威富公司 (VFC) 2001 Q4 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the VF Corporation (Company: VF Corporation;

Ticker: VFC;

URL: http://www.vfc.com/) earnings conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question and answer session, and instructions will follow at that time.

If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone.

If anyone should disconnect and need to rejoin, please dial 1-877-817-7175.

And as a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Vanessa Schwartz of FRB Weber Shandwick.

Ms. Schwartz, you may begin your conference.

Thanks, Scott, and good morning, everyone, and thank you for participating in the VF Corporation fourth quarter.

You should have all received a copy of the press release last night.

If you did not, please contact Thomas

at FRB Weber Shandwick at 212-445-8459, and he will send one out to you and confirm your name on either our fax or e-mail list.

Starting our call today is Mr. Mackey McDonald, Chairman and Chief Executive Officer of VF Corporation.

But before we begin, I'd just like to remind everyone that certain statements included in today's remarks and in the question and answer session may constitute forward-looking statements within the meaning of the federal securities laws.

Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements.

Important factors that could cause the actual results of operations or financial conditions of the company to differ are discussed in the documents filed by the company with the Securities and Exchange Commission.

Now I'd like to turn the call over to Mackey -- Mackey.

Thank you, Vanessa, and good morning.

Thanks for joining us.

With me today are the Chief Financial Officer, Bob Shearer; also our Coalition Chairmen, John Schamberger, George Derhofer, Eric Wiseman, and Terry Lay.

Today we're going to be giving you our usual review of results, and then each of the coalition chairmen will spend about five minutes or so talking about their specific businesses.

We started this year with a strong platform in place for improved results, but clearly the events that transpired in the fourth quarter have had an impact that continues to be felt as we go into '02.

As you saw in the release, we had a mix of factors in this fourth quarter.

One the positive side, first, our operating results were basically in line with our previously announced expectations.

And given the difficult retail and economic environment, our brands have held up extremely well.

Our brands remain leaders with very strong market shares.

Second, our people did a great job of getting our inventories down.

We brought inventories down over 200 million, and additional 100 million more than we had planned for the year.

Our inventories are in great shape.

This contributed to cash flow for the year of 685 million, well above what we had expected for the year.

Third, our European businesses, which were not as impacted by the events that took place here in the U.S., performed strongly.

We continue to see great opportunities for our brands on a global basis.

Fourth, the North Face, East

, H.I.S.,

, and

all have been successfully integrated, a great accomplishment by our coalitions.

As we've expected, our acquisitions contributed positively to earnings, this past year.

Fifth, our divisions and operating management did an excellent job in identifying and taking aggressive actions to shape our company for the future.

These actions included cutting cost, exiting underperforming businesses, and aligning our capacity with current demand.

We believe we're in an excellent position today to pursue new sources of growth and improve our overall profitability and return on capital.

Of course, these actions that we took in the quarter came at a cost, details of which are provided in the release that you received.

These actions are never easy, but we've proven throughout our company's history that we won't hesitate to do what is necessary to keep our company strong and profitable.

In terms of our guidance for '02, we said that on an apples to apples basis -- that is, excluding the unusual charges and items that were discussed in our release -- earnings per share could be flat to up slightly, operating margins should improve, and cash flow from operations should continue to be very strong.

In terms of the top line, we continue to expect slow consumer spending on apparel, which is why we're forecasting a decline in sales.

Some economic indicators have recently turned positive, and we hope that any improvement in the economy will translate into stronger apparel sales at retail.

Clearly we're in great shape to leverage any upside in sales.

Regardless, we'll be supporting our brands with more marketing dollars, more product innovation, and more in-store promotion.

We also talked about our intent to grow through acquisitions.

We're very pleased with how well our integration efforts went in '01, and we continue to be on the lookout for additional brands to add to our portfolio.

We've said in the past our efforts will be focused primarily on our core businesses -- jeanswear, intimate apparel, and outdoor.

We have the cash flow and balance sheet flexibility to finance the acquisitions, and more importantly, we have the people and operating skills to bring new companies and brands into our company quickly, efficiently, and profitably.

I'll now turn it over to Bob Shearer to cover some of the financial details -- Bob.

Thanks, Mackey.

The overall sales and environment during the quarter was difficult, to be sure, but we did have two particularly bright spots.

Sales in our outdoor and European jeans businesses were both up in the quarter, and profitability improved as well.

Domestic jeans sales were down, reflecting not only soft retail sales, but also pressure from low-priced private-label goods, particularly in the mass channel.

We're going to be more aggressive in pricing this year, while continuing to support our brands with higher marketing investment.

At the same time, the actions we took to reduce costs in 2001 should still enable us to improve our jeanswear margins in 2002.

The intimate apparel market was also tough in 2001, but our research indicates that our brands gained share in every channel of retail distribution.

We're bullish on the outlook for our intimate apparel brands, with lots of great products in the pipeline this year for Vanity Fair, Lily of France,

, Vassarette, and our licensed Tommy Hilfiger business.

One of the key objectives for 2001 was an improvement in our imagewear business.

Certainly our workwear and service apparel businesses were negatively affected by weakness in the manufacturing sector.

But by exiting underperforming businesses, improving our sourcing, and cutting costs across the board, we reported an improvement in margins in 2001.

Imagewear will continue to be an area of focus for us this year as well, with further improvements in profitability planned.

In terms of the impact of restructuring charges, we did provide in our release -- in our release that contained as-reported and pro forma numbers.

The as-reported figures include the impact of all restructuring charges.

Including these charges, we reported a net loss of $1.03 per share in the fourth quarter of 2001, and earnings of $1.19 cents per share for the year.

The pro forma figures exclude the restructuring charges.

Excluding the restructuring charges, earnings in the fourth quarter of 2001 were 50 cents per share, and $2.68 per share for the year.

The comparisons to prior year results are also included in the tables.

We indicated that the total charges for our strategic repositioning program would approximate 265 million, down a bit from our original estimate of 280 million to 320 million.

Cash costs are expected to total 120 million, but we expect to generate cash of approximately $80 million as we dispose of assets related to business exits.

So the net cash outlay will approximate $40 million.

We took the bulk of the charge, about 90 percent, in the fourth quarter.

Of the 237 million taken in the quarter, 119 million relates to costs to exit our private label knitwear and swimwear businesses and a small specialty workwear business, and 118 million relates to cost reduction activities, including capacity adjustments, workforce reductions, and other measures.

