Upbound Group, Inc.
Q1 2016 Earnings Call Transcript

Published: 28 Apr 2016

[Executives:]

Maureen B. Short - SVP-Finance, Investor Relations & Treasury Robert Dale Davis - Chief Executive Officer & Director Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer

[Analysts:]

Beryl Bugatch - Raymond James & Associates, Inc. J.R. Bizzell - Stephens, Inc. Brian Hollenden - Sidoti & Co. LLC Carla M. Casella - JPMorgan Securities LLC

[Operator:]

Good morning, and thank you for holding. Welcome to Rent-A-Center's First Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Following today's presentation, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Thursday, April 28, 2016. Your speakers today are Mr. Robert Davis, Chief Executive Officer of Rent-A-Center; Guy Constant, Executive Vice President, Finance and Chief Financial Officer; and Ms. Maureen Short, Senior Vice President – Finance, Investor Relations and Treasury. I would now like to turn the conference over to Ms. Short. Please go ahead, ma'am.

[Maureen B. Short - SVP-Finance, Investor Relations & Treasury:]

Thank you, Stephanie. Good morning, everyone, and thank you for joining us. Our earnings release was distributed after market close yesterday, which outlines our operational and financial results for the first quarter of 2016. All related materials are available on our website at investor.rentacenter.com. As a reminder, some of the statements provided on this call are forward-looking statements, which are subject to many factors that could cause actual results to differ materially from our expectations. Rent-A-Center undertakes no obligation to publicly update or revise any forward-looking statements. These factors are described in our earnings release issued yesterday, as well as, in the company's SEC filings. I'd now like to turn the conference call over to Robert. Robert?

[Robert Dale Davis - Chief Executive Officer & Director:]

