JAKKS Pacific Inc (JAKK) 2002 Q3 法說會逐字稿

Good morning, participants, and welcome to today's JAKKS Pacific Conference Call. All lines are going to be in a Listen-Only mode until the question and answer portion of today's program. At that time, instructions will be given to anyone who wishes to ask a question. I would now like to turn--I'm sorry. At the request of our call leader this conference is being recorded for instant replay purposes. Any objections, you must disconnect at this time. I would now like to turn the call over to our moderator, Mr. Jack Friedman. Sir, you may begin when ready.

Good morning, and thank you for joining us to review our third quarter results. With us today on the call is Stephen Berman, President and Chief Operating Officer, and Joel Bennett, Chief Financial Officer. I will provide an overview of our third quarter results and current trends of our operations. Joel will then provide detailed comments regarding our third quarter results. We will then open the call for questions.

Before we begin I would like to point out that any comments made about future performance, events or circumstances, including estimates of sales, earnings per share information for 2002 are forward-looking statements subject to Safe Harbor protection under the Federal Securities Laws. These statements reflect our best judgment today based on current market trends and conditions and are subject to certain risks and uncertainties which could cause actual results to differ materially form those projected in the forward-looking statements. For details concerning these and other risks and uncertainties, you should consult our most recent Form 10Q filed with the SEC as well as the company's other reports subsequently filed with the SEC from time to time.

I am pleased to report a record third quarter for JAKKS Pacific, both in terms of sales and net income, especially in light of the retail and economic environment. Sales increased 10.6 percent to a record $106.6 million, our highest quarter ever and our first quarterly sales exceeding $100 million. We are very proud of that. Our emphasis on controlling our operating costs and improved product sourcing allowed us to turn the 10.6 sales growth into a 27.4 increase in net income to a record $14 million. This is our 29th consecutive quarterly profit.

I believe these results are excellent in light of the recent weak marketplace trends and are a direct result of our basic strategy to diversify our product lines and distribution channels. Cost controls have significantly increased our net growth. Joel will comment a little further on our third quarter final results in just a moment.

I'd like to take a moment to review our company's successes. Since our founding, we have grown from $6 million in sales in 1995 to well over $310 million forecasted for this year in addition to our joint venture with THQ. We achieved this more than 100 percent compounded annual growth rate in our sales through a combination of internal growth and acquisitions. While acquisitions have supplied a significant source of revenue growth, we have also been able to grow our organic sales over the last three years by 19 percent per year. We accomplished this internal growth through the efforts of our talented product development team and by expanding into new product categories and distribution channels. We have every reason to believe we can continue our organic growth while seeking additional acquisition opportunities on our way to becoming a billion-dollar company.

Acquisitions--which brings me to my next point. Since our founding, we have very successfully completed a number of acquisitions. We have demonstrated our team's ability to identify, favorably negotiate, and integrate a creed of acquisitions. Time and time again, we have consolidated these companies into JAKKS Pacific, eliminated expenses, and made the acquired product lines more profitable while delivering additional profits to our bottom line. Let me clearly state that we focus on a creed of acquisitions. With $101.3 million in cash, $156.2 million in working capital, and virtually no debt, our balance sheet is extremely strong and we continue looking for additional acquisition opportunities to leverage the financial strength and accelerate our internal growth, although we have nothing to announce at this time.

I believe that we have an excellent team in place to continue to grow our business. We focus on delivering value products to the consumer, higher profits for the retailer, and results for our shareholders. And I believe we deliver on all three.

Through 2001, we have grown our net income at a 64 percent three-year compounded annual growth rate and are on track for another record year. Yet, I believe our proven success has taken a back seat to a few marketplace concerns that are impacting our stock's valuation. I'd like to comment on two of these.

Toymax. I believe there may be a general misconception that we have had problems with the Toymax acquisition. Let me clearly state that Toymax is essentially completely integrated on our--on an operational level and initial results are in line with our expectations. We look forward to completing the final phase with the shareholder vote later on this week. Number two, officer loans. Stephen Berman, President of JAKKS, and I have each reduced our loan balances with the company to less than $700,000.00, and we will settle the remaining balances in full by March 2003. With that, I will now turn the call over to Joel for more details regarding our financial results.

