we are trying to boot up more facilities and expand our production facility and it is so that our reliance on OEM will decrease but as you know it usually takes six months for a new facility to ramp up the full facility so our reliance on OEM will decrease but steadily, not overnight.

And also regarding your gross margin question, as you know there are a lot of factors that will impact the gross margin such as the cut? So for the first quarter of this year that we see that the price of pork is relatively pretty high and according to our anticipation that it will still be high in the following few months, however we don’t see that the possibility of even higher prices for raw materials being there. We think the price of the raw material will be stabilized, as so we also think that the gross margin of our products is also stabilized and at the same time that we will try our every effort to improve and further enhance the gross margin in a way to optimize our product mix, the distribution channel, and so on and so forth to try to further enhance the gross margin.

Bill House - Pinnacle Funds

OK. Thank you. Just one quick question too, could you ask Mr. Ben what percent of the market is still like a wet market versus a dry market and over what time frame do you think that that might migrate to the dry market. And finally how does he expect to see the company benefit from that, if at all?

Yuanmei Ma

We’re sorry. Because of the technical issue we think that probably Mr. Ben has been off-line. So ask whoever you want to answer this question.

Bill House - Pinnacle Funds

That’s fine, Yuanmei. Maybe instead I’ll ask you a tough question. Just really quick, does the tax rate, and I’ll follow up on that one, but the tax rate was really low again this quarter which is nice. Could you discuss what your expectations are for the tax rate and could you tell me, I know there’s been a little bit of change in the tax laws there, whether you’re still getting the zero percent tax rate on new plants.

Yuanmei Ma

Well, actually you’re absolutely right and actually our whole fresh meat products as well as the fruits and vegetables, we don’t pay any income tax on that and the only income tax we’re obligated to pay is the prepared pork products which is only about 10% of our total revenue.

Bill House - Pinnacle Funds

OK, so as the chilled pork is really risen up and so forth and frozen, you guys have been able to enjoy a decline in the tax rate.

Yuanmei Ma

Right, we’ve enjoyed the exemption from the income tax.

Bill House - Pinnacle Funds

OK, well thank you. I’ve taken enough of your time. Congratulations again. Thanks Crocker. Bye.

Crocker Coulson

Thanks a lot.

Operator

Ladies and gentlemen, there are no further questions in the queue.

Crocker Coulson

Great. Well we certainly appreciate all of the questions on the call today and appreciate all of your interest in our results. The company will be participating next week in the Capital China tour. I hope to meet with some of you then and in addition the company management will be traveling to the US the week of May 21st so if any of you are interested in meeting with the company in person please let us know and we’ll see if we’re going to be in the cities in which you’re located and see if we can make that happen. Again, thanks all for your interest and we look forward to coming back to you and talking about our second quarter results. And that concludes our call. Thank you.

Operator

Ladies and gentlemen thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.

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