卡洛馳 (CROX) 2008 Q3 法說會逐字稿

Welcome to the CROCS Incorporated fiscal 2008 third quarter earnings call.

(OPERATOR INSTRUCTIONS)

Before we begin, I would also like to remind everyone of the Company's Safe Harbor language.

Please note that some of the information provided in this call will be forward-looking statements within the meaning of the securities laws.

These statements concern plans, beliefs, forecasts, guidance, projections, expectations and estimates for future operations.

The Company cautions you that a number of risks and uncertainties could cause CROCS actual results to differ materially from those described on this call, including the retail environment and global economic conditions.

CROCS has explained some of those risks and uncertainties in the risk factor section of the annual report on Form 10-K and its other documents filed with the SEC, and you are encouraged to read that section and all other disclosures appearing on our filings with the SEC.

CROCS intends that all of its forward-looking statements in this call will be protected by the Safe Harbor provisions of the Securities Exchange Act of 1934.

CROCS is not obliged to update its forward-looking statements to reflect the impact of future events.

I would now like to turn the conference over to the President and Chief Executive Officer, Ron Snyder.

Please go ahead, sir.

Thank you.

Good afternoon, and thank you for standing by.

With me on the call today, is Russ Hammer, our Chief Financial Officer and John McCarvel, our Chief Operating Officer.

2008 has obviously been a very tough year as we deal with one of the most challenging economic and global and retail environments in some time.

As a result after multiple years of triple digit revenue growth and achieving approximately $850 million in sales in 2007, we have experienced a slowdown in demand for our product in certain regions.

Therefore, as the business matures to a more normalized levels, we are making strategic adjustments in order to right-size our operations and cost structure, to better align with lower projected sales volumes.

This includes the restructuring program and additional cost cutting actions that we announced earlier today.

While the impact to our third quarter results was significant, these are primarily non-cash one time charges, and we believe these actions are in the best interests of the long term success of the Company, our brand and ultimately our shareholders.

To review, we have taken the following cost actions during Q3 resulting in $104 million pre-tax charge which we expect will result in the annual P&L savings beginning in 2009 of approximately $10 million to $15 million.

We recorded approximately $70 million in inventory write-down.

We recorded a non-cash good will impairment charge of $22.8 million, recorded an $8 million non-cash asset impairment charge on certain toolings, molding and machinery.

Completed the shutdown of Canadian manufacturing and compounding operations resulting in a $2.5 million dollars charge in Q3, and initiated closing of our Company-owned manufacturing facility in Brazil, which is expected to result in a $1.2 million restructuring charge in Q4.

During the third quarter we also completed global workforce reductions, which we expect will result in approximately $11 million in savings in 2009.

Some of the cost actions we have taken year-to-date, which we believe will have a positive impact during 2009, include reducing our 2008 capital expenditures by 38% against planned from $126.6 million to an estimated $78 million, reduced global operations employee count by approximately 2,100 from Q3 '07, completed the shutdown of Canadian manufacturing compounding operations, resulting in a $21.1 million charge through the first nine months of 2008.

The $70 million inventory write-down is primarily related to certain products that we have discontinued, including core products in colors that we now believe would be difficult to sell at full price.

Therefore, we have written this portion of our inventory down to reflect a more appropriate value, and we're in process of selling it through select channels and in certain markets throughout the world, where we believe it will not impact our full price business or damage our brand equity.

We believe the strategic decision to reduce our operating platform will further improve the long term health of our balance sheet, and allow us to focus more on the resources -- more of our resources on the evolving needs of our business.

I will now turn the call over to Russ to review the financials.

Thanks, Ron.

Good afternoon to each of you and thank you for joining us.

I will provide specific detail in our financial results, the impacts of our one-time charges, cost actions and certain near term inefficiencies we will incur -- incur Q4 of this year.

First for sales, our total sales for the third quarter were $174.2 million compared to $256.3 million a year ago which was below our forecasted range of $195 to $205 million.

We booked $32.7 million in returns in allowances in Q3 2008, an increase of 240% over Q3 2007 returns and allowances of $9.6 million, this was primarily due to a channel inventory rebalancing strategy we enacted in Q3, in order to better position our key customers with the right inventory mix going into the fall and holiday season.

For the quarter revenues outside the US were $104.7 million or 60% of our total sales versus $130.9 million last year.

