Fox Factory Holding Corp.
Q2 2017 Earnings Call Transcript

Published: 4 Aug 2017

[Operator:]

Greetings and welcome to the Fox Factory Holding Corp’s Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Haugen, General Counsel.

[David Haugen:]

Thank you. Good afternoon and welcome to Fox Factory’s second quarter fiscal 2017 earnings conference call. On the call today are, Larry Enterline, Chief Executive Officer; Mario Galasso, Executive Vice President and Chief Technology Officer; and Zvi Glasman, Chief Financial Officer and Treasurer. By now, everyone should have access to the earnings release, which went out today at approximately 4

[Larry Enterline:]

Thank you, David. Good afternoon, everyone, and thank you for joining us today. On today’s call, I will discuss our second quarter 2017 business and financial highlights. Mario will then provide a more detailed update on our business. Zvi will review the second quarter financials in greater detail, as well as discuss our guidance. After that, we will open the call for your questions. Our business continued to deliver strong results for the second quarter across both our bike and powered vehicle product offerings. Sales of bike products were up 3% and powered vehicle products were up 43%. This growth helped us exceed our net sales and earnings expectations for the second quarter of fiscal 2017. New bike product introductions and favorable spec positions with certain high growth OEMs fueled our bike growth and powered vehicle growth fueled by positive demand for on and off road suspension products including solid OEM sales. As a result, we generated record sales of $120.8 million, an increase of 18% compared to Q2 last year and non-GAAP adjusted earnings per diluted share of $0.39 for Q2, above our guidance of $0.32 to $0.38. Based on our performance, and our view of our business today, we are increasing our fiscal year 2017 guidance which Zvi will discuss in more detail. Overall, we are pleased with our businesses performance. In bike, we continue to make progress with the success of our new product and we remained comfortable with overall inventory in both the OEM and aftermarket channels. On the powered vehicle side, the 2017 Ford Raptor and 2017 Toyota Tacoma TRD Pro OEM programs continued to do well. Also in the aftermarket, we believe that the current level of descriptive inventory supports ongoing demand of the Fox products in key categories across certain sectors. In a competitive global industry, product innovation remains a key cornerstone of the Fox brand and our success in both bike and powered vehicles. We appreciate the efforts of our team as we continue to deliver differentiated products to increase market penetration. Looking ahead, our team remains committed to further building the Fox brand presence in our existing vehicle categories and consistently pursuing potential new markets. In summary, we are pleased with our operational execution and financial results for the first half of fiscal 2017. At Fox, we have a differentiated market position and continue to expand the diverse end-markets we serve. We believe these aspects of our business will help us generate future growth and further enhance value for our shareholders. And with that, I will turn the call over to Mario.

[Mario Galasso:]

Thank you, Larry, and good afternoon, everyone. During my remarks, I’ll touch on a few of our recent business highlights. I’ll begin with our bike business. In mid-June, we launched our new FLOAT DPX2 rear shock platform for Trail and all mountain bikes. Ahead of the launch, the shock had already been in the media’s hands for testing leading up to its debut. Upon product release, the favorable reviews started to roll in by such publications as MTB News out of Germany. They had this to say. With the Fox DPX2, the Californians have succeeded in a big throw, not only does it builds a bridge between DPX and FLOATX2, it will even compete with its big brother FLOATX2 and some bikes. Its simplified setting make it easy for the rider to find a good set up. The overall support has been improved and the firm mode of the shock is generating high traction and technical climbing passages with a pleasantly smooth transition when a hit occurs. Going downhill, there is a lot of traction and even with platform pedals, there were never any problems to keep a feet on the pedals even with violent hits. As a result of these efforts, we believe our brand continues to resonate well and our distributor and dealer orders are strong with very positive consumer reaction. We are now half way through the 2017 bike ride season and Fox-supported athletes have won 17 cross-country events, four enduros and five free ride events and 30 downhill events worldwide. Now I will move on to our powered vehicle business. On July 25, Polaris launched their 2018 RZR XP Turbo Dynamix edition featuring our Live Valve Active suspension. Live Valve is part of an electronic suspension system developed in conjunction with Polaris that processes data from multiple vehicles sensors to adjust the suspension virtually instantaneously to meet the demands of the terrain. Initial reactions from the launch were positive and we are very excited to have brought this technology to market. UTVUnderground had this to say about how Live Valve performs. After testing the new 2018 Polaris RZR XP Turbo Dynamix edition, the Fox Live Valve technology, the comfort, sport and firm setting is at your fingertips. You have a setting for whatever type of terrain you are in and you can really feel the difference between modes. To climbing in rocks when put mode and it smoothed it out. I got into the big stuff and went into full boogie firm mode and sent it right on top of the bumps. I am pretty impressed to check it out for yourself. If there is a demo ride in your area, take advantage and go out and feel this new Live Valve technology from Fox. I’ll conclude with a few of our recent race results in powered vehicle segments. At the San Felipe 250, Rob MacCachren won the overall with our Off-Road Race Manager Wayne Israelsen, co-driving making it Rob’s third consecutive win in Baja. At the NORRA Mexican 1000 Cameron Steel took the overall win in the multi-day Baja race. Shannon Rentsch won his fifth outright title at the Tatts Finke Desert race in Australia and we continue to rack up the circle track wins with over 300 year-to-date. I would now like to turn the call over to our CFO, Zvi Glasman to review our financial results. Zvi?

