賓士域 (BC) 2008 Q2 法說會逐字稿

Good morning and welcome to the Brunswick Corporation's 2008 second quarter earnings conference call. All participants will be in a listen-only mode until the question-and-answer period. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Kathryn Chieger, Vice President, Corporate and Investor Relations. Thank you. You may begin.

Thank you. Good morning and thank you for joining us. With me today are Dusty McCoy, Brunswick's Chairman and CEO; and Pete Leemputte, our CFO. Now as many of you know, I am retiring next month. So this'll be the last time you hear me utter these immortal words.

Before we begin our remarks, let me remind everyone that during this call our comments will include certain forward-looking statements about our future results. Keep in mind that our actual results could differ materially from expectations as of today.

For the details on the factors to consider, take a look at our 10-K for 2007, our 10-Q for the March quarter and our press release issued this morning. All of these documents are available upon request or by going to our website at Brunswick.com.

We appreciate your taking time to be with us this morning and given that we are in the busy earnings reporting season, we will try to keep our remarks brief and wrap up the call in 45 minutes. Now I'll turn the call over to Dusty.

Thanks, Kathryn. Good morning everyone. We appreciate your joining us for our call. I hope we're not missing anyone that wanted to be on the call today because we changed the start time. We made the change to accommodate some of our analysts and investors who were double booked for an event in Las Vegas.

I will begin with a brief overview of our results, the markets and our reaction to market conditions. Pete will give us some color and context around our numbers and I will close by talking about several great things we have underway in the second half of the year.

We had a solid quarter in a difficult economic climate. Before we go further, I want to thank our employees for outstanding performance as we deal with market conditions and the changes coming about as we resize our Company.

We reported a loss of $0.07 in the second quarter as we absorbed $0.55 in restructuring charges, net of some favorable tax items and investment gains. Excluding these items, we earned $0.48 per share, down from $0.64 in the second quarter of 2007, also excluding some small restructuring costs in that quarter.

I will not repeat the factors affecting US recreational marine markets as we have unfortunately been discussing them for several quarters. Suffice it to say that these factors have not abated and the decline in U.S. recreational marine markets accelerated somewhat in the second quarter.

Preliminary second quarter industry data, with slightly over half the states reporting, shows fiberglass retail demand was down 29% and aluminum demand was down 18%. This compares with declines of 24% and 17% in the first quarter, respectively.

Looking at the numbers at this level shows the slightly accelerating decline, but a deeper look is more instructive. If we look at the U.S. sterndrive inboard market, that segment is down in the second quarter more than 30% versus 2007. In general, this is our most profitable segment in both our engine and boat businesses and declines at these levels have a significant impact on our earnings as a result.

Anticipating poor market conditions, we had cut our production levels in the quarter. So while our fiberglass boat production levels were down in the high 20% range, retail demand was down even more.

This disconnect was impactful as more than 40% of the boats we sell all year in the United States are retailed in the second quarter. In our aluminum boat businesses retail, demand was also slightly lower than our production and shipping levels.

The result then is that while the absolute number of boats in our dealer pipeline is about flat with the second quarter of 2007, our weeks of supply on hand has risen to 32 weeks from 26 weeks at this time a year ago. We're taking most of our fiberglass plants off-line for a month in the third quarter and this'll reduce pipeline significantly in the near-term.

But we will also be reducing our production levels across our fiberglass boat and engine plants for the next several quarters to ensure that we achieve the necessary pipeline adjustments. We do this to act as a responsible party in our dealer relationships.

As difficult as the domestic marine market has been, our global markets have been a bright spot. Our focus on growth outside the United States has never been more important.

47% of our sales in the second quarter came from outside the United States. Our non-U.S. sales grew 19%, led by 35% growth from our boat businesses. I don't want to move from this portion of the call without mentioning the great work from our non-marine businesses in the quarter.

Life Fitness delivered a 9% sales increase even though the consumer portion of its business has suffered the same downward pressure I have been describing in our marine businesses. Their new products and great efforts by the commercial businesses in Life Fitness was a foundation of this nice growth in sales and earnings.

Our Bowling & Billiards businesses also demonstrated outstanding sales growth of 7%. Pete will cover our cash flow, cash and balance sheet positions in a moment. But suffice it to say that we're pleased with our performance. We're coming out of the quarter with great liquidity and a strong balance sheet and that is a nice situation to be in. Pete, I'll now turn call over to you.

