MillerKnoll Inc (MLKN) 2003 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Herman Miller, Inc. second quarter fiscal 2003 earnings results conference call. This call is being recorded. This conference will include forward-looking statements that involve uncertainties and risks. There can be no assurance that actual results will not differ from the company's expectations. Factors that could cause such differences include the company's ability to improve operations and realize cost savings, competitive and general economic conditions, the future profitability of acquired companies and other risks described in the company's annual report on Form 10-K, it's quarterly reports on Form 10-Q and its other filings with the Securities and Exchange Commission.

Today's presentation will be hosted by Ms. Beth Nickels, Chief Financial Officer, and Mr. Michael Volkema, Chairman, President and Chief Executive Officer. Ms. Nickels and Mr. Volkema are joined by Mr. , Treasurer and Vice President of Investor Relations. Ms. Nickels and Mr. Volkema will open the call with a brief presentation which will be followed by your questions. We will limit today's call to 60 minutes. At this time, I would like to begin the presentation by turning the call over to Mr. Volkema. Please go ahead, sir.

Good morning, everyone, and welcome to our second quarter conference call. As is our custom, I'll open the call with a brief introductory comment and then I'll turn it over to Beth Nickels for a more detailed review of the financials. And then, of course, we'll use the remaining time for your questions.

My message is short and simple today. As you know, we continue to operate in an interesting economic climate. The leadership team is working hard to keep the promises that they make to you and to other stakeholders. We believe that the second quarter results were a promise made and a promise kept. Last quarter we realized many of the anticipated benefits from our restructuring activities. As a leadership team, we are focused not only on ways to lower our costs, which continues to be a primary focus even after completing the restructuring initiatives, but also discover ways to enlarge our market opportunity and to increase sales.

In short, we're not waiting around for economic recovery. We plan to significantly improve our performance over time, even if the economic climate, as I said, remains interesting. And with that brief introduction, I'll turn the conference call over to Beth.

Thanks, Mike. I'm going to ask all of you to bear with me as I cover a lot of details based on inquiries that we received last night after the release. And first I'd like to remind everyone that this quarter's call is also being Web cast and includes a slide presentation which can be viewed on our Web site at hermanmiller.com. And if you haven't received the press release, it's also available on the Web site.

As Mike mentioned, we're very pleased with our second quarter results. The first quarter marked our return to profitability and we improved this performance in the second quarter. EPS came in at 16 cents per share, which is two cents above the upper end of the range of nine to 14 cents per share that we provided.

This performance is tied to a fuller realization of the benefits from actions taken last year to redesign our business model. It confirms the earnings leverage that is now possible. Throughout the call we'll discuss the details that enabled us to achieve this level of earnings performance.

Let's start with consolidated sales, orders and backlog. On a consolidated basis, net sales for the quarter totaled 357 million, which is near the upper end of the guidance we provided. This represents roughly a 9.5 percent decline on a year-over-year basis. However, for the second consecutive quarter, our sales did show sequential improvement over the previous quarter increasing three percent or $10 million over the first quarter.

Our average weekly sales for the quarter were 27.5 million compared to 26.7 million in the first quarter and 24.8 million in the fourth quarter of last year. Consolidated new orders for the quarter totaled 352 million, which is down three percent compared to 362 million last year. However, sequentially, this was a two percent improvement from the first quarter orders, which totaled 346 million.

Orders booked during the second quarter translate to an average of 27.1 million per week. This is a 14 percent improvement over the low point of 23.8 million per week experience in the third quarter of last year.

The level of business activity during the quarter as measured by client business continue to be strong comparing favorably to first quarter activity. In fact, customer business were up 40 percent over the first quarter to the highest level experienced since June of 2001.

While this is encouraging, it's difficult to predict what percentage of these business will actually translate into new business or what the timing will be. As you may recall we track project opportunities and it has remained steady over the quarter, but there hasn't been any significant up ticks that would suggest a dramatic recovery.

On the competitive bidding front we continue to win our share of projects and fair well in the bidding process. Of course, as you may expect, the pricing environment continues to be very competitive. We continue to focus our selling activities on projects and customers who value our capabilities and knowledge regarding the application of furniture solutions to work environment issues.

Today we feel we've been successful with this approach and we're encouraged by and pleased with our win rates.

Let's move onto the backlog. For the quarter, our ending backlog of 194 million was down three percent from the first quarter. On a year-over-year basis it down approximately one percent from last year's second quarter levels of 197 million.

