Levi Strauss & Co (LEVI) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Levi Strauss & Company's third quarter 2005 earnings conference call. (OPERATOR INSTRUCTIONS). This conference is being recorded and may not be reproduced in whole or in part without written permission from the Company. I would now like to turn the call over to Jeff Beckman with Levi Strauss & Company's Worldwide Communications Department.

Good morning and welcome to our conference call. I'm pleased to introduce the Levi Strauss & Co. management team. With us here today are Phil Marineau, our President and CEO; Hans Ploos van Amstel, our Chief Financial Officer; Robert Hanson, President of the U.S. Levi's brand; John Goodman, President of the U.S. Dockers Brand; Scott LaPorta, President of the U.S. Levi Strauss Signature Brand; Paul Mason, President of our European business; and John Anderson, President of Asia-Pacific business.

This call is being recorded and a replayed will be available through October 25th by calling 800-642-1687 in the United States or Canada, and from outside these countries call 706-645-9291. For either number please input the ID code 9898242 followed by the pound sign. This conference call also is being broadcast over the Internet and a replay of the webcast will be accessible for six months on our website at LeviStrauss.com.

Before we begin let me remind you that our discussion today may include forward-looking statements, including in particular, statements about our plans, prospects, targets and expectations. These statements are based on management's current data, assumptions, expectations and projections about future events. These forward-looking statements are subject to risks and uncertainties. Those risks and uncertainties and other factors that could cause our actual results to differ materially from management expectations are described in our annual report on Form 10-K, our registration statements, and our other filings with the Securities and Exchange Commission. Our actual results might differ materially from historical performance, current expectations or these forward-looking statements because of the factors described in those filings or otherwise.

During the call you will hear us talk sell-through numbers or retail trends. When we talk about sell-through and retail sales, we are referring to over-the-counter dollar sales of our nonlicensed product. We use sell-through data internally as an indicator of consumer demand for our products at retail. We compile sell-through data based on information received from a group of top U.S. retail accounts. Our sell-through methodology may change in the future based on changes in our customer base or channels of distributions. Sell-through dollars do not include taxes, and may not be consistently calculated from retailer to retailer, including for example the treatment of markdowns, coupons and discounts. Other companies may discuss sell-through and obtain data or compute it differently from us.

We also use average weekly rate of sale as a performance measure for our Levi Strauss Signature business. Average weekly rate of sale measures a retailer's weekly sales rate as a percentage of their average unit inventory on hand during that week. Both sell-through and average weekly rate of sale data are intended to be illustrative only, and are not necessarily predictive of future volumes, sales or other operating results. In view of SEC Regulation FD we request, and strongly encourage, you to ask all of your questions during the Q&A portion of this call.

This quarter our CFO has created a brief 7 page slide presentation to accompany his review of the financial results. He will speak to those slides as he goes through the Company results this morning. This presentation is available on our website, LeviStrauss.com, in the Earnings Webcast Section of Financial News. We encourage you to refer to the presentation during the CFO portion of this morning's call.

Now I would like to turn the call over to Phil Marineau.

Good morning everyone. Thanks for joining us today. We had another good quarter. Our performance was consistent with our goals for the year, and it really does build on our accomplishments of the first two quarters.

Let me talk about the business performance for this quarter within the context of what our goals have been for 2005. Our first goal is to deliver the 2000 financial plan -- 2005 financial plan. I'm pleased with our results, especially in light of the slowdown in the retail environment that we experienced in this quarter. Now our year-to-date highlights include the fact that our net sales are up on a reported basis. We continue to have strong margins and profit performance, with substantial improvement in operating income, and 125% increase in net income year-to-date. We're really on track to have another solid financial performance in 2005.

Our second priority has been to grow the Levi's business around the world. Net sales grew in the U.S. Levi's business this quarter. I think it is evidence that the actions we have taken to overhaul our business model, our product assortments, and our marketing are beginning to pay off.

The Levi's brand performance in Europe is weaker than we had hoped. Some of this is due to a very difficult retail environment, probably the worst retail environment in the last 15 years. But it is also due to the fact that the transformative strategies that we're following in Europe, which in many ways parallel what we have done in other parts of the world, are just taking longer than we had planned or initially expected.

On the other hand, if you look at Levi's brand profits they are improving substantially with a shift to a more premium positioning in the markets, as well as our efforts to control costs, benefiting from the restructuring of the European business. We do believe, and are quite confident, that we're on the right track to turnaround our Levi's business in Europe. But it is going to take longer than we had hoped. And we have to be realistic and persistent and patient to make that happen.

On the other hand, in Asia or our Asia-Pacific division Levi's brand sales remain robust with premium and super premium product continuing to grow at double-digit rates.

Our third priority is to grow the Levi Strauss Signature Brand presence in the mass channel around the world. Levi's Signature net sales grew 18% in the United States this quarter. And this despite the pressure of high gas prices, which really impacts discretionary income, particularly for the value consumers -- the people who shop in the Wal-Marts and Targets of this world.

The growth comes from an increase in existing customers, meaning Wal-Mart and Target, as well as the expansion in terms of the number of doors that we sell at in Kmart in the U.S. Our Levi Strauss Signature sales, while small in Europe are down versus a year ago. And that is really a function of one country, which is Germany. Sales are continuing to be strong in both the UK, as well as France. We are expanding the LSS brand into further countries in Europe during the fourth quarter of this year.

For the quarter and the year the Levi's Strauss Signature brand is generating incremental sales and profits for the Company. And again our analysis supports what we have told you before, these sales are truly incremental and not affecting our Red Tab business.

Priority number four is to revitalize our Dockers business. I'm pleased with the progress that we're making on Dockers. The U.S. men's business continues to show increasing strength, and in fact was growing in the U.S. this quarter, both in terms of sell-in and sell-through. And I said before men's products represent more than 80% of the U.S. Dockers business. The improved market place performance of our Dockers business reinforces our conviction that we now have a very, very strong Dockers men's line at multiple price segments in the marketplace, especially in the core pants business where a huge percentage of the profitability comes from.

We still have a lot of work to do in the U.S. business. We talked about that in previous calls. The business is down and we don't expect it to improve for the balance of this year. But we have made progress since our last discussion, not only putting a new business model in place for the women's business, but really a new assortment of product that we will launch in 2006, and are encouraged by the progress that we're making there.

