Eastman Kodak Company
Q1 2015 Earnings Call Transcript

Published: 8 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Eastman Kodak Q1 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over Mr. Dave Bullwinkle. You may begin, sir.

[David Bullwinkle:]

Thank you. Good afternoon. My name is Dave Bullwinkle, Director, Global Financial Planning and Analysis and Investor Relations for Kodak. Welcome to the First Quarter 2015 Kodak earnings call. At 4 p.m. this afternoon, Kodak filed its quarterly report on Form 10-Q and issued its release and financial results for the first quarter of 2015. You may access the presentation and webcast for today's call on our investor center at investor.kodak.com. During today's call, we'll be making certain forward-looking statements as defined by the United States Private Securities Act of 1995. These forward-looking statements are subject to a number of uncertainties or risk factors which are clearly described in the company's 10-K and which are qualified by the safe harbor provisions in our filings. We advise listeners to read these important cautionary statements in their entirety, as any forward-looking statement needs to be evaluated in light of these important risk factors or uncertainties. In addition, the release just issued and the presentation provided contains certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website in our investor center at investor.kodak.com. Speakers on today's call will be Jeff Clarke, Chief Executive Officer of Kodak; and John McMullen, Chief Financial Officer of Kodak. Jeff will provide some opening remarks, his perspectives on our quarterly performance, a review of our new division structure and an update on the outlook for the company. Then John will take you through our cost reduction update, additional details of our first quarter results and cash flow results and outlook, before we open it up to questions. As this is our first reporting on the new division structure, we will be spending more time describing each of the divisions and reviewing the full year 2014 results under this structure. The remarks on this call will be longer than previous calls. We will extend longer than 1 hour if necessary to take your questions. I will now turn this over to Kodak CEO, Jeff Clarke.

[Jeffrey J. Clarke:]

Thanks, Dave. Welcome, everyone, and thank you for joining the Q1 investor call for Kodak. On the call today, I'll provide you some comments on Q1 2015 and review our divisional finance results for the first time since we put the new organization in place at the beginning of 2015. I'm pleased to provide increased transparency to Kodak's business. I will also update you on our expectations for the year. As Dave mentioned, our prepared remarks will be longer than usual as we're covering divisional results for the first time for the full year 2014. I encourage you to get comfortable and relax for a bit. Let's get started. Looking at Slide 5. For the total company, revenue of $427 million for the quarter is a $61 million decrease from the prior year, more than half of this reduction is a result of foreign exchange. On a constant currency basis, revenue in Q1 2015 reflects a reduction of $26 million or 5% versus Q1 2014. The remaining decrease is driven by a $15 million reduction in consumer inkjet printer cartridge sales and a $9 million nonrecurring intellectual property revenue for the first quarter of 2014. Within the quarter, year-over-year growth in key product lines included

[John Nicholas McMullen:]

