Q2 2013 Earnings Call Transcript
Transcript Call Date 06/06/2013

Operator: Good morning, ladies and gentlemen. Welcome to the Nordion Second Quarter Results Conference Call.

Please note that during the question and answer period, participants will be limited to one question and one follow-up question. I would now like to turn the meeting over to Ms. Ana Raman, Investor Relations. Please go ahead Ms. Raman.

Ana Raman - Director, IR: Thanks, Melanie. Good morning and welcome to Nordion's second quarter fiscal 2013 earnings call and webcast. On the call this morning are our Chief Executive Officer, Steve West; and our Chief Financial Officer, Peter Dans. The format for our call will be that Steve and Peter will provide their perspectives on the quarter and then we'll open up the lines for questions from analysts. Slides have been posted to accompany this webcast.

As per Slide 2, which contains our caution on forward-looking statements, please note today's comments do contain forward-looking information, so actual results may differ materially from expected results because of various risk factors. These factors are described in Nordion's quarterly and year-end news releases and annual filings, which are available on SEDAR, EDGAR, and the Company's website. Results have been prepared under U.S. GAAP and all amounts mentioned are in U.S. dollars except when otherwise noted.

Turning to Slide 3, we had included certain non-GAAP measures. These include adjusted net income and adjusted earnings per share. These non-GAAP measures exclude certain items, and are intended by management to provide investors with a meaningful consistent comparison of the Company's core operating results. This information should be considered as a supplement to and not a substitute for the corresponding financial measures prepared in accordance with GAAP.

A reconciliation between the non-GAAP measures and corresponding GAAP financial measures is available in our second quarter news release that was issued yesterday after market close. You can find it on our website at nordion.com.

With that I'll turn it over to Steve.

Steve M. West - CEO: Thank you, Ana, and good morning and thanks to everyone for joining us today. Before we get started on Nordion second quarter results, I would like to discuss the agreement we recently signed to divest our Targeted Therapies business to BTG and address some of the key questions we received from market since the announcement.

Please turn to Slide 5. In January, Nordion announced it was initiating a strategic review, with a view to enhancing shareholder value and assessing future opportunities. The agreement reached to divest the Targeted Therapies business was the result of a thoughtful process. We believe that the proposed transaction will provide value for shareholders and allow Nordion to focus on its core Specialty Isotopes business.

We are pleased with the outcome of this part of the process and we plan to continue the strategic review using a measured approach to evaluate other opportunities that can further enhance the value of Nordion.

Under the terms of the agreement BTG will acquire the Targeted Therapies business for $200 million in cash. We estimate net cash proceeds after taxes, deal fees and costs to be approximately $185 million. This represents an implied value of approximately $3 per share for Nordion and it represents a 4.1 times revenue multiple based upon the fiscal 2012 Targeted Therapies results.

Nordion manufactures and commercializes TheraSphere, a targeted liver cancer therapy and the sole product of our Targeted Therapies business, under the terms of this transaction agreement, BTG is expected to acquire TheraSphere, and Nordion has agreed to manufacture the device on BTG's behalf under a manufacturing and support agreement. This agreement has a contract term of three years, plus it has up to a two-year extension on BTG's option. And it's expected to contribute $12 million of annual sales in each of the first three years of the contract.

As with the recent NVIDIA Biopharmaceuticals agreement, we intend to continue to build a contract manufacturing portfolio utilizing our core competencies to provide customized solutions to efficiently bring products to market.

Now more than 40 employees and contractors who are currently with the Targeted Therapies business are expected to join BTG following the close of this transaction, which we anticipate to happen by the end of June. The close is subject to customary closing conditions and approval from BTG's shareholders. Subsequent to the announcement, we saw consent from our credit facility lenders in regards to this transaction. I believe the sale of TheraSphere is the right decision for Nordion as a Company. It allows us to unlock value for shareholders, focus on our core competencies while manufacturing TheraSphere for BTG and it is expected to assist the market's ability, to value, our specialty isotopes business.