Historically, revenues in the third quarter reflect a seasonal slowdown and this year does not appear to be an exception for that trend. Clearly, we would prefer to enter the third quarter with a higher backlog and order pacing so that we can continue to demonstrate earnings momentum.

However, on a positive note, our industry leading reliability and lead times have resulted in a shortened business cycle. This enables us to take and fill orders much deeper into the quarter than in the past. Though this shortened cycle makes forecasting revenues more difficult, it gives us confidence that we can quickly translate the benefits from any increase in business activity into top line and earnings gains.

Now I'll give you some specifics around domestic and international operations. Domestic sales decreased eight percent while new orders declined two percent on a year-over-year basis. On a sequential quarter basis, meaning first quarter to second quarter, our North American sales actually increased three percent, while orders were flat.

As in the first quarter, the international business environment continued to be difficult. On a year-over-year basis, sales for the quarter decreased 17 percent while new orders declined six percent. This decline in sales in partially attributable to our shift toward a non-owned dealer based business model and select international markets and increased focus on higher margin projects in our European business.

On a positive note, compared to last quarter, meaning sequentially, international sales increased roughly three percent from 49 million to 51 million. And new orders increased by over 12 percent from 46 million to 52 million. Additionally, the profitability of our international operations has improved dramatically on a year-over-year basis, even though revenue levels have declined. This is due largely to the restructuring actions taken last fiscal year.

Let's move on to gross margin. We continue to make gains toward improving gross margin. Once again, this was a bright spot for the quarter. Our gross margin improved to 31.8 percent from 30.1 percent on a year-over-year basis, despite a 38 million decline in sales volume. Sequentially gross margin improved .3 percent from the first quarter.

The ongoing challenges of the current pricing environment, coupled with 2.7 million in variable comp accruals in the second quarter, makes this improvement even more encouraging.

The results for the quarter again showed marked improvement in all areas of cost of goods sold when compared to the prior year. Most notable were improvements in overhead spending and direct material costs. On a pure basis overhead spending declined by $8.5 million compared to last year. This decline of almost 11 percent is greater than the relative decline in sales over the same period.

Material costs for the quarter totaled 37.5 percent of sales, an improvement of .8 percent from the prior year and .3 percent from the first quarter. Our procurement and supply chain teams are continuing their pursuit of over 250 initiatives to further improve our material pricing.

Several of these programs are targeted at offsetting the increase in steel and plastic component costs and have yielded early results, which contributed to our strong margin performance during the quarter. The component cost increases are starting to kick in, so we're excited that we were able to get the savings programs and margin improvements in place before these increases took effect.

Compared to the first quarter, cost of goods sold improvements were achieved in all areas, with the exception of overhead spending, which was held flat as a percent of sales.

Pricing pressure has continued to compress gross margins. Higher discounting in the second quarter as compared to a year ago reduced our domestic margin by approximately $6 million. Discounting also increased in relation to levels experienced last quarter. On a year-to-date basis, discounting has reduced domestic gross margin by approximately $11 million as compared to the prior year.

We've done a good job so far of mitigating the impact of discounting on gross margin. Going forward, this will become more challenging, particularity in the third quarter, due to the lower expected revenue levels. We want to assure that we continue to work at reducing our costs, so even though we're pleased with our results today, and we're finished with the major restructuring actions, we had ongoing continuous improvements efforts. These efforts should continue to yield dividends. We will not stop pursuing ways to be more effective.

Moving on now to operating expenses. Our performance in this area is another bright spot. For the quarter, operating expenses totaled 92.8 million or 26 percent of sales. This is almost a three-point improvement, or $21 million, on a year-over-year basis. And included in second quarter operating expenses is variable incentive compensation of 3.1 million. Compared to first quarter levels, operating expenses increased slightly due to higher spending in product sales, marketing and research and development. These increases were all expected and they relate to initiatives grow the business including new product new product launches and improving our face to the customer.

Our continued focus on managing cash flow and maintaining spending patterns at levels appropriate for the current business environment has resulted in dramatic improvements in leveraging our operating structure. As with improvements in cost of goods sold, this performance is a reflection of the great efforts of all of our employee owners to control costs. As reported last quarter, we believe we can continue to maintain close control over our spending. At the same time, we intend to continue investing in those projects and programs that we think are essential to innovation and future sales growth.

