Universal Stainless & Alloy Products Inc (USAP) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the USAP Third Quarter 2018 Conference Call and Webcast. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, June Filingeri. You may begin.

Thank you, Sarah. Good morning. This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal Stainless conference call and webcast. We are here to discuss the company's third quarter 2018 results reported this morning.

With us from management are Denny Oates, Chairman, President and Chief Executive Officer; Chris Zimmer, Executive Vice President and Chief Commercial Officer; Paul McGrath, Vice President of Administration and General Counsel; and Chris Scanlon, Vice President, Finance, Chief Financial Officer and Treasurer.

Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. The conference operator will instruct you on procedures at that time.

Also, please note that in this morning's call, management will make forward-looking statements under the Private Securities Litigation Reform Act of 1995. I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission.

With these formalities complete, I would like to turn the call over to Denny Oates. Denny, we are ready to begin.

June, thank you. Good morning, everyone. Thanks for joining us today. This morning, we announced that sales reached $69.1 million in the third quarter, and year-to-date sales are approaching $200 million driven by broad-based and strong business conditions.

Normal third quarter seasonality was somewhat muted this year. Frankly, it's rare for a third quarter sales number to exceed the second quarter in our industry.

Incoming business as measured by bookings of $69.2 million before surcharges continued at near-record levels during the quarter, and our backlog reached a record of $111.4 million at September 30, validating that the demand cycle remains intact.

Taking a closer look at the details. Third quarter sales of $69.1 million were up 35.7% from the third quarter last year and up 4.5% from the 2018 second quarter.

Tool steel sales were especially strong in the quarter and reached a record $13.1 million. Premium alloys sales totaled $9.2 million, an increase of 24.3% from the 2017 third quarter, but lower than the record second quarter 2018.

I should point out that third quarter bookings and September 30 backlog reflect record levels for our premium products and will remain upbeat about our prospects for future growth.

Gross margin as a percentage of sales for the third quarter of 2018 was 15.1%, which was the second highest in 13 quarters, but trailed 17.7% achieved in the 2018 second quarter.

Lower value shipments coupled with spending and production inefficiencies associated with our new labor contracts adversely impacted margins.

Similarly, earnings before interest, taxes and depreciation of $10.1 million increased from the third quarter of 2017 by a noteworthy 79.5%. It was 9.8% lower sequentially.

Third quarter net income totaled $3.9 million or $0.44 per diluted share compared with a loss of $300,000 or $0.04 per diluted share in the third quarter of 2017, a net income of $4 million or $0.50 per diluted share in the second quarter of 2018. Today's press release references the puts and takes on earlier periods along with further details on our shares outstanding.

Regarding raw materials, nickel drifted lower during the third quarter reaching at 2018 low of $5.68 a pound in September. Although down from the 2018 high of $6.85 per pound reported in June, nickel remains higher than the $5.10 per pound reported in September of 2017. We attribute the decline to -- mainly to lower Chinese production and tariff concerns. Earlier this morning, nickel was quoted at around $5.57 per pound. We expect nickel to move sideways the rest of 2018 and agree with most of the experts who are calling for increases in 2019.

Other key commodities such as molly, chrome and scrap have been basically flat for the last several months. Because of these raw material trends, we did experience some minor misalignment between surcharges and melt cost, which will continue during October and November.

Earlier this week, we announced a price increase of 3% to 8% on a selected specialty steel long products. The products involve represent about 15% to 20% of our shipment volumes.

Regarding our balance sheet, Chris Scanlon will provide an update in his review, but just let me reiterate that we are heading into 2019 with a much stronger financial structure because of the initiatives completed in 2018, which added significantly to our flexibility to pursue our growth strategy.

Turning to the third quarter operating highlights. The installation of our $10 million mid-size bar cell at our Dunkirk New York facility is proceeding on schedule and initial production is slated to begin in November.

We'll spend the rest of the quarter in early 2019 fully commissioning all functions of the new line. We're looking forward to the resulting cost reductions, quality improvements, cycle times and lower inventory requirements afforded by the state-of-the-art operation.

The union and management negotiating teams did an excellent job of hammering out 2 key collective bargaining agreements during the quarter: a 5-year contract with our Bridgeville employees effective September 1 and a 6-year contract with the North Jackson employees effective earlier in the quarter. Both agreements contain flexible work roles and profit-sharing incentives.