Thanks, Jeff, and good afternoon. Today, the company filed its Form 10-Q for the quarter ended March 31, 2015, with the SEC. I recommend that you read this filing in its entirety. This is the first reporting of the company after announcing our new division structure in December 2014. In my remarks, I will take you through some housekeeping items, provide an update on our cost-reduction programs, discuss the divisional results for the first quarter, provide you with details of the use of cash in the first quarter and update you on our full year expectation for cash. First, the housekeeping items. As we indicated in our last earning calls, we have recast the quarters of 2014 to the new divisional structure. This information is included in the investor presentation as an Appendix. Jeff took you through the annual 2014 numbers earlier in the call. In addition, our segment measured in our Form 10-Q has been changed to be aligned with how you're measuring the new divisions. Segment earnings or loss in the Form 10-Q is equal to operational EBITDA by division. You will also find operational EBITDA before corporate SG&A and the corporate SG&A allocated to each division disclosed as part of our MD&A in the Form 10-Q. We will continue to provide this level of transparency going forward. When we last spoke in March, I provided an expectation regarding linearity in 2015. Let me reiterate what I said. During 2014, the weighting of our first half and second half operational EBITDA was roughly 25% and 75%, respectively. You should expect similar linearity in 2015. One factor is the more significant impact of foreign exchange and increases in the cost of aluminum in the first half of the year versus the second half based on how these trended throughout the course of 2014. Second, like 2014 and years prior, the Print Systems business performance is more heavily weighted in the second half. Third, as we continue to grow our installed base of our PROSPER and packaging businesses, the annuity streams of those businesses will ramp throughout the year similar to last year. Now I'd like to update you on the status of our cost reduction programs. As we shared with you on our March call, we expect greater than $100 million in operational SG&A and R&D cost reductions for the full year of 2015. As you can see on Slide 12, we have made significant progress in the first quarter towards this objective. Based on actions taken through the end of the first quarter, the reduction in operational SG&A and R&D was $35 million year-over-year for the quarter and the annual run rate of savings is approximately $80 million. Headcount has been reduced by approximately 20% year-over-year and benefit reductions, which were effective at the beginning of 2015, will provide $10 million in annual savings and operating expenses. These improvements are the results of continued actions, including headcount reductions, reduced overhead cost, savings from global benefit changes, facilities consolidations and renegotiations of vendor contracts. We continue to focus on opportunities to further reduce our cost structure going forward by driving a simpler, more efficient and more execution-oriented organization consistent with our new divisional structure. We have made significant progress in this area, and we will continue to take actions as appropriate based on the business model needs of each of our divisions. Now I'll take you through the divisional results for the quarter. Moving to Slide 13 and beginning with the Print Systems Division, revenue decreased by $34 million from $288 million in 2014 to $254 million for the first quarter of 2015. This is due to the impact of foreign exchange. Operational EBITDA was $13 million for the quarter, up from $12 million in the prior year. Within PSD, total plate volumes increase the 2% year-over-year driven by 94% increase in SONORA plate volume. Due to the strength of SONORA, we are adding capacity in our Columbus, Georgia, plant while we exit our Leeds facility in the U.K. The new Columbus line is now able to provide SONORA plates and we have begun customer testing in order to start selling SONORA from the Columbus plant in the third quarter. In the Enterprise Inkjet Solutions Division, revenue decreased by $9 million from $48 million in 2014 to $39 million for the first quarter of 2015. Operational EBITDA was negative $13 million for the quarter compared with negative $12 million in the prior year. This reduction is due to the decrease in the legacy Versamark business as well as the impact of a large PROSPER printhead sale in the first quarter of 2014. We also continue to make significant progress on our PROSPER installed base in the first quarter. We ended the first quarter with 44 units in the installed base, up from 39 units at year-end 2014. In addition, our pipeline remains strong. We continue to expect system placements of greater than 25 units for the full year, and we are off to a good start through Q1. PROSPER page volumes were up in total by 46% in the quarter versus the prior year. This is a metric we track as it is the key indicator of annuity growth going forward. Within the quarter, PROSPER annuities grew 23% year-over-year. In the Micro 3D Printing and Packaging Division, revenue increased by $2 million from $29 million in 2014 to $31 million for the first quarter 2015. On a constant currency basis, revenue improved by $5 million year-over-year or 17%. Operational EBITDA was breakeven for the quarter, an increase from negative $2 million