Mattel Inc (MAT) 2009 Q4 法說會逐字稿

Good day and welcome to Mattel's fourth quarter 2009 earnings conference call.

Today's call is being recorded.

For opening remarks and introductions, I would like to turn the conference over to Dianne Douglas.

Please go ahead, ma'am.

Thank you, Lori.

As you know this morning we reported Mattel's fourth quarter and full-year 2009 financial results.

In a few minutes, Bob Eckert, Mattel's Chairman and CEO, and Kevin Farr, Mattel's CFO will provide comments on the results and then the call will be opened for your questions.

Certain statements Bob and Kevin make during the call may include forward-looking statements related to the future performance of our overall business, brands, and product lines.

These statements are based on currently available operating, financial, economic, and competitive information, and they are subject to a number of significant risks and uncertainties, which could cause our actual results to differ materially from those projected in the forward-looking statements.

We describe some of these uncertainties in the risk factors section of our 2008 annual report on Form 10-K as well as our 2009 quarterly reports on Form 10-Q, and in other filings we make with the SEC from time to time.

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 would like to turn the call over to Bob.

Thank you, Dianne, and good morning, everyone.

At the beginning of 2009, I made some promises on behalf of the thousands of employees who work at Mattel.

I said, quote, our agenda is clear, to deliver improved execution, to position the Company for the future, and our promise is simple, to reward investors, run the business well and responsibly, and make kids' lives fun, end quote.

And in 2009, we accomplished just that.

We improved execution across the supply chain and throughout the Company by realigning our infrastructure, controlling costs and expenses, tightly managing working capital, especially inventories, and reducing capital spending by doing only business critical projects, and doing them exceptionally well.

The result was improved profitability, a stronger balance sheet and improved cash flow, which we used to lower debt, increase cash balances, and continue to reward shareholders through our strong annual dividend.

We were also successful in bringing magic to the lives of children through innovative new toys including the revitalization of some of our classic and time honored brands, such as Barbie and Hot Wheels.

Last year as you know, we celebrated the 50th anniversary of the world's most iconic doll, and the world celebrated with us.

This incredible milestone for the Barbie brand allowed us a unique platform to reconnect girls of all ages with the legacy of the brand, fashion, aspiration, and cultural relevance.

And we connected with girls beyond the 30-second television spot, Barbie was everywhere.

We hosted global events like fashion shows and birthday bashes, made breakthrough partnerships with fashion icons like Karl Lagerfeld and Christian Louboutin, as well as with specialty retail outlets like Pottery Barn and Sephora.

And talked to girls in their own voice through social media outlets like Facebook and Twitter.

And the result of all this cultural conversation, I'm proud to say is that for the first time in years all three brand health indicators are headed in the right direction for Barbie.

Our US shipments into retailers are up.

Retail take-away is up, share is up.

That's the trifecta.

Barbie is back.

And in 2010 we expect to build on the momentum we created in 2009.

I'm also pleased to report growth across much of our portfolio, in our Wheels business, both Hot Wheels and Matchbox experienced strong global performance, driven by continued strength in the core product lines, which includes basic cars and track and play sets, as well as key innovations such as Hot Wheels Color Shifters and Matchbox's Rocky the Robot Truck which was a sell-out by the holidays.

In our little girls business, the Little Mommy large doll line did very well in the holiday season, driven by the successful launch of our innovative Walk & Giggle doll.

As for our games business we saw growth in core products like Uno and Apples to Apples, as well as with our adult and family games like Pictionary and Blokus, but the most exciting news in the games arena was Mindflex, an early sell-out and ultimately one of the hottest toys of the year.

Max Steel also enjoyed another year of record sales as Latin America's number one boys action brand.

We also experienced success with our partners, with outstanding performance in our Disney Princess line driven by core dolls,fashions and accessories, including robust sales late in the year of the Princess and the Frog line.

Disney Pixar's relaunch of the Toy Story franchise in fall 2009 drove performance with our Toy Story line of toys.

Additionally, Disney Pixar Cars had another strong year, further establishing it as an evergreen brand.

As you are well aware, we were awarded new toy licenses last year that are coming to life in 2010.

WWE Wrestling and Hit Entertainment's Thomas and Friends have already hit store shelves, with Disney Pixar's Toy Story 3 hitting in early summer.

And even though 2009 was a year of sacrifice and hard work for Mattel employees, I'm extremely proud that for the third consecutive year, Fortune Magazine has named Mattel to it's 100 best companies to work for list.

Think about it.

A year with essentially no performance bonus payouts, no merit or promotional salary increases, and a significant reduction in force in our employees continue to proclaim their dedication and loyalty to our Company.

And, like me, I know they're really looking forward to seizing the opportunities this year.

As I've said throughout the past year, companies that deliver improved execution during the tough times, will be the ones best positioned to capitalize on the economic turnaround which will most certainly occur.

2009 was important because it set the stage for what I'm confident will be a strong year for Mattel in 2010 and for many years to come.

And now for the financial review, Kevin?

Thank you, Bob, and good morning, everyone.

As we've consistently said, we entered 2009 with a number of significant head winds, and plan to deliver results based upon realistic revenue assumptions, with our top priorities being to improve profitability, strengthen the balance sheet, and increase cash flow.

Despite the head winds that are still challenging us in the industry, I'm pleased to say, we did what we said.

We delivered our 2009 priorities with profits and margins up versus last year, with $500 million more cash on hand than last year, and finished the year with a stronger balance sheet.

As I've done in prior years, I will first review the results for the fourth quarter before reviewing full-year results.

For the fourth quarter, total worldwide gross sales for the quarter were flat, including a 3 percentage point positive impact from changes in currency exchange rates.

US sales were down 2%, while international sales were up 3%, including an 8 percentage point positive impact from changes in currency exchange rates.

On a regional basis, sales in Europe were up 4%, including a 9 percentage point positive impact from exchange rates.

Sales in Latin America were flat, including a 7 percentage point positive impact from foreign exchange.

And sales in Asia Pacific were up 8% including a 16 percentage point positive impact from changes in exchange rates.

I will now review our core categories and brands for the fourth quarter.

Mattel girls and boys brands.

Worldwide sales for the Mattel girls and boys brand segment were up 4%, including a 6 percentage point positive impact from changes in currency exchange rates.

Worldwide Barbie sales were up 12%, including a 6 percentage point positive impact from changes in currency exchange rates.

