Howard Goldman - Director of IR Sunny Sanyal - President and CEO Clarence Verhoef - CFO.

Larry Solow - CJS Securities Paul Coster - JPMorgan John Koller - Oppenheimer + Close.

Welcome to the Varex Imaging Earnings Conference Call for the Second Quarter of Fiscal Year 2017. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the call over to Mr. Howard Goldman, Director of Investor Relations and Public Relations. Thank you. Mr. Goldman, you may begin..

Good afternoon, and welcome to the Varex Imaging Corporation's conference call for the second quarter of fiscal year 2017. With me today are Sunny Sanyal, our President and CEO and Clarence Verhoef, our CFO. To simplify our discussion, unless otherwise stated, all references to the quarter or year are fiscal years and fiscal quarters.

Quarterly comparisons are for the second quarter of fiscal 2017 versus the second quarter of fiscal 2016, unless otherwise stated.

Comparable financial statements for fiscal year 2016 and the first quarter of fiscal year 2017 reflect operating results for the Imaging Components business of Varian prior to its separation, and include estimates of cost allocations for various corporate functions, interest expense and tax expense.

Please be advised that this discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Our use of words and phrases such as believe, estimate, expect, anticipate, intend, could, should, will, opportunity, prospect, potential, continue, outlook and similar expressions are intended to identify those statements which represent our current judgments on future performance or other future matters.

While we believe them to be reasonably based on information currently available to us, these are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.

Risks relating to our business are described in our second quarter earnings release and in our filings with the SEC. The information in this discussion speaks of as of today's date and we see assume no obligation to update or revise the forward-looking statements in this discussion because of new information, future events or otherwise.

And now I'll turn the call over to Sunny..

Thank you, Howard. Good afternoon, and welcome to our first earnings conference call since becoming a new public company. As you know, at the end of January this year, we completed the spinoff from our former parent company, Varian Medical Systems. Our common stock began trading on NASDAQ on January 30, under the symbol VREX.

A tremendous amount of effort went into making our separation a huge success in such a short period of time. I would like to thank all Varex and Varian employees who worked together tirelessly to make this happen without disrupting our customers. A lot of exciting things have happened since the separation.

Most notably, on Monday, we announced that we completed the acquisition of PerkinElmer's Medical Imaging business. I'd like to first provide a summary of our quarterly financial results and then come back to highlight these exciting items. Top line growth was 3% for the quarter and 5% year-to-date.

Since the slowdown in our revenues in the second half of 2015 and the first half of 2016, all of our product lines have experienced good recovery and the trailing 12-month revenue growth rate was 7%. Our net earnings increased to $15 million or $0.40 per diluted share.

Our gross margin was 37% in the second quarter and our operating margin was 15%, both down from the prior year quarter due to a shift in product mix and higher cost of quality. We were encouraged to see lower SG&A costs in the second quarter.

This was a 27% sequential improvement from the first quarter of this year, which included allocations from Varian and separation costs. In a few minutes, Clarence will discuss our financial results in greater detail. But before that, let me give you some color on the market segments that we serve and our solution lines.

In our digital detector business, we continue to see strong demand as the industry converts from X-ray film and CR-based systems to digital detectors. In fact, we produced 22% more detectors in the quarter then we did a year ago. This quarter, we completed development of two low-cost radiographic detectors with advanced capabilities.

These new products will join our family of digital detectors targeting the ongoing analog-to-digital conversion that is taking place around the world.

Based on recent industry data, we believe that only approximately 30% of the global conversion to full digital X-ray imaging systems has occurred to date, with the vast majority of the remaining adoption to take place outside the US.

This should equate to a potential seven to ten-year runway of greenfield sales of digital detectors, followed by ongoing sales of replacement opportunities. We believe that approximately 50% of X-ray imaging systems in the U.S. have already converted to full digital.

We expect to see further adoption of digital detectors as a result of recent reduction in reimbursement rates for film and CR-based imaging procedures. Now while all types of X-ray-based modalities continue to convert to digital detectors, we see a particular opportunity with mobile C-arm systems for surgical applications.

More than 10,000 systems are sold annually, making this a sizable global market opportunity. Less than 20% of the mobile C-arms currently manufactured by OEMs are being shipped as digital systems.