By region, age of sales were $61.4 million, Europe was$ 29 million, Canada and Mexico were $7 million, and the balance of the $7.3 million was from other international locations.

Asia results were up 14% from Q3 2007, primarily driven by growth in new markets and retail.

Some of the strongest performing markets were Japan, China, Middle East and Korea.

Europe sales were down 50% from Q3 2007.

We believe Europe was negatively impacted by bad weather, and our prime selling season, negative PR and a deteriorating retail environment and increased presence of knockoff and counterfeit product.

Domestic sales were $69.5 million, down 45% from Q3 2007, representing approximately 40% of our global business.

Due to the weakening retail environment, many of our wholesale accounts continue to be very cautious of their orders choosing to work down existing inventory to much leaner levels.

That said, we are seeing some positive sell-through data from several accounts indicating consumer demand for our products in select regions and channels.

Footwear sales accounted for approximately 91% of revenue and represented 8.1 million units, for an average selling price of $19.33.

Core products represent 54% of our unit sales.

Sales of our classics represented 21% of footwear sales.

Sales at full retail price at our Internet site and Company-owned retail stores, grew to 28% of our total sales driving our average selling price higher.

Gross profit for the third quarter of fiscal 2008 was $2.4 million or 1.4% of revenue compared to $155.4 million or 60.6% of revenue in the third quarter, 2007.

Inventory write-downs contributed to $70 million of the decrease in gross profit for the third quarter 2008.

While we have removed significant costs from manufacturing and distribution cost structure, we again experience deleveraging during the third quarter, primarily due to the lower than expected sales and higher than expected seasonal returns.

Q3 SG&A expenses were $104.4 million versus $77.2 million in the corresponding period last year.

The effects of realized and unrealized losses related to changes in foreign currency exchange rates, included in SG&A during the third quarter of 2008 were $14.6 million compared to a foreign currency exchange rate gain of $3.6 million include in SG&A for Q3 2007.

The increase in SG&A was primarily driven by operating costs related to our increased number of retail stores, IP litigation, marketing spend and severance costs associated with personnel reductions.

Including the restructuring charges, we reported a net loss of $148 million or $1.79 EPS per diluted share in the third quarter of 2008, compared to net income of $56.5 million or $0.66 per diluted share in the third quarter of 2007.

This went below our guidance range of diluted earning per share between $0.01 and $0.05, due to the lower sales volumes, one-time charges and higher than expected costs.

The one-time charges including the restructuring, asset impairment and inventory contributed to $104.1 million or $1.26 per diluted share to our net loss.

More specifically, our quarterly operating margin included $14.6 million in FX loss and $19.5 million net impact of our returns rebalancing activities.

These items and charges when aggregated, contributed $138.2 million to our loss before income taxes, in the third quarter of 2008.

Now turning to the balance sheet, we continued our strong balance sheet management.

Our inventories decreased 36% to $141 million at September 30th, 2008, from $220 million as of June 30th, 2008.

We also continue to pay down our outstanding borrowings.

We understanded the third quarter with approximately $19.8 million in outstanding borrowings, a 46% decrease from the approximate $37 million outstanding borrowing as of June 30th, 2008, an approximate 54% decrease from Q1 2008 borrowing levels of $42.8 million.

As of September 30th, 2008 we have $56.6 million in cash and cash equivalents compared to $36.3 million as of December 31, 2007, an increase of approximately $20.3 million.

Our net accounts receivable balance as of September 30, 2008 was $71 million, a decrease of $57.1 million, or 45% since last quarter and a 54% decrease from year-end 2007.

Our DSO improved to 37.5 days from 52.3 days as of June 30, 2008 and 70.9 days as of March 31, 2008.

Our Q3 capital expenditures were approximately $17 million, a slight reduction from our second quarter capital expenditures.

Now for the outlook for the remainder of the year.

Based on the uncertain global economic crisis that continues to impact our customers, and the consumer, we expect the holiday season to continue to reflect these uncertainties and we are lowering our Q4 guidance.

Let me go through the specifics.

We now expect Q4 revenues to be in the range of $100 to $120 million.

We expect Q4 diluted loss per share in the range of $0.50 to $0.65.

We are not providing further guidance for 2009 at this time, due to the uncertainty in the global economies.

I will now turn the call to John McCarvel, our Chief Operating Officer, for some specifics on our markets and our operational cost reduction activities.

