WW International Inc (WW) 2003 Q3 法說會逐字稿

Good afternoon, welcome to the Weight Watchers third quarter 2003 earnings conference call.

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

It's my pleasure to turn you over to the host, Mrs. Donna Stein.

Thank you for joining us for the Weight Watchers International third quarter conference call.

With us on the call are Linda Huett, the President and Chief Executive Officer and Ann Sardini, the Chief Financial Officer.

At 4:00pm eastern time today, the company issued a press release containing financial results for its third quarter of 2003.

The purpose of this call is to provide investors with some further details regarding these results and a general update on the company's progress.

The press release is available at www.weightwatchersinternational.com.

Before we begin, let me remind everyone that this call will contain forward-looking statements.

Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission.

The company does not undertake any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

I would now like to turn the call over to Ms. Huett.

Please go ahead, Linda.

Thank you, Donna.

Good afternoon and good evening to those of you who are listening from Europe.

Thank you for joining us as we review Weight Watchers International's performance for the third quarter ended September 27,2003.

I will open today's call with an overview and we'll then review our financial results and finally we will answer questions from the financial community.

For the quarter, our revenues increased 15% to $217.5 million this year from $189.2 million in last year's third quarter.

Our global attendance at company-owned meetings increased 11% to 14.2 million, up 12.8 million in prior.

Our operating income was essentially flat at $74 million compared to last year's $74.4 million.

Our operating income growth lagged our top-line revenue growth due to the year-over-year reduction in our gross profit margin and additional marketing investment to support the launch of Flex Points in North America.

The reduction in gross margin in the quarter was principally due to the one off innovation related expenses in this year's quarter which Ann will discuss in more detail.

For the quarter, our fully-diluted earnings per share excluding the expenses relating to the early extinguishment of our high-yield debt, net of related currency and hedging activities, were 38 cents for the quarter; up 9% compared to 35 cents for the prior year's third quarter.

On a GAAP reported basis, our EPS was 10 cents compared to 34 cents in the prior year.

I would now like to provide additional color in each of our major geographies.

First, North America.

For the quarter, NACO had attendances of 8.3 million, up 14% from the same quarter last year as we continue to benefit from our franchise acquisitions.

If I remove the impact of the acquisitions, organic attendance declined 2.4%.

A better performance than the 6% decline I indicated in our last conference call.

As expected, the late August launch of our Flex Point program innovation drove a surge in enrollments, moving attendance levels from the negative year-over-year rates we had been experiencing through the summer, into positive territory by the first week in September.

The feedback we've received from the field and our members on our Flex Point Innovation has been very positive.

Our retention, that is how long members stay once they have joined us, remains excellent.

However, word-of-mouth referrals have been weaker than expected.

In fact in the several weeks since we completed the bulk of our marketing push around our innovation, we have seen our enrollment trends weaken.

As a result despite our over performance in September, we believe NACO's organic attendance growth in quarter 4 will be roughly flat.

This compares with our earlier expectations of low, double-digit growth.

Our issue is that it's been more difficult for us to generate word-of-mouth interest in this environment of media hype around carbs and low-carb dieting.

The low-carb industry has certainly done a great job generating incredible media buzz.

They have taken a sound principle of cutting back on refined sugars and empty calories and managed demonize healthy, nutritious foods such as fruit and whole grains.

All despite the repeated extensive and long-term scientific studies that have shown the significant health benefits of a balanced diet.

It's reported that tens of millions of people have or are currently giving low-carb diets a try.

Enticed by the promise made by most extreme diets of quick, initial weight loss and encouraged by the misperception that low-carb diets have been given a clean bill of health by the scientific community.

As weight watchers is not tied to any diet, we could quickly adopt a low-carb diet and probably achieve some short-term gain.

We won't do that because we believe that these diets are both unhealthy and unsustainable.

The scientific literature clearly shows the importance of incorporating fruit, vegetables and whole grains in your diet.

At the same time, numerous long-term studies have repeatedly proven the negative health consequences associated with the overconsumption was saturated fat.

Just as importantly, our 40 years of experience in the process of weight loss and weight management tells us that although extreme diets do result in quick, up-front weight loss; they also inevitably result in a quick weight snapback due to the inability of the vast majority of people to sustain diets that are so foreign to real life.

Looking ahead I believe that the growth stage of the low-carb bubble is ending.

We are beginning to see the seeds of its decline, including the increasing number of what we call low-carb refugees coming to Weight Watchers.

They have found that low-carb diets are difficult to sustain and have very uncomfortable side effects.

For many, the weight snapback has been equal to or greater than the initial weight loss.

As the population of former low-carb dieters continues to grow, word will spread about the unsustainable nature and the ensuing weight snapback associated with these extreme diets.

I expect consumers will increasingly place the same degree of skepticism on these diets that they have placed on other extreme diets.

So what does this all mean for our business and our strategy?

In the near-term, this low-carb buzz will continue to stem our growth.

Nonetheless, we do not believe that we are in a situation where increasing marketing spend is the answer.

Therefore, we will not be increasing our marketing spend in 2004 to any significant degree.

Instead, we're focusing on educational PR and improving the effectiveness of our word of mouth.

We have recently launched our truth about carbs initiative, and this initiative is designed to accelerate consumers understanding of carbs and their role in healthy, long-term weight loss and to disspell the many myths surrounding low-carb diets.

Though it's difficult to predict the rate at which this will all play out, I'm confident that Weight Watchers will benefit.

Consumers disillusioned by the promises made by such diets will search for a more sustainable approach to weight loss.

And as the leader in sustainable healthy weight loss, we are well-positioned to appeal to this growing wave of low-carb refugees.

Now, before I finish NACO, I can confirm that we have now completed our integration of the WW group acquisition.

This integration was smooth and was completed months ahead of schedule.

Our team has now shifted it's focus to improving product sales per attendance in the new territories to get them up to NACO much higher benchmark.

NACO will continue, of course, to benefit from our acquisitions as we move forward.

Moving on to the UK, we had another excellent quarter with attendance of 3.1 million, up 14% over prior year.

This is a particularly gratifying performance as the UK is also benefitting from the 25 pence fee increase from January.

Looking ahead, the UK will be facing difficult comps in the fourth quarter as the fantastic fall diet season in 2002 resulted in an attendance growth of 15% in last year's quarter 4.

Our business in continental Europe has now lapped the August 2002 launch of its most recent program innovation, Points Plus.