Thank you, Maureen. Good morning, everyone, and thank you for joining us. As part of our multi-year transformation strategy, there were a number of levers that we set out to manage to become more consistent and to reduce the amount of risk in the business. Although there is still more work to be done on our top line results in the Core and Acceptance Now, I'm happy to say that we now have several of these levers working successfully as demonstrated in our first quarter performance. For example, managing the middle of the P&L in the Core business has positively contributed to our results for several quarters now. We are seeing increased labor productivity from our store optimization effort and our flexible labor model, which continues to roll out successfully. This quarter, we also saw the intended improvements on gross profit margins in both the Core business and Acceptance Now. Our work on the supply chain initiative is favorably impacting the Core P&L, driven by product cost per unit savings of 5% to 9% and a more efficient supply chain. With our strong focus on profitable growth, we've taken a more surgical approach with our promotions in the Core, which increased gross margins in the quarter. Our work with retail partners in Acceptance Now to improve the economics of the 90-day cash options is also having the desired impact on gross profit margins. Another positive for the quarter was performance in Mexico. I'm very pleased with the progress we have made here. We exited 14 under-performing locations in the first quarter as part of our strategy to focus on the northern parts of the country and border markets. While our goal for this business is to break even in 2016, as of the end of Q1, we are already very close to delivering on that goal. In fact, the entire segment is now profitable on an EBITDA basis. Last quarter, we presented our capital allocation strategy of using free cash flow to pay down debt, the goal being to reduce our leverage ratio below 2.5 times by the first quarter of 2017. Because of our more efficient use of working capital, the tax refund, and our increased focus on profitable growth, I'm happy to say that we ended the first quarter with a leverage ratio of 2.52 times, nearly hitting our goal one year in advance. The increased flexibility that we will gain by meeting our leverage goal will enable us to add share repurchases as another lever to drive shareholder value. At the same time, paying down debt helps to reduce the level of risk in the business. Overall, I'm very happy with the progress that we have made against our transformational strategy as more of the opportunities that we have been pursuing start to bear fruit. I mentioned earlier that there is more work to be done, most notably with top line performance and Acceptance Now losses. Our sales results were negatively impacted by the further deterioration in oil affected markets, including our Texas stores across both Core and Acceptance Now, which were down 10% each, as well as the impact of the onset of the new point-of-sale system rollout in the quarter. Additionally, we made a deliberate decision to be more disciplined, selective and strategic with our pricing and promotional strategies, which as expected impacted sales but benefited gross margins. In the Core segment, furniture continued to perform very well in the quarter, but the computer and tablets category continued its negative trend. As part of our new smartphone strategy, we've been working on enhancing our assortment by adding new brands. During this transition time, several of the new brands did not have the locking capabilities that we require to ensure an efficient use of working capital by decreasing the risk of losses. Again, because we are focused on driving profitable growth, we decided to delay the purchase of these phones until the locking was in place. And as a result, our top line performance on smartphones came in lower than planned. The good news is that we're now able to lock the new phones, so the newer brands of phones will start to appear in stores in the second quarter, and we anticipate improved performance in this category in the back half of the year. Last quarter, we guided to lower Core sales in Q1 because of the impact of our new point-of-sale system. During the initial roll-out phase, we experienced a greater than expected impact to sales. So, we made the decision to delay the timing of the roll-out and address opportunity areas. We've made those changes and have restarted the POS roll-out this quarter with the plan to have the system fully implemented by the end of Q3. Today, approximately one-third of our Core stores are operating with a new POS system. Acceptance Now same-store sales were flat for the quarter. It remains a highly competitive landscape and while we still see pockets of irrational behavior, we are seeing initial signs that the competitive intensity may have peaked. Our flat same-store sales in the quarter were impacted by lapping the 90-day cash pricing changes at the end of the quarter. In addition with our enhanced technological capabilities, we have made conscious decisions to improve near and long-term profitability by making changes to our approval process that moderates approval amounts for higher risk customers. So while a top line headwind in the short term, this should result in lower losses in the future. Looking forward, I am pleased to say that we're also making significant progress with our new Acceptance Now commercial capabilities teams, which has already translated into a stronger pipeline of new retail partner opportunities. And as a result, I am optimistic about future growth resulting from this enhanced pipeline. While Acceptance Now losses are still at an elevated level, our leading indicators such as past-due metrics are currently trending more favorably. Additionally, we have begun pilot testing of a centralized collections function, which we believe will further the positive impact on losses as early as this quarter when combined with the customer decision changes that I mentioned earlier. Even if we start to achieve the benefits of our transformational strategy, we are simultaneously hard at work on new opportunities and priorities, including e-commerce, and additional cost savings initiatives such as fleet optimization, which will generate future benefits. Development of our e-commerce platform as an example is going well and we plan to roll-out the initial pilot in June and be nationwide before the end of the year. We believe the e-commerce initiative will further benefit top line results in the Core once fully rolled out. In summary, we have made great progress on our profit maximizing initiatives and reducing the level of risk in the business. We intend to build upon that momentum as we move through 2016. I want to thank our teams for focusing and executing against our strategic priorities. I'll now hand the call over to Guy to discuss our financial performance in more details. Guy?