Standard Motor Products Inc (SMP) 2020 Q4 法說會逐字稿

Good day, everyone, and welcome to today's Standard Motor Products fourth quarter earnings call. (Operator Instructions)

It is now my pleasure to turn today's program over to Larry Sills. Please go ahead.

Good morning, everybody, and thank you for attending our fourth quarter call. My name is Larry Sills, Chairman of the Board. With me today, we have Eric Sills, President and CEO; Jim Burke, Chief Operating Officer; and Nathan Iles, Chief Financial Officer. Our agenda for today is we'll start with Eric, who'll review the highlights of the fourth quarter and the year, Jim will then review some operations, and Nathan will then give a more detailed review of the numbers. When that's complete, we will switch over to -- we will start our Q&A session. So a lot to cover. Let's start.

So Nathan, you'll begin with the forward-looking statements, and then we'll go from there.

Okay. Thank you, Larry, and good morning, everybody. Before we begin this morning, I'd like to remind you that some of the material we will be discussing today may include forward-looking statements regarding our business and expected financial results. When we use words like anticipate, believe, estimate or expect, these are generally forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available to us and certain assumptions made by us, and we cannot assure you that they will prove correct. You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements.

I'll now turn the call over to Eric.

Well, thank you, Nathan, and good morning, everyone, and welcome to our fourth quarter earnings call. I'd like to open the day by thanking all of our employees for going above and beyond in a year unlike any other. I truly believe we would not have been nearly as successful in navigating these uncharted waters without their dedication and skills. I truly could not be more proud of how they guided us through it.

Okay, on to business. We are extremely pleased with our fourth quarter results as we set records for both sales and profits. Our sales were up $41 million or 17%, with both divisions contributing record numbers. Engine Management was up 15% and was far and away our largest fourth quarter on record. Some of this was due to entering the period with an order backlog. As you'll recall, the third quarter was also quite strong, and due to some manpower shortages in our distribution centers, we did not fully catch up until early in the fourth quarter. But beyond that, incoming volume from our customers continued to be robust throughout the period as well. I would note that our customer sell-through in the fourth quarter was in the mid-single digits, and we are pleased to see that the positive trend has continued into 2021.

Temperature Control also hit a record, up 30%, though the fourth quarter is the lowest sales period of this highly seasonal category. We enjoyed a very warm summer, and similar to Engine Management, we entered the quarter with a bit of a backlog. In addition to this backlog, the warrants continued into the fourth quarter, prolonging the selling season. Customer POS was robust throughout, but again, this is a light period for the air conditioning business.

Reflecting back, this was a -- this year was a tale of 2 halves. At midyear, we were down nearly 15% due to the sales drop-off in the pandemic and with the third and fourth quarter strengthening sequentially. On a full year basis, we were nearly flat with 2019, with Engine Management slightly behind and Temperature Control slightly ahead. From a profitability standpoint, the trend was similar. After the first half, our earnings from continuing operations were down almost 37%. And with record third and fourth quarters, we ended the year up 16%. Nathan will provide much more detail later in the call, but overall, we are quite pleased with our year and proud of our performance.

Although we enter 2021 with many positives, as previously announced, we were recently informed of a loss of a major account within our Engine Management segment. At the time of the announcement, we knew that the annualized impact was an approximate loss of $140 million, though we had yet to finalize any details, including timing. We now know that this business is phasing out over the course of the first quarter of this year, during which we expect approximately $20 million in revenue, and it will then be totally absent beginning in the second quarter and thereafter. This account has chosen to pursue a private label strategy, as they have with other product categories before, and it is our understanding that they have split the business between several suppliers, both domestic and overseas. We now turn our attention to rightsizing our cost structure accordingly. Meanwhile, we seek to replace the volume. First off, we have many exciting opportunities with various customers that are actively in discussion; and secondly, installers all have many sources for their parts needs, many of whom we believe to be loyal to our brands. And we plan to work aggressively in the field, helping them find our products.

While this account decided to pursue a different approach, we strongly believe that our full-line, full-service strategy continues to resonate with our other customers as well as with the installers and end consumers. As evidence of this and of the strength of our partnerships, we are honored to have recently received O'Reilly Auto Parts' top honors as their 2020 Supplier of the Year.