On the European business, again sales are down on the European business on Dockers. But we'll make a profit for the first time in the history of the Dockers business in Europe. And the Dockers San Francisco positioning, which was adopted here in the U.S. and taken around the world, gives us strong encouragement for the promise of this business as we move forward in Europe.

And the fifth priority is to focus on stock construct and operational efficiency. We remain very focused on controlling cost and being competitive, not only in terms of our cost of goods, but our SG&A.

In past calls we have told you that we have centralized into a global sourcing organization. The intention there is to allow us to really use our global size to reduce the cost of goods, but most importantly, or just as importantly, to be about chase business opportunities on a much faster basis than we have historically been able to do it, and manage our inventories and the quality of the inventories more carefully.

Our inventories are in good shape, both in our own inventory that we hold at wholesale. And the inventories at retail are very high-quality and not -- we're not experiencing anything in terms of being over inventoried at retail. We do have slightly higher inventories because our goal this year was to improve our customer service and take advantage of growth opportunities on the U.S. Levi Strauss Signature business, and we have been able to do that. But we feel very confident about the quality of the inventories that we're carrying today.

I'm pleased with the quarter and our year-to-date performance, particularly given the realities of the marketplace today. We continue to remain cautious, and are paying close attention to the performance of our really basic entry price point product in the United States and Europe. There has been a slowdown in retail, both in Europe and the United States that is really a function of consumer (technical difficulty) discretionary income being impacted by gas prices, and just a tremendous competitive environment in the apparel business.

That is affecting how customers -- our retail customers -- buy product, and they are taking a very cautious approach in terms of their merchandising strategies and inventory management. Given that, we're being very careful in terms of how we manage the business and our expectations for the business. But we are seeing strong sales on our core trend in premium products, and in line with the trends in the marketplace. And we believe we have the right product assortments to be competitive as we move forward.

Given sort of the divergent market trends -- good sales on the premium products, a slowdown on the basic that entry price point team. We feel like we have a balanced approach to managing the business, and we have good prospects for the balance of the year.

Let me turn it over to Hans Ploos van Amstel, who will take you through the financial (technical difficulty).

Good morning everyone. As said, we have a new former (technical difficulty) numbers should be in front of you (ph). We will take you through that presentation side by side. And starting with slide 1, the introduction.

The third quarter was a solid quarter with 2% sales growth and a 9% increase in operating income. Net income for the quarter was $38 million, or 4% of net sales. Despite the higher operating income, net income was down versus the third quarter of last year because Q3 of last year benefited from an adjustment in the tax rate. Year-to-date net income was almost $112 million, which is 63 million above last year. On top of that we have been delivering solid net income each quarter of 2005.

Net sales were up 1.8% in constant currency. This increase was primarily driven by our U.S. Levi's brand and the Signature brand, plus continued growth momentum in Asia. Europe's net sales were down, and it will take more time to return to grow there. Finally, yet importantly, we closed in 1990 to 1999 tax years during the third quarter.

I'm moving to the second slide, which is called Net Sales to Net Income. As mentioned, our third quarter operating income is 9% above last year. Lower restructuring charges contributed to the improvement. Our restructuring charges were 5 million versus 28 million in quarter 3 of last year. Year-to-date operating income is $468 million, or around 16% of net sales. This represents a $200 million increase over last year.

In the quarter we delivered a healthy 45% gross margin. This is in line with our expectations. Our current mix includes higher percentages of trend or fashion finishes, which have a healthy but lower gross margin than our basic open price point products.

Third quarter SG&A expenses were up behind higher advertising support for our brands, the Sarbanes-Oxley project implementation cost, and the impact of currency movements. In the next slide I will further explain our SG&A trend.

As I mentioned already, we delivered a $38 million net income for the third quarter. And the only reason why this is down versus the third quarter of last year is the fact that last year's third quarter benefited from an adjustment in the effective tax rate.

Slide 3, called SG&A, explains further our SG&A. Our total SG&A for the quarter are up 6%. Half of that increase is due to the advertising investment, the balance is due to SOX compliance work, currency impact, and a prior year curtailment gain resulting from changes in our retiree medical plan. Excluding those items, our core cost structure is flat year to year.

This brings our year-to-date expenditure up 4%, including the advertising investment. However, if you exclude the impact from strengthening advertising and currencies, we're down for SG&A year-to-year, year-to-date. And this is confirming that we continue to prioritize, focusing on the cost structures and operational efficiencies.

Page 4 is showing our cash flow. 2005 cash investments include rebuilding inventory, and the payout of our 2004 incentive compensation plan. As highlighted in the Q, the cash outlay for closing the open tax years is planned for in the fourth quarter. Strong operating income fuels our cash flow, and this solid financial performance is enabling us to invest in these critical projects. I closed the open tax years, refinanced the (indiscernible) and rebuild our inventory for service.

On the next slide we're giving some further perspective on our inventory level. We recognize that our inventory reflects a meaningful investment versus 2004. This is in line with our plan to rebuild our inventory level to secure our service level. Last year's inventory was below target level and resulted in service issues. Our current inventory level is in line with 2003 and industry benchmarks. Going forward we will oversee stronger (ph) initiatives to move from industry average to best in class.

Before handing it over is to the business unit Presidents, I would like to take the opportunity to quickly comment on the business performance of our business units. Page 6, which is called Business Unit Performance, is highlighting the key movements. First, our North America business. Net sales increased 4% compared to the third quarter of 2004. This was driven by the sales increase in the U.S. Levi business, double-digit net sales growth in the U.S. Levi Strauss Signature business, and improved performance by the U.S. Dockers men's business.

Year-to-date net sales for North America are essentially flat, offsetting the impact of products we licensed out last year. Total North America operating income for the quarter decreased 17% behind the recent higher SG&A, primarily driven by refinancing of advertising, i.e. higher expenses in the third quarter, and a low (technical difficulty) with healthy gross margin. This is driven behind the higher mix of trend products and the fact that Q3 of last year had a higher mix of basic replenishment products because of last year's service level issues. Net last year's gross margin was above normal.

Now let's have a look at our international business. Europe's net sales decreased 10%, or 9% in constant currency. The decrease reflects the impact of a weaker replenishment business in Europe, and lower sales on our European Dockers Brand driven by the transition to a new business model. Year-to-date net sales for Europe are down 2%, which translates in a 6 percent increase in constant currency. Europe's third quarter operating income decreased by 1% to 47 million, i.e. essentially flat offsetting the sales decline through better improved gross margin.