Nonetheless, it delivered a solid volume performance with attendances of 2.1 million, up 7% over prior year.

With the lapping of our program innovation, we do expect to see a slowing of our year-over-year attendance growth in continental Europe.

Let me also take a minute to discuss some important management initiatives we have undertaken to prepare continental Europe for it's next phase of growth.

While our operations there are made up of 12 separate countries, historically we have managed them as a single entity.

With a strong growth in our continental European operations over the past five years, we're now in a position to cost effectively develop more localized strategies.

This will allow us to better tailor our programs, marketing, and communications to the cultures and the needs of our members in each of our countries.

This effort will be modeled on our current successful approach in Germany.

To support this initiative, and as we announced in the recent press release, we have made two senior executive appointments to join our continental European team.

I would now like to turn the discussion over to Ann Sardini.

Thank you, Linda and good afternoon, everyone.

I will begin with a review of our financial results for the quarter and then I'll summarize our cash flow and balance sheet.

Revenues in the third quarter of 2003 were up 15% to $217.5 million from $189.2 million in the third quarter of 2002.

Net income for the quarter was $11.5 million, including $48.7 million of expenses associated with the tender, repurchase, and retirement of our 13% senior subordinated notes, which concluded in late August.

The $48.7 million of tender-related expenses is captured in two lines on our income statement and is constituted as follows: The early extinguishment of debt, the separate line-item on our income statement which totaled $47.4 million includes $42.6 million aggregate premium paid to holders who tendered, a $4.4 million write-off of deferred financing fees for prior related transactions, and $.4 million of other expenses.

The other expenses net line-item on our income statement includes $1.3 million of expense in conjunction with the retirement of swaps and hedges related to the Euro denominated portion of the 13% note.

Absent this $48.7 million of expenses, our net income for the quarter was $41.7 million, as compared to $36.8 million for the third quarter 2002; an increase of 13%.

Just a note before I review earnings per share.

Beginning in this quarter as a result of the retirement of the lion's share of our Euro denominated senior-subordinated notes; we will, happily, no longer have to report the impact on EPS of Euro debt-related unrealized currency gains or losses.

So reported earnings for fully diluted share for the third quarter 2003 were 10 cents as compared to 34 cents in the third quarter of last year.

The impact of all of the expenses associated with the early extinguishment of debt was a 28 cent reduction of EPS in the third quarter of this year.

In the third quarter last year, EPS was reduced by unrealized foreign currency translation losses net of hedges.

Excluding the impact of these items from both years, fully diluted earnings per share this quarter were 38 cents as compared to 35 cents in the third quarter 2002.

I'll begin our review by geography with a summary of results of our NACO operation.

In NACO, revenues including the addition of the WW group franchise rose to $122.9 million, up 12% from last year's third quarter level of $109.8 million.

While attendances grew 14%, nidiqi revenues grew 12% and product sales were up 11% for the quarter.

The result of a few more weeks of free registration and the inclusion of the WW group, which has lower product sales per attendance than the rest of NACO.

Internationally, revenues from our classroom operations rose 22% in the third quarter to $68.5 million from $56.1 million.

In local currency, the increase was 11%.

By geography, UK attendances were up 14% and revenues rose 19% on the local currency basis, including the price rise in the weekly meeting fee that was instituted at the time of the innovation and an increase in product sales per attendance.

Continental Europe's attendances grew 7% in the quarter and revenue was up 8% in local currencies.

Here, too, product sales per attendance increased over the prior-year levels.

Moving now to our other revenues.

Franchise commissions totalled $5.3 million this quarter, a decline of 31% from last year's third-quarter level.

As we acquire more of our franchise territories and bring their operations in house, revenue from franchise commissions will continue to decline.

But as you have seen, the overall impact on net income of making these acquisitions is significantly accretive.

Excluding third quarter 2002 commissions from the North Carolina and WW group territories, which we have since acquired, worldwide franchise commissions declined 5% in the third quarter this year with domestic franchises explaining all of the decrease.

Other revenues of $6.9 million, which accounted for 3% of our total revenues in third quarter, is a growing category.

It's up 53% versus the prior-year quarter.

Other revenues are a composite of weightwatchers.com royalties, advertising and sponsorship revenues related to our publications, and other licensing revenues.

Royalties received from weightwatchers.com licensing were $1.8 million this quarter.

The royalty payment represents 10% of weightwatchers.com's net revenues in keeping with the licensing agreement.

Royalties from the dot com increased to $.7 million of 55% year-over-year, which is indicative of the strong growth in that business.

As a reminder, we own 19.9% of weightwatchers.com on an issued and outstanding basis, and about 38% of the company on a fully-diluted basis, including all warrants and options.

And we do not consolidate their financial results with ours.

We also saw strong increases in advertising revenues and royalties from our publications, notably Weight Watchers Magazine, as well as in our licensing revenues.

In the aggregate, these categories grew 53%.

Now, taking a look at our gross margin in the third quarter.

As a percentage of revenues, the gross margin was 50.7%, as against 54.7% in the comparable period last year.

This 400 basis point margin compression resulted mainly from factors related to the timing of our NACO innovation.

We made the decision's in NACO to keep more meetings open than we normally would have during the lower attendance summer months in anticipation of the volumes we were expecting for the innovation and to add back a few weeks of registration.

We also had significant expenses in the third quarter, related to the countrywide innovation training meetings we held with all of our meeting room staff; and we wrote off some unused program materials as well.

We expect our fourth quarter gross margin to be more inline with the prior year.

Below the gross margin level, our operating expenses consist of marketing and G&A.

In the third quarter, marketing expense was 8.4% of revenues, up from 7.6% last year.

In total, we spent $18.2 million in the quarter, an increase of $3.8 million.

About 30% of the marketing increase was currency.

A little more than half of the increase was the edition of the WW group, and the rest was an increase in NACO as we begin our marketing campaign for the innovation in mid-August.

As Linda indicated, we are not planning to materially increase our absolute level of marketing spending next year.

As a result, marketing as a percent of revenues is expected to decline.

G&A expenses were $18 million in the third quarter, up $3.2 million or 22% versus last year.

Currency translation added 5%, the edition of the WW group accounted for another 5%.

Of the remainder, the key drivers, as with many other companies, were significantly higher insurance rates, higher legal fees, and expenses associated with the additional regulatory and compliance requirements.

