Marriott Vacations Worldwide Corp (VAC) 2013 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Marriott Vacations Worldwide fourth-quarter and FY13 conference call, held on February 27, 2014.

(Operator Instructions)

I would now like to turn the conference over to your host, Jeff Hansen. Please go ahead, sir.

Thank you, Mark. Welcome to the Marriott Vacations Worldwide fourth-quarter 2013 earnings conference call. I am joined today by Steve Weisz, President and CEO; and John Geller, Executive Vice President and CFO.

I do need to remind everyone that many of our comments, today, are not historical fact and are considered forward-looking statements under federal securities laws. The statements are subject to numerous risks and uncertainties, as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our the comments on this call, are effective only today, February 27, 2014, and will not be updated as actual events unfold.

Throughout the call we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures, referred to in our remarks, in the schedules attached to our press release, as well as the Investor Relations page on our website at ir.mvwc.com. I will now turn the call over to Steve Weisz, President and CEO of Marriott Vacations Worldwide.

Thanks, Jeff. Good morning, everyone, and thank you for joining our fourth-quarter earnings call.

This morning I will walk you through our 2013 fourth-quarter end full-year results and will also share our guidance for 2014. I will then turn the call over to John who will provide more detailed review of our 2013 performance. We will then open up the line for your questions.

Let me remind everyone as we discuss our results that due to our reporting calendar, 2013 financial results include one extra week. Even taking into account the impact of the extra week, 2013 was a solid year, as $38 million of adjusted EBITDA in the fourth quarter contributed to full-year adjusted EBITDA of $175 million, up nearly 27% over 2012, and at the high end of our guidance range.

Company-wide contract sales of our vacation ownership product increased over 6% in the quarter to $206 million, led by our North America segment, which increased 9.9% over the fourth quarter of 2012, to $179 million. The impact of the additional week approximated $9 million of contract sales for the Company, virtually all of which occurred in our North America segment.

For the full year 2013, total company contracts sales improved slightly to $694 million. In our key North America segment, contract sales increased 6.9% over the full year 2012, within our guidance range of 4% to 8%. Excluding residential sales, North America contracts sales were up 4.5%, also within our guidance range of 3% to 5%.

This was due to continued improvement in VPG, which was up 8% on a full-year basis over last year to $3,200. This increase was even more impressive given that 2012 was up 18% over 2011. The increase in VPG was driven by almost 1-full point of improvement in closing efficiency for the full year 2013.

While slower sales in our Europe and Asia Pacific segments offset our improvement in North America, it is important to remember that we are selling out of our European developer-owned inventory. And, in our Asia Pacific segment, we intentionally shut down certain underperforming off-site sales galleries in the fourth quarter of 2012. We are repositioning ourselves in this segment for future growth by seeking out new destinations that will provide strong on-site sales distribution.

In North America, tours increased in the fourth quarter by just over 1%; however, this was due to the 53rd week I mentioned earlier. Adjusting for the extra week in the quarter, tours were, as expected, down approximately 4.5% compared to the fourth quarter of 2012. To that end, we expect tour-flow trends to improve sequentially during the first half of 2014, with year-over-year growth beginning in a second half of the year, as we continue to implement new programs to drive tour growth. Remember, as it relates to first-time buyers, there is typically window of time before these tours occur.

Turning to our other lines of business, for the full year, our rental results were strong, delivering $11 million, compared to break-even results in 2012. This improvement reflected an approximate 2.6 percentage-point increase in transient occupancy, and a 9% increase in transient rate.

If you recall, on the third-quarter call, we said we expected full-year rental results to be between $13 million and $17 million, but cautioned that redemption costs associated with our Marriott Rewards pre-spin liability could be higher. In fact, during the quarter, we recorded $4 million of additional charges for this liability. Adjusting for the impact of these higher costs, our full-year rental results would have been $15 million, in line with our third-quarter expectations.

Our resort management and other services results, as adjusted, improved by $4 million over the fourth quarter of 2012, to $23 million. For the full year, adjusted results improved $15 million to $70 million. These results were driven by increased club dues and additional management fees as well as improvement in our ancillary operations.

Shifting to G&A, costs increased $6 million in the quarter over the fourth quarter of 2012, due to an additional $3 million of legal fees related to ongoing litigation, $3 million of salary and wages, and $1 million of costs related to the 53rd week. These results were offset by an additional $1 million of savings from organization and separation related efforts. For the full year, G&A costs have increased $13 million over 2012, including $8 million of legal costs, $8 million of salaries and wages, and $1 million of costs related to the 53rd week. This was offset by $4 million of savings from our organization and separation related efforts.