[Zvi Glasman:]

Thank you, Mario. Good afternoon, everyone. I’ll focus on our second quarter results and then review our guidance. As Larry stated earlier, sales in the second quarter of 2017 were a record $120.8 million, representing an increase of 18.1% versus sales of $102.3 million in the second quarter of 2016. Gross margin was 32.3% for the second quarter of 2017, a 70 basis point increase from 31.6% in the prior year period. The improvement in gross margin was primarily due to favorable product and customer mix and improved manufacturing efficiencies. Excluding acquisition-related costs, non-GAAP gross margins for the second quarter of 2017 expanded 60 basis points, as compared to the second quarter of last year. Total operating expenses were $20.9 million, or 17.2% of sales in the second quarter of 2017, compared to $21.1 million or 20.6% of sales in the second quarter last year. The slight decrease in operating expenses is primarily a result of the conclusion of our acquisition-related compensation arrangements, partially offset by strategic investments to support future business growth and increased incentive and stock-based compensation expense. Non-GAAP operating expenses stated as a percentage of sales were 15.7% versus 16.3% in Q2 of last year. Focusing on expenses in more detail. Our sales and marketing expenses increased approximately $0.6 million primarily related to investments to support our brand including higher employee-related costs. Research and development expenses increased approximately $0.4 million due to investments in our product lines and technologies. As we previously stated, the timing of R&D and promotional expenses often changes between quarters and years depending on a number of factors including product launch cycles. Our general and administrative expenses in the second quarter of 2017 were $8.1million compared to $7.1 million in the prior year period. The change was primarily due to increased stock and incentive-based compensation costs. In the second quarter of 2017, our tax rate was approximately 22.7%, compared to 16.9% in the same period last year. The increase in the effective tax rate was primarily due to the impact of the increase in pretax income and resulting increase in tax expense with no corresponding increase in tax credits and deductions. Adjusted EBITDA is a record $24 million for the second quarter of 2017, compared to $18.6 million in the same quarter last year. Adjusted EBITDA margin was 19.9% compared to 18.2% in the prior year quarter. On a GAAP basis, our net income in the second quarter of 2017 was $13.7 million, compared to $8.9 million in the prior year period. Earnings per diluted share for the second quarter of 2017 were $0.35 compared to $0.24 in Q2 of 2016. Non-GAAP adjusted net income was $15 million, an increase of $3.2 million as compared to $11.8 million in the second quarter of the prior year period. Non-GAAP adjusted earnings per diluted share for the second quarter of 2017 were $0.39 compared to $0.32 in the second quarter of 2016. We believe non-GAAP adjusted net income and adjusted EBITDA are useful metrics that better reflect the performance of our business on an ongoing basis. You will find a reconciliation of all GAAP to non-GAAP financial measures in our earnings press release issued today. Now, focusing on our balance sheet. As of June 30, 2017, we have cash-on-hand of $43.3 million. Total debt outstanding was $64.9 million, compared to $66.7 million of debt outstanding as of December 31, 2016. Inventory was $89.4 million as of June 30, 2017, compared to $71.2 million as of December 31, 2016. Accounts receivable was $63 million as of June 30, 2017, as compared to $61.6 million as of December 31, 2016. Accounts payable was $51.1 million as of June 30, 2017 as compared to $36.2 million as of December 31, 2016. The changes in accounts receivable, inventory and accounts payable are primarily attributable to business growth and our normal business seasonality. Accrued expenses decreased to $29.9 million as of June 30, 2017, from $34.4 million as of December 30, 2016, primarily due to the final scheduled earnout payment related to one of the our 2014 acquisitions partially offset by our normal business seasonality. Turning now to our outlook. For the third quarter of 2017, we expect sales in the range of $119 million to $125 million and non-GAAP adjusted earnings per diluted share in the range of $0.40 to $0.44. For fiscal year 2017, we are raising our previous guidance and now expect sales in the range of $458 million to $470 million and non-GAAP adjusted earnings per diluted share in the range of $1.43 to $1.51. For 2017, we now expect non-GAAP operating expenses to be lower than our expected long-term target of just below 17%. For 2018, we expect to return to our longer term target OpEx as we support strategic initiatives such as ERP, support continued business growth and higher compliance costs resulting from the process of exiting our emerging growth status. We believe that the 2017 annual tax rate will be in line with our previously guidance of 18% to 20%. However, our tax rate is trending towards the upper-end of the range on our increased profitability expectations. We expect the Q3 tax rate to be in the mid to upper teens, while Q4 will likely be in the mid to upper 20s. We are pleased with our business performance and year-to-date growth. As we mentioned to you on our earnings call earlier this year, we anticipated a more front-loaded year as a result of the new product introductions. Consistent with our previously communicated expectations, I am implicit within our guidance, we continue to expect a lower growth rate in Q4. However, we would point out that our expected growth for the entire year exceeds our original expectations and exceeds our long-term project growth rates. As we have previously stated, the quarterly growth often varies between this based on timing of vehicle introductions and other factors. Looking at the second half of this year, we will be wrapping some very successful powered vehicle introductions. Based on our visibility of the future new powered vehicle product introductions, our growth rate in 2018 will be lower than the 2017, and more consistent with our annual long-term target range of 2018. We remain confident in our ability to achieve our growth targets of mid to high single-digits at bike and low double-digits in powered vehicle over the long-term. Additionally, as we mentioned previously, powered vehicle growth is subject to new vehicle introduction timing and will not necessarily be linear between quarters or years. I’d also like to note that we are not providing guidance on GAAP EPS as it cannot be provided without reasonable efforts due to the difficulty of accurately predicting the elements necessary to provide such guidance and reconciliations. Finally, as a reminder, non-GAAP adjusted earnings per diluted share exclude the following items, net of applicable tax