I'd next like to speak for a moment about some of our other areas of business that complement our North American aftermarket focus. First is original equipment. While we do enjoy some OE business for the passenger car market, our larger emphasis has been more towards the heavy-duty, industrial and agricultural arenas. We believe these are a better fit for us. The product life cycle tends to be a bit longer and, frankly, tend to be a bit more profitable than OE for passenger cars. In general, the OE market was slower to recover from the pandemic than the aftermarket as new vehicle production and sales were more adversely impacted, but I'm pleased to report that it has now rebounded quite nicely and we are seeing good run rates entering 2021. Included in this is our recent Pollak acquisition, of which 75% is OE and largely commercial vehicle. Not only are we seeing a rebound of the acquired product lines, this acquisition has opened new doors for us, which we are actively pursuing.

Another original equipment area that has been a real highlight for us has been our compressed natural gas injectors, which are utilized in heavy-duty commercial vehicles, largely in Asia. As that region focuses on alternative energy vehicles, we have seen strong growth as they build out systems that operate cleaner than conventional powertrains. We sold over 1 million natural gas injectors last year, and the order book remains very strong.

Next, regarding the heavy-duty aftermarket portion of the acquired Pollak business, we saw the same rapid recovery that we saw in our legacy aftermarket. But as you'll recall, our intent with this is to focus on reinvigorating what has been a somewhat neglected business from its former owner. We have added hundreds of SKUs, are refreshing all marketing materials and are building out an organization to aggressively pursue the heavy-duty aftermarket for both Engine Management and Temperature Control. We see this as a very complementary channel for us. There are many similar products to what we offer elsewhere, and we have acquired a well-known and highly regarded brand on which to build.

Lastly, I'd like to address our Chinese operations. To remind you, we have 3 joint ventures, all within Temperature Control. While they provide us with access to high-quality, low-cost products for our North American aftermarket business, there are other purposes to pursue Chinese original equipment business, which is the largest new vehicle market in the world. As of now, about 30% of what we sell out of these JVs is for in-country OE.

Now while these businesses are still quite small, the growth potential is substantial. One that we are really excited about is called CYJ, which manufactures electric compressors for electric vehicles, both passenger car and heavy-duty truck and bus. Similar to the natural gas injector discussion a few moments ago, we see real potential in being a basic manufacturer of products for alternative energy vehicles and are excited to be in at the ground floor.

So in summary, 2020 was a roller coaster of a year. After a difficult first half, the second half showed the resilience of our industry, and we were able to make up essentially all of the lost ground. And while the ongoing pandemic will continue to cause uncertainty, looking forward to 2021, we see many positives. Industry trends are all favorable. Among them, average age of vehicles has hit a record 12 years, gas prices remain relatively low, and as mile driven recovers, we expect DIFM, which is our core business, will strengthen as well. Our strong customer sell-through from the second half of 2020 has continued into the first quarter of '21. And while we will feel the near-term impact of the lost business, our relationships in the marketplace have never been stronger.

And with that, I will hand it over to Jim to talk about our operations.

Okay. Thank you, Eric. This is Jim Burke, and I would like to touch on 2 topics from operations today. First is our supply chain. 2020 was like no other year, and I'm very proud of all our team members enduring everything that was thrown at us. We are deemed an essential business to the transportation industry, and we remained open to meet our customer demands. This entailed retrofitting all of our facilities for safety precautions and social distancing. We endured while demand swings dropping 30% to 40% followed by positive swings up 10% to 20%. At the same time, we were faced with a labor shortage. We are very thankful for all our employees who worked continuous overtime and 7 days a week. Many customers were very complementary, recognizing our employee efforts.

A more recent topic around supply chain has been the disruption in the auto sector from locked in availability of semiconductor chips. Fortunately, we believe we have an adequate inventory supply and deem this to be a minor risk. Another supply chain challenge has been the logistics of moving product, primarily from the Far East to the U.S. Fortunately, we have a very large manufacturing footprint in North America and Poland and are less exposed than others who source 100% from Asia. The logistic challenge reflects a combination of container shortages; availability of shipping vessels; and ultimately, congestion at local domestic ports. We have been managing through this process by forward booking containers and vessels to meet our needs. While definitely a challenge, we were able to alleviate more of this risk than others with our North American and Poland manufacturing locations.