Barbie sales in the US were up 9%, and Barbie sales in international markets increased 14%, including a 9 percentage point positive impact from changes in currency exchange rates.

The worldwide sales for the quarter reflect strong performance in core lines, including Fashionistas, and "I Can Be", as well as hot products like the Camper and Town House.

Consumer take away for Barbie in the US was up double digits for the quarter, as well as full-year leaving US retail inventories clean.

Worldwide sales to other girls brands were down 17%, including a 5 percentage point positive impact from changes in exchange rates.

Sales in the US were down 20%, while international sales of other girls brands were down 15%, including an 8 percentage point positive impact from changes in currency exchange rates.

The worldwide sales decrease for the quarter was driven primarily by declines in the sale of High School Musical products.

Sales in the Wheels business, which includes Hot Wheels, Speed Racer, Matchbox and Tyco R/C increased 11%, including a 5 percentage point positive impact from changes in currency exchange rates.

The worldwide sales increase for the quarter reflected strong performance in Hot Wheels and Matchbox, partially offset by sales declines in Tyco R/C and Speed Racer product.

For core Hot Wheels, which excludes Speed Racer worldwide sales were up 16%, including a 6 percentage point positive impact from foreign exchange.

Domestic sales increased 13%, and international sales increased 19% including a 12 percentage point positive impact from foreign exchange.

Sales in our entertainment business, which includes games and puzzles, were up 2%, including a 5 percentage point positive impact from changes in foreign exchange.

For the quarter, excluding the positive impact of changes in foreign exchange, the worldwide sales decrease was driven primarily by lower sales of Radica and toys geared to the prior year's three summer movie properties, Batman, Speed Racer, and Kung Fu Panda.

These declines were partially offset by sales of toys geared to Toy Story and Toy Story 2, solid performance in the game business, along with US sales of "Cars" related product.

Fisher-Price brands.

Worldwide sales for Fisher-Price brands were down 3% for the fourth quarter, including a 3 percentage point positive impact from changes in currency rates.

On a regional basis, international sales of Fisher-Price brands increased 3%, including a 6 percentage point positive impact from foreign exchange, while sales in the US declined 7%.

Worldwide, core Fisher-Price was up 1% including a 3 percentage point positive impact from changes in currency exchange rates.

US sales of Fisher-Price core were down 3%, and international sales were up 6%, including a 7 percentage point positive impact from changes in foreign exchange rates.

The worldwide sales increase for the quarter was driven primarily by double-digit growth in baby gear, partially offset by disappointing sales of higher price point key drivers.

Worldwide Fisher-Price Friends sales declined 14%, including a 2 percentage point impact from changes in foreign exchange rates.

Sales of Fisher-Price Friends in the US were down 22%, and international sales were down 3%, including a 6 percentage point positive impact from changes in foreign exchange.

The worldwide sales decrease for the quarter primarily reflected a difficult comparison to a successful 2008 performance for Elmo Live and similar product.

American Girl brands, fourth quarter sales of American Girl brands were flat reflecting solid performance in the retail channel, offset by softness in the direct channel, primarily driven by a difficult comparison to strong entertainment related sales in 2008.

I will now review sales for the full year.

Worldwide gross sales were down 9% for the full-year, including a 2 percentage point negative impact from changes in foreign exchange rates.

US sales were down 4%, international sales were down 13%, including a 4 percentage point negative impact from changes in currency exchange rates.

On a regional basis, sales in Europe were down 15% compared to the prior year, including a 4 percentage point negative impact from changes in foreign exchange rates.

Sales in Latin America were down 12% including a 6 percentage point negative impact from changes in exchange rates.

Sales in Asia Pacific were down 7%, including a 2 percentage point negative impact from changes in foreign exchange rates.

I will now review our core categories and brands for the full-year.

Mattel girls and boys brands.

Worldwide sales for Mattel girls and boys brands decreased 10%, including a 3 percentage point negative impact from changes in foreign exchange rates.

The sales decrease reflect US sales declines of 2%, and international sales declines of 15%, including a negative impact from changes in currency exchange rates of 4 percentage points.

Worldwide Barbie sales were down 3%, including a 3 percentage point negative impact from changes in foreign exchange rates.

Barbie sales in the US were up 4%, while in international markets Barbie sales were down 6%, including a 4 percentage point negative impact from changes in exchange rates.

Worldwide sales for other girls brands were down 20%, which included a 2 percentage point negative impact from changes in currency exchange rates.

The worldwide sales performance for the full-year was driven primarily by declines in sales of High School Musical products.

Worldwide sales for the Wheels business were down 7%, which included 3 percentage point negative impact from changes in currency exchange rates.

The decline in worldwide sales reflected lower sales of Speed Racer product and Tyco R/C, partially offset by strong performances in Hot Wheels and Matchbox.

For core Hot Wheels, worldwide sales were up 5%, including a 3 percentage negative impact from foreign exchange.

Domestic sales increased 17%, and international sales declined 3%, including a 5 percentage negative impact from foreign exchange.

Sales in our entertainment business which includes games and puzzles, were down 14%, with a 2 percentage point negative impact from changes in currency exchange rates.

The worldwide sales decrease for the year was driven primarily by lower sales of Radica and toys geared to prior year's three summer movie properties, Batman, Speed Racer, and Kung Fu Panda.

These declines were partially offset by sales of toys geared to Toy Story and Toy Story 2, along with US sales of Cars related properties.

Fisher-Price brands.

Worldwide sales for Fisher-Price brands were down 8%, with a 1 percentage point negative impact from changes in foreign exchange rates.

US sales were down 8%.

International sales were were down 9%, which included a 4 percentage point negative impact from changes in currency exchange rates.

Worldwide sales at core Fisher-Price were down 6%, including a 1 percentage point negative impact from currency exchange rates.

US sales were down 4%, and international sales decreased 9%, including a negative impact of 4 percentage points from changes in exchange rates.

Worldwide sales of Fisher-Price Friends were down 13%, including no impact from currency exchange rates.

US sales declined 18%, while international sales were down 5%, including no impact from changes in foreign exchange.

American Girl brands.

Full-year sales of American Girl brands were flat versus the prior year, driven primarily by the November 2008 openings of our two new boutique stores in Boston and Minneapolis, offset by softness resulting primarily from a difficult comparison to strong entertainment related sales in 2008.

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

For the fourth quarter gross margin was 53.4%, up 740 basis points from 46% for the fourth quarter last year.