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Thanks, Robert and good morning, everyone. This morning I will walk you through the highlights of our financial results for the first quarter. I'd also like to mention that as I refer to our first quarter performance either this year, or versus a year ago, all numbers will be presented on a recurring basis, excluding special items. As outlined in the press release, consolidated total revenues were $836 million, which represents a 4.8% decrease versus last year, as single-digit revenue growth in our Acceptance Now segment was offset by a same-store sales decline in the Core as well as the impact of store closures over the past 12 months in both the Core and Mexico segments. Our total U.S. same-store sales combining the Acceptance Now and Core segments decreased 2.5% versus a year ago. But on a two-year basis, U.S. same store sales increased 5.5%. We continued to face headwinds in our oil impacted markets with Texas stores down approximately 10% across both segments as well as the onset in Q1 of the rollout of our new point-of-sale system. Looking at sales performance in our Core segment more closely, total revenues were down 7.1% driven by a same-store sales decline of 3.8% and a 5.6% reduction in store counts in the prior period. Furniture performed very well and benefited from improved in-stock positions versus the port impacted comparison last year, computers continued to be down sharply as compared to a year ago and smartphones were down more than planned, although as Robert mentioned, we expect this to be temporary as our recast assortment will start to appear in stores during the second quarter. In the Acceptance Now segment we saw 2.7% revenue growth driven primarily by stores open less than 12 months. Flat same-store sales in this segment were driven by the dynamic of having fully lapped the rollout of the 90-day pricing option at the end of Q1 and a focus on driving profitable sales. Consolidated gross profit was $535 million and gross profit margin was 64%, 30 basis points lower than the prior year with the decline driven by higher mix of the Acceptance Now sales. In the Core U.S. segment gross profit margin was 70.5%, 40 basis points better than a year ago as we begin to see the benefits of our supply chain initiative in the P&L. In addition we have built capabilities that are executing on a more surgical approach to pricing and promotions as Robert discussed. In our Acceptance Now segment first quarter gross margins were 48.2%, down 50 basis points from Q1 last year. Our year-over-year gap in gross margins, however, showed a meaningful improvement of 350 basis points compared to last quarter driven primarily by the completion of the lap of our 90-day cash option and the increased focus on more profitable sales. Consolidated store labor, which includes the expenses associated with co-workers at our stores and at the district manager level, improved 10 basis points to 25.3%. Other store expenses, which include expenses related to occupancy, losses, advertising, delivery costs, and utilities, also improved 10 basis points to 25.6%. In our Core U.S. segment, store labor expense was down over $11 million but worsened by 30 basis points due to sales deleverage. Other store expenses were down almost $10 million, but also deleveraged 50 basis points from the prior year. Our Core U.S. rent-to-own skip/stolen losses were 3.5% in the quarter, down 30 basis points year-over-year due to the ongoing improvements we have put in place in the smartphone category. In our Acceptance Now segment labor as a percent of sales was relatively flat, while other store expenses increased 220 basis points versus the prior year driven primarily by higher skip/stolen losses. Acceptance Now skip/stolen losses came in at 9% in the quarter, up 130 basis points to last year. Earlier, Robert reiterated our intentions related to centralized collections, and we expect these changes, along with our ongoing focus on the customer approval process, will allow us to narrow the year-over-year gap in future quarters. On a consolidated basis we delivered operating margins of 6.1% in the first quarter, representing a year-over-year decline of 40 basis points. Now turning to the balance sheet; we ended the quarter with consolidated inventory on rent down approximately 13.5%, or $128 million versus a year ago. In the Core U.S. segment inventory on rent was down $96 million due to our lower mix of smartphones, lower store count and the improved purchase cost brought about by our supply chain initiative. In the Acceptance Now segment the decline in inventory on rent of $27 million was driven primarily by lower ticket in our retail locations resulting from refinements in the customer approval process and the lap of the full impact rollout of the 90-day cash option program. Consolidated inventory held for rent was down approximately $15.5 million even with the investment inventory at our third-party distribution centers. This was predominantly driven by the Core U.S. segment in which we saw our one-time increase in working capital for the sourcing initiative, offset by a reduction mobile inventory and lower store count. We expect to see continued reductions in inventory held for rent in future quarters as we offset initial investments in distribution center inventory and some increases in smartphone inventory with lower sourcing cost and the ongoing removal of safety stock from our stores. As of the end of the first quarter we had approximately $46.4 million in cash and cash equivalents and as outlined in the release, we paid down our total net debt by $212.1 million since the end of 2015. We had approximately $20 million drawn on our revolving credit facility as of the end of the first quarter, and as of today we are undrawn on our revolver, leaving approximately $580 million of available capacity. Again, as Robert noted, we ended the quarter with a leverage ratio of 2.52 times as our more efficient use of working capital and the tax refund resulted in better-than-expected debt reductions. We are encouraged that we're now approaching the 2.5 times threshold that will give us additional flexibility to execute against our capital allocation strategy and provide the additional levers to deliver on our promise of more reliable and more predictable earnings growth. With that, I'll turn the call over to Stephanie to open the line for your questions.