Moving down the income statements - operating margin and net income. Our 5.8 percent operating margin for the second quarter improved both from the prior year of 1.3 percent, including special charges, and the prior quarter of 5.3 percent. As mentioned in our fourth quarter call, our goal was to improve our operating margins for the fiscal year to five percent. Based on our performance during the first half of fiscal '03, we're well on track to achieve this.

Other expenses for the quarter, net of interest income, totaled $3 million. Included in this amount is a 2.2 million pretax charge or two cents per share net of tax related to the impairment of an equity investment in a dealership joint venture. This charge is partially offset by pretax income of 1.8 million for interest received from prior year tax audits. During the quarter, we realized approximately $222,000 in interest phasing from our interest rate agreement. We expect to realize similar savings in the third quarter.

The effective tax rate was 34 percent for the quarter. As explained last quarter, the lower rate is driven primarily by the change and amortization of goodwill related to the adoption of FAS 142, the effective changes in international and state tax provisions and the size of permanent deductible items relative to our earnings. We don't anticipate any material changes in our tax rate during the balance of the fiscal year.

Net earnings for the quarter were 11.8 million compared to 1.7 million in the second quarter last year before considering pretax charges in last year of 38.8 million. Earnings per share were 16 cents compared to two cents last year before special charges.

Now let's talk about cash flow and the quality of the balance sheet. For the quarter, operating cash flow continued to be very strong as we generated 31 million of cash from operations. This compares to 16 million for the same period last year. Year to date, cash from operations is just over 105 million. Even excluding the net effect of tax related transactions in the first quarter and cash outflows related to the restructuring, year to date cash from operations totaled approximately 93 million. We're very pleased with this progress for, as you remember, one of the primary objectives of our restructuring plan last year was to improve our cash flow.

In light of current conditions we monitor our accounts receivable and credit exposure very closely and believe we're adequately reserved for bad debt expense.

Our collections of accounts receivable continue to remain relatively strong and we've improved our aging over 90 days consistently through the past three quarters. In fact, during the second quarter our day sales outstanding and inventory and accounts receivable improved to 52.5 days from 53.5 days in the first quarter.

We're also closely monitoring at the highest levels within the organization the health of our dealer network. We've developed action plans to ensure we have adequate coverage in our key markets and have limited our risk exposure. Our expectation is that there will be some consolidation in both the dealer network and in office furniture manufacturers in light of the current market conditions.

Capital expenditures for the quarter were 6.7 million. Year-to-date our cap ex has 12.3 million, which is 19.5 million below last year. We continue to closely scrutinize capital spending to make sure we're making the right investments to sustain the business and to preserve our ability to introduce innovative new products.

Based on the reduced pace of our capital spending, we now project capital expenditures for fiscal '03 to be in a range of 35 to 45 million. Now, although we have lowered our spending levels, we are monitoring capital spending to ensure we're making appropriate investments in a manner consistent with our business priorities.

This year we have continued to spend on projects that will significantly improve the performance of our products in terms of quality, durability and profitability. In addition, we've introduced a wide variety of extensions to our space and Resolve products platforms.

We introduced a breakthrough product in ergonomic seating called and we plan to introduce a new high performance work chair later this fiscal year. We also continue to make investments in research as we evaluate concepts that will lead to the commercialization of new innovative products as well as new product platforms.

I'd like to give you a brief update on the status of the facilities that were existed in the restructuring. As we mentioned last quarter, the largest facility -- located in California -- is currently under contract. Although it hasn't yet closed, the purchaser is making progress in clearing the remaining contingencies.

If successful, they will commit additional non-refundable funds to us in a few weeks. The transaction is currently scheduled to close in our fourth quarter. We entered into a sublease for a good portion of the Michigan facility called the facility. We've also seen an increase in activity related to the Michigan chair plant. And, no, we do not yet have an offer on the facility. We have had inquiries from several interested parties during recent weeks.

Let's move onto our liquidity and cash position. At the end of the quarter, total debt was down three million from year end to approximately 232 million as we've paid down some bank debt associated with our former Australian business unit.

We expect to reduce our outstanding debt further during the third quarter when we will make a scheduled $10 million principal payment on our 55 million outstanding private placement note balance. Our increased profitability and cash flow has resulted in a significant improvement in our coverage ratios.

As a result, we're now in compliance with the requirements of our debt covenant without the benefit of the amendments that were negotiated last spring that exclude special charges from the calculations for a period of time.

