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Good day, ladies and gentlemen, and welcome to the Colfax second quarter earnings conference call. [Operator Instructions] And as a reminder, this conference is being recorded.
I would like to introduce your host for today's conference, Mr. Kevin Johnson. Sir, please go ahead.
Thank you, Michelle. Good morning, everyone, and thank you for joining us. My name is Kevin Johnson, and I am Vice President of Finance at Colfax. With me on the call today are Matt Trerotola, President and CEO; and Chris Hix, Senior Vice President and CFO.
Our earnings release was issued this morning and is available in the Investors section of our website, colfaxcorp.com. We will also be using the slide presentation to walk you through today's call, which can also be found on our website. Both the audio of this call and the slide presentation will be archived on the website later today and will be available until the next quarterly call. During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we might make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law.
With respect to any non-GAAP financial measures made during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and today's slide presentation. Now I'd like to turn it over to Matt, who will start on Slide 3.
Thank you, Kevin. Good morning, and thank you for joining us today. We are pleased to report our second quarter operating results. We made strong progress in the quarter and are building momentum for an even stronger second half. Our ESAB business continues to deliver strong growth and to proactively offset the cost headwinds from global steel prices and U.S. tariffs. Howden delivered another quarter of strong industrial growth and year-to-date industrial orders now represent more than half of the business' orders. The business also showed solid sequential improvement in margins that position it for a return to more normal margin levels in the second half of 2018.
We had a very active quarter driving smart capital deployment. We signed an acquisition for a great ESAB bolt-on, took the opportunity to buy back Colfax shares at low relative price levels and sold our CIRCOR share position to complete the successful divestiture of Fluid Handling.
On Slide 4, you can ESAB's strong growth trajectory. We continue to show double-digit overall growth and high single-digit core growth. While healthy markets around the world are a positive factor, we are also increasing product vitality and strengthening our automation backlog and funnel. These should help us to drive share gain over time in this business.
We drove sequential and year-over-year margin improvement in ESAB. As we continue to see one after another source of cost escalation, I am really impressed with our team's performance on this critical challenge and believe we're building CBS pricing and productivity muscle that will help us as we drive to mid-teens segment margins in the coming years.
Our Air & Gas Handling segment, shown on Slide 5, had solid progress in the quarter. While core order growth was still negative, we had a healthy step-up from Q1 and another quarter of very strong industrial growth. Oil and gas order intake stepped up as well, but reported orders include a cancellation due to recently implemented restrictions by the U.S. government related to Iran. We do not expect any further impact from these sanctions.
We expect the Howden business to turn over to positive order growth in Q3, as industrial growth continues, the strong funnels in mining and oil and gas begin to convert and power remains stabilized in the expected range. Our Howden margins improved in Q2, and we see a clear path to continued sequential improvements in Q3 and Q4. While part of this will come from clearing low-margin projects from our backlog, we have also driven CBS improvements to project margins and we'll have a growing contribution from restructuring.
As communicated on earlier calls, our teams have identified additional restructuring projects that will start later this year. These include strategic changes that generate additional benefits for 2019 and 2020 and further secure a sustainable Howden path to mid-teens operating margins, despite the revenue headwinds.
On Slide 6, we introduce GCE. This is a great bolt-on to our ESAB business. It's about $100 million of revenue that is split between a leading European position in industrial gas control and an attractive business in specialty gas control serving markets like medical and life science/scientific. We see healthy cost and revenue synergy opportunities, runway for growth in specialty gas and more great talent added to our company. Clearly, our acquisition engine is working well, and we continue to have a healthy pipeline of other potential bolt-on and platform acquisitions. Chris will share later our ample capital deployed on great acquisitions to make our company stronger.
On Slide 7, you can see from 2013 to today, the significant progress we've made in diversifying these businesses into higher-growth, less-cyclical end markets. The Howden business looks very different today than 5 years ago, with about half of the business now in industrial markets with less-cyclical diversified growth potential.
GCE along with other recent acquisitions further strengthens and diversifies our ESAB business. We're investing in technology to broaden and deepen our relationships with customers. Recent acquisitions like TBi, HKS and Ventsim complement our organic efforts and accelerate our progress. And our businesses continue to pivot resources and infrastructure to those regions and applications that have the best growth potential.
