Kelly Services Inc (KELYA) 2011 Q2 法說會逐字稿

Good morning and welcome to Kelly Services' second-quarter earnings conference call. All parties will be in a listen-only mode until the question-and-answer portion of today's presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Carl Camden, President and CEO. Sir, you may begin.

Thanks, Kaylee, and good morning everyone. I'm glad that you could join us for Kelly Services' 2011 second-quarter earnings report and conference call. And with me on today's call is Patricia Little, our CFO. Let me remind you that any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the Company's actual future performance.

Now, let's move on to the results. Kelly turned in a solid quarter, continuing on the steady growth track we began more than 6 months ago. Revenue growth for the quarter was a healthy 16%. Our gross profit rate held steady at 16%. And a tightened expense base delivered strong operational leverage. Overall, Kelly's second-quarter results showed impressive improvement, both year over year and sequentially. We are well on our way to a nicely profitable year.

For the quarter, Kelly's adjusted earnings from continuing operations were $0.52 per share, compared with last year's adjusted second-quarter earnings of $0.14 per share. We achieved an adjusted operating profit of $20.7 million for the quarter, a significant increase over comparable earnings of $10 million earned for the second quarter of 2010. You'll remember that we took immediate action to bring our expenses in line with revenue growth and current business conditions late in the first quarter, and those actions clearly had a positive impact on our bottom line. In terms of demand for services, we appear to be following a normal seasonal pattern, with a slow pace of improvement. Nevertheless, we believe that the general trends remain positive and that we're headed in the right direction.

Specifically, light industrial remains well ahead of pre-recession levels and continues to perform well. We are especially pleased with the performance of our OCG segment; with the infrastructure largely completed and the largest investments behind us, OCG made considerable progress this quarter. Earnings improved $5 million year over year, and more than $1.5 million on a sequential basis. We're now near breakeven for this promising business segment. We also continue to make investments in professional and technical staffing, where we see growth and demand for highly-skilled workers and more profitable business opportunities.

Our strategic emphasis continues to be on growing our higher-margin PT and fee-based businesses. We are confident that it's a strategy that positions us well going forward. But as long as the economy maintains its current trajectory, our business mix will skew to lower margin sales. Recent economic news and job reports have many consumers, investors, and businesses wondering if the current US recovery has stalled; and, from our perspective, it's clear we have hit a soft patch, but the recovery has not ground to a halt. It is true that uncertainty hangs over the economy, fueled most recently by concerns over our nation's fiscal situation. The strength of the recovery has been tested this year by the convergence of several unusual events. The combination of events has created negative fallout throughout the US as well as the world's economy.

In our opinion, although the recovery is slow and somewhat erratic, we believe it is sustainable. Our customers expect continued economic expansion with the second half of 2011 stronger than the first. In the US, the current labor market remains essentially flat, and while we saw a moderate deceleration in temp job growth during the second quarter, year-over-year growth for our industry stands at a respectable 9%. During the first 6 months of 2011, temporary jobs were up nearly 11% and that's better than the 9.4% growth in the whole of 2010. And we're pleased to see that deceleration in temp job growth reversed itself in July, trending back in the positive territory.

Let me remind you of how far we've come. Not that long ago in 2009, temp jobs were down more than 25% for the year in the US. And, while we are still somewhat short of pre-recession levels in the US, we are building healthy momentum. In relative terms, June's 7.4% temporary job growth stacks up well, certainly when measured against overall job creation.

We also believe that ongoing economic uncertainty is helping to create a secular shift in demand for temporary staffing, as we provide the flexibility and fluidity employers seek during uncertain times. Our workforce model may very well become the normal business model this cycle. We've already seen significant growth in the number of nontraditional workers, as well as greater demand from our customers to recruit and manage a skilled, flexible workforce well into the future. And there's no question that skill shortages loom ahead and these trends reinforce our outlook.

Let me provide you with greater detail about our second-quarter performance in each of our business segments, beginning with the Americas. Revenue in Americas Commercial in the second quarter increased 12% year over year; on a sequential basis, revenue was up 3% for the quarter. Within the Commercial segment, light industrial staffing and electronic assembly continued to experience strong year-over-year growth, growing 14% and 32% respectively. Placement fees increased 38% year over year for the quarter, with increases in both conversion fees and direct placement fees. On a sequential basis, placement fees were up 1% compared with the first quarter.

