Lear Corporation
Q1 2010 Earnings Call Transcript

Published: 6 May 2010

[Operator:]

Good morning. My name is Sarah and I'll be the conference operator today. At this time, we’d like to welcome everyone to the Lear Corporation First Quarter 2010 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to our host, Mr. Ed Rollenthal [ph], Director of Investor Relations. Sir, you may begin your conference.

[Unknown Speaker:]

Thanks, Sarah. Good morning, everyone. Thank you for joining us for our First Quarter 2010 Earnings Call. Review materials for our earnings call will be filed with the Securities and Exchange Commission and they are posted today on our website, www.lear.com through the Investor Relations link. Today's presenters are Bob Rossiter, Chairman, CEO and President; and Matt Simoncini, Chief Financial Officer. Also participating on the call are Terry Larkin, Senior Vice President and General Counsel; and Mel Stephens, Senior Vice President of Human Resources and Communications, as well as others on the Lear finance leadership team. Before we begin, I'd like to remind you that during the call, we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the last slide of this deck and also in our SEC filings. In addition, we will be referring to certain non-GAAP financial measures. Additional information regarding these measures can be found on the slide labeled Non-GAAP Financial Information, also at the end of this presentation. Slide #2 outlines the agenda for today's review

[Robert Rossiter:]

Thank you, Mr. Ed. I think I just want to start off by saying that, obviously, we're also doing quite well since the second half began of 2009 and we continue on in 2010; things are looking up. Our positive momentum, we've completed our refinancing. We have no significant debt maturities until 2018. Sales growth, margin improvement in both our major product lines, Seating and Electrical Power Management Systems, and we've had positive first quarter results. We've got a strong start to the year. We continued strong operating fundamentals. Our efficiency is up all over the world and we're operating at world-class levels in terms of quality. For the sixth straight year, we were named GM Supplier of the Year, and also received Best Supplier Award from the Volkswagen Group in Europe. The outlook for 2010, we're going to increase today because production's coming back, so we're going to improve our margins and increase our cash flow outlook. If you’ll turn to Slide #4. As I said, we completed the refinancing. We have no significant debt maturities until 2018. We've improved our long-term financial flexibility, lowered our overall debt levels and lowered our interest rates in the process and we freed up collateral. Our capital structure provides us the flexibility to invest in our business and execute our strategic objectives going forward and the company continues to have strong liquidity position. With that, I'll turn it over to Matt.

[Matthew Simoncini:]