Our strategic repositioning program should reduce costs by about $130 million annually, which is higher than our original estimate of 115 million.

We won't fully realize all these benefits until 2003, but do expect that they will favorably impact the results this year.

Now, looking at the balance sheet and cash flow, as previously indicated, inventories were down 19 percent, or over $200 million from prior year levels.

We continue to manage our inventories very aggressively, and expect to see additional reduction in inventory dollars in 2002, primarily related to the business exits previously discussed.

Cash flow from operations reached $685 million, representing an increase of 242 million over last year.

We're pleased to start 2002 with a healthy cash balance.

Our priorities for cash flow continue to be acquisitions, to pay down debt, and share repurchase.

As noted in the release, we will pay down $200 million in long-term debt later this month.

We expect to continue to repurchase our shares at about the same rate in 2002 as in 2001, which is approximately one million shares per quarter, although we will adjust our repurchase and debt structure, depending on acquisition opportunities that might arise.

Looking at our debt to total capital ratio in 2001, the ratio was 32 percent compared with 35 percent in 2000.

On a net cash basis, however, the ratio was 24 percent in 2001 compared with 32 percent in 2000.

Moving to our outlook, we provided a fair amount of detail related to our outlook for 2002 which I want to touch on for a moment.

A mix factors will affect our results this year including, first and foremost, our expectation for a continued difficult sales environment.

Sales, excluding business exits, are expected to decline slightly this year, and this decline does have a corresponding impact on our margins.

Second, while we took the bulk of the charges related to our strategic repositioning in the fourth quarter, we did indicate back in November that some of the costs would flow into 2002.

These costs are expected to be approximately $25 million to $30 million in 2002.

Third, we expect to incur costs during the phase-out of our private label and Jansen businesses of approximately $15 million.

Previously we had expected this figure to be closer to $25 million, but we made good progress in our efforts to minimize these costs.

As stated in our release, these combined restructuring and business-exit costs are expected to impact earnings by about 25 cents per share.

We also talked in our release about the impact of the new accounting rules related to goodwill.

The absence of goodwill amortization expense will benefit earnings this year by 32 cents per share.

However, there's another component to the new accounting rules that relates to the devaluation of goodwill on the balance sheet.

This is a tough statement to interpret and implement but, based on our current analysis, we could be required to write off $350 million to $550 of goodwill which would be recognized as the cumulative effect accounting adjustment as of the beginning of 2002.

In terms of other items, capital spending should again be below $100 million, depreciation should decline to approximately 110 million, and net interest expense should be down slightly -- Mackey.

OK.

Well, now we have John Schamberger, our jeanswear coalition chairman -- John.

Thanks, Mackey. 2001 was a tougher year than we really anticipated due to the softness in the overall jeans market, especially in the fourth quarter.

From our market research, we estimate unit volumes in the total jean market for men and women 25-plus declined 14 percent and five percent, respectively.

And that's the market where our brands are primarily targeted.

Value continues to be a key driver, and we're seeing price deflation at both the retail and wholesale levels.

Growth in private labels, particularly in the mass stores, also continues to be a significant challenge.

While we expect market conditions to remain tough, especially the first half of the year, we are ready to meet these challenges.

In our Lee brands, we're concentrating our resources on increasing market share with the young adult male consumer.

We've had terrific success with our Lee Dungarees program and our Buddy Lee marketing campaign.

And we'll be building on that success with some new five-pocket programs that incorporate upgrading

fabrics and finishes, some new fashion-forward jeans, and we're supporting all of that by additional marketing investment in both media and fixturing.

If you look at 2001, Lee increased share in the 15- to 24-year-old male consumer shopping in the national chains from 11.3 percent to 12.8 percent.

And again, those national chains would be Kohls, Penney's, Sears,

, and even last year's numbers would include Wards.

Speaking of that younger consumer, even on the Western wear side, we've had success with our

program in jeans and shirts, and that is directed at the young male Western wear consumer.

We've had some nice sales change in 2001 with the

line, even though traffic was down in the Western wear specialty stores.

Also on the Lee's side, we're launching a new line of casual pants, Lee Performance Khakis, which are made of the new

technology.

By making molecular changes to the fabric, spills bead up and roll off without a trace.

For consumers, the new Lee Performance Khakis will far exceed the easy-care fabrics they've seen in the past, and these stain-proof properties will not wash off or wear out, for they do not coat the fabric; they are actually part of it.

On the mass side of our business, we have number of specific initiatives underway.

First is the focus on big idea product introductions which will provide excitement and newness in the category.

Wrangler Hero will be launching a new five-star denim program which really is better fabrics, better finishes, fashion-forward trendy finishes at tremendous value to the consumer and the retailer.

Timber Creek will also launch a line of

Performance Khakis, and our

brand will also offer some new jeans cumbered collection for more mature consumers.

We'll be increasing our marketing spend on both Wrangler and Riders brands, using our investments to back all these new product introductions.

And that is a little bit different than we did in 2001.

We'll be tying in these new product introductions with our marketing advertising investments.

We will continue to lead the pack in terms of how we showcase and differentiate our brands.

We're working on some new formats for several of our larger customers, including Wal-Mart and Kmart.

We also will be addressing the customers' value demands head-on with selective price adjustments in our Rustler, Wrangler, Riders, and Lee brands.

In order to protect our margins, though, we took significant costs out of our business for 2001 by closing a number of domestic manufacturing facilities, aligning our manufacturing capacity with demand, increasing our Far East sourcing capabilities, and reducing administrative expenses.

I'd like to say a quick word about our playwear business, which includes our

and Lee

business, as well as our Nike and Jordan license businesses.

Our big news for 2002 is centered around

, a revolutionary knit fabric processing technology that bonds to the fabric so it won't wash out.

In test after test,

process reduced spilling and shrinkage, resisted difficult stains, and improved both color retention and the feel of the

brand products for boys and girl that incorporate this new

technology will be available in retail stores this spring.

We also see the Jordan line, although small right now -- we launched it in fall of 2001 -- that will be growing significantly in 2002.

And now, I think, Eric Wiseman, Coalition Chairman for intimates, will give you an update on the intimate coalition.

Thanks, John.

Our core U.S.

Intimates business had a good year in 2001.

Based on MPD from data, we gained market share in department, chain, and mass stores during the year.