in the prior year. Our FLEXCEL NX product continue to perform well. In the quarter, FLEXCEL NX plate volume improved by 27% year-over-year. The growth associated with the packaging business was offset by the continued investment in the Micro 3D Printing business. As Jeff indicated, we have 2 technology areas which we are investing in to develop products for touchscreen sensors, silver mesh and copper mesh. Our expectation for modest levels of revenue in Q2 2015 for touch sensors remains unchanged. Let me briefly provide some color on the remaining divisions. Software & Solutions revenue for the first quarter of 2015 was $28 million, an increase of $4 million year-over-year. Operational EBITDA also improved by $3 million from negative $1 million in the first quarter of 2014 to $2 million in the first quarter 2015. The division benefited from a government contract within the quarter. This, combined with the impacts of cost reductions and business mix and workflow solutions, resulted in the improvement in operational EBITDA. The Consumer and Film Division delivered revenue in the first quarter of 2015 of $72 million, a decrease of $14 million or 16% compared with the first quarter of 2014 due to the expected reduction in consumer inkjet and motion picture film. Operational EBITDA improved by $8 million year-over-year from $10 million in the first quarter of 2014 to $18 million in the first quarter of 2015. The improvement in operational EBITDA was due to improved inventory management and manufacturing costs reductions in Entertainment and Commercial Films. A favorable impact of inventory management in the first quarter should not be viewed as a run rate benefit for this division going forward. We expect decreasing operational EBITDA as the year progresses due to the reduction in consumer inkjet revenue. Our 2 other divisions are the Intellectual Property Solutions Division and the Eastman Business Park Division. The Intellectual Property Solutions Division had no revenue in the first quarter of 2015, down $9 million from the first quarter of 2014 due to nonrecurring revenue in the prior year. Operational EBITDA in this division was negative $7 million, a reduction of $7 million versus Q1 of 2014, again, due to the nonrecurring IP revenue in 2014. The Eastman Business Park Division was essentially flat year-over-year for the quarter. Revenue for Q1 2015 was $3 million and operational EBITDA was negative $1 million. As Jeff mentioned in his remarks, the objective of this division is to increase occupancy of the Eastman Business Park to attracting external companies as tenants of this unique offering. To summarize the results of the divisions overall, we exceeded our expectations and are pleased with the performance for Q1. Now let's focus on cash. As shown on Slide 14, the company's liquidity remained strong with ending cash for the quarter of $609 million. This reflects a decrease in cash of $103 million from year-end 2014. This was consistent with our expectations and the linearity built into our 2015 plan. As you can see on this slide, during the quarter, the company used cash primarily for interest expense and debt repayments; reorganization and legacy payments related to our Chapter 11 and reemergence process; capital expenditures, including cash usage associated with our commercial business; restructuring employee severance payments; cash used for prepayments and royalties; the year-to-date negative impact to foreign exchange rates on cash; cash used for working capital; cash pension payments and other individually insignificant cash items. To summarize the quarter performance, we continue to make significant progress in key businesses, while in parallel, improving the company's cost structure. We will continue to build on the progress we have made in both areas throughout 2015. Now I'd like to provide you with our outlook for cash in 2015 given the revenue and operational EBITDA expectations Jeff provided. On Slide 15, we continue to expect that in 2015 with a cash balance between $630 million and $650 million. Within this, we expect to move deposit of cash flow operations for the second half of 2015 and going forward. Let me provide you with a refresh of what we shared as drivers of cash performance back in March. In addition to operational EBITDA between $100 million and $120 million, we expect to generate cash from working capital of at least $50 million. Key uses of cash in 2015 include interest and debt repayments of about $65 million; legacy and final reorganization payments of approximately $30 million; reinvestment in our growing businesses through capital expenditures, including both direct and commercial capital of approximately $70 million; severance cash payments of approximately $50 million as we continue to drive efficiency within the new Kodak structure; and cash tax payments of approximately $20 million. Before I hand you back to Jeff and in closing, we've made very good progress in the first quarter of 2015 and will continue to take actions necessary to drive further simplification, speed of execution and efficiency where appropriate throughout 2015. We are also pleased with both the individual performance by division and overall performance of the company in our first quarter execution for the new structure. Like Jeff, I'm very excited with the many opportunities for Kodak and our ability to move to sustained growth and profitability for the company going forward. I'll now turn it back to Jeff for closing comments.

