Mattel Inc (MAT) 2005 Q1 法說會逐字稿

Good day and welcome everyone to the Mattel Incorporated first quarter 2005 earnings results conference call.

Today's call is being recorded.

With us today from the Company is the Senior Vice President for External Affairs, Miss Dianne Douglas.

Please go ahead.

Thank you, operator.

Good morning and welcome to Mattel's first quarter earnings conference call.

I'm Dianne Douglas, Senior Vice President of External Affairs, and joining me are Bob Eckert, Chairman and Chief Executive Officer, and Kevin Farr, Chief Financial Officer.

Earlier this morning we issued a press release which detailed our results for the first quarter.

On the call this morning you'll hear brief remarks from Bob, Kevin will provide a review of the financial results, and then we'll be happy to take the questions.

Before the formal remarks, let me note certain statements made today may include forward-looking statements about management's expectations, strategic objectives and anticipated financial performance and other similar matters.

Such forward-looking statements will include statements regarding performance of the Barbie and our other core brands, costs including raw material and labor, alignment with retailers, development of new channels, supply chain management, repatriation of foreign earnings and the tax affect thereof, returning excess capital to shareholders and the decision-making process related thereto, and creation of value for shareholders.

There may be additional forward-looking statements in response to questions or otherwise.

We intend for these additional forward-looking statements to be covered by this cautionary statement.

A variety of factors, many of which are beyond our control, affect the operations, performance, business strategy and results of Mattel, and could cause actual results to differ materially from those projected in such forward-looking statements.

Some of these factors are described in our 2004 report on form 10-K, filed with the SEC and Mattel's other filings made with the SEC from time to time as well as in Mattel's other public statements.

Mattel does not update forward-looking statements and expressly disclaims any obligation to do so.

Information required by Regulation G regarding non-GAAP financial measures is available on the Investor and Media section of our corporate website, Mattel.com, under the sub-heading "Financial Information and Earnings Releases."

Now I'd like to introduce Bob Eckert.

Thank you, Dianne, and good morning, everyone.

While Kevin will take you through the financial details, I'd like to give you my thoughts on the first quarter.

Following last year's encouraging holiday season, the new toy year is well underway here at Mattel.

And while the overall results thus far have been disappointing, there are some bright spots.

According to the latest NPD data for the U.S., which is through February, we're off to a pretty good start relative to the competition.

We grew mid- to high-single digits and gained a couple of share points.

And our internal POS through the first quarter reflects a similar growth rate but clearly includes the benefit of an earlier Easter.

That said, it's shipments of drive profits and cash flow and, quite frankly, ours are not where we wanted them.

Generally speaking, we continue to see shipments lag POS, as certain key retailers tightly manage inventory levels.

Additionally, as it relates to Barbie, results were mixed so we clearly have more work to do.

This quarter, overall, our selling prices and costs were reasonably well-aligned, but as I've said previously, we remain concerned about record-high petroleum prices going forward.

Additionally, this quarter's profitability was significantly impacted by a write-down of our investment in JuiceBox, a product that sold okay last fall but has performed poorly so far this year.

As you'll hear from Kevin, the balance sheet and cash flow are about where we expect them to be this time of year.

Earlier this week we began mailing our 2004 annual report, which you can also see on Mattel.com.

This year, the theme is "connect."

Connections are an important part of our success as we build and maintain meaningful relationships with customers, consumers, employees and communities.

This year will be focused on those connections more than ever as we work to achieve our goals of driving growth globally by continuing to turn the Barbie brand around whole growing our other core brands and by better aligning with growing retail customers and developing new channels.

We'll also continue tightening the supply chain with a focus on global E-procurement in an effort to offset increased costs of raw materials and labor.

It's still early in the year and we have a lot of work to do and connections to make.

We're acutely focussed on executing our strategies, and at this time of year, it's especially important to remember that we don't run the business in 90-day increments.

We set our sights on the long-term.

Thank you and now I'd like to turn the call over to Kevin for a financial review of the quarter.

