Pool Corporation (POOL) Q3 2011 Earnings Report, Transcript and Summary

Greetings, and welcome to the Pool Corporation's Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Joslin, Vice President and Chief Financial Officer. Mr. Joslin, you may begin.

Thank you, Kevin. Good morning, everyone, and welcome to our Q3 2011 conference call. I'd like to once again remind our listeners that our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for 2011 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. Now I'll turn the call over to our President and CEO, Manny Perez De La Mesa. Manny?

Thank you, Mark, and good morning to everyone on the call. With our 2011 season ending in September, I'd like to start my prepared comments by thanking our teams throughout the company for their execution and commitment to continuous improvement. Our results in a very challenging economic environment are a credit to them. Well, our third quarter results speak for themselves, especially as the industry is still operating at very depressed levels, with new construction down over 70% from peak levels and replacement remodel activity down 30% from normalized levels. Fortunately, we have continued to gain share, coupled with very modest improvement in consumer discretionary behavior and increases in the install base. These increases in share are the result of both our ongoing improvement in service level, as well as our ongoing development of new tools and programs to help our customers' businesses. The execution of both service levels and customer tools and programs are a credit to our teams that make it a reality every day. Organic sales growth of 9.4% in the quarter and 9.9% year-to-date are exemplary in this environment, especially as these sales gains were realized without compromising gross margins as these also increase by 61 bps and 63 bps in the quarter and year-to-date, respectively. It is because of this exemplary performance that our incentive expense in 2011 will be the highest ever. It is important for investors to note that we have a very tight pay-for-performance structure with performance principles based on continuous improvement and considering both absolute and relative performance in context with the industry and the general economic environment. In the third quarter, our green base business sales increased 8.9%, while our blue base business sales increased by 9.4%, yielding the combined weighted 9.4% increase mentioned earlier. As noticed, noted in the base business schedule included in our release, sales from acquisitions and new locations were $6 million in the quarter. Within the blue business' major markets, Texas and Arizona have the strongest sales growth at 16% and 19%, respectively, while Florida came in at 9% growth and California realized 5% growth. All other markets were up 8% collectively. Overall, weather was neutral in the quarter versus both last year and the long-term norm, with the benefits in the Southwest offset by worse-than-normal weather in the West. Year-to-date, our green base business sales increased 7.9% while our blue base business increased 10%, yielding the combined 9.9% increase for the year-to-date. Acquisitions and new locations contributed $21 million in sales, but did not contribute any operating income as these are investments for the future. Our 2 principal organic sales growth focus areas are the retail customer segment which increased 11% year-to-date and the building materials product segment which increased 17% year-to-date. Together, these focus growth areas accounted for approximately 45% of our sales margin dollar growth year-to-date. We expect to finish 2011 with mid to high single-digit sales growth in the fourth quarter but a lower gross margin as we realized certain nonrecurring vendor incentives in last year's fourth quarter. Talking about gross margins, 12 bps of our 61 bps increase in the quarter is due to our recovery of higher freight expense, with the balance primarily due to improved sales and purchasing execution. As mentioned last quarter, some vendors have unusual in-season price increases that we bought into. But given the timing and competitive behavior, we were not able to realize significant benefit from those buy-ins. The additional buy-in amounts from the second quarter have largely since been sold through while some other vendors have increased prices in the last -- past 30 to 60 days which we've also bought into. Overall, our working capital is very sound, with DSOs down and over 90% of the year-on-year inventory increase being the fastest velocity classes. Our management here should result in operating cash flow approximating net income for the year. Now I'll turn the call over to Mark for his financial commentary.