Operating income was on par with last year at $74 million.

Our operating income margin was 34% in the third quarter this year, as compared to 39.3% in the comparable period a year ago.

Now, one of the benefits of the repurchase and retirement of most of our 13% senior subordinated notes is the savings in interest expenses going forward.

We have already begun to see that impact.

Net interest charges were down $2.6 million in the quarter to $8 million from $10.6 million last year.

Our effective interest rate moved from 8.67% in Q3 last year, to 6.41% this year.

And it will decline further to an expected 3.7% in Q4; our first full quarter after the completion of the tender.

Other expense net on our income statement was$.9 million in the third quarter 2003 as compared to $3.5 million a year ago.

Here too, the retirement of the high-yield Euro debt will have a long-term impact.

In last year's third quarter, the marking-to-market of the Euro notes net of hedges resulted in an unrealized currency loss of $2.8 million.

Since we retired over 90%of the high-yield Euro notes, the impact of unrealized currency gains or losses will be negligible in the future, and knowing how confusing this has been to everyone, I'm delighted to report we will no longer break out this impact.

The major items that are reported in the $.9 million other expense net in this year's quarter were largely expenses associated with the unwinding of swaps and hedges related to the tendered portion of the Euro-denominated debt.

Now turning our attention to cash flow and the balance sheet.

In terms of cash, we began 2003 with $57.5 million.

During the first nine months of the year, we accumulated cash flow from operating activities of $210.2 million, $71.6 million of which was generated in the third quarter.

We ended the third quarter with $61.1 million in cash.

The $207 million of cash utilization this year-to-date can be summarized in three major categories.

During the third quarter, we made cash payments of $60.3 million for expenses associated with the tender and repurchase of our 13% senior subordinated notes and concurrent refinancing of our credit facility, including a small principal paydown.

Earlier in the year, we acquired the WW franchise territories, funding $96 million of that acquisition with cash, and we also paid down $51 million of debt principal so far this year.

On the balance sheet, our total debt at the end of September 2003 was $476.7 million.

This compared with $502 million at the beginning of the third quarter and $454.7 million at the end of last year.

In August, concurrent with the completion of our tender offer and consent to repurchase $144.9 million of our U.S. dollar denominated debt and $91.6 million of our Euro-denominated debt, we borrowed an additional $227.3 million under our credit facility and refinanced.

Over and above the debt, the balance sheet changes and liabilities from year-end 2002 is a reflection of the normal timing of third quarter tax and other payments.

The change in our assets versus year-end 2002 is the increase in franchise acquisition rights associated with the acquisition of WW group.

As a result of our debt restructuring, cash flow will increase further.

As you know, our business model is unique.

It doesn't require, but rather generates cash as we grow.

As a result, more than 100% of our income is free cash flow.

Now that our interest rates are lower and our debt coverage ratios are comparable to investment-grade companies, prepaying debt ahead of schedule is no longer priority.

Instead, we'll use our free cash flow to create shareholder value.

Through the $250 million stock repurchase program we announced a few weeks ago, as well as by continuing to be opportunistic in making accretive franchise acquisitions.

Establishing, in fact, a specific annual budget for this purpose.

Now, I would like to turn the discussion back to Linda.

Thank you, Ann.

I would like to highlight several aspects of our business that will drive our long-term growth and which, in the near-term, have allowed us to continue to grow earnings and cash flow in the face of the low-carb hype.

We have a terrific business model with high free cash flow, we have long-term growth drivers with our current meeting operations including demographic trends, the underpenetration of group education in many of our largest markets, and the increasing product sales per attendance.

Finally, we have a number of significant opportunities outside of our current meeting operations, which we will continue to push forward.

Including franchise acquisitions, licensing, publishing, and geographic expansion.

Now, I would like to discuss our guidance.

During our last conference call, I provided fully diluted EPS guidance for 2003 of $1.59 to $1.64.

While our international operations have continued to perform according to expectations, the lack of strong momentum in NACO suggests we will come in at the lower end of this estimate at $1.59 to $1.60.

Of course, this is before the one-time expenses in our third quarter associated with our tender offer for the high-yield notes.

Stepping back for a second, in spite of the challenges we have faced this year, we will still anticipate delivering earnings within the guidance I first gave you at the start of the year.

And this, while still significantly increasing our marketing investment.

Looking ahead to 2004, despite the head wind we're facing in North America, I am confident that our guidance, which we will give in our next conference call, will be within the current analyst range of $1.90 to $2.12.

So I'd like to open the floor to questions.

Thank you, the floor is now open for questions.

If you have a question, please press the number 1 followed by 4 on your touch-tone telephone.

If at any point your question is answered, you may remove yourself from the queue by pressing the pound key.

Questions will be taken in the order they're received.

We do ask that while you pose your question that you to pick up your hand set to provide the best sound quality.

Please hold while we poll for questions.

Thank you.

Our first question is coming from Andrew McQuilling of UBS.

Good afternoon, Andrew.

Linda, how are you?

I'm fine, thank you.

Thank you very much.

I would love if you could expand, maybe, on your decision not to increase marketing spending to compensate for the word-of-mouth.

Thoughts about that for the fourth quarter.

I can understand, but maybe in the first quarter.

How come, you know, more advertising doesn't replace the word-of-mouth?

Well, obviously if you're looking at what we spent this year, we've layered significant increases into our marketing; particularly in our North American operations.

So, we really expected to maintain similar level of support next year would be our best move.

We believe that this is quite adequate because our push will be more on the education of the public and on the PR efforts that we'll be making.

To counter this sort of huge buzz that is just still out there in the marketplace.

Um, the issue hasn't been our marketing so much this year as the effectiveness of our word-of-mount during the summer period particularly, and we're beginning, as I said, to take steps to improve this.

I think if you take this initiative that we started with the truth about carbs, it shows me how much the public is really eager for information such as we're providing.

Recently we put our truth about carbs message on the MSN home page and in a 12-hour period, there was something like over 700,000 hits to that message.

And that was just despite the fact that it didn't go up on the site until the evening.

I think as we continue to push these kinds of messages forward, it will be much more effective than increasing the absolute terms of our marketing expense which we, you know, considerably increased this year.

And, Linda, maybe just a thought about kind of where we are on the Atkins low-carb diet wave.

Uh-huh.

Low-carb refugees, how do you track them and what is your sense for when the absolute peak in numbers is?