Europe's year-to-date operating income improved 33% to 188 million, driven by the impact of repositioning the Levi's brand to the premium segment combined with lower cost in Europe. Our Asia business continues to perform well. Third quarter net sales increased 17%, or up 14% on a constant currency basis. Year-to-date net sales are up 17% and 13% in constant currency. Asia's operating income increased by 21% in the third quarter of 2005 driven by higher sales and more favorable mix and sourcing savings. This brings our year-to-date operating income for Asia up 29% to almost 114 million.

On page 7, the key conclusions. To summarize, we feel good about the solid quarter and our year-to-date performance. We have improved the financial strength this year. Sales are stable to slightly growing. We have delivered strong gross margins in the mid-40s as we expected this year. Profitability through the first nine months of this year is significantly improved on both the operating income and net income line. Based on our results through the first nine months, we believe we are well on track to deliver solid financial results for the full year of 2005.

Now I will turn the call over to Robert Hanson who will discuss the third quarter results for the U.S. Levi's business.

Good morning everybody. As both Hans and Phil have indicated, the U.S. Levi's brand had a solid third quarter. We delivered (technical difficulty) in the prior year. Year-to-date sales were 868 million. This is a reduction of 2% compared to the same period in the prior year. We anticipated the decrease for the first nine months, and it primarily reflects the impact of businesses that we licensed in the prior year. This was somewhat offset by the increase in the current quarter sales.

All in, given again what Phil described as the decline in both the market and Levi's, we are both facing in the opening price point basic jeans businesses, which has been offset somewhat by sales in more trend core product and destructed finishes, as well as premium price products. We would describe this business as stable.

Let me briefly review how our five core strategies are driving this performance. As we discussed in the past our first strategy is to remain sharply focused on increasing sales and profits in our core jeans business. sell-through -- retail sell-through, including the license and discontinued business segments, was up 2% for the third quarter, and flat for the first nine months of the year. If you look at just the comparable businesses, we were up about 4% in all segments, and that would include our men's, women's and boy's businesses.

As we have mentioned, we're facing some challenges in our men's 25 plus business. That was essentially flat for the quarter, but we also have had some strong performance in that area as well. This has been offset by some strong performance in our young men's segment, which is basically products targeted to guys less than 25 years of age. Our innovations have been working well there, and it drove about a 6% increase.

If you go to the men's business our original 501 Fit is performing very well. We're also pleased with the performance of our new 559 Relaxed Straight Fit. But again, we continue to see declines in the older, more opening price point basic fits, like our 550 Relaxed Tapered and the 560 Loose Tapered. In young men's, the new low rise boot cuts, our 527 Boot Cut, and our 514 Slim Straight Fits, which we introduced this year, have had good sell-throughs, and that, combined with our 569 Loose Straight continue to drive strong volume. As with the current market trends, all of our destructed and trend core finishes are selling very well.

Our women's products continued to demonstrate retail sell-through gains. We delivered a 14% increase for the quarter in women's. Based on the continuation of warm weather in this third quarter we also saw strong sell-throughs of shorts and capris.

For fall our women's focus is on better priced fashion long bottoms. We have a great fit called the Trouser Flare in juniors. We are introducing it also in misses in vintage and destructed washes. It is one of our strongest selling fits. Our misses' 515 Boot Cut continues to perform well. It is one of our highest volume products, as well as our junior's 518 Super Low Boot Cut. As in men's, our more opening price point basic jeans like our 550 Relaxed Tapered jean and our basic washes have been slower performers.

One highlight is in boy's. Our retail sales were up about 19% for the quarter. This reflects the solid performance in destructed as well as vintage finishing, and our 559 Loose Straight and the new 527 Low Rise Boot Cut, which we also introduced in the boy's segment is performing very well. We take a strong and early position on finished innovation leadership in boys, and as a result we're gaining both in sales and share.

Our second strategy, we continue to deliver improved customer profits through more strategic promotional programs. And in fact, we have aligned our calendars with our customers much more effectively this year. That has led to a significant increase in customer advertising in the back half of the year.

Our third strategy is to improve our go-to-market process and supply model to improve our market responsiveness. We talked about this in the past. I think the best evidence of this working now is that we are able to read our back-to-school school sales results and then remerchandise our assortments with our key customers for our 11/1 floor sets moving into the holiday period.

We remain somewhat cautious though because of our retailers' focus on lowering their inventories in the face of an unpredictable environment. Internally, as Hans mentioned, we plan an inventory increase in the first half of the year to improve customer service performance as we moved into the back half. We have now decreased our inventory for the balance of year. In total we are hitting our service targets, and we're prepared to deliver inventories down for the balance of the year.

Fourth, we remain focused on driving demand via our South Wear (ph) restoring advertising campaign. This campaign is working well for us. It has contributed to our sales growth in the quarter, we believe. During the third quarter we premiered two new TV commercials for the back-to-school season, and just recently in September aired a third commercial. As we discussed last quarter, we're also continuing to focus on featuring the Levi's brand in several major U.S. motion pictures. Additionally, similar to last year, we've run branded and entertainment efforts such as our tie in with rock star, NXS.

Finally, we are making it easier to find and buy Levi's jeans at retail. We continue to implement the additional merchandising model that we run in our customer stores based on the product presentations in our owned and operated Levi stores. Using this merchandise model our owned and operated stores have achieved comp store sales increases for 34 consecutive months now by focusing on leadership in destructed and vintage finishes, customized finishes and premium price point products. We do intend to grow the network of our stores, leverage them with our wholesale customer base. And we opened three new stores recently in selected locations, Georgetown, Raleigh Durham and Beverly Hills. We do remain committed to our core strategies and believe that they will deliver to our objective to position this brand for future growth; however, we remain cautious given the current environment.

With that let me turn it over to John Goodman, President of the Dockers Brand.

Good morning. I have been here about four months now, and I continue to feel positive about the opportunities with Dockers brand. I am encouraged by the improvements that we've seen in the third quarter, and even more convinced about the growth potential of the brand. I spent much of the last four months with our customers. I'm excited about the opportunities I see for the brand and the growth we can achieve together.

Net sales for the brand, including both men's and women's, decreased by 2%. This is a significant improvement over prior quarters. But the headline for Q3 is that our men's business, which represents more than 80% of our sales, is performing strongly. As Hans mentioned, outperforming the category. Both sell-in and sell-through at retail our up versus Q3 last year.

