Revlon Inc (REV) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Revlon's first quarter 2011 earnings conference call. At the request of Revlon, today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Ms. Elise Garofalo, Revlon's Senior Vice President, Treasurer, and Investor Relations. You may begin, Ms. Garofalo.

Thanks, Simon. Good morning, everyone, and thanks for joining today's call. Earlier today we released our results for the first quarter ended March 31, 2011. If you have not already received a copy of the earnings release, you can obtain one on our website at RevlonInc.com.

On the call with me this morning are Alan Ennis, Revlon's President and Chief Executive Officer; Chris Elshaw, Executive Vice President and Chief Operating Officer; and Steven Berns, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Alan, I'd like to remind everyone of a few things. First, our discussion this morning might include forward-looking statements which are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act. Information on factors that could affect the Company's results from time to time and cause them to differ materially from such forward-looking statements is set forth in the Company's filings with the SEC including our 2010 form 10K and our 2011 first quarter 10Q, which we filed earlier this morning.

Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, both of which are non-GAAP measures. These non-GAAP measures are defined in the footnotes to our release and are also reconciled to their most directly comparable GAAP measure in the financial tables at the end of our release. And finally, as a reminder, our discussion this morning should not be copied or recorded. With that, I'll turn the call over to Alan.

Thank you, Elise, and good morning, everyone. As we have discussed with you in the past, Revlon's vision is glamour, excitement, and innovation through high-quality products at affordable prices and this underpins everything we do. We realize this vision by executing the five key elements of our business strategy, and they are building our strong brands, developing our organizational capability, driving our company to act globally, increasing our operating profit and cash flow, and improving our capital structure. We are carrying positive momentum into 2011 with respect to our strategy and have a keen focus on delivering on our strategic goal of profitably growing our business.

With regard to building our strong brands, during the first quarter of 2011 we made progress in a number of areas. From a top line perspective, we are very pleased with our net sales growth of over 9% during the quarter. We delivered improved year-over-year net sales performance in each of our five regions, which demonstrates the focus of our regional teams on delivering global growth.

Our brands performed well in the marketplace with particularly strong performance by some of our new products including Revlon ColorBurst lipgloss, Revlon Top Speed nail enamel, and Almay Intense-I smoky eye kits. We have discussed for some time that we believe the drivers of profitable growth are first, innovative high-quality consumer preferred brand offering; second, effective brand communication including appropriate levels of advertising and promotion; and third, superb execution with our retail partners to provide optimal in-store offering. Our continued emphasis and key focus on these drivers is of utmost importance to our objective of sustaining top-line momentum.

Also with respect to our focus on growth, we added the Sinful Colors brand to our portfolio in March of this year. Sinful Colors is a fashion color cosmetics brand primarily in nail color, which is sold today in mass cosmetics retailers in the US and certain markets outside the US. We will continue to utilize the successful Sinful Colors business model, namely, speed to market with on-trend and exciting new product introductions and highly effective in-store promotional programs. Going forward, we will evaluate opportunities to drive further growth with this brand.

With regard to our strategic objectives of increasing our operating profit and cash flow and improving our capital structure, we continue to make progress. We sustained competitive operating margins while significantly increasing our advertising investment to enhance our marketplace competitiveness. Also with respect to our capital structure, Moody's announced in April that it upgraded our corporate credit rating.

And lastly before I turn the call over to Chris, let me remind you about our annual EIF Revlon Run/Walk for Women, which will be held in New York City this Saturday, April 30, and in Los Angeles on Saturday, May 7. We at Revlon are very proud of our longstanding and continued philanthropic support for women's health initiatives and the fight against women's cancers. Over the years, Revlon has helped to raise millions of dollars for research, education, and advocacy. Every dollar we help raise puts us one step closer to finding more treatment options and a cure for women's cancers. If you would like to donate to this cause or register to participate, please visit www.revlonrunwalk.org.

So with that, I will hand it over to Chris who will talk about our marketplace performance.

Thank you, Alan, and good morning, everyone. Today I will review our net sales performance excluding the impact of changes in foreign currencies by region and by brand. Our net sales include the acquisition of Sinful Colors effective March 17 through the end of the first quarter, the results of which were not material in the period.