Commercial's gross profit rate for the current quarter was 14%, or 30 basis points lower than the same period last year. This decline was due mainly to the expiration of the HIRE Act. On a sequential basis, the gross profit rate was 20 basis points lower than the first quarter, due to higher benefits costs.

As you may recall, last quarter we significantly reduced the number of positions to bring expenses back in line with anticipated business growth, and we were successful. Expenses for the quarter grew only 4.4% year over year on a revenue increase of 12%. On a sequential basis, expenses were down 7% from the first quarter. We're pleased with the solid earnings of $23 million achieved by Americas Commercial in the quarter, growing 28% over the prior year.

Now onto Americas Professional and Technical segment, PT revenue in the second quarter increased 13% year over year; on a sequential basis PT revenue was up 3%. For the quarter, we saw strong double-digit growth in our technical business lines. Our IT business grew 23%, science 17%, and engineering also increased 17% year over year. In addition, our IT and science lines exhibited strong sequential growth for the quarter. Combined temp-to-perm and direct placement fees for Professional and Technical increased 76% year over year and 41% sequentially. For the entire segment, our gross profit rate was 14.6%, down 110 basis points from the same period last year. The decline is due primarily to stronger growth in lower-margin business within our large accounts, as well as the expiration of the HIRE Act, partially offset by higher fee incomes.

Sequentially, the GP rate is down 40 basis points, also attributable to service mix issues. As expected, with continued investment in this segment, year-over-year expenses were higher in our PT segment, increasing 13%. We're adding recruiters and adjusting performance-based compensation in support of our PT expansion. Sequentially, however, expenses were down 7%, due mainly to lower overhead costs. All in all, PT earnings were $10.4 million for the quarter, although 12% below prior year due to the margin impact in additional investments I just mentioned; earnings were up 22% sequentially compared to the first quarter.

Let's turn now to our operations outside the Americas, beginning with EMEA. Reported revenue in EMEA Commercial was up in the second quarter, compared to last year, by 23%. On a constant currency basis, revenue was up 7%. For the remainder of my EMEA discussion, all revenue results will be discussed in constant currency. Looking at the regions, the most significant improvement was seen in Eastern Europe, with an increase of 35% year over year. This was primarily driven by the performance in Russia. Western Europe was up 7% year over year, primarily attributable to our operations in Germany, Switzerland, and Italy.

We continue to see a nice improvement in fees for the quarter. Fee revenue for Q2 was up 12% year over year; this growth was driven by Italy, Germany, and France. The quarterly GP rate for the second quarter was 16.3%, up from the 16.1% for the same period last year, mainly due to perm fees. Expenses were only up 1% year over year and constant currency excluding restructuring. Excluding restructuring on impairments, EMEA Commercial's second quarter performance improved by over $3 million, compared to the same period last period, and nearly $4 million on a sequential basis.

EMEA Professional and Technical also improved this quarter, with revenue increasing 16% year over year. Fees in the second quarter were up compared to last year by 18%. The growth in fees was primarily attributable to Kelly Financial Resources. The gross profit rate in the segment held relatively stable at 27% for the quarter, compared to the 27.1% for the same period last year. PT expenses increased by 8% compared to a year ago on a constant currency basis. EMEA PT reported a profit of $1.4 million, a nice improvement both year over year and sequentially.

In our APAC region, we continue to see strong revenue growth, particularly in the Professional and Technical segment, which grew by 56% on a constant currency basis year over year. For the remainder of my APAC discussion, all revenue results will be discussed in constant currency. Combined revenue, both Commercial and PT for the region, grew by 13%, consistent with the 16% increase in the first quarter. Growth in Singapore was particularly strong, up 20%. Fees continued to improve in the region and were up 30% for the quarter. Both Australia and China had solid growth of more than 50%. Our GP rate for the region increased by 40 basis points as a result of strong growth in fee income, offset somewhat by a decrease in the temp GP rate.

Expenses for the quarter were up 39%, or 23% on a constant currency basis. This reflected continued investment in the region, particularly the addition of PT recruiters. As a result of the increased investments we've made, we had a small loss for the quarter compared to a small gain in the prior year. And, although we plan to make additional investments across this region, we are on track to return to profitability by the fourth quarter.

Our final segment is our Outsourcing and Consulting Group, OCG. We're encouraged by the increased customer demand and pleased that this translated into improved quarterly earnings performance. OCG revenue was up 23% in the second quarter, compared to last year. And as we've demonstrated in the last 4 quarters, we narrowed our loss once again for the quarter with a year-over-year improvement of $5 million. We're pleased with the progress we're seeing in all our practice areas within this segment.