Thanks, Bob. Please turn to Slide #6. This slide provides the financial highlights for the first quarter. Industry production improved significantly, with mature markets increasing from depressed levels of a year ago and growth in emerging markets continuing. Net sales were up 36% to $2.9 billion. Core operating earnings were $138 million compared to the loss of $67 million a year ago. The turnaround in profitability reflects the improved production environment, favorable cost performance and the benefit of operational restructuring actions. Free cash flow was $4 million versus a use of $219 million a year ago. On the next few slides, I'll cover our first quarter results in more detail and provide a revised financial outlook for 2010. Slide #7 shows the vehicle production environment in our key markets for the first quarter. Industry production was up in all our major markets. Overall, global vehicle production was 17.2 million units, up 47% from last year. Slide #8 provides our financial scorecard for the first quarter of 2010. Starting with the top line, net sales were up 36% to $2.9 billion, driven primarily by increased production in all major markets and the favorable impact of foreign exchange. In the first quarter, about two-thirds of our sales were generated outside of North America. Net income was $66 million, an improvement of $331 million from last year's net loss. Reported SG&A, as a percentage of sales was 4.4%, down about 80 basis points from a year ago. On an absolute basis, reported SG&A was up $16 million compared to last year. This reflects increased program development costs of certain compensation programs, partially offset by higher restructuring costs in the prior period. Interest expense was $19 million, down significantly from $56 million last year, reflecting the lower debt levels. Depreciation and amortization was $59 million compared with $66 million a year ago. The lower expense reflects lower capital spending over the last few years as well as extended asset lives as part of the Fresh-Start Accounting. Other expense increased to $21 million compared to $13 million a year ago. The increase reflects the write off of $12 million in deferred finance fees resulting from the accelerated repayment of our first and second lien term loans and unfavorable foreign exchange, partially offset by an improvement in equity earnings of our non-consolidated joint ventures. Slide #9 shows the impact of our non-operating items in our reported first quarter results. Our reported pre-tax income, before interest and other expense, was $120 million. Excluding the impact of operational restructuring costs and other special items, we had core operating earnings of $138 million, compared with negative core operating earnings of $67 million a year ago. The improvement in earnings reflects the increase in sales, favorable operating performance in the second from operational restructuring actions. To help clarify how these special items impact our financial statements, we've indicated the amount by income statement category on the right-hand side of the chart. Turning now to our performance by product line. Slide #10 shows adjusted margins for Electrical Power Management segment. In the first quarter, the adjusted margins for this segment improved to 5%. The improvement from a loss a year ago reflects higher global vehicle production, backlog, favorable operating performance, including the savings from operational restructuring, partially offset by selling price reductions. We expect continued improvements in year-over-year margins. However, we believe absolute margins for the balance of the year will decrease somewhat from the first quarter. The lower margins in the back half reflect lower relative production, as well as increasing new business development expense and higher launch costs. Please turn to Slide #11. In the first quarter, the adjusted margin for our Seat business improved to 6.8% from 1.4% a year ago. The improvement primarily reflects higher global vehicle production, favorable cost performance, including savings from operational restructuring, partially offset by selling price reductions. We expect continued improvement in year-over-year margins. However, we believe absolute margins for the balance of the year will decrease somewhat from the first quarter. The lower margins in the back half reflect lower relative production, as well as increasing new business development expense and higher launch costs. Please turn to Slide #12. Free cash flow was a positive $4 million in the first quarter compared to a use of $219 million last year. The improvement of free cash flow primarily reflects improved earnings. Our cash balance decreased by $250 million in the first quarter to $1.3 billion, due mainly to the paydown of debt and related fees in connection with the refinancing of our capital structure. Slide #13 provides a snapshot of our share count. At the end of the first quarter, over more than half of our preferred shares and warrants issued under the plan of reorganization had been converted into common shares, resulting in 44.4 million shares of common stock outstanding as of April 3, 2010. There remain 8.9 million preferred shares and warrants outstanding that can be converted to common stock at any time. Total shares are 54.6 million, assuming full conversion, exercise, and investing of the remaining preferred stock, warrants and management-restricted stock units. Now turning our attention to the revised outlook for the remainder of the year. Slide 14 shows our full-year 2010 forecast for global vehicle production as compared to our prior outlook. We have increased our full-year global vehicle production to 65.4 million units, up 4% from prior outlook. Our revised outlook in North America is up 500,000 units to 11 million units as the industry recovery continues. In Europe, while our forecast is up 400,000 units to 50.8 million units, we remain somewhat cautious, given the market concerns in the E.U. In our key emerging markets, where solid growth continues, we are increasing our production estimates for China and India. We are now projecting a dollar-to-the-euro exchange rate at $1.35, down from $1.40 in our prior outlook. Please turn to Slide #15. Turning to our full-year financial outlook for 2010, we are forecasting net sales of approximately $11 billion. Our core operating earnings are estimated to be in the range of $375 million to $425 million. Depreciation and amortization is forecasted to be about $250 million. Depreciation expense is down about $15 million from the prior forecast, due to revisions in asset lives related to Fresh-Start Accounting adjustments. Interest expense is estimated to be about $65 million, down from our prior guidance, reflecting reduced debt levels following the refinancing in March. Our estimate for tax expense is in the range of $80 million to $100 million. Operating restructuring costs are estimated to be about $110 million for the year. 2010 capital spending is expected to be approximately $175 million and free cash flow is expected to be in the range of $150 million to $200 million. Lastly, our 2010 forecast for average fully diluted shares outstanding is 54.1 million shares. As discussed earlier, this share count includes common shares, preferred shares, warrants and a portion of the management shares granted at the time of reemergence. I'll turn it back to Bob for closing comments.

[Robert Rossiter:]

So the outlook for 2010 continues to look very good and beyond. We're very positive about the future for the company. We've completed our refinancing, as I've said. We have no significant debt maturities until 2018. Our company is looked upon by our customers in a very positive light. We continue to make progress with every customer in the world. Our cash balance is about $1.3 billion and our total debt is $745 million. The outlook for 2010

[Operator:]

[Operator Instructions] Your first question comes from Himanshu Patel of JPMorgan.