Nordion and BTG are working towards completing and closing the transaction in an expedient manner. Once the transaction has closed Nordion has agreed to provide transition services to BTG under a transition services agreement for up to one year post-close and manufacture TheraSphere and provide technical support services under the manufacturing support agreement.

We will also assess the potential uses of cash proceeds from this sale including returns to shareholders and the requirements of the business going forward. We will be giving this decision careful thought and consideration, and we intend to communicate our plans to market once we have material news to announce.

Now turning to Slide 6, I would like to discuss our second quarter business results.

Nordion's Q2 results were within our expectations for all three businesses. Consolidated revenue was $56.1 million, which was up 12% from Q2 of last year, while consolidated segment earnings were unchanged from the same period last year at $10.4 million. Targeted Therapies revenue increased by 6% from the second quarter of 2012. Targeted Therapies year-over-year revenue increase was in line with management expectations and was primarily driven by increased TheraSphere sales to our existing customers.

We plan to continue to effectively manage the Targeted Therapies business during the pre-close period. And this includes supporting our employees and TheraSphere customers through what we expect will be a smooth transition of the business to BTG.

Now moving on to Slide 7 and Sterilization Technologies, Sterilization Technologies' revenue increased 36% to $20.2 million. Cobalt revenue of $20.1 million increased by $6.2 million or 45% in the second quarter on a year-over-year basis as a result of strong volume shipped to customers, and this is primarily due to the timing of shipments to our customers. Sterilization other revenue decreased by point $0.8 million, which was largely due to reduced production irradiator refurbishments during this period. We are on track to achieving 2013 revenue expectations for our Sterilization business, which we forecast to be approximately the same as it was last year in 2012. Cobalt revenue is anticipated to be slightly higher than in the previous year due to relatively flat volume but slightly higher pricing.

Now, please turn to Slide 8 for our summary on Medical Isotope business. Medical Isotope revenue levels remain unchanged compared with the same period last year. Revenue for the Reactor isotopes product line also remained relatively unchanged in Q2 of 2013. As we have previously disclosed, the NRU reactor underwent a planned month-long maintenance shutdown from mid-April to mid-May resulting in an interruption of supply of Medical Isotopes in also our second and third fiscal quarters. The reactor came back on line as scheduled in May and we resumed production and sales of Mo-99 as expected the week of May 19.

Nordion offset some of the loss of revenue from the one month maintenance shutdown, as we received additional orders resulting from the continued shutdown of a primary reactor in Europe that supplies certain of our competitors. Now, according to June 4th update, the European reactor, which shutdown in November last year is projected to be operational again around June 11.

Now, as a result of the positive impact of this additional revenue we have updated our annual guidance Medical Isotopes revenue by lowering the expected year-over-year decline. Fiscal 2013, Medical Isotopes revenue excluding the potential impact of TheraSphere contract manufacturing is now forecasted to be about 10% lower than in 2012 compared with our original annual forecast of about 20% revenue decline from fiscal 2012.

Now, if you'd please turn to Slide 9. The priorities and strategic positioning of our Sterilization business and Medical Isotopes businesses currently remained unchanged. The Sterilization, our plan is to maximize the long-term value of Cobalt-60 by looking at and evaluating geographic and new application growth options. At Medical Isotopes, we continue to seek to optimize the value of the business through securing long-term isotope supply and maintaining customer relationships. Nordion remains an important player in both Sterilization and Medical Isotopes industries.

We know we are the highly respected global brand, we intend to focus on our core competencies while continuing to provide customers with the quality products and services they use every day. We have been in these businesses for decades and have a proven track record. Our businesses are characterized by high barriers to entry due to their nuclear nature and core competencies including management and logistics of nuclear materials, regulatory expertise in the nuclear industry and strong relationships with the industry's regulatory bodies. We believe Nordion is well positioned to generate strong gross margins and create value for its customers and therefore for our shareholders.