Thank you, Bob, and good morning everyone.

My remarks regarding the first-quarter financial performance will be organized in the following manner: Revenues by geography, core categories and brands, key drivers of the P&L, cash flow from operations and the balance sheet at March 31, 2005.

To facilitate my review of the financial performance for the first quarter, I recommend that you refer to the exhibits of the press release.

I'll begin with a discussion of worldwide gross sales shown on exhibit 2.

Total worldwide gross sales for the first quarter were flat, including a benefit from changes in currency exchange rates up two percentage points.

U.S. sales declined 5% and international sales grew 6%, including a benefit of 4 percentage points from changes in currency exchange rates.

On a regional basis, sales in Europe were up 4%, including a 4 percentage point benefit from changes in currency exchange rates.

Sales in Latin America were up 28%, including a 3 percentage point benefit from changes in currency exchange rates.

Sales in Canada were down 18%, including a 4 percentage point benefit from changes in currency exchange rates.

And Asia-Pacific was up 12%, including a 2 percentage point benefit from changes in currency exchange rates.

I will now review our core categories and brands.

Mattel brands.

Sales from Mattel brands decreased by 3%, including a 2 percentage point benefit from changes in currency exchange rates.

Worldwide Barbie sales were down 15%, including a 2 percentage point benefit from changes in currency exchange rates.

Barbie sales in the U.S. were down 25%, while international Barbie sales were down 7%, including a benefit of 4 percentage points from changes in currency exchange rates.

As Bob said earlier, we still have more work to do to improve the overall performance of the Barbie brand.

While category share gain from the U.S. continued to point to improved consumer take-away relative to the competition, our overall performance at retail is still below our expectations.

We remain focused on turning the Barbie brand around.

Worldwide sales of Other Girl Brands were up 10%, including a 2 percentage point benefit from changes in currency exchange rates.

The sales growth for Other Girls was driven by new product introductions, including Winx, Pound Puppies and Doggy Day Care as well as strong sales of Disney Princesses, partially offset by declines in Polly Pocket.

U.S. sales of Other Girls brands increased 12% while international sales increased by 8%, including a 5 percentage point benefit from changes in currency exchange rates.

Sales in the Wheels category were down 5%, including a benefit of 2 percentage points from changes in currency exchange rates.

Double-digit sales growth of Hot Wheels internationally was more than offset by declines of Hot Wheels sales in the U.S. and declines of Tyco R/C and Matchbox sales worldwide.

Sales in the entertainment business, which including games and puzzles, were up 18%, including a 3 percentage point benefit from changes in currency exchange rates.

The increase in sales in entertainment category was driven by continued strength in our male action entertainment properties including Robots, with the movie released in March, Batman and Megaman, partially offset by sales declines in Yu Yu.

Fisher Price brands.

Worldwide sales for Fisher-Price brands were flat for the first quarter including a benefit of 1 percentage point from changes in currency exchange rates.

Worldwide sales of core Fisher-Price were flat.

Double-digit sales growth internationally was off by -- offset by sales decline from the U.S. despite particularly strong performance at retail.

Worldwide sales of Fisher-Price Friends were up double digits driven by the continued strength of Dora the Explorer.

American Girl brands.

Sales of American Girl brands were up 25%, reflecting increased sales from the January launch of a new American Girl Today doll, and continued growth generated by the American Girl retail stores.

Now, let's review the P&L, which is shown on exhibit 1.

For the first quarter of 2005, gross margin was 43.9%, a 110 basis point decline versus the first quarter of 2004.

Compared with the prior year first quarter, the gross margin benefit from changes in currency exchange rates and price increases which became effective January 1st, 2005.

These benefits were more than offset by external cost pressures including higher raw materials and transportation costs, and higher royalty and obsolescence costs primarily related to the Juice Box.

For the first quarter, advertising expense was 87.7 million, or 11.2% of net sales, flat when prepared to last year's first quarter.