Are we -- have we come through it or are we still six months away from a peak in the low-carb?

Absolute number of people trying, I guess.

Well, I think that it -- it's a little bit difficult, obviously, to say exactly when something has reached its absolute maximum.

But we are certainly seeing that the trend has stabilized, as far as we're concerned.

We're seeing an increasing number of refugees coming into our meetings, and calls to our call center from people who are currently or have been on a low-carb regime.

We're starting now to see some media beginning to present a more realistic picture about the implications of these regimes, and I think that is only just beginning.

We're starting to see, I think, the medical and the health community starting to speak out more and more.

There was a very, very good article in Tufts University newsletter.

This kind of article really needs to be picked up by the mass media and printed more and more.

You know the truth about carbs and the response that we have had both from our members and, as I said, on places that are just in the public domain like the MSN editorial piece that they did on it, has shown a tremendous interest.

Because I think people are very genuinely confused on this subject.

So, I think the more we can get information out there, the more the growth in -- in this bubble will just stop.

Thank you.

Maybe just one more.

Uh-huh.

Thoughts for December quarter organic attendance on a global basis.

North America flat.

Should we be up one to two similar to this quarter?

Well, obviously I've given you a few indicators in terms of our major geographies.

Yes, we're now anticipating that North America on an organic basis will be flat rather than the growth we had anticipated previously.

Of course, when you're looking at our reported, we will continue to benefit from our acquisitions.

If I'm looking at the UK, as I mentioned, it's going to be up against an almighty 15% quarter last year.

It's had a tremendous year.

As you can imagine in this very mature, very well-penetrated market, 15% last year is a very, very significant mountain to be climbing this year.

And as I mentioned continental Europe is, of course, lapping their innovation that went in last year in August and September.

So we're not expecting to see the strong growth that we saw in the first year after its innovation introduction.

Very helpful.

Thank you.

Thank you.

The next question is from Bob Craig of Legg Mason.

Good evening.

Hi, Bob.

Just a couple of questions, not to harp too much on this marketing issue, but related to an earlier question.

How long will you give the education tact that you're taking before going to a plan B and, I guess, is there a non-marketing increase plan B that you're thinking about.

Well, I think what we have right now is what we're calling a stable marketing.

This is on a global basis, obviously.

We put in considerable monies and I think Ann has gone through the detail of that several times throughout this year of our marketing increase, in our various markets; so we don't believe we're going to be stingy in terms of our marketing.

We feel that the marketing might will be there.

So we're going to go out in January, which is obviously a very crucial dieting season to us, with what we consider a very, very strong marketing push in all of our markets.

We then anticipate as we go forward, that we will not be increasing on a year-over-year basis, in real dollars and cents terms, because the increase this year, if you like, was so substantial that it should cover us.

Would we, after what we have seen what the winter diet season is like, would we then review it and take a different approach to the market handwriting that I just described?

Absolutely.

I think as a management team, we always are very, very cognizant of what our marketing is producing; and we take decisions as we go forward on what is the best approach.

That's helpful.

When you look at how you spent money in marketing this year.

Uh-huh.

Versus how you will likely spend money in January and throughout '04, any real changes in methodologies at all?

Well, this year, as I said, Ann has sort of outlined several times the components of our marketing increase.

Some of them were strategic and planned and we would continue to do that.

If you take Germany as we explained, that's a market where we've put enough infrastructure in place over the last few years to start using national media in an effective way.

So we did increase our marketing spend in that market last year considerably.

And we're very pleased, obviously, with the results.

If we're looking at the U.S., it was a combination of both things that we did strategically, and also things that we did to counter the appalling weather that we had in the first diet season.

We've said, unfortunately, that that increased spend that we put after the weather impact just happened to be itself impacted by the war with Iraq.

So it wasn't as effective as we would have hoped.

So if we're looking at that same amount of money, we have to say that we believe in a more normalized world and, hopefully the winter will be, you know, more generous to us.

It's not often that we have the severe winters two years in a row, and hopefully there won't be another war next spring.

We're just looking at a more normalized marketing world if you like, and we're putting that same marketing might behind North America.

I think it's appropriate to say that we have spent more than we had budgeted this year for the things that Linda's talking about; so that effectively year-to-year from a budgeting standpoint we would be showing an increase if you took out those things.

But in real terms, it will be flat.

Okay, and lastly, given where the stock is currently selling, could you sort of rattle off a prioritization of uses for cash right now between potential acquisitions, share repurchase, and debt repayment.

Yeah, it is a pretty good market, isn't it, for us, to be repurchasing.

I think if we look at it from, absent today, let's say, I think always our priority is to be opportunistic in the acquisition of franchises because that's the most accretive thing that we can do for our shareholders.

The second place where we would put our money at this point is the share repurchase program that we established a few weeks ago.

So those are our current priorities.

And no repurchases have been made yet, right?

Yeah, actually there have been some.

Okay.

Thank a lot.

Thanks, Bob.

Thank you, the next question is from Greg Cappelli from Credit Suisse First Boston.

Hi, Greg.

Hi, how are you?

Fine, thank you.

Good.

First question is, it sounds like from your comments the innovation jumped out to a good start number.

Uh-huh.

A little more color, what do you think slowed it down after the first few weeks and did you actually go back into negative territory in October?

I think that, if we're looking at what slowed it down, um, when we -- when I use an expression like the word-of-mouth didn't carry on in support and make it build, I think that we have to understand that our enrollments and our growth is driven by both former members and new members.

And, obviously, in this current environment where there is just so much hype and so much trial of this low-carb regimes, it's not surprising that the low-carb regimes have creamed off the new members that we probably would have anticipated would be building after word-of-mouth got more active following our innovation.

As I said, our retention is solid, is excellent, it's not that we're losing people once they come, it's the fact that a lot of new people, you know, get on to a wave and this is a very, very strong low-carb wave that is going on out there.

If the reported figures are correct and tens of millions of people have gone on to this program since last spring, we are feeling the impact as a lot of other people are.

Okay, and I know once you get up to Thanksgiving and through the holidays, it's pretty much, as you used to classify it, sort of a downtime, so can we assume that things are kind of flat now be, you know, in terms --

I think that we have said this before.

It takes the sort of unusual person to start a weight loss program between Thanksgiving and Christmas.

So, you know, that is just not a prime recruitment period for us and never has been.

Okay.

So, we continue.

It will continue to be flat.