Let me highlight a few of those areas with strong revenue growth. Globally, in our RPO practice, revenue was up more than 50% versus a year ago, while fee revenue was up 71% year over year in our contingent workforce outsourcing practice. Our executive placement practice also reported nice year-over-year revenue growth of 35%. And with smaller year-over-year growth of just 10% was our BPO, business process outsourcing practice. Overall, OCG's gross profit rate is 700 basis points higher than a year ago. On an absolute dollar basis, our GP is up 62% over last year. The improvement in GP rate continues to result from improved volume mix in higher-margin practice areas.

Expenses were up $3 million, or 16% year over year in OCG. This increase in expense is primarily the result of servicing cost associated with the expansion of customer programs. Generally speaking, we saw earnings growth in virtually all of our OCG practice areas in the quarter. However, on a combined basis, OCG had a loss of nearly $900,000 in the quarter. That's a significant improvement from the $5.8 million we lost a year ago, and a $1.5 million sequential improvement. We are very pleased with our ongoing progress within OCG and remain on course to achieve profitability in this segment in 2001. Now I'll turn the call over to Patricia, who will cover our quarterly results for the entire Company.

Thank you, Carl. Revenue totaled $1.4 billion, an increase of 16% compared to the second quarter last year, 11% on a constant currency basis. On a sequential basis, revenue was up 5% compared to the first quarter. Worldwide, our fees were up 46% year over year, 35% on a constant currency basis -- an improvement compared to the 30% constant currency growth rate in the first quarter. On a sequential basis, our fees were up 12%. Our gross profit rate was 16%, an increase of 20 basis points compared to last year. The growth in fee-based income offset a small decline in the temp GP rate, due to the expiration of the payroll tax holiday provision of the HIRE Act. On a sequential basis, our GP rate did not change.

During the second quarter, we made a small adjustment to our existing restructuring accruals, reducing expense and improving earnings by $600,000. Excluding restructuring, expenses were up 13% year over year, 7% on a constant currency basis. The increase is due to additional headcount we added in prior periods as well as incentive-based compensation. On a sequential basis, excluding restructuring costs, expenses were down 2%, as we brought expenses in line with our current revenue growth as well as experienced the benefit of some small one-time adjustments. We gained significant leverage through expense discipline in the second quarter. On a sequential basis, GP increased $11 million, while expenses, excluding restructuring costs, decreased $4 million.

In the second quarter, our GAAP earnings from operations were $21 million, compared to earnings of $8 million in 2010. Income tax expense in the second quarter was $600,000, or 3%. The low rate was a direct result of significant employment-related tax credits. During the quarter, we increased our estimates of both work opportunity credits and retention credits related to the HIRE Act. Diluted earnings per share from continuing operations for the second quarter of 2011 totaled $0.53 per share, compared to $0.11 in 2010. Excluding the restructuring adjustment this year, and an impairment charge last year, earnings per share from continuing operations were $0.52 this year compared to $0.14 last year. During the quarter, we recorded a loss from discontinued operations of $1.2 million, or $0.03 per share, which was related to litigation at a division we sold in 2007.

Before I turn to the balance sheet, I'll make a few general comments about our expectations for the third quarter. We expect continued strong revenue growth in the low- to mid-teens on a year-over-year basis, in the high single digits on a constant currency basis. As the year progresses, we will face more difficult comparisons. Sequentially, we expect that the gross margin will be relatively stable, although we may see some improvements if these continue to increase. Please keep in mind, the gross margin comparisons to the prior year will be more difficult.

Last year we received $7.2 million of HIRE Act payroll tax benefits in the third quarter and $21 million for the full year. The HIRE Act payroll tax holiday expired at the end of 2010. We continue to get HIRE Act benefits, but they have my migrated to the tax line. Expenses will increase on a sequential basis due to incentive-based compensation, annual merit increases, and investments in recruiters and IT infrastructure, and the non-recurrence of certain one-time adjustments.

For the full year, we expect that our tax rate will be about 10%, which is lower than our prior estimate of 15% to 20%. The decrease in the rate is due to our work opportunity credit and HIRE Act retention credit realization improving from our already high levels. These credits are a direct result of great performance in our US field operation. It's important to note that the HIRE Act retention credit is only available in 2011.