Gross margin benefited primarily from price increases, savings from our global cost leadership program, favorable product costs, and favorable mix, partially offset by foreign exchange.

For the year, gross margin was 50%, up 460 basis points from 45.4% in 2008.

Compared with the prior year, gross margin benefited primarily from price increases, savings from our global cost leadership program, partially offset by foreign exchange.

For the fourth quarter, advertising expense was $238.8 million or 12.2% of net sales, versus 14.2% for the fourth quarter of 2008.

For the year, advertising expense was $609.8 million or 11.2% of net sales, compared to 12.2% last year.

For the quarter, selling, general, and administrative expenses increased approximately $3.8 million to $388 million.

As a percentage of net sales SG&A expense was 19.8%, or flat compared with the prior year.

The year-to-year dollar increase was primarily driven by a higher crude incentive compensation, partially offset by gross savings before severance of $25 million related to our global cost leadership program, and a $22 million benefit for lower severance charges.

SG&A also benefited from the absence of a $15 million legal settlement charge recorded in the fourth quarter of 2008.

For the full year, SG&A expense was $1.37 billion, a decrease of $50 million from 2008.

As a percentage of net sales, SG&A increased by 120 basis points to 25.3%.

The dollar decrease in SG&A was primarily driven by incremental year-over-year gross savings before severance of $88 million, related to our global cost leadership program, a benefit from foreign exchange, and $27 million of lower litigation and legal settlement related costs.

These savings were partially offset by $81 million of higher incentive compensation expense, and $14 million of higher equity compensation expense.

For the year, overall equity compensation expense was $50 million, compared to $36 million in 2008.

For the full year, our global cost leadership program delivered gross savings before severance of $164 million.

The full-year gross savings includes about $88 million in SG&A, $62 million in gross margin, and $14 million in advertising.

With $164 million of gross savings and $32 million of severance charges, we achieved 2009 net savings of $132 million from our global cost leadership program.

As a reminder, in 2008 we had severance charges of about $35 million.

We remain on track to deliver cumulative net savings of approximately $180 million to $200 million from this program by the end of 2010.

Operating income in the fourth quarter was $417.4 million, or 21.3% of net sales, up 930 basis points compared with last year's fourth quarter, due primarily to higher gross margins and lower advertising expenses.

For the year, operating income was $731.2 million, or 13.5% of net sales, up 430 basis points from the prior year, reflecting higher gross margins and lower advertising expenses, partially offset by higher SG&A as a percentage of net sales.

For the fourth quarter, interest expense was $19.1 million, down from the prior year fourth quarter of $28.9 million.

For the full year, interest expense decreased from $81.9 million in 2008, to $71.8 million in 2009 due to lower average borrowings and lower average rates.

Interest income for the quarter was $600,000 versus $3.2 million in 2008.

For the year, interest income decreased from $25 million to $8.1 million, reflecting a lower yield on lower average cash balances for the year.

In the fourth quarter, other non-operating expense net was $1.9 million, versus income of $19 million in 2008.

For the full year, other non-operating expense net was $7.5 million versus income of $3.1 million in 2008.

The change in other non-operating income expense relates to foreign currency exchange gains and losses, primarily in Venezuela.

The income tax provision for the year was $131.3 million compared to $108.4 million for 2008.

The 2009 tax provision included net benefits related to the prior years of $28.8 million, or $0.08 a share, primarily due to reassessments of previously accrued taxes based upon the current status of federal, state, and foreign audits.

These benefits lowered the full year effective tax rate by 4.4 percentage points.

For the full year 2010, we expect the tax rate to be about 27% based on current tax laws.

For the fourth quarter reported net income of $328.4 million or $0.89 per share, versus last year's $176.4 million or $0.49 per share.

For the year, reported net income of $528.7 million, or $1.45 per share versus last year's $379.6 million or $1.04 per share.

So to summarize the P&L for 2009, the increase in full year net income resulted from higher gross margins, lower advertising expense, and lower SG&A costs, partially offset by a decrease in sales volume.

Now turning to the cash flow and balance sheet, cash flow from operations for the year was $945 million, driven primarily by net income of $529 million, and working capital improvements of $261 million.

Consistent with 2009 priorities for capital deployment, capital expenditures for the full year were $120.5 million, down from last year's $198.8 million.

In 2009 we also continued to reward our shareholders with a strong annual cash dividend of $0.75 per share, flat with the prior year.

Year-end cash on hand was $1.1 billion, up from approximately $618 million at the end of 2008, primarily due to strong cash flow generated from operations and disciplined capital deployment.

Receivables were $749 million, or 35 days of sales outstanding, down six days compared with last year.

Excluding the year-to-year change in factoring, receivables were down $45 million versus prior year, with days sales outstanding down two days versus prior year to 50 days.

Inventories of $355.7 million were down $130 million or 27% versus 2008, primarily driven by tight inventory management, given the current economic environment and the lower cost of producing inventory in 2009.

Additionally, our data suggests retail inventory levels of our products, with our major US customers finished the year below prior year levels.

Our total balance sheet debt was $752 million, a decrease of $148 million from the prior year.

During 2009 the Company paid down $150 million of the maturing long-term debt.

Our debt to total capital ratio ended the year at 22.9% versus 29.8% last year.

So to summarize, as expected, Mattel experienced overall sales declines in 2009.

However, our core brands performed well in terms of consumer take-away, and we executed on the things we control and deliver on our priorities of improving profitability and strengthening the balance sheet.

As we move into 2010, we feel much better about our top-line growth prospects due to the benefit of new license entertainment properties we announced last year, and good momentum in our core brand portfolio.

But we're also aware of the continuing challenges resulting from economic and employment conditions.

In 2009 in terms of profitability, our gross margins rebounded nicely, and we delivered as planned on our efficiency initiatives, resulting in a return to low teens operating margins.

While we are pleased with these results, our long-term performance goals for profitability are unchanged with an overall operating margin goal of 15% to 20%.

So for 2010, our focus will be to build upon our progress towards our profitability goal, in the face of what we expect to be a challenging cost environment and a continuation of a difficult economic climate.

As you heard from Bob, we believe our disciplined execution in what was a challenging 2009, has positioned us well for 2010 and many years to come.

That completes my review of financial results.

Now we would like to open the call to questions.

Operator?

Thank you.

(Operator Instructions) And we'll go first to Tim Conder with Wells Fargo.

Please go ahead, sir.