As the cost difference between analog image intensifiers and digital detectors continues to shrink, we expect greater adoption of digital detectors over the coming years. In addition to C-arms, dental systems are a key to growth modality for digital detectors.

The global dental imaging equipment market has grown in excess of 7% annually over the past several years. We are well positioned at this segment, with specialized digital detectors that are optimized with our cone beam CT reconstruction software to create 3D images of teeth, soft tissue, nerve pathways and bone for a more precise treatment planning.

We're an innovation leader in the digital detector space and we also continue to expand our position as a cost leader, designing cost out as we bring new detectors to market. Moving on to X-ray sources, which include our X-ray tubes and linear accelerator products, several development projects achieved new milestones during the quarter.

We shipped engineering prototypes to several new -- for several new CT tubes for a number of OEM customers in Asia as well as X-ray tube prototypes for advanced mammography and advanced cardiac CT applications.

We are actively engaged in emerging markets, especially China, which is expected to be one of the growth drivers for our business over the next decade or longer. We're working on a number of new CT tubes and high-voltage connectors for Chinese OEMs who have CT imaging systems in various stages of development and market introduction.

Lastly, we participated in three international trade shows during the second quarter and had solid activity in these shows. In January, we were in Dubai at the Arab Health Exhibition & Congress. In February, we were in Seoul at the Korean International Medical & Hospital Equipment Show.

And in March, we were in Vienna at the European Congress of Radiology. These events are an essential part of our sales process and excellent opportunities for us to meet with OEMs to discuss market developments and product road maps. Now let me take a few minutes to talk about our recent acquisition.

I'm very excited about the potential opportunities and prospects of adding the PerkinElmer imaging expertise into the Varex organization. This acquisition will accelerate our goal of producing the broadest, most cost-effective portfolio of components for the X-ray imaging industry.

As a combined group, Varex now has more than 500 engineers, of which 55 have Ph.D.s focused on developing next-generation imaging products. I also want to welcome Dr. Brian Giambattista, who was previously the President of the acquired imaging business, to our executive management team. Brian will head our combined digital detector operations.

The PerkinElmer Medical Imaging business is highly complementary to our business. Overlap of customers is minimal and we see both revenue and cost synergy opportunities. First, we expect to gain significant new cross-selling opportunities.

The combined sales team will now be able to offer customers a greatly expanded product portfolio of Imaging Components. These include x-ray tubes, linear accelerators, amorphous silicon and CMOS-based digital detectors, high-voltage connectors, ionization chambers, collimators and software.

For example, if we sold a Varex X-ray tube with each digital detector brought by every new acquired detector customer, it could add more than $30 million in annual revenues.

Second, we're excited to add CMOS technology to our portfolio of digital detectors, which will enable us to create new higher-resolution and higher-performance detector offerings. We believe there's an opportunity to quickly offer this technology to Varex customers.

CMOS has a longer-term global market potential that we believe is in excess of $100 million annually. Third, we expect that our combined production volumes will enable us to increase our manufacturing scale and improve our direct material costs, which should continue to strengthen our cost leadership position.

We believe ongoing cost reduction is critical for us to maintain our company-wide gross margin levels. Fourth, this acquisition already has a sizable footprint and substantial brand recognition in the industrial imaging space.

We believe these factors will significantly expand the gateway of the Varex product portfolio in what is today a fragmented and diverse market segment. In summary, this acquisition offers complementary capabilities and products, and gives us a potential to accelerate our innovation and expand our leadership position in X-ray imaging components.

Our team is set to hit the ground running. Next, we are very happy that we recently renewed our 3-year pricing agreement with our largest customer, Toshiba Medical Systems.

Our collaboration with Toshiba Medical is important to us, and we continue to supply CT tubes for our integration into several of their next-generation imaging systems for the global market.

We estimate the potential sales of CT tubes associated with this renewed agreement to be in the range of the $345 million to $385 million over the 3-year term, which is consistent with the pricing and volume of purchases made in the past two years under the prior pricing agreement.

We also have in place a separate one-year pricing agreement for Varex to supply to Toshiba Medical other imaging components, including digital detectors and high-voltage connector. Annual sales of these components have ranged from $20 million to $30 million.