Thanks Russ.

As Ron discussed in our previous earnings call, we have been focused on right sizing our business to better align with our projected volume.

Let me go through some of the specific actions we have taken.

We have been actively executing on our factory capacity rationalization plan.

We reduced our global manufacturing capacity to levels in line with today's business.

We realigned our operating resources to a more variable cost model as we enter 2009.

We are planning our 2009 production plan to be roughly 85% subcontracted and 15% internal manufacturing.

Internal manufacturing will be defined going forward as our Leon Mexico facility, and a small operation at our design center in Italy.

As part of our green initiative with SolesUnited, we are starting to build some models with 10% recycled material.

Throughout 2008 we have aggressively reduced our global distribution platform commensurate with our reduced inventory position, and we will continue to consolidate and cut costs in 2009.

Some examples are the reduction in European distribution locations will generate significant cost savings in 2009.

In the United States, we have consolidated our distribution product return centers in the Denver area.

We expect to this streamlining of operation, will allow us to continue both fixed and variable costs, and in Asia we continue to shrink our variable distribution costs as we reduce inventory levels in the region.

We believe we are making significant and sustained progress towards creating a leaner, more efficient Company for the future.

On a positive note, demand for our new fall '08 and spring '09 products continue to generate excitement.

Our new product introductions with our major accounts have resulted in strong prebooking.

In fact, 49% of our new products in Q4 2008, have 43% for Q1 2009 thus indicating the ongoing strong consumer demand for our new products.

Most notably, the new version Mammoth, the Nadia, and AVP products were primarily prebook drivers for fall/winter 2008.

While the US and European businesses have been adversely impacted by the ongoing economic challenges, I would like to highlight a few areas of our business where we have seen continued strong growth.

In Asia where business grew by 14% versus the same quarter previous year Q3 2007 and 46% versus previous year year-to-date.

Compared to 2007, our global retail business grew by 52% in Q3, and our retail locations grew by 40%, primarily fueled by growth in the Asian market.

Additional highlights from the past quarter include the introduction of our new product lines for 2009, our new product lines have been enthusiastically received at major trade shows globally.

We are introducing new merchandising systems with major retailers in 2009, coupled with enhanced point of sale displays, and channel specific consumer marketing campaigns.

Today CROCS has built strong, broad, lifestyle brands and markets over 150 unique models.

According to NPD for 12 months ending August 2008, CROCS is the number one casual brand in the athletic specialty, sporting goods channel for men, women and children.

Our global rollout of CROCS retail stores continued in the 3rd quarter, as we further concentrate our resources on locations that we can merchandise the largest assortment of footwear and showcase the diversity of our business.

We recently opened stores in Toronto, Montreal, Manchester England, Helsinki, Moscow, Chicago, Waikiki and Portland.

We also opened outlet stores in St.

Augustine, North Carolina, Chicago, Atlanta, Toronto and Cleveland.

Today we currently have 120 full-priced stores, 121 kiosks, 21 outlet stores and 180 partner stores worldwide, for a total of 442 CROCS retail locations.

On the brand building front, we are committed to growing increasing and strengthening our brand, exposure and brand equity.

CROCS has a well-recognized brand name globally.

We receive tremendous exposure from our advertising campaign during the Beijing summer Olympics.

Our promotions at the 2008 summer Olympics also provided significant branding opportunities for us in China this summer as well.

CROCS remains committed to our SolesUnited program.

We have launched the SolesUnited initiative in Asia this past quarter, and we are now collecting used shoes at our retail stores in the region.

We donated more than 100,000 pairs in the quarter, and more than one million pairs in 2008, to those less fortunate around the world.

I will now turn the call back to Ron.

As we move toward the end of the year and look out to 2009, our entire team of talented employees around the globe is fully committed to taking the necessary steps to improve the business.

Outside of the restructuring initiatives already discussed, we are implementing strategies that we believe will broaden awareness of our entire footwear collection, help drive consumer demand for our innovative and compelling new product offerings, and improve our profitability.

There's much work to be done and while the current macro economic environment is creating challenges beyond our control, we continue to be optimistic about the long term outlook for our Company.

Meanwhile, consumers remain loyal to our brand and products, and we are confident that the positive attributes of our proprietary Croslite material will allow us to successfully leverage our position into new categories of foot wear.