[Jeffrey J. Clarke:]

Thank you, John. In summary, we continue to carefully manage an exciting portfolio of Kodak offerings and opportunities while taking the actions necessary to ensure our successful performance and continued investment in those growth areas going forward. I'm pleased the with the 50% to 80% improvement we will see in operational EBITDA for 2015 on a comparable basis. On our March call, we provided you with some information regarding an operational EBITDA goal for 2016. While we're not providing guidance for 2016, based on the proportion of earnings for the second half of 2015 and the mix change from the Film and Consumer Inkjet business to core and growth businesses in the remainder of the company's portfolio, we feel an operational EBITDA of approximately $175 million is a reasonable goal for 2016. Contributing to this are the following

[David Bullwinkle:]

Thanks, Jeff. Michelle, we are now ready to open the Q&A session. Please provide the callers with the instructions for asking the questions.

[Operator:]

[Operator Instructions] Our first question comes from Shannon Cross of Cross Research.

[Celeste Santangelo:]

Actually, this is Celeste for Shannon. I had a couple of questions today. I wanted to start with the PROSPER Press Systems. You talked about adding 5 and then 5 additional agreements. Were these to 5 separate customers or people purchasing multiples? And are they new customers or existing? And then, generally, what's the time from agreement to installation?

[Jeffrey J. Clarke:]

I'll answer that questions, Celeste. So in the first quarter, the systems were with 2 customers, a significant set of shipments and revenue recognition to our OEM partner, Bobst, and to a different customer. For the 5 in contract but not yet delivered, those are for all individual customers. So overall, I say 7 customers over the -- for the 10 systems. And in terms of how long does it take? You know that depends on what the application is. So for the Bobst systems, because that's integrated into a complex process, the Bobst systems, those will take longer. Those should be -- some of those systems should be printing significant ink in the second half of this year, others may creep into the fourth quarter even a year after. So typically, we see probably a 6- to 9-month time frame from the time a system is shipped to a customer and installed and when they start printing at the speeds that we start seeing significant annuity growth. During that time, they are testing the system. They are running commercial jobs. But -- it takes a while for the both -- 2 things to happen, one, to get the local operators at the print shops become comfortable with the speed and the applications possible by this very complex machine, remember, this machine can print up to 1 billion pages a year, so this is a significant technological implementation. And second of all, it takes a while for the commercial part of the printer to build enough of business that they can feed this extraordinary machine, and so the combination of those take a while. That's why, over several years, we've been working with Wilen and now they are our largest page provider. So once they start getting the volume, then it works. Thanks, Celeste.

[Celeste Santangelo:]

Great. And I just -- I had a question on the plates business.

[Jeffrey J. Clarke:]

Sure. Go ahead, Celeste.

[Celeste Santangelo:]

It looked like revenue was down, although volumes are up. Could you just talk about maybe pricing and currencies, what kind of impact they had?

[Jeffrey J. Clarke:]

Yes. I mean, currency was more than half of the decline. And we continue to have an ability to have favorable mix on pricing because of the SONORA growth. SONORA is priced higher than our traditional plates, but there is good pricing competition on the non-SONORA plates, the traditional digital plates is a very competitive market.

[Celeste Santangelo:]

Okay. And then just a question on the Micro 3D. Could you talk about maybe what you saw from currencies, what kind of impact you saw?

[Jeffrey J. Clarke:]

Okay. So Micro 3D, we had no material revenue, so currency wasn't a problem. On expense that's -- expenses are primarily in the U.S., so no currency impact on that. Now if your question is on the other part of the division, on packaging, our largest business is in Europe. And so there was a headwind from currency on the packaging partner for Micro 3D division.

[Celeste Santangelo:]

Okay. Okay. And then for Software & Solutions, do you think that maybe additional cost cuts could happen there?

[Jeffrey J. Clarke:]

You know what, I think we've done some significant reengineering there over the last year. This -- in Software & Solutions, this is a business with a very strong product set. We're just coming out with Printer G7, which is a differentiated offering versus the dot releases that go -- went between 6 and 7. It is a product that is well -- it's well distributed, it's got strong market share. I think we're really focusing organic growth and investments in the go-to market in this business [indiscernible] cost cuts.

[Celeste Santangelo:]

Okay. Great. And then just lastly, on the -- how should we think about the Hollywood film agreement benefiting EBITDA within the Consumer and Film division?

[Jeffrey J. Clarke:]

Well, it did. It did. One of the key parts of the Q1 results and one of the key accomplishments over the last year has been really a reengineering of our film business. This was a business that was -- had a very difficult first quarter of last year, was a very large loss. And it's improved since then. And as I mentioned, we see this business as being breakeven by the end of the year here. And so a part of that is commitment for volume from the major studios and also a much better inventory management by our team and better manufacturing work. So it was very important to the turnaround for multiple reasons, mainly because it allowed us to know and load our factories in a fashion because we know that we have a set of demand. But that's -- remember, that's a very complex division because while we have motion picture film, and that certainly gets a lot the press, we also have a very strong archival film business that's growing, because we knew archive -- you can archive digital as well as traditional film. And we have a very strong industrial business in film with Printed Circuit Boards where that is declining in a much [indiscernible] than we've seen in, particularly, the print side of film. So we're seeing some good initiatives on this business turning around, and we think it's an important business going forward.

[Operator:]

Our next question comes from Alex Yaggy of Cortina Asset Management.

[Alexander E. Yaggy:]

I just wanted to ask you a couple of quick questions around, first, UniPixel and then PROSPER. Now that the UniPixel agreement has, I guess, cease to exist, can you explain to what that means for you financially? Leases, I understand, that they had some cost that they were running through their system, and if you're relying upon their customer base to start to monetize that to the back half of the year?

