Neogen Corporation (NEOG) Q3 2013 Earnings Report, Transcript and Summary

Welcome to the Neogen Third Quarter Fiscal Year 2013 Earnings Results Conference Call. My name is Lorraine, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Jim Herbert. Mr. Herbert, you may begin.

Good morning, and welcome to our regular quarterly conference call for investors and analysts. Today, we'll be reporting to you the results of the third quarter that ended on February 28. And I'd remind you that the statements that are made here today could be termed as forward-looking statements, and these forward-looking statements, of course, are subject to certain risk and uncertainties. Actual results may differ from those that we discuss today. And these risks that are associated with our business are covered in part in the company's Form 10-K as filed with the Securities and Exchange Commission. In addition, to those of you who are joining us today in this live telephone conference, I'd also welcome those who may be joined by way of simulcast on the World Wide Web. These comments, along with some exhibits, will be available on the Web for approximately 90 days. Following comments this morning, we'll entertain questions from participants, as Lorraine indicated, who are joined by this live telephone conference. Then I'll make some introductory comments to start the call this morning, then turn the program over to Lon Bohannon, Neogen's President, who will talk about some of the color behind the specifics of this third quarter; then followed by Steve Quinlan, our Chief Financial Officer, who will follow along by line to fill you in on some of the details behind the numbers, and then I'll play clean-up this morning to talk a little bit more about the current events and some future expectations. Well, earlier today, Neogen issued a press release announcing the results of the third quarter of the 2013 fiscal year. Once again, we reported record numbers. Revenues for the quarter were up a bit over $51 million, which is an increase of 14% from the previous third quarter.…

Thank you, Jim, and welcome to everyone listening on the conference call, as well as those joining us via the Internet. Now Jim has already provided some details on Neogen's 2013 fiscal third quarter and year-to-date performance. I was very pleased with our Q3 performance that further contributed to what is turning out to be a very solid 2013 fiscal year for Neogen. Now let me begin by providing a few more details on the third quarter results. I trust those of you who consistently follow Neogen took note that our third quarter revenues of more than $51 million were not only 14% above last year. They were also higher than this year's strong second quarter sales. Historically, the second quarter represents our strongest quarter for total sales, so I think our Q3 revenue performance is an indication of broad-based product line and market segment growth in both our Food Safety and Animal Safety segments. For example, third quarter sales were up compared to last year in 9 of our 10 operating divisions with increases ranging from 8% to 42%. Hacco was our only operating division experiencing lower sales with a slight decline of approximately 3% in Q3 sales compared to prior year, but this division remains a solid 7% ahead of FY '12 on a year-to-date basis. Food Safety sales increased 15% in the third quarter to $25.3 million with all 7 operating groups reporting higher revenues in the prior year. Food Safety sales growth was also broad based from a product line standpoint. Sales of test kits to detect food-borne allergens increased 23%, and sales of products to detect naturally occurring toxins like aflatoxin and vomitoxin were up 22% in the quarter. We also experienced solid growth in sales of our AccuPoint test systems used in general sanitation…

Thank you, Lon. Jim and Lon have already reported on the overall [indiscernible] profit performance for the third quarter and the year to date for our 2013 fiscal year. I'm going to take just a couple of minutes to talk about our operating expenses, our balance sheet and other significant items for the third quarter. Operating expenses were up 15% in the third quarter compared to the same quarter last year. Now we've discussed in prior calls our commitment to continue to build our sales, marketing and research organizations to take advantage of the significant opportunities that we see in our expanding food and animal safety markets, and this investment continued in the quarter. The majority of the increase in our sales and marketing expenses, which are up 18% for the quarter and year to date, results from payroll-related expenses for new sales and marketing personnel, including those from our recent acquisitions, increases in royalty expense, higher shipping costs and increases in promotion and marketing support. General and administrative expenses were up 10% in the quarter, almost entirely due to personnel costs and related expenses and amortization of customer-based intangibles resulting from our acquisitions. Higher stock option and legal expenses from earlier in the year, as well as increased depreciation expense resulting from our continuing investments in our information technology infrastructure, have resulted in year-to-date increases of 13%. Our research expense was up 13% over the prior year primarily due to costs associated with validation and approvals for new products, reflecting the continuing high levels of activity for this group. In other income, we had favorable currency experienced during the quarter, a total of $200,000, about $90,000 better than last year's third quarter, as all of the currencies we do business in, the euro, the pound, the peso and the…