We had strong sales gains in our Value Fair, Lily of

, and

brands, as well as our Tommy Hilfiger licensed business.

Value Fair continues to build momentum.

bra is the number one seller in department and chain stores.

This year, Vanity Fair will extend its product success by introducing

lace and with the launch of the Vanity Fair One bra.

The repositioning of the Lily of France brand continues to pay dividends and will be building on the brand's fun and sexy image with additional marketing behind our successful

, as well as the launch of a new bra, Special Effects.

Our Tommy Hilfiger intimates business which we launched 18 months ago continues to gain share, and we have several new programs scheduled for 2002 to keep our momentum going.

Our Vassarette sales were down last year, but we're attacking this issue with new product introductions, increased marketing support, and updated packaging and in-store materials.

In total, we are increasing our marketing investments in our U.S.

Intimates brands by 19 percent in 2002.

Now, while we're enthusiastic about the product and marketing initiatives we have in place for our brand, another key focus for us this year is the integration of our

and Vanity Fair businesses.

You recall that we acquired

in 1998.

We've made many management and operational changes over the past several years, and this year will complete our systems integration and relocation efforts.

It's a big undertaking for us, but we're on track and expect significant cost savings as a result.

We also have a number of specific initiatives underway to further improve profitability, including lower inventory markdown, increased Asian sourcing, material cost reduction, and approved manufacturing utilization.

Now over to Terry Lay, who will talk about international jeanswear.

Thanks, Eric.

As was noted in our release, our international jeanswear performed strongly.

Most of the markets, with the exception of Germany, are showing modest unit growth.

We're capitalizing on this growth with new product and marketing initiatives across each of our brands.

In Europe, Lee continues to be a leader in innovation with its Stone

program.

This year we'll roll out Lee's Premium

program to 200 additional accounts, thereby expanding our Premium distribution.

And to support our growth plans, we're significantly increasing our marketing investment, particularly in the UK and Italy.

Wrangler's

and retro programs also continue to gain momentum, and will drive the Wrangler brand's growth this year.

We'll also be making additional marketing investments to further expand the brand's presence in France and Spain and Italy.

The key growth initiative for us has been the rollout of our Hero by Wrangler program in the European mass channel.

Wrangler is the first and only authentic U.S. brand with a presence in this emerging market.

Br><br><time begin We now have a strong in-store presence in key hypermarkets across Europe, and plan additional significant growth this year.

You'll recall that, in 2001, we acquired the H.I.S. brand.

H.I.S. continues to be the female market leader in Germany.

While the German market continues to be weak, its strongest segment is female, which plays into the H.I.S. strength.

The brand also has a presence in Austria, Switzerland, the Czech Republic, and Poland.

Our newest market for the brand is Scandinavia, and we're investigating other markets.

We also see a great opportunity in combining the existing VF knowledge and expertise with the H.I.S. resource, and leveraging those resources and investments in Central and Eastern European markets.

For example, we're now using our manufacturing presence in Poland to make H.I.S. products.

And in turn, we're leveraging the H.I.S. presence in the Czech Republic with our Lee and Wrangler brands.

We're also planning growth in Asia for 2002, primarily by leveraging our products and marketing concepts, such as Lee 101, and Wrangler Broken

.

Our Lee brand continues to expand its footprint in China, and we will be testing the Wrangler brand later this year for a spring '03 rollout.

Now, to talk about our imagewear business, I'll turn it over to George Derhofer.

Thanks, Terry.

As most of you recall, our imagewear coalition was formed late in 2000 by combining our knitwear and workwear businesses.

Our imagewear coalition continues to evolve, and we made huge changes to improve profitability and put our new business model to work.

In both 2000 and 2001, we exited several unprofitable pieces of our workwear business, but the biggest change was our decision to exit our private label knitwear business.

Most importantly, we made good progress toward building the foundation for our coalition's future as a one-stop shop for customers seeking a variety of apparel, from industrial and protective uniforms to service apparel and casual lifestyle clothes.

Our diverse customers include industrial laundries, distributors and decorators, government agencies such as U.S.

Customs, and corporations such as FedEx, American Airlines, and BellSouth.

The economic recession has affected our workwear and service apparel businesses, but improvements made over the past year in sourcing and systems have positioned us well to take advantage of improving economic conditions.

We also have begun to take advantage of cross-marketing opportunities using our Lee, Wrangler, Gitano, JanSport, and the North Face brands to offer our customers a comprehensive range of products, brands, and services that they can't find anywhere else.

To support all of this, we are building a new order-management system that will provide significant benefits to us and our customers.

Additionally, we expect to do over $30 million in e-commerce business in the next year.

In terms of our licensed sports business, we've had a partnership with the National Football League for many years.

But 2001 marked an exciting milestone with the signing of an agreement to become their exclusive supplier of certain licensed NFL apparel products in mid-tier department and mass stores starting this spring.

VF imagewear also holds licenses with Major League Baseball, the National Hockey League, the National Basketball Association, most major colleges and universities, and top NASCAR drivers to produce apparel.

We also make locker room apparel worn at title celebrations for events like the World Series, the Stanley Cup Championship, NASCAR Winston Cup, and the Super Bowl.

The most recent Super Bowl was one of our best special events ever.

We believe our licensed sports group is now well positioned to achiever higher sales and profit in an improving environment for that business.

Now over to Bob Shearer to talk to you about some good stuff going on in outdoor.

Thanks, George.

We continue to be excited about the opportunities we see in our outdoor brands via the North Face, JanSport, and

.

In terms of the North Face, I'm pleased to report that our efforts to address operational issues that affected the company prior to the acquisition have been successful, with significant improvements in service and inventory management.

We can now build on those improvements and continue to focus on new products that meet the needs of our core consumer.

The North Face is famous for technical innovation, and in 2001 the company introduced the

jacket, which utilizes a network of microscopic heating elements woven into the fabric to provide supplemental heat.

The North Face

jacket was named one of "Time Magazine's" best inventions of 2001, and we plan to expand the use of this technology in 2002.

The first of the new North Face showcase retail stores is slated to open in Beverly Hills in March.

The new store format will provide a total brand experience for the consumer and contribute to a continuing build in equity for our brands.

Building on our lead in technical innovation is our cornerstone for growth, supplemented by terrific opportunities in footwear and casual wear, as well as additional retail showcase stores.

