Steelcase Inc (SCS) 2017 Q2 法說會逐字稿

Good day everyone and welcome to Steelcase's second-quarter fiscal year 2017 conference call. As a reminder today's call is being recorded.

For opening remarks and introductions I would like to turn the conference over to Mr. Raj Meehan, Director of Investor Relations, Financial Planning and Analysis and Assistant Treasurer. You have the floor, sir.

Thank you, Andrew. Good morning everyone.

Thank you for joining us for the recap of our second-quarter financial results. Here with me today Jim Keane, our President and Chief Executive Officer; Dave Sylvester, Senior Vice President and Chief Financial Officer; and Mark Mossing, Corporate Controller and Chief Accounting Officer.

Our second-quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast and this webcast is a copyrighted production of Steelcase Inc. A replay of this call will also be posted to ir.steelcase.com later today.

Our discussions may include references to non-GAAP financial measures and forward-looking statements. Reconciliations to the most comparable GAAP measures and details regarding the risks associated for the use of forward-looking statements are included in our earnings release and we are incorporating by reference into this conference call the text of our Safe Harbor statement included in the release.

Following our prepared remarks we will respond to questions from investors and analysts. And with that I'd like to now turn the call over to our President and Chief Executive Officer Jim Keane.

Thanks, Raj and could everyone. Today we reported second-quarter earnings in line with our expectation. Revenues were lower than we were expecting but we had very strong gross margins, particularly in the Americas where we reported 13.7% operating income.

We have been talking every quarter about our EMEA business and the restructuring work we have been doing. In this quarter we began to see more significant impacts as EMEA gross margins excluding restructuring costs improved by 700 basis points. That's the second consecutive quarter of significant improvement in EMEA gross margins.

Our operating metrics for on-time deliveries and quality also showed consistent improvement. We continue to shift our efforts towards implementing lean, a mindset of continuous improvement and ongoing investments in our new footprint. As in the Americas we expect those investments will lead to continuous cost reductions.

I'm also pleased to confirm that next week we will be opening our new Munich Learning + Innovation Center to the first group of employees. Dave Sylvester and I will be on site to help start a new era of research and product about.

Let me turn to demand levels now. And I will stay with EMEA to start. We saw a 10% organic revenue decline this quarter.

Now that's up against a very strong quarter last year. But still we feel demand has been negatively impacted by a variety of factors. The Middle East remains a challenge because of energy prices.

The UK has been significantly affected by uncertainty related to Brexit. We have talked about those reasons before. However, this quarter we saw some softness in other parts of Western Europe, some of it likely related to Brexit but perhaps also related to local elections that create a cloud of uncertainty for the future. Of course, we also have opportunities to improve our competitiveness but we feel good about the progress we are making.

In the Americas you will remember that last quarter we had relatively weak backlog as we entered the second quarter. That was compounded by very weak order patterns in July. Our July orders were down 8% which approximated BIFMA's industry-wide data.

So it was a tough month. And because of leadtimes it was a critical month if we were going to meet our quarterly shipment estimates.

The good news for the Americas is that we had stronger orders in August and those have continued through the first three weeks of September. We are in the midst of annual dealer meetings and they have been quite enthusiastic about the new products launched earlier this year. Orders for those products are gaining momentum and are doing better than we estimated. Dealers are also responding positively to the work we have done to address growing demand for informal spaces including better merchandising of our ancillary portfolio.

At a broader level, our backlog of high confidence opportunities in the Americas has strengthened for the second half of the year so we are expected to grow our top line third quarter. Yes, there is still plenty of political uncertainty as we head into the first presidential debates and, yes, CEO confidence is down and job growth is less than we'd like to see but despite those headwinds we are seeing strength in our own business and that is reflected in our outlook.

We discussed on a previous call that we expected EMEA performance to improve and that we expected to see growth in our America segment in the second half of this year. And I'm pleased to say both of those expectations are unfolding as we anticipated.

Now I will turn it over today.

Thank you, Jim. I will cover a financial results first, noting where results differed from our expectations and highlighting year-over-year and sequential-quarter comparisons. And then I will talk about our balance sheet and cash flow before getting into our order patterns and outlook.

Overall, we feel pretty good about the business and the progress we have made on a number of fronts over the past 12 months. Second-quarter revenue did fall just below the low end of the estimated range we provided in June and I will cover that in a moment but first I want to share a few broader highlight, some of which Jim just referenced.

