Gentex Corp (GNTX) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Gentex earnings conference call. Today's call is being recorded. I would now like to turn the meeting over to Ms. Connie Hamblin, Vice President of Investor Relations and Corporate Communications. Please go ahead, ma'am.

Thank you. Good morning, everyone. Welcome to Gentex Corporation's second-quarter conference call. On the call today is Enoch Jen, our Senior Vice President; and Steve Dykman, our Chief Financial Officer. I'll go through a few routine comments, and then Enoch will go through the quarter and we will open it up to Q&A.

The call is being broadcast live on the Internet on our website at www.Gentex.com. There will be an auto playback of the conference call available on that site as well. This call is being recorded by Gentex Corporation. All contents of Gentex Corporation's conference calls are the property of Gentex. No such content may be copied, published, reproduced, rebroadcast, retransmitted, or otherwise redistributed without the express written consent of Gentex Corporation. Gentex Corporation alone holds such rights.

While we understand that there may be companies that transcribe and redistribute our conference calls notwithstanding this warning, Gentex Corporation provides no authorization to do so and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcripts, as Gentex Corporation will not be held liable for the content of such transcripts. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex with respect to any such unauthorized use.

Your participation implies consent to our taping and to the foregoing terms. Please drop off the line if you do not agree with these terms.

Our Safe Harbor statement. This presentation may include forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about topline growth in the global automotive industry, the economy, the impact of stock option expenses on earnings, the ability to leverage fixed manufacturing overhead costs, new shipment growth rates, and the Company itself. Words like anticipates, believes, confident, estimates, expects, forecast, likely, plans, projects, and should, and variations of such words and similar expressions, identify forward-looking statements.

These statements do not guarantee future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, expense, likelihood, and degree of occurrence. The actual results may differ materially from those in the forward-looking statements. The Company undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. We urge you to review this whole Safe Harbor statement that is contained in the news release that is posted on our website.

At this point, I will turn the call over to Enoch, who will make his comments regarding the second quarter. We will open it up to Q&A. And, as usual, we ask that you ask one question. Enoch?

Good morning. Thank you for taking the time to join our second-quarter earnings conference call. Our revenues for the second quarter were $117.3 million, which was a 31% decrease compared to the $170.5 million recorded for the second quarter of 2008. For the first six months, our revenues were $211.2 million, a 39% decrease compared to the $348.5 million recorded for the first six months of 2008.

Our operating income for the second quarter was $16.1 million, a 55% decrease compared to the $35.8 million reported for the second quarter of 2008. For the first six months, our operating income was $18.3 million, a 76% decrease compared to the $75.8 million reported for the first six months of 2008. Our net income for the second quarter was $12.2 million, a 55% decrease compared to the $26.9 million reported for the second quarter of 2008. For the first six months, our net income was $10.7 million, an 81% decrease compared to the $57.3 million reported for the first six months of 2008.

Our earnings per share -- per diluted share for the second quarter was $0.09. This compares to $0.19 reported for the second quarter of 2008. For the first six months, our earnings per diluted share was $0.08 compared to $0.40 reported for the first six months of 2008.

Next, we'll look at automotive revenues and auto-dimming mirror unit shipments. Total auto-dimming mirror unit shipments decreased by 33% in the second quarter of 2009 compared with the second quarter last year. Automotive revenues decreased by 32% from $164.8 million in the second quarter of 2008 to $112.2 million in the second quarter of 2009. Total auto-dimming mirror unit shipments decreased by 42% for the first six months of 2009 compared with the first six months of 2008.

Automotive revenues decreased by 40% from $336.9 million in the first six months of 2008 to $201.2 million for the first six months of 2009. Auto-dimming mirror unit shipments in North America decreased by 49% in the second quarter of 2009 compared with the same period in 2008, primarily as a result of significantly lower light vehicle production. North American light vehicle production declined by 48% in the second quarter of 2009 compared with the same prior-year period.

Auto-dimming mirror unit shipments in North America decreased by 53% for the first six months of calendar year 2009 compared with the first six months of calendar year 2008, primarily, again, as a result of significantly lower light vehicle production. North American light vehicle production declined by 50% for the first six months of 2009 compared with the same prior-year period.

