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Executives

Jacques L’Ecuyer – President, Chief Executive Officer &Director

Christian Dupont – Chief Financial Officer

Analysts

Carolina Vargas– Clarus Securities, Inc.

Rupert Merer – National Bank Financial

Lisa Brown – GMP Securities, LP

[Patrick Chan] – TD Waterhouse

Ian Thorpe – Dundee Securities

Mac Whale – Cormark Securities

5N Plus Inc (VNP ) F2Q08 Earnings Call January 9, 2008 10:00 AM ET

Operator

Welcome to the 5N Plus Fiscal Year 2008 Second quarterresults conference call. At this timeall participants are in the listen only mode. (Operator Instructions) I would now like to turn the conference overto Mr. Jacque Philippe L’Ecuyer, President and Chief Executive Officer. (FrenchTranslation)

Jacques L’Ecuyer

Good morning everyone and thank you for joining us today forthe 5N Plus FY08second quarter results presentation. This is our first ever webcast conference as we’ve just very recentlycompleted our IPO on December 20th and now take on thechallenges of regular reporting to thepublic. Aquick reminder concerning our second quarter results which were issued earlierthis morning together with our MD&A and financial statements. If you’ve not been able to geta copy of thesedocuments I invite you to doso by accessing thecenter website at www.sedar.com where these documents areposted.

Joining me this morning is Christian Dupont our ChiefFinancial Officer who will be providing you with more detailed informationlater during the call concerning our financial statements. For those of you who are not very familiarwith our corporation we are a producer of high-purity metals and compounds forelectronic applications and we draw our name from the nominal purity of theproducts that we sell. 99.999%, fivenines or five N’s and above.

Wedevelop and produce such metals and compounds and provide our customers withrecycling solutions. We have our headoffices in Montreal Quebec, Canada and are currentlybuilding a new facility in Eisenhüttenstadt, Germanywhich is approximately 150 kilometers east of Berlin. We are an integrated producer with bothprimary and secondary refining capabilities and we focus on specialty metalssuch as tellurium, cadmium and selenium and on related compounds such as cadmiumtelluride and cadmium sulphide. Wesell our products in a number of electronic applications, including the rapidlyexpanding solar cell market of thin-film photovoltaics and the radiationdetector market where our products are used for medical imaging, for example.

Now before discussing our results, I would like to mentionthat we may be making forward-looking statements during this call and that suchstatements involves significant risks, uncertainties, and assumptions and aretherefore subject to the usual cautionary remarks. For a list of the factors that could causeour actual results to differ materially from those discussed or implied in ourforward-looking statement we refer you to the risk factor section of theprospectus that we filled on December 12, 2007.

I would also like to mention that the consolidated income financialposition and cash flow statements that were presented are all calculated oneconomic GAAP basis but that in addition to these GAAP measures we use non-GAAPmeasures such as EBIDTA to assess the financial performance of the corporationand that we believe EBIDTA provides meaningful information to investors.

I would now like to move on the discussion of our secondquarter results. We’re very pleased ofour second quarter results which have been record breaking, both in terms ofearnings and sales as well as in terms of EBITDA and this despite of thecontinuing strengthening of the Canadian dollar. In terms of net earnings we reached a recordlevel of $1.2 million or $0.04 per share using a weight average number ofcommon shares outstanding of approximately29.6 million which represents a 40.6%increase over net earnings of $867,000 or $0.03 per share for the secondquarter of the previous fiscal year. Forthe six month period ended November 30, 2007, net earnings increased by 49.3% to $2.3 million or $0.08per share which compares favorably with earnings of $1.5 million or $0.05 pershare for the same period of the previous fiscal year.

In terms of EBIDTA we increased by 49.2% to record level of$2.3 million up from $1.5 million during the second quarter of the previousfiscal year. During the six month periodended November 30th EBIDTA increased by 49.7% to $4.4 million upfrom $2.9 million during the corresponding period of the previous fiscalyear. Finally, in terms of sales, weincreased the record level of $6.8 million up by 39% compared to sales of $4.9million for the second quarter of the previous fiscal year, and sales for thesix month period ended November 30th increased by 34.7% to $13.2million up from $9.8 million during the six month period ending November 30, 2006.