Thanks Dusty, and good morning everyone. Let me start with a few details on our restructuring costs which totaled $83 million in the second quarter, just as we expected. Non-cash impairment charges and current asset write-downs represent $50 million, or 60% of the total restructuring costs.

The shutdown of Sea Pro and other value saltwater fishing brands is one component, accounting for about $17 million of the impairment expenses; while the decision to evaluate strategic alternatives for the commercial billiards table business at Valley-Dynamo resulted in an $18 million charge.

Fixed asset write-downs at Mercury and the Boat Group make up the largest portion of the remaining impairment expenses. Next, severance and related costs totaled $14 million during the second quarter. Our hourly and salaried work force at our domestic marine businesses and at the corporate office fell by 2200 people during the first half of the year, a decline of about 14%.

We also saw cash restructuring expenses of $19 million, related to a number of other actions we have taken including costs associated with the plant shutdowns and expenses for the move of production into other lower-cost manufacturing facilities, among some additional items. The $83 million in restructuring charges reduced earnings per share by $0.59 in the quarter.

We also recognized income of $0.03 per share from the special tax benefit and another $0.01 from final adjustments associated with the first-quarter transaction involving the divestiture of NBK, a bowling joint venture in Japan. So on net as Dusty mentioned, there was a $0.55 per share unfavorable impact from these items.

By the time our actions are complete by the end of 2009, we expect to deliver a reduction of $300 million in annual fixed manufacturing costs and operating expenses. Actions already underway will deliver $100 million in annual savings as we move into 2009.

As I mentioned last month, our restructuring charges for the full year are estimated to fall in the range of $170 million to $180 million. In the first half we've recognized $105 million. So our current estimate for these expenses in the second half of 2008 is $65 million to $75 million. Please note that I will exclude restructuring costs in my remaining comments and our financial results so you can get a better sense of the underlying performance in our businesses.

Dusty indicated the importance of global diversification and offsetting lower domestic sales. Total revenues outside the U.S. grew by 19% in the quarter with all segments and most geographies posting favorable performance.

The weaker dollar did play a role, but international sales were up a very healthy 12% when measured using a constant exchange rate. We are, however, watching this closely as there are emerging signs of weakness in some European markets.

But we anticipate continuing growth in Latin America, Russia, the Middle East and Canada. In fact, sales in the quarter to Latin America and the Middle East were extremely strong, increasing at a rate in excess of 50%.

With a tough sales decline in the United States and strong growth abroad, international sales accounted for 47% of our overall revenue in the quarter as Dusty mentioned. That compares to 38% last year.

We have spoken about our goal to have a 50-50 split in domestic and international sales. We're not going to claim success if we hit the target due to a significant drop in U.S. sales, and our marine business saw a 19% decline in the second quarter. But our efforts over the last few years to build a greater international presence are obviously paying off, particularly with our boat brand.

Operating margins stood at 4.4% this past quarter, down 130 basis points versus 2007, again with both figures excluding restructuring costs. Gross margins accounted for the full decline.

Operating expenses measured on a percent of sales basis were actually down by 10 basis points. The gross margin decline is driven by reduced fixed-cost absorption on lower production volumes, particularly at our key fiberglass boat brands and the MerCruiser sterndrives that power them.

In addition, we are also paying higher freight bills in most of our operations due to fuel price surcharges. Accruals for potential losses on inventory purchases at the Boat Group for dealers in default also impacted our gross margins; more on that in a minute.

As an aside, the lower absorption of fixed cost will significantly increase in the second half of 2008 as we take greater production outages. These will adversely affect both the third and fourth quarters with most of our fiberglass boat plants taking furloughs in the month of July or August and many of our fourth quarter holiday shutdowns are being extended beyond their normal course.

Keep in mind, however, that both Life Fitness and Bowling & Billiards will enter their strong selling season during the fourth quarter. So the earnings pressure will be most significant through September absent the need for any further production cuts. Dusty will speak a bit later on trends expected in the second half of the year.

In terms of discounting our product at retail to help marine dealers reduce inventory, we continue to offer support in select markets. Overall, however, there's been no significant degradation of pricing as a result of these programs in the first half of the year relative to 2007.

Operating expenses were down in the second quarter by $8 million, or 3% versus the prior year. After removing the impact of the weaker dollar on local currency expenses outside the U.S. and slight increase in variable compensation in bad debt accruals, operating expenses fell by 10%. Our cost reduction initiatives are kicking in and we should see the reductions continue to grow as we move through the remainder of the year.