First, we launched an additional eight new products, enhancements and line extensions during the last three months, bringing the calendar year-to-date total to 25 and we have plans for an additional 15 introductions over the balance of the calendar year. And our efforts are already beginning to pay off as the revenue generated by these new products through the second quarter is ahead of our initial expectations.

Second, our pipelines for project business expected to be ordered and shipped during the next four quarters in the Americas and Asia Pacific continue to reflect strength compared to the prior year.

Third, EMEA has stabilized in the new manufacturing and distribution footprint, posting a 700 basis point improvement and cost of sales compared to the prior year. And we expect further improvement over the balance of this fiscal year, driving our expectation of a significant improvement in EMEA's operating results in the third and fourth quarters compared to the same period last year.

Fourth, Asia-Pacific is poised to potentially set a new record for quarterly revenue in the third quarter surpassing prior year's high-water mark. And we are doing it by securing more and more business with leading organizations headquartered in China and India.

Fifth, Designtex and PolyVision have been going pretty consistently. And we made significant progress in the last 90 days to potentially resolve the majority of the anti-dumping duty exposure at PolyVision we have been discussing the last several quarters.

As it relates to revenue in the second quarter, the organic decline of 7% was just outside our estimated range of down 3% to 6%. You will recall that our backlogs of orders in the Americas and EMEA at the end of the first quarter were significantly lower than the prior year, driven by lower orders in a few vertical markets and geographies.

The organic revenue decline of 7% was more than our estimated range, primarily due to a shortfall in the Americas which was largely driven by weak orders in July. Our order patterns in July were consistent with broader industry trends reported by BIFMA and they improved in August and into early September. But the softness in July contributed significantly to our shortfall in revenue in the second quarter.

Our direct business, which includes revenue from some of our largest corporate customers and the federal government, also reported revenue lower than our internal estimates and significantly lower than the prior year. EMEA and some of our other business units also came in somewhat short of our internal revenue forecasts but in most cases the shortfalls were linked to timing of project deliveries. From an earnings perspective operating income was largely consistent with our expectations with lower spending, solid manufacturing performance and favorable business mix offsetting the impact of lower-than-expected revenue.

Switching to year-over-year comparisons, in addition to my previous remarks regarding revenue, I let add a few additional comments for each segment. For the Americas the organic revenue decline of 7% in the current quarter compares with 6% growth in the second quarter of the prior year. And it reflected revenue declines across all quote, types, project continuing and marketing, compared to the second quarter of the prior year, which reflected growth in all three areas.

From a vertical market perspective some of the largest declines were in sectors that had strong double-digit percentage growth in the prior year. For example, federal government, financial services, technical professional and insurance services or in sectors where you might expect a significant decline because of known headwinds like energy. But we also saw a significant decline in the information technology sector which was closer to flat in the second quarter of the prior year.

Strong growth in the healthcare and manufacturing vertical markets and mid-single-digit percentage growth across our untracked vertical markets in total offset some of these declines. As you can see, prior-year comparisons in our revenue story in the second quarter just as they did from an orders perspective during the first quarter.

In EMEA the 10% decline in the current quarter compares with 17% growth in the second quarter of the prior year. Revenue declines in the UK, Middle East and Africa were significant contributors to the 10% decline consistent with the order patterns we experienced in the first quarter.

Across the balance of EMEA growth in France and Spain was offset by a 10% decline in Germany compared to the prior year which grew by more than 20% compared to fiscal 2015. We continue to closely monitor the overall demand environment in EMEA is various headwinds continue to pressure consumer and business confidence raising concern that even a small shift in confidence could destabilize the already fragile environment.

Across the Other category I don't have much to add to the highlights I mentioned earlier. I will just reiterate that we are feeling pretty good about all three businesses.

The $0.32 of adjusted earnings per share in the second quarter compared to $0.35 in the prior year and reflected the impact of lower revenue and higher operating expenses, partially offset by a 160 basis point improvement and cost of sales as a percentage of revenue. The improvement in cost of sales was driven by a 700 basis point improvement in EMEA and 60 basis point improvements in both the Americas and the Other category. For EMEA the improvement was driven by a significant reduction in disruption costs and inefficiencies associated with our manufacturing and distribution footprint changes plus initial benefits from cost-reduction programs.