The improving trend in profitability and cash flow, the 200 million available on our revolving credit facility and our significant cash balance provide us tremendous financial flexibility.

As the second quarter progressed and we continued to experience the benefits from the adjustments to our business model, we grew confident that these benefits were sustainable. In fact, we now believe we have lowered our breakeven point, even below our prior estimate.

Therefore during the second quarter, we resumed our share repurchase activity, buying 2.46 million shares for 42.6 million. This approximates an average price of $17.31 per share. And going forward, we expect to continue our repurchase activity. Consistent with our past practice, the level of repurchases will be balanced against our cash flow. Our desire to reinvest in the business and our mandate to maintain a high degree of financial flexibility.

We currently have $66 million remaining on our share repurchase authorization. We're confident that once this authorization is completed the board will approve a new authorization, consistent with our past practices.

Despite the higher cash outflows during the quarter, we continue to maintain a strong cash position, ending the quarter with a cash balance of 169 million.

Pension plans have been receiving a lot of attention lately, so I thought it would be helpful to give you a brief update on the status of our design benefit cash balance plan. At fiscal year end, we're in an under funded position of approximately $54 million, despite making voluntary cash contributions of 37 million to the plan during the year. Since that time, we estimate that the poor performance in the stock market has further increased the under funded status. But based on current data, we still will not be required to make any additional contributions this year. However, we're currently reviewing our options and will likely make a voluntary contribution during the second half of the fiscal year, in the range o 25 to 35 million.

We should also point out to you that we are revising our expected return on plan assets, from the current 9.5 percent to nine percent. We believe a change in the three, which is used in the actuarial determination of our pension plan expense is warranted, given market conditions. This change increases our pension costs by approximately $1 million for the fiscal year, half of which has already been recognized.

Now let's talk about . for the quarter was a negative 4.3 million, an improvement from the negative 5.6 million in the first quarter. And year-to-date has improved 11.5 million, or 54 percent from the prior year. These gains have been driven by our improved cost structure, a lower pacing of spending, and a significantly lower capital base. Consolidated capital has been reduced by 108 million, or 14 percent from the prior year level.

Now let's turn to the outlook for the balance of the fiscal year. As I mentioned earlier, we believe that our business is stabilizing, however we're entering into what is historically been a seasonally lower quarter for us.

This combined with the increase in our short cycle business, makes forecasting quarterly orders and sales difficult at best. However, we believe that the economic and business environment are not worsening, nor is our relative performance.

Although we hadn't given guidance beyond this quarter, analyst's estimates reflected an expectation for sequential revenue growth in the third quarter. We believe this is based on an expected improvement in economic and business fundamental. It appears that general economic recovery has been pushed out further into 2003. We see nothing that would indicate deterioration in the general economy, the business environment or our performance in the second half of our fiscal year.

Therefore, we believe that the second six months of our fiscal year should closely approximate the first six months, although the pacing of business for the third and fourth quarters will not be level.

This suggests that full-year revenue should be between 1.37 billion and 1.42 billion with earnings per share in a range of 52 cents to 61 cents. We believe that third quarter revenues will mirror historical patterns and fall short of the second quarter levels by eight to 10 percent, putting them in a range of 310 to 330 million, with earnings of three to seven cents per share. This should be followed by an increase in fourth quarter revenues, putting them in the range of 355 to 385 million and earnings of 18 to 25 cents per share in the fourth quarter.

In summary, we're beginning to return to the level of profitability that creates compelling value for our shareholders. We feel we're doing a good job of managing the things that are within our control and responding appropriated to the current business environment. In addition, we're beginning to demonstrate the type of earnings power we can come expect from our restructuring effort of last year.

We're also pleased that this quarter's results continue to give all of our employee owners the opportunity to celebrate the holiday season with the knowledge that the business has stabilized and we're confident our employees will earn bonuses this fiscal year. With that, I'd like to turn the call back to the operator to open it up for questions.

Thank you. Today's question-and-answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key, followed by the digit one, on your touch-tone telephone. If you are on a speakerphone, please be sure your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal us and will take as many questions as time permits. Once again, please press star, one, on your touch-tone telephone to ask a question.

We'll take our first question from Budd Bugatch with Raymond James. Please go ahead.

Good morning, Beth.

Good morning, Budd.