I mean obviously the initiatives that I have been talking about we have only just put in.

We did spend a lot of time during the summer doing intensive research on the low-carb dieters and this low-carb phenomena, and that is why we believe that we -- we identified this information gap that was so glaring.

And that is why we have produced things like the truth about carbs.

Now, that booklet went into all of our meetings so that our members, I mean if you think of it, our members have already made a choice.

They have come to watchers, but they're exposed just as you and I are to people in their acquaintance who trying low-carb regimes.

Up until now, I don't think they have been armed with the real information that they need in order to counter the sort of hype of that quick weight loss and that crashing off in the first few weeks that a lot of people going on this regime experience and, therefore, they're telling everybody about it.

Of course, what they don't tell a lot of people about is that it only is for the first few weeks and that there are a lot of negative, you know, side effects that people don't hear so much about.

Okay, I understand.

Just just a couple more quick ones.

I'm sorry if I missed this.

Given what you're thinking about, fourth quarter, the comp gets significantly easier in the first quarter.

Are you expecting a lift there into -- into positive territory for flat and do you think you could -- is it too early to tell or do you think you could see early double digits in the early part of '04.

Obviously if we're looking at our guidance that I just indicated.

Right.

Obviously we'll be giving our actual guidance in our next conference call, but if we're looking at the lower end of what is the current analyst range of $1.90, we can achieve that $1.90 with very low, single-digit attendance growth.

Because, obviously, you have to remember that you can't directly compare EPS in 2003 with the EPS in 2004 because we'll benefit from a number of positive factors.

But -- so if we're looking at that, the fact that I have said that we anticipate giving you guidance within that range would indicate to you that we expect growth.

Okay, and then one last one.

Do you plan on having sort of a relaunch of Flex Points in January?

We had heard from certain members that it was a little confusing having it be in the fall this time of the year.

Would you do something like that in January?

It's a good point, Greg, one I have tried to cover during the year.

I think that autumn launch, which is not necessarily our traditional time but not unheard of, after all continental Europe has been doing autumn launches now for several innovations but the autumn launch does give us two bites at the cherry; because the winter diet season is, by far, our biggest recruitment period, and because the program innovation in marketing terms can still be called new.

We have -- we have that second chance which is a very big one to us coming up in January, which is why I was emphasizing we're not actually cutting back on our marketing in January.

Okay, so to your point, we shouldn't look at that, that statement about marketing as you know what, we have sort of given up on this program already.

In fact, it's the opposite.

I think it was a lot of you guys pointing out how aggressively we had increased our marketing this year and you were very, very worried that we might continue doing that next year and for years to come.

So, I was really just giving you assurance, if you like, that we're not going to continue that very aggressive growth in our marketing.

We feel that this year's growth we have really covered, you know, next year quite adequately in dollars and cents.

Thanks a lot.

I appreciate the answers.

Uh-huh.

Thank you, our next question Carol Wilke of Merrill Lynch.

Hi, Carol.

Hi, Carol.

Hi.

I have sort of more a conceptual question, not anything specifically about the quarter at least the first question.

How do you go about increasing word-of-mouth because, you know you have the -- you commented that it's been -- that the more the disappointment's been in attracting new people so there are clearly people that know Weight Watchers, like Weight Watchers they're there, you're handing out the truth about carbs pamphlets but they're already there.

How do you get them to go out and tell their friends?

Do you use an incentive program, you get a free week if you bring a buddy, how do you do that?

It's a very good question.

Yes we do use member-get-member-type approaches so that they can introduce Weight Watchers to their friends or relatives or anyone else that they feel could benefit from our, you know, healthy, long-term approach to weight loss.

We do that quite regularly.

We'll continue to do that.

I think that, as I mentioned in the previous call, one of the biggest things we're giving our members, if you're just looking at them; is the correct information so that they actually can participate in the debate.

I think one of the most shocking things to me that has happened over this summer is that, you know, completely different from the UK.

In the United States there just has not been an informed balanced debate about this whole issue.

If you look at the huge wave of PR and publicity that has been surrounding the low-carb issue, it has been one-sided; and it's sort of inexplicable to some degree why the scientific community hasn't been more vocal, why the media hasn't taken the more balanced approach that we saw in the UK, but that's a fact.

So what we're trying to do is to not only help our members to answer questions and to engage in the debate in a very informed and intelligent way, which is why we're giving them the literature and we're talking more openly about it within our meetings; but we're also on a push to help the scientific community to actually understand what is going on out there.

All of the, um, research that we did this summer I think would be very surprising to a lot of people in the scientific community, because they just do not believe that the vast majority of people don't know that cutting out essential carbs is unhealthy.

They really believe that people, um, you know, know this.

That it's just a given because there is so much scientific information backing it.

So we're helping the scientific community to recognize that they do have a voice here, that they should have a voice here, and, obviously, we're trying to encourage the media and I think we're starting to see the signs of it.

There are's few articles that are starting to put a more balanced approach out there.

I mean there was, um, a Newsweek story just recently that started talking in a more balanced way.

As I said, the Tufts article was just superb.

If I could get that printed in every newspaper across the country, you know, I would be delighted.

I think that we are going to be much more proactive in trying to get this balanced approach.

I think we went on the assumption as happened in the UK that the media themselves, that the professionals, that the scientific community would be actively out there.

That is what we have seen.

So, you know, we -- we really -- we really believe that more and more of this will be coming and, of course, as this trickle, this trickle of low-carb refugees; what we're calling low-carb refugees, in other words, people who have not been satisfied with or have failed on a low-carb regime, as that trickle becomes more of a steady stream, I think word-of-mouth will be much more, um, positive about spreading the counter-story, if you like.

The other story about the negative side effects, the temporary condition that these extreme regimes are.

I mean people cannot sustain these kind of regimes over any long period of time.

And it's a proven fact that after these extreme approaches when you return to anything like normal eating, there is a weight snap back.

So I just think all of these things put together will start creating the more positive word-of-mouth that I'm talking about.

Thank you.

Two other quick questions.

huh huh -- uh-huh.

As you look coming out of September, and this is sort of a follow-up to Greg's question; but have you seen the number of low-carb refugees increase, you know, as we have come into November.

Clearly you, you know, early September a good pop from the Flex Points but now that we have gone through October and into November you commented that the bubble has burst a little, have you seen that -- I mean granted it's not the big diet season, but have you seen that pick up?

Yes, we're seeing that pick up.