Net sales for the men's business increased by 3% in the third quarter. Men's unit volume was flat, but strong sales of first quality goods and a larger mix of higher priced premium pants, along with fewer units sold at discount, drove strong margins. Our men's premium business continues to perform well, up 7% versus Q3 last year.

Net sales for the women's business declined as expected, reflecting the ongoing weakness in our women's business as the market shifts away from basic opening price point products to a more stylish integrated look. We are aggressively addressing these marketplace trends, and have taken several significant steps this quarter to be trend right in upcoming seasons.

We remain focused on the three strategic priorities for the brand, grow the men's business, reinvent the women's business, and relaunch the brand with consumers. Now I will talk a little bit about our progress against these priorities.

First, growing the men's business. In bottoms more premium and stylish products are driving our men's business. Our revitalized Dockers premium pants assortment continues to perform well due to the success of the Never Iron pants, which gives a dry clean look right out of the dryer. In addition, the premium essential dress pants continues to perform strongly. The newly launched Plus 12, the lead product from our Simple (ph) luxury line for fall '05 is also performing well.

Looking at retail sell-through for the Dockers men's business, performance was also up in Q3, despite continued weakness in the overall men's pants -- casual pants category. The men's Dockers business has out performed the category by delivering more value-added style and performance versus our competitors.

Now let's take a look at our tops business. Tops, which represent 11% of our men's business, and are still a very small proportion of the overall business. We saw improvement in the sell-in performance of men's tops in Q3, and as we expected following a weak Q2 when retailers were adjusting their on floor strategies and inventories.

Men's tops sell-in was up 10% versus the same quarter last year. This improvement was seen in both the knit and woven categories. Sell-through of men's tops at retail was challenging in Q3. As we mentioned last quarter, retailers experienced poor sell-through of long sleeved woven shirts during Q2, resulting from an over saturation of inventory in the category, combined with a shift in demand to knit shirts. These factors also impacted Q3 tops sell-through as retailers cleared the excess spring, summer long sleeved inventory.

Our second priority is to reinvent the women's business. Sell-through at retail for our women's business declined 17% this quarter. The loss of fixtures and retail doors since last year have compounded the challenges we face in our women's business. As we said after Q1, we expect the balance of the year to be challenging for our women's business, and that expectation has not changed.

Still the women's business is a significant opportunity for the Dockers Brand, and I'm excited about the potential to grow this business. We know that in order to succeed with women it starts with the product. We have to offer a compelling package of very stylish, integrated wardrobe solutions that are simple, easy, and fit women's active lifestyles.

We're taking decisive steps to do that. We are implementing a new business model focused on delivering integrated offerings from head to toe. We have increased the strength of our women's team led by a new Vice President of Women's Merchandising and Sales. In July we decided to bring our licensed tops back in house to insure seamless integration with our complete women's line. We built a new tops organization with top talent, led by a new Senior Merchant, a new Director of Women Tops Sales, and a new top designer, who all recently joined the Company.

We have also repositioned our best women's design talent to insure a top-flight team. We're being aggressive in rebuilding our women's business so that we can go after additional fixtures and distribution.

Our third strategic priority is to relaunch the brand with consumers. In September we premiered the second round of our new TV ad in the Dockers Dress to Live campaign which launched in April. Our own consumer research indicate that the advertising has been well-received by consumers. The new spots spring back to its San Francisco roots using the city as a back drop for two lifestyle vignettes that feature both our men's and women's ranges together. The ads are a part of our fully integrated marketing campaign that includes TV and print advertising, a redesigned Dockers.com website, Internet advertising publicity, an in-store campaign imagery to position the Dockers Brand as a head to toe lifestyle brand for both men and women.

In conclusion, Q3 was consistent with our expectations, and I believe showed that we have positive momentum in the all-important men's business. We remain focused on men's and our longer-term initiative to revitalize and grow the women's business. Now I would like to turn the call over to Scott LaPorta, President of Levi Strauss Signature Brand.

The Levi Strauss Signature Brand had a successful third quarter, driving growth and gaining additional market share in the value channel as the premium apparel brand. We are now number one in share in men's at one of our major retailers, and have the largest share of all national brands in women's in the channel.

During the quarter Levi Strauss Signature net sales grew by 18% to $103 million compared to 88 million in the prior year. The increased sales were driven primarily by comparable customer sales growth at Wal-Mart and Target, and expansion into additional Kmart stores. It is important to note that about 1/2 of the 15 million sales increase was driven by our comparable customer growth year-over-year. Furthermore, this growth was achieved despite significantly higher gas prices, which are limiting the value shopper's discretionary income.

For the nine months of 2005 our net sales grew by 7% from the prior year to $266 million, as first quality sales increased by 10%, driven by strong growth in our misses, men's and young men's segment. This first quality growth was partially offset by a 28% reduction in closeout sales.

Moving on to product. Throughout the third quarter of 2005 our business at retail was strong across all consumer segments. In addition to a healthy core long bottom product performance, growth was driven by, first in women's and men's our seasonal product assortment where men's shorts, women's shorts, and women's capris delivered mid to high double-digit average weekly rates of sale throughout the season.

Second, the launch of our new Authentics line. Authentics are the premium five-pocket denim proposition for young men's, misses and juniors that brings category leading fabric and finishing at higher price points to the value shopper.

Third, our expanded fit portfolio. Here we brought new fits for misses, men's and girl's, and saw strong sell-throughs that represent growth opportunities for the core business as we attract additional consumers into the brand.

And forth, our solid kid's business, driven by shorts for boys, as well as fashion long bottoms and scooters for girl's. The solid performance here highlighted the success of our Wear Now fashion assortment in boy's and girl's.

Our marketing efforts during the third quarter focused on continuing our family oriented advertising campaign and PR outreach in traditional women's lifestyle and ASCAR fan-focused magazines. Then in July the Levi Strauss Signature Brand sponsored the All-American Soap Box Derby in Akron, Ohio. Press coverage of Levi Strauss Signature sponsorship has resulted in 55 million impressions to date. And the event will be broadcast on the Speed Channel in October.

Thirdly, the Levi Strauss Signature Fit Pit traveled to over 50 locations in the third quarter, including NASCAR races, state fairs and retail stores. At the Fit Pit shoppers can get fitted for the perfect pair of Levi Strauss Signature jeans by going through the IntelliFit system. Shoppers can then either go to a local value retailer or immediately order the product over the Internet on Wal-Mart.com while they are at the Fit Pit. Over 10,000 consumers have participated and are telling their friends about their great fitting Levi Strauss Signature jeans.