Turning to the balance sheet, I'll make a few comments. Cash totaled $80 million equal to year-end 2010. Accounts receivable totaled $930 million, and increased $119 million compared to year end. For the quarter, our global DSO was 52 days, compared to 50 days last year. Accounts payable and accrued payroll and related taxes totaled $501 million and increased $76 million compared to year end.

At the end of the second quarter, debt stood at $89 million, an increase of $10 million compared to 2010 year end. Debt to total capital was 12%, up slightly from 11% at the end of last year. In our cash flow, net cash used in operating activities was $7 million, an improvement compared to cash used of $20 million last year. The change primarily reflects improved operating results in 2011. I'll turn it back over to Carl for his concluding thoughts.

Thank you, Patricia. After significantly streamlining operations, realigning our geographic footprint, adjusting our expense structure, and reshaping our business strategy last year, 2011 has been about executing our plan. We've made steady progress. Our strategic position is stronger and our outlook is optimistic.

To recap, our US Commercial business is performing well due to the out-performance of [lid]. PT is now growing faster than our Commercial business in all 3 regions year over year, and we continue to focus on higher-end PT services. We've seen significant growth and considerable performance improvement in our OCG segment. We're winning contracts and solidifying OCG's importance as a vehicle for accelerating Kelly's long-term growth and profitability. Both OCG and Professional and Technical have the potential to support solid revenue growth and lead to greater margin performance. And we're now configured to capture more of that business going forward.

Fees are recovering nicely, with sequential and year-over-year improvements, but we are still well below pre-recession levels. Across the Company, we're applying more focused discipline around management of our cost. However, investments are required at this point in the cycle to support our business growth. As Patricia highlighted, these investments will cause expenses to increase on a sequential basis for the third quarter.

You'll remember we have set an aspirational target of reaching a 4% return on sales. We've stressed our commitment to delivering more competitive returns this cycle. Our emphasis on higher-end PT and fee-based services will help to fuel our progress. However, more rapid advancement won't occur until permanent higher-end accelerates in a more meaningful way.

For the second quarter, our ROS was 1.5%, an improvement compared with the 0.4% ROS in the first quarter. As we look out, in the shorter-term, we expect the recovery to continue at its gradual pace. Currently, our customers, while not signaling dramatic upswings in near-term hiring, are also not sharing plans to scale back either. As such, we expect revenue to grow year over year in the high single digits and constant currency for the third quarter. We're also continuing to see signs of normal seasonality in our business. Based on our strong second-quarter performance, the strategic progress we're making, and our confidence in the sustainability of the recovery, yesterday our Board of Directors approved a dividend of $0.05 per share for the quarter. The dividend is payable on both class A and class B common shares.

Reflecting on the progress we're making, it's helpful to remember our overarching strategy. Kelly will achieve a competitive profit by emphasizing higher-margin specialty staffing and leveraging our reputation to grow broader, more profitable customer relationships. Kelly will deliver customer-focused workforce solutions by meeting customer demands for an entire continuum of flexible, customized services spanning traditional staffing, professional and technical offerings, and outsourcing and consulting services. We will engage the best talent, ensuring exceptional service to our customers by attracting and retaining high-quality internal employees, free agents, and suppliers. Clearly, we've established ambition goals, we've mapped out a path to reach them, and we believe that the strategies we're implementing are taking hold. We are confident that our Company is ready to make the most of the evolving world economy and all the labor market demands that lie ahead.

That concludes today's reports. Patricia and I will now be happy to answer your questions. Kaylee, the call can now be opened.

Thank you. (Operator Instructions) Our first question will come from the line of James Sanford at Citigroup. Please go ahead.

Good morning, thank you. Just wanted to touch on a couple things. I realize you don't have that much government exposure directly, but what are the potential derivative effects of budget cuts on sectors like education or even healthcare that might impact your business?

We do have a large relationship with the US government, they're one of our top 10 customers. Even through the budget debate and the looming deficit, we did not see an intent to disproportionately impact temporary employment and in fact I would argue that the government is probably going to catch up to the private sector over the next few years in its use of nontraditional or free-agent labor as a component of their labor mix.

Great. And just a quick high-level question, you mentioned secular growth as potentially more important this time around versus maybe in prior recessions. What gives you comfort that you're seeing more of that happen now versus prior recessions?