Turning to our JanSport brand, with the expansion of its high-tech

line, and the introduction of new fashion-forward products, and colors that should open up opportunities in periods other than back to school, JanSport will continue to build on its position as the day

brand of choice for students shopping at department, sporting goods, and specialty stores.

In 2001,

benefited from its integration into JanSport, translating into lower costs and improved product for the brand.

is the day

leader in Europe, where it continues to enjoy strong growth.

In fact, we now have our European businesses unified under one management team, giving us the ability to manage our brands as a true portfolio -- Mackey.

OK.

Thanks, Bob.

I think, from these reports, you get an idea of the confidence we have in the long-term prospects we have as a result of the innovation investments that we're making in these great brands.

Clearly, as 2002 is going to be an important year for VF, as we begin to reap the benefits of our strategic repositioning program, invest more in our brands, and continue our search for acquisitions.

It's also going to be a year of transition as we complete our restructuring actions and finalize our business exits.

We're really looking forward to putting these behind us so that we can focus on identifying and capturing new growth opportunities we have in front of us.

To recap our long-term performance targets, we continue to focus our efforts on achieving a return on capital of 17 percent.

Because we've taken actions to reduce our fixed asset base and invested capital, we do expect the returns of our core businesses to improve.

As we've stated in the past, achieving our target of six percent sales growth will require acquisitions, and we hope to see some exciting opportunities emerge this year.

And we're confident in our ability to quickly and profitably integrate new brands and companies.

Long term, we continue to believe our core businesses have opportunities for growth.

We've cleaned up our portfolio so that we can concentrate our human and financial resources on the most attractive opportunities, and we're committed to increasing the marketing investment behind our leading brands.

We continue to target a 14 operating margin, and again, on an apples-to-apples basis, we should see operating margins improve by more than 100 basis points.

And we're also committed to keeping our debt to capital below 40 percent, and dividend pay-out around 30 percent.

These are the thoughts we wanted to share with you.

I now would like to open it up to questions.

Thank you, Mr. McDonald.

Ladies and gentlemen, if you have a question at this time, please press the one key on your touch-tone telephone.

If your question has been answered, or you wish to remove yourself from the queue, please press the pound key.

If you are using a speakerphone, please lift the handset before asking your question.

Our first question comes from Noelle Grainger of JP Morgan.

Your question, please.

Good morning.

Good morning.

I hope we could talk a little bit more about pricing,

with respect to the fourth quarter.

Do you have any kind of numbers you can share on the units versus pricing in the fourth quarter?

And how -- what kind of average price decline are you looking at for 2002?

Overall, in the fourth quarter, pricing was not significantly different from where we've been.

Related to 2002?

Yes, I think it's 2002 in jeanswear -- I mean, it depends on the competition out there, and it depends on the brand, whether it's

, and who it's going up against in private label, and same with Wrangler in the mass, or for Lee in the mid-tier, so, you know, it just depends.

It could be a nickel, dime, quarter, in that range.

And it's mostly isolated to the jeanswear segment?

Yes.

I'll say yes.

OK.

Bob, you talked about the savings; you're ratcheting up your expectation a little bit to 130 million.

I think previously you had estimated you thought about 90 million of that, or so, would fall into 2002.

Has that number changed?

It has, Noelle.

It's -- the 90 million is now 100 million for 2002.

OK.

And what -- Bob, what operating margin are you assuming as your base for 2001?

What we're doing there, Noelle, is -- the reported number is 10.6, again, excluding the unusuals, OK?

And then, of course, we have the goodwill amortization change impacting that as well, and that's about 60 basis points, OK?

And then we referred in the release to the 100 basis points of improvement over that.

Over the goodwill improvement?

That's right.

That's right.

I've got it.

OK.

And Bob, what are your assumptions on Kmart in your 2002 outlook, with respect to your -- you know, your top line?

We have not gotten the final word, obviously, on what Kmart's strategies are, so we've estimated that they're going to close stores, and we've built some of those estimates into our plans, but we don't want to talk now, specifically, about what Kmart's going to do because obviously they're going to have to be the ones to decide that.

But we feel like we've built a conservative number into our plans, with the impact of the number of stores closing.

And I'd rather not get into specifically what we think Kmart's going to do.

OK, fine.

But you've assumed some closures?

Well, we've assumed that they're going to close a significant number of stores, and that will impact our volume, obviously.

OK.

I'll let someone else jump in.

Thank you.

Thank you, Ms. Grainger.

Our next question comes from Carol Murray of Salomon Smith Barney.

Your question, please.

Good morning.

A couple of questions.

First of all, on your sales outlook for 2002, with the core businesses expected to be down, I think it's as much as four percent, could you give us some color on what the expectations are by your -- within, let's say, jeans, intimates, and outdoor?

I mean, I'm sure they're not all going to be down by the same amount; some actually may be up -- if you could just give us a little bit more color on your plans for those businesses.

In the coalition comments, it sounded like, you know, most things were going to be positive.

So what is causing the four percent decline in the core businesses?

Well, our outdoor and international coalitions were playing up.

But obviously the jeanswear, intimates and imagewear, workwear areas are the bulk of our business, and those are all projected down.

Based on an -- across the board pretty well, because this isn't a problem in one of the categories that we're dealing with; it's a problem with apparel sales overall.

And therefore, we're projecting some reaction to our cores businesses as a result of apparel sales being down compared to the entire year of last year, obviously, improving as we go through the year as the comparisons improve.

Should sales of apparel overall improve beyond our expectations, obviously we would expect our brands and our business to respond accordingly.

Within the jeans business -- I mean, is there any difference in the performance between, you know, the mass versus the chains?

I mean, you know, your business is in Wal-Mart, which has had good numbers -- granted, some of it's not apparel-driven.

Kohls has had good numbers.

Penney's has had good numbers, you know, relative to the rest of the industry, or better numbers.

So where -- I mean, how are you performing within those categories?

Yeah, I would say, right now, with the Lee brands outperforming in that middle tier channel, right now we are seeing some softness in the mass side.

Again, you know, with a number of accounts being in Chapter 11, not knowing how any stores they're going to close, et cetera, that is affecting the mass business.

Also, we're seeing some private label business also affecting our Rustler, and to some degree our Wrangler business, on the mass side.

OK.

Within the international jeans business, could you give us a sense, you know, in 2001, how big your international jeans business is?

Well, Carol, as we previously stated, international in total is in the 15 percent to 17 percent range, and a percent of VF's overall volume.