Nordion also benefits from its long-standing relationships with customers and suppliers. Some of our major customers have been with us for more than 30 years. And our business model is based on a recurring revenue base with strong margins that generate solid cash flow.

In addition to advancing business objectives we continue to manage ongoing corporate issues. Arbitration proceedings with ACL related to the MAPLE arbitration, costs are scheduled to take place this month and we expect a decision thereafter.

I believe that obtaining clarity on this issue and removing the uncertainty of this item will be positive for Nordion.

The internal investigation concerning potential improper payments and other related financial irregularities is ongoing. We continue to cooperate with the relevant regulators and authorities in the United States and Canada naturally with a view to resolving this matter as expeditiously as possible. However, in monitoring developments for similar matters involving other companies, we believe it is difficult to estimate the time that it will take to resolve these matters. In the meantime, we have undertaken significant efforts with the help of experienced outside advisors to put in place enhanced compliance measures.

Now looking ahead, and as I noted earlier, we plan to continue our strategic review process with the assistance of our financial advisor, Jefferies, using the same thoughtful approach as we did with Targeted Therapies.

Finally, we intend to continue to operate our Sterilization and Medical Isotopes businesses with efficiency and focus. These are important businesses whose products ultimately impact the lives of millions every day. We take pride in delivering such critical products and services with a focus on creating value for all of our stakeholders.

I like to now pass the call over to Peter Dans, who will discuss our financial results. Peter?

Peter Dans - CFO: Thanks, Steve, and good morning, everyone. I'll start with Slide 11. Nordion achieved revenue of $56.1 million in our second fiscal quarter, up 12% compared with revenue of $50 million in the same period last year. GAAP net income was $0.7 million, which decreased by $2.5 million compared with the previous year, and translates into earnings of $0.01 per share. On an adjusted basis, we had a net loss of $1.8 million, down from $4.8 million of income in the second quarter of 2012, which equates to a $0.03 loss per share. Significant adjusting items include internal investigation costs of $4.5 million and a settlement loss related to the Dr. Reddy's claim of $1.3 million.

Gross margin percentages this past quarter were strong at 53%, up 2% from Q2 2012. On a consolidated business segment basis, earnings were relatively unchanged to $10.4 million from the prior year. Other revenue contributed from Sterilization Technologies resulted in stronger segment earnings, but was offset by lower Targeted Therapies earnings due to increased investment in TheraSphere, and slightly lower Medical Isotopes earnings, as a result of increased general and administrative associated with higher annual incentive costs and pension expense.

Now turning to Slide 12, we had $81.5 million of cash and cash equivalents on a balance sheet as of April 30th, a $6 million reduction from Q1 2013. Operating cash inflows were primarily offset by $17 million cash outflow for Dr. Reddy settlement that we announced during our second quarter. The $17 million outflow included $8.3 million that was previously received from an insurer. We may receive an additional $5 million as a result of a claim against another insurer.

Upon the close of the sale of our Targeted Therapies business to BTG, we anticipate adding an additional $185 million to our cash position, which is net of transaction fees, costs and taxes. We do not expect the completion of this transaction to significantly impact Nordion's cost structure in the near term.

As a result of the sale we expect to utilize approximately $15 million of our deferred tax assets to offset cash taxes on the gain. We may also have to write down an additional portion of our deferred tax assets due to the removal of Targeted Therapies income from our long term forecasts. As well we expect the potential write down to fair value of a $40 million group of fixed assets that were partially used to support the Targeted Therapies business.

We plan to continue to manage our cash levels as prudently as possible considering both the requirements of our business and returns to shareholders.

We had several business considerations in determining Nordion's use of cash including the potential payment to AECL for our arbitration related costs in the range of $22 million to $46 million,a pension solvency deficit funding requirement currently estimated at approximately $13 million in each of the next five years, and we continue to evaluate the long term outlook of our Medical Isotopes business.