A couple of questions. On the order of pacing at $27 million. Can you kind of give us the progression during the quarter, maybe, and talk about what the high was on the order pacing?

We saw ranges during the quarter between 24 million on up to 35 million. And it varied, but it was pretty consistent.

So no trend one way or the other.

No. Only in the last few weeks when we had the short holiday week and going into this season. But throughout the quarter, it was pretty consistent.

Talk a little bit about order of composition or sales composition from seating versus systems or inline project wins versus inline sales?

Hi, Budd. This is Mike. I will tell you that there hasn't been any significant product mix shift for us. Now, as you'll recall, we have a heavier component in systems furniture than the industry does, as an average, and if you looked at the data, you would have noted that systems was probably the one that got impacted the most, which makes sense because they're linked to a lot of the larger companies, larger projects. So we've been struggling with that, but we've been struggling with that for the last 18 months. So, but from a mix shift within the company, it's been pretty stable and constant as well.

What about project wins or the business that's coming from inline, orders and compensation of sales versus business coming from product completion - project completion?

Budd, can you help me a little bit and clarify, just so I understand the meaning you have behind inline?

I mean, orders that come every day, just because of, you know, of inline business as opposed to one time product - project wins when you're going through a bidding process on a project.

Right. No question that we're still under a condition where the total number of projects in the marketplace is significantly lower than what it has been historically. And obviously, the thing that we'll get and believe the demand will release on the other side of some business confidence and an economic recovery.

And so we really are dealing with a much higher percentage of day-to-day business from an installed base, which is like an annuity factor because of the business that we've done over the many years.

And I think we've reported to you once before that about 75 percent of our business comes from historical customers. So, again, there's no question that that pattern remains the same and we haven't seen the major products return to the marketplace.

When you tell me that that's from historical customers isn't quite the same as day-to-day business, because you can have project links from historical customers. I mean, an historical customer can be an historical customer both you and the competitor.

I'm trying to understand has the, you know, business lost from the primarily project business or can you tell? Or obviously not both -- not all project business.

Where it becomes difficult -- and I know you're familiar with this -- it's because of our dealer distribution network. A lot of the day-to-day business never hits our radar. We obviously have sophisticated tracking systems for the projects that are in play, but day-to-day reconfiguration -- I need one more panel -- tends to come through the dealer distribution and falls below our radar.

OK, but that would be -- that's the kind of business I'm looking at as the annuity business.

Right. And it's there and we depend on it, but ...

We track project business before it occurs in terms of the number of opportunities in our win rate. But once it's actually ordered into the system as orders it happens over a period of time and it flows together and then we track it by customer.

OK. And the backlog that you now have of 194 million -- if I remember the number right -- that represents -- it used to represent about six or seven weeks worth of business. Is that still right? Or is that, now, in the shorter business cycle is that now four to five weeks or how many weeks is that?

It's clearly shorter business cycle now. As you know, we have a customer value program out there right now that's, you know, guaranteeing customers 15 days are free off of anything that's ordered on our 10 day program. And that will drive -- we're seeing, in fact, I just had a recent customer that, if you can believe it, ordered 1,800 Aeron chairs on the, you know, off of the 10 day cycle time.

So, we are seeing some of that business move in because of our reliability and predictability on much shorter rate times.

I'm trying to understand. Is there a number attached to it in terms of domestic that we used to use?

I don't think the metric is that far off, but it's probably off by a few days now from where it was. Because the orders still don't get entered until it's a true order and there is a scheduled delivery date.

And in the mix of the backlog, Budd, you've got projects that have picked a date that could be as far out as, you know, 90 days and then you have other things that are on a regular basis come in and want the soon as possible date.

Clearly, virtually all of our product lines are under four weeks from the delivery standpoint today. If someone wants to just pick the best available date.

I'll let some other people ask -- well, I did just ask one last detailed question. Beth, you gave us the EDA for the quarter of negative 4.5 million?

Yes.

Give us the note tied on the capital charge that makes that?

Sure. Hold on a second. For the quarter, , the no pat was 11.5. Capital charge was 15.8. For the year-to-date, no pat is 23 million and the capital charge is 33 million.

Terrific, thank you very much.

We'll take our next question from with UBS Warburg. Please go ahead.

Good morning. Congratulations guys on a great quarter. It seems like you're gaining some market share. Can you talk a little bit about how much sales have decelerated since November, and can you quantify how much of that you think is seasonal versus economic uncertainty?

