Meritor, Inc.
Q3 2013 Earnings Call Transcript

Published: 31 Jul 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Fiscal Year Q3 2013 Meritor, Inc. Earnings Conference Call. My name is Purita, and I'll be your operator for today. [Operator Instructions] As a reminder, this is -- this call is being recorded for replay purposes. I would like to turn the call over to Charlie Christman, Director of Investor Relations. Please proceed, sir.

[Charles Christman:]

Thank you, Purita. Good morning, everyone, and welcome to Meritor's Third Quarter Fiscal Year 2013 Earnings Call. On the call today, we have Ike Evans, Meritor's Executive Chairman, Interim Chief Executive Officer and President; and Kevin Nowlan, Senior Vice President and Chief Financial Officer. Also in the room today are Jay Craig, Senior Vice President and President of Meritor's Commercial Truck & Industrial business; and Pedro Ferro, Senior Vice President and President, Aftermarket & Trailer. Both will be available at the conclusion of our remarks for any specific questions you have about their respective businesses. The slides accompanying today's call are available at www.meritor.com. We'll refer to the slides in our discussion this morning. The content of this conference call, which we're recording, is the property of Meritor, Inc. It's protected by U.S. and international copyright law and may not be rebroadcast without the expressed written consent of Meritor. We consider your continued participation to be your consent to our recording. Our discussion may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Let me now refer you to Slide 2 for a more complete disclosure of the risks that could affect our results. To the extent that we refer to any non-GAAP measures in our call, you'll find a reconciliation to GAAP in the slides in our website. Now I'll turn the call over to Ike.

[Ivor J. Evans:]

Thank you, Charlie, and good morning. Would you please turn to Slide 3? In our second quarter call, we introduced you to M2016, our 3-year plan that includes specific targets to expand EBITDA margin, reduce net debt and drive incremental revenue. As a board member, I was completely supportive of the targets established for M2016 and the path to achieve them. As the current CEO, after spending a significant amount of time with the team discussing each and every element of the plan in great detail, I'm even more confident now that we have a clear and achievable path to improve performance. The slides accompanying today's call are available -- in a relatively short period of time, we have focused this entire organization on a defined set of goals in 4 major areas

[Kevin Nowlan:]

Thanks, Ike, and good morning, everyone. On today's call, I'll review our third quarter financial results and then take you through our fiscal year 2013 guidance. On Slide 9, you will see our third quarter income statement for continuing operations compared to the prior year. Sales of $993 million in the quarter were down year-over-year by $120 million or 11%. The decrease was largely driven by lower production volumes in North America commercial truck, military and China off-highway. This was only partially offset by year-over-year increases in South America. Gross margin decreased $23 million due to the decline in sales and the $12 million warranty contingency booked in the quarter that Ike spoke about earlier. Gross margin as a percent of sales was 11%, including the impact of this specific warranty contingency. Excluding the warranty charge, our gross margin percentage was higher than last year, even with the revenue headwinds we saw this quarter. SG&A was $67 million in our third quarter of 2013, which was slightly lower than the prior year. Next, you'll see a line item related to the pretax pension settlement loss of $36 million we incurred in the quarter. If you remember, we highlighted this expected loss in our fourth quarter earnings call last year and, again, at our Analyst Day this past February. This charge relates to the windup of 5 of our Canadian defined benefit pension plans through lump sum payments and annuity contract purchases. The windup of these plans relieves the company of responsibility for approximately 70% of our gross Canadian pension liabilities and is consistent with our strategy to derisk our pension plans. The corresponding loss associated with the settlement of the plans is substantially noncash, as these plans were fully funded, and it relates primarily to the acceleration of previously unrecognized actuarial losses already reflected in book equity. Restructuring expense was $12 million this quarter and was primarily related to lease terminations and employee severance costs resulting from our China restructuring actions. Earnings in our minority-owned affiliates were $15 million, $3 million higher than prior year. The increase is primarily due to higher earnings from our affiliates in Brazil, offset by lower earnings in North America and India, reflecting weaker truck markets in those regions year-over-year. Interest expense was $45 million in the third quarter of 2013, $20 million higher than the same period last year. During the quarter, we repurchased $167 million of our 8 1/8% notes due in 2015 at a premium of approximately 14%. As a result of this transaction, we recognized a $19 million loss on debt extinguishment, which is reflected in interest expense. Later in the presentation, I will review our new debt maturity and liquidity profile, given some of our recent treasury actions. Income tax expense was down $11 million from the third quarter of 2012, due in large part to the $9 million tax benefit on the Canadian pension settlement charge that I just spoke about. Although we generated a GAAP loss from continuing operations of $37 million, we are reporting adjusted income from continuing operations of $33 million or $0.34 per share. This adjusted income excludes the following unique and material items affecting our results in the quarter