Obviously it started with just a few calls to the call center of people who were on these regimes, and were looking for a more sensible approach, were unhappy, and we're seeing them, obviously, join our meetings in increasing numbers.

One quick question for Ann.

Could you comment on what your expectations are for the tax rate for Q4 and next year.

Yes, the tax rate for Q4 will be at 38.4%.

Because we have such a large expense item in North America in the third quarter, you will see a very low tax rate in the third quarter.

It's a correction both for first and second quarter and creating a 38.4% for the third quarter.

And that 38.4% will carry forward for a period of time.

Thank you.

Thank you.

Our next question is coming from Dina D'Amore of JP Morgan.

Hi, Dina.

Hi.

I have a really quick question on the Atkins.

My understanding is the Atkins, when you initially go on it it's like a two-week program.

For most people it's unsustainable, so they stay on it for a month or two.

Considering that the retention rates have maintained at Weight Watchers, I'm curious why there hasn't been more of a- a more significant move by people who are on Atkins to get into a healthier diet.

I think all of these things just take time.

If you think of it, and this is certainly supported by all of the research that we did this summer.

The majority of people who go on these kind of regimes treat those early weeks as the actual program.

That is what they're following and they attempt to follow it for as long as they possibly can.

But, of course, in time they start craving and needing more variety, particularly in the snacks category.

Of course, when they add that more variety, they often have had no guidance.

They have no help in terms of how to do that in a sensible way, so they're reverting more back to their normal eating patterns, which is putting -- or does put the weight back on, which is what the snap back effect is.

But you don't necessarily then immediately turn around and say, well, I think I'll now go on another regime.

I certainly think in our experience that there is a lag before people eventually come around to thinking that the weight efforts that they put in were very sound.

In other words, a lot of new people, and this is the good side of this bubble that's out there, it's bringing a lot of new people into the dieting arena who have a weight issue.

And they're bringing them into actively trying to tackle it.

Now whether this succeeds or not is still bringing them into the arena.

When it fails, they are now in that frame of mind that says I do have a weight issue.

I do need to do something about this weight issue.

I realize as time goes on it will still be there or, goodness sakes, it will get greater, therefore, maybe it would be sensible for me to look for a more long-term, sustainable, and here, this word sustainable really just talks about can you live with it?

I mean -- and this is the territory where Weight Watchers has such credibility, and has such a strong reputation and such a strong, um, efficacy; in terms of a program that you can live in the real world, week in, week out, month in, month out and it's sustainable.

So I'm talking about something that happens over time, not in a very short time period

Okay, and then just another quick question.

On the word-of-mouth.

Uh-huh.

I understand part of it is the Atkins.

Then, I'm just curious.

Are you confident that the innovation is significant enough to be generating some word-of-mouth, or are there certain tweaks there that you might consider doing just to generate more excitement for the new program and get more people out there talking about it.

I think our results were very, very strong and the program is very, very strong.

I think we have to, and I know that it maybe is a little bit hard to recognize, but if you're talking about, and this is what the statistics seem to be indicating that tens of millions of people have jumped on this bandwagon this year.

You have to understand that those kind of volumes have sucked an awful lot of people out of sensible dieting, meaning Weight Watchers into this particular craze.

Okay.

And then just one last question.

I heard on the news the other day that Weight Watchers had, I don't know if they sponsored or have given Renee Zellweger $3 million or something along those magnitudes to help her lose the weight after she gains it for Bridget Jones.

I'm just curious is that, number one, true, and number two would that be maybe perhaps a new spokesperson?

It never ceases to amaze me of what rumors about Weight Watchers circulate in the market.

I can personally say I have not written a check.

Okay.

But just basically, I'll say as we always do, that we don't comment on rumors.

I'm sure that any movement from us, you would hear from us.

Okay.

Great.

Thank you.

Thank you, our next question is coming from Cliff Greenberg of Baron Capital.

Hi, Cliff.

Hi, guys.

A couple of questions if I may.

Have you raised prices for the meeting fees in your company-owned NACO unit and are you thinking, are you going to on a go-forward basis along with Flex Points?

Second question, could you talk a little more fully about how the products business is doing on a per-member basis.

Yeah.

And third question, it seems like weightwatchers.com is doing fantastic.

Any further thoughts about either somehow owning 100% of that enterprise or getting additional value or more value out of what you presently own?

Right.

No particular order that we'll take them in.

The product sales per attendance, obviously, I think Ann explained; have actually, statistically gone down because the WW group is at a much lower product sales per attendance than our normal on-going businesses, so it's primarily a function in North America of the mathematics.

If we're looking at product sales per attendance, they're continuing to grow.

I think if we net out the WW group, we're in a strong 8.5% growth.

Which, you know, we're delighted about.

Right.

And you feel that that, you can sustain those trends on a go-forward basis?

Oh, absolutely.

Sustain and increase, although every quarter will not be exactly the same as other quarters.

If you're looking at dot com, yes we were very, very pleased with the more-than-50% increase in the revenues that they achieved in this quarter.

I have to say, of course, that they function in the same world that we function in and the low-carb craze is in their web world the same as it's in, you know, the rest of the world.

So I won't lead you to believe that they have not been impacted by the low-carb craze at all.

We do have a significant ownership, as you know and as you mentioned and as we go forward, I'm sure the company will investigate all the different avenues, but we're quite comfortable with our relationship with dot com as it exists at the moment.

Great, how about meeting fee prices in.

Oh, meeting fees.

Of course.

In quarter two, we did inform, obviously, everybody that we had decided not to take a price rise in September with the launch of Flex Points.

We have continued to look at it and we are -- we believe that it's the correct course of action to delay that decision a little bit longer because of the current environment that we're functioning in here in North America.

Okay, but if, Linda, you do get some comp increase in your NACO business next year as you're somewhat expecting, would you -- would, therefore --

I am not ruling out a price rise in NACO.

I'm just saying it's not our intention to put it in in January.

Okay, great.

Thank you very much.

Thank you, our next question is from Jason Hughes of Investment Group.

Hi, Jason.

I'm afraid I'm not hearing anything.

Thank you, our next question is coming from Terry Wozika of Walker Partners.

Thank you, I'm wondering if you could spend a little bit more time giving us some more information on 2004 outlook of $1.90 to $2.12?

And I guess you guys, I mean to get to that kind of number you need to get, you mentioned earlier, to get the low, single-digit attendance growth numbers here in the United States from the flat number in the fourth quarter.