Thank you.

Just a few here.

As it relates to the gross margin again, Kevin, I think you said your preamble that you had -- FX was negative in the quarter.

I just wanted to double-check that.

And then how much would you attribute to your SKU rationalization benefiting gross margin in the quarter?

I think with regard to gross margin in the quarter, negative ForEx, yes, that really reflected the fact, that for the first nine months of the year, ForEx was negative to the Company, and that flowed through in the fourth quarter.

We'd see the benefits of lower ForEx, or strengthening of ForEx in the fourth quarter in next year.

With regard to the SKU reduction, that was part of the benefit of getting improved margins, but it was small, really a part of the Global Cost Leadership Program.

If you look at our full-year gross margins, they were up 50% -- to 50% up 460 basis points from 45.4% in 2008.

Compared with the prior year gross margin benefited from price increases and savings from Global Cost Leadership Program, which was about $62 million benefit for the full-year, and only a small part of that benefit really impacted the margin this year.

We expect more benefits from that in 2010.

And then could you make any comments, Kevin, I think you alluded to it a little bit on 2010, but how do you see the input cost here looking into the year?

And I would expect it to be a little bit more of a head wind in the back half of the year?

Yes.

I think so.

I think we made good progress rebuilding our gross margins in 2009, with, as I said, full-year gross margins of 50%.

Our goal is to sustain gross margins consistent with our long-term goal.

And as you know, Tim, there's many factors that impact our gross margins besides input costs, like bait -- freight, and distribution, royalties, ForEx, mix, and tooling to name a few.

So predicting our gross margin is very difficult, due to the complexity, all the moving pieces, and lack of transparency and predictability.

But looking forward, we know we'll have higher royalty costs in 2010 due to our new entertainment partnerships.

And while it's impossible to predict what will happen with commodity and labor markets, we're like likely to see year=to-year cost increases.

For example, there's been a steady recovery in crude oil prices at the current level about $75 a barrel, compared with $30 to $40 a barrel at this time a year ago.

That said, we're going to continue to execute our Global Cost Leadership Program, and other costs and manufacturing efficiency programs in 2010, and price our product consistent with making progress against our long-term annual goal of 15% to 20% operating margins.

Okay.

And then lastly, I will ask the Avatar question.

I don't think you shipped much in in the fourth quarter, but how did that sell-through go, and anything you can say about what retailers are telling you from a demand standpoint here, looking into early 2010.

Hi, Tim, this is Bob.

Obviously retailers were very cautious about Avatar, given that it was a late December debut.

And the timing of when the fan appeal hits, and those sorts of things was probably an issue.

So we developed a full line, but it was very targeted, and really more focused on collectors than it was for the younger audience.

Sell-through was fine but it wasn't a big contributor in 2009 for either retailers or for us.

2010 could be better.

The DVD will come out.

I don't know when it will come out, but perhaps more younger fans will see the property when the DVD comes out.

So if retailers want to get behind it further, we have a line ready to go.

But today, even though it sold through nicely, it's not a big deal.

Okay, great, thank you.

We'll go next to Tony Gikas with Piper Jaffray.

Please go ahead, sir.

Thanks, good morning, guys.

A couple questions.

Could you talk a little bit about how pricing held up over the holidays?

There was a lot of noise at retail, and a bit more noise than reality.

Also, Fisher-Price was down, I think you said 7% in the US, maybe just the key driver there.

And then also, at retail, category shelf space, was that down a little bit over the holidays?

What did we learn?

And last question, can you update us on where we're at with the MGA process and legal fees?

Okay, Tony, let me see if I remember them.

First, starting with pricing, it held up well this holiday season, or last holiday season.

Obviously different retailers have different promotional and marketing plans, some focus more heavily on price, others don't.

In general, those retailers who didn't focus as aggressively on price did quite well, and picked up some market share.

So I think once again there was evidence that we've now seen year after year that one can sell toys, it's not a commodity.

And it doesn't require huge price reductions to be successful in toys.

The second question was about Fisher-Price.

Business overall was a little soft last year.

And in this case, it was particularly true in our higher priced drivers.

So we have made some adjustments in that line for 2010.

Both we and our customers are optimistic about the Fisher-Price line for 2010.

Baby Gear rebounded a bit in the fourth quarter.

That is the non toy business in Fisher-Price.

But Power Wheels and Friends were still soft.

So we've got some work to do on Fisher-Price, but overall the sell-through was good.

And I think we've made the adjustments we need to make for 2010.

What was the next question, Tony?

Next question was shelf space, and then MGA.

Shelf space, I don't have a number off the top of my head for the overall industry.

I don't think it was significantly changed.

One retailer has talked about strategically emphasizing food and other sorts of things in its stores, so there probably was a little bit of contraction there.

But I don't know that I could conclude today that there was any big impact from shelf space on the toy business overall.

That said, I don't have real good data in front of me.

And as it relates to MGA, the Court of Appeal hasn't yet issued any opinion addressing the merits of the case.

But it has issued an order staying the equitable relief, and that includes the transfer of the Bratz copyrights and the Bratz trademarks to Mattel.

So in light of that development we put our 2010 Bratz line on hold, until we hear further from the court.

We do have a great line of dolls.

We're confident girls are going to love them, and it's unfortunate we're not going to be able to proceed at this point.

We are continuing with the mediation process, that we began after the initial verdict, and that was ordered as part of the stay execution and we're preparing intensively for phase two of the trial, which could occur as early as this spring.

And overall, while we reduced legal expense in total in 2009, and we resolved much of the product recall litigation, we'll continue to make the appropriate level of investments, and do the right thing to defend our brands and our positions until everything's resolved.

Legal fees in 2010 versus '09?

As you know we've been incurring significant legal costs over the last couple years related to MGA and recall-related litigation.

For full-year 2008 we incurred incremental legal costs versus 2007 of about 38 -- about $37 million, primarily for MGA litigation.

Litigation related legal costs increased by $33 million from 2008 to 2009.

Additionally in 2009, we recorded $21 million charge related to legal settlement for product liability related litigation.

In 2008, $15 million was incurred with the connection with the recall related multi-state settlement.

Going forward we expect legal fees related to recall related litigation will be relatively minor,given the recent legal settlement for product liability related litigation.

And as Bob said, we're still in litigation with MGA, incurring legal costs associated with the case being heard by the Court of Appeals.