Well, thanks, Steve and Lon, for a nice wrap-up on a good quarter. In my concluding comments, let me talk a bit about what's happening internationally, along with the flow of new opportunities that we see that are developing. As we've mentioned before, we think that about 2/3 of our potential markets in the Food and Animal Safety business lie outside the U.S. All of our principal operating divisions outside the U.S. showed good results in this third quarter. Our Brazilian operations are gaining traction in both food and animal safety products, and their revenues for the quarter were up approximately 32% compared to the same quarter a year ago. Our Mexico operations saw a similar growth with revenues up 42%. Neogen Europe celebrated its 10th anniversary as a part of Neogen this past week. That business, which is almost entirely food safety, has continued to show nice double-digit increases each and every year. This quarter, they were up about 18% compared to a year ago. Neogen Europe now accounts for a bit over 20% of our total Food Safety revenues. The growth here has been difficult considering the financial downturn in some of our major countries like Italy and Spain, but the strength is coming from the stronger economies with -- as an example, German revenues for the first 9 months of the year being up 40% and also strong revenues coming from both the U.K. and Ireland. These countries benefited some in February due to the economic adulteration issue of horse meat that was mixed with ground beef referred to as the horse meat scandal. Neogen has a group of diagnostic tests to detect various animal and fish species, and these tests were developed to find attempted economic adulteration. One of the tests is very simple and in…

[Operator Instructions] And our first question comes from Paul Knight from CLSA. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: On the DNA testing side of the business, it was a nice sequential jump. Could you go over the components of what's going on there? And is that a run rate on the business now? Could you give us a little color there?

Are you referring to the ANSR-based DNA test system or to the genomic side or... Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: The GeneSeek portion of the business.

Yes, that's -- it's coming from a lot of different directions. The -- part of it, as Lon said, is that we've had a couple of acquisitions that were in for a part of the quarter. I don't think either was the full quarter. But the Scidera acquisition that took place in January brought in some business that we didn't currently have at our GeneSeek operations. Part of this was -- I'd guess probably the biggest portion of this increase has probably come from beef cattle as we look at both parentage and traits in beef cattle, and we do business with the 11 top breed associations in the world. We get a little business in from China. Our delegation just came back from China this week. They've been over there as China is building its dairy operations. They're importing cattle and building huge tremendous dairies in Inner Mongolia, and the genetics is going to be an important part of what they're doing. I think we had -- maybe in February, we had maybe like 6,000 samples in from China of dairy heifers to determine their heifer replacement programs. So it's pretty widespread. And we've got new models that are under development now that we'll -- or almost through development. We'll -- we have the best model for genomics for Nelore cattle, and that's the primary breed in Brazil. And, of course, the Brazilian business in beef production continues to grow. It's a major, major producer on the worldwide markets. So that's going to enable us to do even more there. So it's -- and as we see what's happened on the beef side is -- and we've got the smallest cow herd we've had since the 1950s, and therefore, the price of beef, regardless, is high. There's a temptation for people to want to sell beef heifers that are worth -- those heifers, that could go straight with the steers to feedlots or -- they're worth $1.70, $1.80 a pound now. And do you save them back for replacement heifers? Or do they go to market? That's going to lead, I think, to more -- easily, I think, to more genetic work. You want to save the very best ones. And so we think that, that's probably even though cattle numbers are down on the beef side, there may even be some increase in our testing for beef. That's a longer answer, I think, probably than you intended to -- intended for. But maybe it gives you sort of some color. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: Yes, I think it's a good outlook. I think the other question I would have to wrap my side up would be the operating margin down sequentially, but do we expect a margin pickup here in the upcoming current quarter?

Well, I think it's -- our quarters kind of is -- are strongly influenced by the mix of the products in the different areas. I mean, the gross margins are holding up very fine. And even though, sequentially, it was down compared to last year, I think when you look at the full basis points increase compared to the same quarter of last year, it's following that same trend of showing an operating improvement -- operating profit improvement that's consistent every quarter compared to the same quarter of last year. So I don't think there's really anything that's disturbing there or that's any kind of a trend that's not perfectly consistent with what we're achieving and have been achieving each quarter this year.