As Jack mentioned, third quarter sales increased 10.6 percent to a record $102.6 million, and earnings per share increased to 58 cents per diluted share from 56 cents in the prior year with 4.5 million additional shares in 2002. Earnings per share, including all of Toymax, was 61 cents. We experienced a delay in the closing process and the minority interest amounted to just under 3 cents.

Sales for the nine months increased 8.4 percent to $241.5 million and earnings per share was $1.09 compared to $1.24 in the prior year with 2.8 million additional shares outstanding in 2002. Earnings per share, excluding non-recurring charges of $8.1 million in 2002 and $1.5 million in 2001, was $1.35 compared with $1.29 in 2001. Earnings per share, including all of Toymax was $1.39.

With this conference call we are adopting a new policy of disclosing sales by category to give better insight into how our business is growing and where we face challenges. We will comment on the broad product categories, but for competitive reasons we ask that you please refrain from asking about detailed sales trends by specific products, such as WWE. Sales of traditional toys, which includes our wheels, action figures, child guidance, dolls, electronic and promotional products, sales were $48.3 million for the quarter and $81.7 million for the nine months. Wheels remained weak because of continuing softness in the category and a difficult comparison to last year because of the great successes that we experienced.

In our seasonal product category we have our "Go Fly A Kite" performance kites and other outdoor products, our Fun Noodle pool toys, and our Junior Sports products. Sales for the quarter were $3.7 million and for the year-to-date were $23.2 million. Our third category, crafts and activities, and stationary and writing instruments, which includes primarily our Flying Colors and Pentech products, sales for the quarter were $38.1 million and the year-to-date sales were $105.5 million.

Finally, international sales for the quarter were $12.5 million, and for the year-to-date, $31.1 million. We expect growth to continue as we increase our efforts in placing our expanding product lines overseas.

Our gross margins for the quarter decreased modestly due to a change in product mix with the addition of Toymax product with lower initial margins. As many of you know, we are able to experience a lot of efficiencies in our acquisition of Toymax, and as early as next year we expect to improve our product purchasing in the Far East.

Royalties and tooling amortization were comparable in both years. The year-to-date gross margins were comparable as well. Higher product costs, however, were offset by lower royalties in 2002. SG&A expenses for the quarter and year-to-date were both up in dollars, but were comparable as a percentage of net sales with their year-over-year period. We expect careful management of our operating expenses will result in continued margin improvements.

Operating profit for the three months improved 150 basis points from the prior year, and the year-to-date operating profit margin improved 40 basis points from the year-to-date--prior year-to-date, excuse me. Our joint venture with THQ, which markets the WWE wrestling games and soon to be racing games in 2003, profits from the JV increase to $600,000.00 from $100,000.00 in the quarter in the prior year. For the year-to-date, the JV profit was $2.6 million versus $1 million in the prior year. We expect that wrestling games as well as the new racing games we will be launching in 2003 will keep pace with the industry.

Cash flow for operations from the quarter was $28 million, and cash flow for the nine months was $28.6 million. As Jack also mentioned, our balance sheet remains very strong with more than $103 million in cash, $156 million in working capital, virtually no debt, and an untapped credit line of $50 million. We are pleased to say that accounts receivable, while increasing sequentially to $89.4 million for the quarter from $78.1 million last quarter, our DSO's improved 11 days to 78 days.

Inventory decreased sequentially from--to $40.7 million from $49.9 million, also with improvement in DSI's of 45 days to 73 days. With that I'll turn the call back over to Jack Friedman.

I'd like to talk briefly about the retail--our opinion of the retail environment. The current environment remains tough. Expectations for the forthcoming holiday season seem to be sluggish, but I am happy to say that in the last week or so we are seeing stronger sell-throughs, somewhat of an encouraging aside. In terms of our products, while our strategy of emphasizing lower-risk evergreen products has not changed, I want to briefly discuss a few products I am excited about and that has received industry and consumer recognition.

JAKKS is firmly the number three toy manufacturer in the U.S. in terms of dollar sales behind Mattel and Hasbro. Vandye, a Japanese company, is the number four. This is impressive in that it does also not track our Pentech stationary sales. But we have achieved this without even counting Pentech. Flying Colors, as a category, is up 42 percent in dollars this year-to-date over the same period last year. Our Toymax unit is up 5.6 percent in dollar sales at retail year-to-date over the same period last year.