In addition, as Bob said, we're also incurring legal fees as we prepare for phase two of the MGA trial which could occur as soon as spring of 2010.

We will reduce expenses in 2009, we'll continue to make the appropriate level investments in legal fees until the legal matters are resolved.

Okay, thanks, guys, good luck.

Thanks, Tim.

Thanks.

We'll go next to Felicia Hendrix with Barclays Capital.

Please go ahead.

Hi.

Good morning, guys.

And Bob, nice to end a tough year on a high note.

I was wondering, though, if you could just touch back on your international sales.

Obviously, Kevin, you ran through some of the details, but they were still weaker than I had expected.

I was just wondering, what were the drivers for that, and how should we think about international going forward?

In other words, was there something particular that was happening in your international marketplace?

No, not really, Felicia.

There's no question in my mind that the economic conditions overseas have been more challenging, at least in our business, compared to the conditions here in the US.

Throughout the year, we saw some pretty widespread sales declines in all major markets and across all major brands.

So that -- it wasn't a product line and a country or two or three or four even really made a difference.

I think it's reasonable to conclude that there are just more retailers either unable to buy, or unwilling to buy, or unable to pay.

But all that being said, our international group really did a tremendous job, in my mind, delivering the P&L and balance sheet in the face of a tough revenue environment.

They had solid margin improvement, whether it's gross margin or operating margins.

They had tight inventory management, and most importantly, they collected the cash.

And I would say somewhat encouragingly, we did see a wee bit of sales momentum late in the year.

It really started with Barbie around the globe.

So my view is, we're not out of the woods yet, outside of the US, but we're clearly in a stronger position now than we were a year ago at the same time.

And do the inventory levels there reflect what you're seeing domestically, clean?

Yes.

We don't have quite the precision and the data that that we do in the United States, but I don't have any reason to believe that inventories -- well, let me quit using triple negatives.

I think it's reasonable to conclude that inventories were clean virtually everywhere in the world.

Then on Thomas, is it going to be in Fisher-Price or entertainment or both?

It's going to be in Fisher-Price, the Friends side of Fisher-Price.

So when we think about Fisher-Price and Thomas, does that offset Sesame Street?

Well, nobody knows for sure, but if you look at the history of these properties, in general, the Thomas property has been the biggest licensed property in infant preschool.

The Sesame Street business, at least for us has been more volatile.

Some years there's a big hit product, and some years there are not big products.

And in general, our Sesame Street business has declined overall as the ratings of the television show have declined.

But it's too early to predict sort of how it will play out over time.

Okay, and then at your Investor Day this past summer you were talking, just looking forward to 2011 for one moment, you were talking -- you talked about several properties that you named, but you did talk about an internally developed intellectual property that you would name at a later date.

I was wondering if we were any closer to that?

I'm sure we're closer, but we're not at that date yet.

We're not at it right now.

Not today.

How about in a few weeks?

Okay.

I know we'll be closer in a few weeks, Felicia.

Okay, thanks.

And then, Kevin, just a few for you.

On the SG&A savings, you talked about $180 million to $200 million in 2010.

Should we assume that's all sustainable in 2011?

Yes.

Okay, great.

And then can you just go back through one more time, just the FX head winds in the fourth quarter?

I didn't really understand your answer.

Yes, I think what you see is that when you looked at that time first nine months of the year, FX was a negative to the Company, And when you think about our product flows, our product flows usually lag by a quarter.

So if we manufacture product in the third quarter, it goes through in the fourth quarter through the P&L.

So ForEx was a negative in the third quarter, so it continues to be a negative in the fourth quarter.

Okay, so then you should benefit--?

If you benefit ForEx in the fourth quarter, it ends up in inventory on the balance sheet, and that inventory will flow through the P&L in the first quarter of 2010.

Okay, great.

Guys, I know this is a Board decision, but with things getting better with your cash flow being so strong, you are definitely not in hunker down mode any more.

Any thoughts on buybacks again?

Well, I think, Felicia, as we said all year, our number one priority last year was to strengthen the balance sheet.

We did increase cash.

We did reduce debt.

And we also wanted to protect the dividend, and based on the meetings I had with folks throughout the year, I think there was a fair amount of speculation that we wouldn't be able to do that.

So when I think about going forward, the economy certainly isn't out of the woods.

So we're going to continue to run a conservative cash flow machine, and you're right, the Board determines capital deployment.

I know they're committed to the capital investment framework that we laid out in 2002 or 2003 or thereabouts.

Fortunately, certainly compared to a year ago at this time, we kind of have a high-class problem today.

That said, I doubt we're going to get ahead of ourselves.

I don't have any specific comments on share repurchases, other than as we do the analysis and look backwards in time at a lot of companies, share repurchases start to look like acquisitions.

That is, if you really do the backwards analysis, most of them do not contribute to shareholder value.

So we're going to be cautious about these things.

Dividends today are more important, in my mind's eye, than share repurchases, but that's up to the Board to decide.

Okay, great.

See you in a few weeks.

Thanks, Felicia.

And we'll go next to Greg Badishkanian with Citi.

Great, thanks.

Maybe just a little bit of color on retail sales in the US, as well as internationally and how you think that compares with the industry.

Well, in general, Greg, I would say we saw through NPD for the year in the US, sales down about 1% for the industry.

As we look at our sales at retail, whether we look at it at NPD, or through the POS we get directly from large customers, it was down about 3%, kind of in that neighborhood.

And so as we look at our retail inventories, they're clearly down.

But remember, we finished 2008 with retail inventories, as we calculate them, about 8% over the prior year.

We finished 2009 with the retail inventories down about 9%.

So it played out about as we expected.

When we look at our performance at NPD, the industry, as I said, was down, I think it was some number like 0.8% or 1%.

We were down a little bit more than that, despite the fact that we did gain share in dolls and vehicles and infant and preschool.

But it was a movie light year for us, and in total, really because of the mix of categories, we lost a little bit of share here in the US.

But I think all the numbers, as usual, by the end of the year sort of triangulate to the same thing.

How about the fourth quarter, specifically?

I don't remember the number specifically for the fourth quarter in terms of the performance of NPD and POS.

My recollection is our POS was quite a bit stronger than what NPD reported.

But I really haven't gone through the quarterly data yet, because frankly, literally, we got the NPD data last night.

Great, And then as you look at your retailers, inventory levels are pretty low, as you said.

Do you think that out of stocks were higher this year than last year, left maybe some sales on the table, because of lower inventory levels?