Net sales in the first quarter were $333.2 million, an increase of 7% versus the first quarter of last year. The increase was primarily due to higher net sales of Revlon color cosmetics, as well as Almay color cosmetics, fragrances, and other beauty care products. These increases were partially offset by lower net sales of Revlon ColorSilk hair color.

Before moving on to regional sales performance for the quarter, I'd like to take a moment to address the recent disaster in Japan. We are thankful to report that our employees in Japan were not directly affected. We are currently assessing the potential impact of these events and the aftermath on our global supply chain and our operations in Japan for the remainder of 2011. In the first quarter of 2011, these events did not have a material impact on our net sales, operating profit, operating cash flow, or supply chain. We will continue to monitor the potential impact on our business and evaluate and pursue alternatives to mitigate any possible impact.

Now moving on to regional performance starting with the United States. Net sales increased $4.1 million or 2.3% primarily due to higher net sales of Revlon and Almay color cosmetics, which were partially offset by lower net sales of Revlon ColorSilk hair color. Net sales of Revlon color cosmetics increased in part due to lower promotional allowances as compared to the first quarter of 2010 as we continue to optimize our brand support mix between advertising, promotional activity, and other drivers to be more effective in the marketplace.

In Asia-Pacific, net sales increased $4.1 million or 8.9% primarily due to higher net sales of Revlon color cosmetics in China and certain distributor markets.

Moving on to Europe, Middle East, and Africa, net sales increased $4.8 million or 11.2% primarily due to higher net sales of Revlon color cosmetics, Mitchum antiperspirant deodorant, and fragrances both in the UK and South Africa.

In Latin America, net sales increased $6.9 million or 34.5% primarily due to higher net sales across our portfolio of brands in the region. Higher net sales in Venezuela, including the impact of higher selling prices given market conditions and inflation, accounted for approximately one half of the $6.9 million net sales increase in the region.

Lastly, in Canada, net sales increased $1.6 million or 11% primarily due to higher net sales of Revlon color cosmetics.

Now moving on to performance by brand, starting with Revlon color cosmetics, net sales increased in each of our five regions during the quarter as compared to the prior year. Recent new products included in the face segment, Revlon ColorStay Aqua Mineral makeup, which is the first mineral foundation that captures the hydrating benefits of coconut water in a lightweight powder foundation. Revlon ColorStay's patented long wear technology helps keep skin looking luminous and radiant all day.

In the eye segment, the Revlon Custom Eyes franchise consists of a mascara, as well as an eye shadow with liner. Custom Eyes mascara provides two different lash looks, length and drama or length and definition with one revolutionary adjustable brush. Revlon Custom Eyes shadow with liner is offered in a range of expertly coordinated pallets each with four shadows and one liner that enables consumers to create and customize their look with ease.

In the lip segment, Revlon ColorBurst lip gloss is a luxurious new lip gloss that contains our revolutionary Elasticolor technology and micro-pearl crystal formula, which distributes rich color pigments evenly for weightless color and vivid mirror-like shine.

Continuing in the lip segment, I am pleased that the Cosmetic Executive Women's organization has announced that Just Bitten Lipstain + Balm was named as a finalist for the upcoming Insider's Choice Beauty Award in the US mass category. This award recognizes the most innovative beauty products of the year as selected by the CEW's membership of approximately 4,000 beauty industry professionals from over 1,100 companies.

And lastly in the nail segment, Revlon Top Speed is an advanced line of nail color that dries in 60 seconds. Top Speed has been introduced in several countries where it is performing very well in the marketplace and we have further global launch plans for the balance of 2011.

Moving on to the Almay brand, net sales increased year-over-year. We have seen positive momentum in certain markets on the heels of our recent new product introductions. Notably, Almay Wake Up makeup, a lightweight powder foundation that uses encapsulated water to instantly deliver cooling hydration to soothe the skin while providing full coverage and giving a healthy, well-rested glow; and Almay Intense-I smoky eye kits, which help consumers achieve the smoky eye look with ease. Smoky Eye is performing extremely well in the marketplace.

In women's hair color, Revlon ColorSilk net sales declined, driven by lower net sales in the US, partially offset by higher net sales outside the US as compared to the same period last year.

And antiperspirant deodorants - As we stated in February, we continue to support the Mitchum brand, and in 2011, we plan to build on Mitchum's established efficacy positioning with the introduction of Mitchum Advanced Control containing fresh defense technology. Advanced Control will be supported by new advertising creative that is currently being produced.