That's driven by Europe, the Europe jeanswear.

And we did move forward positively in '01.

And when we talk about growth for '02, which is in really a contract with the U.S. market, Carol, one thing that has happened there, and especially in the second half of the year, from a product mix standpoint, distressed finishes are becoming a much higher percentage of mix.

So, in addition to moving our unit volumes up, we're seeing our average of price actually driven up.

So we're kind of getting multiplier effect that's leading us to benefit on the top line as well as the gross margin.

OK.

So, within that 16 percent to 17 percent international sales, you know, obviously jeans is the biggest.

But then we also have intimates, and you bought some outdoor business as well.

Is there anything else going into international besides those three?

No, those are the three.

Those are the three, OK.

The jeanswear approximates the percent it is in the U.S. volume

.

I'm sorry;

I didn't hear that.

Jeans would be approximately two-thirds of the international volume, just giving perspective

.

Great.

OK, that's helpful.

On the inventory levels, how did you exceed the goals?

I mean, did you lower receipts?

Because, you know, your sales number really doesn't suggest that you moved a lot of product through the off-price channel.

So what enabled you to pull that inventory down?

Cutting our production, obviously, was the primary way that we reduced the inventory levels.

And we did an excellent job of getting our inventories cleaned up as well.

So, moving our excesses -- so we're going into the year -- and it is unusual to be able to accomplish that in the kind of an environment that the top line defining.

So our operating management groups did an excellent job in this area, because we felt like going into this year we didn't need to have that kind of burden.

And we're going into it very clean, with good inventories.

It will be a very strong point for us as we go through this year in our ability to respond to the markets.

You mentioned that inventory would likely show further declines because of the exit of certain businesses and, you know, a lower top-line in your core.

Is there a target or, you know, what you're thinking of, in terms of either dollars or turns for 2002?

Yes, Carol, as you know, we've previously talked about an additional 100 million of reduction.

But as you also know, we have significantly...

You got there.

We got there, that's exactly right.

But we do see some additional reduction, in the range of $50 million to $70 million.

And a significant piece of that will be, in fact, related to the business exits.

But some additional reduction across the board, I mean, we're continuing to keep that pressure on the inventories to keep them clean.

On the -- my last question, with respect the 25 cents of, kind of, you know, incremental kind of, you know, transition costs in 2002, are they at all weighted to the first half, the second half, or when do you think that will kind of work its what through the P&L?

Mostly through the first three quarters, and fairly evenly through the first three quarters

OK.

And the 25 cents is both the 15 million -- what's in the 25 cents?

I'm a little …

Yes -- no, that's exactly right.

It is -- it is both.

It's the -- it's the restructuring actions, and we'll call it the carryover from the actions that we've talked about, so there's some carryover in terms of when the charges related to the actions, you know, are recorded.

And then the other piece is the cost incurred during that period as we're exiting those businesses, the transitioning-down costs.

So both of those pieces are in the 25 cents a share.

OK.

All right.

Thanks, Bob.

Thank you, Ms. Murray.

Our next question come from Robert Drbul of Lehman Brothers.

You question, please.

Good morning.

Hi, Bob.

Excuse me.

First question I have is, on the marketing side, can you talk to us about, you know, priorities on the marketing spend, as well as how much you spent in 2001, both on a dollar basis and a percentage of sales, and how significant an increase we're going to see in 2002?

Yes.

In 2001, we spent just about $245 million, and in 2002, as we indicated, the five percent to 10 percent increase would imply a spend of something like $260 million.

And a significant amount of that spend is behind our strongest brands.

We're getting very focused on our investment to really drive the core brands in jeanswear, intimate apparel, outdoor particularly, our growth coalitions.

And this is international as well as U.S.

So it would be particularly behind Lee and Wrangler, Vanity Fair, Vassarette, Lily of France, the North Face, JanSport,

.

So this is where the primary focus is.

OK.

And then, I guess, on the acquisition front, as you look out on the landscape, what would be the priorities for you in terms of, you know, where you'd like to focus the most, and I guess, what kind of size are we talking about, like, you would feel comfortable doing an acquisition?

Well, our focus is in our growth categories -- jeanswear, intimate apparel, outdoor, primarily, or a lifestyle brand that would cross over these categories, as well as potentially open up new categories to us.

An example of that is the North Face, which is an outdoor branding -- the strongest outdoor brand in the market that has opened up some new categories -- outerwear, footwear, and other categories to us, with a strong position already established..

So that -- those are the types of investments that we're -- that we're really looking for.

OK.

And then, can you update us on how big a business, you know, as a percentage of sales, you did with Wal-Mart and, you know, where that -- where you think that's heading?

Well, we're about a little over 14 percent now with Wal-Mart.

And as some of their competitors drop out, then that pushes that percentage up.

As you know, we're focusing on investing in a lot of new categories, such as the outdoor category, that's a specialty-store business, and businesses that are growing in other channels of distribution.

So we feel like we can keep a pretty good balance in our overall mix of customers and channels of distribution.

But Wal-Mart, it appears, will continue to grow in that mass area, and their percent of business in that mass area is going to continue to grow.

OK.

And then, one final question for you is, were you able to achieve profitability within the North Face this year?

Yes, we were.

Profitability, to be sure, and improvements, obviously, over where were.

OK, great.

Thanks.

Thank you.

Our next question comes from Dennis Rosenberg of Credit Suisse First Boston.

Your question, please.

Good morning.

Good morning, Dennis.

At the North Face, to what extent is the margin recovery completed?

What's left to do?

Dennis, at this point in time, we're nearing our overall VF Corp margin number, and we expect to see some further improvement.

OK.

How much more improvement do you see left?

Well, again, we don't talk about specifics in terms of margin, but we think that the North Face has the opportunity, certainly, to equal or exceed, in terms of operating margin, our overall margins.

And rather than talking numbers, can you talk about what's left to do then?

Well, then -- I mean, there are a couple things.

We're still investing -- we're still investing in areas in terms of product, you know, that type of thing.

And obviously the volume gains which we're projecting.

Mackey referred to it earlier, will help the margins as well.

And we're continuing -- we continue to find ways to reduce product costs, so it really is -- it really is across the board.

OK.

Other outdoor companies suffered from the unusually warm winter.

How has North Face been able to avoid that?