For the quarter, selling general administrative expenses were 250.8 million, or 32% of net sales, down 20 basis points compared with last year's first quarter.

SG&A benefited from lower severance charges in the first quarter of 2005.

As a reminder, last year's first quarter included severance charges of 10.8 million, incurred in connection with the head count reductions at certain headquarters and international locations.

This was partially offset by higher employee-related costs, the negative impact in changes in currency exchange rates primarily the Euro, and the timing of charitable contributions.

For the quarter, operating income was 5.5 million, or 0.7% in net sales, down 7.2 million or 90 base points compared with last year's first quarter.

For the quarter, interest expense was 17.6 billion compared with 15.2 million in the first quarter of 2004.

The higher interest expense reflects higher average seasonal borrowings and higher average short-term borrowing rates, partially offset by the benefit of lower, long-term debt levels.

Other non-operating income net was 8.9 million compared with 10 million in the prior year first quarter and primarily includes gains from sales of market -- of marketable securities.

As of March 31st, 2005, the company had approximately 14 million of unrealized pre-tax gains on the balance sheet associated with marketable securities.

As previously communicated, the Company has been studying whether or to what extent we might repatriate foreign earnings under the American Jobs Creation Act of 2004.

Earlier this week we completed and approved a plan for repatriation and reinvestment relating to the Jobs Creation Act.

Over the course of this year, we expect to repatriate up to approximately 2.4 billion in foreign earnings, and estimate that this will result in a tax liability of approximately 180 million.

This will be recorded in the provision for income taxes in the second quarter of 2005.

The amount of this estimated tax liability is based on existing law and does not include the potentially favorable affects of proposed changes to the law.

So, to summarize the P&L for the quarter, reported net income of 6.5 million, or $0.02 per diluted share, versus last year's net income of 9 million or $0.02 per diluted share.

Now, turning to the cash flow and balance sheet shown on exhibit 3.

Cash flow use for operations for the quarter was 375 million, driven primarily by net income of 7 million and depreciation and amortization of 44 million offset by the use of cash for working capital.

Cash use for investing activities was approximately 7 million, including capital expenditures of 25 million.

Cash from refinancing activities and other was approximately 4 million.

Last month, Mattel's Board of Director's authorized the company to increase it's previously-announced share repurchase program by 250 million.

This action further demonstrates our commitment to returning excess capital to our shareholders.

We plan to continue utilizing a disciplined and opportunistic decision-making process in the deployment and cash in an effort to create value for our shareholders.

Through the end of the first quarter, the company had not repurchased any shares under the current authorization.

At quarter end, our cash on hand was 778.7 million, down 9.3 million from a year ago.

Our receivables, at 571.3 million were up 24.4 million versus last year, representing 66 days of sales outstanding, three days higher than last year.

Before factoring, which was 116 million, up 3 million versus the prior year, receivables were up $27 million, with day sales outstanding increasing by three days.

Inventories at 472.6 million were up 70 million, or 17% versus last year's forst -- first quarter and it represented 89 days of supply, which is four days more than last year.

Our data suggests retail inventory levels of our product continue to decline and are down in the high single digits compared to a year ago.

Our total balance sheet debt decreased by 100.8 million and our debt net of cash improved by 91.5 million from a year ago, with cash exceeding debt by 169.9 million.

Our debt to total capital ratio was 20.2% at the end of the quarter, versus 24.3% at the same time last year.

As Bob said earlier, our performance in the first quarter was a mixed bag.

We know the areas that require more work and that's where our focus will be directed.

Operator, now we'll be happy to take your questions.

Thank you. [ OPERATOR INSTRUCTIONS] We'll go first to Sean Mcgowan with Harris Nesbitt.

Hi, guys.

Hi.

Couple of quick ones.

First, JuiceBox, did -- could you just talk about what the magnitude of that write-down is?

Sure, Sean.

When you look at -- when you look at gross margins for the year, basically what we indicated was that we -- we benefited from foreign exchange and from -- from the price in -- modest price increase to the customers that we rolled out in January.