[Ivor J. Evans:]

Thank you, Kevin. Please turn to Slide 17. Before we conclude our call today, I want to remind you of the 3 financial measures of success we've established related to M2016. The first is achieving a 10% adjusted EBITDA margin. And I'm proud to say that this quarter, we achieved the highest margin in more than 5 years at 8.8%. The second is a reduction to net debt, including retirement benefit liabilities, by $400 million to less than $1.5 billion. Our completion of the sale of Suspensys will contribute to this target. And the third is incremental book revenue of $500 million per year at run rate, which represents a significant organic growth rate. As we said last quarter, we expect about half of this to occur by the end of the fiscal year 2016. Each of the business wins we highlighted at the beginning of the call, whether big or small, is meaningful as we focus on sustained top line improvement. We are redefining who we are as a company, and we are driving that through the organization. Before we open the call for questions, I would like to provide a brief update on our CEO search process. Our executive search firm assisted Meritor's Board of Directors in developing an impressive list of internal and external candidates. I believe the interest that we've had in this position speaks to the powerful brand presence we have around the world. While I cannot provide specific timing, I can tell you that the board is committed to moving as quickly as possible while giving the process the diligence it requires. In closing, I want to reiterate that my #1 priority is to keep the company moving forward through this leadership transition. After 3 months of serving as Interim CEO, I believe we offer a broad portfolio of value-added solutions for our customers around the world. And now, we have the right plan and the right team in place to improve our performance to the level that we expect from ourselves and that our shareholders expect from us. Now we'll take your questions. Thank you.

[Operator:]

[Operator Instructions] Your first question comes from Brett Hoffman (sic) [Hoselton] from KeyBanc.

[Brett D. Hoselton:]

I guess, first, just from a very simplistic standpoint, you nudged your sales guidance down for the year, maintained your margin guidance. I'm kind of reading into that, that the outperformance on the margin line that you've seen thus far is just going to continue into the fourth quarter and that allowed you to maintain your margin guidance. Is that kind of a fair assessment?

[Kevin Nowlan:]

Yes. I mean, I think as we looked at all things coming in at EBITDA, we felt like that we were able -- we would be able to hold the margin at 7% despite slightly lower revenue. I mean, revenue at the end of the day is significantly down in our guidance, and so we didn't think it was a stretch for us to be able to still maintain that approximately 7% margin target.

[Brett D. Hoselton:]

And if I did my math correctly, I'm kind of looking at the fourth quarter, it seems to imply kind of flattish sales but then EBITDA kind of dropping down into the next quarter. Kind of -- what are your thoughts there? It seems like your margins have been -- obviously doing quite well.

[Kevin Nowlan:]

If you look at the revenue guidance range that we provided and if you just use the midpoint as a guide, it would suggest that actually our revenue is expected to be lower in the fourth quarter for some of the reasons we talked about, in terms of Europe stepping down, North America truck stepping down sequentially and FMTV also seeing another step-down in production. So we do expect Q4 revenue to be lower than Q3. And then as you think about EBITDA on that, again, we would have conversion on those downside sales. And keep in mind, FMTV is stepping down. It's historically been one of our highest-margin businesses, so we could see some disproportionate downside conversion on that lost revenue. And then finally, from an EBITDA perspective, with the sale of Suspensys complete as of yesterday, we'll lose 2 months worth of affiliate earnings from the Suspensys business. So those are the way -- that's how you should think about Q4, sequentially down from a sales and EBITDA perspective, and that allows us to achieve our guidance.

[Brett D. Hoselton:]

And then, Ike, on the CEO search, I know that you're not going to be able to nail down specific timing. But I was kind of wondering if you had some broader expectations. I mean, is this kind of a one month, one quarter, 1 year timeframe? Do you have any general flavor for when you hope to find somebody to fill that role?