Well, you're absolutely right; the industry overall was impacted by the -- by the weather, and that was mostly in the Northeast.

We still had a pretty strong fourth quarter, as we said in the release.

OK, a clarification.

When you guide earnings for '02 at approximately $3, are you including or excluding the run-out expenses of discontinued businesses -- not the charge, but the expenses of winding them down?

Yes, yes, as we were saying earlier, Dennis, the 25 cents -- those amounts are included in the 25 cents a share, so we're excluding those.

OK.

Also, you said interest expense would be down slightly this year, given the cash flow and what you're doing with the balance sheet.

Why shouldn't interest be down more than slightly?

Well, still, you have to be seen.

You're exactly right, in terms of the $200 million of debt reduction.

You know, again, we're taking a bit of a conservative view there, depending on acquisitions and refinancing -- the ultimate refinancing of that debt.

Barring refinancing, the interest would be down a bit more.

OK.

And did you buy any stock back in the fourth quarter?

We did; about a million shares.

And what was the cost of that?

The average was about $40 a share; between $35 and $40 a share.

OK, thank you.

Thank you, sir.

Our next question comes from Margaret Mager of Goldman Sachs.

Your question, please.

Hi.

Hi, Margaret.

How are you?

I have a question on the outlook for sales, where you were talking about three of the divisions -- jeans, intimates, and workwear.

So I guess, jeans and intimates are seeing the most relevant.

Do you expect market share losses?

What's based into that sales decline, or is that in line with where your customers are planning their overall businesses?

That -- we plan to hold market share as we go into the year.

We have pressure from private label, as we've talked earlier, but we feel like we could hold market share in this environment.

And so, that is projected based on not necessarily our customers' plans, but our view of our customers' overall sales going down, which obviously includes some customers going out of business, or customers cutting back their numbers of stores, that type thing, which is include in there as well.

But it is a reflection of our view of the overall jeans business, intimates business, and the workwear business, which has been heavily impacted by the high unemployment levels.

So, in the jeanswear, excluding the impact of Kmart, what the outlook for jeans sales growth be for '02?

Well, John gave you the pertinent categories for us, which is the 25-plus male, female -- and John, you might want to mention, this is what has been happening.

And the projections may not necessarily match this from the projections we're getting the overall industry, but we're being very conservative and looking at it and saying what we're seeing happening now may continue out throughout the year, so we're basing our plans on that, John ...

Again, the overall market, if you look at that, male and female 25-plus, where our brands are primarily targeted, especially in the last four or five months of 2001, apparently with the unemployment, the economy out there and everything else, that male consumer, 25-plus was minus 14 percent in the total market.

And in women's wear was about 95 percent.

So, you know, we're planning our business -- despite some of the accounts that we have out there that might lose some stores or go out of business.

You know, we are planning our business slightly down in 2002.

And hopefully we're conservative about that, and hopefully, you know, the whole apparel business, such as jeans -- whole apparel picks up.

I think that's -- jeans is just a reflection on what's going on with apparel, especially over the last six months or so of 2001, and really starting off in January this year.

Right.

And you said that those numbers include all channels of distribution?

Right.

Those would include all channels of distribution, correct.

Is there any noticeable difference between the channels of distribution?

I would say, right now, in the mass side, we've got -- and again, you've got to look at this.

This is a market research company that we've used and have used in the past.

They've changed some of the ways they've looked at the business.

Wal-Mart is now out of those numbers.

Kohls was never in those numbers.

So, a lot of it is a projection, but if you look at the mass side, for example, it's about the same in men's as what I just gave you.

Women's wear, it might even be a little worse.

It might even be up to 10 percent off in that 25-plus.

If you look at the national chains, they might be a little bit better.

And again, national chains would be Kohls, Penney's, and Sears.

In the men's 25-plus, they're only down like seven percent, and the women's wear business is about flat.

So there is a little bit of a difference between channels of distribution.

All right.

And, you know, there's been all the write-ups in the trade press about Levi's going potentially down market.

How do you think about that?

Well, we compete with Levi anyway.

I mean, we have the Lee brand there in strictly in middle tier and upper tier.

And, you know, consumers do cross-shop between middle tier and lower tier so, you know, obviously it's up to them what they want to do, but we already compete with them in the total marketplace.

But don't you think if they went in -- down into Wal-Mart, that that would really disrupt the mass market?

Well, obviously, any brand that goes down there would cause some disruption, especially a brand like Levi.

But fortunately, Margaret, we have brands in every channel of distribution, so if one brand decides to change channels and go, obviously that adds a new competitor in that channel, but it also gives us some relief in the other channel, where were already have strength with our Lee brand, so that's one of the real strengths of the up-core pricing and having multiple channel -- multiple branded strategy, is we're able not only to have a negative impact, but also to have a positive impact when these things occur.

OK.

And can I ask the same question about the intimate division and the outlook there for sales by channel of distribution?

Sure.

Similar to jeanswear, we're looking at product category that according to the same information that we get -- same source as John, the NPD group, which we think is directionally correct, but it's hard to get specifically tied into it.

Looking at a category that's down -- bras are in the category, and bras are down, you know, about five percent.

Within that, we're having market share gains in every channel of distribution, as I said earlier.

Across the channels, it looks like the mass channel's picking up a little bit of share, and the department stores are losing a little bit of share.

Again, within that, we're gaining share in every channel.

OK.

Does that answer your question?

Yes.

Yes, that helps.

So, can I ask a last question, just about first half, second half outlook.

So, if total company sales are down, you know, a couple percent, how is this -- how are you sort of shaking it out over the course of the year?

First half down, you know, more than a couple, and second half up?

Yes, the first half, Margaret, will be tougher than the second half.

And that was indicated in the first quarter numbers that we included in the release.

OK.

Thank you.

We have a follow-up question from Noelle Grainger of JP Morgan.

Please proceed.

Hi, John.

Can you talk a little more about private label?

Any sense of what percentage of the jeanswear market in mass it's representing at this point?

Right now, if you look at -- again, if you look at the market research we have, it's about 30 percent or so.

And it says it's not growing yet.

For example, in some of the larger accounts, we see that it is growing.

So, you know, that's were we have a discrepancy.

What we know we see in the numbers -- because we -- in some cases we're category captains, we see that their numbers are growing, yet the research says it's not.

So we believe it is growing in the mass channels.

I think it's peaked in the mid-channel, though.

OK.