Terry, it's a very good question.

I'll give you a little bit of color, but as I said, we will give our detailed guidance in our next conference call as we normally do.

When we're looking at the analysts current rate of $1.90 to $2.12, I said that our global attendances could be in the low single digits, and with the positive impact of a number of factors that -- between 2003 and 2004 we could still achieve the bottom end of that range.

Could you maybe give us some color as to what those factors are?

I would assume currency would help yield that, at least in the early quarters, but could you give us something to chew on there?

If you just want to look at the bigger things, it's obviously the impact of the restructuring of our debt.

It's things like having the WW group for the full year.

Things of that nature.

Okay.

I'm sure if you go through the past quarterly of calls you will be able to pick the individual items out quite easily.

Okay, great.

Then, if you could reconcile, I guess based upon the comments you made with respect to franchisee growth here in North America.

It looked -- I'm kind of eyeballing, I guess it was negative 7, 8%.

And, of course, you guys put -- you guys gave numbers that were better than that.

Can you reconcile the two there, why would the franchise --

Really it's a function of what I have said over the years.

They are not as active marketers, generally speaking across the board as we are.

Uh-huh.

I think generally speaking they're just a bit below wherever NACO is.

Okay.

Thank you.

That's all.

Uh-huh.

Thank you, our next question is coming from Debbie Talalas of Tribion.

It's actually Ward Davis of Tribion, question about the revenue guidance for the fourth quarter.

I wanted to get clear.

I think you guided for NACO to be flat versus prior guidance of double-digit.

That was attendance, ward.

That's attendance?

Yeah, that's attendance.

Okay what does that translate into what we should expect for revenues and so forth?

First, let me be very clear.

When I say flat, I'm talking organic attendance growth.

We obviously will continue to benefit in our reported North American numbers from our acquisitions.

Secondly, I think if you just look back historically, and anyone can do that, you will see that our attendance growth is only part of our revenue growth and it has been consistent since we have been reporting numbers.

So acquisitions then should account for say roughly what in terms of a contribution in -- in sales growth for Q4?

The guidance that we gave, which gives you an implication of our EPS for quarter 4, the guidance we gave was that this year will come in at $1.59 to $1.60.

$1.59 to $1.60.

That's on EPS, so we don't have an exact revenue number then?

We don't give you advanced guidance on revenue.

Okay.

Thank you, our next question is coming from Bruce McFadden of Atlas Capital.

Hi, guys.

Hi, Bruce.

A quick financial-related question.

What type, in your guidance of fourth quarter and general guidance for last year, what have you incorporated for as far as the recapture of the weightwatchers.com note?

Is any of that built into the guidance?

The -- no, we -- there will be, there will be two repayments; two scheduled payments next year on the weightwatchers.com note.

Okay, but the fourth quarter guidance doesn't.

Fourth quarter doesn't.

Okay.

Great.

Thank you.

Thank you, our next question is coming from Bill Orslander of Morgan Stanley.

Hello, how are you.

Hi, Bill.

Just curious to get some color - the opportunity coming up over the next year or two on product licensing and any additional color you can give us on that opportunity.

Obviously we believe that licensing is one of our opportunities going forward.

This year we, in North America, we announced two licensing agreements with Conair on weighing scales.

They have gone into the marketplace and on Applebee's.

Applebee's is proceeding as planned.

In front of their national rollout, they have launched the Weight Watchers section on their menu in four markets; and, obviously, the next phase will take the learnings from those markets and fine-tune the menu before the national rollout in 2004.

These are long-term agreements.

I think if we're looking internationally, this is an area that has continued to grow.

We also will recapture in the fourth quarter of 2004 some of our licenses from Heinz, and that's been running about $5 to $6 million a year.

That was part of the initial transaction.

There was a five-year period where they kept the economic value, the lion share of the economic value of the third party licenses that didn't fall within the core category that they can keep.

And you've been walking down the road on the negotiations with the various players that you will be able to partner with on that opportunity that comes back to you from --

Yes, we have been actively managing that portfolio now for quite a few years.

It's just as Ann pointed out that the economic value will start coming 100% over to us in October of next year.

Thank you very much.

Uh-huh.

Thank you, our next question is from Stephen Migetuke of Pike Place Capital.

Good afternoon.

Hello, Stephen.

Two questions.

First off, Linda, can you comment -- you talked about geographic expansion in Europe.

Uh-huh.

How is Germany and some of those less-mature regions still growing at kind of these 30, 40, 50% rates and what other kind of marketing would you want to enter?

Well, as you know, Germany was what I would call a rebuild.

Uh-huh.

We have been putting considerable infrastructure into our German market in the last two years -- and that has given us a platform on which we can accelerate growth and we're very, very pleased, obviously, with the achievement of our German operations.

If we're looking at our two new markets that we have entered in the last few years, that would be Spain and Denmark.

They're making good progress in terms of getting their infrastructure in.

I think we said before it takes a number of years before there is a wide-enough network of weekly meetings to make the majority of the marketing affective within these markets; and we're starting to see some real increases, obviously in, that infrastructure, which is very, very pleasing to us.

There are other European markets if I'm going further into the future that we would be looking at, um, and, of course, there are big markets that we have yet to enter in any big way such as Asia.

Which, I think, is surprising to a lot of people, but they are certainly starting to experience a very strong trend in overweight and obesity.

So I think that a lot of markets will be open to us in the future.

Okay, secondly, Ann, you said you had done some buyback already and, you know, I'm assuming that you don't have any franchisee acquisitions teed up at this very moment, so when you can be active again post this conference call?

And then does the credit line, does your revolver actually allow you to draw down for buyback or are you limited by, you know, with the cash you have on the balance sheet today and the cash flow from business.

We're not limited in terms of that.

The -- the revolver doesn't have any limitations on it in that way.

We actually have the 10(b) 5 in place, as we speak, for a stock repurchase; so we can be active in the market at any time.

Okay.

Terrific.

Thank you.

Thank you.

Our next question is coming from Dina Pleotis of Bennett Lawrence Management.

My question has to do with your '04 earnings guidance.

I was hoping you could clarify one more time what you said regarding your ability to achieve the low-end of that guidance of $1.90.

Does did that assume global attendance growth of low single digits or North America organic?

That was global.

Global.

Okay.

Thank you very much.

Uh-huh.