In summary, we continue to strengthen and diversify our company for long-term profitable growth. Both businesses made good progress on margins and growth in Q2, and we continue to drive healthy acquisition growth. We have an improved outlook for 2018 to deliver well over 20% earnings growth. And now I'll turn it over to Chris to discuss the financial results.
Thanks, Matt. I'll start my comments on Slide 8. Total company sales grew 9% in the second quarter to $925 million, including an 8% contribution from acquisitions and a 2% FX benefit. We actually expected more year-over-year currency benefit but pressures emerged throughout the quarter that our businesses overcame to deliver the expected operating results.
Gross profit grew $29 million in the quarter and gross margins improved 70 basis points from acquisitions and restructuring benefits.
Operating profit increased $2 million or $7 billion excluding amortization from acquisitions. As expected, year-over-year operating margins were lower than the prior year but improved 90 basis points sequentially from our first quarter. We expect additional sequential improvements in the second half from higher-margin orders, restructuring and seasonally strong fourth quarter volumes.
Tax contributed to this quarter's results as we converted some of the opportunities that the Fluid Handling divestiture created. The actions we took generated a onetime benefit that helped drive the tax rate down to 15% in Q2 and these actions will also contribute to our future tax rates. Adjusted EPS grew 36% to $0.61. In summary, our businesses overcame FX pressure to deliver expected operating profit and sequentially higher margins and tax changes benefited the quarter and future rates.
Slide 9 includes the second quarter results of our Fabrication Technology business. Segment sales of $561 million were up 8% organically in the quarter. The business achieved growth across the globe and in every product line. Acquisitions delivered 6 points to our top line growth and are performing in line with expectations.
Adjusted operating profit grew to $71 million in the quarter and margins increased 40 basis points year-over-year to 12.7%. The business is successfully addressing inflationary pressures through a combination of price and productivity improvements. Looking ahead, we expect the usual seasonal sales dip in the third quarter. Our teams will continue to address dynamic tariffs and inflation in the back half of the year while driving greater productivity across the business. ESAB is positioned for a strong year-over-year improvement in margins in the fourth quarter, creating a healthy jumping off point for next year.
The Air & Gas Handling segment, as shown on Slide 10, was up 3% in sales quarter-over-quarter, including contributions from the acquisitions. The business had a small FX tailwind but, organically, sales were down as expected. Sales in the industrial sector were up 34%, oil and gas was relatively flat and power was down 44% following the Chinese investment step-down in last year's third quarter. As Matt covered earlier, since the step-down, power sector order levels have remained in the expected range.
Lower organic sales resulted in operating profit being down $8 million compared with the prior year. From our first quarter, margins sequentially improved 60 basis points or 260 basis points if you exclude the first quarter facility sale gain. We are seeing the expected benefit of lower-margin projects exiting backlog and restructuring benefits are increasing. We expect improved performance in the second half of 2018 with a seasonally strong fourth quarter for both sales and margins.
As Slide 11 shows, we remain disciplined and agile in capital deployment with a focus on growth and shareholder value creation. We recently repurchased 6.4 million of our shares for $200 million of investment, mostly during the second quarter, enabling us to take advantage of recent prices. We also supported our primary objective for capital deployment, which is our strategic growth program, including the GCE acquisition.
Our board authorized an additional $100 million for repurchases that remains open and available, creating additional flexibility for long-term value creation.
During the quarter, we monetized our CIRCOR shares, completing the divestiture of the Fluid Handling business at an attractive multiple. We finished the quarter with significant global cash balances, gross leverage of 2.5 and access to our $1.3 billion revolver. We have ample liquidity to pursue attractive platform acquisitions where we can apply our model for compounding value creation.
On Slide 12, we discuss our outlook for the balance of the year. We started the year with an expectation of significant earnings growth. And I'm pleased to say that our view has strengthened, and we are again increasing our guidance from $2.05 to $2.20 to $2.15 $2.30. This represents year-over-year growth of at least 24%. In addition to discrete tax benefits in the first half of the year, our operating performance is playing out as expected. Our FabTech business is benefiting from healthy market conditions and battling inflationary pressures with pricing actions. Full year organic growth in this business is expected to be 5% to 8%, including price to offset inflation.