We also managed to increase our backlog of orders during theperiod which are expected to translate into sales within the next 12 months to$22.2 million up by 73% over what it was approximately one year ago. I would like to thank our customers of course,for their confidence and our suppliers for their support and I would also liketo take this opportunity to thank our employees for this record breakingquarter which has been made possible by their hard work and their continuingcommitment.

These results reflects largely our increasing penetration ofthe solar cell market where we expect growing demands for our products. As we’ve announced we are making significantinvestments to address this forecasted growth and demand which includes our newEisenhüttenstadt plant in Germanyand also additions to our Montrealfacility which are aimed at increasing capacity and improving efficiency. We’ve also made some changes during thequarter in our operating practices at our Montrealfacility which have allowed us to increase capacity.

Now looking a little bit more closely at the quarter, wethink our progress has been possible by our ability to execute in the followingareas: First, we’ve managed to increase capacity and production throughput aswell as improve efficiency and scalability at our Montrealfacility allowing us to increase gross profits and margins. Our gross profit reached $3.3 million in thesecond quarter and $6.2 million for the six month period ending November 30,2007 which corresponds to gross margins of 48.2% and 47.4% respectively whichcompares favorably with gross profits of $2.1 million and $3.9 million for thecorresponding periods of the previous fiscal year and respective gross marginsof 43.2% and 39.7%.

We also managed to execute by staying on targets both interms of costs and schedule for our new German facility which is undergoingconstruction. Mr. Marc Suys on of ourofficers has relocated in Germanyto oversee the construction of the plant as well as the commissioning and startup phases. The building is well underway and we expect to start receiving equipment and begin installations duringthe fourth coming quarter.

We’ve also been able to pursue and complete successfully ourinitial public offering which actually closed right at the end of our thirdquarter and allowed us to basically yield at $31.5 million net of the costs ofthe offering. Of course this will enableus to continue our investment program as planned.

We’ve also entered during the quarter a number of prospectivediscussions aimed at expanding our customer base even though we still remainhighly dependent on a few key customers. We anticipate an increase in the number of our customers moving forward. Finally, we’ve also managed to strengthen oursupply chain as we’ve entered during the quarter into a number of new orexpanded supply agreements for some of the critical raw materials that weprocure.

All of these accomplishments madeduring the quarter are important and enable us to pursue our business strategywhich we’ve articulated as follows: Centrallyorganic growth of our cadmium, tellurium, selenium metals and compoundsbusiness in order to meet the increasing demands for these products. We have an objective of maintaining ourleading position in these markets. Wealso intend to leverage our competitive strengths to diversify our productoffering and enter into new electronic market segments. And also, advance in both training andresearch development to develop advantages in terms of competencies, advantages,technologies, and costs.

I would now like to turn theconference to Christian for some additional comments on our financialstatements.

Christian Dupont

As mentioned earlier our unaudited consolidated and financialstatements were filed earlier this morning on the Sedar website. This provides relevant information in orderto assess the financial pertinence of this corporation. Add the following additional comments onthese statements: First, I would like to remind you that on October 1, 2007, 5N Plus and theholding company both held by the same shareholders [inaudible]. The new activity arising from this [inaudible]operates under the name of 5N Plus. Accordinglythe comparative figure in the financial statement reflect this [inaudible].

With respect to the company’s statement of earnings, we haveyet to recognize the future income tax asset related to the expenses productcost of our German facility. Accordingly our expected tax rate is higher for the quarter in the sixmonth of year ending November 30, 2007 than and in the correspondent years ofthe fiscal year lying at 33.7% and 33.5% respectively compared to 30.8% and30.6% in the previous fiscal year.

With respect to our company based balance sheet we areseeing increase in inventory which rose by $3.2 million over our May 31stnumber to $6.5 million. This increase isrelated to an increase of $2.6 million in one of the inventory following anincrease in both inventory volumes for strategic purposes as we ramp up ourproduction capacity and unit prices and by an increase of $.6 in finished goodsinventory resulting from the increase in sales. With respect to our consolidated Statement of Cash flow operatingactivity before changes in non-cash working capital items for the quarter endedNovember 30, 2007 yield and increase of 32.3% to $1.5 million compared with$1.1 million for the corresponding quarter in the previous fiscal year.