Auto-dimming mirror unit shipments to offshore customers decreased by 24% in the second quarter of 2009 compared with the same period last year. The decrease in unit shipments was primarily due to lower light vehicle production in Asia and Europe. Light vehicle production in Europe decreased by 27% in the second quarter, and decreased by 36% in Japan and Korea in the second quarter of 2009 compared with the same period last year.

Auto-dimming mirror unit shipments to offshore customers decreased by 35% for the first six months of 2009 compared with the same period last year. The decrease in unit shipments was primarily due to lower light vehicle production in Asia and Europe. Light vehicle production in Europe decreased by 34% in the first six months of 2009, and decreased by 40% in Japan and Korea in the first six months of 2009 compared with the same period last year.

The average selling price per auto-dimming mirror unit was $42.64. For the second quarter of 2009, the ASP was up sequentially at $42.64 in the second quarter of 2009, primarily due to mix. The ASP also was up on a year-over-year basis compared with the second quarter of 2008, primarily due to a mix of higher feature mirrors, partially offset by annual customer price reductions. Based on CFM's end of June light vehicle production forecast, we continue to expect ASPs to increase over the balance of 2009 as we begin shipping for additional RCD and SmartBeam programs.

Fire protection revenues decreased by 10% to $5.1 million for the second quarter of 2009 compared with the same period last year, and declined by 14% for the first six months of 2009 to $10 million compared with the same prior-year period. The decline in revenues in both periods was primarily due to the weak commercial construction market.

The gross profit margin of 30.5% in the second quarter of 2009 increased sequentially from 23.8% in the first quarter of 2009. Approximately two-thirds of the increase was due to the Company's increased ability to leverage its fixed overhead costs due to the 25% sequential increase in revenues. The balance of the increase was due to direct labor productivity, foreign exchange rates, and product mix. The gross profit margin declined on a year-over-year basis from 34.7% in the second quarter of 2008 to 30.5% in the second quarter of 2009, primarily due to the Company's inability to leverage its fixed overhead costs due to lower revenues.

The impact of annual customer price reductions was offset by purchasing cost reductions. Based on the Company's expected revenues for the third quarter of 2009, which will be discussed later in these comments, we would expect the Company's gross profit margin to improve on a sequential basis. The gross profit margin will continue to be impacted by annual customer price reductions, uncertain global automotive production levels, our ability to leverage our fixed overhead costs, purchasing cost reductions, VAVE initiatives, and manufacturing yields.

Engineering, Research and Development expense decreased by 16% in the second quarter of 2009 compared with the same 2008 period, primarily due to reduced employee compensation expense. ER&D expense decreased by 14% for the first six months of 2009 compared with the same 2008 period, again primarily due to reduced employee compensation expense. ER&D expense is currently expected to be down approximately 10% for the third quarter of 2009 compared with the third quarter of 2008, primarily due to reduced employee compensation expense.

Selling, General and Administrative expense decreased by 14% in the second quarter of 2009 compared with the same prior-year period, primarily due to reduced employee compensation expense and foreign exchange rates. SG&A expense decreased by 13% for the first six months of 2009 compared with the same period in 2008, primarily due to the same reasons: reduced employee compensation expense and foreign exchange rates. SG&A expense is currently expected to be down approximately 10% for the third quarter of 2009 compared with the third quarter of 2008, primarily due to reduced employee compensation expense and foreign exchange rates.

Next, we'll talk briefly about our ERP project implementation. The Company implemented the first phase of a new enterprise resource planning system effective July 1, 2009, which covered core business areas at our Zeeland, Michigan locations. To date, we have not experienced any significant issues during the implementation process. However, there is no guarantee that all system components will function as intended in the future. In addition, the Company is planning to implement the second phase of its new ERP system by the end of calendar year 2009. The second phase includes two overseas office locations, and additional lean manufacturing production line scheduling and business reporting capabilities.

Next, I will talk about the Company's allowance for doubtful accounts and credit exposure. The Company had increased its allowance for doubtful accounts by $3.8 million in the fourth quarter of 2008, related to financially distressed Tier 1 automotive customers. While the Company has made progress in collecting a portion of the significantly past-due account balances from certain customers, the overall allowance for doubtful accounts related to all financially distressed Tier 1 automotive customers remains unchanged.

