Lennox International Inc (LII) 2014 Q1 法說會逐字稿

Welcome to the Lennox International first quarter 2014 earnings conference call.

At the request of your host, all lines are in a listen-only mode.

There will be a question and answer session at the end of the presentation.

As a reminder, this call is being recorded.

I would now like to turn the conference over to Steve Harrison, Vice President of Investor Relations.

Please go ahead.

Good morning.

Thank you for joining us for this review of Lennox International's financial performance for the first quarter of 2014.

I'm here today with Chairman and CEO, Todd Bluedorn, and CFO, Joe Reitmeier.

Todd will review key points for the quarter and Joe will take you through the Company's financial performance and outlook.

Financial results in prior periods have been revised to reflect sold businesses and discontinued operations.

In the earnings release we issued this morning, we have included the necessary reconciliation for the financial metrics that will be discussed to GAAP measures.

You can find a direct link to the webcast of today's conference call on our website at www.lennoxinternational.com.

We will archive the webcast on that site and make it available for replay.

We'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements.

For information concerning these risks and uncertainties, see Lennox International's publicly available filings with the SEC.

The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Now let me turn the call over to Chairman and CEO, Todd Bluedorn.

Thanks, Steve.

Good morning and thank you for joining us.

In the first quarter, Lennox International grew revenue 6% at constant currency.

EBIT margin expanded 70 basis points to a first quarter record of 5.1% and adjusted EPS from continuing operations was up 27% to a first quarter record of $0.42.

The Company's performance in the first quarter continued to be led by our Residential business.

Residential revenue was up 10% at constant currency and profit was up 19%.

Replacement business remains strong with mid-teen growth as we continue our distribution expansion in North America.

Cold weather was also a factor.

The cold weather that began in November and December continued in the first quarter with heating degree days above both normal and the prior year.

While cold weather was on balance and net positive for Residential Replacement business, the severity of it in many parts of North America significantly impacted our new construction business: both in residential and in commercial.

Residential new construction revenue was down mid-single-digits in the first quarter, but we expect an improved construction environment moving now into spring and summer.

In Commercial, revenue was up 6% at constant currency; profit, though, was down 8% from the prior year quarter.

Europe was down and we made strategic investments in the business for growth, including expansion of our distribution of service networks in North America and start-up costs to enter the VRF market in the second half of 2014.

Europe Commercial HVAC business can be chunky on a quarter-to-quarter basis and revenue was down mid-single digits at constant currency in the first quarter.

North America Commercial service revenue was relatively flat against a tough comparison to last year.

North America Commercial Equipment revenue was up low double digits with our placement revenue up nearly 20%.

Impacted by the severe weather, commercial new construction was up low single digits in the first quarter.

On the new business front, we signed up 11 new national account customers; a great start to the year.

In Refrigeration, market conditions remained challenging in the quarter, as expected.

Revenue was down 6%, as reported, with segment profit down 28%.

At constant currency, Refrigeration revenue was down 2%.

South America was up low double digits.

Europe was up high single-digits and China was up mid-single digits.

North America was down slightly and we continue to expect the region to pick up in the second half of the year, based on new national account business.

Australia revenue was down high single-digits at constant currency and we expect that market to be soft the balance of the year.

To update you on our strategic initiatives: in Residential, we are on track with expansion of our manufacturing facility in Mexico.

We are transferring certain furnace production there from the United States and also will be insourcing sheet metal fabrication as part of our Mexico operations.

We expect furnace production to be up and running in Mexico in the second half of 2014.

We're making a $30 million US investment in total over 2013 to 2014, and by 2016 we expect $15 million in annualized savings from this initiative.

In our Residential distribution expansion, we opened five new Lennox PartsPlus stores in the first quarter.

We are targeting 25 new stores in total for 2014 as they continue to be a big reason for our market share gain momentum.

We plan on exiting this year with 160 stores on our way to at least 215 stores in 2016.

In our Commercial distribution expansion, we continue to move commercial products in strategic distribution points to meet the needs of the emergency replacement market.

This expansion and the success of our Raider rooftop systems are creating strong momentum.

Emergency replacement revenue was up more than 20% in the first quarter.

Also in Commercial, our partnership is progressing well with Midea to launch Lennox-branded VRF commercial products in North America, leveraging Lennox Company-owned distribution.