[Larry Enterline:]

Thank you, Zvi. With that, we’d like to open the call for questions. Operator? Operator, are you there?

[Operator:]

Yes. [Operator Instructions] Our first question comes from Andrew Burns with D.A. Davidson & Company. Please proceed with your question.

[Andrew Burns:]

Thanks, and congratulations on the great results.

[Larry Enterline:]

Thanks, Andrew.

[Andrew Burns:]

I have sort of a longer term, big picture question. There was discussion about the Live Valve technology and you also have this intelligent ride dynamics and you are increasing this in electronics componentry embedded in your suspension products. If you could just may talk about how that will change the business going forward? What types of investments are required? What is the margin potential and price points this product when we get further and further advanced? Thank you.

[Mario Galasso:]

Sure, Andrew, this is Mario. So, Larry and Zvi can probably speak to maybe price points and different things, but from a technology standpoint, it is a focus of ours, you’ll remember that we’ve been speaking about Live in various forums for many of these calls, you referenced the IRD system which we did in collaboration which you know and that’s been on the market already for several years within the bike product line. And it is an interesting time for us. These things are packaged in mechanical sliding sort of legacy structures, which we know very well. But now we are into things like controllers and wiring harnesses and connectors and fast-acting valves and it’s a big area of focus for us here at Fox. And I think we are believers that with electronics and systems on these vehicles, you are going to see the suspension, talking to other elements of the vehicle and it makes for pretty exciting future and I think what, both in the performance and safety of a lot of the vehicles we are involved in.

[Zvi Glasman:]

In terms of the margin and the price points, we would tell you that we obviously only sell premium price products and when you saw things at the very top of our product line with the most technologies, those tend to have better margins than other products we sell. But on a blended basis, this is not inconsistent with the margin profile of the higher end products that we introduced and sold.