And finally with regard to Revlon beauty tools, we continue to bring innovative new products to the market and through the first quarter of 2011, we are pleased with the performance of our new designer collection slanted tip tweezer and Revlon Crazy Shine, a nail buffer that gives bare nails 400% more shine instantly. In addition, I am pleased to announce that Revlon Crazy Shine nail buffer has been named a best beauty buy for 2011 by InStyle magazine. Revlon Crazy Shine was chosen this year by Hollywood's top beauty pros as a "get-gorgeous" essential.

Now I'll turn it over to Steven to walk you through the financial results for the quarter.

Thank you, Chris. As we have already discussed our net sales performance, I will start with gross margin performance in the quarter. In the first quarter of 2011, our gross profit margin improved to 66% versus 64.4% in the first quarter of 2010. Gross margin in the 2011 first quarter was positively impacted by lower material costs, higher sales levels resulting in favorable fixed overhead absorption, lower pension expenses, and lower costs related to inventory obsolescence and sales returns. These positive impacts were partially offset by unfavorable changes in sales mix during the quarter.

In addition, there was a negative impact on cost of goods sold in the first quarter of 2010 as a result of the devaluation of Venezuela's local currency. This impact did not recur in the first quarter of 2011 and therefore benefitted the comparison of gross profit between the first quarter of 2011 and the first quarter of 2010.

SG&A increased $23.8 million or 15.7% to $175.2 million primarily due to higher advertising expenses consistent with our strategy to build our strong brands.

Operating income in the first quarter of 2011 was $44.7 million compared to $45.4 million in the same period last year, and adjusted EBIDTA was $60.7 million compared to $61.1 million in the same period last year. The benefit of higher net sales and gross profit in the first quarter of 2011 was offset by higher SG&A expenses as noted earlier.

Net income in the first quarter of 2011 was $10.4 million or $0.20 per diluted share compared to net income of $2.2 million or $0.04 per diluted share in the same period last year. The 2011 first quarter provision for income taxes was $2.7 million higher than 2010 primarily due to a higher effective tax rate in the United States. As we discussed on our last earnings call in February, the increase in the provision for income taxes, resulting from the higher effective tax rate in the US, is not expected to affect cash taxes paid in 2011. Net income in the first quarter of 2010 included $9.7 million of expenses associated with our March 2010 refinancing and a $2.8 million foreign currency loss related to the re-measurement of Revlon Venezuela's balance sheet as a result of Venezuela's currency devaluation.

Net cash provided by operating activities in the first quarter of 2011 was $24.1 million compared to $31.2 million in the same period last year and free cash flow was $21.7 million compared to $28.2 million in the same period a year ago. Net cash used in investing activities was $41.4 million compared to $3 million in the same period last year. The increase in cash used was primarily due to the Sinful Colors acquisition in the first quarter of '11.

On the liquidity front, our unutilized borrowing capacity and cash on hand as of March 31, 2011 was $162.5 million comprised of $56.1 million of available cash and $106.4 million available under our revolving credit facilities. Our revolver was undrawn as of March 31, 2011.

Now moving on to the balance of 2011. Consistent with our historical practice, I'm going to provide certain 2011 cash flow information, none of which has changed from the guidance we provided you during our last earnings call. Capital expenditures are expected to be approximately $20 million. Permanent display expenditures are expected to be approximately $40 million. Pension plan contributions are expected to be approximately $30 million. Cash interest expense can be estimated by reference to our public filings which detail the composition of our capital structure and applicable interest rates. And lastly, cash paid for income taxes is expected to be approximately $20 million.

As a reminder, with respect to operating cash flow in general, the timing of these cash flow items just noted as well as other working capital items can vary from quarter to quarter based on a number of factors. We continue to closely manage our key working capital accounts including receivables, payables, and inventory.

This concludes our prepared remarks, and we would now like to open up the call for your questions. Operator, please prompt the participants for questions.

Certainly. (Operator instructions.) And your first question comes from the line of Grant Jordan with Wells Fargo Securities. Your line is open.

Good morning. Thanks for taking questions.

Good morning.

My first question, on the Sinful Colors acquisition, can you give us a little more color in terms of revenue and potential EBIDTA or what they did last year?