[indiscernible] just called it to my attention that I misspoke earlier in my prepared comments, and I said that the largest grocery chains -- one of the largest grocery chains, I said the U.S. I meant to say the U.K., running as many as 1,000 tests a week to test for horse meat. There are -- there is testing in a lot of countries. There's testing here. I can't tell you for sure whether anybody has ever found anything here or not. We do know that Nestlé got caught with some bad meat that went into some lasagna -- the frozen lasagna that's circulated in a lot of countries. IKEA, I thought made furniture, but in addition, they also have a few food items, including meatballs, I guess, and some of that horse meat maybe got in the meatballs. And I don't know whether we ate any of it here or not. But it's much more widespread than was expected. But it's not a U.S. grocery store chain. It's a U.K. grocery chain, so my apologies for misspeaking there.

And our next question comes from Steven Crowley from Craig-Hallum Capital.

In terms of the sales and marketing investment that you've cranked up by design, can you give us a little bit of a feel for the capabilities that you've put in place at the company maybe versus 18 months ago or 24 months ago, so we have some sense what you're doing with that investment?

I'll let Lon add to it. I'll start off. We've expanded what we're doing in the marketing area. We -- because we got a large number of products and we serve multiple markets in multiple countries, our sales group is, if you will, is divided into 3 sections. We have what we call our product managers that are looking at all of the different products that are being developed, that are under development to make certain that they're poised in the right direction. Then we have our marketing group that looks at the markets for those like they might be -- one group might be looking at dairy and beverage, and another might be looking at meat and poultry. And then the third group is our sales group, which is under sales management. And in many cases, most cases, they are also divided. So we -- I don't -- hadn't looked to -- Lon maybe can add a little bit to it. I haven't looked at the exact numbers, but we have probably done more to expand our marketing group than in the sales side of that product -- then we have the sales side of that over the course here of the past quarter. I don't know, Lon, you've got better detail on that?

Well, it's really across-the-board increases in a number of areas. We have -- we've added staffing in all of those areas that Jim indicated and on both the Food Safety and Animal Safety side of the business. Some of that has been in marketing. Some of it has been in the direct sales force. We've added both individuals and broken out additional market segments where we didn't think we were getting enough penetration and added staff there and have also added some inside salespeople to help support the efforts, which would free up some of our territory managers to focus on some of the larger accounts. So it's been a combination of items. The acquisitions have added to that. The Igenity acquisition brought with it some sales and marketing, particularly sales personnel to call. And I think that's -- you're seeing some of that, and we talked about some of the success we've had in the genomics area. I think that's helped that. And the same thing could be said on the Animal Safety in a number of markets, including some of our international markets where we've expanded our sales efforts and staffing. And that brings with it -- you got increased travel costs as a result of that and all of the ancillary costs associated with having increased personnel. So it's pretty broad based and across the board, and it's all done because we think the opportunities are out there, and we can achieve even higher organic growth rates going forward.

Have you seen some of the recent new product introductions like the Q+ line benefit from those enhanced capabilities? In other words, are you seeing some nice confirmation on having added capabilities to the organization? Or are those still -- those benefits still prospective?

No, I think we've seen and realized some benefits from adding the staff, and I think it's reflected in the third quarter. It's reflected in -- or there's really a very broad-based growth in revenues across a number of market segments and product lines. I think we're better able to take advantage of some of the things that we see that are being driven from the new regulations from FSMA in the area of things like allergens. And we've talked about the pathogen area is, we think, is going to benefit more going forward. And I think, certainly, in the mycotoxin area, adding some staffing there as a result of our investment in those areas certainly helped when the outbreak occurred both in Europe, as well as here in the U.S. last fall. So I think we are seeing benefits, and we expect to see more going forward.

Great. Now on the R&D side, you've had a pretty active schedule of new product launches. I think, that continues maybe for the foreseeable future, but could you give us a little feel for what's going on there and what kind of pace you're hitting on now in the new product introduction front?

Sure. And I'd say that R&D, like sales and marketing, there's a lead time in any of them. We spend the money today for products that were going to be released tomorrow. They're probably not going to have an impact on revenues for another quarter. But we've gotten -- we had 20 products aimed throughout the company for a new product release for this year. I've lost track exactly where we are. I said earlier that I thought we could get 17 of those out. We may do a little bit better than that. Realized that some of them are improvements of existing products. Like you mentioned our Q+ products, those are -- that's just an improvement on products that we had that were going into the testing of natural toxins. They are new products, but they are improvement on areas where we're already functioning. So we expect and we're in budgeting process now so for the new year, starting the first of June and we'll be looking at equally as many new product opportunities next year as we have been working on this year. So we won't let up there. I think also as following up on your questions or line about the sales and marketing people, it takes -- our -- we get pretty quick traction on additions in sales and marketing. Within 6 months, quite often, we got the guy that's paying his own way when you add people there because of our nice gross margins. But it's -- we've always tried to lead the market with our sales and marketing expenditures. So I think this quarter is just an example of how we're leading the market for what you may not fully see for -- until the first quarter of next year.