This renewed agreement continues our 4-plus decades of relationship with Toshiba Medical Systems. We view this renewal as a vote of confidence in our ongoing ability to develop innovative X-ray imaging component technologies that improve performance and reduce time-to-market for OEMs.

We look forward to continuing our long-standing relationship with Toshiba Medical now that they're part of Canon and to the prospects of providing Canon with access to our portfolio of X-ray imaging products. And last but not the least, Dr. Jocelyn Chertoff was appointed to our Board of Directors in late March.

Jocelyn is the chairperson of radiology and OB/GYN at Dartmouth-Hitchcock Medical Center. She's an accomplished physician and an educator. Her experience will add a strong clinical perspective for us.

Her appointment has increased the size of our board to seven directors, and I'm very proud to say that we have established a diverse and internationally-oriented Board of Directors that will guide as well through our growth aspirations.

With that, let me hand over to our CFO, Clarence Verhoef, to talk about our financial performance in greater detail..

Thanks, Sunny, and hello, everyone. As Sunny mentioned, this quarter was a huge milestone for us as we completed the separation from Varian and are now able to provide you with a good look at Varex as a stand-alone company.

Given the separation costs that are in our first quarter's operating expenses, the year-to-date information that we are providing will only be for revenues and gross margins. Our second quarter revenues were up 3% to $155 million from $150 million a year ago.

Year-to-date revenues were up 5% to $312 million, with good performance in most all of our product offerings. Medical segment revenues increased 3% in the second quarter to $126 million. Year-to-date, revenues were up 5% to $257 million and represented 82% of our business.

The primary modalities where we saw good growth were CT, mammography, dental and general radiography. Industrial segment revenues for the second quarter increased 6% to $29 million. The major driver of this growth was in our security products, where we saw a nice increase in linear accelerator revenues and the related service business.

This was partially offset by a decline in industrial detectors sales. Year-to-date revenues were also up 6% to $55 million. Our company-wide gross margin was $58 million in the second quarter, down from $59 million in the year-ago quarter. As a percentage of revenue, the gross margin was 37% compared to 39% a year ago.

The change in gross margin was primarily due to higher cost of quality as well as a product mix shift to lower-margin radiographic components. These items were partially offset by increased sales of higher-margin linear accelerators for security applications. For the first half of the year, our gross margin was 37% compared to 39% in the prior year.

While we now expect the full fiscal year 2017 to have gross margins of 37% to 38%, we still expect our long-term gross margins to be in the range of 38% to 40% as we continue to see the benefit from our product cost-reduction programs.

During the quarter, we accepted and shipped an order for a package of components for several hundred general radiographic systems. While this package of tubes, detectors and high-voltage connectors increased our revenues, it created an unfavorable mix shift to lower-margin components, which was a contributing factor in reducing our gross margin rate.

Medical segment gross margin declined 4% to $45 million. The gross margin rate was 35% compared to 38% in the year-ago quarter. Year-to-date, the gross margin rate was 36% compared to 38% in the prior year period. Industrial segment gross margin increased 4% to $13 million.

The gross margin rate in the second quarter and year-to-date was 45% compared to 46% in the comparable periods of the prior year. Our operating expenses in the second quarter were $34 million, about equal with the year ago.

R&D expenses were $14 million or 9.3% of revenue in the quarter, which increased from $13 million or 8.8% in the year-ago quarter. This increase is due to higher prototype material costs in the current quarter.

While we have been investing in R&D to accelerate new product introductions, we still expect R&D expense to remain in the range of 8% to 9% of revenues for the current fiscal year. Second quarter SG&A expenses decreased to $20 million or 12.7% of revenue, from $21 million or 13.9% of revenue in the prior year.

This is our first quarter where the majority of the SG&A expenses are stand-alone Varex expenses. All prior reported periods included the first -- including the first quarter, had costs that were allocated from Varian, and recent quarters included separation costs.

Depreciation and amortization totaled $5 million for the quarter compared to $4 million a year earlier. Our operating earnings were $24 million, down from $25 million in the same quarter a year earlier. And our operating margin rate was 15% in the second quarter, a decline from 17% in the year-ago quarter, reflecting the decrease in gross margin.

Interest expense in the second quarter was $1 million compared to $500,000 in the prior year. Our effective tax rate for the second quarter was 33% compared with 41% in the year-ago quarter. We will continue to have volatility in our tax rate due to the geographic mix of our earnings and losses.