Yes, so, Grant, good morning, Sinful Colors, as you know, we have a complete disclosure of certain information in our 10Q which we filed this morning. We're not going to disclose, as we don't with our other brands, we're not going to disclose revenue or EBIDTA or even the targets for the business. What I can tell you is the following. We paid $39 million to buy the business, and that included not only the Sinful Colors brand, but also two other smaller brands, Wild and Crazy Cosmetics and Fresh Minerals Cosmetics. As I mentioned, the Sinful Colors brand is a nice compliment to our portfolio, sold primarily in the US but also outside the US. So we're not going to disclose revenue and EBIDTA targets or historic information but we did pay $39 million for it.

In terms of other acquisitions, how would you rate your appetite right now?

Well, so here's -- our strategy, as you know, is to profitably grow the business, and so we believe there are opportunities both with our existing brands and to potentially look at other acquisitions. I think we've shown that with our organic brands that we can drive profitable growth as we did in 2010 and the first quarter of 2011. So, my view is that if there are opportunities out there, we'll certainly evaluate them. Our focus now is to drive our organic brands and to transition the Sinful Colors business into our portfolio.

My last question, switching gears a bit, it certainly seems like the increased investments in advertising and brand building are paying off on the top line. In terms of year-over-year increase going forward, do you still expect to see that continue to ramp up at a pretty good rate?

You know, what we said throughout 2010 is as we shifted the focus of the Company's strategy from managing cost to driving profitable growth, what we said is that we would expect to increase advertising spending and we did that throughout the balance of 2010 and the first quarter of 2011. That's a key part of our strategy to build our strong brands. The amount of the investment that we have from period to period is going to vary depending on timing of new product launches within the marketplace and competitive conditions. What I will tell you is that we are spending at competitive levels both above the line and below the line and we'll continue to do that throughout 2011.

So would you say that the big ramp up that happened in 2010 and Q1 of '11 is kind of over from a financial standpoint as we think about how to look at the Company going forward?

Well, what I will tell you is from Q2 last year recall that specifically that we expected increased spending in advertising in the following quarter, and that was done through the fourth quarter of 2010. We didn't make such a statement in the first quarter this year.

Great. Thank you.

Sure.

Your next question comes from the line of Carla Casella with JPMorgan. Your line is open.

Hi. I wanted to ask a question just on the competitive market, what you're seeing in terms of competitive promotions and whether they are picking up or abating at all.

Hi, Carla. It -- well, as I think we've said a number of times before, this is a highly competitive category. I wouldn't say that we've seen an increase or decrease. It continues to be continuously competitive. Everybody is competing very hard on product innovation, on the quality of their advertising, and their in-store promotion. And as we've said in the past, we are very competitive in those arenas.

Do you get the sense that display spend is similar to competition or are people competing on different levels?

I mean, there's no information available on display spending in the marketplace. What I will say is that in-store, as we mentioned in Q4 of last year, we're very focused on improving our in-store display presence and also our permanent wall merchandising presence. So that's what we're focusing on.

I think what you'll see, Carla, just to build on Chris' point, what you'll see in the US business is since the middle of last year, we've really focused on improving the execution in-store and improving the quality of our in-store displays and making sure that that's consistent from a 360-degree standpoint with all of the advertising materials that we have around new product launches. And so our objective is when the consumer walks into the store, we want them to see the Revlon brand, Revlon, Almay, etc., displays being the most impactful and to attract the consumer to buy our product versus a competitive product. And I think we're making some good progress there.

Okay, great. And then I may have missed this at the beginning, did you talk about what your ship in versus the sell through has been and whether it's relatively even at this point?

You know, we don't talk about ship in versus sell through, Carla. We talk about net sales. What I can tell you is that we work very closely with retail partners to ensure that we've got the optimal levels of inventory across those channels. We haven't seen any significant jumps in inventory in the quarter in terms of the retail environment.

Okay. Great. Thank you.

Thanks Carla.

Your next question comes from the line of David Wu with Telsey Advisory Group. Your line is open.

Hi. Good morning, everyone.

Good morning, David.

Hi. Just have a couple of questions. First, EMEA and Latin America were nice surprises in the quarter. Can you talk about whether it's driven more by expanded distribution, stronger sell through, or through new launches? And just secondly on input costs, we've heard from some group peers that they've seen a slight -- a bit of an increase and I just wanted to get your thoughts on what you're seeing with costs. Thank you.