As of June 30, 2009, the Company has been paid for all pre-petition bankruptcy receivables relating to Chrysler, who filed for bankruptcy production under Chapter 11 of the US Bankruptcy Code on April 30, 2009. After June 30, 2009, the Company received payment for all pre-petition bankruptcy receivables relating to General Motors, who had filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code on June 1, 2009.

Next, looking at our expense management activities. The Company continues to work to reduce expenses in a number of different areas. The primary items that we are working on include continued purchase cost reductions and VAVE efforts; continued slowdown in hiring; reduced incentive employee compensation; reduced travel, supplies, healthcare, and freight expenses; and a significant reduction in capital expenditures resulting in slower growth of depreciation expense.

Looking next at Other Income expense. For the second quarter of 2009, our investment income was $868,000. Other net was $1,356,000 and there was no impairment loss recorded in the second quarter. For the first six months of 2009, our investment income was $2,060,000. The impairment loss was $1,291,000 and Other on a net basis was a negative $3,131,000.

Other Income decreased in the second quarter of 2009 compared with the second quarter last year, primarily due to decreased investment income as a result of lower interest rates. Other income of $9.7 million for the six months ended June 30, 2008 decreased to Other expense of $2.4 million for the six months ended June 30, 2009, primarily due to realized losses on the sale of equity investments and lower investment income due to lower interest rates.

Next, I will provide a few balance sheet items. Accounts Receivable at June 30, 2009 was $51.4 million. Inventories at June 30 was $48.4 million. Patents and Other Assets were $10.2 million. Accounts Payable were $16.7 million, and accrued liabilities at June 30, 2009 was $34.5 million.

The effective tax rate of 33.3% for the second quarter varied from the statutory rate of 35%, primarily due to the domestic manufacturing deductions. Excluding stock option expensing, we currently expect that the tax rate for 2009 will be approximately 33% based on current tax laws, primarily due to the domestic manufacturing deductions.

Our year-to-date cash flow from operations was $49.5 million. Our capital expenditures for the second quarter of 2009 was $5.5 million. Our depreciation expense for the second-quarter 2009 was $9.6 million. For calendar year 2009, our estimate for capital expenditures is approximately $30 million to $35 million. Our depreciation and amortization expense for 2009 is estimated at $36 million to $38 million.

Next, looking at our share repurchase plan. The Company did not repurchase shares during the second quarter of 2009. The Company has a share repurchase plan in place with authorization to repurchase up to 28 million shares of the Company's stock. To date, the Company has repurchased approximately 26 million shares, leaving approximately 2 million shares authorized to be repurchased under the plan.

The Company's current share repurchase plan was originally announced in 2002. The goal of the plan was to have it be opportunistic, and it's based on a number of factors, including market conditions, the marketplace of the Company's common stock, the anti-dilutive effect on earnings, available cash, and other factors that the Company deems appropriate. Given the current market conditions, including market volatility, uncertain production sales levels, potential customer bankruptcies and liquidity needs, you should expect that factor is playing a more important role in the decisions that are being made as to the number of shares being repurchased and at what prices they are repurchased.

On July 17, 2009, the Company paid a quarterly cash dividend of $0.11 per share to shareholders of record of the common stock at the close of business on July 7. The ex-dividend date was July 3. The Company's cash dividend policy was established based on a number of criteria, including current US income tax laws with favorable tax treatment for dividends. Other criteria included that it be meaningful, sustainable, and that the dividend rate would increase generally aligned with the Company's earnings and operating cash flow over time.

The cash dividend rate is an agenda item at every Board of Directors meeting. Investors have asked if the Company will continue to pay a cash dividend at the current level, given the current economic environment, or if the Company does not earn the dividend. On a balance sheet basis, the Company could continue to pay a dividend within the criteria above for a long period of time. The decision on any change to the dividend policy is a Board decision, and the Board will take into consideration the existing economic climate, and would base any changes on their expectations as to the duration and magnitude of this global recession.

Real quick, I want to -- I need to interrupt, Enoch. It sounds like somebody has a discussion going on. So, it would be helpful if you are doing that, if you could mute your phone, because it's distracting and I think it's probably distracting to others.