Thank you, we have a follow-up question coming from Andrew McQuilling of UBS.

Thank you very much, Linda.

Just one.

Sure, Andrew.

Can you talk a bit about the WW group.

What do you think you can increase meetings in 2004, and what your plans are for December in terms of increased meetings in the territories; and any thoughts on product sales per attendance that you would be willing to share.

Obviously product sales for attendance is our biggest opportunity there as we have said.

Our franchises, and the WW group was no exception, are roughly half of what our NACO product sales per attendances are.

So we know we have opportunities there and we're concentrating on those opportunities.

I -- I think if you asked about, you know, sort of meeting expansion right now, December is not normally a time, obviously, when we're expanding our meeting infrastructure.

It's a quiet recruitment period for us.

So we would anticipate that that would be the case in the WW group the same as it is in the rest of NACO.

Of course, getting ready for January, one of the beauties of this particular business is, we analyze our opportunities and our gaps in meeting infrastructure down to a very, very, very localized level.

So we're able to identify where we need specific meetings, specific time slots, in specific locations.

And -- and we're continuing to do that.

No initial thoughts for '04.

On that -- on the ability to increase meetings in those territories.

Obviously we continue to increase our meetings to support the demand that is in our infrastructure, as well as to bring Weight Watchers to the places where we aren't as well covered as we should be.

Fair enough, but nothing like 20 or 30%?

Unless we thought this trickle of low-carb refugees was turning into an absolute flood in the next few weeks, I don't think that you would consider that very wise of me, would you?

Fair enough.

Thank you very much.

Thank you.

Our next question is a follow-up coming up from Greg Cappelli of Credit Suisse First Boston.

Hi, Greg.

Hi, thanks for the follow-up.

I wondered if you could talk briefly about your efforts in training you've had for your classroom leaders; and actually educating them on low-carb diets.

We noticed some differences in attending meetings from franchisees versus North American-owned operations.

Some of the knowledge, you know, varied somewhat when they get asked questions by attendees.

Is that -- and I thought it was noticeable and very helpful for the ones that were educated and could explain differences.

Is that something that you feel is where you want it to be or is there more money going to be spent on training at this point and is training varied a lot around the country?

I never- never ever, you will hear me say that we're satisfied with all the training we're doing.

I'm a true believer in training and putting the effort in, and oddly enough, I think it's as much an effort as it is an investment-type of decision, we do share all of our training materials, all of our training approaches with our franchise community.

Obviously we're not responsible for delivering it, implementing or running their businesses for them.

So, I cannot speak on behalf of the franchise community.

I can, though, say that we're putting a tremendous amount of information and effort in our training program with our NACO staff to educate our service providers on what the issues are, to give them the materials, to give them explanations, to give them meeting outlines that obviously discuss the issues and -- and inform the members about what the issues are.

And we will continue to do that.

I don't think this is something that is a one off exercise and then will disappear.

We will be continuing to do that.

Do we always have a variation in the delivery of anything that we have in our system?

I would have to say yes.

As a former leader myself, I can tell you that we're reliant on the individual's ability and understanding of any issue; just as we are dependent on their ability to stand up and motivate, but I believe we do a very, very good job in getting the vast majority of our service providers on board to an initiative such as this in a very, very quick time frame.

And -- and we're very pleased with that effort and will continue to do it.

Okay, any reason to believe that the company-owned locations could be doing better now than franchises, or is there no trend there, or vice versa, would there be any reason for that?

Obviously, if you're looking as a previous caller mentioned, if you're looking at the negative organic growth in NACO for the third quarter, um, the domestic franchises had a bigger negative picture than we had.

That is absolutely true.

That's imbedded into the figures that you saw because our international franchise revenues actually increased.

So the decrease was entirely down to the North American franchisees.

Got it.

One final one.

Your long-term targets, you know, have always kind of been -- I know they had been 10 to 12% sort of organic revenue growth, mid-teen operating profit growth, and 20 to 25% net income growth.

Have those longer-term targets changed for you?

I know you're going through obviously issues where you're dealing with the carb hype right now, but is that something you still believe is achievable longer term?

Absolutely, Greg.

Nothing has made me change my views.

Those are long-term targets that are achievable and that we can consistently deliver them.

I think we're just in a very unusual situation right now.

Okay, I think -- one quick one, one last one here.

Is there anything you're doing about, you know, I have heard you talk about this before.

We see it more in the papers every day, the serious problem with kids and obesity and type II diabetes.

Are you going to be launching any kind of, you know, any kind of program that is significant there in the near future, perhaps using a spokesperson or someone to market it?

It's a very real problem and everything you're reading, I think, indicates what a real problem it is.

Obviously as commercial weight loss program, and one of the most efficacious, and I hope serious solutions that are out there for adults; we view the rise in obesity with adolescents and children in -- as alarming as everybody else does.

By the same token, we also believe that our environment and our program, particularly our behavior modification and the discussions in what happens in a Weight Watchers meeting is aimed at adults; and around the world if you're looking at the obesity experts, there is a considerable disquiet amongst them in terms of this phenomena, because there is another great issue out there in this age group and that is an area of eating disorders.

So, we're being very, very responsible and we're being very cautious in our approach.

Now it that being said, we have partnered with a very, very reputable Swedish children's hospital and have piloted a couple of programs where we're working very carefully with the doctors and the dieticians within that environment to try to pilot, if you like, and develop a protocol that is more appropriate to this particular age group.

I think it will would be totally irresponsible for a commercial weight loss program to actively seek this particular age group when there is so little scientific evidence that there is a protocol out there, particularly aimed at this particular age group.

You know, I mean if you just look at what our advice has been in the past few years about how parents can best help youngsters who are facing a weight issue.

It really is by being a good role model themselves.

We had a very, very good leaflet out last year that talked specifically about how parents can help young members of the family that have weight issues and that role model role is so crucial.

If you think of what is happening in America right now with the low-carb craze, it's actually quite worrying in terms of the kind of role model that so many parents must be setting for their kids.

Thanks a lot, I appreciate it.

Thank you, I'm showing no further questions at this time.

I will turn the call back turnover to Ms. Linda Huett for any further or closing comments.

Thank you.

Thank you for joining us today.

I'm looking forward to updating you on our progress and full-year results in our next conference call.

Thank you and have a good night.

Thank you, that does conclude this evening's teleconference.

You may disconnect your lines and have a wonderful day.