Closer to home, I would be remiss without addressing the recent storms across the U.S. and, in particular, Texas. The polar blast with snow and ice instilled significant hardship and devastation across the mid-section of the U.S., affecting many of our plans. However, Texas was hit hardest where we have our Temperature Control headquarters and distribution center. We are assessing employee needs to recover, and our facility reopened after being shut for 4 days. Fortunately, this time of the year, we are focused on preseason orders and will be able to make up the loss days with overtime and weekends. Our global teams have met all these supply chain challenges head-on with pride and are driven to meet our customer needs. We thank all our worldwide employees for their dedication throughout these very difficult COVID times.

Turning to my final topic. I would like to highlight our SMP inaugural social responsibility and sustainability report. For over 100 years, SMP has nurtured a culture focused on all our stakeholders, including our employees, customers and our communities. With solely internal resources, our team members produced this outstanding ES&G report, which can be found on our website. With a focus on environmental and social responsibility, our report highlights the products we produce that reduce auto emissions, efforts to reduce our carbon footprint in our operations, increasing diversification and inclusion throughout our organization, addressing the health and safety of our employees and being engaged in the communities where we are located. Many of these efforts have been captured under our SMP Cares banner, focusing on all stakeholders and striving for continuous improvement.

Thank you for your attention, and I'll pass the call over to Nathan for our financial wrap up.

Okay. Thank you, Jim. Now turning to the numbers, I'll walk through the operating results for the fourth quarter and the full year, cover some key balance sheet and cash flow metrics and then also talk a little about our expectations for the year 2021.

Looking first at the P&L. Consolidated net sales in Q4 2020 were $282.7 million, up $41.5 million or 17.2% versus Q4 last year. Our consolidated net sales for the full year were $1.13 billion, finishing down just 0.8% after recovering in the last half of the year, as Eric noted earlier.

Looking at it by segment, Engine Management net sales in Q4, excluding wire and cable sales, were $193.5 million, up $26.2 million versus the same quarter last year. This 15.7% increase was driven mainly by catching up on the large order backlog we carried into the fourth quarter that stemmed from the sharp rebound in business activity after CVOID lockdowns were listed. For the full year, Engine Management's net sales were down 2% to $691.7 million as strong second half volume helped offset the pandemic-induced decline we saw earlier in the year and brought the segment's full year sales to a level just slightly below 2019.

Wire and cable net sales in Q4 were $38.3 million, up $3.7 million or 10.6%, but for the full year were relatively flat, finishing up 0.6% at $144 million. Sales during the quarter and for all of 2020 were positively impacted by an increase in DIY sales as consumers stayed home during the pandemic. While the wire and cable business performed very well in 2020, the business remains in secular decline, and we believe sales will be lower by 6% to 8% on an annual basis.

Our Temperature Control net sales in Q4 2020 were $47.7 million, up 30% versus the fourth quarter last year, driven by an extended selling season as weather stayed warm well into the fourth quarter across most of the U.S. Like Engine Management, Temp Control's full year sales were more in line with last year, ending the year up 1.3% at $282 million as the strong seasonal sales helped the segment finish slightly ahead of 2019.

Looking now at gross margins. Our consolidated gross margin in Q4 2020 was 33.3% versus 30.2% last year, up 3.1 points. And for the full year, it was 29.8% versus 29.2% last year, up 0.6 points. Looking at the segments, fourth quarter gross margin for Engine Management was 33%, up 2.4 points from Q4 last year, and for Temperature Control was 30%, an increase of 7.3 points from 22.7% last year. The very strong margins in both segments reflect the higher sales volumes we experienced as well as the positive impact of high fixed-cost absorption resulting from increased production. For the full year, gross margins in both segments more closely aligned with long-term trends. Engine Management gross margin was up 0.5 points to 30.1% while Temp Control was up 1.5 points to 26.7%. These full year margins reflect strong second half sales and fixed-cost absorption and also incremental improvements achieved from our continuous savings programs.

Moving now to SG&A expenses. Our consolidated SG&A expenses in Q4 were $61 million, ending at 21.6% in sales versus 22.5% last year. For the full year, SG&A spending was $224.7 million, down $10 million at 19.9% of net sales versus 20.6% last year. The improvement as a percentage of sales in the quarter mainly reflected improved expense leverage as sales volumes increased. Lower overall SG&A expenses for the year were helped by cost reduction plans put in place earlier in the year and lower interest rates on accounts receivable factoring programs and, to a lesser extent, COVID-related government incentives.