For the first six months of fiscal 2008 cash flow increasedby 42.1% to $3 million compared with $2.1 million for the corresponding periodof previous fiscal year. These increasesare the result of higher net earnings. Net working net working capital requirement increased significantly inboth the quarters in the six month period ended November 30, 2007 compared with the current spendingperiod of previous fiscal year. Theserises are the results of a substantial increase in inventory and accountsreceivables in the payment of $1.7 million in deed and income taxes, all ofwhich were only partially offset by increase in accounts payable.

Cash flow from financing activities were positive at $1.9million in the second quarter and $3.8 million in the first six months of thecurrent fiscal year as we raise funds through our loan agreement with HSBCbank. We also paid on November 27, 2007 a dividend in theamount of $1 million. This is in sharpcontrast with the negative cash flow from the corresponding period of theprevious fiscal year, where we only essentially only repaid principal onexisting debt. Cash flow from investingactivity was substantial as we continue to invest in our new German facility,expected to be operational on July 31, 2008, and in our Montrealfacility. With that investment reached$4.8 million for the quarter, and $5.6 million for the six month period ended November 30, 2007 which is over tentimes larger from those made during the correspondence period of fiscalyears. These investments are largelyresponsible for [inaudible] of cash during the quarter and six months endedNovember 30, 2007 and also largely account for the increase on our long termdebt and bank loan.

I would now like to turn the conference back to Jacques.

Jacques L’Ecuyer

Beforeturning on to the Q&A session, I would like to take this opportunity towelcome on behalf of all the shareholders and our employees as well as theother stakeholders to our Board of Directors, two new independent members, namelyMr. Jean-Marie Bourassa, CA, Managing Partner of Bourassa Boyer Inc.), who willchair our audit committee, and Mr. Pierre Shoiry the Chief Executive Officer ofGenivar a [inaudible] listed company active in engineering. Both will bring valuable experience andknowledge that we believe will strengthen our largely independent board ofdirectors which is composed of Mr. John Davis, Mr. Pierre Shoiry, Mr. Bourassa,myself and our Chairman Mr. Dennis Wood. I believe this concludes our prepared comments and we are now ready forthe question period.

Question-and-AnswerSession

Operator

Ladies and gentlemen we will now conduct a question andanswer session. (Operator Instructions)(French Translation) Your first question comes from Carolina Vargas of ClarusSecurities. Please proceed.

Carolina Vargas – Clarus Securities, Inc.

I have two questions for you, in terms of the revenue growthyou expect for this year have you provided any guidance above your $22 millionthat you have on your pipeline. Second,in terms of your customer concentration, what kind of new potential customersare you looking at? And, I am interestedmore into the solar business, as there is just a handful of [inaudible] producersthat are mastering the technology successful. Thank you.

Jacques L’Ecuyer

To answer your first question, we are not providing anyguidance as to our revenues for the next twelve months other that what we haveprovided in the backlog. So, I am afraidwe cannot comment any further on that. As far as our customer are concerned we believe that the Cadmium Tellurium,Solar Cell market will develop. We thinkthere are a few companies which are becoming more active in this field, ofcourse First Solar is a very important player in this but there’s Calyxo whichis a wholly owned subsidiary of Q-Cells as well as AVA Solar, PrimeStar Solarand a few other players. We expect astime moves on that many of these companies will gradually ramp up and so we aretaking the necessary measures to ensure we remain a credible supplier to all ofthese people.

We are also looking at other companies active in the solar fieldwhich are based on CIS or CIGS and so we have disclosed that to some extentalso in our prospectus. There are anumber of companies which are active in this and we expect, again there’s goingto be a significant increase as this thin-film solar cell technologydevelops. I think its still in the veryearly stages and so we certainly expect some significant growth. Now, having said that, we also sell ourproducts to other market segments including the nuclear detector market and wecertainly expect some growth in that area as well and an increase in ourcustomer base as this technology, which is not yet commercialized in anysignificant way, eventually finds its place into the market.

Operator

Your next question comes from Rupert Mere of National Bank

Rupert Merer –National Bank Financial

Can you share any more color with us on First Solar’s plansfor supplying their Malaysian plants. Have they given any indication on who might supply those plants, and ifnot do you have any thoughts of what we might hear more from First Solar ontheir plans to supply the plants?