However, those benefits were more than offset by the negative impact of external cost pressure from oil-related input, such as resins and transportation, and higher royalty and obsolescence expense primarily related to JuiceBox, but if you look at the Juicebox write-down, that accounted for slightly more than the 110 bases point decline in gross margin.

So, essentially floor ex and price increases offset the -- the external cost pressures and JuiceBox really was the significant driver at the declining gross margins.

Okay.

Thanks.

And are you suggesting that the entire tax liability for the repatriation will be represented in this second quarter?

From a financial reporting perspective, it will be recorded in the -- in the second quarter and that $180 million estimate is based upon current law.

There is some proposed law in Congress that could reduce that, but at this point, we would record it in the second quarter, cash payments will -- will follow based upon when we actually distribute the cash and we're looking for more guidance from the IRS with regard to this situation, so we haven't pinned down exactly when we're bring the cash back yet.

Okay.

Last question then.

What specifically are you planning to do to kind of revitalize Barbie and get that back to positive momentum.

You mentioned the word "programs" in the release.

Can you -- can you be more specific?

Sean, this is Bob.

I don't want to get into total details on what we're working on, but let me give you at least some flavor on Barbie.

The performance clearly varies by product segment and key retailer and we still have work to do on Barbie.

I said that last quarter in the holiday season, when we had a better holiday season and the early numbers support that this year.

Our shipments were down, as Kevin mentioned, in the U.S. 25%, about half of that was due to POS and about half was due to retail inventory reductions.

On the other hand, in the NPD data, which is only through February, we saw a bit of a bounce, and -- and it is early but our doll share is up a bit.

By segment, some of our dolls are doing well.

Fairytopia is an example here.

We've sold 1 million units of the Fairytopia DVD or video at retail already.

It's tracking above the Princess and Pauper video, which was a fall launch last year.

Some of the segments are okay like My Scene or Fashion Fever and some are clearly disappointing like Cali Girl or some of the older segments like Happy Family.

We're going to continue the strategy of rebuilding relevance with girls.

We have a clear idea of how to build on last fall's successful total brand and marking campaign.

We're going to be pursuing that this fall.

Our second part of the strategy was to regain market share.

We do have a lot of competitors coming at us this fall.

Disney's Cinderella, which we support, should be very strong and we're seeing some other brands whose business is softening in the older segment, push younger at lower prices.

We also have a lot of work to restore confidence at retail.

We have a mixed bag here.

We've had some excellent successes with POS up at some retailers, but several areas need more work, which we'll be working on this year.

So, the bottom line, Sean, is when we walk and talk and chew gum simultaneously we make progress.

We did that broadly last fall.

We've done it some segments this spring like Fairytopia.

But when we don't have everything working together in sync, we're disappointed.

All right.

Thank you.

Thanks, Sean.

We'll take our next question from Margaret Whitfield with Ryan Beck

Good morning.

I wondered if you could comment on the possible uses of the -- of the cash that you might repatriate earlier.

I guess there were some areas that you could not use the cash for.

Have you been able to analyze that further and at least tell us what you could do with it and what you might not be able to do with the cash?

Yes, be happy to do that, Margaret.

Let me start by saying that current guidelines require us to repatriate the cash by the end of 2005.

So that if the over the course of the year we'll expect to repatriate approximately 2.4 billion in foreign earnings.

And as part of our repatriation in reinvestment plans, we've identified several investments expected to meet the Safe Harbor requirements of the law.

They investment include, among others, worker compensation, hiring and training, research and development, advertising and marketing.

And the repatriation of foreign earnings is expected to result in the $180 million tax liability.

So we'll focused on -- on utilizing the cash in -- in these areas, but with respect to our deployment of cash, it's going to be consistent with our capital and investment framework, from a priorities perspective.

And I assume the cash cannot specifically be used for buy backs or dividend boosts, is that correct?

That is correct, Margaret

Okay, but advertising and promotion, it can be used as -- does the company plan to, perhaps, study that and perhaps boost the A&P spending this year?