And the improvement in the Americas was driven by lower warranty cost and continued cost-reduction efforts. These improvements in cost of sales as a percentage of revenue were reduced in part by the impact of lower revenue. In the Other category we experienced lower cost of sales or improved gross margins across all three businesses.

Higher operating expenses were driven by the investments in product development that I highlighted a minute ago and the establishment of the new Learning + Innovation Center in Munich, partially offset by lower variable compensation compared to the prior year. Sequentially, second-quarter adjusted operating income was higher compared to the first quarter primarily driven by seasonally higher revenue, lower warranty costs and improved manufacturing performance.

Switching to restructuring costs, they were in line with our estimates and primarily related to our move to Munich. For the balance of fiscal 2017 we expect to record less than $2 million of remaining restructuring cost with the majority being recorded in the third quarter.

Moving to the balance sheet and cash flow, cash provided by operating activities approximated $86 million in the current quarter, similar to the prior year. Capital expenditures totaled $13 million in the second quarter and $27 million on a year-to-date basis and we continue to estimate capital expenditures for the full year will approximate $75 million to $85 million. This estimate excludes expected proceeds from the sale of an existing aircraft.

We returned approximately $26 million to shareholders in the second quarter through the payment of a cash dividend of $0.12 per share and through repurchasing approximately 900,000 shares under our share repurchase authorizations. Over the last nine months we have repurchased approximately 5 million shares under these authorizations and have $142 million remaining under the authorization approved by our Board of Directors in the fourth quarter of fiscal 2016.

Turning to order patterns I will start with the Americas where our orders in the second quarter declined by approximately 2% organically compared to the prior year which grew by approximately 4% compared to fiscal 2015. Year-over-year order comparisons by month during the quarter reflected 4% growth in June followed by an 8% decline in July and a 2% decline in August.

The swing between June and July order comparisons may have been somewhat due to the way the Fourth of July holiday affected order flows differently year over year, impacting orders more in the last week of June last year and the first week of July this year. Or timing of orders in general may have affected the monthly comparisons as the last two weeks of orders in July were relatively weak but the first two weeks of orders in August were relatively strong.

Though the month-by-month order comparison was unusual, our customer order backlog at the end of the quarter was flat compared to the prior year much improved from the significant year-over-year decline just 90 days ago. And our orders during the first three weeks of September reflect growth compared to the prior year supporting our expectation to report third-quarter revenue growth in the Americas.

Turning to vertical markets in the Americas, orders from customers in the energy vertical market declined significantly again this quarter compared to the prior year. Beyond energy growth in seven of the remaining nine vertical markets we track was offset by declines in the insurance services and information technology sectors as well as a decline across our untracked sector which includes retail customers and other vertical markets not large enough to track separately.

Across quote types orders from continuing agreements in the Americas grew by 4% in the quarter while project orders declined by a similar percentage. Orders related to our marketing programs aimed at smaller day-to-day business declined modestly.

Before I switch to EMEA I would like to provide an update of our pipeline of project activity that we talked about in June. Specifically, our project pipeline of estimated project revenue over the next four quarters continues to reflect meaningful growth compared to the end of fiscal 2016 as well as compared to this time last year. This pipeline calculation includes project business from customers we expect will generate more than $3 million of revenue over the next four quarters which we have already been awarded but which has not yet been ordered or which we believe we have a significant probability of winning.

It's only one piece of data and these aren't binding commitments and it's possible that ongoing uncertainty could negatively impact business from continuing agreements or marketing programs. But we continue to feel good about this data point as it's not just a few large projects that are driving the improvement in the pipeline, it is also being driven by a large number of smaller- to medium-sized projects compared to the prior year.

For EMEA the organic order decline of approximately 4% in the current quarter compares to a 7% decline in the second quarter of fiscal 2016 and 10% growth in the second quarter of fiscal 2015. Customer order backlog for EMEA ended the quarter down 7% compared to the prior year. The decline in orders during the current quarter was driven by continued weakness in the Middle East and Africa largely driven by low prices as well as the UK likely impacted by Brexit, but it's also a market where we believe we should be doing better and have recently appointed new leadership.

Germany also declined by a notable percentage compared to strength in the prior year. These declines were reduced by strong growth in Spain despite uncertainty related to recurring elections and France which is continuing to improve following the leadership changes we made a year ago.

