Scholastic Corp (SCHL) 2003 Q3 法說會逐字稿

Thank you for joining us for Scholastic's third quarter conference call.

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Today's conference call will be followed by a question and answer portion.

Callers will be placed in a listen-only mode until that time.

Now, I would like to introduce Ray Marchuk (ph), senior vice president of finance and investor relations.

Sir, you may begin.

Thank you.

Good morning.

Welcome to Scholastic's third quarter conference call.

This conference contains certain forward-looking statements which are conduct to various risks and uncertainties, including the conditions of the children's book and educational materials markets, the impending Iraq war, and economic uncertainty, as well as other risks and factors which are identified from time to time with our filings with the Securities and Exchange Commission.

Actual results could differ materially from those currently anticipated.

Once again, as the operator said, to follow our slides on the Internet, go to the investor relations section of scholastic.com and you'll see a link.

After 11:00 today, through April 2, you will be able to access a replay of the slides and the audio.

Just follow the instructions on our news release.

I'd like to now introduce Mr. Dick Robinson, the chairman, president and CEO of Scholastic to review our third quarter results.

Good morning and thank you for taking part in the call.

Last night we reported approximately break-even results for the third quarter as we had anticipated in the February 10 call, largely reflecting flat revenue and lower operating profit due to a change in revenue mix.

While disappointed in the quarter, we have taken a series of aggressive actions to reduce cost and improve revenues in our core businesses.

We have reduced discretionary spending, we are freezing head count and expect to pay no management bonuses at current profit levels.

We have taken steps to improve school book clubs for the spring through new marketing programs including more special offers.

We have implemented marketing and retail programs in our trade business leading up to the June 21 publication of "Harry Potter and the Order of the Phoenix."

As a result of the remarkable demand for this book, we are increasing our print runs to 8.5 million copies.

Given the impending war and economic uncertainty, we are keeping our range for fiscal '03 EPS at 185 to 215 per share.

In today's call, Kevin McEnery, CFO, will provide more detail on the third quarter financials, Barbara Marcus (ph), president of children's book publishing and distribution, will review our progress in her area.

And then I'll return to wrap up and open the call for questions.

Joining us for the Q & A will be Beth Ford (ph), senior V.P. of global operations and information technology to answer any questions that you may have on our cost savings effort.

Now here's Kevin.

Thanks, Dick.

To recap, revenue for the third quarter increased by 1 million to $434 million as compared to that of a year ago period.

Operating income declined $23 million to 3.9 million, net income declined by approximately $12 million, resulting in a loss of $500,000, which is equivalent to a loss of 1 cent per diluted share.

The third quarter is our second smallest revenue quarter.

The change in the revenue mix in the quarter that Dick mentioned pertains to lower revenue from higher margin trade channel offset by increased revenue from lower margin businesses.

The current quarter included $13 million of revenue from the modestly accretive acquisitions which were made last spring, and were not included in the year ago period.

The current quarter also includes a $2.9 million gain from the previously disclosed sale of an interest in a French publisher.

The prior year quarter had a $6.1 million benefit to operating income which resulted from a refinement of the calculation of the bad debt requirement to reflect better than previously anticipated payment performance.

This had a benefit of 10 cents per diluted share last year.

During the quarter, we realized an $8 million benefit from our fiscal '03 cost reduction plan bringing the savings for the first nine months to $25 million.

This was partially offset, however, by the large, but anticipated increases in health and general insurance costs, and the postage increase implemented last July.

Most of the changes in the revenue and operating income in the quarter occurred in children's book publishing and distribution.

Revenue for the segment for the quarter was level with that of the prior year at $269 million.

School book club revenue was down 4% or $4 million while school book fair revenue was up 8% or $5 million.

Continuities grew by 16% or $10 million, which included $3 million from the baby's first book club acquisition of last April.

Overall trade revenue was $11 million lower than that of the prior period.

And revenue from the Klutz (ph) acquisition, which was completed last April, is now included in the trade revenue, and added approximately $8 million of revenue in this past quarter.

The lower trade revenue resulted from reduced Harry Potter sales of $14 million as compared to the prior year quarter, and the lower trade revenue also reflects reduced sales of other titles due to a disappointing holiday season for the booksellers.

The operating profit for the segment declined by $15 million to $27 million reflecting the lower trade revenue as well as the absence of last year's $6.1 million bad debt benefit.