Thanks, Connie. Next, an update on SmartBeam. We continue to make progress with automakers, as they more broadly offer SmartBeam across their product lines. SmartBeam is the highbeam headlamp assist product that we introduced in the 2005 model year. And it is currently offered on 25 2009 vehicle models at seven OEM customers, including General Motors, Chrysler, BMW, Audi, Opel/Vauxhall, Toyota, and Land Rover.

We expect to announce a number of additional vehicle models for existing and new customers during the balance of the 2009 calendar year. For the 2008 calendar year, we shipped approximately 295,000 SmartBeam units. Based on our current forecasts, volumes, and incremental sales dollars for SmartBeams will become more meaningful in the 2009 calendar year.

Next, an update on Rear Camera Display or RCD. We have announced that our RCD mirrors are offered on 33 vehicle models with four automakers, including Ford, Hyundai/Kia, General Motors, and Toyota; and four aftermarket or accessory programs with Mazda, Gulf States Toyota, and Suzuki. There continues to be significant interest in Gentex's RCD mirrors, and we expect to announce a number of additional vehicle models during the balance of calendar year 2009.

The Company shipped approximately 270,000 RCD mirror units in calendar year 2008. If light vehicle production begins to stabilize and does not significantly decline from currently forecasted levels by CSM, we still believe there is sufficient customer demand, and that shipments of RCD mirrors could nearly double in calendar year 2009.

Regarding legislation, the automakers currently offering a Rear Camera Display product are doing this absent any legislation, and made the decision before any was pending. In 2008, the Kids Transportation Safety Act of 2007 was signed into law on orders of Secretary of Transportation at the National Highway Traffic Safety Administration to revise the federal standard to expand the field of view, so that drivers can detect objects directly behind vehicles. A phase-in period, during which automakers will need to meet these new requirements, is expected to be between now and 2015.

Next, an update on dimmable aircraft window programs. Boeing currently expects the first 787 Dreamliner aircraft to go into service in late 2009 or early 2010. Due to the Boeing production delays, we currently anticipate that we will begin to deliver our windows to the aircraft production line in 2009. Boeing has also expressed interest in utilizing dimmable windows for other aircraft.

Gentex and PPG Aerospace also announced in 2008 that we also will be shipping dimmable aircraft windows for use on the passenger cabin windows of the 2010 Beechcraft King Air 350i aircraft. This was the first aircraft in general business aviation with dimmable windows. Each King Air 350i will have 15 windows. Other aircraft manufacturers continue to be interested in this technology, and we are working on these potential programs with PPG Aerospace.

Next, looking at revenue estimates. The following projection for revenues for the third quarter of 2009 is based on CSM's end-of-June light vehicle production forecast. Due to the significant uncertainties with global vehicle production volumes, we do not plan to provide an estimate for revenues for calendar year 2009 at this time.

Our estimate for revenues for the third quarter of 2009 is a decline of approximately 10% compared with the same period in 2008, based on CSM's end-of-June forecast for light vehicle production levels. However, due to the many uncertainties in the marketplace, we believe there is potentially more downside than upside to global light vehicle production levels. For the third quarter of 2009, light vehicle production per CSM for North America is 2.2 million vehicle units, a 27% decline compared to the third quarter of 2008. Europe, for the third quarter of 2009, is currently forecasted at 4.2 million vehicle units, a 13% decrease compared to the third quarter of 2008. And Japan and Korea is forecasted at 2.7 million vehicle units, a 22% decrease compared to the third quarter of 2008.

For the calendar year 2009, light vehicle production for North America is currently forecasted at 8 million vehicles, a 37% decrease from calendar year 2008. For Europe, light vehicle production is forecasted at 16.3 million units, a 21% decrease compared to calendar year 2008. And for Japan and Korea, light vehicle production is forecasted at 10.3 million vehicles, a 28% decrease compared to calendar year 2008.

At this time, I just want to give you a quick reminder that all listeners should note that this call is being recorded by Gentex Corporation. All contents of Gentex's conference calls are the property of Gentex. No such content may be copied, published, reproduced, rebroadcast, retransmitted, or otherwise redistributed without the express written consent of Gentex Corporation. Gentex alone holds such rights.

While we understand that there may be companies that transcribe and redistribute our conference calls notwithstanding this warning, Gentex Corporation provides no authorization to do so, and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcripts, as Gentex Corporation will not be held liable for any -- for the content of any such transcripts. Gentex will hold responsible and liable any parties for any damages incurred by Gentex with respect to any such unauthorized use.