The team is tracking with plans for entering this fast-growing $500 million market in the second half of this year.

We will continue to drive our strategic initiatives in 2014 and are well-positioned for continued momentum with our expanding distribution network and leading product portfolio.

The year is off to a good start with the first quarter and we're looking forward to the seasonally strongest quarters of the year.

Now, I'll turn it over to Joe.

Thank you, Todd.

Good morning, everyone.

I'll provide some additional comments and financial details on the business segments for the quarter, starting with Residential Heating and Cooling.

In the first quarter, revenue from Residential Heating and Cooling was $342 million, up 9%.

Currency had a negative 1 point impact, volume was up 7%, and price and mix combined was up 3%.

Residential profit in the first quarter was $24 million, up 19% from the prior year quarter.

Segment profit margin was 7.1%, which was up 60 basis points.

Segment profit was positively impacted by higher volume, favorable price mix, and lower material costs.

Partial offsets include a negative impact from foreign exchange and investments in distribution expansion and other growth initiatives.

Turning to our Commercial Heating and Cooling business, in the first quarter, commercial revenue was $173 million, up 6%.

Currency was neutral, volume was up 6%, and price and mix combined was flat.

North America Commercial HVAC Equipment and Service revenue was up high single-digits.

Europe commercial HVAC and revenue was down low single-digits on a reported basis.

Commercial segment profit in the first quarter was $10 million, down 8% from the prior year quarter.

Second profit margin was 5.9%, down 90 basis points.

Segment profit was negatively impacted by investments in the business for growth, including North American distribution and service expansion, as well as start-up costs to enter the VRF market in the second half of 2014.

Partial offsets include higher volume and lower material costs.

In our Refrigeration segment, revenue in the quarter was $180 million, down 6%.

Currency had a negative 4 point impact.

Volume was down 1% and price and mix combined was down 1% on a revenue basis.

Todd mentioned the revenue change by region at constant currency.

At actual currency, Europe was up low double-digits, China was up high single-digits, North America was down low single-digits, South America was down high single-digits, and Australia was down about 20%.

So there was significant negative currency impact from South America and Australia.

Segment profit was $12 million, down 28% from the prior year quarter.

Segment profit margin was 6.7%, down 200 basis points.

Segment profit was negatively impacted by foreign exchange, SG&A, lower volume, and factory investments for future growth.

Partial offsets included favorable price mix and lower material costs.

Looking at special items in the first quarter, the Company had a total after-tax charge of $900,000, which included $400,000 for the net change in unrealized losses on unsettled futures contracts and $200,000 for a special legal contingency charge.

Corporate expense was $11 million in the first quarter, down from $19 million in the first quarter a year ago on lower incentive compensation as planned.

Overall, SG&A was $136 million in the first quarter, which was flat with the prior-year quarter.

Cash used in operations was $125 million in the first quarter, compared to $137 million in the prior-year quarter.

Capital expending was $17 million, which was up from $12 million in the first quarter a year ago, as the factory expansion in Mexico continued.

Free cash flow was negative $142 million compared to a negative $149 million in the prior-year quarter.

As most of you know, we tend to use cash in the first half of the year and generate cash in the second half, due to the seasonality of our business.

Looking at liquidity, cash and cash equivalents were $39 million at the end of March, our debt-to-EBITDA ratio was 1.5 ending the quarter, within our targeted range of 1 to 2 times.

Total debt was $564 million at the end of March.

Now, before I turn it over to Q&A, I'll review our outlook for 2014.

Our market assumptions for 2014 remain the same for the industry.

We expect North American Residential HVAC shipments to be up mid-single-digits.

We expect North America Commercial unitary shipments to be up low single-digits and we expect refrigeration shipments to be flat global for the industry in 2014.

Based on these underlying market assumptions, our revenue growth guidance for the year remains 3% to 7% at constant currency.

Given currency movements, we now expect a 1 point of negative impact from foreign exchange on the full-year basis for revenue growth of 2% to 6% with this headwind.

Looking at our other guidance points for 2014, we still expect about $30 million of savings in our sourcing and engineering-led cost reduction programs for the full year weighted to the second half of the year.

We continue to expect $10 million on favorable product mix in Residential in 2014 and we still expect $5 million of net benefit from price and commodities with a positive $10 million from price and negative $5 million from commodities.