Next, let me offer some highlights on our balance sheet and liquidity. We generated free cash flow during the second quarter of $109 million, down only slightly from the $118 million seen in 2007. While lower earnings played a part, keep in mind that much of the earnings decline is due to non-cash restructuring charges so our free cash flow was stronger than you might otherwise think. In addition, capital spending of $30 million in the quarter was down $13 million versus 2007.

Favorable working capital liquidation also had a significant positive effect on free cash flow. Inventories in particular fell by almost $56 million during the second quarter of 2008 as our accelerated production cuts took hold.

That compares to a decline of $10 million in the prior year. The impact was offset, however, by lower payables arising from reduced production levels and lower capital expenses to some extent. It was not a full offset.

Cash balances at the end of the quarter stood at $393 million, up $126 million for March and $61 million from year end. We're very pleased with our cash position which demonstrates that while earnings in the marine industry can be quite cyclical, our cash flow is much less volatile if managed properly. We expect healthy cash flow to continue through the second half of the year allowing further growth in cash balances.

Our most significant short-term cash exposure relates to inventory repurchase obligations from dealers in default or bankruptcies. We could see an increase in the number of dealers facing financial distress as the current marine season starts to wind down in the third quarter.

Our largest dealer on the West Coast filed for bankruptcy protection last week. Olympic Boat Centers distributes several of our brands in California, the Pacific Northwest and British Columbia.

While we cannot comment specifically on the proceedings, they're actively working to ensure that the needs of our end-use consumers continue to be met and that we maintain distribution in this market. And we're confident we will have solid distribution on the West Coast.

We believe our cash exposure on inventory repurchase is quite manageable and limited. As I stated in the June conference call, if we extrapolate from the worst downturn seen by the industry in the early 1990s, our repurchase obligation would be $40 million or so. In most cases, we are able to arrange alternative distribution to take on our brands in the affected markets.

And the inventory is moved to the new dealer without us having to buy it back or take title to the product. And in those cases where we do buy back inventories, the cash impact tends to be one of timing until new distribution is identified or product is moved into other markets.

The loss that we experience in such cases is not excessive and we maintain reserves for this exposure on our books. We did increase this reserve in the second quarter at our Boat Group and this is one factor which influenced Boat Group margins in the second quarter.

We remain on track to amend our revolving credit facility to ensure that we have uninterrupted access to it. We are also still planning to refinance our $250 million in notes that mature in July 2009.

Please note that capital spending for the full year should be at $140 million or lower, down from $208 million in 2007. Depreciation and amortization expense is estimated at $185 million. With that, let me turn the call back over to Dusty.

Thank you Pete. We have a lot going on, and the actions we're taking are succeeding. They will keep us healthy in the near-term and position us very well for the future. Our resizing efforts are well underway and are being led by our employees. We will report on our successes in future calls.

We're having some really great contact with consumers through events and new product introductions. Last weekend our Sea Ray brand kicked off its annual AquaPalooza celebration, the largest in-water event in the world, and it's starting out again to be one heck of a party. Now in its third year, the enormity of the event and its success keeps surprising even the expansive talent in Sea Ray and its dealer network.

Throughout the summer, AquaPalooza events are scheduled at 123 locations around the world. More than 11,000 boats and 50,000 people have registered to come to the party. Typically, actual attendance exceeds the registration. Boaters are still enjoying boating as a lifestyle and social activity.

The success and lore around our Axius) and Zeus engine products continues. We hear from dealers and users constantly that these products are changing their boating habits and their ability to enjoy boating, likely forever. Anyone who has seen these, in which even a novice can dock a boat equipped with these systems, recognizes that this is truly game-changing technology.

We're working on alternative power and drive systems for marine applications to meet the desire for consumers to be more green and to decrease the cost of boat operations. The flow of new product continues across all of our businesses. We have investment decisions to make around new products and our liquidity gives us the ability to fund these investments. We never forget that new product is our lifeblood.

We remain focused on being a great partner with our distribution. Our unrelenting focus on our dealer pipeline is important for our dealers' health. Our liquidity permits us to make hard decisions to curtail production for extended periods in order to more quickly reduce the pipeline.

Our dealers have access to programs such as Brunswick Dealer Advantage and its range of assistance from scholarships for the children of dealers' employees to new and less expensive health care options for dealers, to office supply and other brand programs that improve their profitability. Our Life Fitness and Bowling & Billiards businesses continue to grow in importance. And we believe each is positioned to continually improve its performance.