Turning to our efforts to dispose of excess land and built inventory, I am pleased to announce that subsequent to the end of the year, we completed the sale of a golf course and adjacent land, here in Orlando, for $22 million of net cash proceeds, resulting in an estimated gain of approximately $2 million. With the sale, we have now disposed of nearly $40 million of excess land and inventory that was built, including last year's sale of our golf course and spa in Jupiter, Florida; all ownership residences in the Florida Panhandle; and residential lofts in St. Thomas.

This is good progress, but we have more to sell, primarily in Kauai, Cancun, and the Bahamas, as well as several smaller portions located in North America and Europe. Our remaining a remaining excess land and built inventory is expected to generate net cash proceeds of $120 million to $160 million.

As we closed out year as a public company, I would like to reflect on our accomplishments over the last couple of years. Just over two years removed from our spinoff, I am very proud of what we have been able to achieve. Since 2011, VPG has improved almost 30%, North America owned contract sales are up 17%, adjusted development margin has grown 7.4% to 19.8%, our rental program has gone from a loss of $8 million to generating $11 million of positive results, and we have generated over $300 million in adjusted free cash flow.

In addition, we have disposed of almost $40 million of excess land and built inventory and begun our program to return capital to shareholders, all while working diligently to complete our separation from Marriott International. To put it simply, I couldn't be happier with the progress we have made. While we must remained focused on these areas to achieve our Company goals moving forward, we must also broaden our focus to include adding new destinations.

Future top-line improvement will depend, in part, on finding inventory in exciting new locations with strong on-site sales distribution. In support of these efforts, our teams are actively seeking out asset-light opportunities in our key growth segments of North America and Asia Pacific. We must also go our powerful pipeline of first-time buyers, while being mindful of our continuing goal of improving development margins and bottom-line results.

Now, let me transition to our outlook for 2014. We have had two strong years of performance as a public company, and we expect 2014 to be no different. We have established our adjusted EBITDA guidance to be between $185 million and $200 million, total company contract sales growth between 5% and 8%, and adjusted free cash flow between $135 million and $160 million.

Lastly, while we do not provide quarterly guidance, let me provide a little color on what we have seen so far this year. Business results remain strong, however, as you can imagine, we have seen some impact from the weather, as heavy snowfall in the Midwest and Northeast have forced some travelers to remain at home, while snowfall has come late to many ski destinations out West.

In addition, the 53rd week in 2013 may have a nominal effect on our first-quarter comparability, as that is typically a higher-than-average week for contract sales, due to the inclusion of the New Year holiday. While these headwinds may have some marginal impact on our first quarter year-over-year growth, we remain confident in our 2014 full-year outlook and look forward to reporting on our performance as we progress through the year.

With that, I will turn the call over to John to provide a more detailed look at our 2013 results and our 2014 outlook. John?

Thank you, Steve, and good morning to everyone joining us on the call. We ended 2013 with a solid fourth quarter, continuing our trend of improved VPG and increased development margin.

Our North America segment, once again, was a large contributor, with contract sales increasing $22 million over the fourth quarter of 2012 to $186 million. This was due to an increase of $6 million from residential sales, as we continue to sell through our remaining excess built inventory, and $16 million of additional timeshare sales, approximately $9 million of which related to the 53rd week.

Total company reported development margin was $47 million, an increase of $7 million over the fourth quarter of 2012. Year-over-year improvements in product costs and marketing and sales spend, more than offset a tough prior-year comp, which had benefited from $11 million of favorable revenue reportability, and $4 million of favorable product cost true-up activity. The fourth quarter development-margin percentage improved 450 basis points over the fourth quarter of 2012 to 23.3%.

In North America, reported development margin increased 180 basis points over the fourth quarter of 2012 to 26%. After adjusting both quarters for the impact of reportability, adjusted development margin improved roughly 600 basis points to 25.4%. This improvement was driven by a 320-basis-point reduction in product costs, primarily due to the success of our inventory repurchase program. We repurchased roughly $47 million of inventory in 2013 and expect to repurchase over $50 million this year, as we continue to buy back inventory at less than replacement cost.