Our Air & Gas Handling business is improving the profitability of orders, creating a better cost structure and building order funnels that support a strong second half finish, with seasonally highest profits in the fourth quarter of the year.
Our outlook includes restructuring savings that have expanded to more than $30 million, interest expense of $40 million to $45 million, 6.4 million shares repurchased and a 20% to 22% tax rate for the full year that implies about 24% for the second half. We have not included the GCE acquisition in our guidance.
That concludes our prepared remarks. Michelle, please open up the call for questions.
[Operator Instructions] Our first question comes from the line of Jeff Hammond with KeyBanc Capital Markets.
So just ex the sanction deal, just talk to us about how oil and gas orders came together in the quarter relative to expectations. And just a little more color on the funnel and confidence that translates into orders into the second half.
Yes. Jeff, the oil and gas orders were about in line with our expectations in the quarter -- or were in line with our expectation in the quarter. We've got a healthy funnel there. Most of our business is downstream, we've got a healthy funnel there. And the question really becomes how fast the funnel converts through, and so we've been looking at a healthy funnel for a few quarters here. We've been talking about it. And I think, we had a quarter here where $68 million of new order flow came in, which was -- didn't include any very large projects and so was a kind of a higher water mark versus the past, and we see the potential for the third and fourth quarter to be in a solid range as well in terms of starting to show some of that recoveries coming through.
And then just on the -- can you give us a better sense of margin trajectory in Air & Gas into the second half? I know you've been kind of targeting flat or up profits. And just with the restructuring savings coming in and then the projects coming off, how does that phase into 3Q, 4Q?
Yes. We expect to be able to continue to improve the margins of Howden in Q3 and again in Q4, with Q4 getting into that double-digits margin range and giving us a back half of the year that we can build on in terms of driving Howden towards mid-teens margins as we've talked about. The things that give us improvements in the back half of the year are the high -- the low-margin projects clearing from our backlog, as we've been talking about, but then also a combination of kind of pricing and winning products -- projects at better sold margins, driving productivity in how we execute those projects and then restructuring benefits coming through. And as we talked about, we've got both restructuring benefits that are helping to secure this year but then also things that we're doing to create that path forward from this year to an even better margin place.
Okay. And then you did the $200 million buyback and this Gas Control Equipment deal, how does that inform the way we should be thinking about platform pipelines?
Yes. Our strategy remains the same, that we're going to -- we're focused on investing and in growing these businesses, and we're going to continue to do attractive bolt-ons where they make these platforms stronger and better and we could see how we can create strong value. But we also are continuing to be very active looking for the right next platform, and we've got a number of different possibilities that we're evaluating and pursuing.
And our next question comes from the line of Nicole DeBlase with Deutsche Bank.
So I just -- I want to spend a little bit more time on the Air & Gas Handling margins as well. I guess, I think, reading back from the 1Q transcript, you guys had talked about $25 million of restructuring payback. And I guess, I'm curious how that phases between 3Q and 4Q. Is it more back-end loaded or is there some coming through in 3Q as well? And I guess what I'm trying to get to is, should we expect year-on-year margin improvement in both quarters within that segment?
So the restructuring benefits that we've got, which have recently been expanding a bit, primarily for longer-term projects that'll benefit 2019 and '20, but those projects remain on track and on target. I think we previously communicated that we expected those to have minimal benefit in the first half of the year, so we've certainly gotten a little bit of benefit. But then you'll see that ramp up as we go through Q3 and as we get into Q4. So the margin profile for the -- I think you'll see the margin profile really kick in more in the fourth quarter when we've got the full extent of those -- or a larger extent of those benefits coming through in addition to some of the healthier funnel conversion and another productivity benefits that we've talked about.
And the only thing I'd add there is that, for the total second half, we expect to have margins a little above the second half of last year. So we do expect to show some improvement. Chris is making it clear that, that comes more in the fourth quarter than the third quarter, but we do expect the third quarter to be better than this quarter.
Okay. Understood. That makes sense. And then I guess just switching to FabTech. Can you just provide some color with what you saw with respect to price cost in the first half? Is it been neutral to margins? And then what's the expectation for that as we move into the second half, as it seems to me like your pricing is getting stronger each quarter?