Regarding the internal investigation, we must consider possible outcomes, but we currently cannot quantify the potential impact of the investigation.

As Steve described we have two important businesses with strong margins that generate good cash flow. We expect to utilize the cash generated from operations and the cash on our balance sheet to provide value to our businesses and to our shareholders.

This concludes my financial review. Melanie, we can now open the line for questions.

Transcript Call Date 06/06/2013

Operator: Stephanie Price, CIBC.

Stephanie Price - CIBC: In terms of the strategic review, could you talk a bit about some of the other options you are looking out at this point?

Steve M. West - CEO: No, I can't. Obviously, during the strategic review any discussions that we would be having or have had are usually under confidentiality agreements and therefore we are unable to really go into any specific details, Stephanie. I mean, clearly from the announcement we made with BTG, we believe we believe that the first outcome of our strategic review unlocked significant value for Nordion and for our shareholders. And as I said earlier, we continue to undergo a thoughtful and consider process to consider our other options for enhancing the value of the business.

Stephanie Price - CIBC: So would you consider selling another division such as the Sterilization division at this point or is it more looking at internal operations?

Steve M. West - CEO: At this moment in time, Stephanie, I am not really prepared to comment or speculate on the outcomes of our strategic review. I will say that we haven't closed the deal yet with BTG, so that continues to remain a focus. Again, as is typical with these kinds of arrangements, noting that we have a Manufacturing and Services agreement with them, we are going to insure that we carefully manage those transition activities in the early stages post the closing of the deal. And then we will be evaluating options for what we consider to be two very, very strong franchises in our business.

Stephanie Price - CIBC: In terms of the Medical Isotopes division, do you have any further clarity from AECL, on plans to NRU post 2016? And can you talk about some of the options you are looking at there?

Steve M. West - CEO: Well, I think the 2016 date is pretty well set. We haven't heard as any deviation from AECL's plans. As you know they will be undergoing some process for, I guess in RSP for our GoCo models for Chalk River, and so we are interested to see how that pans out. But we are planning currently as far as NRU is concerned that when we get to at the end of the license period in 2016 that we will no longer be sourcing (ATU) moly from there. As to other options, and I have said this previously, Nordion does continue to explore other options for a sustainable long-term supply of LEU-based moly, it's hard for me to talk about that, because as you can imagine these again are proprietary discussions taken place with potential partners. But we do continue to do that, we believe that there are options that could available to us, we have a very strong franchise, a great brand in Medical Isotopes business and people still count on us and it’s not clear as of yet how the whole supply chain will pan out when NRU comes offline. So we are as I say, exploring variety of options and we'll continue to do that noting that obviously as we get closer to the date of 2016 we need to get some clarity around potential partnerships. So we are actively engaged in that and will continue to do so.

Operator: Neil Maruoka, Canaccord Genuity.

Neil Maruoka - Canaccord Genuity: Just a quick question on, just a follow-up question to Stephanie. Can you provide an update on negotiations with – for Russian supplier I know there have been some changes there and you had mentioned in the past that you had an opportunity to renegotiate another deal. Is there any update there?

Steve M. West - CEO: Nothing specific Neil. Actually we haven’t started negotiations with, yet. That’s an option for us and, that would just be one of the options that we'd be exploring.

Neil Maruoka - Canaccord Genuity: And to shift to the Sterilization business, just to give us a better idea of maybe the EBITDA there. Can you maybe provide like a run rate EBITDA expectation ex-pension and ex-incentive comp? It wasn't entirely clear in the MD&A.

Steve M. West - CEO: I'll ask Peter to handle that.

Peter Dans - CFO: Yeah, so Neil, in terms of the EBITDA of the business, again, if you look at the trends, the revenue again we expect to be similar to last year, a slight increase on pricing from the overall business. So really what we are looking at is a portion of the increased pension expense, which we estimated at about $7 million for the year, so a portion of that's allocated to Sterilization. And then from an incentive compensation perspective, you will have seen year-to-date we're about $3 million above last year, and again, that gets allocated across the three businesses, so Sterilization would pick-up a piece of that.