[Operator Instructions] And our next question comes from Tony Brenner from Roth Capital Partners.

I'd like to follow up on a comment that Jim just made about the productivity of the sales and marketing additions. You made a big investment in the middle of last year. And there was roughly a 200-basis-point increase at that time in your sales and marketing expense as a percent of revenue. And just gauging by that measure, it doesn't appear there's been any productivity improvement from those initial people and now you're adding again to that sales and marketing staff. So I'm -- the sales increase doesn't appear to have been proportionate to your increased spending in marketing. Do you mean to imply that, that's about to happen and that percentage begins to come down a bit in the next quarter or 2?

Well, you're ahead of me, I think, in percentages, Tony. I guess we'd back up to when we had the last influx of expenses or additions, I'd say, to our sales and marketing group was a result of the fact that we had sort of eaten a little better seed corn the year before, and we needed to get built back up to the kind of levels that we're talking about. The -- I do think that we -- that, that big part of what you see is increase -- of our increases is due to the sales and marketing increase. We've got more people. We've got more activity. We're attending more trade shows. We're doing more travel. We're making more sales calls. So I think with that, I haven't gone back to try to develop those percentages, but I think that what we spent last year is paying off. I think that's what's responsible for what we're seeing this quarter and what we will see next quarter as a part of that. So we continue to believe that, that's the right place to go if -- for growth, if we're looking at internal growth, it has to come through either increased market share or new products. And I think we're pretty fortunate with the kind of products that we've got and the kind of gross margins we have. It's pretty easy when you've got a product group out there that's got 60%, 70% gross margins that it's pretty easy to add some extra sales to that. So we ought to continue to add resources as long as we can bring in that kind of revenues at the top line. Lon, you might have a little bit closer look on actual calculation of percentages and outlook there.

Well, we -- thanks for the question, Tony. It's a good question. We do pay pretty close attention to those percentages in how they correspond and relate to our year-to-date revenue growth. I can tell you that a big chunk of the increase this year is also related to distribution costs. General accepted accounting principles requires us to record shipping and things in the sales and marketing area, and we've had a big increase in that particular area this year, which has drove up percentage a little bit. The other thing I would say is, just so the people know, we planned for this when we did our budgets last year, and we're actually -- as a percent of revenues, we're actually running a little bit below our budget through 9 months. So maybe we didn't do a good enough job of continuing to explain why and how we're investing in sales and marketing because we do have good margins in the products, and we do think it will pay off. And so far this year, we are managing them to be certainly within our plan and our budget. So I think this quarter is higher than we've seen in the previous 2 quarters, but on a year-to-date basis, we're still very much in line with where we expected to be.

Fair enough. One other question. So you've not talked about China in a couple of quarters. I wonder if you could drill down a little bit on just how rapidly your business in China is increasing and what percent of sales that now represents.

Well, overall, it's still -- I'll answer it, start from the back and work back to the front. I think overall it still represents a very small percentage of the overall revenues for Neogen Corporation. Jim already addressed the fact that we're starting to see some progress over there in the genomics area. They certainly have placed more emphasis, and you read almost daily about the kind of things that are happening on the food safety side. I know that our Neogen Europe operations, through a distributor over there, have had some good success this year in sales and general sanitation area for our ATP systems. We've seen good placements of product the last 2 years over there for our Soleris optical microbial test systems to detect things like yeast and mold, poly coliforms indicator and spoilage organisms. The only thing that's falling a little bit behind schedule is we expected to have some further increase over there with cleaners and disinfectants, again talking about some of the kinds of things from viral and bacterial kind of standpoint that are problems in animal protein production facilities, and we expect to get some approvals for our product there in China within the next 3 months, I think, so that next fiscal year, we'll start to see growth in that area as well. It's a market for our products, and I think it will continue to grow as it has the last couple of years.