Thank you, and I'll now turn it over to questions.

Thank you.

(OPERATOR INSTRUCTIONS)

We'll take our first question from Jeff Klinefelter from Piper Jaffray.

Yes.

Russ, a question for you on Q4, once you back out the charges to margin and SG&A, can you give us a sense for what would have been your normalized gross margin rate, and your SG&A rate against that Q4 -- or Q3 revenue?

So you're asking Q3, Jeff?

Yeah, for Q3.

Yes.

So as I mentioned on the call, if you back out all the one time charges, we were just slightly positive on our pre-tax.

Okay.

But just for clarity, the gross margin would have been at what rate?

I was just trying to figure out if this you back off, take the $70 million in write-down and you also were talking about the FX.

If you back off FX, the write-down, and the impact on gross margins for the return product?

Yeah.

Hey, Jeff, I'll calculate that and call you back real quick on that.

Okay, okay.

We can come back to that.

That's pretty easy.

Okay.

The other one, the other questions, would be on the Q4 guidance, $100 million to $120 million.

Can you give us a sense for kind of how that breaks down between US, Europe and Asia, and also just curious, I think, John, you were mentioning the prebook, did you say that 50% of the revenue has been in the new styles prebooked?

49%, Jeff, are for new products and in Q4 2008.

So of our prebookings 49% are our new products.

Well, what percent of that guidance is actual prebooked product versus replenishment?

Based on the 100 to 120 --

Yeah.

So about 40%.

Okay.

Also just curious on doors at this point.

You know, you've been I think attempting to rationalize your door counts over the last quarter or two.

Can you get a sense for how great a reduction you've been able to effect there, and where you see that in terms of year-end?

Yeah, Jeff.

We've had some door rationalization, for some of our underperforming doors.

However, we have added some, where we added Famous Footwear for our work line, and a few other products, that they don't have some of our core products.

So that's been a big add, but so we've added -- we've probably dropped 10% or so in the US, about the same in Europe, and we've added about a little bit -- about a thousand doors in Asia.

Okay.

One other thing, back to that Q4 top line guidance, US, Europe versus -- in Asia, how does it break out generally between the three global regions?

We're expecting it's almost 50%, 50% in Q4, between US and international.

Okay.

And I would imagine similar trends with Asia and Europe, Asia growing, Europe still contracting.

Correct.

Okay.

Russ, any updates on the receivables, the way you're managing that in terms of the dating?

I know you've been working on getting the terms down.

Yes.

So we've seen very strong progress in that.

As I mentioned, we were up in the 70 DSO days in Q1, and now we're down in the just below 40 at 37.

We're just keeping a very tight watch on our credit with our customers, during these trying times, and we're going to continue that through the fourth quarter.

Okay.

Great.

And then, John, you mention on manufacturing capacity, you'll be 80% -- 85% subcontract, and that is with no terms whatsoever, in terms of guaranteed minimum volumes with those manufacturers?

That's correct, Jeff.

Okay.

Okay.

Great.

Thanks a lot, guys.

Thanks, Jeff.

We'll take our next question from Jim Duffy with Thomas Weisel.

Thanks.

Russ, a couple questions for you.

Hey, Jim.

Exclusive of the discontinued expenses, where would you expect the SG&A rate in absolute dollars for the fourth quarter?

We'll expect that to be somewhere in the low 90s in the fourth quarter.

Okay.

And then it would be helpful if you could provide a little bit of clarity on kind of the cash flow and liquidity situation.

Exiting the year-over-year, where are you expecting cash balances and outstanding borrowings on the credit facility?

So as I said right now, we've paid the credit line down to 19.8, so we've already paid down almost 70% of our line this year.

We expect that we will be cash positive here in the fourth quarter, and we're looking at how much more we'll be paying down on the lines or not by the end of the year.

Okay.

And then do you have a target for the inventory position by year-end?

Should we expect further improvement or will it build going into the spring season?

Yeah.

So at this time we'll continue to reduce our inventory probably another 10% by the end of the year.

Okay.

And then final question, at this stage, you know, maybe looking at 3Q numbers, how much of the revenue is done through CROCS retail doors?

Our retail, Jim, and our Internet combined made up about 28% of our global revenues.

So it's growing very nicely.

Does that include the partner doors?

No.

It does not.

Okay.

Company owned.