Where do think -- I mean, how much do you think it grows, and in 2002?

And if it's growing, you know, where are you -- who's losing share, if you're not?

Well, there's some tertiary brands that are

being kicked out.

Obviously, it has affected us in the fourth quarter, primarily in -- on the Rustler side and the Wrangler Hero side to an extent.

Again, we're planning to combat that by increased marketing investment, and also lowering our prices to some degree to match it.

And aside from price, John, what's moving product?

Well, right now, if you have newness of product, we have different fabrics and finishes out there and showcase it well, and I think that's one thing we're working with our major accounts, especially on the mass side, is presentation.

I think we can get nice sales uplift there, and they can get it even with their brands too, if they display and present the product to the consumer a lot easier, I think that ease of shopping is an important part today for the consumer.

They look for that.

One of the strengths we have is the technology we have in managing retail space.

I think that's really helped us in our brands to hold our position in this type of environment because we are able to adjust our inventories and also manage our retailer's inventories, so that they have the right new products in there right quantities.

It's another reason why we think, as this industry goes through consolidation, we will be a consolidator, because a lot of companies don't have this technology and capability we do have, and we think that opens up opportunities for us to pick up brands that are strong with consumer, but have trouble managing their retail space, and we will be able to pick up some attractive brands as a result of that.

Speaking of technology, Eric, can you walk us through the timeline for the intimate apparel systems transition?

Sure.

I guess it's -- in broad terms, we expect to have the back-end functions of the

company integrated into the Vanity Fair intimates business by the end of the third quarter.

OK.

And are you running parallel for a time period there, or is it just a switch-over?

Just going to -- we're going to switch over.

OK.

My last question, Bob, on the North Face, what's the -- what's the store plan for 2002, and can you elaborate a little bit on the footprint?

And then, what are any plans at this point to further tier or segment the North Face brand at wholesale?

Relative to the stores and

, we plan to open three stores this year.

The stores are about 6,000 square feet.

Obviously they're in better areas, better shopping areas, metro areas.

And in relative to the final rollout, I mean, you know, we're moving in this area fairly cautiously.

You know, a lot of what's behind this is to showcase the brand, and build brand equity.

So, we'll see.

You know, after we see the results of those stores, maybe we'll be able to talk about looking forward.

And relative to tiering the brand, we think we have some opportunities, more in the casual side, which is a category that we've not been in, with the North Face.

It's right on with our core consumer.

Again, it's not -- it's not the technical side, and we'd be very careful to keep the technical product out of that tier that we're talking about, but we think we have opportunities there as well.

So that tier would be kind of mid-tier?

Well, in terms of tier of distribution, no.

You know, we're not talking about mid-tier of distribution.

It's more about the product, what the product does in overall price points.

It would just be sportswear, or would it be outerwear?

That's exactly right, really related to the sportswear side, again, but not -- the North Face has always been so strong; it remains very, very strong in the technical side.

We think there's an opportunity for the brand, again, related to our core consumer who stops -- who shops in a sports specialty stores to also get after the sportswear side of the business.

Are you going to continue to call it

?

We will call it

.

We may also categorized it with another name that you will hear about in the near future.

OK, thanks very much.

OK.

Thank you.

We have another follow-up question from Carol Murray of Salomon Smith Barney.

Please proceed.

John, could you just walk us through -- I thought I knew what the numbers were, and now I'm not so sure.

In 2001 -- I think in your prepared comments you said something like, "The jeans market was down 14 percent and five percent."

That was just men aged 25-plus?

Men aged 25-plus is down about 14 percent in the total market, and women aged 25-plus was down about five percent.

OK, the men's, and -- that was for the year?

That was a rolling 12-month through November.

OK, so LTM, 11-01, men's down 14; women's down five.

Correct .

OK, thank you.

Within -- I just also want to clarify, when you're talking about private label, are you talking about the retailers sourcing their own product directly, or are there other kind of, you know, companies, you know, like a tropical sportswear who are doing the -- you know, a lot of private label khaki.

Are there some other companies who are doing that in jeanswear, or is it basically the retailers going direct?

It's both; they do both.

But they go through some private label contractors, whether it's 807 or Far East.

Who -- all right, OK.

It just seems a little surprising to me that a private label company, you know, who's not -- you know, the retailer's not going direct, seems odd that there would someone else kind of -- that's sourcing and needs to make a margin could be that competitive on price.

Well, it's some of it right now, with the -- in general, the total apparel business, obviously, is not doing all that well, and jeanswear, like the numbers show, there's some excess production out there.

So, you know, like in any times when you have excess production, people are making goods for very, very low margins, and obviously some of the retailers are taking advantage of that.

Yes.

Are denim costs down as well?

Yes.

We see denim costs down in -- throughout the year, and we've kind of locked in, at least in through the first six months, and in some cases, we've locked in through 12 months at lower costs versus 2001.

And we are passing along some of those savings to the retailer.

That's where -- when we take a price down, some of that is because of the price of denim is down also.

Bob, on the North Face, the store plans -- three stores is what you committed for, or three stores is what you're planning?

We have -- we have one committed, and two others planned.

Is -- I don't know why I seem to remember a number that was higher.

Is that a scale-back, or am I just not recalling correctly?

I don't know if we talked about higher numbers or not, Carol.

I don't really think so, but again, we've -- all along, we said in this area, that we were going to move a little slowly, OK, to make sure it's the right -- the right model.

Yes.

And Beverly Hills location, are the other locations -- it seems like, relative to the product -- I mean, I know Beverly Hills is a big, obviously, fashion market.

But it -- are the other markets going to be kind of -- I don't know?

I mean, are you thinking about maybe like a Denver or a Seattle?

I mean, cities where there -- where your bigger customers already doing an adequate job in those venues, for the North Face?

Yes, and I guess what your saying is because of the outdoor influence You know, those are -- those are great areas for us to be sure, and the sports specialty shops in those areas, of course, do a lot of business with the North Face.

But we also have a fairly strong business in the Northeast, for example.

So, areas outside of Washington, in the New York area, again, in the better -- the better shopping areas are all our targets.

OK.

And just following up on someone else's question regarding weather.

From an inventory perspective, the outdoor category is not one where you have a large amount of carryover into 2002 -- of fall and -- of fall product?

You're asking is there a lot of carryover in the stores?

Well, either in -- in the stores of your brand, or on your balance sheet?