All of these efforts continue to drive our brand awareness with the value consumer. And as Phil mentioned previously, the Levi Strauss Signature business is delivering incremental revenues and profits for the Company without cannibalizing our Red Tag business. And now over to Paul in Europe.

Good morning, or rather good afternoon from Brussels. Let me build upon Phil's and Hans' comments on our European quarter 3 performance. In Europe our first priority is to deliver our plan for 2005, which is challenging given that consumer demand has remained soft throughout quarter 3, illustrated by disappointing consumer and back-to-school sales in most European markets. In this difficult retail environment Q3 sales were down 10% year-on-year on a reported basis and 9% down in constant currency.

But ongoing strong margin levels helped to keep year-on-year operating income almost flat versus prior year, while we moved our operating margin almost 2 percentage points from 20.2% to 22.1%. This increase continues to reflect the impact of higher average selling prices resulting from the Levi's brand repositioning, savings arising from more cost-effective product sourcing, as well as reduced overhead. We're not expecting a short-term rebound in consumer demand, and have therefore taken appropriate actions to secure our planned improvement and profitability in the fourth quarter.

Priority two is to deliver operational effectiveness. Our key focus being to improve delivered service levels to our customers. And indeed we maintained improved service levels for both the Levi's and Levi Strauss Signature brands in quarter 3, but we do remain focused on driving further service improvement in our Dockers deliveries.

Our third priority is to continue to build the Levi's brand. Given the challenging environment retailers across Europe have been left with low confidence, and are focusing therefore strongly on inventory management. Year-on-year Levi's sales were down 8% in constant currency. Positive sales growth in Italy, in Spain, in the Nordic countries were simply not sufficient to offset declines in major markets like the UK, Germany and France.

Research at a pan European level indicates that the total men's jeans segment showed no growth. And although the total women's jeans segment continues to grow, this growth is primarily in distribution channels not available to us, namely the vertically integrated specialty stores. But this research does continue to show growth in sales of jeans priced at EUR85 and above in the distribution channels where Levi's jeans are sold. These numbers continue to support therefore our strategy to reposition the brand in the premium segment of the jeans market.

A priority for us is to expand Levi Strauss Signature distribution. Third quarter sales as Phil has outlined, were down 10% in constant currency. The soft consumer demand environment also impacting the key value channel retailers, and in particular, the German market, as Phil has outlined. Phil also mentioned that we intend to launch the brand with new customers in France and in Belgian in quarter four. And this is indeed the first step in executing our expansion plans outside our original customers and our launch markets.

And finally, priority 5 is to fix the Dockers business in Europe. We continue to deliver against our plans in line with the new strategy and business model we announced last year. Net sales in the third quarter are down 19% versus last year, but as I mentioned last time, this is in line with our expectations. As I have also said, our key focus is to substantially improve the brand's profitability. And nine months into the year we are on track to deliver against this objective, as Phil has said, the first time in the brand's history in Europe.

During quarter 3 and according to plan we transitioned the Dockers brand organization from Amsterdam to Brussels. We closed the stand-alone Dockers distribution center, and we connected the brand to our European common IT platform. And therefore now all three brands are running on our Bond (ph) operating system. Critically and importantly, we have accomplished these significant steps without any disruption to our business.

To summarize, therefore, we feel positive about the profit we have delivered in both the third quarter and the year to date. And as Phil has underlined earlier, critically we're confident that our strategies are the right ones. But given the macroeconomic environment, it will take more time than anticipated to stabilize the topline sales in each of our markets in Europe.

And with that, I will turn you over to John Anderson in Singapore.

The results for the Asia-Pacific division in the third quarter continued the positive momentum of the previous two quarters. We are now entering our fifth year of consistent revenue growth, and sixth year of consistent profit growth.

For the third quarter of 2005 net sales revenue grew by plus 17% over the prior year quarter. And operating income grew by plus 21% over the prior year quarter. The growth was led by Japan, Korea, China, Hong Kong, Taiwan, Malaysia, India, Singapore, Thailand, Turkey, the Middle East, South Africa and Latin America. The growth was driven across the total region, and it was led by the Levi's brand.

Levi's brand represents approximately 90% of the Asia-Pacific business, and continues to drive growth, particularly in the super premium and premium product segments. Both our men's and women's businesses are growing over prior year at double-digit rates.

Major initiatives that have driven consistent growth, and will continue to do so, can be summed up through consistent focus on product innovations, a compelling retail experience, all supported by aspirational advertising. These successful strategies will be continually upgraded and implemented going forward.

For the third quarter specific products initiatives included new finishes on 501, which performed well; building on the successful implementation of the new core product concept of square cut for both men's and women's in the Levi's brand. The successful launch of the Never Iron pants program, leveraged from the U.S. for the Dockers Brand.

Our retail initiatives include opening new overlet (ph) stores for the Levi's brand in both India and China for both men's and women's; continuing to upgrade to new retail formats in Brazil and South America; and the opening of our first Levi Strauss Signature store in Taiwan.

This was supported by advertising with the Lady's Levi campaign in Japan and our northern markets. The second wave of our Levi's Engineered Jeans television campaign in Korea during August; and magazine and point-of-sale support for the Dockers Never Iron pants programs across the region.

Other notable achievements during the quarter were we went live for our first SAP implementation in Australia, New Zealand on time. And we also entered our first store in Vietnam, adding another country to our distribution base. All three brands performed to expectation, building on the strong momentum for Q1 and Q2.

Back to you Phil.

We will be happy to take people's questions now. Thanks for your attention.

(OPERATOR INSTRUCTIONS). Reade Kem with Banc of America Securities.

I just wanted to follow with Scott on the comments about Signature. I was curious how much the Authenics sell-in (indiscernible) boosted the strong comps that you cited there? And when was the bulk of the sell- in for that product?

The Authentics product was all shipped in late June, early July. And that did drive a significant portion of the increased sell-in, as well as the increased sell-through.

What is our expectation of the percentage of the total Signature line up that Authentic is going to be? Is it sort of a 10 to 15% piece of the portfolio there?

I guess I would probably think of it this way. Right now the opening price point core parts of our line is about 50, 55%. And then I would say our fashion basic program, which is in the $23 range is around 25, 30%. And then I will call it the Authentics premium piece, could grow to around 20%.