Corporate expense is still expected to be approximately $70 million for this year, down $18 million from 2013.

Last year, corporate expense jumped from $60 million in 2012 to $88 million in 2013 on higher incentive compensation, as annual incentive plans were exceeded and long-term plans trued up in line with the Company's performance.

As mentioned last quarter, headwinds for the year include our entrance in the VRF market in North America, our continued expansion in Residential and Commercial distribution, and strategic investments in resources for continued market share gain momentum.

More normalized weather in the summer could also be a year-over-year headwind and foreign exchange is now expected to be a negative impact, as well.

Just a few more guidance points: we still expect net interest expense for the full year of about $16 million, our effective tax rate is still expected to be between 34% and 35% on a full year basis, and we are still targeting $150 million in stock repurchases and the weighted average diluted share count for the full year is expected to be approximately 49 million shares.

We expect capital expenditures of $90 million as we continue to invest in the Company for growth and finally, to wrap up, our 20,014 guidance for adjusted EPS from continuing operations remains between $4.20 to $4.60.

With that, let's go to Q&A.

(Operator Instructions)

Rich Kwas, Wells Fargo Securities.

Just wanted to follow-up on the investment spending, I know you've got the facility in Mexico, but you've also expanding in distribution as well and distribution points.

Any views --any color you could provide in terms of quantifying that impact here in the quarter and then how should we think about that as we move through the year?

Todd, I know you don't give quarterly guidance, but any color around that would be helpful.

Thanks.

The color that we've given so far has been on VRF, we've said it's a $3 million to $5 million investment for the year for us.

The net expense is going to be more first half of the year than second half of the year because we'll have revenue second half of the year to offset the expense.

I think about that $3 million to $5 million as primarily first half of the year.

The investments that we're making in distribution, I think that's, in large degree, a timing issue where in our seasonally lowest quarter the investments don't have as much volume to cover it and so, I think, for the balance of the year, we'll see some of that wash out.

Although you didn't ask it, I'll talk about it, some of the other headwind that we had for the quarter that we haven't talked about and usually don't mention, is FX.

FX that affected us was a decline in the Australian dollar and the Canadian dollar and we had a negative 2 point impact from FX on revenue in first quarter and a headwind of EBIT of about $4 million or so on our earnings.

We now think, on a full year basis, we expect a 1 point negative impact on revenue and we're taking actions to mitigate the impact on earnings based on FX for the balance of the year.

Joe, what are you benchmarking the Canadian dollar and Australian dollar at now, what's embedded in the guide?

Right now, we're holding FX rates flat with where they are currently and taking action, as Todd said, against where those current rates are.

Okay.

Todd, I know we're only a few weeks into April here, but what's the early read so far on what you're seeing in the Residential market and then Commercial on the national account side?

We're seeing solid business trends continue, both in Residential and Commercial.

You talk to our dealers and customers, I think people are optimistic.

Replacement business has been strong and we expect new construction to gradually normalize moving into the spring and summer.

Although you didn't ask about refrigeration, I'll talk about it.

It remains soft and we expect that to be the case through the first half of 2014.

We're continuing to execute on the strategic initiatives that I talked about.

April, it's early, and June is the month for second quarter, as everybody knows, where we have 40% to 45% of our revenue.

We need the weather to warm up.

It was pointed out or I was listening on the radio on the way in, it's going to be mid 50s, low 60s in Boston today.

Two years ago, it was 87 when the marathon was run and so we need some of that 87 Boston degree weather to come back.

Okay.

Thank you.

Keith Hughes, SunTrust.

First on the VRF initiative, will you be shipping, in the second half of this year, systems?

Yes.

How long do you think that'll take to ramp up where it becomes a meaningful number for the Commercial segment?

We talked about this back in December is we think, over a five-year period, we can turn this into a $100 million revenue business.

I think a lot of that's under our control, but a big part of it, Keith, is going to be how fast the market grows.

Because implied in that is that the market continues to grow in the next four or five years like it has in the past three to five years, which is 20% to 25% a year.

But we've said $100 million in five years.

Do you think it's a $500 million market right now?

We think it is a $500 million market right now.

Right now?

Okay.

Second question, in Commercial as well, you had talked about low double-digit unit shipments in the quarter, is that correct?