Our Goooze continues to be strong, and it has outsold Crayola crayons year-to-date. WWE is still the number two licensed action figure line for children nine to 11, and number three licensed action figure brand of figures and accessories for kids 12 to 17 year-to-date, ranked by dollar sales behind Star Wars and Transformers. Flying Colors accounts for over 57 percent of the licensed compound business with sales of Nickelodeon brand, Blues Glues, and Sponge Bob products. Flying Colors has the exclusive craft and activity toy rights for six of the top 10 craft kits. Additionally, JAKKS has launched an OEM Princess doll line for the Disney stores with huge success. Sponge Bob and Hello Kitty were two of the top sellers for back-to-school products this past season.

In closing, I believe that JAKKS Pacific is well situated to continue on its path to becoming a billion-dollar company. Let me review a few factors I believe will help us get there. We have one of the strongest management teams in our industry. Our emphasis on evergreen products reduces our reliance on hit-driven products and mitigates some of the risk inherent in the toy industry. We have proven our ability to deliver organic growth. We have demonstrated dramatically our ability to execute and integrate a creed of acquisitions, and we have a strong balance sheet to continue doing so. From where we sit, we are very excited about the opportunities available to us and we expect to continue delivering both sales and earnings growth. With that, we will now open the call to questions.

Thank you. Participants on the phone, if you would like to ask a question, please signal by pressing "star 1" on your phone keypads. Once again, participants, if you would like to ask a question please signal by pressing "star 1" on your phone keypads. If using speaker equipment, you may need to lift your hand receiver prior to pressing "star 1," and if you wish to withdraw your question you would press "star 2." One moment while questions register, please. Thank you. And our first question comes from Tony Geika of US Bancorp.

Nice job on the quarter.

Thank you, Tony. Good morning.

A couple of questions. Maybe just a little bit more color on any concerns that you guys have with the retail environment, and also maybe an update on the West Coast port issues. Is there really any material product that you have sitting in containers? Are there any issues there? And then I have a follow-up.

Okay. I'll take this. This is Jack, Tony. I'll take the second part first. We have stated on our last conference call that we were not going to take much risk regarding the dock strike and that we were bringing products in on an earlier basis to make sure we had those products in. We do have some containers on the docks, nothing of consequence to disturb our business. It probably costs us a couple or three million dollars of wholesale sales in Q3, but nothing of--nothing of significance to us. And the first part of your question was the--.

--The retail concerns?

Retail concerns. Number one, we definitely feel a desire on all of our major retailers parts to carry lower and lower weeks of inventory and we believe we are in a good position, financially able, and systems able to manage our inventory to the way that the retailers want their inventory. The general feeling is that business is somewhat sluggish. I did say earlier in the call, Tony, that this past week we did see a nice beef up in the retail sales. Hopefully, that's the beginning of a trend, but we're not--we're not, and I wouldn't recommend anybody betting on that off of one week.

Okay. How's business--how are you doing business with K-Mart and how is that business? And then, could you quantify--you talked a little bit about the cost controls. I don't know if you have the number at your fingertips, but any idea--any way to quantify what sort of costs you've taken out of the business for this year?

We had a--we had announced a headcount reduction in our last conference call that was effective July 15 which will give us savings in the neighborhood of $1.5 million to $2 million per year.

Joey, you might comment on that--last year, if you know if offhand, what was the SG&A for nine months of Toymax and approximately how much would you say additionally it's costing us to add that to our business.

For the quarter, layering in their current infrastructure, most debts on Toymax had already been done. We were up about $1.5 million, but that's including the volume increases. In general, we've always been cost conscious and it's just, you know, one step of many. In addition to the headcount, there are related costs and we also each day, each week look around all the different operations and look for opportunities to improve our operating margins. Year-over-year, our warehouse has been operational for about 18, 19 months now, and we're continuing to gain efficiencies there as well.

And then, K-Mart?

K-Mart, we sell a lot F.O.B. We have 15-day terms there. It keeps them on a fairly short leash. If you don't remember, we were paid in full on all of our Hong Kong receivables relating to pre-filing sales. And we're monitoring them on a regular basis. They have stated some bullishness in terms of when they'll get out of Chapter 11. We're hopeful that that will be the case, but we're not taking too many chances with them at this point.

Well, with their--and additionally with their closing down of many stores and their same stores' sales down, we've emphasized at all of our past conference calls that we have made a very strong effort at finding alternative outlets for our products. And we think we're doing a very good job with that.