Jacques L’Ecuyer

I think with respect to when we might hear from First Solar,I think you need to speak to First Solar on that. We certainly are positioning ourselves to betheir preferred supplier in Germanywith our new German facility and we certainly intend to leverage our facilityin Germany asmuch as we can. We’ve done this I thinkquite successfully also in Montreal. So, we will certainly be looking at this veryclosely but I’m afraid we can’t comment a lot more on this at this point simplybecause we don’t have that information in hand.

Rupert Merer –National Bank Financial

When those plans start for First Solar in Q3 you should havesome excess capacity in Germanyand Montreal I suspect, is that afair assumption?

Jacques L’Ecuyer

That might be a fair assumption. I think its going to depend a lot on how ourother customers move along and what their ramp up plans are. But, as I think we’ve mentioned to some extentin our prospectus we have the ability to increase capacity in the relativelyincremental way. So, even though wewould be for example close to capacity, we could add additional capacity withrelatively modest investments and certainly in a relatively short time frame. So even if we were for example at capacity, Ithink it would be reasonable to assume that we could develop some additionalcapacity relatively quickly.

Rupert Merer –National Bank Financial

Just one more before I jump back I queue. You had an increase in your raw materialsinventory in the quarter and you’ve also mentioned some new supplyagreements. What’s should we expect tosee here in the future? Do youanticipate you’d have

rising raw material inventory or do you think that thismarket might develop like the poly silicon market where you may be makingprepayments on raw material at some point.

Jacques L’Ecuyer

I think it’s a little bit early to comment as to where ornot there’s going to be prepayments. Ithink we have indicated in the prospectus, again, that we do have somecustomers which provide us with the feed stock and so I guess you can considerthat in some way as almost like a prepayment. If we look at our own situation, I think we will want to maintain ahealthy inventory moving forward simply because we expect a pretty significantincrease in demand for our products. Sowe want to make sure that we have enough material available in the pipe line forus to deliver on time for our customers.

Operator

Your next question comes from Lisa Brown from GMPSecurities. Please proceed.

Lisa Brown – GMPSecurities, LP

I have a customer concentration question. I’m wondering if you can tell me whatpercentage of this quarter’s sales did First Solar represent?

Christian Dupont

I would say it’s about 60%.

Lisa Brown – GMPSecurities, LP

Can you also maybe give me some information on what therevenue split was by your different market segments?

Jacques L’Ecuyer

I think we don’t want to do that unfortunately, Lisa. I think what we’re ready to provide you with– I think we are providing you with some information as to how much our mostsignificant customers represent in terms of our revenues and we’ve also of courseindicated how much as Christian just mentioned how much First Solar representedin the first quarter. But, I thinkthat’s as far as we’re ready to go as far as splitting the revenues per marketsegment.

Lisa Brown – GMPSecurities, LP

Can you also give us an update on how the German facility ifprogressing?

Jacques L’Ecuyer

Well, actually we discussed that briefly in the preparedremarks. Essentially we are using ageneral contractor who has a mandate of building the building, the site itselfand that’s moving along nicely. Weexpect the building to be ready to accommodate equipment that we will besending into the plant as early as late January early February. We expect the building to be completed by theend of March. And then, we expect ourramp up schedule to initiate in terms of commissioning our equipment plantstart up some time in April so that we are ready by July 31st whichis the date on which we must be ready in order to comply with the provisions ofour agreement with First Solar to deliver products in accordance with ourcommitments.

Lisa Brown – GMPSecurities, LP

One last question, can you give me some more information onthe operational changes that you mentioned in the Montrealfacility?

Jacques L’Ecuyer

I can provide you with some of that information. I think what we’ve basically done during thequarter is we’ve changed a little bit our working schedules. So, we’ve gone from a seven day week,something like a 14 to 16 hour work shift if you want to a 24/7 workshift. This has provided us with someadded capacity, flexibility that you’ve only seen partly during the quarterbecause that actually started during the quarter so I think you’ll see most ofthat kick in during the next quarter.

Lisa Brown – GMPSecurities, LP

Would it be reasonable to assume further gross marginincrease?

Jacques L’Ecuyer

I thin what we’ve provided, what we’ve told everyone Lisa, isthat we feel comfortable with our existing gross margins and that we will beable to maintain them.

Operator

Your next question comes from Patrick [Chan] with TDWaterhouse.