The trade returns were consistent with our expectations and the fairs experienced slightly lower than expected growth in the revenue per fair.

In educational publishing, revenue increased 5% or $3 million to $64 million as compared to the quarter a year ago.

Curriculum publishing revenue was up approximately $3 million as a result of the continued sales growth in our Read 180 intervention program.

Revenue for the balance of the segment was slightly higher than last year and the segment's operating contribution improved by about $1 million benefiting from the increased sales of Read 180.

In international, revenue for the quarter was level at $70 million.

The revenue reflected lower export revenue partly due to the unsettled world conditions as well as the discontinuation of certain unprofitable operations in Canada and in the U.K.

These revenue reductions were offset by a $4 million benefit from the favorable currency exchange rates and the operating income was about $1 million or approximately $3 million lower than last year due largely to the lower export revenue, reduced results from Australia and Canada.

The latter reflecting some of the costs of discontinuing certain operations.

In media, licensing and advertising, the third quarter revenue was $30 million, which was $2 million below last year's $32 million due to lower software and license revenue.

The segment's operating loss was about $5 million as compared to last year's loss of $3 million largely reflecting the lower licensing revenues.

As you know, the segment includes our Internet operating costs.

Now, while our total revenue was fairly flat, costs and expenses increased by 5% or $24 million.

Our costs of sales was slightly better than that of last year.

The comparison for the other operating costs included the $6 million bad debt benefit realized last year which did not repeat this year, $5 million of the operating costs pertaining to the acquisitions that have been made over the past year, $4 million came from the significant although anticipated increase that I mentioned before in health, general insurance and postage.

More than $3 million of the increased costs came from the higher effect of foreign currency translation on our international costs which offsets the currency effect I mentioned a few moments ago on revenue.

And increased depreciation and amortization amounted to $2 million.

The remaining $4 million came from a variety of smaller items, including the impact of inflation.

Turning to the balance sheet, accounts receivable increased by $34 million largely due to the acquisitions and the impact of the Harry Potter back-list program.

We are on track to end the year with a debt level of about $560 million as compared to $550 million last year.

We continue to estimate free operating cash flow this year of approximately $30 million.

This will be offset by approximately $40 million for the already completed acquisitions in this year, and the settlement of a prior year litigation.

The February 28 debt level was $680 million, as compared to $550 million last year, which reflects the acquisitions made last spring, the purchase of our new fulfillment center in Arkansas, and the acquisition or the effect of the Harry Potter back-list program.

Now for more on children's book publishing and distribution here is Barbara Marcus.

Thanks, Kevin.

As Kevin stated, school book club revenue declined by 4% in the quarter, slightly better than we had expected in early February and is expected to finish the year down in the low single digits.

The third quarter decline was primarily due to the poor January performance of the Lucky and Firefly Club.

For the fourth quarter we have implemented new print and online targeted offers.

These programs have just begun to arrive in the classroom and the initial response is encouraging.

Furthermore, we feel confident that we are addressing issues in the clubs for next year.

Turning to school book fairs, during the quarter revenue reflected a 6% increase in the fair count, in line with the plans for growth in the area, and a 2% increase in revenue per fair, not the numbers referenced on the slides.

We believe revenue per fair was affected by the economy and school closings due to severe winter weather conditions.

Looking to the fourth quarter, we expect both the trend in fair count and revenue per fair to continue, which would enable to us achieve high single digit revenue growth for the year.

Continuities had a strong revenue increase in the quarter with a 38% year over year increase in the school to home channel, and an 8% increase in direct to home programs, including babies first book club.

Trade was slightly below the revised expectations for the quarter due to the continued soft retailing book selling environment even though we did see an improvement in our business in February, as compared to January.

We expect to achieve the fourth quarter revenue plan supported by marketing activities, leading up to the June 21st release of "Harry Potter and the Order of the Phoenix."

The response to "The Order of the Phoenix" has been incredible.

Retailers are planning parties all over the country for the release and are eagerly looking forward to the increased foot traffic.

Consumers are reserving copies at the local retailers and online in high numbers.

Therefore, due to the significant demand, we have scheduled an unprecedented second printing of 1.7 million copies.

These will arrive immediately following the initial printing of 6.8 million copies.

Additionally, the Harry Potter back-list inventory program is on track.