Some did, and some didn't.

Clearly, I think we have several retailers who think they lost some business because they were out of stock.

But we had some other retailers who were in stock, and would didn't give toys away at the end of the year, and they did particularly well.

So I think it's a retailer by retailer sort of question.

Obviously our position is to make sure retailers have everything all the time, so we tell them how much sales they lost, but I don't think I'd overly generalize that.

And then, just kind of looking out to 2010, how do you think your toy lineup compares with your lineup in 2009, just kind of qualitatively in your view?

Maybe on the entertainment side?

It's better.

Here's the problem.

I think if you ask me that question each of the last ten years, I'd answer the same.

It's not only my point of view, but we've also shown our line, or a good chunk of our line now for 2010 to retailers.

They're very supportive of our business.

Some of the new stuff just looks fabulous to me.

It if you go to stores today, and look at Barbie, Mermaid Tales looks very good.

The basic black dress segment of Barbie looks very good.

"I Can Be" is doing very well.

We've already got tens of thousands of girls voting on what Barbie's next career is going to be.

I was in stores over the weekend.

The WWE product that we've done is just fabulous.

We've got products for both collectors and kids.

And the collectors has a real level of precision and detail that they're going to appreciate.

And for kids, there's this Force Flex sort of, I think it's called, technology where the toy actually does what the character does.

And I was reading USA Today last week on an airplane, I was looking once again at the ratings.

The top two shows in cable were WWE.

So we've got some great properties.

We've clearly got more entertainment than we've had in the past.

But I also have to tell you our core brands are performing well in the marketplace.

Hot Wheels has been up for several years.

I think Matchbox finished its third year of really solid, I think in every case, double-digit POS growth.

Fisher-Price is the one where it was a little soft this year.

And it's really just in the high priced key drivers, and we've corrected that.

So I think my optimism about 2010 is warranted.

But I will also admit that that's the nature of the toy business, and my view of toys.

Great, and just one final one.

When you look at the gross margins, obviously very strong results there, and nice increase.

You mentioned a number of different drivers.

What do you think the one or two biggest ones that led to the outperformance were?

It's really pricing and the Global Cost Leadership Program, as well as other efficiency programs outside of the Global Cost Leadership Program.

Manufacturing efficiency programs.

Remember, our margins, our gross margins, are only back to where we want them to be, and about where they were a few years ago.

It's when the commodity costs ran up, and our prices didn't go up quickly enough.

We now, over time, made those adjustments.

We got the prices right, and the margins went back to where we expected.

So we weren't all that surprised at strong gross margins this year.

Great.

Thank you.

We'll go next to Linda Bolton Weiser with Caris.

Please go ahead.

Hi, thanks.

I was just wondering if you could go over any impact from the Venezuelan bolivar devaluation.Are you going to book a charge for balance sheet revaluation in the first quarter?

And do you have any quantification of that?

And also, are you gaining access at all to the official rate, or do you have to go to the parallel rate to transact going forward, in which case we may still see some negative impacts on your income statement?

Yes, I think going to Venezuela, Venezuela account for about less than 3% of Mattel's sales volume.

The devaluation of the currency announced on January 8, did not have a material impact on our results.

We also don't expect to have a material impact on our 2010 results, because we typically obtain US dollars at the parallel rate.

So we continue to manage the risk associated with Venezuelan government, and post-currency controls by pricing of product based upon the expectations of the local currency cost of acquiring inventory in US dollars, generally at the parallel rate.

So Linda, we've more or less been running the business based upon the parallel rate, and not the official government rate.

If we look at next year, there is actually inflationary accounting required in Venezuela.

And what we consider to be highly inflationary effective January 1, 2010.

As a result, it will use US dollars as functional currency effective January 1, 2010, and local currency monetary assets and liabilities will be remeasured at the end of each reporting period, with net adjustment being recorded in earnings.

Additionally Mattel used the official rate to translate earnings in Venezuela to US dollars in 2009.

In 2010, Mattel expects to use the parallel rate to translate earnings.

We estimate that Mattel's consolidated net income would have been reduced by less than $10 million in 2010, if we had used the parallel rate in 2009.

Great, thanks.

And then can I just ask about advertising rates?

Your advertising and promo ratio was down quite a bit in the fourth quarter.

Is that just less spending, or are you benefiting from rates, and do you have any -- I know you don't like to project, but what do you think the outlook is for 2010?

No, Linda, the biggest change from a year ago was really the fact that our sales declined last year, when the economy tanked.

And we had already made the advertising commitment.

So my recollection is sales were down some number, like 11% in the fourth quarter last year.

And we hadn't planned that, and we had committed the advertising dollars.

So this year is -- Kevin's mantra has been all year long, it was about realistic revenue assumptions, in light of the economy.

And we executed the advertising program almost exactly as we had planned it this year, in terms of expenditures.

There were some reductions.

Mostly a couple of things in our -- part of our Global Cost Leadership Program.

We consolidated some things and lowered some costs.

We're obviously using more social media, Twitter and Facebook, and those sorts of things as opposed to television commercials.

Overall, I think the number, Kevin, on a percent of sales, was 11.2, or some number like that, in all of 2009.

And that range is about right for us.

I think we said some number like 11% to 13% over time, and that's sort of what we planned for.

Okay, thanks a lot.

Thanks, Linda.

We'll go next to Sean McGowan with Needham & Company.

Please go ahead.

Hi.

Excuse my voice.

It's a little scratchy today.

On the -- looking at the inventory at the end of the year on your books, and the fact that your retail sell-through was so strong, better even than the sell-in, do you think that you lost some sales because you didn't have the inventory, just kind of a different view of that early question of retailer inventories?

Yes, Sean, a bit.

I mean our inventory was down 27% last year.

I think it was up, I don't know, some number, like 11% or 13% in the prior year.

So it came down.

And I think about a quarter of the inventory decline this year is just the cost of goods, as opposed to real fewer units, about order of magnitude.

We clearly left some business on the table on something like Mind Flex or Barbie Fashionistas as an example, but that's true every year.

We've got 8000 SKUs.

Well, I hope we don't have 8000 SKUs.

It's a little less, Bob.

And we leave business on the table at some, and we've got too many of others.

I don't know if we had it to do all over again that we would have had more inventory overall.

We clearly would have had more on some products, and less on other products.

But when you cite something like Mind Flex or Fashionista, those are product that perhaps performed better than one might have have reasonably expected or conservatively expected.