[Patrick Chan] – TDWaterhouse

Can you give us an indication about what a megaton of solargrade tellurium, cadmium goes for? Arange? I don’t know if it’s competitive.

Jacques L’Ecuyer

Of course, that’s to some extent that is sensitiveinformation, Patrick. But I think werefer in the prospectus to metric tons so there is no possible confusion. One metric ton is a thousand kilos ofmaterial and the material will sell for a pretty varying range of pricesanywhere from $300 to $500 a kilo.

[Patrick Chan] – TDWaterhouse

$300 to $500 a kilo?

Jacques L’Ecuyer

Yes.

Operator

Your next question comes from Ian Thorpe of DundeeSecurities

Ian Thorpe – Dundee Securities

I did want just a bit more clarity around the commission ofyour plant in Germany. You mention you were able to meet your productionto First Solar by the end of July. Doesthat mean the plant is at 100% capacity at that point? Or how will theproduction ramp from the plant.

Jacques L’Ecuyer

As I tried to explain a little bit earlier on, essentiallywe expect that by July 31, we will be able to honor the commitments that wehave as part of our supply agreements with First Solar. So that doesn’t necessarily that our plantwill be at full capacity, but it would mean that we will be able to deliverproducts at the rate required. Wecertainly expect that we will be able to ramp up our plant very quickly,essentially because the technical risk is relatively modest given that we arereplicating a plant that we have here in Montreal.

Ian Thorpe – Dundee Securities

Just further color on that - what percentage of the Germanplans is comprised of the First Solar order?

Jacques L’Ecuyer

That’s a little bit difficult to specify precisely becauseof the way that we define capacity. Butessentially I would say less than 60%.

Operator

(Operator Instructions) (French Translation)

Rupert Merer –National Bank Financial

Since the IPO we’ve heard a little more from Nanosolar aboutthem entering production in CIGS market. Can you give us any more thoughts on how you see the marketdeveloping? How you might enter themarket? Who would be your keycompetitors? Any issues sourcing India? More issues purifying the material?

Jacques L’Ecuyer

I think it’s premature for us to comment on that, we certainlyfeel that in additional to Nanosolar there are other companies which haveindicated or are commercial, for example, Honda has started a plant in Japanas far as we are aware of. I think weexpect able to enter this market in much the same way as we have for the CadmiumTellurium, so essentially what we will be proposing to our potential customersin these areas would be supply of the base metals as well as the recyclingservices. We expect that by doing that wewill be able to develop an Indiasource, for example, something that you’ve just alluded to us. Again, I think it a little bit premature forus and I think we might be able to communicate to more specifics on that as wemove along.

Operator

Carolina Vargas – Clarus Securities, Inc.

This is a follow up question on the Tellurium side, how muchdo you think you can produce before you see a shortage of the material? Second, is a further comment on the call optionthat First Solar has on your German facility.

Jacques L’Ecuyer

To answer your first question we expect that – if we’re talkingmore specific of tellurium, we expect that we reduction of tellurium willgradually increase as the demand increases. Tellurium is a byproduct of copper refining and we don’t anticipate anysignificant issues with tellurium supply in the near or midterm future. That might change in the long term, butcertainly in the mid or short term we think this is not a serious issue,regardless of what’s published out there on the internet.

With respect for your second question I wasn’t quite sure Ithink you want to have more specifics on the call option? Can you rephrase that?

Carolina Vargas – Clarus Securities, Inc.

Yeah. How is the calloption that First Solar has on the Germanyfacility triggered? Just to explain alittle bit more on that.

Jacques L’Ecuyer

Actually, this is really a default clause. So, if we are in default of our agreementwith First Solar and therefore are not able to provide products in accordance withthe terms of the contract, which would represent the default, and that were arenot able to cure this default, within the default time that’s specified in theagreement then First Solar has a call option on our plant. Essentially this is a very special case. It’s basically a protection mechanism; Ithink you could view that in that way to provide First Solar with some abilityto overcome for example some difficulties that we may experience if for examplewe’re not able to deliver products for them. But, again this is a very special case and would only be able betriggered if we are in default of the agreement.

Carolina Vargas – Clarus Securities, Inc.

Is the Cadmium telluride process that you are using patented? What is the likelihood that someone else cancopy and get something similar since there is a limited number of customers outthere?