The reorder programs for other titles are currently on plan, and new products are performing both in traditional booksellers as well as those in the mass market.

Now here's Dick Robinson to wrap up.

Thanks, Barbara.

The management team is disappointed with the results for the quarter.

We have already made changes to overcome the current lower profitability.

We're refocusing on the core businesses, tightening expenses, reviewing head count, reorganizing the internal processes, and further strengthening the businesses which need different approaches in today's tougher environment.

At the meeting yesterday, the board of directors reaffirmed the company's goal of approving shareholder value through increasing free cash flow and earnings per share.

We will deliver on this plan largely by reducing the cap-ex spending and improving profitability next year and beyond.

On July 16, we hold our regular meeting with analysts and institutional investors to review the year-end results and detail our budget and strategic plan for fiscal '04.

Thank you, operator, now open the call to questions.

Thank you.

The floor is now open for questions.

If you do have a question, you may press the numbers 1, followed by 4 on your touch-tone phone.

If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key.

We request while posing the question that you pick up your handset to provide optimum sound quality.

That's 1, followed by 4 to ask a question at this time.

Please hold while we poll for questions.

The first question coming from Lauren Fine (ph) from Merrill Lynch.

Thank you -- a few questions.

One, the wide range of guidance for the fourth quarter and really for the year is somewhat surprising, you know, given that we're already into it, and I'm wondering if you could tell us sort of where your biggest concerns are and where the greatest variability could occur, and then I guess maybe related to that, I'm wondering if you could update us on the guidance for international.

I think you had been expecting growth there and I wonder if you still expect high single digit growth which is what you indicated earlier.

You brought down the guidance on the fairs and I wonder if you expect double digit for the fourth quarter and really it's just the shortfall that you just experienced that caused you to bring down your guidance there.

Lauren, let me answer that.

I think to some extent what you are seeing in our overall guidance is a reflection of today's world.

We have an impending conflict in the Middle East.

Depending how that goes, that could have a range of impacts upon some of the businesses.

So, with that in mind, we're maintaining the guidance that we provided last month.

In terms of international, I think that we have indicated previously we're looking for growth in international.

I think we're still looking for, you know, the mid upper single digits growth in international.

And -

Kevin I'll talk a little bit about international.

Lauren, we are -- there are two things in international which are going on.

One is our export sales are down.

This is largely due to the uncertainties that have been caused in the past year by the whole Iraq situation, and sales in the Middle East clearly for example, are down.

Sales in Asia are a bit down.

So, the export business has been pretty hard-hit by international issues.

In respect to our base businesses in the U.K. and Australia, we're making some very fundamental changes in the businesses.

In Australia, in the quarter, we invested significantly in new systems which are going to obviously provide terrific benefits for us but have an impact on the results in the quarter.

That's a transitional issue, we believe.

In Canada, we're slightly down, but basically on track, and there's some very strong growth in that market.

In the U.K., we have a new managing director.

We have been changing our basic underlying processes with a lot of re-engineering of costs.

We have changed our consumer home book business.

We're re-engineering our fairs and our clubs.

There's just a lot of change going on in addition to the results of our procurement program, which are having a very positive effect there.

So, it's a transitional situation in international, and these results are going to go up and down.

Also, we have a -- in Asia we have a very strong business -- that in the Philippines for example, the currency is down, there's concern over terrorism, and similarly in Indonesia, we have the same sort of situation.

So, I think we are looking for long term international growth.

We're taking the steps to realize that growth.

We have very promising opportunities there, but we have to do some restructuring of the business which is affecting our results from quarter to quarter.

Lauren, I'm just go to answer the fair question.

This is Barbara.

We are seeing that we expect for the fourth quarter to continue what we are doing in the third quarter, achieving high single digit growth for the fourth quarter as well.

Okay.

One last question that maybe you can also address is there's been a lot written lately about how bookstores are getting angry about the direct selling that you are doing on Harry Potter.

I'm wondering how real that is or if it's just a good headline for an article?

You know, we take our retailers' comments seriously, and we are discussing it with them, and trying to achieve a solution which will benefit everybody, but most importantly, you know, we're looking forward to benefiting the children and the adults reading Harry Potter.

We do take it seriously, and we are working with the retailers to achieve a result that will make everyone satisfied.

All right.

Thank you.