If I understand the question, our balance sheet and inventories related to the North Face are very clean.

They're not excessive at all.

As a matter of fact, they worked down a lot from where they were last year, which is exactly what you'd expect.

So, we don't have any -- any inventory issues at all.

Our production very, very closely matched the sales, so we felt very good about that.

And then the channel, at your larger accounts?

Yes, no.

In the channel, there's -- again, it was a little softer, especially in the Northeast.

But we don't see -- we don't see significant issues there.

Really, I know this is a little confusing, but I think we benefited from this standpoint.

We went into the year conservatively, and our sales have really exceeded expectations in the year, because went into it very conservatively with North Face, as opposed to some of our competitors who may have been more aggressive and then suffered because of the weather.

But I think the way our operating group and our North Face group managed their business going into this year, has really resulted in very clean inventories.

And then, my final question, with respect to your target for a 17 percent return on capital, when would you think -- Now, I've tried to do some back-of-the-envelopes, but there's so many moving parts on what may or may not happen with impairment, because that obviously is going to lower your asset base significantly.

When are you going -- when might you -- I mean, is that goal realistic for '03?

Or, when might we expect to see that, or is there a chance you might even make it '02, because of the declining asset base?

The factor that's hardest to project, at this point, is top line, relative to that goal.

That's one reason why we're conservative in our view of when we're going to hit that.

We obviously need a more positive movement on the top line.

We feel like we'll get that positive movement as the apparel industry overall begins to recover, begins the retail gets stronger, and we think we'll begin to move very rapidly towards that target when we are seeing an improving retail apparel environment.

And when that's going to be we're having a hard time projecting.

We're not building it into '02 plans.

We would anticipate, by '03, people are going to want to be wearing clothes again, so they'll be out buying more apparel, and then we'll see the benefits of that.

OK.

Thanks very much.

OK, thank you.

Thank you.

Once again, ladies and gentlemen, if you have a question at this time, please press the one key on your touch-tone telephone.

We have another follow-up question from Margaret Mager of Goldman Sachs.

Please proceed.

Hi.

I just wanted to ask you about cap ex, and you said less than 100, so is that close -- is that going to be around the $80 million level that you spent this year?

Eighty million to 90 million.

That's right, Margaret.

And, can you just tell me what the major pieces of cap ex are?

And, if it's changing, for '01 to '02?

Not a lot of change year-to-year.

And, right now, it's more of a maintenance spending mode.

There aren't any -- you know, any individual areas that stand out.

Yes, so...

And, again, these levels are very low, form a historic standpoint, so -- whereas, in the past, we may have been investing more in brick and mortar, that's not the case.

It really is more of a maintenance type of spend.

So, what is it?

The vast majority on -- on computer systems, or …

There's -- not necessarily.

I mean, there's always some spending against the IS side, but, you know, there's also some spending against our existing manufacturing on a global basis.

So, can you give me a sense of major chunks?

It's mostly -- again, it really is mostly maintenance spend.

The majority of spend is maintenance spend, against the -- on the manufacturing side.

OK.

Thank you.

Thank you.

Our next question comes from Elizabeth Shamir of PNC Advisors.

Please proceed.

Hi.

I got on the call late, so I'm -- please accept my apologies, if you already covered this question.

I was wondering, with Kmart closing a lot of stores, one does think, you know, eventually we'll be -- that business will migrate somewhere, and probably a lot of it to Wal-Mart.

Do you -- your share of the jeans business at Wal-Mart, your shelf space, how does that compare -- as well as for all the other categories you sell -- how does that compare to your exposure at Kmart?

Well, we have a very strong position with both Wal-Mart and Kmart, so, across both intimates and the jeans category, so I would say that our representation is -- it's pretty close for both of them.

The obvious impact would be a short-term impact, if Kmart closes a large number of stores.

But as you say, the customer will buy those products somewhere, and so eventually, once you get through that inventory reduction and the redistribution of that inventory, and you get through that short-term impact, that we would feel like we would be -- you know, continue to be in good shape on that exchange.

And by the way, how long do you think it will take to go through this transition process?

For Kmart to go through?

Yes.

It's hard for us; we haven't heard their plans yet.

So we -- it's hard for us to say.

We don't know the number of stores or anything.

There's a lot of speculation about that.

The one thing we did say earlier that you may not have heard is we have built into our plans what our anticipated -- our anticipation is for their store closing, the impact of that.

But we're -- we don't want to talk about that.

We'll let them talk about their actual plans.

OK, thank you.

Thank you.

Our next question comes from Barrett Eynon of Bank of America Securities.

Your question, please.

I'm not sure if you guys addressed this or not, but could you briefly comment on inventory levels at retailers in terms of jeanswear?

By that I mean, are you still seeing reductions in inventory level, and if so, when do you see that reversing course in terms of more reorders?

Yes, I would say in jeanswear right now that the inventory levels are pretty lean, although we do see some retailers, again, continuing to lower them.

To some degree, that plays into our hands because of our systems and our retail floor space management, because we're really directly linked up with many of our major retailers.

So, you know, we can provide the right product to them when they need it, so they are -- there is some lowering of inventory still going in the first quarter.

Again, that would be reversed in the second -- last part of the second quarter, and going into back to school in the fall selling period.

All right, thanks.

Thank you.

Our final question comes form Dennis Rosenberg of Credit Suisse First Boston.

Your question, please.

Given that you're going to reduce the asset base because of the impairment charge, should we imply that your return on investment goal of 17 percent should be raised?

At the time -- at the time, Dennis, that we -- that we indicated the 17 percent, you know, obviously we weren't -- you know, we weren't necessarily counting on a write-off related to the goodwill.

We'll take a -- we'll take a look at that, and have a response to that in earlier time, particularly when we know the specific amount of the write-off.

OK, thank you.

Thank you, sir.

Mr. McDonald, I'm showing no further questions at this time.

I'd like to turn the program back over to you, sir.

OK.

Thank you.

I think as you've heard, we feel like we have a very solid plan going into '02 that's appropriately built in cost in a very difficult environment.

But at the same time, we are very optimistic about the results of the action we've taken and will be taking this year in investing in our brands, to be a consolidator in a consolidating industry, to utilize our retail technology and partnerships and our cost reduction and value improvements to grow our

businesses as this market rebounds.

Thanks for joining us today.

Thank you, Mr. McDonald.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the program, and you may now disconnect.

Good day.