As we said in the press release, with the production cuts we've planned for the remainder of the year we will not be profitable in the second half excluding restructuring charges or any potential goodwill impairment. We're planning to be profitable for the year excluding charges in the market conditions existing today.

Any non-cash goodwill impairment charge at our Boat Group is something we will monitor as the marine season continues to unfold. Goodwill at the Boat Group is about $370 million.

Finally, we continue to generate cash. We have access to capital and we have a stable source of floor plan financing for our dealers through Brunswick Acceptance Company, our joint venture with GE which is in place through 2014. In short, our balance sheet and liquidity are healthy and not under stress.

In my prepared remarks, we're well positioned to handle this tough market and look forward to speaking with you next quarter. Before I take questions, I want to say a few words about Kathryn Chieger who is now getting red faced and looking at me very angrily.

Kathryn said she is retiring. This may be Kathryn's last conference call. She is irreplaceable and we're trying to replace the irreplaceable, and she's agreed to help us for some period time in case we haven't gotten a replacement on board by the time for the next call.

Kathryn has been here 12 years. She's trained three CEOs, myself being the last, and for those of you know Kathryn she is a real taskmaster. She doesn't suffer fools easily and I've been foolish many times so I have incurred her wrath a lot.

She's trained three CFO's, Pete being the last. Pete has gone through the same training that I've gone through. Kathryn will be sorely missed in this Company as both a friend, a confidante, but more importantly the face of Brunswick to many of you.

Kathryn, we're going to miss you and we wish you nothing but a wonderful life in retirement. Now lest anyone believe that Kathryn is going to go off in retirement and shrink away somewhere, she now owns one of the fastest cars on the planet -- the fastest sport cars I should say on the planet, and has one of the best SUVs on the planet.

So the best I can tell watching her plan her retirement, it's going to be wild and a lot of fun and we're not worried about Kathryn at all going into retirement. So with that now, I'll be happy to take your questions.

(OPERATOR INSTRUCTIONS) Hayley Wolff, Rochdale Securities LLC.

First, I just want to echo Dusty's comments about Kathryn. I started working with her when she joined the Company in 1996 and she has endured a lot and she is by far one of the best IR people I've ever worked with. So I am going to miss her as well.

Thank you.

A couple of questions. First, Pete, on some of the comments on the dealer exposure; can you just characterize how you're different versus the 1990s? You've got a lot more brands out there, so I would suspect the exposure may be a little bit more. And then how did you come to own the 12% of Olympic Boat Group?

In terms of how the exposure is different, we are a larger company. There's no doubt about that compared to where we were in the late '80s, early '90s downturn, Hayley. But one key difference is the amount of inventory that's out there.

Honestly, the industry then did not shut off production. The OEMs did not shut off production fast enough and that included Brunswick. And so in some cases, there was more than a year's worth of inventory sitting in the channel which actually drives up your exposure.

And that really does to some extent I think offset the fact that we are a bit bigger than we were then. But you know the number that I quoted, that $40 million to $50 million sort of number, is really based on the experience that we had back at that period of time extrapolated to the amount of inventory we have in the channel today.

Hayley and Pete, may I add one other comment? I think we've got to give credit to the dealer network. The dealer network is becoming a much better network. Dealers across the United States are great businesspeople.

A lot of them have learned through the hard knocks, but they continue to raise the level and quality of the processes they have in their dealerships. We have a lot better information for the entire industry about how markets are doing. And dealers are, in my view, running their businesses better and much better able to anticipate where markets may be going and position themselves in order to react better.

And the ownership of OBC?

You'll recall that at one point we had ownership in MarineMaX and both ownerships came about as a part of the approval to set up a conglomerate, if you will, a set of dealers through one dealership, and we took an equity interest in each as a part of the initial approval.

And we had written down the value of that equity many, many years ago.

Okay, can you give a little more color on international sales in terms of the mix, overall parts and accessories business? Was international driven by a few large boats that were shipped over there?

In terms of a few large boats, no. It's very consistent across every geography and it's brands like some of our freshwater boat brands, US Marine, Bayliner as well as Sea Ray. They're not necessarily a couple of big boats that are driving that.

Hayley, the key to our growth is we put strong regional organizations in place now in Latin America, Asia-Pacific, Europe, and then the European organization controls through the CIS in the Middle East.