Neil Maruoka - Canaccord Genuity: Can you give us an idea of how much is allocated to Sterilization?

Peter Dans - CFO: Again, not getting specific, you can look at it sort of a third as a rough guideline but without getting into specifics.

Neil Maruoka - Canaccord Genuity: And final question, do you believe that there are buyers out there for the Sterilization business?

Steve M. West - CEO: I'll handle that one. Sterilization business is a very good business. Medical Isotopes business, we believe has value too, even though we got supply challenges. And I think the whole Nordion brand has a lot of value. Yeah, I think Neil, if one were to think about potential universe of folks that would be interested in our assets, I think there are – there would be a variety of potential financial and strategic sponsors. And I wouldn't just characterize it purely for the Sterilization business.

Operator: David Krempa, Morningstar.

David Krempa - Morningstar: On the internal investigation, it sounds like we should expect that expense to run into 2014. Should we expect something comparable to 2013, or is it going to be starting to wind down and not take all of 2014, can you give any clearance on that?

Steve M. West - CEO: So in terms of the internal investigation, the costs on that are difficult to project exactly how they're going to unfold just based on the requirements that may arise from the regulatory perspective. As you'll see from our forecast for the year, we do expect the spending to reduce in the latter part of this year, and again we'd expect that trend going forward based on where we are at. But there is some uncertainty as to how it will actually unfold.

David Krempa - Morningstar: Then just on the contract manufacturing with BTG, what kind of margin do you expect on that $12 million a year of revenue?

Steve M. West - CEO: Again, the margins on that, they are positive margins. Again, they are sort of typical of transition type manufacturing agreement. However, they may be a little bit lower than what we've seen with some of our other contract manufacturing agreement.

Operator: Fred Garcia, RBC Capital Markets.

Fred Garcia - RBC Capital Markets: Just a quick question on the strategic review. Are there any specific events that would change the timing of when you would finish or announce something material?

Peter Dans - CFO: As I said, this time we have to close the deal, we have to start the transition, and we will continue to be thoughtful and look at all the options for our strategic review with Jefferies and our Board and other possible parties. But at this – it’s hard for us to kind of try and give you any sense of timing on that, its activity, and then when we have something material to disclose, then we will.

Fred Garcia - RBC Capital Markets: Just wondering if you are waiting for, like the arbitration to be settled and those sort of things before. You got a lot on the plate for that. Then on the sterilization business, maybe you could discuss some of the outlook for that business, the irradiators, GammaFIT's been launched for a while, maybe you can talk about what that outlook looks like. It’s still not projecting any orders this year. What about next year and is there any pent up demand for these sort of services because it doesn’t – now that you even the refurbishing services have taken a decline too?

Steve M. West - CEO: So, I mean, I'll take the question and couple of components. I mean, the outlook for the business I think continues to be characteristic of the Sterilization business, which is low growth, but steady over a period of time, even though it can be lumpy, as you know, from quarter-to-quarter. But our longer term outlook certainly on cobalt is that demand for cobalt remains steady and consistent. And that we continue to look at parts of that industry potentially expanding in Asia in particular, maybe Latin America, but particularly when you think about China and India. But this is still an industry that's driven by medical devices primarily for gamma sterilization, and that uses a predominant amount of cobalt. And a lot of the use of single medical used devices is frankly driven by the number of procedures that are done and the number of factories in terms of installed base that are set up. So we continue to feel that we are a leader in this space. It's a strong business, good margins, good cash, and see no difference there in the outlook. So our strategy is to continue to ensure that there is strong demand for cobalt and a strong value for the product. Clearly demand, second part of your question, is driven by the installed base. So, we always – we have a very good understanding of what's going on around the world in terms of installed base and we do have a pipeline. We haven't announced yet a GammaFIT installation, but we have a pipeline for GammaFIT, which is a new product to the market, so it's still taking a little time for the market to understand that. Again, as the global economy kind of shifts and we see potential opportunities for new installations, we are definitely looking at that part of the business and would expect that at some point we are going to get some irradiator sales. It's just a matter of time, but certainly our team is always continuing to have discussions about potential installations. And as I say, we look at perhaps enhancing the value of our offering to the marketplace by looking at other services that we provide in that arena, and in this particular quarter actually we didn't have very much refurb business, but we continue to do refurb business on existing installations and there is quite a large installed base out there, so that refurb business can also be good for us. But it’s steady as she goes for Sterilization.