Thank you, Manny. I'll stop -- I'll start by commenting on our SG&A cost which, as we've discussed in our second quarter call, were higher for the second and third quarters than what we expect on an ongoing basis. As noted in the release, our SG&A costs were up 14% for the quarter, 12% excluding acquisitions, with the biggest component of growth coming from incentive cost increases, as it did in the second quarter. As Manny just mentioned and as we've discussed on many previous occasions, compensation at POOLCORP is closely in line with performance. The result of this was that as the market contracted from 2007 to 2009, incentive comp at POOLCORP fell by about $15 million from peak levels. As our earnings have recovered, we've had to build back our incentive compensation expense to more normalized levels which was started in 2010 and which will complete and in fact surpass in 2011 given our exceptionally strong results this year. While we will certainly have some variability in incentive comp in the future based on our performance, any increases from our 2011 expense levels would be very modest. We mentioned in our release that in addition to incentives, the growth in our quarterly expenses was impacted by bad debts, freight and currency translation. As was the case in the second quarter, growth in our bad debt expense in 2011 reflects our normal modest amount of bad debt expense this year compared to an abnormally low level of bad debt expense in 2010 as we were able to reverse previously booked reserves as a result of better than expected collection results in 2010. The impact of freight, which was offset in freight billed to customers, and currency translation was also similar to what we reported in Q2. Excluding the impact of these items, our core base business expenses grew just 2% in the quarter and year-to-date, which given our revenue growth is a very good achievement and a reflection of the significant emphasis we put on expense management. This is also more in line with our expectations for expense growth in the coming quarters. Moving on to the balance sheet. We again have had an excellent results in our receivables management as both ends of our aging have shown significant improvements. Our total receivables classified as current at the end of September were 79.8% compared to 74.9% a year ago, while receivables 30 or more days past due were 7.2% of total compared to 12.9% a year ago. Our DSO, or days sales outstanding, was 30.3 at the end of the quarter, which is an improvement of 2 days from a year ago. Moving on to inventories. Our inventory balances increased $31 million or 10%, including $5 million or 2% in acquired inventories to $338 million at the end of Q3, which is roughly in line with the sales growth, although a bit higher than what we would like it to be. Excluding the impact from any of early buy purchases which will be done on extended payment terms, we expect to work this down a bit between now and year-end. Manny covered the main topics on cash flow, so let me update you on our share repurchase activity. For the quarter, we've repurchased 760,000 shares of stock at an average price of $25.15, bringing total shares repurchased on the open market this year to 2,397,000 for a total purchase cost of $59 million. This leaves us with $80.2 million available under our current board authorization. Finally, as noted in our release, we completed a new revolving credit facility, just yesterday in fact, that provides us with access to $430 million in credit to fund our business growth and the repayment of our $100 million note when it matures next February. This replaces our $240 million revolver facility which was set to expire next December. Although pricing is not quite as attractive as our expiring facility which was set at a very opportune time in December 2007, we could see a slight drop in our interest rates next year after our current swaps expire in the first quarter. I'd like to put a plug-in here for our bank group which has been a great group to work with. Our credit facility was co-led by Wells Fargo and J.P. Morgan and included Bank of America, Regions Bank, Capital One, Comerica, Union Bank and BB&T. We certainly appreciate their support and investment in our business. That concludes my prepared remarks, so I'll turn the call back over to our operator to begin our question-and-answer period. Kevin?

[Operator Instructions] Our first question is coming from Mark Rupe from Longbow Research.

This is Leah Villalobos filling in for Mark this morning. It seems like things came in a little bit better than you had expected on your last conference call. And I was hoping you could just kind of talk about some of the positive surprises you saw during the quarter.

Sure. Leah, we had -- frankly, it's incredible. I think the commitment of our people to go above and beyond, particularly as the season winds down and you're tend to get tired after 16, 18 hour days, but the resilience is fantastic. I think the other factor there that played into it was that our commitment to taking care of our customers not only from a service level standpoint at the local employee level but also from having the right inventories in the right place, I think is a testament to our improvements being made in our purchasing execution and the reduction of stock outs to enhance that service level. And again, it just bodes well for our continuing to gain share of market.

Okay, great. And then just kind of specifically on the gross margin line, was there anything in the quarter -- I think, I know we are modeling a little bit less. I think maybe guidance was a little bit lower than where it came in?

Again, it's a matter of our execution. When our service levels sustain themselves, as the season -- as we go through the season, as our people continue to have an upbeat attitude, as they take care of the customers after very long days, I think that all bodes well for us in terms of not having to compromise at all and in terms of the pricing that we provide to our customers because they genuinely appreciate our commitment to them and their businesses.