So if you left money on the table, if's because you could of sold more, if you had built more.

But you got a situation, where you actually have less, because you built less.

So were you just not expecting what you did?

I think in general, across the Company, the revenues for the year came in darn close to what we thought they were going to be when we built the plant a year ago.

We knew they were going to be three things working against us in 2009.

They played out.

Again, this isn't precise, but order of magnitude, about a third of the revenue decline was due to economic contraction, whether it's lower consumer purchases or certainly lower retailer purchases.

About a third of the decline was lack of entertainment properties versus the prior year.

A third of the decline was due to ForEx.

We had planned it that way.

It worked out that way.

We built inventory that way.

We focused on the cash flow that way.

It did what we expected it to do.

Okay, fair enough.

Bob, I think you said earlier when talking about employee morale type issues, I think you said there were no merit bonuses.

Could you square that with the recent incentive comp?

Is there something I'm missing there?

A disconnect.

Yes, it's the timing of the payment.

We had no bonuses last year, in 2009.

Based on 2008 performance, I got zero bonus in 2009.

Got you.

We also gave no merit increases or promotional increases at all in 2009 across the Company.

In 2010, Kevin has accrued bonus, based on our results in 2009, and we're expecting to get that cash, Kevin.

I think on order of magnitude on incentive compensation recorded this year, it was $97 million versus last year it was $15 million.

I guess I'd want to be a Lexus dealer near your office.

I don't know about Lexus or Toyota, Oh, I am not supposed to go there.

Yes, put the pedal to the metal and it never comes back.

Well, the question I would have for 2010 is assuming that, just assuming, for the sake of the question, we'll have another good year of compensation but I would assume nowhere near the kind of increase that you saw in '09, is that right?

Yes.

If you go back to the -- and I did this the other day, if you go back to the ten years that I've been here, we kind of have a target level of bonus.

If you look over a ten year period of time, we're pretty close across the Company to paying the target level of bonus.

That said, we rarely pay above the target level of bonus every year.

We really do have a pay per performance philosophy here and it works.

So when the business doesn't do well, we don't get paid well.

And when the business does well, we do.

And unfortunately, as you're kind of going through your P&L planning, as we do in here, it's kind of hard to predict exactly how it's going to be, but the program works out well for us.

And I think shareholders should be satisfied to know that we do well when they do well.

Final question.

Regarding gross margins again.

There's been a lot of questions about it.

So how would you characterize the sustainability of this current level?

If you have recaptured some lost ground over the last few years, knowing what you do know, which isn't everything, but about the head winds that you might be facing, do you think this is a level that you can sustain, assuming no major changes in the product mix?

Yes, in general, Sean, yes.

Now, I'm not giving guidance, and I don't want to go forward, that kind of level and stuff like that but since the year 2000 I said we kind of targeted a 50 gross margins, or thereabouts.

And it's going to change year in and year out.

We made good progress just about got there, then we lost ground, primarily due to the commodities, and the fact that our prices couldn't keep pace with the rapid growth of the commodities.

We're now back on track.

It's our goal to try and sustain good performance and gross margin, whether or not we can do it in any given three-month period of time, or 12-month period of time, we'll see.

But we're where we intended to be.

Okay, very good, thank you.

And we'll go next to John Taylor with Arcadia Investment Corporation.

Please go ahead.

Good morning.

Nice job with a tough year.

Let's see.

I got a couple of questions here.

If you look at the products that were short in the fourth quarter, like Mind Flex and maybe Fashionista and so on, I guess I'm thinking about the environment where many merchants were cautious about bringing in large quantities.

Which of those, could you give us a list of things that you think have an additional after-life in 2010, which in the past might have been thought of as a kind of a one and done kind of opportunity?

JT, I don't know if I'd do a great list, but if you look at things like -- my number one on my list is Mind Flex.

Mind Flex, we would have intended it -- it's a fascinating game, but it's not the kind of thing that's going to be an evergreen property.

In our mind's eye when we launched it, it was probably a one year property.

Well, it's going carry forward into 2010, and now we've got some ideas to extend the technology and do some new things with it.

So that's a big one.

Matchbox's Rocky the Robot, that was a sell-out.

We've got some follow-up product to Rocky, the one we're introducing this year.

I think is a really cool Matchbox item that we'll be showing, hopefully at Toy Fair.

Uno-Moo is it another one.

That was kind of Uno meets Fisher-Price Farm.

And that worked out very well, that was a sell out.

There were several things in the Barbie line that sold out.

The Three-Story Town House, the Camper, the Fashionistas line.

Barbie really sold through incredibly well.

But again, J.T.

, you look at the 8,000 SKUs, and the one we rarely talk about are the bottom ones on the tail, where we made too many.

Fortunately if our inventory is down 27% last year, we didn't make too many of those items,

Okay, good.

As you look at your -- the gross margin components going into 2010, I wonder you said, I think, that part of the improvement in 2009 was a mix shift in favor of higher margin stuff.

So as you get the new entertainment properties in, is there anything in particular you've got your eye on that might drag the gross margin down because of the influence on mix?

Yes.

Royalties in general, those products in general that carry royalties that is, somebody else's intellectual property, have lower gross margins than our internal intellectual property.

That being said, from an operating margin standpoint, they're very similar, because obviously somebody else is building the intellectual property and investing more in the advertising that we need to.

Okay.

And then as you ramp up on the new properties that are here many years, like WWE and Thomas and so on, is there -- is there kind of a gross margin curve, or do you pretty much hit the ground running with tooling costs and all of that stuff as that deploys out through the year?

I'm going to guess, Kevin, we pretty much hit the ground running.

Yes, I think that's right, Bob.

Okay, good.

Last question, in your 10-Qs and Ks, you break out the gross -- the cost of sales numbers by product royalty and freight, so on, could you share those with us this morning or do we have to wait for the K?

I don't have that information.

I think it's the K.

Okay, thank you.

Thanks, JT

Our next question is from Margaret Whitfield with Sterne Agee.

Good morning and congratulations.

Bob, I agree with you the new lines for WWE look strong, also Thomas.

I wonder if you have any initial response from consumers to the lines, and how you might be supporting them this year with advertising?

We do.

WWE, in terms of it's product life for us, probably a little bit ahead of Thomas.

There was some channel inventory when we picked up the Thomas business so it will take a little bit longer for our product to flow through on Thomas than WWE, but I saw some of it last weekend.