Consolidated operating income before restructuring and integration expenses and other income net in Q4 2020 was $33.2 million or 11.7% of net sales, up 4 full points from Q4 2019, and for the full year was 9.9% of sales, up 1.4 points from last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in fourth quarter 2020 diluted earnings per share of $1.08 versus $0.59 last year, and for the full year, diluted earnings per share of $3.61 versus $3.10 last year. The increase in our operating profit for the quarter was mainly due to higher sales volumes, while the increase for the year mainly reflects higher gross margins and lower SG&A expenses across the company, which overcame the impact of slightly lower sales volumes.

Turning now to the balance sheet. Accounts receivable at the end of the quarter were $198 million, up $62.5 million from December 2019, with the increase over last year due both to higher sales in the fourth quarter and management of our supply chain factoring arrangements. Inventory levels finished the quarter at $345.5 million, down $22.7 million from December 2019, but the decrease is from last year, mainly reflecting the sharp recovery in sales we experienced in the second half of the year after having lower production levels earlier in the year.

Our cash flow statement reflects cash generated from operations for the year of $97.9 million as compared to a generation of $76.9 million last year. The $21 million improvement was driven by an increase in our operating income, as noted earlier, but also by changes in working capital. The changes in working capital in 2020 were mainly a result of strong second half sales and related timing. Inventory balances finished lower, but accounts payable were higher as we tried to replenish our shelves. Further, accrued customer returns and rebates were also higher due to timing of sales in the back half of the year. These favorable movements were partly offset by an increase in accounts receivable, as highlighted before. As we said last quarter, we expect this timing around cash flows to normalize as sales and production levels stabilize.

During the year, we continued to invest in our business and used $17.8 million of cash for capital expenditures, which was more than the $16.2 million used in 2019. Financing activities included $11.2 million of dividends paid and $13.5 million paid for repurchases of our common stock. Financing activity also included $46.7 million of payments on our revolving credit facilities. We finished the year with total outstanding borrowings of $10 million and available capacity under our revolving credit facility of $237 million.

Finally, as noted in our release this morning, we continue to look to return value to our shareholders. To that end, our Board of Directors has approved a quarterly dividend of $0.25 per share on common stock outstanding, which is payable on March 1. Further, our Board has also authorized an additional $20 million common stock repurchase plan. This new authorization is on top of the $6.5 million remaining under our existing plan and, when added together, will allow us to repurchase up to $26.5 million of additional shares.

Lastly, let me talk about our expectations for 2021. As I said earlier, sales in the last half of 2020, and the fourth quarter in particular, were very strong, leading to very favorable gross margin performance. But as you heard, as we head into the first quarter of 2021 facing the loss of a customer, we'll be working through cost reductions for the balance of the year while we seek to replace the volume. While gross margins will vary across the quarters, we expect full year 2021 gross margins for Engine to be 29% plus. For our Temp Control segment, we continue to target gross margins of 26% plus for the full year in 2021. Looking at our SG&A costs in 2021, we expect expenses to be in the range of $52 million to $56 million each quarter. Finally, with regard to working capital, we expect balances to normalize, as noted earlier. As a result, we expect cash flows to be driven by using cash to build our inventory back to appropriate levels and to pay customer rebates earned during 2020 and offset by cash generated from the collection of accounts receivable.

Thank you for your attention. I'll now turn the call back to the operator to open it up for questions.

(Operator Instructions) And we will take our first question from Scott Stember with CL King.

Congrats on a great quarter. Good way to finish out the year. Maybe let's talk about the loss of business. You talked about it was a change in strategy by this one customer. Correct me if I'm wrong, but it seems that they just, I guess, want to break it out amongst different folks, and they're not as interested in the one-stop shop portfolio services that Standard offers. I'm just trying to dig into a little bit more what their reasoning is.

Understood. Got it. And that's -- I don't want to overly speculate on their strategy, better to speak with them. What I would say is that we continue to emphasize our go-to-market strategy, which we still think is very sticky and very relevant out there today. And to remind you as well, certainly, but others perhaps on the call, that our approach has always been to be a full-line, full-service guy, and full line being a very important part of it, which is we're now within Engine Management north of 40,000 part numbers and adding more each year. And as the line gets more complicated and the technology gets more complicated and car manufacturers find new systems and methods to improve their vehicles, to have a category manager, like a Standard Motor Products, to really drive the whole thing for you we think it's very well received by the balance of our customer base.