We did incur a onetime cost of approximately $0.01 per share for expenses directly associated with a potential work stoppage in Bridgeville and certain production inefficiencies associated with the negotiations having an estimated impact of another $0.02 per share.

Our precision rolled products group serving aerospace and power generation customers out of our Titusville location continued on a record-setting path for 2018.

Turning to our major end markets. Let's start with aerospace. Our aerospace sales represented 54% of total sales in the third quarter of 2018, consistent with the third quarter of last year, but below 61% of sales in the 2018 second quarter.

Third quarter aerospace sales totaled $37.3 million, which is up 34.6% from the third quarter of 2017, although 7.2% lower sequentially.

The sequentially lower sales notwithstanding commercial new build activity remains robust, the aftermarket remains strong and there is a growing defense market.

Additionally, IATA continues to report air traffic demand ahead of expectations and noted that global load factors in August was the highest since they began keeping records. Analysts see the ongoing air traffic growth is further supporting long-term OEM build rates. For Universal, the robust activity has translated into continued high levels of aerospace backlog at the end of the third quarter, including record backlog in our premium melted products.

One of the aerospace industry concerns earlier this year was the pace of production ramp-ups by the airframe manufacturers due to engine supply challenges. Boeing and Airbus are signaling that these engine issues are being overcome and production ramps are getting back on track.

In any event, we have not experienced any pushback or delays from our aerospace customers. Quite the contrary, customers are demanding more as evident in our bookings and backlog.

In other industry news, Honeywell reported on Friday that the aerospace sales for the third quarter were up 10%, driven by robust demand from business aviation original equipment manufacturers, continued strength in the U.S. international defense business and growth in the air transport and business aviation aftermarket, among other factors.

We could cite other similar reports from aerospace companies based on third quarter releases, but suffice it to say, demand in aerospace market remains very robust.

The heavy equipment market remained our second largest market in the third quarter of 2018, representing 19% of total sales, which is in line with the third quarter of 2017 and compares with 14% of sales in the second quarter of 2018.

Third quarter of 2018 heavy equipment sales, which are primarily tool steel plate sales, totaled $13.4 million, an increase of 38.4% from the third quarter last year and up 48.4% sequentially.

Those of you who've followed us for a while know that our tool steel plate sales tend to be lumpy. In the third quarter of 2018, tool steel sales reached a new company record.

Automotive production, especially model changeovers, off-road equipment, mining equipment, cutlery and general industrial manufacturing requiring metal fabrication all drive tool steel demand. While auto production is down modestly, production remains well above the last 10-year annual average.

Model changeovers are happening at a healthy clip. At the same time, on the industrial side, the last few days, which suggest investor sentiment has turned somewhat negative due to concerns over tariffs, politics and geopolitical issues. That said, we have a decent backlog to ship in the fourth quarter and our customers continue to be very positive about 2019.

Lastly, favorable rulings in the first quarter 2017 trade case have leveled the playing field for Universal as a domestic producer of tool steel plate and enabled us to gain market share, which bodes well for the future.

The oil and gas end market remained our third largest market in the third quarter of 2018, representing 13% of total sales versus 9% of sales in the third quarter of 2017 and 12% of sales in the second quarter of this year.

Third quarter oil and gas sales totaled $8.9 million, an increase of 94.4% from the third quarter of 2017 and up 14.1% sequentially.

The ongoing recovery in oil and gas generally continues despite some of the negative news regarding future's global economic growth and Saudi plans for output. Our opportunities are centered in North America currently, based on fundamental activity increases coupled with some of our new capabilities being provided by the North Jackson facility. Orders and backlog are up and we see this trend continuing well into 2019.

Power generation continues to be the weak spot for both Universal and the industry as a dropoff and new build turbine demand is fully evident. I think it's safe to say that recovery in the new build market is a few years off at best. In the third quarter of '18, our power gen market sales represented 4% of total sales, the same level as in 2018 second quarter, but down from 9% of sales in the third quarter of 2017.

Third quarter 2018 power gen sales totaled $2.7 million, which is down 16.7% from the third quarter last year, although up 16.3% sequentially.