Probably, the -- one of the biggest concerns there now is Western companies that are producing food in China. I think you heard me say that China's got a lot of the resources and they need to do their own thing. They don't have enough resources to produce the quality -- the quantity of quality food that they're going to need, just putting pressure on. So we have a number of U.S. corporations that are gone to China or not just U.S. We got to where the largest dairy operation in New Zealand is there with large dairy operations. So I think we'll see more of that, U.S. corporations producing food in China for the Chinese population. And they've got more to protect. They've got a bigger reputation to protect, and as a consequence, we think that there may be bigger opportunities for us, particularly with our diagnostic products, whereas the local Chinese companies, food production companies, may opt for cheaper diagnostics produced by Chinese diagnostic companies. So it's going to be interesting as we see that unfold. I do think we will continue to have a good opportunity there and to grow our business. But as I've often said, going way back don't go buy Neogen stock today based on the fact that we're going to make huge tremendous earnings out of China.

And our next question comes from Steve O'Neil from Hilliard Lyons.

I was wondering if you could quantify the impact of currency on third quarter revenue. And then along the same lines, Jim mentioned the 18% increase in Neogen Europe. I just wondered what that was in local currencies.

Steve, you got those for the quarter...

Yes, currency effect on revenue in the quarter was very minimal. It was $18,000. And the second question was...

On Neogen Europe?

The $18,000 I think was -- was that based on pound-to-dollar conversion? I think in total, we -- if I remember correctly, the positive impact of currency -- of all the currencies was positive to the tune of maybe a couple of hundred thousand dollars in revenues. That's not -- I'm just quoting revenues, not earnings. So yes. We've got -- when you go back to figure earnings, you've got to figure that we're paying 25% taxes in the U.K., and we've consolidated -- we're paying whatever the rate was, 34% for the quarter, whatever, so it's -- the year-to-date, I think Steve said in his comments, that on a year-to-date basis, we're about even. We've had wind at our back at times and wind in our face at times. So on the first 9 months, we're providing you an...

Yes, the European conversion gain was $76,000.

That was fairly small.

Yes, yes.

And our next question comes from Greg Halter from Great Lakes Review.

I wondered if you could discuss your plans for research and development. I know you talked about 70 researchers and so forth and so on but just wondered where you would like to see this program go over the next few years.

Well, every competitor we have will sooner or later listen to this call I would guess, so I'm a little reticent to talk about where we're going to spend our money. There's opportunities in a number of places, both on the food and the animal side. Diagnostics will continue to be a major area for us. I think we've said before that we've got tests for a dozen allergens out there now, I guess, but there's more allergens of concern that are beginning to pop up. So we'll likely do some more work there. We'll likely do some work to fix our speciation product a bit. There's opportunities looks like out there in the fish business for specie identification in fish. Over on the animal side, we're continually working on the development of better rodenticides. In the drug area, we've got things that are underway in drugs now. We're doing some things in drugs. We'll likely do some more things on drug diagnostics, and of course, we're always working with the general micro side of our business, which is predominately today than when we look at the pure general side of our business would be, what we're doing with the Soleris product line, and so it's pretty broad.

All right. And in the quarter, what were the sales that came from acquisitions that you've made? And I guess, in other words, I'm trying to get to the organic growth for the company in the quarter.

Right. I don't have that one in my head. I think Steve probably has it here.

Yes, the organic growth for the quarter was almost 9% versus 8.8%.

8.8%. And that's versus the 13.7% that was reported, correct?

Correct.

That's correct.

And I'd be remiss if I didn't introduce the fact that how we measure organic growth versus how we measure growth from acquisitions, and we're not an acquisitive company that's out there buying whatever is available at good prices. Everything that we buy is a fit somewhere within the organization. Example of that would be the Macleod acquisition. We bought the Macleod acquisition, and I don't have the numbers exactly on the top of my head, but our sales this quarter were a whole lot higher than they were the same time last year when it was owned by the previous owners. So when we bring a product in, we put extra sales and marketing behind it. We've got extra activities we put behind it. And do you count that -- we count that as growth from acquisitions, not organic growth. But I'd say to you that the growth was responsible, that it was our existing organic group that caused that growth to be there. So it's -- there's just different ways to calculate it. We calculate for the first 12 months that we own one where we say whatever revenue came from that was by acquisition, and thereafter, it's organic. But it's as long as you understand our model and how we calculate -- make the calculations, I think is what's important.

Steve, I think I heard you say that cash flow from operations is almost $20 million year to date. Is that correct?

Correct, yes.