[In North America?]

Correct.

Okay.

Was this anyone specific end user market where you saw some strong growth or was it across the board?

Any kind of color there would be great.

What we called out in the script was new construction was mid single-digits -- low to mid single-digits and replacement was up 20% and then we called out emergency replacement up over 20%.

I think it continues to be planned replacement with the national accounts continues to chug along and then the initiative with emergency replacement with Raider and with the distribution, just as it did last year, I think we're off to a really fast start this year in that segment of the market.

The emergency replacement would be weather-driven or is that more just a function of your better operation?

I think it's better operations.

Okay.

Thank you.

Rob Wertheimer, Vertical Research Partners.

Could you talk just a bit about the modest divergence in trend on Commercial versus Refrigeration?

I don't know whether geographic or product or what you think causes the split there.

One is this emergency replacement initiative that we have in Commercial has helped quite a bit.

That's one point on the Commercial side.

I think the other point is just the segments that we're in, in Refrigeration in North America, obviously, our largest exposure is to grocery and some of those customers have deferred some spending on their refrigeration.

But as we said in the script, we think second half of the year, we'll see a bounce back in that market.

Okay.

Let me just ask about Resi.

Actually, I don't know if you've ever talked about it in great detail, but the driver for Resi in the quarter, heating versus cooling, are you able to say how much that was?

Whether the cooling business was as solid as the overall number?

We never spike it out that way, Rob.

I understand the question, but I'd anecdotally say that we saw strength across the enterprise, as we have for the last couple years.

Given where the revenue was up 10% on constant FX, it was an overall good quarter, so across the enterprise for Residential.

Especially when you consider new construction, where we've always talked about we have such strong share, it was actually down mid single-digits.

For us to be up 10% overall when new construction was down 5%, that means we had a really strong quarter in replacement.

Great.

Price was up, as well as price mix, in Resi?

Correct.

Thank you.

Josh Pokrzywinski, MKM Partners.

Back to the investment question, I know you guys don't give quarterly guidance, but assuming there's some internal forecast, how did the quarter play out versus that?

It seems like Residential top line was a bit of an upside surprise and at least the tone on all this investment spending seems like none of it was a surprise, all consistent with what you had planned throughout the year.

First, what was your take on the quarter relative to expectations going in?

I think we had a nice quarter and we managed it.

We really don't get surprised on costs and investments.

We know what our costs are and we know what investments we're going to make and we guide to them in December and then we execute during the year.

To me, the variable within the quarter is execution.

We executed well and what the end markets do.

So if the tone appears to be everything went as we hoped and expected, that's right.

Excellent.

On the Commercial business, Europe a little more sluggish there, seems to be an aberration versus where you guys had been, I think the past couple quarters that it started to firm up.

It seems like Europe, in general, is turning as an economy.

Is that -- (multiple speakers).

I think it's just timing.

I think if you look inside the business, Joe and I touched a little bit on the script, we were up in Refrigeration in Europe and we were down in Commercial HVAC in Europe.

Then we said something like it can be chunky, I think that's code for we're not such a big business in Europe HVAC.

Depending on what some customers do or don't do, things can be pushed around.

I think if you look at the trend line in Europe over the last two or three quarters, it continues to be going up.

And that's consistent with what our guide is for the full year, for it to be up, I believe, low single-digits is what we've called out.

Got you.

That's helpful.

On the price mix in commercial being flattish, is that a function of price going one way and mix going another?

Is there competitive dynamics there that are different than the Residential business?

Any color on how you expect that to play out as the year unfolds?

No.

We've been very good in our Commercial business over the last three, four, five years of getting both price and mix in and we ended the year, last year, at 14% margins for the segment.

As you can imagine, we probably make higher than that in North America given the footprint of our Europe business.

Our team in North America is very good at getting price mix with some very challenging customers and we do that through innovation and we'll continue to do that in 2014.

Got you.

All right.

Thanks guys.

Jeff Hammond, KeyBanc Capital.

On price cost, it seems like we saw some relief in commodities, but your guidance is unchanged.

Any room for upside there as we move through the year?

I think the big variable is going to be steel second half of the year, Jeff.

Copper, as you know, given our hedge strategy, and aluminum, were to a large degree baked and our guidance reflects that.

I think the variable is going to be what happens with steel.

Okay.