We expect continued improvement in product costs, with 2014 total company product cost rate between 31% and 32%. Additionally, marketing and sales costs improved over the fourth quarter of 2012 by 290 basis points to 48%. This was driven by over a half a point improvement in closing efficiency over the fourth quarter of 2012, resulting in a 6.8% increase in VPG. Full-year company-adjusted development margin continues to move toward our goal of 20%, ending the year at 19.8%. North America was, again, the key driver, with an adjusted development margin of 21.8%.

Looking at our rental business, rental revenues in the fourth quarter were $69 million, $11 million higher than the fourth quarter of 2012, driven primarily from higher occupancy on increased availability of inventory to rent. Rental revenue, net of expenses, however, was a loss of $13 million, compared to a loss of $9 million in the fourth quarter of 2012. $1 million of this additional loss is due to higher charges related to the Marriott Rewards pre-spin liability, as redemption costs came in higher than expected. Remember, this liability will be paid down over the next couple of years and will be fully paid off in 2016.

The remaining loss in the fourth quarter was due primarily to additional costs associated with more inventory available to rent and a softer demand period. As we have discussed on prior calls, because of seasonality, our rental business does well in the first three quarters of the year, but the fourth quarter is our shoulder season, and we typically incur a loss.

This trend is evident in our 2013 results, in which rental revenues, after expenses, were $24 million through the end of the third quarter. This compares to $9 million through the first three quarters of 2012. So, while higher inventory availability allowed us to drive significant improvement in the first three quarters of year, the opposite was true in the fourth quarter. However, for the full year 2013, results showed significant improvement, with profits of $11 million, versus breakeven last year.

In our resort management and other services business, revenue, net of expenses, improved $5 million to $23 million in the quarter. These results reflect higher annual club dues earned in connection with our North America points product, higher management fees, and improved ancillary results.

Turning to our Asia Pacific segment, results were $3 million, an improvement of $3 million over the fourth quarter of last year, due to reduced marketing and sales spend from the closure of underperforming off-site sales centers late in 2012. These closures also drove full-year results higher by $4 million to $8 million in 2013.

Moving to Europe, adjusted segment results were $3 million in the fourth quarter, flat year over year, and full-year adjusted segment results were $14 million, a $5 million improvement over 2012. This was due to improved rental results and reduced marketing and sales costs, as we are optimizing our structure in the region to align with our strategy to sell out our remaining developer inventory.

In our financing business, revenue, net of financing expenses and consumer financing interest expense, was flat compared to the fourth quarter of 2012, as lower interest income was offset by lower interest expense. As of the end of 2013, the weighted average interest rate of our securitization debt is 3.5%. Our notes receivable balance continues to decline as prior-year notes are burning off faster than we are originating new notes. We expect this trend to reverse itself in 2015.

As an update on our organization and separation plan, we have successfully completed the majority of our separation from Marriott and expect to complete the full implementation of our remaining organizational changes by the end of 2014. In 2013, we spent approximately $19 million on these efforts, $8 million of which was incurred in the fourth quarter. We have achieved $10 million of cumulative cost savings to date and expect to achieve $3 million to $5 million of additional ongoing savings by the end of this year, with the balance of savings occurring in 2015.

Turning to our balance sheet and liquidity position, since the end of 2012, real estate inventory balances declined $17 million to $864 million, which is comprised of $369 million of finished goods, $151 million of work-in-process, and $344 million of land and infrastructure. The Company's debt outstanding was $718 million, flat to the end of 2012, including $674 million in non-recourse debt associated with our securitized notes and $40 million of mandatorily redeemable preferred stock of a subsidiary.

Our 2013 full-year adjusted free cash flow was $175 million, within the guidance range of $170 million to $185 million. At the end of 2013, cash and cash equivalents totaled $200 million, and we had $78 million of notes receivable eligible for securitization. We also had $199 million in available capacity under our $200 million revolving credit facility.

Turning to our share repurchase program that we implemented at the beginning of the fourth quarter of 2013, we have repurchased over 1.035 million shares through yesterday, at an average price of $50.19 per share, representing nearly one-third of the authorization that was approved by our Board in October.

Now, let me take a minute to discuss our outlook for 2014. We have seen tremendous improvements in our business over the last couple of years, adjusted development margins have improved almost threefold, our rental results have improved considerably and are contributing positively to our earnings, and our financing business has benefited from record-low borrowing rates.