Yes. We have been able to, in the first half of the year, kind of continue to catch up and even stay a little out in front of that price cost equation. We expect to be able to continue to do that through the year. It's been -- there's been a continual stream of escalations from steel price earlier in the year and now with the tariffs. And so we have had to continue to move price, and so you've got the pass-through benefit of that in our revenues that has some impact.
And our next question comes from the line of Matt Trusz with Gabelli & Company.
Can you provide a little more color on the Fabrication Technology growth trends by region? And also if there's any difference in growth between consumables and equipment?
Yes. So first of all, our growth is broad-based across our regions. North America is definitely one of the stronger areas of growth as well as China is a very strong area of growth as well and India is a very strong area of growth. So those are at the upper end. Everything's in the positive range at this point in time. Some of that more on price than volume and those areas I commented on have the most volume growth alongside the price.
Okay. And then on the Gas Control acquisition, can you disclose how much you paid for that? And what EBITDA you expect or what they did in the last year?
Yes. That's an investment of a couple hundred million dollars. And the multiple that we paid is within the sort of historic range of recent acquisitions that we've done.
And our next question comes from the line of George -- of Joe Giordano with Cowen.
This is Tristan for Joe. And I just want to go back on your oil and gas orders for Air & Gas. Can you maybe parse out what you're seeing in upstream and midstream versus downstream in your funnel?
Yes. We've got -- I'd say we've got projects across-the-board in the funnel, but the downstream is the healthiest area. It's the area that we have had the most business historically. And it's the healthiest area in, in particular, places like the Middle East where those downstream projects seem like they got stalled quite a bit. And that's kind of what we're seeing.
Okay. And then do you feel like you have a significant competitive advantage in your cutting line of products at FabTech versus maybe just your welding line of products?
Yes. We've got a strong position in the cutting line of products. We've got mechanical cutting and also plasma cutting and in both of those businesses we've got a strong position. We actually have rolled out some great new products in both areas that strengthen our position. Now we've also, in the mechanical cutting area, got some very good software. We've got a cut-cloud product -- software for nesting of the cutting. And then we've added functionality to have off-line productivity tools and things that we're rolling out in that business.
And our next question comes from the line of Adam Farley with Stifel.
My question is about industrial orders. Could you talk about kind of the size and scope of these orders? Is it broad-based? I guess, my question is asking where -- are you starting to see like larger capital projects move into the market?
Yes. So our industrial order flow is broad-based. Steel is a strong area there at this point and that's small and large projects in the steel industry but also a broader set of the industries, be it glass and other industries like that. Also infrastructure projects, tunnels as an example, wastewater projects and other environmental projects. And just the broad general manufacturing industrial space in our industrial fans business and our blowers business, that gives a feel. And within that spectrum, there is everything from smaller kind of more run rate business to larger projects.
And our next question comes from the line of Ronnie Weiss with Barclays.
I just wanted to touch on the free cash flow, it was down significantly the first half. I saw working capital was inflated. So could you just talk with the factors driving that and how should that play out for the remainder of the year and what we should be thinking about for free cash for the year?
Sure. Last year's cash flow included some significant recoveries following the 2016 successful ruling we had with some of the insurers on asbestos. So we had that in last year's results that we didn't repeat in this year's results. In addition to that, working capital is a bit of a use for cash this year and that reflects the significant growth of the Fabrication Technology business. We expected that there'd be some fundamental improvement in processes and all that, that would benefit the business. That's certainly happening, but the rate of growth is requiring some working capital investment. I'd say those are the principal reasons there. As you look ahead for the full year, we expect working capital to continue to follow the growth of Fabrication Technology and be a bit of a use of cash in the year. And that sets us up for free cash flow for the year that will exceed last year but be somewhere between that and a couple of hundred million dollars for the year.
Understood. And then back on the restructuring. I noticed the spend stepped up a decent amount in FabTech rather than Air & Gas Handling for the quarter. So wondering, what kind of the initiatives you're taking there? And what should we be thinking about as far as the split goes on that -- the restructuring benefits for the year?
Yes. So first, most of our restructuring efforts are in the Howden business. But our FabTech business continues to be focused on strengthening the business and securing that strong path to mid-teens margins. And so they've been rolling through some expected projects related to their supply chains and back-office simplification that are part of the plan to take that business to a healthy mid-teens margin business.