[Andrew Burns:]

Thanks and just to put it in other way, as we think about new product introductions over the next five years, is it fair to think that a greater percentages of those new introductions will include some sort of electronic componentry?

[Larry Enterline:]

Well, I think it’s fair to say, as you are going to see more products of this type introduced. It’s a transition. Again, these things are typically going to be initially at the higher end. I think over time, you will see that pick up as a percentage of the things that we bring out. I think you’ll see it on more vehicle classes in the future. Keeping in mind, when we say electronic suspension that still spans a large application range from mobile control which we’ve had out on other vehicle classes to things that get more and more fully active.

[Andrew Burns:]

Thanks and good luck.

[Larry Enterline:]

Thank you.

[Operator:]

Our next question comes from Mike Swartz with SunTrust. Please proceed with your question.

[Anna Glaessgen:]

Good afternoon. This is Anna on for Mike. First question, I just wanted to ask how we should be thinking about the e-mountain bike opportunity and how it’s evolving over time.

[Mario Galasso:]

Similar for the bike industry, Anna, it’s a big area of focus. So, we believe that our Live Valve technology has a real nice application in e-bike. There aren’t typically a lot of batteries and extra power sources on bicycles. So, while we do have a pedal on the application for Live Valve with its own batteries as e-bikes have a larger battery capacity. So that allows us to do some different things with it. But e-bike is a big focus in the industry. We are playing well with some e-bike specific products for mountain bike. And over time, we will also participate in a more urban community-oriented versions of those.

[Anna Glaessgen:]

Got it. That’s helpful. And then, could you remind us how you are thinking about using your growing free cash flow?

[Zvi Glasman:]

Yes, look, in terms of priorities, first and foremost to support the growth of the business whether that means investing in production facilities like in El Cajon or in Taiwan or whether that entails investing in ERP systems that would be priority number one. I think priority number two would be strategic acquisitions that meet our financial and strategic criteria. I think we’ve done share buybacks before and we would look at share buybacks. We look at paying down bit more aggressively as well.

[Anna Glaessgen:]

Got it. And then, last quarter you called out your strength in oil regions. Has that continued?

[Larry Enterline:]

Can you repeat that again?

[Anna Glaessgen:]

Sorry, last quarter, you called out that you are seeing relative stronger oil region performance has that continued into the second quarter?

[Larry Enterline:]

Yes, I think we were – we continued to be pleased with the recoveries we saw in some of the parts of the world that are more dependent, particularly on Western Canada. Also a little bit in the Southwest in the U.S. So, again, I think we are happy that they are continuing to recover. I don’t think we would say that they are fully back.

[Anna Glaessgen:]

Right, yes, that makes sense. And then just last one from me, there has been a lot of commentary that bike OEM exports from Taiwan has been declining. Any color you can provide on what’s going on there?

[Larry Enterline:]

Well, I think are you hearing the overall bike industry, I think it’s been pretty well documented that that’s been challenged. But within that, I think we continue to see that mountain bike is doing better than overall bike and high-end mountain bike is doing better than overall mountain bike. So, I think, clearly, the overall bike industry, world mountain, hybrid comfort cruising is having some challenges. E-bike continues to be troubled with the bright spot in all of that. But I think maybe that’s what’s you are hearing.

[Anna Glaessgen:]

Got it. Thank you very much.

[Operator:]

Our next question comes from Craig Kennison with Baird. Please proceed with your question.

[Craig Kennison:]

Hey good afternoon. Thanks for taking my questions as well. Wanted to jump into the mountain bike category first. Revenue was up 3%, but it’s my impression, you are gaining share and you are also growing your content per bike and you are entering new price points. So, what could you tell us about the broader marketplace assuming you are significantly outperforming it?

[Larry Enterline:]

Again, I think when you look at the markets we principally serve, I think from a broader standpoint, we think inventory is in pretty good shape now. Broadly again there is, you could still point to a bike model that might have an issue, but we think broadly we feel pretty good about that. We still think overall, the category is not resumed to kind of growth that we are seeing several years ago. We – again look to continue to perform and hit our targets with – as you noted things like new products getting into the lower price point, continuing to expand our effort and so, again, I would say that we believe we are outperforming the market that we find ourselves in. And we are doing it with through those mechanisms.