As we've noted previously, our power generation sales continue to be mainly for the maintenance market. In the third quarter, there was a nice pickup from second quarter as customers feathered in inventory for their next round of scheduled maintenance. We continue to expect maintenance on installed gas turbines to drive our power generation sales until the replacement cycle does kick in.

Our general industrial market sales was 7% of sales in the third quarter 2018 compared with 9% of sales in the third quarter of '17 and 7% of sales in the 2018 second quarter.

General industrial sales totaled $5.1 million, an increase of 10.9% from the third quarter of 2017 and up 5.1% sequentially.

Our general industrial business continues to develop nicely, serving the semiconductor, medical, infrastructure and general manufacturing markets. As we've discussed in the past, we continue to expect continued growth in these markets in 2019 and beyond.

Let me now turn the call over to Chris Scanlon for our financial report. Chris?

Thank you, Denny, and good morning, everyone. This morning, I'll cover the financials and then conclude with some points summarizing our August PNC Bank credit agreement amendment.

Starting with revenues, third quarter 2018 sales of $69.1 million were up 4.5% sequentially and up 35.7% compared with the 2017 third quarter.

Current year-to-date sales of $198.9 million were up 30.5% compared with the prior year-to-date sales. Increased revenues for both the third quarter and year-to-date 2018 were driven by all end markets, except for power generation.

Gross margin in the third quarter was $10.4 million or 15.1% of sales, down 260 basis points from the 2018 second quarter and up 440 basis points from the 2017 third quarter. The sequential decline in gross margin was driven primarily by a decline in premium product sales. Note that third quarter 2017 gross margin included approximately $300,000 of charges related to the facility fires. Adjusting for this, Q3 2017 gross margin was 11.2%. Lastly, we did see a mild pinch in melt cost alignment compared to our commodity surcharges in the 2018 third quarter.

Turning now to selling, general and administrative costs. Our third quarter SG&A was $5.1 million or 7.4% of sales, a decrease of approximately $720,000 compared with the 2018 second quarter and $680,000 higher compared to the 2017 third quarter. The largest driver in SG&A change between periods was employee incentive compensation with current period incentive compensation decreasing compared to the second quarter of 2018, while employee incentive compensation increased from the prior third quarter.

Our tax rate for the 9 months ended 9/30/18 was 19.1% and included approximately $100,000 of unfavorable discrete tax items, primarily comprised of the expiration of fully vested stock option, partially offset by research and development credits. Excluding discrete tax items, our underlying annual effective tax rate is 18.5%.

Specific to our third quarter, income tax expense totaled $460,000 and was favorably impacted by discrete tax items totaling $270,000. These favorable discrete items were primarily comprised of R&D credits and then to a lesser extent, stock option exercise benefit.

Net income in the third quarter was $3.9 million or $0.44 per diluted share. Second quarter 2018 net income totaled $4 million or $0.50 per diluted share. You will recall our 2018 second quarter earnings included a gain on a legal settlement totaling approximately $520,000 net of taxes. Excluding this onetime gain, our adjusted second quarter 2018 earnings totaled $0.44 per diluted share or flat to current quarter diluted earnings per share.

Current quarter diluted shares outstanding totaled approximately 9 million, while second quarter 2018 diluted shares outstanding totaled approximately 8.1 million. The difference of approximately 900,000 shares is due to our Q2 equity raise and the weighted average calculation of diluted shares outstanding.

Current quarter share count includes the full effect of the 1.4 million additional shares issued, while the diluted shares outstanding in the second quarter, which totaled approximately 550,000 shares were prorated based on the Q2 equity raise date.

2017 third quarter net loss totaled approximately $300,000 or $0.04 per diluted share. The prior year third quarter net loss included a $0.03 loss per share related to facility fires as well as a $0.03 loss per share for a discrete tax expense charge related to the change in stock compensation accounting guidance. Excluding these items, 2017 third quarter net income totaled $0.2 per diluted share.

Year-to-date, 2018 net income totaled $10.1 million or $1.23 per diluted share and was significantly improved from the 2017 year-to-date total, which was a loss of $250,000.