[Jeffrey J. Clarke:]

Right. So financially, the biggest impact is that the prior agreement with UniPixel, which has ended but has a 90-day notice period that we're 15 or 20 days into, the biggest impact is that, that deal had a sharing of the revenues at roughly a 50-50 basis. And going forward, nearly all the revenues will go to Kodak. And so the biggest impact of this -- for this program is that Kodak has complete control over the program now, and we'll reap all of the economic upside of the program, short of a modest royalty to UniPixel. So it's very good news for Kodak from that perspective. On the cost side, it will mean increased costs. So as you can tell in the numbers, Kodak was spending a little over $1 million a month investing in this program down to about $1.5 million last year. The decrease is because we achieved significant progress on the program. And where we're going to need -- so for the next 90 -- no, it's 80 days, UniPixel is contractually required still to contribute its portions -- portion of the expense sharing. And after that, Kodak will have to pick up most of the expense. But most of the expense at that point, from an engineering perspective, will be completed. And so there's not a significant increase because a lot of that work will be behind us. Where we will need to invest, in terms of new, will be -- we will need to purchase the equipment from UniPixel from the partnership. And then the second piece is we're going to need to add sales resources because the way the partnership -- the partnership was multifaceted. But in kind of shorthand, UniPixel was responsible for the go-to market and market sizing and the customer pipeline and development, and Kodak did certainly some heavy lifting on the technical and engineering side. And so we're going to have to invest some additional resources on the go-to market side, as well as pick up the entire bill post the notice period for engineering as we go forward.

[Alexander E. Yaggy:]

Okay. And I think the expectation was that you'd start to see some revenues in the back half of the year. Is that still reasonably the case? Or do you have to go out and develop a new potential customer base in order to do that without UniPixel?

[Jeffrey J. Clarke:]

Well, the existing customer base shifts over the existing pipeline. But we -- in this business, I have found startup businesses that have significant technical advancement in them, particularly with new sets of customers that are trying a new product for the first time. You need to be very circumspect when you make forecasts. So yes, I expect we will shift some revenue in the second half of the year, but it's going to be modest. As we are -- this is a program that has been many years in development. It is a significant advancement beyond some of the other technologies in the market, and so it will take longer to adopt. So we're going to be conservative as we make projections going forward in this business. We're committed to the technology, we like to be of control of the program, but we're going to be conservative when making forecast in this. And we have taken the risk and opportunities into our guidance projections for this year.

[Alexander E. Yaggy:]

Okay. And then just quickly on the PROSPER. If you have 5 new customers, 5 new going out this quarter, 5 contracted, can you just talk a little bit about the economic [indiscernible] machines? How you get paid over time? What the annuity is per machine? Kind of on average so we could think about 2, 3 years down the road, what kind of revenue you'll be generating from there?

[Jeffrey J. Clarke:]

Yes. This is going to differ by application. Where we have the richest set of annuities is in the OEM market. And so the Bobst partnership related to printing on packaging, starting with corrugated and moving to other types of packaging, will be quite lucrative because of the amount of the concentration of ink that is used in that industry. Color is important and so -- versus transaction types and PROSPER can do both. And so if we're moving into heavy color applications, newspaper printing, that type of application is going to have less profitability than more color applications. So it differs significantly. But as a rule of thumb, you should think about somewhere around $0.5 million a year in ink consumables for each system. And as I said, you should plan, if you're doing some modeling here, 6 to 9 months delay between that kicking in at that level and from the shipment or recognition of the system. So at a high level, we've given you guidance here, we expect the division to breakeven before corporate costs, which is a $30 million improvement year-over-year. And I want to emphasize that there are 2 parts of that improvement. There's an amount larger than that $30 million of improvement with PROSPER. While at the same time, the Versamark base[ph], which is quite profitable today, declines. So you've got 2 moving lines there. So PROSPER is going to have significant economic impact and favorable economic impact this year compared to last year for the company.

[Operator:]

[Operator Instructions] Our next question comes from Amer Tiwana of CRT Capital Group.

[Jack Chan:]

This is Jack Chan, in for Amer. A couple of questions. For Print Systems Division, what was the impact of aluminum costs? And do you guys have any other hedges in place?