[Ivor J. Evans:]

Brett, I'd tell you the Board is committed to moving as quickly as possible while giving the process the diligence that it does require. As I've said in the past, I've committed to the Board to serve in whatever capacity is needed to find the best solution for our company. But I got to tell you, my #1 priority is to keep Meritor moving forward, and I think we've made significant progress. But I can't tell you I can't be proud of this team. We've got the right plan and the right team in place, and I truly believe in our potential.

[Brett D. Hoselton:]

And then I know it's -- let's see, you're -- I presume you're not in a position to provide guidance into 2014, of course. But I'm kind of wondering, as you think about your key end markets, whether it be North America, Europe, South America, China, as you think about those 4 key ends markets that you have, what's the flavor of your expectation going into the -- into 2014?

[Kevin Nowlan:]

Brett, this is Kevin. I mean, I think it's still a little bit early to tell you. You could see some of that signals that we're giving in terms of what we're seeing sequentially Q3 to Q4. I mean, there are still factors. As we've talked about before, we have to think about -- in India, we have to see how the elections are going to play out, and we've indicated that we're not sure we're going to see material recovery there until we see what comes out of the elections. In China, I think we've talked about not seeing any recovery in the very near term. Now how that plays in the next year, I think, it's still a little bit premature. And then I think even the truck markets, pre-buy in Europe that we're seeing right now, what does that mean for '14, hard to tell yet. I think all these means is I think we'd like to wait until we get to the year-end earnings review, which is normally when we give our following year guidance. And so I think that would still be our plan. But I think you could see some of the color on what we're giving you here today.

[Operator:]

Your next question comes from the line of Patrick Archambault from Goldman Sachs.

[Patrick Archambault:]

The -- I wanted to piggyback a little bit on what Brett was getting at. I think your implied margin in the fourth quarter is something like in the sort of mid-7% range. And it looks like you're there, having kind of fleshed out a number of these kind of sequential issues, the nonrecurrence of the Brazil revenue, that step-down in military business, which I think stays at that run rate until maybe the fourth quarter of next year, if I remember your guidance correctly. So is 7.5% kind of like a good base to think about going into 2014 with, on which you can build with restructuring and, God forbid, volume should recover in some of these other regions, maybe there's upside?

[Kevin Nowlan:]

Yes. Patrick, this is Kevin. I -- with respect to that, I think -- a couple of things. One, I think you're right in terms of the way to think about how Q3 goes to Q4, losing Suspensys earnings, as well as the revenue step-down. And in terms of what that means as a going forward, is that a good jump-off point, I mean, I think what you're seeing is that we are generating a pretty decent earnings profile that's giving you a sense of what the operating performance is in the business right now in the revenue environment that we're operating in. So we're not giving specific guidance on Q4, although you can read pretty clearly through our numbers what that implies about Q4. But I don't think we're expecting anything necessarily unusual as we think about the full year guidance that we've given that would make you think heading into next year that, that wouldn't be a good starting point.

[Operator:]

The next question comes Brian Johnson from Barclays.

[Brian Arthur Johnson:]

Three things. One, pension, any narrowing and are you doing any liability-based investing that might mute the reduction and the obligations to the stairway change? Two, for Vernon, any update on the timing of the trial on the Eaton litigation? And three, sort of a broader question for Ike. I mean, if you -- what really changed in the last 2 quarters in the performance culture of the company? And how much of that was in place beforehand and how much more is there to come? And it was through -- was it changing people around, was it changing the metrics, was it just reinforcing the importance of execution, or what was it?

[Kevin Nowlan:]

Brian, can you repeat the first question on pension again. I didn't catch all of that.

[Brian Arthur Johnson:]

Pension. What kind of benefit from discount rates could we expect on the U.S. pension side? And to what extent, if any, is that offset by fixed income, perhaps liability-based investing on the asset side?

[Kevin Nowlan:]

Okay, fair enough. Yes, the -- good question. The -- with respect to pension, I -- as we've disclosed in our 10-K, if we have a 50 basis point move in discount rates, that tends to have about $140-ish million, $140 million, $150 million impact on the liability. Now to your point, we do hedge interest rate movements within our portfolios. In our U.S. portfolio, for instance, we're hedged somewhere between 40% and 50% on those interest-rate movements. So while the liability might move with a 50-basis-point movement rates by that level, $140 million to $150 million, we would expect to see an offset in the asset portfolio corresponding to that hedge, that -- position that we have.