Our next question is coming from Peter Appert (ph) of Goldman Sachs.

Hi.

Good morning.

Just a little bit of follow-up to the prior question.

I'm wondering how realistic the high end of the earnings guidance range is in the context of all that you have discussed about the third quarter.

Frankly, I just don't see how you get there.

Well, Peter, we are maintaining the range.

We elected not to modify it in the past -- we elected not to modify it in the past month.

I'm not here to try to tell you that it's going to be on the low end or the high end, or try to reconcile to that.

I think there's enough uncertainties at the present time that we have just decided to maintain that outlook.

Okay.

Secondly, the -- Harry Potter return experience in the quarter, in the current quarter, any change, any adjustments required in the return allowances?

No.

We are tracking on plan.

Our accounts are adhering to the program there and we feel fairly confident.

We feel confident that we have created a plan and the retailers are sticking to it.

Right.

Basically the increase in the receivables effectively just as a function of the more favorable payment terms you're offering the retailers primarily for Harry Potter.

It's a combination of that as well as the acquisitions that were not in the balance sheet a year ago.

That's a predominant element.

Okay.

Got it.

And just lastly, can you help me understand better the special offers in the club business.

Is this incremental mailings?

Is this just more attractive point rewards for the teachers?

Maybe just help me understand how that works and the economics of that in terms of whether that has some potentially negative impact on margins here on the near term basis?

Peter, it is incremental mailings.

It will not have a negative impact on profits, and they have just landed -- these are focused mailings that we did not do last year, and they are sort of additional, sort of to supplement some of the differences or weaknesses we are seeing in the core clubs which we are going to address next year as well, but we feel that these will not have any negative impact.

Okay.

And I guess the follow-on to that would be, Barbara, to the extent that some extent I think that you have said that the weakness in clubs is perhaps a function of too many selections, too many offers to the teacher, it feels a little counter intuitive that you would then make special offers.

Can you speak to that?

Yes, I definitely can.

I think that we feel that what we're doing this spring is --some segment, the majority of the teachers are ordering and they're ordering frequently, but there is a segment who were not as responsive as we said in the first quarter.

These offers, we feel are an enticement to them as well as there's a very large segment of teachers who do like a variety in order for everything, but going forward, we are going to revitalize the core clubs, and the mix of special offers will be in balance to that.

So, I appreciate what you are saying is counter intuitive, but we will -- we are focused on the core clubs for this year.

It is -- next year.

It is what it is this year, and this is sort of a supplement to what exists this year.

Okay.

Thank you.

Our next question is coming from Steven Barlow (ph) of Prudential Securities.

Mr. Barlow, your line is live.

We'll move on to the next question coming from Brandon Dobell (ph) of Credit Suisse First Boston.

Couple of questions.

In the education publishing division, I saw some decent growth in READ 180 relative to the space in general.

Maybe talk a little bit about if there's anything special there, a large contract that fell in the quarter, or any different sales or marketing techniques that you are using, or if the program is sufficiently different from other things that you are offering to get the momentum where you are not seeing it in other products.

Secondly, in the media licensing and advertising, just an update on what the future schedule holds in terms of production needs or TV programs as well as you -- where you think you are in terms of Internet activities with either developing new sites, the online ordering as well as kind of what your web presence is going into next year.

Thanks.

Brandon, I'll try to answer the questions.

In respect to the education business, READ 180 fulfills a unique need that no other product fills published by us or by anybody else.

It takes junior high school or middle school kids and high school kids reading at the first and second grade level or up to the third grade level and moves them up often as much as two to three grade levels per year through the unique combination of video, computer assisted technology, and high interest material in a structured phonics program.

Superintendents who are faced with needing to increase reading scores not only see the importance of doing this to improve their overall reading scores for their schools, but they see the impact on the kids, and they take kids who are fundamentally not experiencing success in school at all and making them successful students.

This program is something they need despite the more difficult budget situations in the schools and they're continuing to adopt it widely all over the United States.

Our marketing focuses on the large cities where there's a predominance of kids who have the need, but there's -- the sales of the product are going on all over the United States.

Our marketing in this has been particularly effective, but it's cumulative and it's getting more intense now, and more and more places are interested in READ 180.

The other part of the educational business, I think we're actually doing quite well, given the difficulty of budgets.

We have noticed reductions in California, for example, for school paperbacks and library books based on the absence of money for the state of California for education.