So we're going to continue to emphasize our strategy. As mentioned, players like O'Reilly awarding us their top honors and relationships we have with the other players out there, both large and small, suggest that going forward, our strategy is still the stronger. And so while this other account chose to go in another direction, better to talk to them about why, but we still believe our strategy is the right one.

Fair enough. And the business that's going away, what is the mix? Is it pretty much the same mix of business that you have across your entire Engine Management business? Just trying to get a sense of whether this is higher-margin business going away or if it's just emblematic or just representative of your entire mix of business that you have.

Yes. They were a customer of the entire line. So their mix was roughly reflective of the overall division.

All right. Last question before I get back in the queue. You talked about some opportunities that you're working on currently to replace this lost business. Can you just give us a sense of what kind of stuff we're looking at here? And the -- how long it could possibly take to replace all those? This is, obviously, a big chunk of sales that are coming out.

And really don't have any details to report, Scott, but what I would say is that we have many prospects in the works across Engine Management and other product categories with many customers out there, they're all in different stages. So it's not like there's going to be potentially a big stepwise replacement of the business. But I would actually say that we possibly have more opportunities now than ever. We're excited about it. We think that our customers are excited about working on some of these things with us, but we don't have any specifics to report.

And we will take our next question from Andrew Ryan with Stephens Inc.

Congrats on the quarter. Yes, so I guess, first question I have here, you've heard from some of your like public retail customers, inventory is on the lower side of where they'd like to be. Where do you think like they are and you guys are positioned heading into like preseason sales for 2021?

Sure. It's a good question. So it's best answered by looking at the divisions separately because they have had somewhat different dynamics, especially this time of year. Within Engine Management, we actually really entered the fourth quarter where they were a bit light, but -- and that was partly because of our order backlog. But by the end of the quarter, they were really back up to reasonable and healthy levels. That being said, what we see is perhaps more of an appetite than we've seen in a long time for some of these distributors to really strengthen their forward deployed inventory as they're looking to aggressively go after the market out there. So we see the potential for -- even though they're not under-inventoried today that there's more of an appetite to really strengthen their -- what they have on the shelves.

On the Temperature Control side, here too, they ended the year roughly where they have in the past. So even though it was a very strong selling season, as you saw by their purchases from us over the course of the quarter, they were up 30%. So their shelves are in reasonable shape. As we enter 2021 for Temperature Control, the first half of the year is almost entirely about preseason, preparing for the summer. If you look at 2020, 2020 was very light preseason. The first quarter was just light, and the second quarter was the pandemic. So the comps are relatively easy, but that's why we always caution to look at the full year. The first half of the year is really just about preparing the shelves, and it's really what happens in the summer. So perhaps I've given you more than you asked for, but that's kind of how we see things going forward.

No, that was very helpful. I guess, then moving over to, I guess, Temp Control SG&A. Really impressive leverage there. Can you kind of parse out how much was cost removal versus production and sale leverage?

Yes. Well, just to reiterate what we said before, when you look at SG&A, the costs tend to be roughly 75% fixed and 25% variable and they then tend to flex that way. And so with strong volumes, like I said in my remarks, most of the improvement was just the better leverage on the top line volume.

Perfect. I guess, just one quick little housekeeping follow-up. I guess, can we get any color on expectations for the cadence of repurchases now that you've started that up going into 2021?

We have no specific cadence around repurchases, just noting that we do have the Board authorization, and we'll use it as it makes sense.

(Operator Instructions) We'll take our next question from Bret Jordan with Jefferies.

On the existing inventory at Advance, is that going to be bought out? Or is there any inventory that would be returned to you in this transition?

We don't get into those levels of details. But I would say it would be -- as you're looking to model it for this year, it would be negligible.

Okay. And then obviously, a lot of talk about OE in the prepared remarks. Is that something we should read as sort of a shift in the strategy and maybe if you think about how you see OE as a percentage of sales mix on maybe a longer-term basis? Like looking out a few years, is that going to grow? Obviously, a lot of small numbers probably helps it grow, but is that going to be a meaningful growth driver of the total top line?

It's a great question. And there's nothing -- while, it perhaps got a little bit more attention in the prepared remarks, there's nothing new about this diversification strategy. We've been working on it for the last several years. And some of our M&A over the last few years have really been geared towards finding categories that are complementary to our core business, makes sense for us where we think that we can do well but not chasing every little opportunity. That's why we emphasized that we think commercial vehicle, heavy-duty, industrial space is a little bit better suited for us, and we've seen some nice inroads there. Some of it came with the acquisition of Pollak. But this is an area we've been working on, especially out of Poland, which is, in some ways, uniquely positioned to go after OE business because it has a very good cost structure and is very technical in their capabilities.