We expect the tax rate for fiscal year 2017 to be in the range of 34% to 35%, which is comparable to the prior year. Net earnings for the second quarter were $15 million or $0.40 per diluted share. This compares to net earnings of $14.7 million or $0.39 per diluted share in the prior year. Now turning to the balance sheet.

I want to highlight a few areas. We ended the second quarter with cash and cash equivalents of $80 million.

Under the separation and distribution agreement with Varian, we have an obligation to return to them approximately $45 million, primarily for the delayed transfer of certain non-US entities to Varex and excess cash held at the time of the spinoff. We expect to pay this obligation over the remainder of this fiscal year.

During the quarter, we established a $300 million credit facility, borrowed $200 million and paid this amount to Varian in connection with the separation. At the end of the second quarter, our total debt was $202 million.

This week, in connection with the closing of the acquisition of PerkinElmer's Medical Imaging business, we replaced this credit facility with a new credit facility consisting of a $400 million term loan and a $200 million revolving line of credit.

We used $497 million of this new facility to repay existing debt and fund the acquisition and credit facility fees. Looking at our working capital, accounts receivables increased $9 million during the quarter and days sales outstanding was 70 days compared to 71 days in the year-ago quarter.

Inventory increased by $8 million during the quarter in preparation for anticipated higher shipments at the end of the fiscal year. During the quarter, current liabilities increased by $70 million, which included the $45 million obligation to Varian and $15 million current portion of our debt.

Cash flow from operations in the second quarter was $14 million, bringing the total cash flow from operations for the first six months of the current year to $33 million. Property, plant and equipment additions were $2 million for the second quarter and $7 million for the year-to-date.

Earlier this week, we closed the acquisition of PerkinElmer's Medical Imaging business. During the third quarter, we will complete the purchase accounting for this acquisition and consolidate two months of its financial results into Varex. The audited financials for calendar years 2015 and 2016 will be filed with the SEC by mid-July.

Revenues for the prior fourth quarters for this business were approximately $140 million, and we expect the 2017 revenues to be at a similar level. Gross margin rates are expected to be similar to Varex, but may vary depending on product mix. This acquisition is expected to be immediately accretive on a cash basis. Now turning to guidance.

As a reminder, we've previously stated that Varex will provide guidance on an annual basis. Also, as we just closed off acquisition of the PerkinElmer Medical Imaging business earlier this week, at this time, we are only able to include the added revenues in our guidance.

We expect to update our full year revenue and EPS guidance to include this acquisition when we report our financial results for the third quarter of fiscal year 2017. For fiscal year 2017, Varex maintains its previous expectation that organic revenues will grow by 3% to 4% over fiscal year 2016.

The added revenues from the acquisition are expected to increase Varex's revenue growth by an additional 9% to 10% for fiscal year 2016. The incremental increase in interest expense, resulting from the higher debt level of our new credit facility, is expected to reduce net earnings in the fiscal year by approximately $0.11 per diluted share.

Including this impact, our net earnings for the second half of fiscal year 2017 are expected to be in the range of $0.69 to $0.79 per diluted share, which does not include financial results from the acquisition.

In order to provide enhanced transparency to Varex's ongoing operations that adjust for the impact of our acquisition of PerkinElmer's Medical Imaging business, we intend to provide certain non-GAAP financial measures starting with the reporting of our financial results for the third quarter of 2017.

At this time, we would like to open up the call for your questions..

[Operator Instructions] Our first question comes from Larry Solow with CJS Securities..

Sunny, this is your first call as a separate component company, maybe you could just take a step back and sort of discuss -- obviously, you participate in very competitive markets in general.

But maybe you could sort of discuss the competitive nature of your two primary markets or the one market broken into two between tubes and flat panel, and sort of the dichotomy between the higher end and the lower end there..

Sure. Thanks for the question, Larry. So as you said, the two biggest chunks of our revenues come from flat-panel detectors and x-ray tubes. And the competitive dynamics are very different in these two markets. In both these product lines, there is -- there are high-end products and, I'd say, value segment or low-end products.

And they're -- it's all -- I'll give your reference to both of those. So let's start with X-ray tubes. The high-end -- when we talk about high-end X-ray tubes, these are typically our CT tubes. And then the low-end side, these are radiographic tubes.