Your participation implies consent to our taping and to the foregoing terms. Please drop off the line now if you do not agree with these terms.

At this point, we will open this up to Q&A and -- ask your questions, go have it. Operator?

Thanks very much. (Operator Instructions) Himanshu Patel, JPMorgan.

This is Ryan Brinkman for Himanshu Patel. Can you help us in trying to understand, even directionally, how to think about SG&A and Research and Development spending going forward, as we begin to see sequential improvements in revenue?

Well, as we have -- if you look at the SG&A line, one component within that particular line item that we have talked about in the past is the impact of foreign exchange rates. And both for the second quarter and the first six months, that contributed to about 4 percentage points of the expense declines. And we would anticipate that that would continue into the third quarter. The fourth quarter foreign exchange rates could be potentially comparable on a year-over-year basis.

The balance of the SG&A declines through the first six months has been due to reduced incentive employee compensation. And as things stabilize, that component of the expenses could be reinstated. Within the ER&D line, the major contributor there has been the impact of lower wages due to the fourth-quarter layoff that took place, as well as incentive compensation.

Okay. Thank you very much.

Brett Hoselton, KeyBanc.

Let's see here. So many questions to choose from. Third-quarter declined (multiple speakers) --

You only get one.

Yes, I know. Well, a multipart question. Third-quarter of 2009 revenue declined 10%. That appears to be much better than the decline or outperforming the decline in production pretty materially. So, if that's the case, which I think it is, then what are the key one or two drivers of that outperformance? Why is your revenue doing better than production in the third quarter?

Well, I think there's probably three reasons, Brett. The first one is, we have a significant number of new programs that are beginning in the third quarter. The second, we have a number of new RCD and SmartBeam programs that will have a higher ASP. And third, there's -- it's somewhat tied to the behavior of some of our customers.

We've had certain Asian customers that, in the first half of the year, and particularly in the first quarter of the year, significantly reduced their production to bring their inventories in line with the sales levels. And, so, that was very abrupt and greater than the normal decline in production that you would expect based on the sales levels. And now they are resuming production at a higher rate. And so, we are benefiting from the higher production rates because they were able to bring their inventories more in line with their sales.

And I'm just going to slip another one in here. The SmartBeam -- 2009, more meaningful. Are we at a point now where you can define what more meaningful means? I mean, is it up 25%? Up 50%? What that might look like?

We would've defined it if we would have -- if we could have. At this point, I still think that the production levels are too uncertain.

Okay. Thank you very much.

Thank you.

David Leiker, Robert W. Baird.

I wondered -- talk about the revenue and margin guidance here for the third quarter. I think we'll do the math on that, it works out to -- I think it works out to about a $20 million increase in revenue. If you take the contribution margin sequentially you had in this quarter, you've got a gross margin number that's well above what was in the second quarter, like 200 or 300 basis points. Is there anything else we should think about that might offset that type of margin improvement beyond just the higher revenue?

Well, I think we are still being cautious in managing the -- our direct labor employment level. So, to some extent, near the end of the second quarter and going into the third quarter, we are going to use overtime as one of the buffers.

The second is -- Steve had mentioned, with ER&D and SG&A, the incentive employee compensation, which is really our quarterly profit-sharing bonus. And so, if revenues expect -- increase in the third quarter as we expect, then presumably, the margins and our profitability will also increase, which will increase the incentive employee compensation portion.

Okay. So, should we look at that being that more normal 40% to 45% that you would see as being more typical here than what we saw here in the second quarter?

Yes. That's what we would expect, David.

And do you think, going forward, then, that that's the appropriate number that we should use?

Yes.

You know, as we look out the next two to four, eight quarters?

Yes.

Perfect. Great. Thank you.

(Operator Instructions) Rich Kwas, Wells Fargo Securities.

I guess as I think about this, on the 35% gross margin, that longer-term outlook -- which, I think, Enoch, you mentioned last quarter -- has there been any change to that? Is that still the bogie?

Yes, that is still our objective to work towards getting back to that 35% margin. And as we've previously stated, that's going to take some time. And that's based on a more normalized production environment.

Okay. And then how do we think about the more normalized production environment? I.e., what's kind of the European or North American production level that would get you back there?