The key to our growth is building a strong dealer network. We believe we're not opportunistically pushing boats outside the United States. We are in fact, working very hard to build the dealer network for all of our brands in all regions of the world.

Now we're clearly being helped by the dollar. There's absolutely no question about it. But as we said in our prepared remarks, our global sales are up 19%, but when we strip out currency from a volume perspective, we're still up 12%. That is very good and we believe it is coming about because of our strategies.

And how did P&A hold up in the quarter?

P&A in the domestic market was actually down a little. You've got to keep in mind that a portion of our parts and accessories business is related to rigging for new boat sales, and so it does tend to have some component that was in there. So it was down slightly. And to some extent we are seeing a slightly lower utilization of boats on the water as well, which could be lead to lower sales of oils and props and things like that.

And the international today P&A?

International P&A is holding up fine. It's not as big of a business over there as it is in the U.S. marketplace. Particularly in the boat side it's fairly small. Mercury has a very solid business there, and it's similar to the underlying engine and boat volume.

But over time, we should see the P&A business outside the United States grow as our presence outside the U.S. continues to improve.

Well, thanks a lot; well done quarter.

Thanks for the comments on Kathryn, Hayley.

I'm just waiting to go on a road trip with her.

She's only got room for one more and not much luggage. (multiple speakers)

I'll take Thelma, all right? Not Louise.

Yeah, you want Thelma. Thanks, Hayley.

Steven Rees, JPMorgan.

Just a follow-up on those international comments. Pete, you mentioned that there's certain European markets that are showing signs of I guess a potential slowdown. What are the signs, what is the magnitude of the slowdown you're seeing and where are you seeing it?

Where we're seeing it first of all is in Scandinavia. We have a very big presence up there, a couple of different boat brands, some that we hold an equity interest in. And that market was running very hot for a couple of years. It is showing some decline at this point in time.

Also, the UK, they're going through some of the similar issues as the US is with regard to sub prime loans and housing; and to some extent Spain as well where housing prices had really (inaudible) up and they're going through a correction. Some signs as well I think in Germany; other markets though like Russia is doing extremely well like I mentioned. And Italy at this point is holding up okay as well. It depends on the specific country.

Okay, and then you also mentioned that you continue to provide support to certain retailers in select markets but you haven't seen pricing degradation. Can you just sort of explain that comment and sort of what you are doing today versus last year on the dealer relief front?

We will always have some programs out there either for dealers where we will offer them basically an incentive to move a certain amount of volume or to take a certain amount volume. That's pretty typical in the industry in order to level set production in what's a very seasonal business.

And then we also will offer programs at retail, special programs basically to incent volume and consumers to come in and buy. When you look at those discounts as a percentage of growth sales relative to the prior year, for our businesses they're basically flat or down modestly.

Okay, and then just finally, you mentioned that you increased the reserve to deal with the Olympic Boat Group on the West Coast. Can you just talk about the magnitude of the increase and then perhaps just some color on your remaining large dealers?

It was a mid-single digit dollar reserve that was booked and it basically is there to represent the potential loss if we have to buy back the inventory and then resell it. And so it's something on that order of magnitude.

We're working through it right now with the bankruptcy court. And as I stated, we're pretty confident we're going to come out of this in very good shape. And if you sit back and also listen to what I said with regard to the amount of cash exposure we have, we don't want to go into any detail on that with regard to that particular dealer at this point of time, but we're pretty confident we can manage quite well through the cash exposure that we would have.

Tim Conder, Wachovia Securities.

Thank you and let me also say to Kathryn, enjoy the retirement. I hope you have a large privilege fund to pay for the excessive speed. (multiple speakers) But know it's been pleasure working with you for as long or maybe a tad longer than Hayley mentioned. So again it's been a pleasure.

A couple of items as usual here. Pete, if I could follow onto the previous question, could you talk about -- you said mid-single digits reserve. Was that just related to Olympic or was the total reserve that you took in the quarter --

It was related for all of our exposure

Okay great. What's a balance on that reserve? Any color you can give us there?

It's probably about $10 million in total. Just to point out too, the dollars of inventory that we could potentially buy back will ultimately lead to the exposure there. We have not seen to date any big cash call on the company. We literally rebought $2 million of inventory in the first half of this year. That's actually running below what we had to pay out in 2007.