Operator: Lennox Gibbs, TD Securities.

Lennox Gibbs - TD Securities: I think quite a bit of what I wanted to cover may have been touched on just in Fred's question. But can you provide a bit more detail again on the irradiators? Can you provide a bit more detail on how end user behavior has changed? Are potential customers keeping old irradiators longer? Are they buildings fewer plants to require them or are they looking else? What really is the market intelligence telling you?

Steve M. West - CEO: So, we're not seeing any dramatic shift. I mean, first of all, we're not seeing any shift between the usage of gamma and EtO or E-Beam or X-ray, we still see that as consistent. I think that as the global economy starts to go through a little bit of recovery, we do anticipate that folks will make more capital investments than they might have held back on a little bit. We are seeing – one of the reasons we don't (scan fiscals), we are seeing interest in the sort of whole phytosanitary disinfestation area, which is predominantly in exporting economies in United States for fruits and vegetables, but they are smaller installations. The really big installations that are driven around medical device manufacturing, the industry went through a surge, sort of, 10, 15 years ago. We don’t anticipate that, it's hard for us to compete a little bit in Asia on the irradiator side. It doesn’t stop us getting the cobalt, but there are some companies that produce irradiators similar to ours. They don’t have any capabilities in terms of providing cobalt. But some of the – there are couple of guys in China that certainly provide sort of leaned down versions of our product. But we are in conversations with our customers around this. There is still an appetite for high quality irradiators, good logic controls, good software, and I think that we see this still as a very viable business for us and we continue to look at our business model to make sure that we can be competitive where the value of our offering is well appreciated.

Lennox Gibbs - TD Securities: Just in the established markets, just focusing on the established markets, do you have good reason to expect that either in new plant starts which would require new installations or replacement cycles to improve going forward? Why is that?

Steve M. West - CEO: First of all we do think there'll be new installations. Our customers need to grow as well. And so that’s how they grow is by putting in new installations and certainly our view of the market and the conversations that we are having with customers that certainly quite a few of our customers are considering new installations that’s for sure. There are going to be replacements, I mean it's always a tradeoff between revamp versus a rebuild and we do have a business for that. So we do work with our customers and helping them upgrade their existing installations. And the upgrades tend to be around the controls and the logic, because the actual installations do have quite a sort of a longevity to them, but no customers are considering that as well as replacing some of their exiting installations. So we still see this as a very, very viable market where our customers whether they'd be contract manufactures or whether they'd be in-house irradiation facilities still very committed to gamma. And particularly lot of medical devices that are being produced are under regulatory approvals, for gamma versus gas or e-beam we still consider this to be a good market with a long-term growth potential. It's just not high growth potential year-on-year.

Operator: Alan Ridgeway, Paradigm Capital.

Alan Ridgeway - Paradigm Capital: I guess I'm sitting here thinking. Lot of my questions have been answered, so I'm sitting here and thinking I'd like to focus maybe on the facility in Otowa post the sale of TheraSphere and maybe looking forward the NRU going away. What level of fixed costs are carried in those two businesses that could potentially be gone at 2016 that would have to flow over into the Sterilization business going forward beyond that?