Well, Margaret, this is Bob.

You know we don't do guidance going forward.

Uh-huh

But we continue to support our brands aggressively, and we'll continue to do that.

Overall, I would say, if you look at advertising as a percentage of sales, it's been reasonably consistent over the last several years.

And -- and we expect it to continue to be in some sort of range that we've been in.

But given the challenging retail environment, the competitive landscape and our desire to drive sales on our core brands, we won't hesitate to increase our advertising spending if we think it's a good investment.

And on the price increases you -- you implied that the price increases thus have have held -- held the cost incomes, but do you think you might have to consider additional increases should the price of oil continue to rise?

Well, certainly over time we would have to do that, Margaret.

As -- as I think I've said we try to price in recognition of an antic -- anticipation of a steady state of higher costs and that's how we built our price increase.

We don't want to go up and down with gyrations in the -- the petroleum market.

That said, we're not priced to cover petroleum costs in the 50 to $60 range.

So, if those continue to be -- petroleum prices continue to be that high, we'll have to make some adjustments at some point going forward.

Okay, and you mentioned of course that if retail inventories are limited at this point, I was wondering if you could elaborate on -- on -- on where in particular the retailers are holding the line?

It looks like Fisher-Price along with Barbie has been affected.

That's absolutely true.

Our -- our companywide POS, and -- and that is the internal sales we get from the largest customers, shows mid to high single-digit increases for us over a year ago but that clearly includes a benefit from the earlier Easter.

We calculate the retail inventories as you know by subtracting the POS from the shipments and we see that that's down in the high single digits versus year ago and down in virtually every one of our core- categories.

So, retailers seem pretty focused on cleaning up after last Christmas.

That said, there's still plenty of toys to go around it.

If you look at the publicly-traded toy companies, most finished last year with their own inventories up in the double-digit levels.

So we're seeing some pretty good news in the POS.

The NPD data supports that.

Again it's early and I always caution folks, the small sizes.

But through February, the toy category is down in the mid-single digits, our take-away is up in the mid-single digits.

We've gained about 2 share points.

And the NPD data suggests that our retail take-away and share has grown in virtually every segment.

I think when you look at the individual segments, probably the biggest gap right now between shipments and POS is at Fisher-Price.

We're seeing a double-digit increase in consumer take-away either as measured by our internal POS or the NPD and the shipments clearly are lagging that.

Any explanation or any sign of a turn in that business, in terms of shipments?

Well, as we say, we focus on the POS and if we get the retail sales going in the right direction, they shipments ultimately have to follow.

And I think the proof of that was the fourth quarter of last year where shipments lagged all year long and then in the fourth quarter as we saw the POS growing, as we were gaining market share, retailers came around and bought more of the goods.

Finally, two specific products.

Could you comment on how American Idol is performing and what happened to Polly Pocket?

Well we don't want to go into specific segments.

American Idol is doing fine, it's selling fine.

Polly Pocket had a pretty sluggish fall season last fall and an early start this year there.

There's a lot of competition in the small doll isle, including things that we've introduced, like Pound Puppies or Doggy Day Care or Furryville.

Those brands are off to a good start as Kevin mentioned.

And I think we've seen a -- a bit of a pickup in very recent weeks in the Polly Pocket business.

So, I think we'll be fine in Polly Pocket as the year goes on

Thank you.

Thanks, Margaret.

We'll go next to Dean Gianoukos with J.P.

Morgan

Hi, just two quick questions.

Did you say Barbie gained share in the quarter, whether you thought she gained share?

And then secondly, is -- should we expect Batman in the range of a Harry Potter movie, as far as what to expect?

Hi, Dean, this is Bob.

According to NPD, Barbie did gain share.

I don't have the full quarter data yet, we just have it through February.

But our share increase continues in dolls and it continues in Barbie.

Batman, it -- it's hard to pin down when you say should it be like a Harry Potter.

Harry Potter's vacillated from the first movie down to the third movie.