Okay. Thanks, guys.

Thank you.

Thank you.

Thank you. And our next question comes from Brett Jordan of Advest.

A couple quick questions, and one just on the alternative distribution channels. I guess as you've acquired some lines that were not typically, you know, toy resale products, could you give us a feeling for what percentage of the revenue this quarter were mass versus non-mass retailers?

The mass still accounts for better than 50 percent. The second tier, which is sort of the next seven of the top 12, they're about 20 to 25 percent. It's the drug channels, grocery, and Bed, Bath and Beyond, and the warehouse club stores.

That's opposed to two years ago, 67 percent of our sales were in the [inaudible].

Okay. Do you have a feeling for the dollar contribution from Toymax for this quarter, Joel?

The product, the top line have been integrated into the other lines and those are the numbers that I had provided earlier.

Okay. And then I guess on the JV side it sounds like the WWE product is reasonably strong within the THQ property. Is there a fixed expense per quarter or a way that we should factor in, you know, their payment to you and your fixed cost against that on a quarterly basis?

Yes, our SG&A--we've got about eight people or so that we allocate a portion of their--some are 100 percent, some are less than 100 percent. But the aggregate of their salaries, facilities, and T&E is about $1.070 million, or it's about $370,000.00 a quarter that we charge to the JV. And one of the other differences between what they reported--I think they had a $1.044 million. There are--under the original deal they were responsible for all of the royalties. And beginning this year, when we took over the WCW license, there were some incremental royalties that we're paying separately. So it's basically the recognition of that royalty expense on our side which accounts for the other part of the difference.

Is there any material guarantee on that royalty, the going-forward that you have to address?

No.

Okay. And then I guess, you know, given the strength of the core earnings and the valuation, is there any thought to a share repurchase program?

It's always on our minds when the stock is at these levels. We think that we're undervalued at this point and it is definitely under consideration.

We have been--since we did a secondary past May, we are restricted for a period of six months before we can begin that program.

Okay. Thanks a lot.

You're welcome.

Thank you. Our next question comes from Jamie Howd of Current Capital.

That's nice work. Brett, you took all my questions. Joel, just a question on the income tax--income tax payable, $14.6 million. Is that related to Toymax?

The deferred is. The payable is consolidated operations. I know--I think it may be a coincidence they are both about the same. We have a deferred tax asset of about $14 million--.

--Right--.

--And the income tax payable--actually, let me look. Yeah. No, that's combined operations.

Okay. And then, oh boy, that's just about it. Can you all comment on the karaoke machine? I've seen them promoting it over at Toys 'R' Us and Kay Bee in the neighborhood. How's that--how's that looking?

This is Jack, Jamie. Number one, we run our business very conservatively and have acquired components for these karaoke machines very conservatively. And in the UK, it's probably the number one best-selling toy. In Australia, it's probably the number one best-selling toy. We've only been on TV promoting it for the past two weeks and sales have accelerated about three-fold. The long and short of what I am saying to you, we have an apparent hit on our hands and we will not have expensive inventory to boost up fourth quarter. They will come out better than expected. We did do some anticipation. The really good news to it is we have additional products in that category for next year. And traditionally in our industry, when a product comes up real short, and this probably will come up real short by year-end for the consumer, that we probably have a very open field, a terrific year for the category next year.

Good. Are you--.

--But the opportunities with that line is the--sort of the old razor/razorblade--

--Right--.

--Scenario. And we've got four volumes of additional songs and we have many more themes and assortments planned for that.

And you are gonna stick with the cartridge base on that? I see--Singing Machine, they've got the CD's.

Well it is our intention, but we do have some--we think some unique products next year which we can't discuss at this point.

Okay. And on international sales, where are you getting those sales from? Is it the UK and Australia primarily?

Mostly UK and Australia.

Okay.

Canada, we consider part of U.S.

Okay. And last, are you willing to take a stab at numbers for 2003? We're getting pretty close.

No.

Okay. Thanks, guys.

Only because of the retail environment. We need a little--a little better what happens in the Christmas selling season.

Okay. Great. Thanks a lot, guys.

You're welcome.

Thank you. Our next question comes from Brett Hendrickson of B. Riley and Co.

Hey, guys.

Hi, Brett.

Hi. Good morning.