Okay, great. And then just kind of in terms of the timing of the season and sort of how it wraps up, did you see sort of strength in the business maybe a little bit longer than last year?

Nothing significantly or significant. I think it's -- the season this year from a -- in a more seasonal markets started a little bit later than last year and maybe extended a little bit later but not significantly so. In the Sun Belt where the lion's share of our business is, that was pretty well constant during the entire year.

Okay, great. And then just lastly, I know that you're gaining share in building materials, and that's been a strong driver of growth. But also kind of just looking at the markets where you saw the strongest growth, it seems like that would be the markets where there's kind of the youngest installed pool base. And I'm kind of wondering if there are any different drivers in those markets or if it's more just having more products there? Or kind of if you could talk a little bit more about that?

Sure. Well, building materials -- and by the way just for those on the call, the lion's share of the building materials we sell are used in the remodeling of existing pools. While we certainly sell them for new construction, the volumes are heavily weighted towards remodeling. And to that end, we have a broad array of private label products that we source worldwide, some unique products included in there, that enable us to provide our customers with alternatives that enhance the aesthetics for the consumer. And with our having those products in stock, with our efforts from a marketing and sales side to raise awareness with customers and turn our customers with consumers, we are capturing share. And that is not necessarily in one customer segment or another in terms of one market segment or another, it's pretty much across the board. And again, it's driven by the uniqueness of the products. It's driven by our marketing and our sales execution, together with, obviously, our customers that end up selling it to the consumer.

[Operator Instructions] Our next question is coming from Ryan Merkel from William Blair. Ryan Merkel - William Blair & Company L.L.C., Research Division: Manny, let me start with the market share gains story which continues to be very strong. Can you speak to the competitive environment? And is the weakened state of your competitors a part of the story?

There are 2 sides. On the blue part of our business, not so much we can state. The resilience of the blue side with the install base is a factor that provides a foundation for our blue competitors. And therefore, their financial condition, while certainly not as robust as it may have been 3 or 4 years ago, they've been able to plug in. I think there are pockets certainly where they have been adversely affected from a capital constraints standpoint and that has limited their ability and impaired their ability to serve. But I think it's more our positive execution than their shortfalls that accounts for our shares -- share gains. On the green side, that business has been much more severely affected by the contraction given the greater weighting of that business to new construction. And therefore, in that area, we do see some more gaps on the part of competitors. But again, I revert back to it's I think our positive execution more so than the other shortfall that has enabled us to continue to gain share as we have for the better part of the last 18 years. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then second question, in the press release, you mentioned that base business operating expenses going forward will be very modest. Can you give us an idea or range of what you're expecting for base business expense growth?

Sure. If you look at -- Mark went through the dynamics of our expense growth. And both for the quarter and year-to-date, our core base business expense growth was 2%. I mean, to the extent that fuel costs go up, we try to recover those and have essentially been able to do that historically with higher fuel surcharges, which is captured in gross margin. So if you take freight out of the equation, again because that's neutralized above the line, and you take out exchange because that goes up and down, I think a 2% to 3% level of expense growth is a very reasonable number given, I'll call it, 4% to 7% type top line growth. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then last question, the gross margin story pool since 2007 has been very impressive, up about 200 basis points. I'm wondering if preferred vendors in private label can help drive that expansion further going forward. Or would you expect mix to start to be a headwind soon?