Okay. Hi, David. So as regards to EMEA and Latin America, I'll say a couple things. One, as we've said when we talked about the brands, we're pleased with our new product performance, the innovation that we've brought to marketplace. In all our markets, as we've said, we've been focusing on the execution in-store and its relation to the 360-degree marketing campaign. So I think what you're seeing is a result of those things happening in EMEA and Latin America. One thing, as I mentioned in my remarks, in Latin America is approximately one half of the $6.9 million net sales increase in the region is due to the impact of higher selling prices given market conditions and inflation. But overall, our performance is based upon our focus on execution and go-to-market plans.

Yes, just in terms of the other part of your question, David, in terms of input costs, obviously, a key element of our strategy is to grow profit and cash flow and we're continuously looking at all input costs to make sure that we have the best and most competitive pricing. I would say that with respect to our business, there is no single commodity that has a material impact on our cost structure. Obviously, oil plays a part as it relates to distribution, but it's not a significant component of our overall cost base. So like other companies, yes, we are experiencing some input cost pressures, particularly from oil based commodities as it relates to plastics, etc., but we are looking for opportunities to offset those costs with other savings. So nothing material to call out at this point.

Excellent. Thank you very much.

Thank you, David.

Your next question comes from the line of Connie Maneaty with BMO Capital Markets. Your line is open.

Hi. I'm on. I think Pat may also have a couple of questions. The first question I have relates to the second quarter gross margin a year ago. Sorry to bring it up, but it was -- there was margin expansion of about 480 basis points. Can you remind us what was of a one-time nature back then so we can get a better sense of how to think about the quarter that's coming for gross margin?

All right. So, Connie, what we talked about last year when we discussed gross margin and we reported it was the focus of the Company is to deliver competitive operating margins. And so we have done that consistently over the past three or four years and we continue to do that over rolling 12-month periods. We had the benefit last year in the second quarter of restructuring savings and the first really full quarter of procurement savings as a result of a procurement initiative that began in 2009. So that might have had an impact on the gross margin in that quarter, but our focus, once again, is really on delivering operating margins that are competitive. We've done that in the 14.5% range to 15% range over several quarters when you look on a latest 12-month basis.

Okay, and then we had trouble getting into the call, so I hope I'm not asking something you've already answered. On the first quarter sales growth in the US, can you give us what the contributions were in percent or growth from the acquisition, the volume increase, and the reduction of returns versus prior year?

Yes, so a couple things. Just in terms of the acquisition, what we've said is that the acquisition, we owned it for 13 days in the quarter, so clearly it was an immaterial impact to the performance in the US business. The results of Sinful Colors are consolidated within the US region for reporting purpose, so that's where they will be going forward, but it was immaterial in relation to the results of the first quarter. The second part of your question, Connie, was around volume?

Yes. Was there an increase in shipments and how do we think of that versus your comment in the press release that were better comparisons to last year's returns and allowances?

Right. Well, so, we talk about net sales, as you know. We don't talk about gross sales or shipments, as you say. What we did say is that we saw net sales growth of 2.3% in the US and we said that part of that growth was driven by lower promotional allowances. So part of it was lower promotional allowances. Obviously, the rest of it was either higher shipments or lower returns.

Were there any material price increases?

No. Listen, price in the marketplace is a function of both the quality of the products that we're launching and the competitive landscape, so when we launch new products, we make sure that they're priced appropriately. There's no price increases on existing products. If there is a price increase, it's generally as a consequence of launching a new product at a higher price point.

Okay.

Hi, good morning. I actually just have one quick question on the gross margin in the first quarter. First, for the Venezuela adjustment, could you remind us what that was last year and why it didn't repeat and also if that's going to continue throughout 2011?

Yes, so in the first quarter of 2010, the Venezuelan government devalued the currency and as a result, the accounting impact of that was a $2.8 million expense item, which hit cost of goods as a result of the revaluation of our inventory at the new exchange rate. So unless there is another devaluation, okay, it's a one-time item and would not repeat.

And so that should continue throughout 2011?