FX, should we expect kind of a similar Op income headwind into 2Q and I think you mentioned some things that you're doing to offset it.

What are you doing exactly and how does that mitigate it?

I think the high watermark will be first quarter in terms of negative FX, unless things continue to move.

But the issue is, in Canada and Australia, which are pretty big markets for us, the costs are denominated in US dollars because we manufacture a lot of the products here, certainly for Canada and some for Australia.

But a lot of the costs, even of where we buy things elsewhere, are denominated in US dollars.

Then you sell into those markets, you get some headwind unless you're able to get some price to offset your cost increases.

That's what we're in the process of working through the system.

Okay.

Commercial replacement being up 20%, is that an easy comp or seasonal weakness or building momentum in Raider and sustainable?

How should we think about that growth rate?

I think it's a bit of a breathless number that I wouldn't necessarily expect 20%-plus for the whole entire year, although we did something close to that for the last year.

A couple things: it's seasonally low quarter, so the percentages can look a little bit better; also, we didn't really get in the full swing of Raider last year until second quarter, so I think it's the last quarter where we have an easier comp.

But all that being said, we feel great momentum in emergency replacement and Raider.

We just launched, last week, the larger unit, so we now have a full product line of the Raider product line, so we are excited.

Okay, great.

Thanks.

Nigel Coe, Morgan Stanley.

Did you call out how the Residential market tracked during the quarter?

We did not call it out.

We called out what we did, but we didn't call it the market.

The industry numbers for March aren't out yet, so it's really hard to know.

Okay.

Great.

Obviously, we talked about the Commercial performance in North America in some depth, but one of your major competitors, Trane, had some well-publicized production issues.

Was there any benefit from that, even if only modest?

Best answer is, I don't know.

We asked some of those questions of people in the field, after we saw what Ingersoll-Rand had to do.

We had a very good quarter in Commercial in North America, especially considering the weather on new construction.

Without being too acidic about it, I think it's one mistake maybe amongst others and so we continue to win in the marketplace against them.

Okay.

That wasn't too acidic.

Finally, as you're rolling out the possibility of being very successful, how do the productivity or same-store sales of each incremental store compare?

Are they comparable?

Are we seeing a slight attrition in same-store sales?

How does it start to go from 160 to 210?

Do expect to have similar performance metrics?

So far, we have.

The way I like to think about it is the economics or the ramp up curve of our last 20 stores are very similar to what they were 100 stores ago.

We haven't reached diminishing returns on incremental investments of the stores we put in.

So it continues to be a very good investment for us.

Okay.

Great.

Thanks much.

Samuel Eisner, Goldman Sachs

Regarding the move down to Mexico, I was curious if there were any headwinds or inefficiencies associated with that move that may have shown up in this quarter?

Not really much in this quarter.

I think we'll see a little bit more next quarter, in second quarter.

We've brought some people on, but really, when we're going to see the inefficiencies for a while, for a quarter or so, is when we staff up and are qualifying the product before we produce it.

We'll see more second quarter, but, again, that's all anticipated by our guidance.

Sounds good.

Regarding the guidance and the kind of guidance of corporate expense around $70 million or so.

Just curious how you guys are thinking, there's about $60 million left for the course of the year, is that about $20 million a quarter?

I know you don't give quarterly guidance, I'm just trying to understand, maybe from a timing issue, if it's more first-half weighted or second-half weighted at this point?

To your point, we don't give quarterly guidance, but the way I would do it if I were you is, I'd look over the last two or three years and plot them all out.

Then last year we talked about, when we were so high in corporate expenses, at $88 million that a lot of that wasn't -- or $18 million of it was incentive comp-related and that was going to go away this year.

I think if you look at last year, corporate expenses by quarter compared to the couple prior years before, I think it's pretty obvious where the spikes are at.

Which first to fourth quarter is when we tend to take adjustments.

I think if you lay that out, I think you can figure it out.

To follow-up on that, this year was around $11 million and change, that seems to be the lowest first quarter corporate expense in the last couple years here.

Just curious if there's something more to this year than just timing of incentive comp that impacting that expense line?

No.

That's more than the 80/20 of what happens.

There's always sort of timing of things, the corporate expenses this year, last year, the next year, but there was no major structural change of things.