I don't know that Batman will quite as big as the first movie.

It should be very strong based on everything we see.

It certainly better do a heck of a lot better than we were doing with Harry Potter movie three or something like that.

It's a big launch.

The Batman business is doing well already.

We're seeing double-digit point of sale increases and the movie doesn't launch until June 17th.

So, we've had a pretty good success with Batman since we took over that business, and we do have high expectations for the toy sales based on the movie.

Okay.

Thanks.

Thanks, Dean.

We'll go next to Tony Gikas with Piper Jaffray

Good morning, this is Stephanie for Tony.

I have three questions and they're all retail focused.

Now you mentioned that the point of sale patterns have been mixed, strong at some retailers, soft at others.

Can you comment further on any identifiable channels trends, not necessarily specific retailers but in the channel?

Hi, Stephanie, this is Bob.

Well we've certainly had success over the past year in developing some new channels for toys, including department stores and food and drug stores.

And -- and those businesses continue to grow for us relative to others.

I -- I don't want to get in the specifics of customers and who's doing well and who's doing poorly, that's -- that's really not a good place to be.

So I would agree.

So you are seeing some strength, though, in those new channels?

Department, food?

Yes Yes.

Okay, then my second question, any indication of how the mass merchants plans are for the category in the holiday?

Are they developing as you had expected or are there any shifts or change in the posturing from the buyers and the mass merchants?

Well I always talk -- tell folks to -- to speak directly to retailers about their business.

I wouldn't want to comment publicly or privately, I don't want to comment on their plans

Okay.

So then my last question on regarding cannibalization in age compression, do you sense that the cannibalization and compression that we're seeing from video games and electronic toys, or electronics, excuse me, non-toy based is behind us, or do we still have a bit more to come?

Well, that's something we'll see unfold over the long-term.

I can tell you that our about business tends to be a little bit more focused on girls than boys and boys tend to play video games a lot more frequently than girls do and we tend to be a little bit younger rather than older as you compare our business to the rest of the toy industry.

And we've seen the infant and pre-school segment grow quite nicely for the past couple of years and we fairly consistently have been gaining share in that growing category.

So, we are seeing a -- a bit of a change in the birth rate and I think the prospects of that playing out through the ento -- entire toy industry are pretty good over the next few years.

Okay, thank you guys.

Once again [OPERATOR INSTRUCTIONS] And we'll go next to Linda Bolton Weiser with Oppenheimer.

Thank you.

I guess I'm figuring into my estimate that you'll -- you'll record the unrealized gains on your stock sales this year, and those will run out.

That's four pennies per share.

Do you envision anything being available to offset that in terms of the swing in earnings in '06?

Well, Linda, you know we don't do guidance and -- and I don't want to make any comment on what our future plans might be with regard to sale of securities.

Each quarter we tell you what have sold and we tell you the balance is and I think you have to make your own estimates of how that plays out.

But -- but we've been talking about it for a couple of years now.

Okay.

And secondly, I guess I'm a little surprised at the SG&A ratio wasn't a little bit more reduced year-over-year given the severance costs that were in the prior year period, and you've been commenting for a couple of years now that your SG&A ratio is higher than peer companies.

Can you explain why that is?

Because really all large companies have increased personally compensation and insurance costs.

Can you pinpoint exactly why your ratio's higher than peers and if you might work to reduce that a little more aggressively this year?

Yes, I think, we have put into place financial realignment plan and other initiatives and they're generating savings for the company.

As you mentioned, Linda, we continue to experience negative impacts from things like currency exchange rates, higher employee-related costs and overheads associated with operating two American Girl retail stores.

It's our expectation that cost pressures will continue through the year, but our goal is to minimize the impact on earnings with cost saving initiatives to the extent possible.

As you've mentioned, our SG&A has been consistent over time but for different reasons and any given year, some things may go in our favor in a particular area and other areas we may have cost pressures working against us.

But our benchmarks are still in place.

We still think we can deliver the 17 to 18% benchmark by continuing to focus on continuous improvement programs.