[Jeffrey J. Clarke:]

Yes. For the quarter, do the -- are we giving the number this quarter or...

[John Nicholas McMullen:]

A rough number for the quarter. Yes, roughly, the cost impact, the way we provided the guidance was about $6 million in the first -- $5 million to $6 million probably in the first quarter was the aluminum impact, not built in on a year-over-year basis.

[Jack Chan:]

And for the full year, John?

[John Nicholas McMullen:]

And for the full year, roughly $20 million.

[Jeffrey J. Clarke:]

So it's a headwind that -- so we're looking at improving the overall bottom line of our Print Systems Division in '15 over '14, and that is overcoming the $20 million of aluminum cost that you referenced.

[Jack Chan:]

Right. And do you guys have any hedges for aluminum or none whatsoever?

[John Nicholas McMullen:]

Yes. We do hedge a percentage of our aluminum purchases over time through the course of the year. It's not 100%, but we do put on hedges on kind of a rolling quarter basis. And those were factored into our assumptions in terms of what we already saw and what we already knew in 2014 relative to 2015.

[Jack Chan:]

Got it. My next question is on the leverage. Any thoughts on refinancing the term debt? And any feelings in the right level of leverage on a gross basis for the company going forward?

[John Nicholas McMullen:]

Yes. So clearly, we are always watching the market in terms of opportunities for us going forward. So there's no change for us versus where we were in last year. So we will pay attention to the market and what opportunities are there for us. I think, over time, do we want to be operating with less debt as a company, sure. Yes, and I think you'll see over the next couple of years, as the company moves and opportunities and decisions we make, we'll talk a lot more about what we think the appropriate capital structure should be on our company on a longer-term basis.

[Jeffrey J. Clarke:]

One of the reasons, and one that we want to increase the transparency for the divisions is so people would understand the stability of the profitability of the PSD business for Kodak. As you can see, it's more than half of our revenue, half of our profitability. We're able -- even in a relatively slow growth or no growth market, we're able to maintain or increase our EBITDA and that -- in this business. And so that's very important for the leverage thought. This is a business that -- again, it's a portfolio that adds very stable component of our operating structure. And it allows us to have some of the growth businesses that are more volatile, that would not be as -- would not be able to put much leverage on. So a key part of our portfolio is a heavy annuity-based business in PSD. And as we build some of the digital imaging and packaging annuities, you'll see our ability to keep this leverage. And as John said, you always want to revisit what the best capital structure is. But this is a company that can handle that pretty easily.

[Jack Chan:]

Great. The next one I had was on working capital. I know you anticipate striking $50 million this year. But any thoughts, longer term, on reducing the amount there and extracting more efficiencies?

[Jeffrey J. Clarke:]

Yes. I think, for us, certainly, as the company -- as we've shown over the last couple of quarters, the company getting stronger and we get further away from the Chapter 11 process. I think our ability, in general, in the marketplace relative to working capital improves. I think also within that, our own disciplines around working capital, I think, the divisional structure from a predictability point of view, our ability to forecast, our ability to understand the inventory requirements of the company going forward is a big help. We haven't disclosed, and I won't get into the absolute numbers at this point, but we have a cash conversion cycle that I think we can improve, over time. And certainly, we have some goals this year around that built into our assumption of working capital improvements. I think they are, in fact, I think they're reasonable goals. I think there's more for us over time.

[Jeffrey J. Clarke:]

Jack, anything else?

[Jack Chan:]

Have you guys scheduled an Analyst Day?

[Jeffrey J. Clarke:]

Yes. We're -- we are going to be working with some of you to understand what the best timing for you is. But it would probably be in the early summer. Dave, any update on that?

[David Bullwinkle:]

No. That's the time frame we're still looking at.

[Jeffrey J. Clarke:]

Yes. And so we'll let you know as soon on that.

[Jeffrey J. Clarke:]

Thank you, Jack. Are there any other questions?

[Operator:]

There are no further questions.

[Jeffrey J. Clarke:]

Well, thank you very much. I appreciate everyone's time. I guess, I had predicted this might go over an hour, but we snuck it in. So I thank you all, and I look forward to talking to you next quarter. Again, I'd like to just share how excited I am about our execution in the new divisional structure, we're seeing a lot of progress and a lot of the right tone here, and so I'm pleased. And thank you all for your time.

[Operator:]

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