Well, I think we've talked about it -- probably more in line with the Company's revenues, that the Company revenues and unit shipments have to start approaching what it was last year. The units probably don't have to completely approach the prior levels, because we are expecting more dollar content and higher ASPs, due to the new RCD and SmartBeam programs. RCD and SmartBeam programs.

Okay, but just to follow-up on that, as we get closer to 14 million units or so in deliveries, that's kind of the bogies we should be thinking about in terms of getting back there to that 35%?

I think that's in the neighborhood.

Okay, great. That's helpful. Thank you.

Brett Hoselton, KeyBanc.

All right. That was a fast circle back. Other income. About $868 million -- or $868,000. Is that simply the interest on the fixed income portion of your portfolio?

Yes. It's the interest on fixed income investments as well as dividends on the equity investment portfolio.

And then as we think about the equity portfolio, how large is the equity portfolio at this point in time?

As of June 30, a little over $80 million.

And then, as we think about the impact of an increase in stock prices, are you mark-to-marketing -- mark-to-market the increase in the value of those in that portfolio?

Well, from an accounting standpoint, the balance sheet reflects the equity investment portfolio at its fair market value. The unrealized gain or loss on that portfolio is accounted for in shareholders equity on the balance sheet. In the fourth quarter of 2008 and the first quarter of 2009, we did mark-to-market. Due to other than temporary impairment accounting rules, some of those investments and those losses ran through the income statement.

Okay. And then, so, as far as the profits, the unrealized gains, those are going to be recognized as those stocks are sold?

Correct.

And then (multiple speakers) --

(multiple speakers) As of June 30, the portfolio was in a net unrealized gain position.

Okay. And then SG&A and R&D year-over-year in the third quarter -- year-over-year change?

We are forecasting 10% declines, both for SG&A and the R&D on a year-over-year basis for the third quarter.

And then, finally, on the share repurchase, what are your thoughts? Is there a general expectation that you're thinking maybe at some point in the time in the next, like, month or two that you might repurchase shares? Or is this still a period of tremendous uncertainty and you're probably going to consider it, realistically, like, 6 to 12 months from now?

Well, I doubt you're going to be able to pin us down to a timeframe, but I think we are more -- still more cautious in looking at the -- both the global economies as well as the automotive industry. I think when you look at the two OEM bankruptcies, GM and Chrysler, as well as some of the Tier 1 bankruptcies, we, at least, have been very fortunate in being able to minimize our credit exposure and bad debt expense, due to those situations.

But I think there's still a lot of uncertainty that there may be other auto companies and suppliers that are going to go into bankruptcy. And it's difficult to say right now what that impact could be on the global supply chain.

Okay. Very good. Thank you very much.

And we will take a follow-up question from David Leiker of Robert W. Baird.

I'm all right. Thank you.

Thank you. (Operator Instructions) Elliott Schlang, Great Lakes Review.

This is Jason Rodgers, Great Lakes. I was wondering if you could break out -- you mentioned about $80 million was in equities. I was wondering if you could break out the rest of the cash and investments portfolio?

Yes. As of June 30, our cash and cash equivalents was just under $330 million. Short-term investments were just over $6 million; and long-term investments were just under $81 million.

Okay. Thank you.

Garo Norian, BlackRock.

I wanted to just ask -- have you guys, thus far this year, had any accruals for incentive compensation? And if not, would you expect, by the end of the year, that you will have accrued anything?

Our incentive employee compensation is primarily our quarterly profit-sharing bonus. And we do accrue that on a quarterly basis, based on the actual results for that particular quarter. So we did not have any accrual in the first quarter of this year. We did accrue some funds in the second quarter of this year. And if the CSM and our forecast is accurate for the second half of the year, we would expect to accrue some funds for the third and fourth quarter. But it's basically accrued as you go. So it's not like Wall Street, where you have to accrue based on an annual expectation.

Okay. And ask one other question. Have there been any, I guess, reversals of some of the temporary cost savings measures that you guys have taken earlier in the year?

No.

Okay. Great. Thank you.

And it appears there are no further questions at this time.

Okay. Thank you, everyone, for participating. We will be here if you have additional follow-up questions. Have a good day.

And that does conclude today's teleconference. Thank you all for your participation.