Well, as a case in point, and you mentioned preferred vendors, preferred vendors will finish this year representing somewhere between 95% or 96% of our purchases. And that's up from 70% or so 13 years ago. And certainly, the reason they're preferred is because they're more profitable, and more profitable not just in terms of margin but also in terms of service levels, in terms of how we work together from a sales and marketing standpoint to grow the business, grow the industry, grow our customers businesses, as well as all the supply chain back end that transactions, shipments per order, on-time consistent deliveries, those types of factors all weigh into the profitability as to why they're preferred, as well as -- and it's one factor. The other factor, which is obviously encompassed within preferred vendors, is our private label. And private label represents approximately 25% or so of our business this year. That has been growing. It was -- I can't remember the number, but it was let's say 2%, 3% of our business, 12, 13 years ago, so it's been growing at a decent rate every year. And we intend to continue to do that where it makes sense and how it makes sense, both to grow share as well as to grow margin. I think though when you're up at 96% of your purchases coming from preferred vendors, you are kind of pushing the limit in terms of how much more it can go. I mean, it certainly can go to 100%. I can't see it going beyond 100%. And the same thing can be said about private label. We're currently at about, again, mid-20s. That should continue to creep up a bit. But again, it's not going to creep up and be much more than it currently is. So on a go-forward basis, I would not anticipate the levels of gross margin improvements as we've had in the last 4 years or for that matter, 12, 13 years, going forward. But I think, I still believe there are opportunities for margin improvement, but they will be more modest along the lines of 20 to 30 bps a year on average.

[Operator Instructions] Our next question is coming from Keith Hughes from SunTrust Banks.

The building materials numbers you mentioned earlier were very impressive for the year. Can you give us any sort of breakout among those? Which types have done better than others?

I'll tell you that tile is a key growth area within the context of building materials. A second category of product is some of the components that we sell that is blended in with plaster for the pool finish, and then some of the decking products that we sell and some of the components that are blended again in with cement to provide deck finishes.

And this is just contractors coming to you to buy these where before they were buying somewhere else, is it that simple?

That's part of it. The other part of it is our working with contractors to help them upsell to the consumer and having a higher end finish.

Our next question is coming from David Mann from Johnson Rice. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: First question, the comment you made in the press release about the modest increase in consumer discretionary spending. It seems like that's a slight change from previous comments. Can you just elaborate a little more on what you're seeing, perhaps certain categories that you're seeing that in and any geographic dispersion on where you're seeing that?

Well, we're not seeing it in California. We are seeing some of that in such states like a Texas and pockets in the Southeast. And when looking at it, we know we're gaining share. But we also look at certain products that are higher end, for example a variable speed pump, some of the building materials that I just covered, where there's a small premium to be had for this tile versus that tile or this component versus that component in terms of pool finish. And those small price premiums are being paid for by the customer. For example, on the cleaning, pool cleaners, a modest migration from suction, which is the lowest end of pool cleaner, to pressure and pressure to robotic. Those kind of small shifts are indicative, in my mind, of while it's loosening up a bit. Certainly, nothing significant in the overall scheme of things, but certainly modest improvements. Another product segment, heaters. Again, heaters are very discretionary and heaters are being replaced more so -- a little bit more so than we saw 2, 3 years ago. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Do you have any reason to believe that this is a little more sustainable just given the pent-up demand over recent years? Or anything you can call out on that?

I wouldn't -- David, I wouldn't say that there is a -- first of all, I wouldn't list it as being significant. I mean, I mentioned in my opening comments that what we see is that behavior in terms of replacement, remodeling activity still being approximately 30% below historical normalized levels. So consumers are still holding back and deferring. But whereas maybe perhaps a year ago, that may have been 31%, 32% below normalized levels, now it's more like 30%. So it's a modest change, but certainly not significant. And I would expect that, that should continue to improve modestly over the next year or 2, but not any significant recovery until we're out of the woods from a macroeconomic standpoint. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: In terms of the green business, can you give us a sense on what that bottom line impact was for the quarter and how it's looking for the year?

Sure. The green business which lost, from an operating income standpoint, several million dollars last year is currently tracking at a small positive year-to-date, and with a couple of things coming together in the fourth quarter, should finish a positive from an operating income standpoint for the year. So that will be a several million dollar improvement year-on-year. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: And then in terms of your European operations, with all the noise going on there, what's the status of what you're seeing?

It's great that you brought up Europe. We have done well in Europe. The first 5 months of the year were exceptionally strong as that business got off to an early-than-normal start with an earlier spring by about 2 to 3 weeks than normal. It tapered off significantly in the last 4 months, from June through September. But overall, we're still up nicely. In fact, I was commenting to Mark yesterday evening that our international business this year will grow from 10% of our total business to 11% of our total business. And in large part, that's due to our growth in Europe where we continue to gain share and continue to grow our sales. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: And then one last question, in terms of the fourth quarter, it sounds like your base business comment was for mid to high single-digit growth. Can you just give us a sense on how October is going?