Steve M. West - CEO: So, in terms of that question, there's a couple of aspects to it. One I alluded to during my comments was we are looking at the sort of the fixed assets or depreciation costs for the business going forward with the absence of the cash flow from Targeted Therapies, so, that may result in a write down and a reduction in our depreciation costs. The other comment I would make is, when you look the Medical Isotopes part of the business, the main fixed costs would be around some of our G&A infrastructure costs, that aren't as variable which may have to be restructured in that timeframe if we were to stop receiving Medical Isotopes from a reactor perspective and have not achieved an ultimate supply by that point in time.

Alan Ridgeway - Paradigm Capital: Then maybe as my follow-up. What's the outlook as a long-term CapEx requirement to maintain those facilities? It is a relatively large facility split up between the contract manufacturing on the more pharmaceutical side as well as then the smaller sales for the moly business in the larger stuff for the cobalt business, so going what would your CapEx look like at the facility maybe over the next 5 to 10 years? I will leave it at that. Thanks.

Steve M. West - CEO: From a CapEx perspective again 5 to 10 years that was probably a long horizon to look at. But if you look at our past 3 or 4 years, our CapEx has been consistently below the $10 million mark. The majority of that investment has been focused on Targeted Therapies. So, from a maintenance perspective the numbers are relatively low again the facility has the capacity to support our requirements. We do the ongoing maintenance. We have maintenance in terms of our shipping containers and things of that nature. One of the variabilities is as we potentially bring on new contract manufacturing opportunities that can drive some CapEx spending to get those projects up and running.

Operator: Neil Maruoka, Canaccord Genuity.

Neil Maruoka - Canaccord Genuity: Just a question on your dividend policy. Since you suspended the dividend last year, how does the Board now assess and prioritize maybe more importantly the risks when assessing the policy going forward?

Peter Dans - CFO: So Neil in terms of dividend policy, we currently don’t have a plan to reinstate the dividend. From an overall perspective because we are going through our strategic review, we are really looking at capital requirements through that process and I would potentially reassess things such as a dividend as we come out of the review.

Neil Maruoka - Canaccord Genuity: But the individual risk that the Board looks at in assessing that policy can you provide a little more color on that?

Peter Dans - CFO: Well, I think as we highlighted when we suspended the dividend. Really related to a number of uncertainties in the business the ACL arbitration cost being one of them, which again as Steve mentioned the current view is that there'll be resolution around that later this month. We still have the ongoing internal investigation pension funding and really the outlook around the Medical Isotopes business where the key factors that caused us to consider spending the dividend, and again, a number of those still exist and we're still working through those and looking for clarity.

Operator: Stephanie Price, CIBC.

Stephanie Price - CIBC: I just had one quick question on the cyclotron isotope revenue. You mentioned in the press release it was up 6% year-over-year. Can you quantify that for us and kind of talk about the possibilities there in terms of how big could that get?

Peter Dans - CFO: Yeah. So Stephanie, in terms of cyclotron isotopes the real change was that we started shipping strontium again in the quarter. So we had been out of production for strontium for a period of time. So we expect to continue to deliver strontium in the following quarters, so we would expect increases again relative to prior quarters in that part of the business. Again, there was a period last year where we did ship some strontium. So you need to take that in consideration from a trend perspective.

Stephanie Price - CIBC: Okay. And in terms of the actual revenue from that line of business, can you give us kind of a sense of what that is right now?

Peter Dans - CFO: So in terms of the cyclotrons, again the specifics on that, for the quarter we are running at $3.8 million. So that part of the business is generally fairly stable. Again, the strontium tends to be the item that has created the fluctuations over the past year and a half.

Operator: Thank you. There are no further questions registered at this time. I'd like to turn the meeting back over to Ms. Raman.

Ana Raman - Director, IR: Thanks, Melanie. This brings us to the end of today's second quarter fiscal 2013 earnings call. If you have any additional questions, please feel free to follow-up with me. Thank you.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.