Do you expect to, within your CapEx guidance for down 50% next year, are you expecting to continue opening retail doors?

Jim, we're going to continue to look at opening the retail doors in the right regions of the world.

We're going to be very discriminate in spending money here, over the next couple quarters.

So what we had planned a fairly aggressive launch, we've scaled that back now for 2009, and we'll address it as we go through the quarters.

Very good.

Thanks very much.

Good luck.

Thanks, Jim.

We'll take our next question from Reed Anderson with D.A.

Davidson.

Good afternoon.

Just a quick follow-up on one of the last questions.

What was the -- what was your owned retail a yearly basis 28% of global this quarter.

What was it a year ago?

About 19%.

19?

Okay.

And then another question, Ron, just if you'd comment on kind of your license business because, you know, you go into Wal-Mart and you see a lot of knockoff product but with a Disney character, Nickelodeon.

I'm just curious your, what your thoughts on that and just that license business in general.

Yeah.

I mean our license business has continued to perform rather well.

We don't have -- Wal-Mart can sell licensed products as well.

They have licenses with some of the same properties that we do.

We're going to continue to grow that business.

and we've got a number of new styles and new models that we're introducing both -- we introduce for fall '08, and we have for spring '09, and at the end of next year as well.

So that business has contracted a bit with the rest of our business.

And what we're going to do is we're going to start bringing some of that product out into the mass channel over time as a Jibbitz branded product.

Okay.

But as you've seen like them specifically ramp up that piece, have you seen a direct impact, do you think?

It's kind of hard to tell what the impact would have been.

We have -- we're not really seeing any competition on the sports license side.

On the entertainment license side we've seen some.

Okay.

Frankly, our better products that look like nice products for kids to wear ,do fairly well and some of the other ones don't.

And then as it pertains to Mammoth, I mean regardless of how you want to look at it do you just look at that product line, whether it's adding new product or new models this year versus last year.

What year-over-year growth makes sense just for Mammoth this year versus last year, because it was such a key piece of last year's fourth quarter?

You know, we don't know yet.

We got a lot of business between now and the end of the year last year.

and Mammoth tremendous booking.

So we don't know how that's going to play out.

We do know that our bookings so far in Mammoth are very, very strong.

They're not at the level that we were at for the full year, full fourth quarter of last year, but they're very strong.

Would the Mammoth bookings be bigger than the overall number that was given previously, the 49%?

No, no.

Okay.

And then last one.

Russ, on the FX piece, I mean is that just, some hedging issues or is that just timing related to currency value?

What happened and what can you do to mitigate it?

The FX is the realized and unrealized gains just due to translation and at this point in time, we're looking at different options to try to mitigate it.

But as you know, we do business all over the world globally, and we have a lot of different national hedges in place just from the mix of our business.

But specifically more was it issue relative to Europe in this particular quarter?

Europe and Brazil were the two big currencies.

Okay, all right.

Thanks.

We'll take our next question from Mitch Kummetz with Robert Baird.

Yes, thanks, just a follow-up to Reed's question on the FX.

Obviously you had a big loss in the quarter there, and you called it out as such, which I think understandable given the size of it, although in the past it was just included in the SG&A.

How should we be thinking about that piece going forward, given where currencies are now.

And is the guidance of what the $0.50, $0.60 -- $0.50 to $0.65 loss from Q4, is that -- is there an FX component that's incorporated in that guidance, or is that kind of adjusting for an FX impact?

Hey, Mitch, it's Russ.

So on the breakout schedules, what we have done for you is we've broken out SG&A with what the true operating SG&A is and the FX piece, so if you have clear visibility to that, and then in regards to your question on what we have in the fourth quarter, we do have $10 million of FX built into our guidance that we have given.

But of course, we don't forecast, hedge currency rates changing all the time.

Okay.

You said you built in a $10 million loss on FX?

Correct.

In the Q4?

Correct.

Okay, all right.

And then just kind of want to run through, maybe performance of your business in the US in the quarter.

I think you said it was down 40% plus, nearly 50% I think.

When you look at the business, in a variety of buckets whether it's men's, women's, kids or classics versus kind of core styles, versus newer styles, how do you see the performance?

Or what was kind of the trend of that performance in the quarter that kind of led to that big drop?

Well, we think that -- I mean that we can see from our kids shoe sizes that the kids business continued to be fairly strong.