[Ivor J. Evans:]

Brian, on the Eaton lawsuit, we view this process really as a marathon. It's not a sprint. And so far, we've been successful. There are motions pending for the district court, but we do expect the trial date to be set this fall. And I have to tell you, we're very comfortable with our position as we sit here today. But beyond that, I really can't offer any further comments. As to your third question, I think what I've brought to the table a little bit is focus. We have a clear path to what we need to do as far as 2016, and I'm not allowing any distractions. But having said that, this is a very, very good management team. The firepower and the capability of this -- of the team to execute the strategy was in place, and I couldn't be prouder to be working with these people. They're a -- it's a good team and we're going to make this happen.

[Operator:]

Your next question comes from the line of Robert Kosowsky from Sidoti.

[Robert A. Kosowsky:]

I was just wondering if my math is right, it's about a $10 million income tax expense in the quarter. And are we looking for -- it seems like we're looking for a big step-up in income tax rate in the fourth quarter, is that correct?

[Kevin Nowlan:]

Yes. I think we are expecting income taxes to increase in the fourth quarter. That's correct. And on top of that, even outside the ordinary course, we would also expect to see income tax charge associated -- or an income tax expense associated with the Suspensys sale as well.

[Robert A. Kosowsky:]

Okay. But is the $10 million adjusted tax number for third quarter appropriate or in the ballpark?

[Kevin Nowlan:]

For the third quarter, I'm sorry. I thought you're speaking for -- yes, it is.

[Robert A. Kosowsky:]

Okay. And then secondly, how should we think about the benefits from the China consolidation and, kind of building on that, the current margin profile? Do we have any other stair step changes in the cost structure coming down the pike from further restructuring, or are we just looking at continual improvement, largely on the material side, going into 2014?

[Kevin Nowlan:]

Well, when we talked back at Analyst Day about the restructuring actions that we had taken, that we're going to generate $37 million of run rate savings of which half was going to be this year and then we would be at run rate heading into the -- into next year, that encompassed the benefit of the China restructuring. So the restructuring actions that we're taking and completing throughout the rest of this year will be fully in place to -- as part of that $37 million of run rate savings.

[Robert A. Kosowsky:]

Okay, that's helpful. Then also, will we expect to see another executive severance charge or anything -- any other headwinds in the fourth quarter EBITDA walk?

[Ivor J. Evans:]

No, not that we're aware of, obviously, at this point in time.

[Robert A. Kosowsky:]

Okay. And then finally, any thoughts -- I know you're kind of backing away from a 2014 outlook. But any thoughts on the Brazil decline, how real that is and how long that's going to persist, and also kind of the potential for European decline into the calendar 2014, just post the year also?

[Jeffrey A. Craig:]

Robert, this is Jay Craig. On Brazil, I think what we're seeing -- we've had concerns about the fundamentals in the economy for a few quarters now and how much of the demand might have been temporary because of the tsunami. So I think we're a bit cautious on the outlook down there until we see the fundamentals of the economy strengthen somewhat. So we're watching that with a bit of a cautious side. And then I think, as Kevin mentioned earlier on Europe, the dynamic in Europe of the pre-buy, that I think all the OEs, including our customers, are starting to see that's resulting in a slight uptick of demand right now in Europe for the emissions change. We are cautiously watching what happens as that pre-buy begins to unwind towards the end of this calendar year.

[Operator:]

Your next question comes from the line of Ryan Brinkman from JPMorgan.

[Ryan Brinkman:]

If I look at your sequential EBITDA walk on Slide 12, it shows that there's a $21 million contribution from volume mix and pricing on an $85 million revenue rise, so something around 25% incrementals. Two things. First, can you just help us with the volume/mix component of that improvement? And secondly, what sort of incremental margins do you target on increases in revenue brought about by changes in the volume mix in your M2016 plan?