So if you add up all this complementary business, and we report this in our K, it's about somewhere north of 14% of our business. It's been growing slowly over the last few years. We're judicious in what we look for, but we see it as a nice complementary business. We still believe the North American aftermarket, that's our core business. That's what we've emphasized for the last 100 years. We think this fits nicely on top, and there's some synergies between the 2.

(Operator Instructions) Next question from Robert Smith with the Center for Performance Investing.

So as you're in your second 100 years, have you given some thought to the so-called end of the ICE age and the transformation of the industry to electric vehicles? And how you might see this in your role?

Robert, it's a great question. It's certainly one that we spend a great deal of time thinking about and preparing for internally. We're certainly seeing more news recently, whether it's the General Motors announcements of what they're planning to do with their fleet by 2035 and just so many other car manufacturers preparing for that. We recognize that it's not an if, it's a win. We do think that, that win is still many years out. Again, General Motors is looking at 2035, and that's really for new car sales. And as largely an aftermarket manufacturer, we have a pretty good lead time even after that before it has any significant impact on the addressable market on the car park.

But look, we definitely see that it's coming. So as we look at our product portfolio and make sure that we're evolving along with automotive technology, perhaps it's helpful to break it into its components. If you look at our Temperature Control division, that's essentially immune. There are some slight technology changes on AC systems for electric vehicles, but for the most part, it's still all there. And on Engine Management, we really see more and more of that division really having little to do with the engine. So we're seeing much more as it relates to safety-related devices, whether it's older technologies, like ABS sensors, or getting into the new technologies with all of the advanced driver assist systems we're seeing on vehicles where we are already offering hundreds and hundreds of SKUs to support cameras and lane departure systems and so on and so forth. So we see as the potential for ICE-related components to contract, we hope that there are replacement -- that there are product categories that are there to replace that business. And that potentially also includes parts to service that electric vehicle powertrain.

It's also important to note, and I think you're aware of this, that much of the electrification going on, certainly for the near term, is hybrid vehicles where there is a combustion engine on board along with the electric motor. But yes, we continue to look to evolve. And with these new systems comes new technologies and new parts opportunities. So for example, there's going to be much more related to battery cooling, which we think is in our wheelhouse; to power management; battery sensing technology and so on, which we think is in our wheelhouse; and again, more and more emphasis on different types of sensors and actuators throughout the vehicle.

So we've been evolving with automotive technology for 100 years. We plan to continue to do it. We think we have several year lead time before there's significant impact in the addressable market. But we're by no means ignoring it, we're addressing it and preparing for it.

And we will take our next question from Andrew Ryan with Stephens, Inc.

Andrew on for Daniel again. I have one quick question. I was wondering you mentioned rising freight costs in the quarter, and I'm kind of wondering if you're seeing inflation anywhere else. And how do you guys feel about the industry's ability to pass this cost to the consumers?

Yes. Well, and let me just answer, I guess, specific to SMP. We have a number of inputs in our manufacturing processes from a materials perspective. And of course, you see the inflation out there is -- but we do. But we don't have any one commodity that's a big input into our processes, so it's not a huge driver there. But yes, to your point, anything that we see, we will try to pass through to the customers.

Okay. Would that be kind of similar process, like with the tariffs, where you guys had to protect the gross profit dollars?

Yes. With -- yes, so if you're saying it's similar to tariffs, yes, like we did a couple of years ago.

(Operator Instructions) And we will take our question from Robert Smith with the Center for Performance Investing.

So as 2020 unfolded with the pandemic, you kind of were playing, I guess, defense and -- due to the uncertainties, and you passed the dividend. I voice my concern about what happened subsequently and the fact that the dividend payout was reduced in 2020. So again, I might ask of you that the way the year is ending, so to speak, in really fine shape that you might consider declaring an extra dividend in 2021 to make up for the reduced dividend payout in 2020.

We will discuss these things with our Board as we always do and take it under advisement.

(Operator Instructions) And it appears we have no further questions at this time. I will turn the program back over to our presenters.

Okay. Thank you all. Thank you all for attending. Wish us all good luck. Okay. Bye.

Thank you.

Thank you.

This does conclude today's program. You may disconnect at any time.