No. Once again, the question you're asking is, I believe, is what was the impact in the first quarter of 2010. The impact in the first quarter of 2010, that is last year, was a $2.8 million expense. Okay, so that expense showed up on our P&L, was in inventory only in the first quarter. It revalued the inventory. That inventory sells through during the year at a higher cost of goods. Okay, it's now gone. Okay, and if there's no other devaluation, that impact was only on the P&L in the first quarter of 2010.

Okay. Thank you. I understand now. So -- and then secondly, with regard to material costs, why were they down in the quarter? Does that have something to do with your inventory turns? And given with what's going on with the price of oil, later in the year should we expect material costs to increase?

Well, in terms of material costs, listen, material costs are going to jump around from quarter to quarter is the first thing I think I'll say. Second thing is that we have a -- we have a global procurement organization that's very sophisticated and they're focused on making sure that we get the highest quality product at the lowest - when I say product, I mean whether it's a chemical or a package - the highest quality of product at the lowest possible price, and we are always challenging our suppliers to provide lower input costs. So it's a function of that ongoing continuous process to reduce input costs. There's nothing specific or unique about what happened in the first quarter.

Okay. Great. Thank you very much.

Your next question comes from the line of Karru Martinson with Deutsche Bank. Your line is open.

Good morning. I just wanted to kind of follow-up on the competitive environment with Walmart talking about bringing SKUs back into the store and others actually kind of continuing to rationalize, what are you seeing in terms of opportunities for shelf space going forward?

Well, as you refer to, Walmart has been very public about the number of SKUs they've brought back into their store. We, of course, work very closely with them. I think in their remarks they said a lot of it was in the food area, but in terms of the environment of SKUs in Walmart versus other customers, they're all constantly reviewing their range and they're all constantly trying to attain the balance between the best productivity per SKU and the right range for the consumer. So as far as we're concerned today, we're optimally spaced. We don't have a space issue. We think we have good productive brands in there, and we have a very close working relationship with them, of course.

All right. Thank you very much, guys.

Thanks, Karru.

Your next question comes from the line of Jeff Kobylarz with Stone Harbor Investments. Your line is open.

Thanks. Just curious a little bit about what's going on with what you cited in the press release in Asia. You said in China you got greater sell in of Revlon and that was both in China and distributor markets. I'm sorry. I used the word sell in. Is it -- is the increase in China and distributor markets, is that sell in essentially? Do you have some new agreements, new distribution agreements there?

No, there's no new distribution agreements. As all our remarks are, it's about our net sales, so these are net sales to our distributors. We have a number of distributors across key Southeast Asian markets.

One of our -- to build on that, Jeff, one of our strategies overseas is to grow and so -- and to do so profitably in China is an opportunity for us, as it is for many companies, and so we've talked about investing to grow our key brands and our key markets and clearly China is a market that we're very aware of.

Right, but can you talk about sell in versus sell through in Asia-Pacific?

We don't talk about sell in versus sell through, Jeff. That's not something we comment on. Generally --

Okay.

-- but that point, generally, we keep a close eye on inventory retail to make sure that nothing gets out of whack.

Right, okay, but do you have any new agreements in Asia markets that are --

No, there's no new agreements. No.

Okay. All right. Good. And then Europe you say that you had better sales of Mitchum and fragrances and the UK and South Africa and anything special driving that?

Nothing special except the continued focus on our execution. As we say, we are constantly focused on how can we profitably grow the business. We're constantly optimizing our promotional and advertising mix -

Right.

- and we're having success in those activities and the innovation that we're bringing to the marketplace.

Okay. All right and then --

The Revlon brand in South Africa is a very successful brand in the marketplace and the fragrance business, both in terms of regular au de toilet and in terms of body spray, is a very robust business in the South African market and doing well in that market.

Okay. All right. Good. And then do you have any general comments about your market share in the different geographic areas?

We don't comment on market share and we haven't done so since the end of 2009 primarily because it's very difficult to get a global view of market share. You can talk about market share at a micro level in the specific markets, but it's not representative of what we're doing as a global company and so what we talk about is we talk about net sales and the performance of net sales over time as being the best indicator of our performance.

Okay. All right. Thank you.

Thank you, Jeff.

There are no further questions at this time. I turn the call back over to Mr. Ennis for any closing remarks.

Thank you, Simon, and thank all of you for joining our conference call this morning. This ends our conference call. We look forward to speaking with you when we report our second quarter results later this year. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.