And our next question comes from the line of Andrew Kaplowitz with Citi.
You had a more difficult comparison in Q2 in Air & Gas Handling, but organic sales decelerated sequentially, as you know. You do have a more difficult comparison in Q3, still. So maybe just give us more color on order and revenue growth in the second half of '18 in that business. I think you mentioned your orders would turn positive in Q3. Is that because of oil and gas improvement? Or is it just continued industrial order acceleration? And Chris, I might've missed it, but did you update us on the 0 to 2% guidance that you had for organic growth for that segment?
Yes. So for sure, we get into Q3, we've got a much lower order comp, but we expect to have solid orders sequentially from Q2 to Q3 and from there into Q4. And so in Q3, we'll both get the benefit of the higher-order level we are here and then also have the lower comp. And that's part about continued growth in industrial, it's part about expecting this long-cycle recovery in not just oil and gas but also mining to start to build some additional momentum here. And then finally, just power being stabilized where it is gives us, certainly, the comp benefit as we compare it to last year.
And I would just mention that we continue to expect the business to be flat to down 2% organically for the year.
Okay. And then Matt, if you -- can you give us more color on China, obviously, a lot of noise out there around tariffs and stuff. So maybe exposure to China, what you're doing? Any contingency planning? Any impact in the guidance for tariffs on either business?
Yes. So there's 2 questions there. I think one about the sort of China market environment and the other about tariffs. Is that correct?
Yes, yes. Exactly.
Yes. So -- yes, as far as the China market environment, we're seeing a quite healthy on the Air & Gas Handling side. We're seeing healthy industrial growth, in particular, in China. And on the welding side, we're seeing healthy growth across product lines, including some healthy automation opportunities there in China. So we see that demand picture in China as looking pretty good and also, looking forward, looking fine. As far as the tariffs, as we've talked about in our remarks, they -- we have some tariff impacts, and we're working hard to get those passed through. And it's a manageable amount for us based on our global footprint and having a fair amount of intra-country production sources. But it is something that we'll continue to add price pass-through into our business. And we have, I would say, a little bit of business where we've got products that are produced in China and, due to the competitive dynamic, we're going to feel a little bit of pressure for a short period of time. But we're talking sort of $1 million or $2 million max of pressure from the products that we will continue to produce in China and ship here, and we also have some options for how we'll work that through and have it not be an issue next year.
And our next question comes from the line of Joe Ritchie with Goldman Sachs.
This Evelyn Chow on for Joe. I was hoping we could drill down a little bit into the $0.10 guide raise for the year. So it seems like interest expense, FX probably a bit more of a headwind than you anticipated, tax may be a bit more of a benefit. So is the corresponding, I guess, underlying back half raise due primarily to the restructuring actions? Or is there something else at work?
Yes. I would say, first and foremost, the core fundamental performance of our businesses is as expected. And that, as we mentioned in the second quarter, enabled us to overdrive past a little bit of the FX pressure there. But that's the first point I'd make. Second is that we are seeing a little bit more restructuring benefit, as we highlighted in the prepared remarks, that will benefit the back half. And then you do have some benefit from the tax in the full year rate, not so much in the back half but what we've experienced in the first half of this year.
That makes sense. And then to revisit, I guess, a number of questions on this call in oil and gas. If we take out of account the $20 million order or so from the Iran sanction, I think that implies you're kind of close to the 40 -- lower end of the $45 million to $60 million base orders you've been talking about for oil and gas. So maybe help us understand what are the conditions you need to see in order for that base level to improve to the higher end of that range?
Yes. Let me -- I just want to clarify, our order intake in the quarter was $68 million of oil and gas orders. Our policy is that we deduct off of that the canceled order that was from the fourth quarter of last year, and so we report the $20 million less than that. And so my comments about oil and gas order flow are that our order intake was just about $70 million of inflow, without any kind of extraordinarily large projects. And we have line of sight to the next few quarters being in that elevated range, which is, we think, some solid signals that we're starting to see that recovery coming through.
Understood, Matt. And then maybe last one from me. Just it would be helpful to get a sense of the pipeline of opportunities you're currently contemplating on the platform addition. Maybe you could refresh us in terms of transaction size, markets that you're especially interested in?