And so even -- just to reiterate, too -- even though you may have a situation like the one Olympic is dealing with, it doesn't mean necessarily that we have to buy that inventory back. We work to establish new distribution. In this case Olympic is still active and out there selling product through the season. They're just going through a reorganization. And we're looking at all options that we have on the table.

Okay, I know as you said in the previous call, it's a little more difficult given the international and so forth to give some color on number of weeks of engines in the supply channel, but anything you can give there would be appreciated. And then in relation to your cash target, if you could just remind us what your target again is. Has that changed from your previous conference call for year end here, your cash target?

Actually, we did such a good job with generating cash in the second quarter, we said we wanted to have near $400 million by the end of the year. We're at $393 million.

And if listen to what I said too, I made the point that we expect to have solid cash flow in the second quarter and to build our cash -- in the second half, I apologize -- and to build our liquidity and cash balances over the second half of the year. So we will be higher than that.

In terms of pipeline, as we look at it internally the engine pipelines are up about four weeks. However, the problem is with that we have seen such an increase in international sales to Canada - there's a lot of product manufactured here that goes across the border - and also over into Europe. In many cases those boats and those engines are never registered, we never see access active to it.

So, we actually think the delta there is significantly lower than that four weeks I mentioned. But you'll see the exact same trend as what we see on the boating side that when you look at outboard boats, inventories are in better shape. Our pipelines are in better shape just because of the fact that they fell faster and we've had more time to make the correction there.

You see the same thing on outboard engines. And then when you got into fiberglass boats that use sterndrive or inboard products, they're a little bit heavier and the same thing holds up with the MerCruiser sterndrive.

Okay, the comments regarding P&A that you made earlier in response to some questions, were those -- were you discussing P&A as a whole or were you just referring to the Boat Group? I took it as a whole but just wanted to clarify.

It was as a whole, both Boat Group and Mercury.

And then two last ones here. Could we anticipate over the balance of the year here seeing some additional changes in some of your boat brands or additional footprint changes? And then finally maybe just give us a little additional color what the expansion with GE into Latin America will do here. Is that -- was there some type of financing bottleneck that now maybe that can accelerate some growth in Latin America here as we look into '09?

First with regard to footprint changes, we have stated back in June that there was another four plants that we're going to openly close. We haven't announced those at this point in time.

In terms of other brands, I mean we will keep you abreast as time moves on. I think at this specific point we're comfortable with the portfolio as it stands, but that's always subject to more evaluation.

And then with regard to Latin America, the financing scheme there is not going to go through Brunswick Acceptance. It's going to be on the side. And the challenge was the Mexican market was not very well developed with regard to the floor planning models, on the automotive side that there were some. But it's really kind of an emerging industry down there. And so we worked with GE to help set that up. The amount -- we have a limited amount of inventory that we will sit back and finance for dealers. We think it's sufficient to help our business grow there and our dealers' business to grow in Mexico. And you know it's kind of a similar concept to what you see here.

Great, thank you. Kathryn, again enjoy the retirement.

[Paul Burton], RBC Capital Markets.

Thanks and congratulations, Kathryn, from Ed and myself. Just wondered -- most of my questions have been answered. Just wondered on the furloughs that you guys talked about, you had mentioned previously in your prior call that you were planning on some furloughs in July but now you're talking a little bit about August and I read that also somewhere previously. So I'm just wondering how -- a little more detail on that and then how you expect that to affect inventories at the end of the year and maybe dealer inventories, what your thoughts are. Just a little more color please?

Just to clarify, Paul, it wasn't that the same plant would be down in July and August. It was that certain plants would be down in July and others would be down in August. So it really is of all the -- most of the fiberglass plants will be down for a month sometime during the third quarter.

And the majority of them were in July, that's what we said last time. Some are taking place in August. There's no new information in that, if you will.

With regard to inventories, we do expect to see some further inventory reductions in the third quarter related to the furloughs, although we are also cutting back on our shipments to dealers at the same time. So it's maybe not necessarily as great as that and into the fourth quarter as well.

Normally we take a fair amount of downtime around the Thanksgiving and Christmas, New Year holidays. And in some cases those are being extended by a week or -- a week or two, just to take advantage of it and to help make further cuts.

So overall we would expect to see continued improvement towards lower inventories by the end of the year. We're at 922 now. I would hope to see something in the mid-800s at the highest in the end of the year.

With that, we have no one else in the queue, no questions coming. We thank you very much for your attention and we look forward to talking to you next time around.

Take care.

Thank you. That does conclude today's conference call. You may disconnect at this time.