Regarding our project pipeline for all of EMEA it includes a couple of large projects in the Middle East which could begin shipping at the end of this fiscal year or early next fiscal year depending on the related building construction schedules. But beyond these projects the pipeline reflects lower project activity compared to a year ago. Within the Other category orders in total grew 4% compared to the prior year, reflecting growth from Designtex in Asia-Pacific, partially offset by a modest decline at PolyVision.

To summarize orders in the Americas reflect continued weakness in the energy sector but have improved compared to recent quarters as many of our sales marketing and product development actions are now gaining traction. For EMEA the environment remains mixed and order comparisons were impacted by continuing weakness in the UK, Middle East and Africa. Asia-Pacific orders grew organically again this quarter and we are securing more and more business with leading organizations, particularly those headquartered in China and India.

Before I turn to our outlook and want to give you an update on PolyVision and the anti-dumping proceedings we have discussed on previous calls. As I said earlier, we made significant progress in the last 90 days to potentially resolve the majority of the antidumping duty exposure at PolyVision. We still have some work to do, but at this point we feel it is likely that we will be able to eliminate the duty exposure and recoup the related duties paid to date related to the primary gauge of steel we import.

Accordingly, our earnings estimate for the third quarter does not include any duties associated with these purchases. The balance of porcelain enameling steel we import remains subject to anti-dumping duties for now and we estimate that our earnings could be reduced by approximately $600,000 per quarter for these remaining duties and our ongoing efforts to mitigate. We will provide periodic updates as any new information becomes available.

Turning to the third quarter of fiscal 2017, based on the strength of our project pipeline in the Americas and Asia Pacific we expect to report organic revenue growth of between 1% to 4% compared to the prior year which reflected 1% organic growth compared to fiscal 2015. We expect to report another quarter of significant year-over-year improvement in EMEA cost of sales as a percentage of revenue, primarily due to the expected elimination of disruption costs and inefficiencies associated with the manufacturing and distribution footprint changes. In addition, we expect to build on the cost reduction benefits we began realizing in the second quarter and we expect to see initial benefits from some of our other gross margin improvement initiatives in EMEA.

Related to material costs we expect higher year-over-year material costs in total over the second half of the fiscal year primarily driven by steel prices. To help offset some of these rising costs we have announced a modest list price adjustment in the Americas effective October 3. We expect operating expenses to increase sequentially compared to the first half of the year as we continue to invest in product development, the initial move-in of employees in Munich and other marketing and growth initiatives.

Lastly, we continue to estimate our effective tax rate for the balance of fiscal 2017 will approximate 36%. This estimate does not include the impact of any discrete items which occur as we file our tax returns around the world and reconcile them to the estimated provisions we have recorded in our financial statements.

In addition, the estimate does not include any impact associated with the potential resolution of uncertain tax positions which could occur upon the completion of audit activity by tax authorities or expiration of statutes of limitation. As a result of these factors we expect to report third-quarter earnings within a range of $0.32 to $0.36 per share including approximately $0.01 of restructuring costs which results in an expected range of $0.33 to $0.37 for adjusted earnings. We reported diluted earnings per share of $0.30 and adjusted earnings per share of $0.35 in the prior year.

From there we will turn it over for questions.

(Operator Instructions) Budd Bugatch, Raymond James.

Good morning, this is David on for Bud. How are you doing today? Can you talk about some of the geographies in the Americas that were the strongest and weakest and any trends that you see materializing?

In orders across geography I would tell you that I'm staring at the data for the last five quarters across the East, West, South and Northeast and I don't know that I see any persistent, troubling geographies of significance. It's more some up-and-down across the various regions.

I don't know, Jim, you've traveled --

Well, it doesn't lay out exactly the way we organize our geographies. But I would say that the areas that are affected by energy prices remain depressed.

Good point.

That's clearly true if you compare versus a year ago but we haven't seen any major recovery in those sectors. And it affects, of course, our clients that are directly in those businesses but it also affects the local economy. So that's one piece, and then beyond that I'd say we have some discrete things going on here and there but nothing really notable, as Dave said.

Okay. And then also in the Americas in terms of contract size and pricing what are you seeing, is there a trend towards more of small- and medium-sized contracts versus really large products? And pricing is pricing becoming a little bit more competitive or a little bit more challenged compared to this time last year and what your expectations going forward?