It was, as I suggested, that and we continue to trim corporate expenses as we have since we've been here and so continue to take costs out of something that we do.

Understood.

On PartsPlus, I think you opened about 5 new stores this quarter and you're going to do about 25 for the remainder -- for the full course of the year.

Just curious on the timing of all of that, is that mostly in the middle part of the year during the selling season or is that phased out through the course of the year?

Just curious on timing.

Broadly speaking, it's linear.

Again, if we're doing 25 for the year and we did 5 in the quarter, it'll be some ramp up during the balance of the year.

We have a team who does this, both our field sales force and our operational team here at headquarters.

We sort of deploy the people to do it and really don't have a surge.

We're not like a retailer where everything has to be done by Thanksgiving, we just implement them during the year.

Understood.

Thanks so much.

Drew Pierson, JPMorgan.

Todd, so we had what looks to be the final resolution on the regional standards, I just was hoping to get your color on that.

Specifically, as you look into year-end, if you guys would consider carrying your extra 13 SEER inventory into the 2015 grace period?

Yes.

Let me ramble a little bit, Drew, for those on the call who aren't up-to-date on the latest regional standard rulings out of DOE.

We now have a clear set of rules where minimum efficiency for air conditioners will go from 13 to 14 SEER in the South and Southwest and minimum efficiency for heat pumps is going to go from 13 to 14 SEER nationwide.

The way it's being implemented, as you suggested, Drew, is that OEMs must stop manufacturing the product by January 1, 2015, but distribution has an additional 18 months, or until mid 2016, to sell through the 13 SEER product.

We're talking to our dealer contractors and our independent distributors to see how they're thinking about things, but directly to your point, in our Lennox business, which is about 80% of our Residential segment, we have Company-owned distribution and we don't expect to pre-buy.

In fact, there's not a pre-buy, but rather a pre-build.

To directly answer your question is we, in fact, do plan to use some dollars to stock 13 SEER in our distribution locations in 4Q 2014 for dealers to pull through over the next 18 months.

It'll be closer to the end of the year to put our plans together, we'll indicate exactly what that investment will be.

In our Allied business, which is about 20% of our Residential segment, there we do expect to see some pre-buy from independent distributors in the fourth quarter of 2014 and we're not exactly sure yet what that looks like, because all of this is relatively new.

Then again, I would remind folks that we expect our OEM competitors that have a higher percentage of independent distribution than we do, we'll see more of a pre-buy dynamic from them as they sell to independent distribution in fourth quarter.

So independent distribution, then, has product for the following year, 1.5 years.

Okay.

Thanks.

I appreciate that.

On price, obviously everyone announced a price increase, maybe just a quick update on realization early in the season?

It's early and we feel confident of getting the price that we've committed to, which is $10 million of price and we've put it into the system and we'll go through the major part of the selling season and we'll see how it goes, but we're optimistic.

Okay.

Thank you very much.

Rich Kwas, Wells Fargo Securities.

Todd, on the segments, when you look at the three segments, it seems like there's a fair level of comfort with Residential and there's been some noise in Commercial and I guess some more noise in Refrigeration.

But if you look at the three segments for the year, particularly in the margin front, where do you feel most optimistic or on the reverse side, where do you think there's the most risk in terms of delivery?

I think it tracks my confidence on revenue.

We talked about Refrigeration last year and in December and said we needed some additional volume to drive margin expansion there and we needed some tailwind to do that and so far, we haven't had it this year.

In Residential, I feel very good about the end markets, as I talked about, and our Commercial business is a very good business.

Our target margins are 14% to 16%, they're already at 14%.

They'll continue to chug along and get margin expansion, but again, I have less clarity in my own mind about what the markets are going to be.

In terms of confidence, it's Residential, Commercial, and Refrigeration, probably in that order and it's tied with what the end markets are going to do.

Okay.

All right.

Thank you.

Okay, thank you, and back to you gentlemen for closing remarks.

Thanks, operator.

A few points to leave you with: we're focused on driving our strategic initiatives in 2014, including significant cost reduction in productivity programs and plans for continued market share gains.

The year is off to a good start with the first quarter and we are well-positioned for continued momentum, with our expanding distribution network and leading product portfolio, we look forward to the seasonally strongest quarters of the year.

I want to thank everyone for joining us today.

Okay.

Thank you.

That concludes our conference for today.

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