All right. And what was the capital spending in the quarter? What do you expect for this year? And do you see any ramp-up for 2014?

For the quarter, it was about $3.2 million. Year to date, it's $6.6 million, and it'll probably finish the year around $8 million, of which $1.5 million is the building we just purchased in Scotland. And I would say that next year's level is probably going to be -- we're still putting the budget together for next year, so we have to see how -- if there's major projects that we're going to...

[indiscernible] for GeneSeek.

But -- so it'll be somewhere in the $6 million to $7 million range for CapEx for next year.

And our next question comes from Jeffrey Warshauer from Sidoti & Company. Jeffrey Warshauer - Sidoti & Company, LLC: Two questions, first, I was hoping you could put an absolute dollar amount on the speciation kits and services for the quarter and about how far into the quarter you saw an uptick in that business.

Yes, we can begin to give you a little bit. Most of it didn't affect the quarter. It started to flow in February. So we had -- Neogen Europe had money from the sale of diagnostic test kits plus the sale of internal laboratory. We've got our own internal reference laboratory that we operate out of Scotland, and we happen to be the only firm and the only laboratory in the U.K. that has what we've -- what's termed a UKAS approval. So we were approved in our own laboratory to do, actually to do the DNA work on the detection of horse contamination. So we've picked up some dollars there. We scaled up a big part of -- after things broke, a big part of it was get scaleup of what we're doing. We did about 200,000 in February if my memory serves me correct. So some of that will continue to flow over into March. We had more orders than that on the books but I think what we actually got booked in was maybe a couple hundred thousand. My memory reasonably correct, Steve?

I think when you look at it as an increase over the prior year, we've had speciation tests and have had some business there. But I don't think that's far off in terms of the increase we saw in the quarter. And Jim's right. We carried over a fair number of orders, actually, a good amount of orders, and that will be more of an effect on our fourth quarter revenues likely than it was on our third quarter revenues. Jeffrey Warshauer - Sidoti & Company, LLC: Okay, that's helpful. And second on rodenticides and disinfectants, could you just provide a little more color on competition and market dynamics you saw in the quarter?

Well, in the area of rodenticides, we're really getting back to what we -- what historical levels were as a result of the EPA issuing that risk mitigation rule that went into effect at the beginning of fiscal year '12. It affected our sales last year. We had some customers that bought some significant stocking orders that carried them through most of last year. We're now starting to see a recovery from that. We're also coming out with some new formulations that are starting to have a positive impact on that particular side of the business, talking about rodenticides now. And I think more importantly for us, it also comes with a higher margin. I mentioned that the Hacco operations actually were down slightly compared to last year. But their operating profit was actually higher than it was in the third quarter last year, and it's up significantly through the first 9 months. So the rodenticide story is a good story for this year, and we expect even better things as we bring out some of these additional new formulations moving into fiscal year '14. On the cleaners and disinfectants side, I think there's been a number of things. On the cleaners and disinfectants that we own, we're actually seeing an increase in sales on a year-to-date basis compared to the prior year. So the shortfall has been on disinfectants primarily that we distribute from third parties and mostly as it relates to business that's in the international markets. So -- and there, we are seeing some increased competition that are doing some knockoffs of those products. And I think equally though it's just a timing of orders from quarter-to-quarter on that as well. So overall, the cleaners and disinfectants is an important part of bio security for those animal protein producers. And I mentioned that we're continuing to look and get and obtain registrations in a number of countries, particularly in some areas in Latin America, and I mentioned China, and that will help kind of restore that business going forward.

And our next question comes from Steve O'Neil from Hilliard Lyons.

Actually, my question was answered.

And I am showing no further questions at this time, and I'll now turn the call over to Mr. Herbert for closing remarks.

Well, thank you, Lorraine, and we now are well into our fourth quarter. We're excited about where we're going. Unfortunately, we won't get to talk to you on one of these conference calls for a while now since we don't get to report quite so quickly after the end of the fourth quarter. But we once -- as press releases develop, I think we are have -- we'll look forward to some significant developments, as we move out over the next few months. And we'll see you in one of these conference calls again. When is it, Steve, September or some time so?

End of July.

End of July, okay. All right. Not quite that far away. So thank you, and we appreciate your participation and your continued support. And that concludes our comments for today. Thanks.

Thank you. And thank you, ladies and gentlemen. This concludes today's conference . Thank you for participating. You may now disconnect.