So I'd say that pricing is always competitive in our industry, has been as long as I've been in the industry and that remains true. In the last couple of years it has continued, we continue to see aggressive pricing around the marketplace and we're responsive to that and making sure we're aware of what's happening in the marketplace. I wouldn't say that it's anything profound right now but it is call it continued competitiveness and pricing.

The only thing I would add is looking at the customer buckets based on size of orders, as we've been talking about on the last several calls, more of the midsized projects or midsize continuing orders has been okay or decent for the last three quarters. Larger project business has been an area of decline for us up until the most recent quarters.

The current quarter it grew modestly versus a modest decline last year. And I think that's linked to the improvement in the project pipeline that we started talking about in June.

Okay. That's all the questions for right now. Thank you.

Kathryn Thompson, Thompson Research Group.

Hi, thanks for taking the questions today. First is just on steel. How much is steel as a percentage of the cost of goods sold?

And then also maybe taking a step back, just remind us at least for the Americas how much raw materials account for your cost of goods sold? And then, finally, the point with that is you gave some color in the quarter for the steel impact, but if you could maybe further quantify the potential impact either on a sequential basis or on a year-over-year basis of steel pricing movement?

Hey, Kathryn, it's Raj. On the material side for the Americas total materials probably comprised about 40% of our revenues.

The steel purchases, it's a little more difficult and granular to calculate because we do buy raw steel, we buy steel components. I don't have that particular exact percentage in front of me. But relative to the financial impact that we're seeing from the steel inflation on a year-over-year basis and sequentially I think Dave has got that handy.

What is assumed in our estimate is year-over-year inflation in steel by more than 5 million globally. And sequentially it would be much less than that because we've seen the increases start to creep up. But it's certainly still a sequential increase.

Okay, that's helpful. I also want to dig a little bit more in your commentary about order trends. So continuing agreements growing by 4%, which is good solid growth, but project orders slipping 4%.

Are there any -- I know that you've given color by end market or types of projects that are not doing as well, but is this order slippage have anything to do with more competitive discounting of pricing? Is it project size that has changed? Maybe just a little bit more color on that project order slippage by 4%.

This is Jim. The orders we've received in this quarter would be for the larger ones, in particular based on wins that occurred in previous quarters.

And if you go back a few quarters we did see win rates go down a bit of few quarters ago. We talked about that in previous calls.

Some of that was because of aggressive pricing that was emerging at that point in time. So you could trace it back to those roots.

But since that time we've made appropriate adjustments and we've seen improvements in our win rates. And so I'd say if you asked the question about today I'm not having a sense that we're having any particular problems related to win rates or pricing in today's market. But there could be a bit of a hangover as I said on today's orders.

Okay. And so what are you doing to improve the win rate if there isn't discounting? That kind of begs the question what's driving that improved win rate?

That's where you have to look at the whole picture. So I'd say that it was a combination of making sure that our pricing is competitive, making sure that we've got the products that are in demand by customers, so all those product launches that we talked about have also contributed.

Making sure that we have close relationships with our dealers. So this week and ongoing we have dealer conferences in Grand Rapids and we've been out in the market place talking with folks making sure we are well connected, and just the ongoing actions of our sales organizations. I'd say across it takes everything working together to make sure that you are competitively placed and we've taken those actions and we're seeing the results.

And one question that we for, what it's worth and I noted this earlier this morning on a conference call that order trend that you saw with July being somewhat soft but seeing improvement in August and September is very reflective of feedback that we have received along the value chain and building products and material companies with whom we've spoken over the past several weeks. Basic question for you is what are indicators that this is a head fake versus something more fundamental, particularly given the snap weakness in July, understanding you had two to three fewer selling days? What gives you confidence basically that that bumpiness is more indicative of something we see throughout this cycle versus something more fundamental?

So we've seen recessions before in our industry and they are characterized by significant and sustained drops in order patterns. And that's not really what we're seeing this time. They are usually also characterized by economic news that's somewhat profound.

So whether it was the banking crisis or it was the drop in the NASDAQ back in 2001 you can usually point to some external factor that is profound and say there is a connection there. Sometimes there's a lag between when you see it and when we see our orders. But we're not really seeing that kind of connection now.