I'll cover the EBITDA next with our third quarter EBITDA totaling $10.1 million, which was a decrease of $1.1 million or approximately 10% sequentially and an increase of $4.5 million or 80% compared with the third quarter of 2017. Year-to-date, 2018 EBITDA totaled $30.2 million compared to EBITDA of $17.1 million in the 2017 9-month period ended September 30.

Adjusting for noncash share compensation expense, 2018 third quarter adjusted EBITDA was $10.5 million. The EBITDA and adjusted EBITDA calculations are provided in the tables to the press release.

I'll cover the balance sheet next and I'll start with managed working capital. During the third quarter, managed working capital totaled $136.9 million, an increase by $11.4 million compared with the second quarter of 2018. The increase is consistent with continuing strong end markets and improved business activity.

Accounts receivable increased by $8.4 million and inventory decreased by $2.8 million, while accounts payable declined by $5.8 million. We were able to decrease inventory while still supporting our higher backlog, which grew by $7.2 million during the quarter to $111.4 million. Lastly, the increase in accounts receivable is directly attributable to the higher third quarter sales activity.

Capital expenditures for the third quarter were $6.6 million, with year-to-date capital expenditures totaling $13.2 million. Prior year third quarter capital expenditures totaled $1.6 million, with prior year-to-date CapEx totaling $4.7 million.

For the full year 2018, we expect our capital expenditures to approximate $16.5 million.

Our September 30 restricted cash balance totaled $6.2 million, relatively unchanged from the second quarter. We began recording restricted cash in the 2018 first quarter upon utilizing New Markets Tax Credit Program funds for our Dunkirk New York mid-size bar cell capital project.

Lastly, we continue to report $2.8 million within long-term liabilities related to qualified investment funds received.

As Denny previously discussed, our bar cell project is continuing to progress well and we should begin operating here in the fourth quarter. We also expect annual depreciation expense related to the bar cell unit to approximate $700,000. With this additional depreciation, our 2019 depreciation and amortization expense is estimated to total $20 million.

Moving on to debt. The company's total debt at September 30 stood at $62.5 million, an increase of $5.3 million from the prior quarter, while our debt net of cash and restricted cash totaled $56.2 million at the current quarter-end.

Our increased debt level was primarily driven by increases in working capital as well as increased capital spending.

I'll touch on our PNC Bank amendment activity next. On August 3, we amended and restated our asset-based lending credit agreement with PNC Bank. The new agreement increases the maximum line of the company's revolving credit facility to $110 million and reduces the term loan facility to $10 million. The new agreement also includes a more favorable interest rate structure. The amended credit agreement continues to be collateralized by substantially all of the company's accounts receivable, inventory and fixed assets and will expire on August 2023.

Our amendment activity included reducing the size of the term loan, which was reduced to $10 million at the amendment date. Due to this, $7 million of outstanding term loan borrowings were transferred to our revolving line of credit borrowings as of the amendment date.

I will conclude my comments by adding some color on the timing of the receipt of expected insurance proceeds related to the 2017 Dunkirk facility fire.

We currently estimate these funds to be received in the second half of 2019 and that gross proceed should approximate $650,000.

This concludes my financial update. And with that, Denny, I'll turn the call back to you.

Okay, Chris. Thank you. In summary then, third quarter sales reached $69.1 million, which was a record for a third quarter. And year-to-date sales neared $200 million as very strong business continues -- continue to drive strong demand.

Overall, third quarter bookings were near-record levels and premium melted product order entry did set a new record. Order backlog at September 30 totaled over $111 million, also a record.

The demand cycle remains intact and we feel well positioned for a solid fourth quarter and 2019. We're continuing to focus on growing profitably through better price realization, ramping up plan activity levels, lowering variable cost and targeted capital spending. The addition of the state-of-the-art bar cell in Dunkirk this quarter will be an important step forward in this regard as we capture cost reductions, quality improvements, faster cycle times and lower inventory requirements.

Our new collective bargaining agreements eliminate a major distraction for the next 5 to 6 years, and we're all renewing our focus on taking production levels -- taking production to new levels. We will continue to be relentless in executing our growth strategy in the coming quarters and are equipped with a stronger financial structure because of initiatives undertaken in 2018, all of which have added significantly to our financial flexibility.

That concludes our prepared remarks. Operator, let's take some questions.

(Operator Instructions) Our first question comes from the line of Michael Gallo with CL King.