[Zvi Glasman:]

Craig, I would like to point out that this year, in the beginning of the year we called out that there would be different seasonalities and on a year-to-date basis, bike is actually up 8% which is more in line with our long-term targets. So for the full year, we continue to expect price to be in line with our mid to high single-digits of target growth rate which I do say is likely outperformed the year.

[Larry Enterline:]

And Craig, you look at a lot of the stuff that comes out about the industry and announcements by some of the other public players and I don’t think there is any – our sort of review now is that’s not better than it was a few quarters ago. But still, I think it’s challenging for a lot of the people that are operating it.

[Craig Kennison:]

Yes, that’s really helpful. I am trying to get a feel for how much of your growth, call it, year-to-date that 8% metric is a function of industry volume growth versus your ability to take share with more content per bike or your ability to get on some smaller bikes where you didn’t have product before with maybe some of the…

[Larry Enterline:]

The answer to that question would be, yes.

[Craig Kennison:]

Got it. And then, second question on Live Valve. Really impressive technology we saw on the Polaris units. We know you’ve partnered with them. So there is got to be some joint intellectual property there. What’s the exclusivity you have with Polaris and at what point might that product be released more broadly to the power sports markets?

[Larry Enterline:]

Craig, I would first say, we don’t comment on it, our relationships with any specific customer. But, clearly, we have put a lot into the Live Valve technology both in the bike area, as well as the powered vehicle area. I think you will see that in the future. But again, Polaris I think was an early adopter here of the technology and there are certain elements in their system and again if you look at it, it’s broken down. We did certain parts of it dealing with the Live Valve and the Shock. They clearly did a lot of work in the control parts of the technology. So I think going forward, clearly, they’ve got the things that are proprietary to them that we wouldn’t necessarily have the freedom to offer. But we believe that in the future, that we will be able to offer our technology to a wide variety of applications.

[Craig Kennison:]

Okay, great. Congratulations.

[Larry Enterline:]

Thank you.

[Operator:]

Our next question comes from Rafe Jadrosich with Bank of America Merrill Lynch. Please proceed with your question.

[Rafe Jadrosich:]

Hi, good afternoon. Thanks for taking my questions.

[Larry Enterline:]

Hey, Rafe.

[Rafe Jadrosich:]

Hey, I was wondering if you could – can you walk us through just the SG&A. I know you talked about for 2017 or this is going to be a little bit lower than 17% this year? And then set of sales and then little bit higher, kind of go back up next year. Can you just walk us through what’s driving that dynamic?

[Zvi Glasman:]

Yes, couple drivers. We have been saying consistently that our long-term SG&A target is kind of like high 16%, maybe as high as 17%. This year, it’s a little lower. As we’ve been saying, it’s not an area we are looking to get operating leverage because we believe that continuing to reinvest in the business whether it be with sales and marketing, R&D or just – or in the platform is the thing that enables us to continue to grow. So with that caveat, next year there is a couple of things that are different than this year. Firstly, as of June 30, 2017, our market cap is such that, we anticipate exiting emerging growth status. We will be in EGC and without – with – along what – what comes along with that is having SOX 404 requirements, higher audit fees, higher internal cost in order to be SOX 404 compliant. That’s thing number one. There is some other factors, we are getting ready to really launch into the next phase of our ERP. So we do think our ERP spending is going to pick up. And then lastly, we are hiring aggressively – largely in R&D in order to support the revenue growth. So we think about pick up next year, closer to the long-term projects.

[Rafe Jadrosich:]

And then, in terms of just the gross margin mix benefit that you are seeing, can you give a little bit more color on what’s driving that? Is that having the large auto OEMs? Is that a higher gross margin business? And then, the mix… okay, you start.

[Zvi Glasman:]

Well, we don’t comment specifically on customers unless as you know there is not too many of those. So, I’d be reluctant to speak about them specifically. But if you look at our gross margins over the last several years, we’ve been consistently driving it up and customer and products and channel mix has, in some case has been a drag and in other cases it’s been a benefit. It is a bit of a benefit this year. But along with that comes our various efficient initiatives and supply chain initiatives and also designing for manufacturability and move it to Taiwan and so we have a whole host of factors that are helping to drive the margin up and we hope to continue that margin improvement over the next several years.

[Rafe Jadrosich:]

In the past, you’ve given some long-term gross margin targets or at least in terms of expansion or where you could be – I think you was talking about the 20% plus EBITDA margin. So do you feel, based on kind of what’s happened over the last six months and you are sort of exceeding expectations, are you more confident that you will be able to – I guess, meet or exceed that or is this sort of in line with what your expectations have been?