[Himanshu Patel:]

Have all of the temporary -- reversal of temporary cost cuts, has all of that sort of happened now? Is the cost structure at a normal run rate now, as of Q1?

[Matthew Simoncini:]

Yes. I will say the reversal of temporary was probably compensation related, where we took -- the salary workforce took certain concessions that we don't expect them to do. Those have been reversed and in the guidance, we've assumed in the first quarter and in the guidance we’ve assumed that we basically pay everybody. From a run rate standpoint, I see that program development costs and launch costs, Himanshu, increased in the back half of the year as we

[Himanshu Patel:]

Any way to quantify that increase, sort of sequentially? Let's say H2 versus H1?

[Matthew Simoncini:]

It's kind of hard to do. I would say that the launch costs that we talked about going from $25 million last year to $50 million this year is really back half loaded for the remainder of the year. I would expect a gradual increase in program development costs in the back half as well, but it's kind of hard to quantify without giving you the specific numbers.

[Himanshu Patel:]

On the Electrical division, I just noticed sequentially, there was about a 30% contribution margin there at the operating profit level. Is that sort of the level of operating leverage we should think about for that business going forward?

[Matthew Simoncini:]

No, I wouldn't use that number. In the past, for Lear, we’ve talked about a number between 15% to 20% depending upon which programs are off, and how it comes in, and how the volume comes in, whether it's steady or through overtime or what have you. I would continue to use that range, Himanshu, of 15% to 20%. This segment, in this quarter, while I think did extremely well and they're starting to see the benefit of restructuring, also benefited from [indiscernible]. It had a nice mix of business, hence the sales of increase of roughly 50%. And it also had more developing costs in the back of the year. Now if you think back to what backlog that we announced at the beginning of the year, roughly 60% of the backlog's in this segment. So it's disproportionate to segment and the development costs will be back half, more back-half loaded for Electrical. So I wouldn't use necessarily that. I think that 30% conversion is a little bit rich.

[Himanshu Patel:]

So your comment that sequentially we'll see some moderation in margins, it sounds like it's sort of is more pronounced on the Electrical division, not moderation.

[Matthew Simoncini:]

Slightly, if you look at the guidance overall, and you use the midpoint of the range, it would imply about a 100 basis points reduction versus the first quarter consolidated results. It might be a little bit higher in Electrical than Seating, but both of them are going see about that size of a come-off in the back half and that's really driven, more than anything, first and foremost, by the cadence of the sales. We think the cadence of the sales this year will be the normal industry type of seasonality where 55% of the revenues come in in the first half and 45% in the back half. We see this year kind of closer to historical cadence, and that will drive the margins as well.

[Himanshu Patel:]

Any update on the investigations on price-fixing and all that stuff?

[Matthew Simoncini:]

Let me turn it over to Terry Larkin, our General Counsel for that question.

[Matthew Simoncini:]

We really have no new news on that front. I think we mentioned previously, Lear was visited by the authorities in the E.U., but not by the authorities in Japan or United States. We cooperated fully and it's our belief that Lear has not committed any violation of the E.U. anti-competition laws. But it's not unusual for there to be a prolonged period where there is no news from the E.U. about the status of their investigation.

[Operator:]

Your next question comes from Rod Lache of Deutsche Bank.

[Rod Lache:]

Your corporate expenses look like they picked up a bit sequentially. They were running maybe $30 million or $40 million per quarter, now $50 million. Could you just give us some thoughts on how we should think about that going forward? And also, is there any reason why you're using a North American production of $11 million? In the past, you’d quoted the CSM numbers, which are at $11.5 million. It looks like Europe consensus is also a little bit higher than what you're using.

[Matthew Simoncini:]