[Kevin Nowlan:]

Okay. Ryan, it's Kevin Nowlan. I'll take that one for you. The -- there are couple of things on that. In terms of the $21 million, you're right that the change in revenue in the quarter was $85 million. The change in revenue was associated with volume impact was actually more -- they're closer to $97 million. We had about $12 million of negative FX impact that's really implicitly buried in other. So when you think of that $21 million conversion, think about it on something that's closer to $100 million in sales as opposed to $85 million of sales. So that's kind of point one. In terms of how much of that was volume mix versus pricing, the bulk of it was volume and mix. There is a very small amount in the quarter related to pricing when you look at sequentially. And then finally, in terms of target conversion as we convert on the upside, you should still continue to expect, even with M2016, that we would -- on volume alone, that we would continue to convert in the 15% to 20% range, just on the new volume. Now we're hoping to get additional benefits as we improve our cost structure from a labor improvement perspective and reduce product costs, which are separate initiatives. But on the incremental conversion on a new dollar of revenue, we would expect a typical 15% to 20% to apply.

[Ryan Brinkman:]

Okay, that's very helpful. And then just -- there's been some discussion around China and South America, particularly Brazil, both in the prepared marks and I think at some of the Q&A, and I think we can all agree these are great growth markets over the long run, but some reduced visibility near term. I'm just curious as you look out to the M2016 plan, and again, it's a few years out, but what sort of sensitivity do you think there is in M2016? And it looks like there's about 6% annual revenue CAGR, right, using your 2013 guidance as a base. What kind of sensitivity is there to -- if South America or China were to play out maybe differently than you presumed?

[Kevin Nowlan:]

It's hard to say because there's a lot of moving pieces between now and '16 in terms of what the other end markets would look like at the same time. So it's not as though we're relying on one market to specifically recover and all other markets to hold. We're simply looking at the compilation of all the potential -- all the markets that are out there and expect them to be more normalized levels or what the forecast services are suggesting 2016 would be. And if China's a little bit down and maybe North America's up, it's hard to say at this point with 3 years to go until we get to 2016.

[Ryan Brinkman:]

Okay. Then just very last question. You target the 10% margins is like 300 basis points higher than this year. How do you expect that cadence will look? Is it fairly linear, or is it very much dependent upon when the end markets recover? Or how might investors expect that the margin will track as you move towards 10%?

[Kevin Nowlan:]

I think there are a few different elements of it. I mean, there's -- as we've highlighted back at Analyst Day, some of the key elements of this relate to some of the pricing initiatives that we're looking to implement, some of the cost reductions, particularly on our product costs, as well as the new revenue, both market recovery and the $500 million of incremental business that we're looking to secure between now and '16. And so I'd say some of those things can -- tend to be lumpier, like some of the pricing initiatives. Some of the product cost-reduction initiatives can be a little bit smoother. But I would tell you at the end of the day, we haven't obviously given a specific track to getting to '16, but I don't think you would expect it to be perfectly linear. I think there's going to be some pieces that are going to occur a little bit later in the process, particularly as the revenue wins and some of the pricing initiatives take hold.

[Operator:]

Your next question comes from the line of Colin Langan from UBS.

[Colin Langan:]

Yes. I think you mentioned earlier you said that the Eaton litigation goes to trial in the fall. I thought in the past you have mentioned September. So has that timeline changed at all?

[Ivor J. Evans:]

No, it's been the fall all along. We don't know when the judge will set the trial date, although we anticipate that she will set it this fall.

[Colin Langan:]

Okay. So there's no official date?

[Ivor J. Evans:]

No, there's no official date at this time.

[Colin Langan:]

Okay. And can you remind us of the cadence of FMTV volumes, they're down 30% this year, and down 50% next year?

[Kevin Nowlan:]

Yes, sequentially, from '13 to '14, they would be down 50% and then gone completely at the end of '14.

[Colin Langan:]

Okay. And then can you remind us the mix of South America? Obviously, Brazil is a bit of a concern right now. It's -- I think it was 11% last year. I mean, year-to-date, is it a bit larger as a percent of your sales?

[Kevin Nowlan:]

I'm sorry, is Brazil, as a percent of sales, larger or smaller than last year? I think that was your question.

[Colin Langan:]

I guess what is the -- I think last year South America was around 11%. I'd assume some stronger. It would be higher this year. So is it...

[Kevin Nowlan:]

I think it's -- I mean, as a percent of sales, I think it's probably a little bit higher on a year-over-year basis, because I think all-in, our revenue isn't down as much in Brazil -- or expected to be down as much in as it is for the rest of the company.

[Colin Langan:]

Okay. And some of your walks, you highlight lower material costs. Is any of that commodity related? Or is this paybacks for commodity pass-throughs or anything like that or is this all fairly sustainable type?