And the dynamics there are the higher-end tubes are more difficult to manufacture and are more expensive. The low-end tubes, the radiographic tubes, are cheaper and generally easier to manufacture. So you can imagine from a competitive standpoint, there are many more players that manufacture tubes on the radiographic side.

And actually, no -- there's no independent manufacturer of CT tubes. So in the X-ray tube business, we largely compete with OEMs themselves. So our biggest competitor is the in-house capabilities that the top three manufacturers have.

Now what's happened over the years is the number of manufacturers have increased, but the people that can make the high-end -- the CT X-ray tubes are still limited to your GE, Siemens, Phillips, Toshiba as the manufacturing OEMs. On the radiographic side, there's a couple of other companies that make those tubes.

Now in terms of -- the basic dynamics of the tubes business are we ship new tubes, there's a very large portion of our revenues, about 80% of the tubes revenues come from replacement market which is the replacement tubes, tubes that finance life cycles.

The CT tubes, while they are most expensive and the highest-priced tubes, they're also request -- replaced more frequently than radiographic tubes. So in terms of competitive landscape, we feel this landscape hasn't changed much over the last 30, 40 years. The number of players are fewer and we have a fairly stable competitive environment.

On the detector side, there are two types of detector technologies. There are -- you have the, what I'd call as the dynamic detectors, which are like movie pictures; and your static detectors, radiographic detectors, which take single shots. So the high-end consists of dynamic detectors.

And when we refer to the low-end, these are typically the radiographic detectors. And the price and complexity is higher on the dynamic side and lower on the radiographic side.

So similarly, in the competitive landscape, there are far fewer players that offer dynamic detectors and a large number of players that offer the more -- the simpler radiographic detectors. Over the last -- this landscape has changed quite a bit.

We've been in this business for 20 years and, I'd say, five, seven years ago, several new companies appeared in the radiographic space. But over the last two years, we have not seen any new significant -- any new competitors emerged of any significance. So the -- I would characterize it as the competitive landscape is stabilizing.

We saw a pretty significant price adjustment in the 2014-2015 time frame, as we've discussed previously. Since then, the pricing situation appears to have started returning to historic norms. And we can talk a little bit and Clarence can give you more color on that.

But we're seeing the competitive landscape settle down into what's been -- what's more predictable..

Okay. No, that was very helpful. And just one follow-up question on that, and as it refers more to the current quarter and the last two quarters. You mentioned pricing has sort of stabilized in the last couple of quarters or last couple of years.

Gross margin, obviously seems to be sort of at the low end of, I think, longer-term targets, has come down in the last couple of years.

It sounds like it's not from pricing, what is it from? And is that something that you can sort of turnaround or at least stabilize?.

But great question, why don't I ask Clarence to take this..

Yes. So Larry, the gross margin is driven by two factors, I would say. First of all, the first one is it's a lot about of the mix of what we're selling. So we are going to have variation from quarter-to-quarter.

So for example, we talked about the large order that we took and fulfilled for the -- the tender-based order to ship several hundred radiographic systems and package of systems. Those were lower-tier products. The radiographic systems, it's also the more basic X-ray tubes and the radiographic detectors.

So that had an impact on our gross margins in the quarter. And the second is that -- the factor that comes into play is pricing does come into play.

I would say that we have seen very good cost-reduction efforts now taking effect where the cost reductions we're seeing and the product costs are offsetting the increases that -- or the decreases that we see because of price erosion, particularly on the detector side. Maybe a little bit of color around that.

What I've seen on the detectors in the last year, when I look at pricing, how I look at this is I compare pricing this quarter compared to what it was a year ago for [ light ] products and we have had about 7% erosion or decline in prices for year-over-year comparison.

In the dynamic space, the kind of the higher-end products that Sunny was just mentioning, it's low single-digit kind of erosion; while still in the radiographic space, you're going to be in the -- probably the low double-digit kind of range. So that is the offsetting factor that we have..

Our next question comes from Paul Coster with JPMorgan..

I do apologize, I've got a few questions. So first of all, welcome to the market. It's good to have you out there. So first off, Clarence, you mentioned at the end of your prepared remarks that pro forma reporting will commence soon.

What are you going to do? Are you going to just start stripping out FAS 123 and amortization expense? Can you just kind of talk us through why you've mentioned that?.