Jacques L’Ecuyer

Our intellectual property related to this is notpatented. This being said, we don’tbelieve that differentiation is strictly on the basis of the process itself. As we mentioned, we are an integratedsupplier, we think that’s a very important component of our productoffering. We have the ability to recycle. We also have the ability to treat many ofthese metals some of which of course have serious environmental effects, suchas cadmium and we think that differentiation is on that basis more thananything else. If you want we feel quitecomfortable about our position at the moment and our ability to sustain thatregardless of the fact that our Cadmium telluride processes whether it’s beingpatented or not. This being said, we arealso looking at several ways of perhaps improving on our IP position.

Operator

Your next question comes from Mac Whale with CormarkSecurities. Please proceed.

Mac Whale – Cormark Securities

I was wondering if you can’t give segmentation on a sales basiscan you give it on a tonnage basis or kilogram basis?

Jacques L’Ecuyer

I think we would rather not. I’m sorry but, I think we want to limit that. We consider that very sensitive informationand so we would refer you to what is in the MD&A.

Mac Whale – CormarkSecurities

Can you outline your capacity capabilities in varioussegments as opposed to what you sold? I’m just trying to get an idea of what’s the potential.

Jacques L’Ecuyer

We’ve provided some information as to what our capacity is. I think we disclosed that inthe prospectus and wemention that we have thecapacity for Cadmium Telluride inMontreal of 100 metric tons and we expect that to double once our new Germanplant is up and running.

Mac Whale – CormarkSecurities

But you haven’t given any details on the other materials?

Jacques L’Ecuyer

No and I think we’d rather not. Of course, our process is highly integratedif you want so for example, we need to purify the tellurium first in order tobring it to a level to where it can be purified further in order for it to bethen alloyed and compounded into cadmium telluride. Then of course, once it’s purified it caneither be allied and compounded as Cadmium telluride or it can also be furtherrefined and sold as very high purity metal so it makes it a little complicatedand messy really to provide that kind of information. In any event that would be quite sensitiveand so we do not wish to disclose that.

Mac Whale – CormarkSecurities

In terms of the backlog, how much of the backlog is based onthe tolling arrangement versus another type of sale?

Jacques L’Ecuyer

Again, I don’t believe we would want to disclose that. What I can tell you is that in many of ourcontracts our customer has the ability to provide us with the raw material feedstock and so some contracts can be for example, tolling contracts but thenswitched back to a standard contract. It’s a little bit difficult for us to comment on that because it’s not afirm engagement by the customer to rely purely on tolling for example. There is the ability to toll or purchase onmost of our contract. I think basicallywhat we are saying is, even if we were to provide you with numbers today it couldchange in three or six months down the road. We’re not ready to disclose that.

Mac Whale – CormarkSecurities

Can you give an idea of how big a swing in revenue thatshift would be? Would it be a materialchange in your revenue or margin? Wouldwe see it margin line or the revenue line I guess is the issue.

Jacques L’Ecuyer

You would see it in the revenue line primarily. You won’t see it in the margin line. The amount depends a lot on the variation andthe cost of the raw materials. I think weexpect that our revenue mix will remain relatively constant. If you look at the revenue mix coming fromtolling contracts and non tolling contracts. So we think our revenue, our sales progression will be relatively wellbehaved and you’re not going to see these incredible spikes, but I don’t thinkwe can comment any further on that.

Mac Whale – CormarkSecurities

Lastly, if you were to get these new contract sales over thenext couple of quarters would you be delivering on a contract received this quarterwithin 12 months? So, should we expectthat any of these new developments would be deliverable in the next 12 months?

Jacques L’Ecuyer

Can you repeat that? I’m not sure Iunderstand.

Mac Whale – CormarkSecurities

Yeah. It’sconfusing. I was just thinking if yougot a contract in this present quarter would you actually be delivering forrevenue recognition within the 12 months? Or is the lead time on a contract much longer?

Jacques L’Ecuyer

No. In most cases thelead time is relatively short.

Operator

Jacques, there are no other questions as this time, pleasecontinue.

Jacques L’Ecuyer

Thank you very much and thank you all for joining us forthis conference this morning. Thank youMr. Operator. We hope to have you allhere again at the next quarter earnings release conference.

Operator

Ladies and gentlemen this concludes our conference call fortoday. Thank you for participating. You may now disconnect your lines. (French Translation)

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