Right. Let me work and start with the first part on HQ. At the end of last year, we guided to a number of about $45 million a quarter. We're still fairly comfortable with that number. The driver on the step-up is there are some expenses that are compensation related, Rod, that are front-end loaded, just from an accounting treatment standpoint that pushed that number up. We're also continuing to add some structure in the emerging markets, namely, Asia to support the growth that we see out there. So we’re seeing a step-up there. But we're comfortable with that $45 million kind of run rate on HQ. I think last year was not sustainable for a lot of reasons. One of the things that we talked about in the first quarter or at the year-end earnings call in February was compensation programs that were called out as special items, which are now part of the operating earnings and not called out. From a CSM standpoint, our volume that we're using; we use CSM as a guide. Now, CSM is higher than the 11 million units that we're using in North America, and slightly higher than the production that we've guided to in Europe. That being said, we keep an eye on also our releases, inventory levels and sales rates. And right now, if you look at the sales rate in North America, it's averaged, I think through the first four months about 11.1, 11.2. When you take imports into consideration, in order to hit 11 million units, we probably need to see a sales rate -- if inventory stays flat -- of about 11.7 million to 12 million units. So we think we're balanced there. Europe, we're a little bit more cautious on, just because in light of the global macroeconomic issues that are coming to light over the last 30, 60 days there. So we're just trying to take a cautious view of production.

[Rod Lache:]

The last two

[Matthew Simoncini:]

Right. Let me start with the Electrical Power Management segment. We had a good quarter. We don't think the 5% is sustainable for the remainder of the year because of the launch costs, as well as the program development costs, as we continue to win business. We still are on track to get it to that 6.5% to 7.5% range. We see that late 2012, early 2013. It's very driven by getting scale. That business is under-scaled and it has a fairly high fixed-cost structure at these sales rate. So, we need to be able to leverage that organization or overhead costs. So, we're so comfortable hitting those margins. If we continue to win business at the clip, it will be a little bit earlier than a little bit later. As far as the use of cash

[Operator:]

Your next question comes from Colin Langan of UBS.

[Colin Langan:]

Can you comment on, within your guidance, what the impact of rising cost of seats [ph] in there?

[Robert Rossiter:]

From our standpoint, the two commodities that impact us

[Colin Langan:]

And what was that? It was 60% is you direct and then 40% customer?

[Robert Rossiter:]

Yes.

[Colin Langan:]

Can you also just quickly comment on the working capital outflow this quarter? Is that just normal seasonality and should we see cash flow come back in the second quarter?

[Matthew Simoncini:]

The only item that's peculiar in the quarter was the cut-off of April 3, resulting in one additional payment stream being captured in our normal payment cycle, so to speak. At year end, you’d have a hard calendar close at 12/31. During the quarters, we have an accounting close which is basically a 4, 4, 5. Four weeks for the first two months and five weeks in the last month of the quarter. That resulted in us capturing one additional payment cycle of roughly $50 million in total. Other than that, it was the normal seasonality. What impacts the working capital more than anything is the cadence of sales within a quarter. Since we're collecting our money, on average, between 45 and 60 days, the sales that come in in March and the back half of February are usually what's captured in receivables. There's really nothing unusual in the numbers and everything is pretty much at term. There’s been no change in the payment terms, either what we receive from our customers or what we pay our suppliers.

[Colin Langan:]

From your comments on margin guidance, it sounds like most of this will be in second half. So is there reason to think that Q2 would be consistent with Q1? Or should you already start seeing some weakness in the second …

[Matthew Simoncini:]

We expect it to be fairly consistent with Q1.

[Operator:]

Your next question comes from Brett Hoselton of KeyBanc.

[Brett Hoselton:]

Matt, as you think about the 100 basis points in the back half of the year, it sounds like the majority of it is due to a little bit lower production expectations. Kind of about 75 basis points of that or so, due to the lower production?

[Matthew Simoncini:]

I would say that the cost reductions remain. It’s just harder to get when the volumes are lower, so I would say it’s pretty much driven entirely by the volume.

[Brett Hoselton:]

I just caught the end of your comments about the commodity cost there, with steel in particular. On the 60% portion, it sounds like you’ve got kind of a mixture of things; contracts controlling the pricing coming in and then some pass-through and sort of -- what percentage of the contracts you have with your customers, on your 60% portion -- very roughly -- is either indexed or pass through or something else along those lines?

[Matthew Simoncini:]

A very small portion, if any. At the end of the day, the way it's handled, typically, Brett, is we come in and we work with our customers to find solutions to bring the cost down in their product. This is obviously an item that typically goes the other way or in the past has gone the other way and we sit down and we work with them to find away to absorb it, whether it's engineering changes, supply chain, sub-tier consolidation or what have you. But it's not really an index. Bob, do you want to comment on the pricing environment as it relates to commodities?

[Robert Rossiter:]

[Indiscernible]

[Brett Hoselton:]

Thank you.