Denny, a couple of questions. Normally in the fourth quarter, you tend to see the normal seasonal patterns, as kind of service centers matters the year-end inventory. Seems like your backlog has continued to be really strong and the bookings in Q3 were strong. Do you expect that you'll see the normal seasonal pattern around the end of the year? Or might it be a little less than what you see normally this year?

I think it'll be a little less than what we normally see, but there will be some window dressing at the end of the year. At this point in the quarter, we've already gotten indications from several of our larger customers about what their receiving plans are, but there's always little qualifier in there that they really need the material, we can ship it. But some of our customers are off Christmas week. There is a few of them that are not receiving anything after the second week of December. But as you look at the overall picture, look at backlog, bookings and general activity level and the needs of our customers, I don't -- I think, they're still in the mode from my perspective of meeting their customer demands, which are very strong. So I expect some seasonal activity, but I don't expect it to be as severe as we've seen in prior years.

Great. Next question I have, Denny, is just on the gross margins. Obviously, you had a couple of things going on in the third quarter between, obviously, a lower mix of premium products. You had some misalignment with nickel and then you had some production inefficiencies around the labor contract negotiations. Your commentary on the backlog and what you are seeing suggest you have seen very strong orders and backlogs for premium products. So I guess, should we look at the fourth quarter starting to resume some of the sequential growth? Will that be kind of a low point as we look forward? Or will some of the issues around misalignment, et cetera, continue to drag? Do you expect premium product sales to be similar? And then, how should we think about that gross margin line next year?

The way we're looking at that, I guess, when we just talk about headwinds and tailwinds, if I can. So from a headwind standpoint, yes, there will be some misalignment here. You can see our surcharges in October and November. I would point out though that we're not 100% nickel based. So some of those surcharges, as you see in October and November, are down. And for some of other products, you'll see surcharges that are actually going up. So it's not -- I don't want to leave anybody with the impression there is a significant misalignment coming, but they will continue to be what we saw in the later part of the third quarter occurring in the early part of fourth quarter. So that's one headwind. Obviously, we'll have some higher labor costs on a per hour basis. We are seeing continued inflation in some of our supply items, like electrodes and refractory brick and things along those lines. On the other side, from a positive standpoint, I think you can look towards improvement in mix in the value of the products, more premium melted products as we move through the fourth quarter and into 2019. The only qualifier are put on that is what happens at the end of the year as we just discussed. I don't expect a significant window dressing, but that's one of the wild cards that we have to face every year. We do have a strong backlog, so we can get focused on that backlog. We have the distraction of the negotiations behind us and ramp-up and have a -- looking forward to a very solid fourth quarter from an operating perspective, which will drive better absorption and drive lower variable cost. Although I don't expect significant improvement in margin based upon the bar cell in the fourth quarter, optimistically, we could see some benefit here as we exit the fourth quarter and start up the first quarter. So that's kind of a picture of some of the headwinds we're looking at. The other thing from a tailwind standpoint, I guess, would be -- from a pricing standpoint, you did notice we had had a price increase announcement earlier this week. It's not on the universe of our products, it's on 15% to 20% of our volume. So as we look at some of the higher costs, as we think about what I just said, what we're essentially saying is through a combination of mix improvement, price enhancements and further cost reductions driven by higher volumes and better operations with less distractions, we would hope to maintain -- or improve upon our margin performance we saw in the third quarter.

And kind of looking to '19, obviously, you've had a couple base price increases. Your backlog and your bookings levels suggest your revenue will be up. You should have some of the benefits of the round cell bar project. Is it fair to assume that you should see gross margin growth next year?

Yes, absolutely.

Our next question comes from the line of Lucy Guo with Cowen and Co.

Now start off with a clarification, when you said there will be less seasonality in Q4, does that apply to orders, ex surcharges as well?

Say that again. To orders and what about surcharges?

No, just orders, Q4 orders. Would you also see less seasonal pattern applies to orders, not to sales, meaning, quarters...?

At this point in time, as we look at the third -- at the fourth quarter activity level and what people are telling us in the supply chain about early 2019 activity, I would expect bookings to continue strong in the fourth quarter. So bookings typically are not as seasonally affected as sales would be at the end of the year due to window dressing and so forth. We do have some holidays, obviously, in the fourth quarter, so that's really the only impact you'd see on bookings.