I guess you're probably not going to share which retailer that was your number one. And I guess -- is it a big one or which --?

If you go shop at our two largest retailers it will screen at you which one it is.

The other question was just in terms of overall space on the shelf. Obviously that is good news on that one. But at the other doors where you're at in that product how is does that working? Are you generally picking up share?

I'm not sure I -- can you say that question again?

Just in terms of your space on the shelf and the Signature line broadly, do you feel like -- is it pretty stable right now, or do you think you're picking up some space?

It was pretty much stabilized in all consumer segments, and are on a trend of picking up incremental real estate as we go season to season.

And just lastly, and maybe most on Signature and the Levi's as well in the U.S., what is the trend that you are seeing in terms of average price point? It looks like it is -- when I check out retail, it looks like it is pretty steady. But as we go into the Christmas season, what are you seeing there in terms of the trend?

I would say in the value channel, I will speak to that. It is pretty consistent and stable right now. I would not be surprised though to see a little more aggressive pricing as we move into the holiday season, just to insure that everybody has a good holiday season versus last year.

In the Levi channels the answer is different by channel. In the department stores you are seeing an increase in the average unit selling price, with most of the action coming at $35 or higher. And in the national chains you are basically seeing price stability, but there is some signs of there being some price pressure going into the back half of the year, which can get exacerbated a bit by the pricing strategy from some of our customers' private-label brands. So I think it will be mixed by channel.

This is Phil Marineau. I would just want to underscore so there's no misunderstanding. Our strategy both on Levi Strauss Signature and the Levi's brand is to be the premium priced product within the context of where we compete. And our goal as time goes on quarter to quarter is to move upward in price, not downward in price. We're not trying to compete on the basis of price. And we would prefer not to be the icon of a retailer's low pricing strategy within the context of that. We're competing on the basis of fit, fabric, and finish, the style of our products, the power of our brands, and the power of our advertising. I don't want you in any way to think that we're trying to support a discounting strategy in either brand here.

Thanks for that. And then just one financial question for Hans, and maybe Phil as well. It is just in terms of developments -- in terms of your cap structure as you look out maybe into calendar '06, any thoughts there on what is your planning at this point? I guess I'm thinking specifically in terms of the bank term loan.

This is a consistent question we're getting every quarter. We are at the moment in the midst of our business planning for 2006. Obviously as part of our 2006 business planning we are looking at our financial structure as well. And as in the past and in the future, we will have something to announce, we will announce that on our finances structure.

But we do have the opportunity to refinance the term loan in August with no penalty -- a premium of what, 1%, or something like that.

3%. Starting in April we have not met the refinancing conditions.

Right. So we understand that is an opportunity for us is to continue to improve the capital structure, and we are looking at alternatives. And we have nothing at this point to announce, but you can rely on the fact that we're paying close attention to that and looking at what our choices are.

And then just one last one, Hans. On the prior tax liabilities, I guess you get some favorable developments there with the past tax years, but as you look in what you have accrued in your numbers in that 31 million you're showing for the nine months through August of '06, does that pretty much capture what the bulk of what you are assuming will remain open for the pending years that you're hoping to wrap up with the IRS?

That's correct.

Alexis Gold with UBS.

Sorry, if this was mentioned earlier on the call, I jumped off another call. But did you talk about the Mays Federated impact at all?

No, we didn't.

And if not, could you talk about it a little? I know the business -- sorry about that.

I was hoping I was going to get away with that.

It is not so easy.

I will let Robert and John talk about that. But our business continues to actually improve -- and with May and Federated, which is good news given the consolidation. But I will let each of them describe the situation. And they are pretty much -- we are working in unison in terms of a common strategy with them.

On Levi's, just starting with our current May Company business as it transitions to Federated, our May Company businesses on Levi's has been one of the strongest performing businesses that we have had this year. Through the third quarter we have been seeing positive comps (indiscernible) consumer segment in the kind of high single digits to low double digits at comparable store sales. So we're very satisfied with that. It is basically a reflection of the strategy Phil articulated earlier. We assorted a very innovation leadership focused assortment, including more premium price point product into the May Company assortment. They took a leadership position on less broadly distributed product that were more fashion forward. And that strategy is clearly working.

Similarly, we have been working with the divisions of Federated and have seen some significant traction and recovery in our business on the East Coast with Macy's East. On the men's side of the business we have really worked with that team to develop an assortment of fashion leading, more premium price point product, complemented by the leading core products that we have that are distinctive to the brands, like the original 501 Jeans. That strategy is working quite well. Our sell-throughs on a comparable basis are up significantly on the East Coast.

The next step is to work with Janet Grubb and her team to develop a strategy that segments our department store business effectively so that we can do business in concert with their strategy. We are clearly working to develop a unique assortment in premium priced products. And that would be products that are targeted above US$50, with a $78 price point with one of our sub brands, a premium priced point product in the $100 range. And another -- and then a much more upgraded assortment in our core businesses.

In regard to Dockers, similar to Robert, we are seeing some strong sales in nd the May Company currently, as well as Federated. The premium product, as I said earlier, has performed very well. The Never Iron pant continues to outperform the category and is industry-leading. We are encouraged by the May business and the Federated men's business. Like Robert, we're going to work with the Federated leadership team to define the strategy with them, and hopefully -- and continue to grow the business with them.

I would just add summary to -- at the risk of killing the question -- where we are at now is that we have developed the capability to really assort differently by channel of distribution with really distinct products at distinct price points, so that we can offer an exclusive assortment through department stores at higher price points and really differentiate them from other chains and stores that are selling really at lower price points and to a different consumer base.

I think that puts as us in a good position and the trends that we have on the business with Federated and May to have a really solid business with Federated, and to meet their strategy of really offering distinctive, exclusive product.

That's great. Thank you. Just to touch on a couple of things you mentioned, you seem to have focused on the premium category more today than we have heard you in the past. Can you talk a little bit about just the focus on premium. Do you think you're getting your share there? I know that (indiscernible) revised upward today.

And just additionally, the other thing you talked about was opening some retail stores. And I don't think we have seen that focus for awhile. Is there a target retail effort (indiscernible) a number of retail stores? And is that an effort that we should expect to see continue for the next couple of years?