[Robert Rossiter:]

As always, I’ve got a very quick comment. Whatever Matt says is right.

[Operator:]

Your next question comes from Joe Amaturo of Buckingham Research.

[Joseph Amaturo:]

Could you just give us a sense of what the euro sensitivity is? Implied in the guidance it’s $1.35 and I'm sure you’re aware we’re at $1.27 right now, both on the revenue and EBIT slides.

[Matthew Simoncini:]

We had a pretty strong first quarter on the euro, though Joe, so you’ve got to take a blended rate, but for every penny, so to speak, of euro that we lose or gain, it has an annual impact of roughly -- on sales, of roughly $36 million. And it will convert, on average with the margins in Europe, so anywhere I would say between 3.5% to 4.5% conversion at it. We're comfortable that, while the euro's volatile right now, that we're pretty comfortable with our guidance that we’ve captured the range account [ph] comes as we stand.

[Joseph Amaturo:]

You've mentioned that you'll be updating your backlog midyear. Do you plan on having a separate conference call or are you implying that you'll discuss that when you release the second quarter numbers?

[Matthew Simoncini:]

When we release the second quarter numbers, Joe. What's happening right now; we're in the marketplace, we're continuing to win new business, we're winning on average consistent with what we've done the last several years, where we've won in any given year anywhere between $500 million to $1 billion in business annually. We're continuing to be successful. We're in the process right now of just quantifying it and giving a handle around unit volumes and we plan on updating it in the second quarter earnings call.

[Operator:]

Your next question comes from John Murphy, Bank of America.

[John Murphy:]

If you look at the operating margin of 4.7% in the quarter, it was really good. I was just wondering, as you look at your discussions with the automakers, if you're potentially raising any eyebrows and you're seeing any incremental potential pricing pressure as we step through the next 12 months and go through new contract negotiations. Or, is 4.7% something that's just not raising a lot of eyebrows at the automakers at this point?

[Robert Rossiter:]

People keep bringing this up. The customers -- I don't think anything has ever changed. It hasn’t changed before we went into the tough period. It didn't change during the tough period and it hasn’t changed now. It's the same. It hasn’t stepped up any more. It isn’t any different. It's the same environment that we've always worked in, always operated in, and have been successful. There’s not going to be any major changes as a result of anything that Lear reports.

[John Murphy:]

So, Bob, it's still tough. It’s still a constant negotiation with these guys?

[Robert Rossiter:]

That's what it is. It’s always been that way. It’s not going to be any different. It’s not any worse, John.

[Matthew Simoncini:]

Where we target, John is – we’ve guided and we think, long-term, this business runs at 7% to 7.5% operating margins. That's an important number for us because we think that's a fair, balanced market and it also gives us a return on investment to our shareholders. So, while in relative terms compared to last year, it looks really good. The reality is, it's still not in our target margins longer-term.

[John Murphy:]

On mix, you said it was particularly strong in the first quarter. I was just wondering what the key drivers for that in the first quarter and how you see that? You mentioned a mixed duration through the course of the year. I was just wondering if there any key models in the first quarter versus the rest of the year that you would highlight?

[Matthew Simoncini:]

Actually, I would tell you that mix works slightly against us when you look at the increase in the broader market. We weren’t up. Our revenues weren’t up commensurate with the market overall. And that's really -- mix kind of worked against us. And the reason it did, John, is there were some high runners in the first quarter last year that didn't necessarily take a back step; like the three series in Europe or the GM 900 here in North America. When I mentioned the mix, I mentioned that, on a relative basis of Electrical contributive [ph] seating, Electrical benefited a little bit more from the mix just because of the European car lines that they’re on. I think on the back half the year, it's not that mix deteriorates, it's that we think that the volume cadence kind of is more 55% first half, 45% second half; but the mix should stay relatively consistent. The one strange thing that's going to happen in the second quarter, the outlier is going to be

[Operator:]

Your next question comes from Brian Johnson, Barclays Capital.

[Brian Johnson:]

I know you'll update backlog in second quarter; looking forward to that. In the meantime, what's the split of the backlog by year and by segment? You've given us an overall backlog. What can we think about it in Seating versus Electrical for this year?