It's pretty much running along those lines.

Our next question is coming from the line of Anthony Lebiedzinski from Sidoti & Company. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Just so I was wondering if you could provide some commentary as how your sales progressed throughout the quarter. And given all the noise, especially in August from a macro perspective, just want to get a better sense how your sales progressed in July, August, September?

Sure. As you saw in the report on our base business, sales growth we were up 9.4% for the quarter. I think, they were -- every month was between 8% and 10% year-on-year. So no significant changes during the course of the quarter. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Okay. And then you mentioned earlier that in the fourth quarter you expect the gross margins to be down because last year was unusually high. Can you just give us a better sense as to where you think the gross margin will come in at?

Sure. Last year, we got a little bit of benefit on some deals that we cut with vendors at the tail end, and I don't see those deals happening this year. And that provided us with, I believe, somewhere in the $1 million to $2 million benefit-type range. And given the small sales number in the quarter, that I think probably added somewhere in the neighborhood of 1% to 2% to our gross margins. And again, given that the industry this year was decent, some of those deals I don't think are out there. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Okay, that's helpful, okay. And then also in your press release you cited a further expansion of product offerings. Can you give us some examples of some of the new products that you have benefited from this year? And going forward, are there new product areas that you're looking to get into?

Sure. There's 2 parts to that. One is from a vendor community, particularly our preferred vendors, they have made an effort throughout the course of time to develop new products and provide -- introduced new technologies. And that's been the case. And I think really it's beginning to take hold as from a product management standpoint, they are more and more conversant with what's the consumer is looking for and are developing products to take advantage of that, particularly using technology to make the pool easier to maintain. That's one element. Secondly, I'll go back to building materials and the fact that we launched new lines from a standpoint of new tile designs and new components for pool finishes. And these are elements that help us help our customers. And then again, that goes further along those lines. On the retail side, it's not a significant dollar number, but we have a significant retail initiative working with our approximately 14,000 retail stores that we sell to and helping them become better retailers. And part of that means broadening their product offering to be more of a one-stop shop once consumers come to them as a destination. Obviously, not a one-stop shop in the Wal-Mart sense, but one-stop shop in terms of the pool and peripheral areas. And we sold things like wasp sprays and other pest type sprays. We sold more external, outdoor living-type products that helped -- to our customers and they in turn to consumers that have helped them. Again, it's not a big, big number individually. But collectively, it added millions of dollars of sales for us and certainly for our customers.

[Operator Instructions] Our next question is coming from Tom Hayes from Piper Jaffray and Company.

I appreciate the level of details so far. They pretty much ran the gamut of my questions here. But 2 quick ones. You mentioned in your release a benefit to gross margins from freight out income. Just wondering if that was driven by a better level of recapturing on your part from customers? Or did you guys actually increase your freight rates?

Well, we do -- when the fuel rates go up as they did this year. We either implement or increase fuel delivery surcharges and therefore attempt to recover. And on an overall basis, we essentially did that.

Okay. And then Mark, I'm just wondering, you provided previously some base share count numbers for typically the fourth and first quarter. Can you do that going forward?

For the fourth quarter, Tom?

Yes.

Yes, I don't have those handy. They wouldn't be materially different from what I reported a couple of calls ago, but I'll get to you off-line. They'll be very similar to that.

Our next question is coming from David Manthey from Robert W. Baird. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: First off, as we look at 2009, you saw sort of below trend growth at about 5% and yet you were able to grow your EPS at 21%. And this year, both sales and earnings per share were within your long-term targeted ranges. In conjunction with what you mentioned earlier, Manny, on gross margin being harder to come by going forward, what do you think you could do if growth comes in below trend lines for the next couple of years if we don't hit that 8 to 10 levels or more in the mid single-digit level? Do you think you can get to the targeted EPS range as you have the last 2 years, or would we fall slightly below that? What are your thoughts?