Got it. And then the second is also sort of a clarification. The 200 bps or so sequential gross margin step down, if we think about the plus from your favorable mix and the negative, the headwinds of misalignment and then the production inefficiency, which could be just in the short time, how would you say, in terms of, how they're distributed -- is misalignment and inefficiency potentially 100 bps of some of that decline or how significant, if you can help us calibrate?

I would say, the misalignment is roughly 100 bps. Some of the efficiencies we've called out, the $200,000, $300,000 pretax. And the remainder of that would be basically the mix of products and went out the door in the third quarter, if you're reconciling to the second quarter. As we look at the fourth quarter, we look at the current -- the margin you saw on the third quarter is a target that we're focusing on improving upon in the fourth quarter and definitely improving upon as we get into 2019, where we expect commodity prices to improve -- actually to increase in certain case of nickel. But more importantly, things under our control like the bar cell will be coming online and generating additional profit opportunities.

So just follow-up on your comment there on nickel in 2019 for your internal plans, I think, your -- my sense was that you generally assume nickel prices trending flattish or you're sort of neutral on nickel prices in your internal plan assumptions. But for 2019, are you assuming 5%, 10% increase? Or is it more drastic up or down more than 10% to 15%?

You heard me kind of joke about we're cowardly on nickel. So we always assume it's going be flattish. But as you look at the fundamentals of nickel today, it has drifted down over the last 3 months, largely based upon Chinese production and concerns about what tariffs are going to do to production levels going forward. But if you look at the nickel market itself, it has been running in a deficit. It's been running in a deficit for 2 years. The huge inventories that were build up a few years back are getting worked down. There's a whole specter of the electrical requirements for batteries, for automobiles going down the road, which will put a floor under the nickel prices. So when you look at all those fundamentals, it's hard to come up with a case even if you don't think there's going to be a resolution of some of these tariff issues, it's hard to come up with a case where you're going to see a drop in nickel. And the most logical, most probable outlook is you're going to see an increase in nickel prices bouncing back up to where it was earlier this year and then some. That's kind of where our heads are.

Got it. The next question is, as it relates to the premium alloys and mix, you talk about record levels in your orders and backlog, but Q3 sales is down. Is that mostly timing related?

That was basically 2 customers and largely timing and what their specific needs were.

Great. Okay. And finally, just on free cash conversion, it looks like your working capital may reverse to some extent in Q4, but you are taking up your CapEx expenditure outlook for Q4 into '19. Can you just -- maybe, Chris, if you can address what your free cash conversion outlook may be?

Sure. Q3 was an anomaly. We expect Q4 activity to revert back to what it was more closely look like in Q2 and Q1. From a CapEx perspective, we continue to spend the fund growth initiatives, bar cell being the largest driver of CapEx in total. We accelerated some of that spend in Q3. It'll continue in Q4 as we complete the bar cell agreement or the bar cell unit. Q, or I should say, 2019 capital spend will probably approximate 2018 capital spend. As we continue to work through managed working capital and make the improvements that we have seen in prior quarters in the fourth quarter, we should balance out the free cash flow as Q3, as I said earlier, was an anomaly.

(Operator Instructions) Our next question comes from the line of Michael Leshock with KeyBanc Capital Markets.

Just one quick one from the -- I was just wondering, so you mentioned in last quarter's call, you thought revenue becoming above the $70 million this quarter. I'm just wondering what were the drivers that caused you to come in below that number in the quarter?

The main issue was we had lower premium melted products going out the door. It wasn't that we didn't have the backlog. It was largely a timing issue with regard to 2 customers and what their needs ended up being in the third quarter. But I would point out, as I try to do in my prepared comments, that the third quarter overall itself from an incoming bookings level for premium melted products was a record. And our backlog at the end of the quarter is staying for the record. So I'll not interpret that as any indicator of further declines or anything like that.

We have no further questions at this time. (Operator Instructions) This does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Oates for any further remarks.

Thanks, Sarah. Once again, thanks to everyone for joining us this morning. We sincerely appreciate your support and interest in Universal. And we look forward to updating you on our progress on our next call in January. Have a great day and a great holiday season.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.