[Matthew Simoncini:]

For the backlog that we previously announced, the split is roughly 60%/40%. 60% being Electrical, 40% being Seating. For our backlog in 2010, we'd expect that number to be a little over $100 million in total. And, on a go forward basis, the big backlog year is 2011, when you see the backlog number approaching $1 billion. On the business wins, we're winning fairly equally between the two segments and it's pretty balanced between regional coverage.

[Brian Johnson:]

On the strategic side, two related sub-questions

[Matthew Simoncini:]

I think first off, on the excess cash, we like to maintain a liquidity balance of $900 million to $1 billion, is what we said. It's not that we need that amount of money to run the company, or liquidity to run the company, but we believe it provides adequate or more than adequate cushion for any market dislocation and plus, it demonstrates strength to the marketplace, namely our customers. The first thing that we wanted to do with our excess cash was to use it to fix our capital structure, which we did. We used $250 million of our cash on hand to bring down our debt by $225 million and pay the fees associated with that, and we felt that was not only good for the business, and for our customers, but also benefited our shareholders. Second, what we'd like to do is look to invest organically in our business, first looking at technology in the Electrical distribution, something that would help support our business on hybrid and high-powered vehicles. Secondly, we would like to increase our component capabilities in emerging markets, Asia and South America, connectors or mechanisms, seating mechanisms. On the acquisition front, we are looking at things that would bolster our Electrical Distribution business or Power Management business because it is under-scaled and we think there are still niche players out there. We're filtering everything from

[Operator:]

Your last question comes from Chris Ceraso of Credit Suisse.

[Chris Ceraso:]

Matt, if I look at Slide 7, I'm hoping you can take us through the regions and give us your year-over-year change in revenue, so we can compare how you did in these regions versus the change in production?

[Matthew Simoncini:]

Really, I don't think we've really fully ever disclosed what we're doing. But, from our standpoint, if you look at -- probably Slide #8, would be probably the best breakout I can give you at the moment. But, I would tell you that, in the emerging markets, we more or less move with the markets overall. So, you can see that [ph] and Europe was a little behind of the broader market improvements because of the mix issues that I mentioned earlier; namely that we had a pretty strong first quarter last year on some [indiscernible] which made comparisons, year-over-year, a little bit softer.

[Chris Ceraso:]

So it looks like it stands out most particularly in North America. So is that what you meant that the year-ago T900 was stronger?

[Matthew Simoncini:]

They had, actually, a pretty strong first quarter in light of what they ultimately ended up producing. They went dark, or they closed their production down in the second quarter. So, I think the comparisons that you'll see in the second quarter might be a lot better than the broader market.

[Chris Ceraso:]

So was it something outside that particular platform then, because it's a pretty big difference versus the build rate?

[Matthew Simoncini:]

If you look at it, the [indiscernible] itself is probably the biggest outlier, but again, we don't sell to the industry overall. We have specific car lines and we have a lot of car lines that we sell to. That one, just by the sheer unit volumes, has a way of impacting the results bigger than any other ones. There was a lot of movements in the car lines that we sell to. That’s probably the best thing I could do for you, Chris.

[Chris Ceraso:]

And you mentioned the roughly 100 basis point decline that you expect to see in margin versus the first quarter is almost all related to the decline in volume. Was that just for Europe? Was that for overall? And, if it's for overall, where do I see the allowance for higher material costs?

[Matthew Simoncini:]

It is overall. [indiscernible] markets where we see a cadence the first half, the second half, then it softens – I should say overall, in North America and in Europe. And we still see strength in the emerging markets that are fairly consistent throughout the year. There is additional cost that go in, but we also ramp up our cost reductions during the year as the facilities run more efficiently, as we get the benefit from our restructuring actions that we implemented during the year or so. So there is literally thousands of different inputs that come in to trying to project a number for the remainder of the year; everything from pricing, supplier contracts, efficiencies [ph], I'd like to think that every month our manufacturing facilities run more efficiently and then the savings from restructuring actions.

[Chris Ceraso:]

So big picture, the volume is going to put some pressure on our margin, to the extent that material costs are up, you’re going to offset that with cost saves and productivity?

[Matthew Simoncini:]

Correct.

[Robert Rossiter:]

Since that is the last question, we want to thank everybody for their questions today. Thank you for being on the call. I want to thank you, Matt, for a great job. Thank you, team, for supporting Matt. I thank the company for continuing to operate strong, efficient and optimistic and I want you to know

[Operator:]

This concludes today's conference call. You may now disconnect.