3 things. A direct tie to Kelly, our customers rhetoric is very much along the lines that they plan to increase the proportion of variable labor in their talent mix, and allow a somewhat dismissive of that rhetoric 3 years ago the fact they've consistently stayed with it tells me it really is a strategic directive of their executive management. Secondly, as we look at our own business, without changing our customer mix, without making any special effort to drive into the first categories that recovery, like light industrial staffing and electronic assembly, we're already above our pre-recession levels. So we're seeing actual evidence that companies are mixing out at a higher level of variable talent side. And then finally, outside of the Kelly universe, I'm now seeing a steady stream of studies by various business groups asking that exact question of Chief Purchasing Officers and Executive Officers at companies, and they're all -- even outside of the Kelly universe, all saying that they plan to increase the performance. I'm seeing it both in intent as well as in reality.

Excellent. Thank you.

Our next question will come from the line of Colby Summer at SunTrust.

Hey, good morning. The gross margin at OCG and the operating segment results were pretty impressive. Could you describe kind of the drivers, I think you said infrastructures in place, but anything else in terms of mix or something within the segment?

Within OCG? Absolutely. Kind of in each of our segments, the traditional path as you well know, Tobey, is at the lower-margin businesses pick up first and then the higher-margins come in later. As an example, inside the OCG segment, some of the outsourced functions that we have inside corporations, the ones that were growing first were lower margin, the lower margin outsource activities. But as you begin to see us pickup more fees from managing the free-agent workforce, as placement activity begins to pick up inside OCG, these have a dramatically higher gross profit margin than some of the BPO practices and it's a mix issue primarily. Inside the OCG universe.

Thanks. In terms of your profit goals this cycle and trying to get the consolidated margin above prior-peak, what sort of segment margins would be required in the 2 biggest segments, in the US commercial and maybe PT?

Excellent question, which we've not released that data yet. As we model out things -- partly we've said earlier in the year, we're just waiting to see shape of recovery and I find it amazing that 2 years into it I'm still waiting to see shape of recovery. Much of that, Tobey, is going to be determined by particularly in the PT segment with how much placement activity and conversion activity is taking place. And I don't have a handle yet as to where that's going to be. Stay tuned.

Okay. A couple of detailed questions as well. You mentioned in prepared remarks, Patricia, I think the constant currency growth expectations for the third quarter, could you repeat that for me?

Sure. Make sure I get the exact words for you.

And then I was also interested in the number of billing days in the third and fourth quarter, if there's any difference between the second and a year ago period?

No. We only get that when we have the funny 53 week. We don't have that in either of the compared, So I don't see a big thing. We talked about high-single-digits on a constant currency basis.

High-single. My last question and I'll get back in the queue, relates to the tax rate and the HIRE Act impact on the tax rate. Do you have an expectation for how that works? Not just for this year, does it bleed some into next? And what would be at some point a more normalized tax rate for the firm?

The tax credits consists of 2 pieces, and they're clearly having an outsized effect this year. The first one is the HIRE Act, that's a retention credit that we get for retaining the workers that got HIRE Act treatment up in our gross profit rate last year. And that goes away at the end of this year, and it will be done. The work opportunity credit is about equal in size or actually larger; on a year over year basis, it's about 50% of the improvement. Right now, it's also at a very strong level, partly because we have very good compliance at the branch,. Partly because we're always reevaluating our estimates from prior years. In terms of next year, I have to say that given the uncertainty in the sort of governmental debate over tax structure, I find that I'm less clear about what the work opportunity credit is likely to be worth next year. You just would have seen president Obama talk about a veterans oriented program, which would be positive; but on the other hand it would clearly be probably on the table for if there was a really structural tax reform effort. So I don't know. Primarily because I don't know what the governments going to do.

And we won't have a clear picture of that. Tobey, you've been following the industry for a long time. As we go back historically for 20, 30 years, there's only been 1 year in which it was ever significantly in doubt that there was going to be a walk program and it was done retroactively, like in October, November of that year and run its way back. So history would say some version of it will be there. We'll see. As Patricia says, every time you approach the renewal, you never know what shape it is. Right now, there is a particular emphasis on Washington on putting a real focus on returning veterans, their unemployment rate is particularly high. We always watch to see what groups are added to the credit, which groups come off of the credit, and I think for that you're going to have to wait for the industry to have a clearer picture until next quarter.

Thank you very much. I'll get back in the queue.

Thank you. Our next question will come from the line of Ty Govatos at CL King.

How are you guys doing? After this quarter you should be terrific. Can you give us a little bit more on the SG&A expense in the third Q? I see the up sequentially, but are we talking same level relative to sales, higher, in between? Whatever help you can give would be greatly appreciated.