We expect 2014 adjusted EBITDA to be between $185 million and $200 million. We expect total company contract sales, excluding residential sales, to grow between 5% and 8%, with North America contracts sales to grow between 4% and 7%. Adjusted company development margin is expected to be between 20% and 21%, led by North America, with adjusted development margin of 22% to 23%.

We expect adjusted fully diluted earnings per share to be between $2.41 and $2.67 per share, excluding the impact of any future share repurchases. Lastly, adjusted free cash flow is expected to be between $135 million and $160 million for the year, as our 2014 forecasted cash flows should approximate a more normalized run rate. As we have previously discussed, we expect to benefit from lower cash income taxes and inventory spending, which will offset higher spending associated with the paydown of our Marriott Rewards pre-spin liability.

Let me close by echoing what you heard from Steve. We have achieved great success in our first two years as a public company, and our strategies have not changed. We will continue to focus on driving profitable growth, improving margins, and generating strong free cash flow. I look forward to reporting on that progress in future quarters.

As always, we appreciate your interest in Marriott Vacations Worldwide, and with that, I will now open up the call for Q&A. Operator?

(Operator Instructions)

The first question comes from Robert Higginbotham from the company, SunTrust. Please, go ahead.

Good morning, Rob.

Good morning. So a quick question on contract sales, your outlook for 2014. It looks like your total company contract sales a point or so above your outlook for North America. I imagine some of that has to do with your new property in Asia coming online, maybe less of a drag in Europe, and maybe if you could just clarify that and give some more color on those two pieces? Thanks.

Yes, you are right, Robert. The additional growth is in both places, Europe, where we expect to see slightly higher contract sales, year over year, than what we have been experiencing, given some changes we made there on the sales side, as well as Asia, with the changes we made in 2012. We've stabilized, if you will, you still had some year-over-year declines, now we expect that to start growing more closely with what we expect here, in North America.

Got it. And, on the rental business, you made some solid improvement in terms of profitability there. Looking forward and how you think what's embedded in your guidance, how should we think about that business? Is there still room to grow there and what would be the sources?

Yes, I'll add a few comments. You still have a couple things -- we've made progress, as we've talked about, on the luxury side and some of the unsold maintenance fees there. You still have a fair amount of unsold maintenance fees, as we sell through that remaining luxury inventory that we've talked about, is a little bit of a drag.

The other thing is, as the points program continues to develop and people exchange and go to different places, as you've seen in 2013, we have more inventory available to rent. And typically, as we've said, we're able to monetize that and make a little bit of money on it. So, while we don't know what inventory available to rent will be year over year yet, that's still evolving, we would expect to see some continued growth there.

Got it. That's it for me. Thanks a lot.

Thank you.

Thank you. The next question comes from Steven Kent from the company, Goldman Sachs. Please, go ahead.

Good morning, Steve.

Thanks, this is actually Anto Savarirajan for Steve Kent. On your outlook for land sales, can you talk about the bidding process, here, and are there inbound inquiries? What time frame should we expect the $120 million to $150 million getting realized?

Well, I think there is no specific timetable. Obviously, on some of these larger parcels that we are talking about that remain, you have to go through a variety of different people that express interest and go through a qualification process to see if, in fact, they are there and they are real. It takes a while to get some of these things negotiated.

Obviously, we would like to move them the sooner rather than later, but as we've said before, we're not going to fire sale these things. We think this is great property and what we are listing them for and everything else is at an appropriate value for the land and the marketplace. As we have more to share with you, we certainly will be excited to do that, but it is just going to take a little time.

Got it. For my follow up, you put together a lot of initiators on the sales and marketing side, and you've been running a tighter ship there. Have they largely run the course and are you caught up with peers? How should we think about more efficiencies being realized over 2014 and 2015?

We will continue to push on every front, in terms higher levels of VPG, which obviously give you better sales and marketing costs. We continue to evolve our sales process. It is always a work in progress, always has been, trying to imagine the very best way to present the project -- the possibilities of vacation ownership to new prospects.

I would expect that you will still see improvement in the marketing and sales costs. It is oftentimes difficult to project exactly what that will be.

Now, let me say, in the same breath, that as we've indicated, we are certainly going to try to move towards more first-time buyers. With that, as you begin to open up new sales channels, there are typically some investment costs that you have to make in order to open up those new channels, and in return, then you start to get the yield out of those channels at a later date.

Because of the way the timeshare accounting works, you have to make all the expenses for that in the front end, and then you get the benefit at the back end. Despite some timing differences, we obviously think that it is the right move. We are certainly going to stay focused on trying to lower sales and marketing costs, while at the same time, driving top-line. And, at the end of the day, development margin is really how we're going to measure our success.