We're working on things on the -- on the front end and the back end of the organization.

We're looking at better ways to leverage the scale of the Company when it comes to purchasing and looking at better tools to manage vendor negotiations and contracts.

We have an E-procurement initiative going on this year.

We're in the early stages of planning for that.

But that's going to address $3.2 billion of spending.

We look at other opportunities with respect to our manufacturing and sourcing capabilities making them more efficient and cost-effective.

And then on the back end, we're continuing to upgrade our systems and support infrastructure to streamline our back office functions in Europe and Latin America.

So we think there's plenty of opportunities to continue to work on SG&A as well as other cost areas to hit our benchmarks over the long-term.

Do you think the E-procurement initiative will start to bear some fruit by the end of this year?

As I mentioned, we're in the early staging -- early stages of planning for it.

We don't give guidance on this year, but we think over the long-term, there's a significant opportunity there since we're addressing about $3.2 billion of spending.

Okay, and just one final question.

It's my understanding that under the -- the repatriation act that you will -- you would be able to pay down debt.

Is that your understanding?

Yes.

And also, do you think you'll have to add that to the balance sheet in order to -- to repatriate the cash?

No, I think we can repatriate the cash consistent with our capital investment framework.

So I don't see us leveraging up the Company to bringing the cash back to the U.S.

Okay.

Great.

Thanks a lot.

Operator -- operator, we'll take one more question.

We'll take our last question from Felipe Gossen with Credit Suisse First Boston.

Yes, good morning.

Actually I have a -- a three-part question.

Two of which are for Kevin and one for Bob.

Bob, the first question, given you're talking about $2.4 billion dollars in -- in repatriation, you have about 700 -- let's call it $780 million cash on hand.

What are you currently envisioning in terms of the amount you would have to borrow overseas allowing you to repatriate that $2.4 billion?

Again, we're not going to get into that level of detail but I think when you look at repatriating the cash, we have cash all around the world and we think that based upon our -- our plans that we'd be able to repatriate that cash consistent with our capital investment framework.

Where our targeted debt-to-total capital ratio is -- is 25%.

So is it then fair to say that you might not repatriate the entire $2.4 billion?

No, our intent is to repatriate the $2.4 billion.

Right, because, but then I'm -- I'm not quote following.

I mean if you only have $800 million cash on hand, how can you repatriate $2.4 billion dollars?

You're looking at it at a point in time at the end of the first quarter.

We generate a significant portion of our cash in -- in the fourth quarter.

We also have cash all around the world, so we would be able to repatriate $2.4 billion of cash this year within our capital investment framework.

Okay.

All right.

Thank you.

And then the second question, Kevin, can you just share with us a little bit in terms of what you're currently doing terms of hedging yourselves for the higher raw material and -- and fuel prices, please?

No, Felipe, this is Bob.

We -- we don't talk specifically about hedging.

We have talked historically about trying to protect our product costs to some degree, but we don't get into the specific numbers or anything like that.

Okay.

And then actually the final question, Bob, was more a question targeted towards you.

Obviously if you look at what has been happening in the capital markets over the last number of weeks with regard -- particularly to retailers, not so much consumer products yet, but lots of talk about private equity involvement in the business.

Can I just have your kind of public view in -- in terms of why you believe that going private makes no sense for you, given that there's so much equity or private equity money available for investment?

No, I probably won't do that, Felipe.

I think that the -- the ultimate decision of who owns the company and how is -- is Board of Director sort of decision, and not something I'd comment on in a quarterly conference call

Okay, fair enough.

I thought I'd just ask the question.

Many investors, obviously, are asking the question.

But, many thanks

Thanks, Felipe.

I'd like to thank all of you for participating in the call today.

The replay of today's call will be available beginning at 11:30 a.m.

Eastern time.

The number for the replay is 719-457-0820 and the ID number is 2552645.

Thank you.

Thank you everyone.

That does conclude today's conference and you may disconnect at this time.