WWE reaction has been very strong.

Today I think it's primarily the collector community.

We've started doing a little bit of advertising on the WWE shows.

We're going to do more.

I think we start next week on the more kid-oriented Force Flex segment, but the product just looks awesome on the shelf, and I think the reaction has been good.

Again, on Thomas, it's very early.

The reaction has been good, but there isn't that much of our product out there.

Okay.

And then could you comment on what price actions you might take for the spring and fall lines this year because of higher input costs?

Margaret, we have started showing our line for 2010 to retailers, and we started that throughout 2009.

So at this point, we don't see any big price increases for the year.

That said, we did go up a bit on some new items, but we really haven't priced continuing items, but it is early.

As Kevin said, our goal in pricing is to be consistent with our long-term 15% to 20% operating margin.

And we're really focused on executing continuous improvement programs, and cost reductions across the supply chain and the business units.

So that's likely to be key to success this year.

And, Bob, you mentioned at at the outset that Barbie was back.

You mentioned increases in share and take-away.

Could you elaborate or give us specifics?

Well, as as I said all year, if we can keep the POS and market share growing, the shipments would take care of themselves, and that's what happened.

We had good success in the fashion segment, with Fashionistas and Beach Dolls and "I Can Be" and the Camper and the Town House.

Collector did well last year.

We did the retro my favorite Barbies going back, and looking at Barbie over time, and Twilight is in the collector business.

The Twilight products sold through nicely.

About the only thing we saw a decline in last year was the fall entertainment line.

The Three Musketeers, which was up against the prior year's Diamond Castle.

As we said all year, we wanted to reduce reliance on that segment and we did.

We had good programs, good marketing programs, good partnerships with retailers, as I mentioned.

One of the things I found most interesting in the market share report last night, not only is Barbie obviously one of the toy industries biggest properties, it's one of the fastest growing properties.

If you look at the top ten growth properties of all toys, Barbie was on that list last year.

So we had a really good year, and Barbie performed very well at retail, and we feel good about where we are.

Can you provide specifics on the share or the growth?

No, other than it was up double digits in POS.

It was up double digits if you measure it by NPD.

That is retail sales.

Share gain was consistent all year.

We gained share in the fourth quarter, in the holiday season, whether you measure it against dolls or whether you measure it against total toys.

Barbie was a consistent performer all year.

Finally, how about American Girl?

Another flat year likely, or do you think there could be some growth?

I don't know.

Overall, I've been very pleased with American Girl, especially in light of the economic conditions and particularly in 2009 remember when we were doing comparisons, the 2008 and the Kit Kittredge movie.

The retail stores did well in the holidays.

2010, we've got the Lanie doll now, which is kind of outdoors oriented.

I don't know where American Girl is going to go this year.

But I have to tell you, flat performance, in light of the environment last year, and in light of what that business unit was up versus the prior year, to me was very good.

Okay, thank you.

Thanks, Margaret.

And we'll go next to Drew Crum with Stifel Nicolaus.

Great.

Good morning, everyone.

Just a question on your CapEx.

It was down pretty significantly year-on-year what.

What are your plans for 2009?

Any there any major CapEx initiatives you can highlight for us?

Yes, I think CapEx this year was $121 million, and as Bob said, we focused on business critical projects.

When I think about CapEx for next year, I think about -- we are opening a store in Denver.

I think the CapEx will be around what we were doing before 2008, around the $150 million or less.

Okay, and the other girls segment was down pretty considerably in the quarter.

What do you guys have in the mix for 2010?

Just remind us again of what you have there?

There's a couple things going on.

The big decline last year was driven by High School Musical.

And there's no new entertainment planned for High School Musical until 2011 at the earliest.

We have Polly in that segment, the Roller Coaster Hotel did well in Polly, and we have got a new look for Polly coming in 2010.

Little Mommy did well in the holidays as I mentione, with the Walk & Giggle doll.

Probably the big news coming up is Disney's Rapunzel movie which launches in November.

The Princess and the Frog did very well for us at retail late in 2009.

And we're all excited about the Rapunzel movie in fall 2010.

It's hair play, which is a no brainer for the doll business.

And probably the other thing that's important is regionally we picked up the Disney Princess line in Europe this year.

A competitor had been selling it previously.

We've had really strong results for Disney Princesses here in the US, and we think we can replicate that overseas.

One last question.

Remind us again the debt maturities you have coming due in 2010, a dollar amount if you can provide it.

I think it's $50 million.

I'm sorry, $50 million?

That's correct.

$40 million in May and $10 million in October.

Okay, thanks, guys.

Operator, we have time for one more question.

Certainly.

And our final question is from Garrett Johnson with BMO Capital Markets.

Please go ahead.

Hi, good morning.

I was wondering if could you comment a little more broadly on the fashion doll category.

How do you feel about that category in a broader context of girls?

Do you see any shifts in girls spending, and perhaps a comment on the competition that's out there?

I felt very good about the category.

Remember, there were some big declining properties in this past year.

Certainly one of our competitors makes a product that they've essentially just walked away from in the marketplace.

And Hannah Montana has declined.

High School Musical declined.

These were big doll properties that had significant declines.

So the doll category overall held up well, and clearly we did particularly well in that category and picked up shared.

I was encouraged by the overall sales of the doll business.

Okay, and on the appeal with MGA, when do you expect -- a best guess on a decision there, and when that decision comes through, how quickly can you get new Bratz product on the shelf if that were the case?

Well, we have no idea when the Appellate Court is going to issue its opinion.

There is no way to predict those things.

They work at a pace that they set..

We don't have any control over the timing.

We're ready to go with a Bratz line.

We do have a great product line.

Girls like the product line.

And, obviously it would take us some time to start producing that line and get into the marketplace.But we've told the court all along that we would have had a line in the marketplace this spring, and we would have had a line in the marketplace this spring.

So we're ready to go, if and when the court ever allows us to do that.

Okay, so it would be measured in months or weeks or?

Yes.

All right, fine.

Great.

That's all I have.

Thank you.

Thanks, Garrett.

And that does conclude our question and answer session.

I would like to turn things over to Dianne Douglas for any additional or closing comments.

Thank you, operator.

There will be a replay of this call available beginning at 11:30 Eastern Time today.

The number for the replay is 719-457-0820.

And the passcode is 3945830.

Thank you for your participation today.

And that does conclude today's conference call.

Thank you for your participation.