Sure. It's a great question. For those in the call, we have conveyed repeatedly our perception that over the course of the next 5 years -- and those 5 years assume varying levels of recovery in terms of the replacement and remodel behavior on the part of consumers, pool owners, as well as very modest recovery on new construction. And with that taking place, that over the course of the next 5 years, we should average 8% to 10% top line sales growth. And by the way, all these numbers are internal or organic. Does not include any acquisitions being that those will not be significant to earnings. But nonetheless, organic or top line sales growth of 8% to 10%. And we've also conveyed that given our expectations and given what we see from a macroeconomic standpoint that, that would be more back-end weighted from a recovery standpoint. So therefore, conceivably and really practically in the near term 2012 and '13, that it could very well be and probably will be below 8%. But then as you come out of the 5-year, look at the later years, the 5-year time horizon is going to be more 10 plus percent. So overall average over that 5-year time period of 8% to 10% we believe is reasonable. Again, with a range being on a year-to-year basis probably more from 6% to 12%, with lower numbers at the beginning and the higher numbers towards the end. Having said that, when you take that 8% to 10% over that 5-year time period, we believe that, that will translate to 20-plus percent EPS growth. And we feel good about that. Again, a very modest assumption in terms of remodel/replace activity where in fact we believe that the market revert to normalized behavior between -- by 2018. And in terms of new construction that would revert to normalized behavior by 2020, with normalized behavior being approximately levels in terms of new construction of what they were in the 1998 to 2002 period and below the peak levels of 2005, 2006. So going back specifically now, David, to your question, if our sales growth is 6% to 8%, call it, and our margin improvement is along the lines of 20 to 30 bps in the next 1 to 2 years, then our earnings per share growth will be probably in the mid-teens to, depending on a couple of other things, maybe as high as 20%. But certainly not the 20% plus that we would expect over the 5-year average. But that's consistent with our thought process in terms of that macroeconomic recovery being deferred and that improvement coming later.

[Operator Instructions] Our next question is coming from Brent Rakers from Morgan Keegan & Company. Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division: Maybe a follow-up to the last question, as well as some comments earlier. I was hoping you could put maybe more specifics to the approximately $50 million [ph] recovery and incentive comp the last 2 years, maybe how much came back in 2010 and how much came back in 2011?

In 2010, it was about $5 million, $6 million. And then the rest of it plus several million came in this year given the above our own expectations in terms of results for the year. Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division: Okay, great. And then along the line in terms of that long-term outlook or maybe even kind of the thought process for next year's incrementals, I want to say earlier in the call, you talked about 2% to 3% growth in a number of the SG&A lines. Were you also referring to 2% to 3% growth next year in incentive comp?

No. From a practical standpoint, if we come in at, I'll say, 15% to 20% EPS growth, our incentive comp will in fact be lower next year than it is this year. Now, if our results after incentive comp are up 25% in terms of EPS growth, it could well be a little higher than this year. But if they come in, if our earnings grow 15%, 20% next year, our incentive comp will be down. Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division: Manny, I'm sorry, just to clarify, you're speaking about absolute numbers not growth rates, correct?

I'm speaking about absolute numbers, yes. Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division: Great. And then just a couple of housekeeping if I could. I think you referenced bad debt expense in there. Could you maybe give the dollar change year-over-year in bad debt? And then maybe if you can talk, I know it's a little skewed seasonally, but if you could talk about headcount Q2 to Q3, how has that changed?

Headcount, excluding acquisitions is up less than 2%. And if you exclude acquisitions and new locations, headcount is up less than 1% year-on-year. In terms of the question you had with respect to...

I'll answer that. Just on bad debt, Brent, for the quarter, we were up $800,000 year-over-year, which is really about $800,000 this year and $0 last year in the quarter. And year-to-date, we're up $1.8 million over last year. Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division: And Mark, this puts us pretty much at a normal track. I mean, last year was the anomaly, correct?

That's correct.

[Operator Instructions] It appears there are no further questions. I would like to now turn the floor back over to you for closing comments.

Thank you, Kevin, and thank you all again for listening to our Third Quarter Results Conference Call. Our next call is scheduled for February 16, mark it on your calendars, when we will discuss our full year 2011 results. Thank you again and have a good day.

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.