[Zvi Glasman:]

Look, I think, as the lower operating expenses this year is going to be a inventory at least as it pertains to the next year. I mean, I wouldn’t say we feel more or less confident. We continued to be confident. We’ve got a long-term program in place with a lot of this in folks in the organization focused on delivering their particular aspects of improved margins and continued to march.

[Rafe Jadrosich:]

And then, last one from me. Just in terms of the – has there been any changes to your input cost outlook? Thank you.

[Zvi Glasman:]

Well, I would say it’s more or less in line.

[Rafe Jadrosich:]

Okay, thank you.

[Operator:]

Our next question comes from Jim Duffy with Stifel. Please proceed with your question.

[Jim Duffy:]

Thanks, good afternoon guys. Congratulations on the momentum and recent success.

[Larry Enterline:]

Thanks, Jim.

[Jim Duffy:]

Few questions from me. Within powered vehicles, I am interested in the evolving mix of OEM to aftermarket. Clearly, you have some great OEM programs contributing to growth as the aftermarket business halos that?

[Zvi Glasman:]

I think that the aftermarket business, as you say, we feel like the powered vehicle business is performing well along the diversity of our entire product portfolio. Clearly, the reintroduction of the Ford program and the launch of the Toyota had a good impact on us this year. But we would tell you that, across the entirety of our portfolio, we feel pretty pleased with the performance.

[Larry Enterline:]

I think, clearly, Jim, we’ve always believed that there is a great virtuous circle connection between OEM and aftermarket and I believe it’s fair to say that getting our product out there on OEM vehicle clearly does help our aftermarket on-road replacement shock business.

[Jim Duffy:]

Have you guys ever seen correlation in the aftermarket business to sore our new vehicle sales?

[Larry Enterline:]

No, I think if you try to use the figures coming out of Detroit and Worldwide Automotive figures, probably not a great correlation there. What you find people when they buy – for instance a new truck, they are going to take it out and get it with the suspension on it. That’s a category. I think when things soften up a little bit and they can’t go up and buy that new trucks, then they’ll do a upgrade the one keep it another couple years. So, I don’t think there is a great correlation there. We look at the general health of – the general consumer market a lot. Again, we are believers in the better the economy, the better our business will do. I do think there will be a correlation there. But, in terms of trying to tie it broadly to new vehicle sales, probably not a great correlation.

[Jim Duffy:]

Okay, and just next question, I’ll preface it by saying it may not be an easy one to handle. But the question on everyone’s mind in the investment community is does this – for all of 2017 growth create impossible compares as you look out to 2018, to the best of your ability, can you guys share some thoughts on that please?

[Zvi Glasman:]

Sure, firstly, it’s premature for us to provide 2018 guidance, but we would…

[Jim Duffy:]

Fair enough, yes.

[Zvi Glasman:]

We would tell you that, clearly 2017 growth was above our long-term project growth and so, we would not expect a similar growth profile next year. While we are not prepared to give you a long-term – our 2018 guidance, we will continue to feel confident about our long-term growth targets.

[Jim Duffy:]

Okay, great.

[Larry Enterline:]

Jim, I think, as Zvi talked about this before, in powered vehicle particularly, you’ve got – your business is definitely tied to some of these new vehicle launches, right. And that’s they are all over – we don’t necessarily know now exactly when everything is going to happen on OEMs with that we may have variability there and I think what we try to tell people, hey, from quarter-to-quarter or even year-to-year these things are going to vary, right. This year, we had a great year. We are having a great year based on some of the introductions. Next year as we said, well it’s way too early for us to put out a forecast because we don’t know where everything is. It might be a bit lower depending on that or it could be the same or it could be a little higher, again. So, we don’t know.

[Jim Duffy:]

Fair enough. Thanks for sharing the thoughts guys. Appreciated.

[Operator:]

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Larry Enterline for closing remarks.

[Larry Enterline:]

Thank you. Thank you for your questions and your interest in Fox. We look forward to continuing to execute our plans and updating you on our progress as we go forward with these quarterly earnings calls. I am also thankful for the support of our customers and suppliers and the hard work of our great group of enthusiastic employees, all keys to our continued success. Thank you, and have a good day.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.