[Kevin Nowlan:]

Material performance. And material performance is predominantly true performance. There is some a little bit of benefit in the number we received from some of steel indices being a little bit lower, but that's a small portion of the benefit we receive sequentially going from Q2 to Q3.

[Colin Langan:]

Okay. And lastly, any color to Suspensys benefit and the impact to results in the quarter and what it's been year-to-date?

[Kevin Nowlan:]

On year-to-date results, I apologize, I'm thinking -- we expect it to be $4 million in the fourth quarter in terms of a lost earnings opportunity. I have to go back and look at what the year-to-date figure has been in terms of how much Suspensys has generated.

[Colin Langan:]

Okay. $4 million just for the 2...

[Kevin Nowlan:]

By not having Suspensys for the last few months of the quarter here, we expect that we will lose a benefit of about $4 million of affiliate earnings.

[Colin Langan:]

Okay. And that could be a good proxy for what it was, maybe the...

[Kevin Nowlan:]

If you think about it, I think we talked before about what we thought it was for last year on the last earnings call in terms of how Suspensys contributed.

[Operator:]

Your next question come from the line of Kirk Ludtke from CRT Capital Group.

[Kirk Ludtke:]

Just a follow-up on the specific warranty contingency. Can you maybe give us a little color as to what actually was involved there and the nature of the contingency?

[Ivor J. Evans:]

Well, as we mentioned, we discovered a product performance issue doing just routine testing. The root cause is a supplier-related defect on an internal axle component. The defect does not impact safety and there have been no known failures in the field as -- that we're aware of. And I tell you, we're working extremely closely with our customers. We did record a loss of $12 million. It's reasonably possible that we could have an exposure between '12 and '20 that we -- but in that, we have not assumed any supplier recovery, of which we are working with the supplier as we speak. So that's kind of the -- I think the answer to your question, I hope.

[Kirk Ludtke:]

That's very helpful. Did it impact production schedules at any of your customers?

[Ivor J. Evans:]

Not at all, not at all.

[Kirk Ludtke:]

And so you were able to track which axles were affected, and I guess this is a recall. Is that how it works?

[Ivor J. Evans:]

Well, it -- we've isolated it. And since we haven't had any failures, we continue to work with our customers. And at some point in time, we may have a campaign, but it's going to be dependent upon how each particular customer wants to handle it. I don't know, Jay, if you want to add anything to that?

[Jeffrey A. Craig:]

No. That's a great -- just a couple of points I'll add. I -- we were able to isolate the issues from the parts we received from a supplier to a particular section of time of production. And so we -- as Ike mentioned, we are working with our customers who very much appreciated our proactive approach to this, in determining the best approach to rectify the situation with the impacted customers.

[Kirk Ludtke:]

And the $12 million to $20 million, that's a cash cost?

[Kevin Nowlan:]

Yes. Actually, that will be cash. So over the -- there are some that'll probably hit this year and some that'll hit in the next year as warranty or campaign or the ultimate remediation comes to fruition.

[Kirk Ludtke:]

Okay. Okay, that's helpful. And I just -- just to be clear on Suspensys, it was $4 million of equity income in the third quarter? Is that...

[Kevin Nowlan:]

No. It's $4 million that we were expecting to generate in the fourth quarter of this year that we're now going to be foregoing as a result of closing the transaction in July.

[Kirk Ludtke:]

So it would have been $4 million for the 3 months period?

[Kevin Nowlan:]

No, for the remainder. We closed the transaction yesterday, and we're saying, now, there's 2 months to go. And for those 2 months, we will be losing $4 million.

[Kirk Ludtke:]

Okay. So it's $2 million a month, basically?

[Kevin Nowlan:]

Well, but keep in mind, I mean, Brazil, earlier in the year, was a lot -- at lower volume level. And so you can't simply straight line that to get to what the annual impact is. We have an 8-K on this. I think you could get some more clarity around that by taking a look at the 8-K that we're filing.

[Operator:]

Yes. That's all your question. I would now like to turn the call over to Charlie Christman for closing remarks.

[Charles Christman:]

Thank you, all, for your participation in today's call. For those of you who may have additional questions, please feel free to reach out to me directly. And with that, we'll conclude our third quarter earnings call.

[Operator:]

Thank you for your participation in today's conference call, ladies and gentlemen. This concludes the presentation. You may now disconnect, and have a good day.