And then if I go a step beyond recognizing that every recession is different, we spent a lot of time in addition to looking at data and reading the same stories you all read also talking with our customers. I was in Washington last week meeting with CEOs of a lot of our customers at a kind of a general CEO conference.

And I had a lot of discussions about how people are seeing the economy. And the way I'd characterize it is that there's a lot of uncertainty, but for the most part people see it as an economy that is stuck in neutral, just a very slow growth or no growth economy in the United States. And without probably a lot of signs that there's anything out there that's going to change that in the near term we're not seeing any signs that there's going to be a change in fiscal policy or a change in regulations or changes in trade or other things that would normally stimulate the economy to go a step beyond.

We all know what the Fed did this week. It is clear that they have an interest in raising interest rates but decided not to again based on the economic news that they are seeing. So I think everybody is looking at it the same way.

It just doesn't feel like it's an economy that's poised to grow quickly. But on the other hand there is not really anything that's pushing it down. So I think we're all feeling the same way.

Nobody likes being kind of stuck in the slow growth, no growth economy. But that's where we find ourselves. And that is very different from what we saw in previous years when we were on the brink of a deep recession.

Great, thank you very much.

Bill Dezellem from Tieton Capital.

Thank you. I have a group of questions. First of all, what are you anticipating just from what you are seeing and hearing that the energy industry will reach bottom?

Raj, you were looking at the data around when we think we will hit bottom on the energy vertical market. And it is about one more quarter.

Probably one more quarter, yes, Dave, relative to seeing a trough from our shipments perspective.

And then do you have any perspective on whether it grows from there or whether this ends up just, you reach the trough and you stick along the bottom for a while?

I think it's really too hard to guess right now because a lot of that is connected to energy prices. Typically energy companies like anybody else have a pipeline of project opportunities in front of them. And as they stop launching those projects you do get a bit of a backlog of pent-up demand.

However, it's hard to say right now what's going to happen with energy prices and how quickly they might rebound. And, therefore, it's not clear how that pipeline might be released. So it would be too early for us to start speculating.

Thank you. And then you referenced the CEO confidence was down. I believe you are referencing the US, how about in Europe?

We don't have similar data right now for Europe. So in the US when we reference it I'm referring to the business roundtable survey of CEOs. There's other surveys out there as well.

I would say that those CEOs, although they are US headquartered companies they are often talking about how they are feeling about their businesses around the world. So I think there is probably a global influence in that.

What we feel as we talk with our people and with customers in Europe is uncertainty, uncertainty related to Brexit which, of course, is a factor in the UK but is also a factor in many other countries because Britain is such an important trading partner for the other countries. Then there is also uncertainty in each local market related to recent elections which are surprising people and just causing some uncertainty. So I think you've got the specters.

You also have, as you know, the European governments attempting to stimulate the economies through various low interest rates, even negative interest rates. And it's apparent to people that you can only do that to a certain degree before you run out of opportunities to continue with that strategy.

So I think there's uncertainty and there's concern but that said I don't feel like we're on the brink of anything there either. I think it's just this quarter's news is about those issues. And in the long run I think from what I hear from global CEOs is optimism about growth in Europe after we get through the period that's in front of us.

Thank you. Then, finally, something I just simply don't understand is what I see is a bit of a discrepancy or conflict between your large projects showing some growth and signs of life, if you will, and yet CEO confidence being weak.

Those two seem to be opposites of how we think they would attract more in line with each other. Can you shed some light on what you think is going on there?

I think you are referring to the reference that I made about our project pipeline strengthening and showing growth compared to a year ago. Remember I commented that it was being driven equally or more so by small to midsize projects, not just large projects.

There are a few large projects in our pipeline that we've won and have not been ordered yet or believe we have a high probability of winning. But there are only a few. So I think maybe if that helps clarify.

I would also add that the CEO confidence numbers if you go back two quarters ago it ticked up slightly and then this quarter it ticked down slightly. So it's not improving and we'd like to see it higher than it is, but it's not in freefall either. It's bouncing around a point that we would like to see overall be stronger.

Great, thank you very much.

(Operator Instructions) That looks like all the questioners that we have in the queue at this time. So I'd like to turn the call back over to management for closing remarks.

This is Jim Keane. I just want to thank you all again for your interest in Steelcase and for joining us on this quarter's call.

We look forward to the next quarter and growth again in the Americas. Thank you.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect at this time. Everyone have a great day.