I just have a few--just a--maybe points of clarification. Joel, can you give us any idea for how much Toymax was? I know you integrated the product line some of the--your license content you are actually kind of reporting over to Toymax. But can you give us an idea for how much revenue they contributed and how much for the year?

The breakdown that we provided is the extent of the information that we have at this point for the general public.

Okay. But you guys mentioned continued organic growth. So you guys are saying that there was organic growth in the quarter?

Yes.

Okay. And just--I got interrupted when you were talking about K-Mart. Did you say K-Mart is paying on time right now?

Yes. Basically, we are shipping a lot F.O.B. China, which have shorter terms, so we're able to keep on a bit of a shorter leash. They were a bit optimistic about their emerging from Chapter 11. So we monitor it very closely. And the other part of the K-Mart comment was that we're expanding our distribution outside of our top five, and our next 12 accounts for about 20 to 25 percent of the business, which are the drug channels, grocery stores, club stores, and Bed, Bath and Beyond, and those types of retailers.

The next seven, right Joel? The next seven of 12?

Correct.

Okay. And can you give us the gross you received from THQ in the quarter?

$1.044 million was the amount reported.

Okay. So you're just going off what they reported. Okay.

No, we get a detailed report. I'm just--some quarters, because of timing differences, we don't always--we're not always in sync.

Yeah. That's what I was asking I guess is how much did you guys actually get to book on a gross basis in the quarter.

Yeah, it was $1.044 million. From that we have about $370,000.00 a quarter in salaries and T&E and related costs, and also the additional royalty related to certain games after we acquired the WCW rights.

That was my next question, actually. Can you give us a little more detail on--are you and THQ splitting the WCW royalty equally?

No.

Can you give us any color in terms of how material that is to you guys?

Not very. If you take a $1.044 million and you get to $600,000.00 something and $400,000.00 is overhead, it's really not very significant.

Okay. And I don't have the gross number from last year in front of me. Do you know it off the top of your head for last year, Q3?

Let's see, if we reported $100,000.00 and we have $370,000.00 in--.

--Okay. So the $370,000.00 didn't change?

No, because the same people, at least the core group is the same and the costs don't change much. The only thing that might change is T&E. But now that we're in a steady state, if you will, we have a regular amount of T&E where they travel back to Connecticut or to the various events. So it doesn't change significantly from quarter to quarter.

Okay. Crafts and activities, shelf space for the holiday. Can you guys talk about how much that's grown for you guys in the key retailers?

[inaudible]--To quantify it, but the best comment we can make on it is we are getting more and more shelf presence and it's becoming more and more a very major brand to our retail customers and to the consumer as well.

Okay. Yesterday, Hasbro was talking about retailers doing some special programs for Star Wars in relation to the DVD release. You know, there's a fixed amount of shelf space for some of the boys' activities toys, or the boys' action toys. Is there a worry that that might cut in a little bit to the WWE shelf space?

No, not at all. I think that retail--those retailers that would be in that special program, and I don't know who they are, will usually allocate an end cap or an in-store carousel or some other space for those special promotions.

Okay. Then just two other quick ones. Joel, CAPEX for the quarter? And then, Jack, you mentioned you can't buy back stock for six months. Can you give me more color on that because one of my other companies, Gart Sports, started buying back their stock within six weeks of doing a secondary earlier this year. And I want some more color on the buy back limitations.

I don't know the specific rule but we've been guided by our attorneys to tell us that it's not safe for us to buy within six months of doing the offering.

Okay. If I could just give my two cents, I think anybody who bought in the secondary at 17 is not gonna, you know, cry and whine too much because they're buying back stock at 11. They'd probably cry and whine if you don't buy back stock at 11.

Additionally on that, there is a specific rule that insiders who have sold shares in the secondary, they cannot buy shares for six months without giving up the profits of that initial sale.

Yeah. I understand that. And then, Joel, the CAPEX?

It was about $500,000.00.

Okay. Thanks, guys.

Thank you.

Thank you. And our next question comes from Russell Cleveland from Renaissance.

Hello, fellows. Can you hear me okay?

Yes.

You know, we've been here a long time. Congratulations on building a real good company. My main question was about these buy backs. And I would also add, you know, the management of the company because it seems like your stock is one of the cheaper stocks on the marketplace. And the exact date would be when for considering buy backs?

I don't know the exact date because there was an add-on to the deal, a green shoe. I'm sure exactly what date we closed that green shoe, but it would be six months--approximately six months from the beginning--.