It will be up. My guess is it will be up a little bit on the high side, primarily because we had a company-wide merit increase that took effect July 1. So in addition to the sort of normal patterns of staffing related to revenue, we'll get the increase for that as well.

So we're talking -- if it was 14.5% of revenues 2Q, it will probably be a higher percentage by some blips?

A little bit higher, I think.

Okay, that's it. Most of my other questions were answered.

Very good. Thank you, Ty.

Thank you. (Operator Instructions) And we have a follow-up from the line of Tobey Sommer at SunTrust. Please go ahead.

That was quick. (Laughter) I just wanted to ask you about the OCG segment call. You mentioned a path towards showing a positive segment margin in the fourth quarter. Is that a function of revenue growth that you know kind of is embedded in the system, or is that some sort of expenses that roll off?

That's just wild prayers, Tobey. (Laughter) No, just joking. No. That's it's the path that we're on with the contracts that we have and I don't expect expenses to decline in the OCG segment. In fact, you're now at the phase where in some cases they're going to have to increase as they did this quarter just to handle the increased volumes coming through to some of the customers. But I expect nice operational leverage to continue to advance inside OCG.

Just to delve into that a little bit further, how is the uptake of new customers and new sales versus maybe the ramping of customers that have been signed over the last couple, 2, 3 years and them being more impactful on the segment results?

Well, for sure the more of the impact is going to come from the ramping-up of the customers we have than from the addition of new customers. The sales cycle at the upper-end of the OCG practice is a 1- to 2-year effort, so it's not like you announce 6 of them in any one particular quarter. But more importantly, as you know, there's often heavy cost involved in implementing those accounts. As you get more and more accounts of those large OCG accounts that are in the mature phase, expansion of expense is less than the expansion of the revenue by nice proportions. So it's the growth is coming from much more from the maturing of current accounts than the addition of accounts.

And if you were to look at your segments kind of stratifying between OCG, PT, and commercial, which category would you have the best and longest visibility in?

That's an interesting question. You measure -- so you have different forms of visibility, obviously, as I work my way through it. And the commercial segment, assignments tend to be shorter, they roll off more quickly, but they involve bigger numbers of people. And so customers usually give you pretty advanced warning when they plan for significant increases or decreases in that group.

On the PT assignment, it involves less PT Business, less length -- I mean less numbers but greater lengths, so you have pretty good visibility there, also. I would say that the -- it's inside some of the OCG practice areas where you're involved in the recruiting or management of larger numbers of people who aren't your own temporary employees, so they're not talking to you about making plans to dismiss or to slow down the hiring. But you might have a little less the visibility inside some of the OCG practice areas. But all in all, I'm always pretty confident in our look a few weeks out, and then it declines as you move several months out. But good question, I haven't thought my way through that before, so that's the first tentative answer there.

Okay. We'll revisit next quarter. Thanks.

Thank you. And we'll go next to the line of Josh Vogel at Sidoti. Please go ahead.

Good morning. I just had a follow-up question on the SG&A. I was just curious, are the merit increases, is this an annual event every July 1?

Well, it used to be an annual event, and became a non-annual event during the recession. We've now re-instituted a merit increases that happened. At this year, it was July 1. That's as good a guess as any as to what will be its regular date.

Okay. And this is broad-based across all geographies?

Yes.

Okay. And just lastly, Patricia, with the Q4 tax rate, do you have an idea of can you approximate that for us and what the HIRE Act benefits could be there?

I would just say that the 10% is the full-year rate. The difference between the third and fourth, because of the way we do tax rates, and you can do the math since you have half of it done. And then the second half, the way you do tax rates is you spread it to equalize the rate. Of course, what happens is, in the meantime you change your estimates, so it tends to shift a little, as it did this quarter. But it would be equalized between the 2 quarters for the second half.

Okay, great. Most of my other questions have been asked. Thank you.

Thank you.

Thank you. Presenters, there are no further questions in queue at this time.

Very good. Thank you all.

Thank you. And ladies and gentlemen, today's conference will be available for replay after 11.30 AM Eastern Time today through September 10 at midnight. You may access the AT&T teleconference replay system at anytime by dialing 1-800-475-6701 and entering the access code of 201569. International participants may dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844 with the access code of 201569. That does conclude our teleconference for today. Thank you for your participation and for using the AT&T executive teleconference service. You may now disconnect.