Yes. So if you think about, okay, what are the primary reasons why you go to a non-GAAP reporting, it's really trying to adjust onetime items out of there so you got an apples-to-apples comparison. Obviously, the biggest one that we have is the impact going on with the acquisition.

And so the items that would be adjusted for it's going to be amortization of intangibles, the acquisition-related costs. And then in the longer term, if there was any impairments that were done or any restructuring costs, those are the kinds of onetime events that would get adjusted.

I would say that we're going to approach this very conservatively, that we will not be doing anything such as, you just mentioned the FAS 123R, which is a stock-based compensation. We will not be doing any -- an adjustment for something like that, because that's considered an ongoing operational expense..

Got it. Okay. When you announced the PerkinElmer acquisition, I think you also noted that there was a couple of things to be resolved. There were some regulatory approval -- I assume, it's done, but also a couple of customer contract assignments.

Can you update us on that, please?.

Well, just the good news is, is they're all done, otherwise we wouldn't have been able to actually close the transaction. So the primary one was getting the government antitrust approvals, and that was U.S. and Germany. That took a little bit of time, but it did go through in the first round of the process, I guess, as such.

And then there was also some contractual items that needed to be done that we all got completed in the month of April..

Got it. Okay, my last question is on the Toshiba rollover.

If you think about the value of the contract over the period of time, does the margin improved insofar as its price for sort of a cost end state at the beginning of the rollout, where initially it's less profitable near the end? Or is -- does it work in a different way from that?.

So Paul, I guess, I -- because it's specifically around the CT X-ray tubes, which is a space where we have got very stable pricing and very stable margins in that space. You're not going to see a lot of movement happening around that.

I think as we continue to do things that are cost-reduction activities inside of our process of manufacturing, those are the opportunities that we have to gain some margin there.

And then I think the other side of it is that we have -- for a few of the tubes in particular, we have built in some structure in the agreements where if the life of the tubes or the performance of the tube improves, then we actually have some price adjustments accordingly.

And so that kind of an event is a profit-sharing kind of arrangement between us and Toshiba. So that would be a margin improvement as well..

And our final question comes from John Koller with Oppenheimer..

It's Oppenheimer + Close. Quick question on the quality issues that were discussed.

Just wondering if you could give, more broadly, whether that was tube or panel, and what specifically or broadly that might be? And then when do you expect to get that under control?.

John, so this is Sunny. We're a very vertically integrated manufacturing environment on the tube side and so we have a lot of process steps, a lot of materials that come in, raw materials that get converted into, then finally the finished goods goes through a lot of processing steps.

So it's not uncommon for us to have some variability in the production environment. And the typical things that impact our costs are stuff like scrap, rework. So this quarter -- and by the way, this variability that's quarter-over-quarter.

So this particular quarter, we have some more-than-expected scrap on the tube side and as a result of that, you get -- when you have that, you also end up with the rework, which results in slightly higher labor costs. So that was nature of this increased cost of quality. These are typically one-off events. Nothing here that we see as recurring.

So we expect to continue to be back in line with our normal performance as we proceed through this quarter and next quarter..

Okay. Great. And then just as a follow-up, I was wondering if you can roughly break out, in Medical, the difference between percentage-wise and sales between tubes and panels..

So the -- a little bit of at a rough level, but it's the x-ray sources, tubes plus linear accelerators is going to be in the 45% to 50% kind of range or probably closer to 45%, and the detectors are going to be in the 40% of 45% range in our current scale.

So obviously that changes quite a bit when we add in the PerkinElmer detector business, because that will then change that mix a bit, quite a bit. Because the $140 million that gets added for PerkinElmer is entirely detectors..

There are no further questions at this time. I would like to turn the call back over to Mr. Goldman for closing remarks..

Well, thank you for of questions and participating in our earnings conference call for the second quarter of 2017. A replay of this quarterly teleconference will be available from May 4 through May 18 and could be accessed at Varex's website or by calling 1 (877) 660-6853 from anywhere in the U.S., or 1 (201) 612-7415 from non-U.S. locations.

The passcode for these replays is 13660264. Goodbye..

Thank you. This concludes today's teleconference, you may disconnect the line's at this time. Thank you for your participation, and have a wonderful day..