In general, and I will let Robert answers specifically, our strategy as a Company is to leverage the quality of the brands that we have, both on Levi's and Dockers, to offer more premium products and compete on the basis of, as I said, style, fabric, finished and fit rather than on price, which is what got us in trouble back in the '90s and as we went through the early 2000. And it has taken us a while to get out of that.

With that, one of the keys is to have avenues to the consumer. And on the Levi's brand having -- using our own and operated stores on a limited basis to get the full reflection of the brand out there and the right assortment. And we found that pays off with our department store and chain store customers, because the Levi's way to sell or buy jeans is demonstrated there. And we have been able to take that merchandising strategy and adopt it to the floor on -- in those chains and department stores. So you will see more OLS stores, but we are not going to turn into a specialty retailer before your eyes. But we use that as part of our mix and part of our strategy to drive that premium assortment.

Do you want to talk about (inaudible)?

Sure. I think the thing with the Levi's brand now is, as we have gotten the core business to a solid foundation again -- and we have described it as stable -- there are really positive signs of sales growth in our more (indiscernible) products and offsetting some of the declines in the basic Company price on products. We are focusing on the price points $35 and higher in both chains and department stores.

But importantly, as Phil mentioned earlier, there is a segmentation to that. We can run a 35 to $50 price point jean through our current operating model effectively. And we would look to do that and to upgrade our assortment across both chains and department stores. However, we have just recently set up an operating model which is separate from our core operating model. It is basically L.A.-based, design development and production of our premium price point product. That full set up will be operational in November. And we intend to run two premium sub brands, Levi's Red, which is our 68 to $78 price point sub brand for department and specialty store distribution, and our premium sub brand called Levi's Capital E through that model.

It is a model which is very much based on how the premium brands operate. It is monthly development, monthly selling, quick response, domestically based manufacturing, so you can respond to market demand. It is going to the linchpin to the premium strategy working. And I think we'll start to see a greater momentum on that side of the business. But overall we're working to premiumize the brand to really focus on more premium price points here in the United States as we have got a stable foundation now in the business.

One last question. Just on -- I know that inventory levels are higher. You talked about that a little bit. Just look at your working capital for the year. Do you expect to see it to be a source or a use of cash?

The inventory investment we had this year (indiscernible) the line being impacted to the 2002 level, (indiscernible) our service level. We don't think there will be any use of cash in building inventory -- that we have had that investment behind us.

And your overall working capital?

We're not going to give any forward-looking statement on where we are going to go with our working capital, but inventory (indiscernible) the investment is behind us.

And I guess, just lastly, in terms of guidance, I think earlier this year you said that you thought your top line will be about flat to last year, and gross margin in the mid-40s. Are you still comfortable with that?

Yes.

Clark Orsy (ph) with KBC Investment Advisers (ph).

I thought I heard you brought your women's -- or part of your women's back --.

Sorry, we can't hear you. If you have your headset on and you take it off and use the handset, that would probably help.

I thought I heard you brought some of your women's business back in-house from being farmed out. Can you talk about that a little bit?

We did on the Dockers business. I will let John answer that.

We brought back women's tops in-house. We feel it is very important for us to design tops and bottoms together. So we did do that in July. And we are putting together an assortment for next year at this time.

Is that a significant part of the women's business or --?

It is a very small piece of the business today. We look to grow that business going forward.

I also -- you mentioned about the SAP system in Asia, I think. I haven't heard about that in a while. Is that going to start to transition to other regions or --?

We are on time and on budget in installing SAP in the Australian, New Zealand affiliate. Now we're working on South Africa, Japan and Korea. Our first goal is to take the SAP system through John's region, what we call Asia Pacific division. But that goes from Brazil to Mongolia, so there are, I think, 58 affiliates the last time I counted there. So it will take us to 2 to 3 years country by country to install SAP.

The next question that we will look at is is probably to take SAP in subsequent years to our global sourcing organization and to our financial systems. We are in the process of detailing plans on what time table that will occur, and how we will accomplish it. But we're still trying to make sure that we are well rooted in our execution here in the APD region. And there has been great learning from it about how to do it -- how to train people to use it, and we want to make sure that we are very deliberate in this roll out.

We have been good in terms of transformative execution. As everybody in the industry will tell you, this is one of the most difficult. And the good thing about it for us is that we will complete SOX in 2006. And we're probably one of the few companies that won't complain about doing SOX because, as we outline all the processes with SOX, it will really foreshadow our ability to install SAP in our financial system.

So the two to three years is just to finish Asia Pacific?

Yes.

Ben Capadia (ph) with JP Morgan.

I was just wondering if you are seeing any slowdown in orders for the upcoming holiday season?

Say that again please.

I was wondering if you are seeing a slowdown in orders for the upcoming holiday season?

No, what I would say is in general what we saw in July, coincident with the higher fuel prices, a drop in consumer confidence, and then only exacerbated by Katrina and Rita, is that as we said on our opening price point pants, we saw it particularly in the value channel but really everywhere. We saw a slowdown in demand, which is obviously driven by the fact that people's discretionary income is impacted and they have to give up something in their budget. And one of the first things to go is Mom and Dad's pants, to be perfectly honest. Because we have seen our boy's and our kid's business continue to remain strong (indiscernible).

I think the retailers have seen the same thing. And they had other portions of their assortments, particularly on their own private label, that have not performed up to their expectations. So they are very conservative and caution in their buying. And they are open to buy changes as a result of that. We have seen that, but that is -- we have accommodated that already in terms of our expectations and our outlook for the business. We don't see it worsening. And we have seen some improvement in some parts of the business on those core basics getting a little stronger as we have gone into October. It is not untypical when you hit a period like that we see our U.S. retailers particularly stipulate not wanting to have a holiday season like they did in '03, and so there's a great deal of conservatism out there. But we have accommodated that in terms of our planning.

I think you mentioned a little bit of this, but are there different trends for high-end versus low-end?

Yes. I think you will see, if you took the core jeans business in the United States, you would see the premium price points still being relatively strong, and everything under the low price point business in general, at least in chains and department stores, being a little stronger. But this has been the nature of the market for some time. It is sort of bifurcated at the low-end and high-end. And it slowed down somewhat at the premium end in recent months to some degree. And I told you that on that core basic price point pants we have seen a slowdown there too.

So I think in general you had seen the shock of -- all this happened over the last three months, a little air coming out of the tires in the marketplace. And that is why everybody is so cautious here.

David George with Deutsche Bank.