But we're holding our own in those areas, but we're not getting the growth that we had normally anticipated in the past.

We consider that that's -- that may in fact continue, and we're intensifying the marketing programs in that area.

In respect to the Internet, we are -- and the pre-pub and pre-production issues in television and the media segment -- in respect to the Internet, we have had a pretty consistent strategy on the Internet, which is to offer teachers high interest material that they can use in their classroom and to help them teach, teaching tools, activities, and we get a tremendous amount of teacher use of our web site.

Our business strategy, then, is to sell them materials to use both for their own use and the classroom, and for the use of --by children.

That's taking hold, particularly in respect to Cool.

The -- Cool, which is the Club Online Ordering program.

We are getting a tremendous response to the kids sites and also to the parents' sites.

The Internet is a long term distribution and content vehicle that we believe is going to transform the business.

We are making the appropriate investments.

We hope to reduce the investment slightly going forward because we have a lot of the infrastructure already built.

But that's -- it's a key part of our strategy in almost every area of the company and we don't want to cut back too far.

We want to maintain our consistent approach over the year -- over the years.

In respect to pre-production, we have "Clifford Puppy Days" which is 25 episodes of the younger version of Clifford coming on PBS this fall, September, '03.

We have a Clifford movie.

It's a relatively low budget movie being supported by Warner Brothers in the spring of 2004.

We have another major series coming on PBS.

We have pre-production requirements that will go up somewhat in the next year, but not dramatically.

I'll go back to the school business for one quick second.

You mentioned last time back in February, some worry about, you know, potential budget issues or just going to have a more compressed state budgets has the potential impact on where the guidance might be.

You have had a month to see the landscape and see what the states are doing and see what the salesmen are saying, where do you stand with that?

What is your gut feel about the last three, four months of the school's fiscal year?

I guess in a larger context, how is all of the reading initiatives in the federal government, reading first and early reading first and those things, are you seeing money flow from the programs?

Are teachers kind of holding off on buying things until they actually get money?

What does that look like for you now?

We're doing a little bit better than we anticipated we might.

I think we're expecting that the budget is -- the budget pressures are going to accelerate over next year and could affect the education business in the summer.

We're not anticipating dramatic growth in the quarter from our education business.

But right now, we're doing a bit better than we had anticipated.

I think long term, there's --the picture is not particularly bright in -- unless you have a product that meets a specific need that large numbers of schools have.

I think this is going to be a difficult period for education, and there's no money in many states for investment education.

Certainly, it will affect the materials business.

We're optimistic that we have products that people want, and we're strengthening our marketing to overcome what we anticipate will be reduced funding levels.

Okay.

Thanks a lot.

Yeah.

Our next question is coming from William Byrd (ph) from Salomon Smith Barney.

Could you tell us what cash flow from operations was for the quarter?

I don't know if you have the figures yet, do you know what the bad debt reserve was and the reserve for returns on the quarter was?

Thanks.

Our overall percentage of --hang on one second, Bill.

Let me pull something up -- for the bad debt as a percentage of revenue is a little bit under 4%.

So, I think that is tracking fairly consistent with where we have been through the year and year to date.

On a cumulative basis, our cash flow -- let me get back to you in a second on that, Bill.

I have to pull this up.

Do you have another question?

I guess while I have got you, just on the fairs I was curious if you have seen any bounce-back in revenue per fair in the fourth quarter?

Thanks.

It's really -- you know, I hesitate to say anything at this point.

We are not putting that in our projections right now.

We assume that the trend we are seeing this quarter will continue.

Bill, I'll get back to you on the cash flows here.

For the nine months, I have it here for the nine months.

The cash flow, operating free cash flow, that's before acquisitions, stock options and the impact of the Harry Potter payment deferral is roughly equivalent to what it was last year.

As you would expect, it was a deficit of about 50 to $60 million under that criteria.

That's fairly consistent to the business cycle and to where we were last year.

Thank you.

Our next question is coming from Margo Murtaw (ph) of Snyder (ph) Capital.

You have been successful in reducing costs.

I wonder if Beth Ford could talk about the programs you're involved in, and what -- you know, where you are in the process of -- you know, tightening up things with your suppliers, and what are the areas that you have to work on and maybe some comments about priorities in the next year.

Sorry about that.

I had to get on a phone that was working here.