Thank you very much.

Thank you.

Thank you, and the next question comes from Chris Agnew from MKM Partners. Please, go ahead.

Hello, Chris.

Hello, good morning. Thanks very much. Can you expand upon your commentary on asset-light opportunities? Am I correct in thinking your tone has changed a little bit from, someday maybe, to you're actually looking at some real potential opportunities there?

Yes, I think that's a fair characterization, Chris. When we first started talking about asset light, I think we would have to be fair in admitting the fact that we hadn't done much exploration in that space. We have since spent a fair amount of time talking to a variety of potential partners on asset light.

We think this is some real possibility there, and that, clearly, is what we think is not only an appropriate way to think about the growth of the business, in terms of new projects. But also, in some places, particularly as you get overseas, it really makes a lot of sense because often times, your asset-light partner will also be very familiar with doing real estate development in countries that are less familiar to us.

Got it. And, are there also opportunities closer to home? I'm thinking, you've talked before, I think, about location maybe in New York, and I know Hilton reported today that strong timeshare results, they do very well in New York. Are there -- I don't know what you'd call them, like urban resorts, are those opportunities you are looking at as well?

Absolutely, and we remain very interested in the New York opportunity. And, early indications are that if, should we find something in New York that meets our investment metrics and looks an attractive addition to the portfolio, that we may well be able to get an asset-light partner involved in a transaction of that nature.

Got you. Switching to Europe, any indication on time frame of when you'll be able to sell out, and have you have seen -- are you tracking ahead of your expectations there?

I think probably 2016 is when we think Europe, for the most part, will be sold out of developer inventory. Obviously, every day brings new and invigorating news from what's going on in that marketplace. Europe is no different than the United States, in many respects, due to the fact that people are looking at a vacation-ownership purchase in the context of their broader life and their financial circumstances and everything else.

We are about on track to where we thought we were going to be. And unless there is a significant bump in the road, I think we will get there.

Excellent. And, one more sort of detail question, just on the SG&A, you highlighted $3 million of ongoing litigation. I assume you mean it is ongoing, you're going to be experiencing that sort of level of cost in every quarter? And then, the salary and wages, is that bonus -- year-end bonus related, or again, is that more of a step change, ongoing? Thanks.

The litigation costs, we expense them as they come through, so there is some lumpiness there. Obviously, we want to try to get this litigation behind us as quickly as possible, so we would anticipate that as soon as we are able to put thinks things to bed, the related litigation costs will, in fact, go away, and not be present in our results.

As far as the SG&A, I think there's a couple things that were driving that number. Don't forget there was that $1 million, roughly, of impact because of that 53rd week. We do have, as because of our coming in at the upper end of our guidance, we did have a slightly higher bonus accrual that we put in place, and in the fourth quarter of 2013, that drove some of that.

And then, as we continue to set ourselves correctly, as it relates to our organizational structure and everything else, we have made a few little additional changes, but nothing of any material nature. We are going to continue to be very focused on SG&A and make sure we try to manage those costs down as much as we can. Plus, we will have the benefit of the organization and separation related efforts that will yield some additional savings to offset any increases.

Excellent. Thank you.

Thank you.

Thank you.

(Operator Instructions)

The last question, in queue, currently comes from Bob LaFleur from JMP Securities. Please, go ahead.

Hi, good morning.

Good morning, Bob.

How are you?

Fine. How are you?

I'm cold. It is about 7 degrees here in New York.

Oh, sorry (laughter).

Question on the golf course and land sales that you have accomplished to date. Where does the pricing come out on those relative to your initial expectations? Have they been higher, lower, about as expected? The revised guidance for the remaining stuff, has the pricing expectations on that changed at all?

Yes, I think you'll recall that when we did the Jupiter sell in 2012, my recollection is it was about roughly a $5 million gain against our book, and this sale is about a $2 million gain against our book, so slightly higher. I don't know if you could -- if that's a read through to all of the other real estate.

Obviously, if we thought that there was additional value to be gained from some of these parcels, we have to mark the market and take that book up. We haven't seen evidence of that across the board, here, so far. Hopefully we will get a little bit more than we have in the book, but I don't think you should assume -- take a straight-line percentage increase and assume that, that's going to be the case.