I just had two quick questions. On the mix issues that you had this quarter, was that specific to this quarter, or is that kind of working itself out in the fourth quarter and beyond? Can you talk to that?

Just to reiterate what we tried to say. We saw a slowdown in the basic entry price point pants. Last year the mix was strong in basic price point pants, primarily driven by the fact that we had service issues on the premium product. There is just an anomaly here in terms of the comparison to some degree in the third quarter that is unique to this quarter.

We certainly -- we are forecasting the trend to continue. On those core entry price points we're expecting the business to be a little soft in that fourth quarter. But continue with the product that we have in terms of the premium products, the assortments, the distructed finishes, the plush that Jon talked about, and similarly in Europe the fashion and more stylish products continue to be very strong. And that is why we're pleased with where we are at. We have been able, as Robert said, to take our assortment here in the United States and change it on floor by 11/1, we think reflect what the trends in the market will be for the holiday season.

We are there on Dockers, and we're working hard on Europe to make sure that we're there.

So the fourth quarter gross margin obviously was quite strong as well as the third quarter, but for the fourth quarter that was pretty much all related to the structural changes you did, and not so much any anomalies that you had?

Our guidance has been throughout the year, through quarter after quarter, to tell you our margins will be in the mid-40s. If you plan on us being in the mid-40s, you'll be planning the same way we are, I guess is the way I would put it.

Mid-40s for the whole year or --?

Yes.

Okay.

Yes, mid-40s (indiscernible) in the year. And I -- just to take a step bace (indiscernible) because it significantly above where we used to be before we went through this transition of premiumization and outsourcing our supply chain. To go back over it in 2003 and (inaudible) that is a significant step up. While it is a little lower because there is (indiscernible) fashion in the mix, it is a sustainable 45% for the balance of the year, which is a very healthy gross margin.

And then the second question is on the SG&A, just the advertising and expensives -- additional cost you had this quarter, is that going to be lumpy for the third quarter or that will repeat in a similar rate in the fourth quarter?

Historically we always spend more in the fourth quarter because of the seasonality of the business. We made a choice this year to move some of the A&P support from the fourth quarter to the third quarter to reflect the earlier back-to-school season that we are seeing here in the United States and Europe. And we also made the choice for the year to invest more in Dockers. When we decided not to sell the brand, our goal was been to revitalize it. And we increased the A&P support on Dockers back to more closely parallel with the historical levels of A&P and Dockers have been. You'll see the A&P ratio actually, as it always is in the fourth quarter, higher than it is for the average for the year.

But relative to last year?

Yes. (indiscernible) we're involved with (indiscernible) progress this year. We're also committed to invest in advertising to strengthen our brands to fuel future growth. There has been so many phased into quarter 3 because of the decrease, as Phil is mentioning. We expect in quarter 4 to spend more on advertising versus last year, but not to the extent we're doing in quarter 3 because of (inaudible).

Your last question comes from Roy Ofere (ph) with Brownstone.

I'm asking about the inventory increases. Could you talk to how much of that inventory increase is up due to Signature, core, other replenishment stock, or Levi core order replenishment stock versus all else?

We're not -- provide any details on that the way you're looking at it. What is important to know as you look at our inventory investment, it looks like a big investment versus 2004, but our inventory last year was below target level to deliver the service levels. If you go into the cash flow statements in the Q, you see the cash benefit we had last year out of inventory versus the cash take we have this year, we still have a net better inventory versus 2003. And we're basically bringing back the inventory to the level a little bit below 2003, to secure the service levels we need.

While we did that we have also more outsourced supply chain, which is a little longer so we're having a more efficient inventory. And if you compare our sales to the industry average, we're benchmarking very well now on inventory, and we're hitting all our service levels, which is helping us to deliver the sales line.

Without getting it specific, as I originally requested, you talk a lot about --.

We're having trouble hearing you. I don't know if you are on a head phone or not.

You're talking a lot about service level improvements. And I just want to get a sense of how much of the inventory increase is due to the service level improvements?

The inventory increase was designed to improve our service levels and hit our -- equal or exceed our retailers' targeted service levels, which we're doing now. That inventory was designed to do that. It is the right mix between core basic entry price point product, as well as what the seasonal or the core trend products. Again, we don't want to get into line by line what our inventory is. We will just tell you that the inventory we have is quite of high quality and will meet the requirements and the service requirements of the business.

So across the board the inventory is relatively a similar mix as what you're seeing in your topline sales?

Yes.

From an ERP system perspective, you scrapped the big project, and it seems like you are kind of rolling out smaller projects at different parts of the world. Could you speak to the plan for your going forward global ERP with respect to are you going to have -- are you going to reintroduce that software project to get everything under one IT platform, or what is going on with that?

I think I just answered that question before, but I will do it again. We're rolling out across these 58 affiliates in the Asia-Pacific division. And then we're going to examine rolling the ERP system, the SAP system, first to support our global sourcing organization and then support our financial systems, our corporate financial systems. That will be the next phase.

And then we will finish with the North America region, and then ultimately decide whether we want to use SAP in Europe where we have the Bond system now. That will take a number of years. We're not prepared to say when we will install the global sourcing and the financial systems yet because we're still working on the plans associated with that. But that is the sequence that we see.

What do you think it is costing you right now by not having a system like that in place?

We believe if you installed an ERP system it will continue to provide productivity savings for the Company, and it will enhance our ability to go to market more -- in a speedier fashion than we have been. That said, we don't believe having an ERP system is any reason for us not to be competitive, either on a cost basis or to be able to execute our strategies on a product basis.

Do you have any CapEx -- idea what CapEx will be for the full year?

We have that in the Q. But that is (inaudible) this year.

I am sorry, Now I'm having a hard time hearing you. I apologize.

It is in the A. It is -- we're looking up in the Q and giving you the guidance.

The total is 51.

For the full year?

Yes, it is pretty consistent with the guidance that we have historically given in the capital spending that we historically have, except for last year where we had (multiple speakers).

At this time I would like to turn the floor back over to the presenters for any closing remarks.

Thanks for your attention and attending the call. We feel good about our financial performance, the progress that we're making stabilizing the topline and getting it to grow in parts of the world. We remain committed against the strategies that we have outlined, and believe we're making progress and are well-positioned as we going to the holiday season in 2006. We look forward to talking to you at the end of the fourth quarter and summarizing the total year for you. Thank you.

Thank you.

This does conclude today's teleconference. You may now disconnect your lines at this time and have a wonderful day.