Yes. Sure. We've done a lot of good work on the platform front. A lot of strategic work, and we've got a number of prioritized areas that we view as attractive, and a fair amount of, now, cultivation work on potential targets. We're looking at things that have a range of sizes, some things that would be a fair bit smaller than our existing platforms and some that would be more in a similar kind of size range. And looking at some things that are a little closer to home and some things that would be further from our existing businesses as well. I think what the consistent theme across all the things that we're looking at is that, first, they would improve our portfolio, they would make us better. Second, we can see how we can create compounding value through operational improvements and through bolt-on acquisitions in those platform areas; and third, we can see how, 5 years from now, we'd be thrilled to own them looking forward in terms of the great opportunities for sustained growth. And really trying to -- looking at things that are completely -- less cyclical than the businesses that we're in.
And our next question comes from the line of Seth Weber with RBC Capital.
I wanted to ask about FabTech incremental margins. I mean given the price cost dynamic you're talking about, I mean would you expect incremental margins to be better next year? Or does that -- or just -- are you pushing price basically just to kind of cover costs and so you're not getting the operating leverage off of that pricing?. I'm just trying to think about how -- ask how we should be thinking about incrementals for this business next year and going forward.
Yes. The pricing actions that we've been taking have been to cover the inflationary pressures, and so we haven't expected those to deliver incremental margin benefit for the company. The incremental margins we get come from the volume leverage that we've had so far this year, and I think this most recent quarter about 3.5% or so. We've typically talked about 30% to 40% incremental margins, sort of 40% before we reinvest in the business and so modeling 30% is typically what we guide folks to do there.
I mean [indiscernible] right.
After it stops, then we should move back to a normal incremental margin range.
That's right.
Right. Okay. But so that number seems probably aggressive for next year just given this price cost -- given the fluid situation on price cost, is that a fair way to think about it? Is that -- you're probably not going to be at that full 30% next year?
Well, from a volume perspective, we'd expect to capture at least the 30% incremental margins going forward. And keep in mind that we are doing these other restructuring and productivity projects that will also add to profit for next year.
Okay. That's helpful. And then if I can maybe just take another crack at the restructuring savings question. I mean it's -- I think I heard a $30 million number for this year. Is it -- is there any help you could give us with sort of first half, second half? Is it $5 million to $10 million in the first half and $20 million to $25 million in the second? Is that a fair way to think about it? Or am I completely off base there?
That's probably reasonable. The projects started off mostly early this year. And so they're building momentum as we get into the back half. So we'll deliver more than -- expect to deliver more than $30 million of savings in the year with a great preponderance in the back half.
And our next question comes from the line of Walter Liptak with Seaport Global.
Wanted to ask a little bit more about the FabTech geographic. And specifically, you kind of went through China and the U.S. But specifically, how is Europe looking? And how does Europe factor into that core growth guidance for the back half of 5% to 8%?
Yes. Europe is in a solid positive range. So it just wasn't in that top tier that I mentioned. And we believe that we're competing very well in Europe. It's been a historical strong place for us, and we believe that we continue to do very well there. And it's in a solid positive range and expected to stay in that solid positive range.
Okay. That sounds great. And kind of the same way on pricing. You're getting that price for offsetting inflation. Is Europe any more competitive? Or is it -- I mean is it pretty similar across-the-board when you're going after recovering that inflationary pricing?
Yes. We are getting price in Europe and passing through the inflationary pressure in Europe, like other places in the world.
Okay. Great. And then I wanted to ask about the foreign currency impact in the second half and your assumptions and how we should think about any negative impact from current -- foreign currency on sales and on EPS in the back half?
Yes. The assumption that we have for currency going forward is that the rates essentially jump off from the sort of June, early July rate structure. And then of course, every 1% movement in the basket of currencies that we have is about -- it creates generally about a $0.02 movement in the adjusted earnings per share for the company. So we think we've got a guidance range that incorporates different scenarios with the currency there, but we're not really, at this point, expecting very much year-over-year impact. We haven't -- even though currencies have moved a bit as the year has progressed, it's been a de minimis impact on the company.
And I'm showing no further questions, and I'd like to turn the conference back over to Mr. Kevin Johnson for any further remarks.
Thank you, again, for joining us today. We look forward to updating you on our next call.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.