Okay. In a different topic, John said the close rates were up 50 basis points in the quarter. Can you refresh our memory as to where close rates are relative to peak? And, how long you think, on your current trajectory, it is going to take you to get back to peak? And, how much upside above peak is there do you think, once that happens?

Let me answer the last part first, how high is high? We don't know. Our peak was, call it, mid-teens in the 2006, 2007 time frame. We are getting close there. We are not quite there yet, but we are getting close. Keep in mind, 2006, 2007 was -- we were weeks-based product, not a points-based product.

Again, I think -- we're going to continue to try to push for higher closing rates at every opportunity and do it in a balanced fashion. Obviously, we don't want to give up sales just to get a higher closing percentage. So, we want to try to drive both top line and closing rate, simultaneously. I think you should think about it as a work in progress, and we're going to continue working on it, and we will keep reporting on it.

How much of the increase in close rate do you think is a function of having the ability to sell something that's less on a full week's worth of points? How much would you say that's contributing to your close rate, now, under the points program, versus the prior weeks program?

Clearly, it is a part of it. It is virtually impossible to discern of the half a point in the fourth quarter, as an example, what percentage of that was because we could sell something less than a full week versus everything else.

Keep in mind, and certainly you know this, as you think about the total VPG metric, if we sold at a higher close rate, so people that were buying less than the full week's equivalent, it would take that average volume per sale down, therefore, you'd have a little more headwind going into the VPG calculation. The fact that we were able to drive 8% VPG improvement in the year, on top of 18% in the prior year, I think that says that we are doing a pretty good job.

Do you have any metric that looks at what percentage of transactions are for less than a week's worth of points, just to give us some sense of how the sales breakout between topping-off-the-tank customers versus initial, full complement of points for a week's worth of usage?

I'm sure our sales organization has those things. We track every single sale, obviously. To be honest, it is not something that we spend a great deal of time looking at, at our level, John's and mine. But, why don't we do this, maybe Jeff can dig something up, and on a subsequent call, maybe you and he can discuss that further.

Okay, and one last one on a different topic. As you have done more homework on the asset-light potential out there, and obviously, there are several different iterations that asset light can take, and maybe if you could talk about which iterations seem to make the most sense for you, as you've surveyed the landscape over the past year or so?

I think there are 2.5 different things that are the most obvious. One is, pretty much turnkey stuff, where a developer would, in fact, develop it on their balance sheet. We take it off their hands, hopefully on a phased basis as we need the inventory to feed the trust.

The second would be where we would acquire an asset, working with a third party, who would actually [become] the owner of the asset, where we would then, again, begin to bring more of that inventory back into the trust over time.

The third one that I refer to, which is a half of one, is some blend of that, where you might do something -- a joint venture with somebody, where you put in some money, they put in some money, and find a way to do that. I would think the first two would be the most obvious things that we would talk about and probably the ones where the most opportunity is. The third one is just something that it may be out there on an occasional basis.

Are these opportunities more co-located with existing resort properties, or do they tended to be more standalone projects?

They can come in both flavors. And, it is really market-by-market driven, where it makes sense to do that. For instance, we've talked about New York, should we do something in New York?

I think it would be more than likely that it would be an existing property or a to-be-built property that some developer would probably do, if we take it out over time, probably not affiliated directly with a Marriott Hotel. However, there may well be some other stuff where you've got an opportunity to do something on the same campus, or even within the same physical structure of an existing Marriott hotel, so I think you'll see it in both forms.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from Steve Altebrando. Please go ahead.

Hi. Good morning. It looks like your sales reserve continues to decline. Where has that historically been?

In terms of the overall reserve, or you are just talking about our provision for reserve?

The provision.

It came down slightly year over year. We started to see the improvements in collections and all that, probably have gotten back to pre-downturn levels. So, subject to something more catastrophic to the economy where it could put impact on collections, I would expect there's probably still maybe some marginal improvement, but not that much.

Okay. Thank you very much.

Thank you. There seem to be no further questions. Please go ahead with any concluding remarks.

Sure. First of all, I want to, once again, thank you for your time today. As you have heard from both me and John, 2013 was a very successful year. We look forward to similar success in 2014, particularly as we celebrate our 30th anniversary.

Thank you, again, for your participation and your continued interest. And, finally, to everybody on the call and to your families, enjoy your next vacation. Thanks a lot.

Thank you. Ladies and gentlemen, that does conclude the conference call for today. Thank you for your participation, and you may now disconnect.