[Operator:]

Our first question comes from Budd Bugatch from Raymond James. Your line is open.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

Good morning, and thank you for taking my questions. I guess my first question is on the debt paydown. Congratulations on that. That's pretty exciting to see that. I just want to know that it's sustainable. You said you're undrawn now on the revolver, which means that you can start I guess looking at the notes, if that's going to be where you're going to go. What's the outlook for the second quarter and the balance of the year? Guy, can you give us a feel for how that cadence might play out?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Well, as you know, Budd, generally the first quarter of our year tends to be our strongest cash flow quarter simply because of the amount of payouts we see when our customers receive their income tax payments. And, of course, that was accelerated somewhat this year by the income tax refund that we received as well in the first quarter. Typically the second quarter we tend to tread water a little bit and our cash flow tends to be somewhat even and then we tend to do a little bit better in the back half of the year. Although I will say that our working capital that we're using in order to purchase products is coming in much better than we thought it would and we would expect that to continue. As for looking at the notes or share purchases, you'll recall we have to be under 2.5 times to do that. We're obviously very close to that point, and so once we get to that point, then all options are available to us to put that cash flow to work.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

And the feeling of management? I know that's kind of a board issue as well, but what's the thought process in terms of the company's used its balance sheet pretty aggressively over its long history. What's the thought process today?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Definitely our plan, Budd, to stay under 2.5 times. So we don't see ourselves ramping up our leverage above that ratio moving forward. But again, given the strong cash flow nature of the business, we believe we have lots of opportunities, whether it be looking at the notes that we have today or looking at a share repurchase option, then of course always remaining as the first priority to be investments in the business that we think can generate the kinds of returns better than paying down debt or buying back shares. So nice that we're in a position very shortly here to be able to look at all of those options.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

Okay I'll just take one more question. Is more of a housekeeping question. Skips and stolen -- you gave it to us by segment. Can you give it to us overall for the company?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

I don't have it as an overall. We look at it by segment, Budd, so I don't have it overall for the company, but since the larger number of those is in the Core, my expectation would be that we're probably down overall, but I don't know. I'd have to look at that.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

Well, then let's get Mexico if we can, and if we have that (19

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Yes, Mexico skip/stolen losses were better by 250 basis points versus where they were and that was a fairly elevated number, but obviously great progress by the team over the last year.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

And what was that number? Last time I think there was something we were given, so it will be better by 2% (19

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

It was in the 9%s range and it's down around 7% in Mexico now.

[Beryl Bugatch - Raymond James & Associates, Inc.:]

Okay, thank you very much. I'll let the others have questions. Thank you.

[Operator:]

Our next question comes from J.R. Bizzell with Stephens, Inc. Your line is open.

[J.R. Bizzell - Stephens, Inc.:]

Good morning and thanks for taking my questions.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Hey, J.R.

[Robert Dale Davis - Chief Executive Officer & Director:]

Morning, J.R.

[J.R. Bizzell - Stephens, Inc.:]

So on the POS system I know the original plan or maybe the plan that we discussed at the end of 4Q was kind of expectation to be done by 1Q, and now I know you all said you made some tweaks and now it's looking like 3Q. Could you give us an update on the trend you're kind of seeing from the implemented and the one-third of stores that do have that product or that new POS system? And then maybe your expectations. The main reason you kind of guided first quarter down from an EPS standpoint; should we kind of be thinking about dividing that a little bit of a tailwind – or sorry; a headwind into the remainder of the next few quarters?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

So, J.R., as we look at rolling out the POS system, we obviously want to manage the impact that we have on the stores and we want to reduce the potential transition period impact overall to results. And so, as we roll out stores every week, we're constantly monitoring the results to make sure that it's landing well in our stores because it's a big change. While it's a system that we believe provides better ease of use for our store co-workers and certainly gives us a platform to do a lot of things that we haven't been able to do with our older system, there is a transition period, and so we have to watch that very closely. Now that being said, we don't anticipate now that the impact is going to be any more significant than we originally did, but clearly the timing is a little bit different than we originally expected. So, your point that perhaps we didn't see as large an impact as we expected in Q1, we're likely to see a larger impact than we expected in Q2, but our overall guidance for the years remain the same. So, it's really just a shift in terms of when the impact happens.