Okay.

We are through implementation on our purchasing initiative here in North America.

That's been very successful.

We are seeing good benefit this year, and based on timing of implementation and different commodity categories, we'll see additional benefit next year.

So we're very pleased with that.

That's been a tremendous success.

Additionally, we began implementation of this initiative in the U.K., and again, we're seeing great benefit.

Next year we'll benefit from those savings.

Most of the implementation will be complete through the summer.

And we've started the assessment phase in Australia, and based on what we see in the assessment there, we should be complete here in the next couple of weeks.

We'll look towards implementation and look to reduce the costs there.

So, in terms of purchasing and reducing costs there, we're in terrific shape.

We continue to work on efficiencies and consolidation of activities, and we're seeing good benefits again this year for productivity in operations.

We're on track based on our last quarter of guidance on generating efficiencies in the operations, and this comes from consolidating activities, for instance, the back office activities for Gruelier (ph) were integrated into the national service organization last year and we are seeing the benefits this year.

We continue to work on things like that, so that we can drive efficiencies in the operations and we'll do that and are doing that right now.

And we'll see benefits next year from that.

And then, as you know, we have been working on an integrated planning initiative.

We have got our tactical planning platform up and operating.

We're working in parallel as we have said, and we're starting to see good benefits there.

So, I think it's all of the core areas that you would expect and that I have been speaking to that we're attacking costs, and we have got great traction and we're seeing good results.

Okay.

Thank you very much.

You bet.

As a reminder, if you do have a question, you may press 1, followed by 4 on your touch-tone phone.

Our next question is coming from Steven Barlow of Prudential Securities.

Hi.

I'm back.

Sorry.

Barbara, I wonder if you could just talk about the trade business.

You did say you're confident about the fourth quarter.

I'm trying to figure out what is making you confident there.

It sounds like the programs are working, but I guess, how are you going to get people to go out to the bookstores and, is that partly what Kevin is talking about in terms of not knowing where the guidance is going to be in the fourth quarter because trade is part of being a higher margin business for you.

I think we have been talking obviously to our retailers on a pretty constant basis, and it is about they're looking at their stock and putting in, you know, reorders on our back list based on what they currently have on hand.

Number two, we -- in the third quarter, we usually don't launch a new list.

We have new books in the -- you know, going into the marketplace this quarter.

Some -- you know, many of them are performing quite nicely, which will generate some reorders.

And finally, we have worked with our retailers on a variety of exciting traffic building programs, leading up to "Harry Potter and the Order of the Phoenix," for their stores overall and with those programs, we are -- you know, fairly confident that there will be more excitement about children's books, and about Scholastic children's books leading up to the sale of Harry Potter.

Is there a way to differentiate the channel between Mom and Pop bookstores versus the Barnes & Noble?

There is.

I'm not sure what you are --what your question is.

It's really a matter of I guess where you are seeing the weakness and where you are actually having to push the retailers a little bit more.

Is it the bigger box stores or is it on the smaller shops?

I think it's pretty much across the board.

I can't say that it's one place over the other at this point.

Okay.

And, Kevin, on cap-ex for '04, could you just sort of give us a rough idea of what the number might be reduced to, and what programs you might be cutting out versus what your original plan was?

Well, as Dick mentioned, we are in the process of budgeting '04, and obviously in our July call we'll give you a lot of metrics as to what that entails, but I think you heard clearly that we are focused on free cash flow and we have made investments in the past.

I think now we have the opportunity to benefit from the investments.

I would certainly expect as a result that we would have a reduced level of cap-ex in '04 -- meaningful reduced.

Okay.

We show no further questions in the queue at this time.

I'd like to turn the floor back over to the speakers for any closing comments they might have.

Well, thank you very much for participating.

Of course, the fourth quarter will be a strong quarter for the company because this is our -- one of our most profitable quarters.

There is a certain amount of uncertainty in the world that is causing us to keep the wide range.

We see some good signs in our base businesses, but we're operating in an uncertain environment, so we're being cautious about how we're planning our business.

We are optimistic about the long term of the company.

We feel we have a strong organization.

We're getting stronger.

As we deal with some of the issues that have come up this year, and we're confident about the future, we'll have a good opportunity to talk with you about that future at our presentation on July 16.

We hope that we will see you there.

Thank you very much for your continued support.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.