It's kind of hard to tell when you get up into the larger size kids whether they're womens or kids.

The men's and women's business were less.

What happened last year, too it was such a strong year, such a strong year for our brand.

A lot of customers did take product all the way through the quarter, where with the economic environment this year being difficult, customers stopped ordering as much as they did say in September of last year, still taking a lot of product this year September was not robust.

So that really -- so it wasn't a full impact at retail of that 40% plus.

You know as Russ said, we still saw fairly good sell-through in a number of our larger doors where they had the right product mixes, but overall we're down 40%.

And then last question.

You know, on the call you've talked about it and the press release you mentioned it that, you're looking to further right-size the business, to cost structure the business.

You know, how do you really think about that?

Do you kind of put it in terms of do you have sort of a volume expectation in mind, and then you kind of want to get the SG&A to a level where you can, be profitable?

And how do you think about, where you can cut costs to what degree you need to cut costs, so that at a certain volume level you're going to be, you'll be operating in a better way?

Mitch, if you look at the economy right now in the business, we think it's probably wise to plan our business at flattened down volumes.

In uncertain economies, the economy is impacting everybody in retail and all of our consumers, and all of our customers, so we are going to plan our expenses, our cost, our capital, at a lower volume going into next year.

We're going to plan our capacity of that as well so that we just, batten down the hatches so when the volume returns, then we will leverage it.

I think it would be unwise for us to plan at a higher volume, and have the cost structure deleverage next year.

All right.

And where are the levers that you can pull as you plan the business for a lower level of volume?

I mean, where is the low hanging fruit, if there is any, in the cost structure that you can really attack?

So we're looking at a number of area.

We've already done a number of areas.

As we mentioned before, we did reduce our workforces in the US and in Europe.

We're also reducing a lot of our administrative expenses in the legal finance marketing area.

In particular we're going to be adjusting and you'll see some results of that starting up here pretty soon the next couple quarters.

There's really all areas we're looking at.

In fact, that we're looking at as John mentioned our warehouse distribution space as we continue to work down our inventory.

We shut down the third-party warehouse and that cost comes right off immediately.

Longer term though, as we mentioned on the last earnings call, it is going to take us, you know, nine to 12 months to be working down our inventory and get the full realization of the shutdown of our third-party warehouses.

Okay.

Great.

Thank you and good luck.

Thanks, Mitch.

(OPERATOR INSTRUCTIONS)

We'll take our next question from Sam Poser with Sterne, Agee,

Good afternoon.

Quick question on the inventory levels.

Your comment -- what is the breakout of core versus new in the inventory level, as it relates to the future, to the prebooks?

Hello?

Yes.

Hold on one moment, Sam.

Okay.

So on the prebooks, John mentioned that our prebooks were around 40% going out in fourth quarter, and the core products are running at around 23% of our mix right now.

So we expect that to be a little lower in the fourth quarter, though, just due to seasonality.

What about, of the current inventory levels?

What is the -- of the $141 million in inventory, what percentage of that is core right now because I believe at beginning of the year you had about 70% in the core of the makeup of the inventory.

Is it more built around what people are asking for now, or is it still a lot of core inventory in there?

So, Sam, the core inventory that we have now is over 50% of our inventory is in core right now.

And -- it's running at about 28% of the sales.

So is that part of the stuff you need to reduce down out of, which will be a margin challenge in the next quarter?

Maybe we have to clarify a little bit, Sam.

So about 40% of our prebook for Q1 of next year is in core products.

In the classic, in our classics which would be just basically beach game, kids game and that still runs about 23%, 24%.

Does that help you model that?

So 40% of our business in prebook is still in our core products, and about 54% of our inventory is in core products.

And, Sam, all the (inaudible) -- the majority of the (inaudible) business we get is in core products still.

So people know we have the inventory.

They're not prebooking it.

Right and what percentage -- you might have said this -- what percentage of your business now is kids versus adult?

How is that -- because that has swung I assume in the last couple of years really dramatically?

No.

We still think it's about -- it's a little bit less than 30% still.

Like I said, we can't really tell on the small -- some of the medium sized shoes that we make, but we think it's still about 30%.

Thank you very much.

And, ladies and gentlemen, we have no further questions.

That will conclude today's conference call.

We'd like to thank you all for your participation.

Have a great day.