[J.R. Bizzell - Stephens, Inc.:]

Perfect; thanks. And then kind of switching gears, the direct locations that are up and running now – was wondering if you could kind of give us an update on the trends you're seeing there, and then further building on that, kind of your expectations for your direct rollout for the remainder of the year.

[Robert Dale Davis - Chief Executive Officer & Director:]

So, I think, J.R., in regards to that question, we've got VAN Direct in about 550 locations or so. The trends that we're seeing are improving, but not where we want them to be overall, particularly on the back end from a credit and loss perspective. The commercial capability sales team that I've referred to earlier is working both on the direct and the high service model or manned side. We're seeing a robust pipeline beginning to fill, and so we're going to have options with regards to the number of manned locations as well as VAN Direct. I think our primary focus and our preference is obviously to have the manned locations be the ones that we look to open before VAN Direct. Having said that, the pipeline for both is full, but we are going to focus our efforts primarily on the manned side as opposed to VAN Direct. We do expect VAN Direct to have a number of locations open throughout the balance of the year, but not the 500 or so that we referred to or opened last year. So, the pipeline is strong, the trends are improving, but not where we want them to be, but the high service or manned model is where our efforts are going to be focused on.

[J.R. Bizzell - Stephens, Inc.:]

And Robert, kind of building on that, have you pinpointed the issue with the back – the credit, the loss perspective on the direct and what's causing that? Is there something that -- I know you said you are tweaking kind of the underwriting model around -- is that something that you think you've kind of got fixed on a go-forward basis?

[Robert Dale Davis - Chief Executive Officer & Director:]

We believe we've got the right amount of focus and effort on it now. Frankly, when we were opening them last year it was at the same time an effort on our part to make sure we had a collections team and a staffing resource requirements that were necessary to address those concerns. We are now fully staffed and fully capable of making sure that we're managing the back end appropriately, and so when we were rolling out last year, we were a little bit behind in terms of having the back-end infrastructure to manage that, but today we feel very good about the resources we brought in, the talent that we have on the team to make sure we're addressing those concerns. So going forward we're confident in our efforts to do so, but we were a little bit ahead of ourselves last year with just the back-end infrastructure. Today we're in much better shape.

[J.R. Bizzell - Stephens, Inc.:]

Perfect. Thanks for the detail and thanks for taking my questions.

[Operator:]

Our next question comes from Brian Hollenden from Sidoti. Your line is open.

[Brian Hollenden - Sidoti & Co. LLC:]

Good morning, and thanks for taking my question.

[Robert Dale Davis - Chief Executive Officer & Director:]

Morning, Brian.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Hi, Brian, how are you?

[Brian Hollenden - Sidoti & Co. LLC:]

Good. Can you give us a little bit more – sorry if I missed this, but what leads you to believe that the competitive pressures have peaked?

[Robert Dale Davis - Chief Executive Officer & Director:]

Yeah, it's hard to get a good read on that, Brian. And I would still say they're still elevated, so I wouldn't want to suggest that there isn't still a competitive activity going on, but we do see a couple of things happening in the marketplace. You see, for example, we've made some changes to the economics of the 90-day cash transactions with our retail partners. That program has driven a lot of volume for our retail partners and they've done very well economically on that. We've not done so well, and so we've had some great discussions with our retail partners to try and balance those economics and we've been successful doing that and we saw that in terms of the trends of what you're seeing with our merchandised sales gross profit margin. Obviously if we're in a hypercompetitive or as hypercompetitive environment as it might have seemed where we are going. It would have been very difficult to make a change like that in such an environment and have it stick, but we've been able to see that happen, which implied to us that the environment may not be as competitive as we thought it was.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

In addition we've seen certainly some competitive pricing actions as well that has stuck and so I think as you look at those two factors, those are things that would be inconsistent with an increasing competitive environment and perhaps more consistent with one that might be waiting somewhat.