--First week in December.

First week in December. Okay. And then, adding to this, you know, I think a great deal of confidence if the management bought back shares themselves, you know, when they could, I think that would be a very good sign to the market because as we all know, your record has been superb. You've built a great company. But shareholders have not benefited here because of the low valuations of the company. And I think the best thing is obviously if the company would buy and officers buy back in it would show a great deal of confidence that we have in the future of the business. And so that's really all I have.

Thank you, Russell.

Thank you. And our next question comes from Esther Cho of Waymark Partners.

Hello?

Hi.

Hi. You may have answered this question previously, but I must have missed it. Could you go over again what percentage of your total revenue is from Toymax? Did you break those numbers out?

No, what we did is we broke it out by those categories and Toymax has been integrated into each off the categories that we did break out. And the breakout was the extent of the information that we are able to provide.

Okay. All right. Thanks.

Thank you. And our next question comes from Arvin Bottea of SWS Securities.

Morning, guys. Quick question. More of a macro question, Jack. What are some of the toys that in your opinion will drive customer traffic at like Toys 'R' Us? Is there one or two that you--that you feel like will be the key drivers? And then, one question specifically related to you guys. What is the wheel division's performance? I know you said it was down, but can you write some color on how much it was down? I think you brought a percentage decrease in last quarter. Can you provide some details for September?

The first part of your question, Arvin, video games continue to do well and drive traffic. Uvio, a Japanese brand, is doing quite well. And a line called Ratch from a local California company called MGA is doing excellent. Beyond that, I guess it's a general sell-through of various toy lines. There aren't any huge market drivers. And the second part of your question is that no one can be right all the time regarding our wheels division and our extreme sports. We did anticipate a year ago that they were evergreen like many of our other products, and it's turning out that they are not evergreen and retailers are backing off on it. So it's been our one disaster, if you want to use that word, and the business is way, way off on it. But overall, our business is excellent. That is the one weak area.

Let me ask you this then. If you were to exclude this one problem area, what would be sort of the growth rate, and maybe you can talk in terms of ranges or something of that nature, for the rest of the business. And again, maybe you exclude Toymax as well. If you were looking at it on a core basis excluding Toymax and excluding the wheels division, what would be the rest of the business, the growth rate there?

I don't think throwing that question at us without having those materials and digging into a great deal of information to get that--but if wheels was equal to last year we would be having a runaway year, I would say. But that is--that is not the case and everything in any business isn't always totally euphoric.

Okay. And then, I don't know if--I'm sure you saw this though. THQ, yesterday on their conference call they lowered sort of the industry forecast for the video game business. And I know one of the things that you mentioned as the driving category at retailers, video games. Have you, I guess, have you considered what THQ is saying? And is that a change from your thinking on what's happening out there in retail?

We really don't have any comments on that. We don't--we don't really stay on top of the day-to-day business of video game sales. We're comfortable with the forecast and then what we anticipate for sales of our WWE games. I would just make one comment on that, Arvin. As a past person very involved in that business, I think there is a lot of product from a lot of companies coming out, and once that starts to happen, sometimes that causes dilution of per title sales. But I am not trying to be specific. I'm just giving a comment from past experience there.

Got it. Great. Thank you.

Thank you. Once again, participants, if you would like to ask a question, please signal by pressing "star 1" on your phone keypad. Our next comes from Mr. Brett Jordan of Advest.

Up here on the TV advertising it relates to--as it relates to Toymax, since that really wasn't in the business a year ago. Do you see any material change in the marketing expenditures in the current fourth quarter as you do some TV promotion on those lines?

Well, we are set--we are TV advertising less--considerably less Toymax items than they advertised last year and the previous year.

But do you see a material or a change in your absolute ad spending on the fourth quarter? I mean, should we be adjusting EBITDA expectations to reflect something at the marketing line?

We do have--I mean, with Toymax we've got the equalizer and the karaoke that will go to TV. Again, the level of TV will be more consistent with JAKKS. Rather than really driving the product, the challenge is a big part of our marketing effort and then we're supporting the presence at retail and retail promotions with the television.

But your gross ad--your gross promotional spending isn't changing dramatically?

No.

Okay. Thanks.

Thank you. And at this time, we show no questions registered.

We thank you all very, very much for your attention and we look forward to continued pleasant news on our future conference calls. Thank you all.