Yes, we said that we expect the quarter revenues to be down by about eight to 10 percent, and it's tough when you're in the short weeks and right around the holiday season to get a good handle on what an actual level is, because there are so many people out on vacations and the customers don't tend to focus on actually placing orders. So we think eight to 10 percent is good for the quarter based on what we've seen so far and what our expectations are.

OK, and can you talk a little bit about your inventory? It was up 11 percent sequentially for the quarter.

That was up specifically for a couple of projects that are in our dealer network.

OK, and what is the main focus of your cap ex this past quarter, the coming quarter?

In the past quarter, the biggest component of it was related to equipment and facility improvements. Mostly equipment related to new product launches and to new processes. That was about three-and-a-half million of the total. And the balance related to, specifically to some new product launches.

OK, thank you very much.

Thanks .

Once again if you would like to ask a question, please press star-one on your touch-tone phone. We'll go next to Chris Hussey with Goldman Sachs.

Morning guys.

Morning Chris.

Couple questions. On the, maybe you could just give us a little bit of an update on the steel prices. As I remember the steel price impact is going to start hitting you guys in January I think with some of your price protection contracts start to unwind. Maybe you could give us a little bit of impact on how much of that is, you're expecting to impact the second half.

And then I, a question on your consolidation comment that, and I couldn't help but notice that you mentioned that you thought the industry was going to consolidate and you know, very soon after you talked about how financially flexible Herman Miller, maybe you'd like to, is there a connection there? Are you guys looking at participating in any type of consolidation?

Chris, this is Mike, I'll handle the consolidation question, and then I'll turn the steel price question over to Beth.

I think from our standpoint, if you look at the industry, if you reflect on other industries that have suffered through similar kind of economic downturns or industry downturns as we have, it does create some opportunities around consolidation. We still believe that the primary consolidation is in fact going to take place with some of the smaller manufacturers wanting to access some of the distribution assets slash capabilities of the larger players. We're actively looking at our strategy and product gaps for both, you know, there could be, you know, potential for alignment between some of those smaller players and our own needs. We're on record with saying we're always willing to review those opportunities. Again, don't, please don't read into the comments that there's any larger combination in mind because that would not be the intent of the comment. And with that maybe I'll ...

I'll jump in then on the increased component prices. For steel, we expect that over the next two quarters we will see an impact of about $3 million - about a - between a million and a million-and-a-half - between a million and two million each quarter. And we also are seeing an increase in plastic and PVC costs, which is about $2 million over the balance of this fiscal year. And we're ready for about a million dollar-impact on the PVC costs just in this quarter that we finished.

Could you just elaborate a little bit on what the plastic PVC increase is applied to?

There's just some specific increases in vendor costs that we've seen. As we do a lot of the work around the vendor consolidations, we've worked hard with our suppliers and we're now working on some value engineering and some other things that actually take out that increased cost as we get into the fourth quarter.

And the last question, tied to your bonus accruals. Do you feel like you've, in the first half, you accrued a bonus - at a bonus rate that you - we could expect to see accrued in the second half or some of the weakness that you guys have started to see here in December, maybe making you rethink how aggressive your bonus accrual will be for the second half?

Well, when we had set our expectations for the year, our goal was that we would be able to pay our employees what we call a target bonus, which is a multiple. We have accrued, at this point, about a .7 because we believe that's more realistic. It's where we'll actually come in for the year. So we think we're - we were - we're appropriately accruing and you would be able to take the percentages that you see based on and apply those to the next two quarters.

OK.

We could have accrued - I guess, my point is we could have accrued more in the first half and then not accrued anything in the second half. But instead, we calculated what we believe to be the actual payout that will occur this year and then allocated it among the quarters, based on results, expected results.

Thanks a lot, guys.

Thanks, Chris.

Once again, that is star one, if you would like to ask a question at this time. There are currently no further questions standing by. I would like to hand the conference back over to Mr. Volkema for any additional or closing comments.

Well, thank you, everyone, for participating in the conference call. And as we're in the midst of this holiday season, I'm reminded that this is the season in which we're supposed to reflect on the things that are important to us. Being one of those type A personalities, someone reminded me that part of being a human being is sometimes just being. Our hope is that you'll find a way to set aside the things that make your life hectic and find peace and joy during this holiday season. Everyone have a great holiday. Thanks.

This does conclude today's conference call. We thank you for your participation. You may disconnect at this time.