[Robert Dale Davis - Chief Executive Officer & Director:]

And just further to that, Guy, we've also seen a number of competitors that are primarily focused on the virtual space who had difficulties, a couple of folks have shut down, a couple of folks have gone out of business, so in addition to Guy's comments, we've also seen some competitors actually exit the space just given the fact that their business model is not sustainable for the long term relative to the working capital requirements and the ability to collect and pick up merchandise and re-rent it through a back-end infrastructure like we have.

[Brian Hollenden - Sidoti & Co. LLC:]

Thanks for the color and then I will just – if I can have more and I will jump back into the queue. How much of the Core U.S sales decline was impacted by the point-of-sale rollout?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Well, we didn't talk about that specifically Brian, but we did talk a little about the specific categories and I think when you look at all of the factors, computers still being down sort of to similar levels that we saw last quarter is a big driver, the performance in the oil affected markets is a big driver, as you might recall Texas is about 10% of our system in the Core business and we saw sales in that market down over 10%, which is an acceleration of where it was last quarter. So the math alone on that will tell you 100 basis points of the sales decline was specifically related to the impact of oil affected markets. And then what's a much more temporary impact is that we saw a decline in smartphones simply because we weren't as in stock with the phones for the reasons that Robert referenced on the call. So you probably saw a similar impact related to the fact that we just weren't as in stock with smartphones, which we expect to see that rectified over the coming months. So those were the primary drivers in the sales decline, in addition to the point-of-sale rollout.

[Brian Hollenden - Sidoti & Co. LLC:]

Thank you.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Okay.

[Operator:]

Our next question comes from the line of Carla Casella of JPMorgan. Your line is open.

[Carla M. Casella - JPMorgan Securities LLC:]

Hi, one thing, did you give Core store skips and stolen rate, I didn't see that.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

We did Carla, they were at 3.5%, which was down 30 basis points from what they were a year ago.

[Carla M. Casella - JPMorgan Securities LLC:]

Okay, great. And then how much of the gross profit margin improvement in that Core, you mentioned the 40 basis points of improvement, how much of that was just the mix away from smartphones?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Very little of it, more of it was now just the realization of the cash savings that we had already achieved from the reduced sourcing costs, now actually showing up and becoming a larger and larger component of our portfolio. So, as we start to see more of these products that we bought at the 5% to 9% reduction that Robert talked about comprising a larger component of the portfolio, we'll see the gross profit margins improve. So we would expect additional gross profit margin improvements throughout the year simply as a result of more and more of that product getting into our portfolio.

[Carla M. Casella - JPMorgan Securities LLC:]

Okay, great. And then just one, I have to ask a debt question since I'm the debt analyst on the call. When you look at your two different bonds, the 2020s and the 2021s, is there a difference in the restricted payment basket for either of those in terms of how much you can do and the risk basket to do dividends and share repurchases.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

There is Carla, at least a difference in the way the 2.5 times restriction is calculated. So on the 6.625% notes, letters of credit count as debt in the calculation whereas in the 4.75% notes it does not, so we certainly get under 2.5 times quicker on the 4.75% than we do on the 6.625%.

[Carla M. Casella - JPMorgan Securities LLC:]

But there is not a general basket in the two that you have?

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

Well, we have that $20 million basket that allows us to pay dividends, but in terms of our ability to repurchase notes, once we get under 2.5 times on the credit facility we have complete freedom to be able to do that.

[Carla M. Casella - JPMorgan Securities LLC:]

Okay. Great, thank you.

[Guy J. Constant - Executive Vice President – Finance, Chief Financial Officer and Treasurer:]

All right.

[Operator:]

There are no further questions. I'll turn the call back over to Mr. Robert Davis for closing remarks.

[Robert Dale Davis - Chief Executive Officer & Director:]

Thank you, Stephanie. And thank you everyone for joining us. We appreciate your time this morning. Obviously, a lot going on in the company. We made significant progress on a number of fronts and a number of initiatives. There is still work to be done on others and we're focused on doing so and we appreciate your support. We look forward to reporting back next quarter. Thank you.

[Operator:]

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