RBC - NYSE

Greetings, and welcome to the RBC Bearings Fiscal 2024 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll with Investor Relations. Please go ahead.

Good morning, and thank you for joining us for RBC Bearings fiscal 2024 third quarter earnings conference call. With me on the call today are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today's call, let me remind you that some of the statements made today will be forward looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's website. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I would now like to turn the call over to Dr. Hartnett.

Thank you, Josh, and good morning, and welcome. Net sales for the third quarter of fiscal 2024 were $373.9 million. This represents an increase of 6.3% from last year. And I'm happy to report this is within our guidance range on revenues. The third quarter of 2024 sales of industrial products represented 65% of net sales with aerospace products at 35%. As a footnote over the past five years revenue growth at RBC has been a compounded rate of 16.8%. Gross margin for the quarter was $158 million or 42.3% of net sales, again within our range. This compares to $146 million or 41.5% for the same period last year, an 80 basis point improvement. We continue to see year-on-year improvement in gross margin, as we continue to strengthen operational performance and improve both absorption and methods in our plants. This quarter because of fewer production days, leading to lower overhead absorption, margin is normally the lowest of the year. It's historically bounced back in Q4 and there's no surprises here. We see this effect every year. Overall, profitability continues ahead of plan, year-to-date and to reconfirm, we expect to finish the year in the low to mid-40% range on gross margins. Again our hats are off to the RBC team for this performance. We all understand that we are in business to service our customers to the full extent of our abilities with high quality and service levels is always our first priority. More than 70% of our revenue are from products where we are – sole or primary source. Our customers have learned over the years they can trust us. When they come to us at the last minute in crisis, we perform for them. Adjusted operating income for the period was $75.5 million, 20.2% of net sales compared to last year $71.6 million and 20.4% respectively, a 5.3% improvement. Free cash flow was a strong $70.9 million. Debt reduction continues to be a priority and is progressing as planned. We achieved $550 million decrease in debt, since the acquisition of Dodge in November of 2021, 27 months ago. And net debt-to-EBITDA ratio of 2.5, over trailing 12 months down from 5.65 in fiscal 2022. RBC's record of EBITDA growth over the last five years now stands at 19.4%. Adjusted EPS diluted was $1.85 a share. Adjusted EBITDA was $109.5 million or 29.3% of net sales, compared to $103.3 million or 29.4% of net sales for the same period last year, a 6.1% increase. We continue to make continual improvements in the execution of our business and are excited to see a robust acceleration in demand, for our products from industry leaders in the Aircraft, Marine and Space industries. We look forward to March, year-end with revenues finishing in the $1.5 billion range. On the Industrial business, during the quarter the industrial growth was minus 0.6%, overall against some strong comps last year. Last year improved supply chain performance, allowed us to ship orders, which were late to customers, creating a bulge in sales and distorting year-on-year comps by a few percentage points. We now have well-performing supply chain on the industrial side, so the environment has changed and orders late to customers' requests are back to normal. Dodge revenues are up 1.4% year-to-date, down in Q3 minus 0.3%. And we expect to be up again in Q4, a few percentage points. RBC Classic Industrial sales were down 1.4% during the last period, driven solely by softness in semiconductor machine makers. Normalizing for semiconductor sales, RBC Classic Industrial revenues would have been up 3.6%. In a word our Industrial business is performing well, and is the -- is in the steady ESG goals mode. On Aerospace and Defense, Commercial Aerospace was up 16.5%. The Aerospace and Defense sector was up 22.5% overall. The constraint here is not demand, its production. We are working to expand manufacturing assets as well as increased in Biomaterials to fuel the continued 20-plus percent per year-on-year expansion across many facilities that service these markets. As explained in prior calls, OEM defense includes components and assemblies for Jets, Missiles, Helicopters, Marine Valves, Satellites, Rockets. And it's up 32.7% year-over-year. Bookings overall in this sector have been very strong. We now have over 60 contracts negotiated and signed with a value of approximately $1 billion. Additionally, we are in a position to grow this metric substantially again, by midyear. Finally the aftermarket was up 26.1%, main drivers, jets, helicopters, engines and marine. As you can see the aerospace market is strongly accelerating with increased volumes quarterly. Demand drivers here are defense and of course large plane builders, the submarine and weapons OEMs and their supply chains. Despite the news otherwise, we are building 737 materials at the 42 per month rate and new orders to RBC are inbound at about the 47 per month rate. We don't expect this change to -- this situation to change materially at this time. On the 787, our current build rates are approximately five per month now and seven per month by April that’s an important ship to us. As, you know, airbus is pushing the 320 ship build to exceed the monthly rate of 70 in 2024. So in summary just to go over the highlight reel, Q4 sales were up 6.3% for the period. EBITDA $109.5 million, up 6.1% from last year. EBITDA 29.3% of sales, up from 26.7% in Q3 of 2022, adjusted net income of $60 million, up 12.4%; debt pay down since November of 2021 $550 million, trailing EBITDA to net debt 2.5 versus 5.65 in fiscal 2022, and well over half of our revenues are to replace products consumed in use. Full year guidance, revenue range FY 2024 in the $1.55 million range and gross margins will be in the low to mid-40s. Regarding the fourth quarter of 2024, we are expecting sales to be somewhere between $405 million and $415 million range. And I'll now turn the call over to Rob, our Chief Financial Officer for more financial details.

Thank you, Mike. SG&A for the third quarter of fiscal 2024 was $63.9 million compared to $56.8 million for the same period last year. As a percentage of net sales SG&A was 17.1% for the third quarter of fiscal 2024 compared to 16.1% for the same period last year. Other operating expenses for the third quarter of fiscal 2024 totaled $18.9 million compared to $18.8 million in [indiscernible]. For the third quarter, other operating expenses included $17.7 million of amortization of intangible assets, $0.1 million of restructuring costs and $1.1 million of other items. For the same period last year, other operating expenses consisted primarily of $17.4 million of amortization of intangible assets, $1.2 million of Dodge TSA costs and other costs associated with that acquisition, and $0.2 million of other items. Operating income was $75.2 million for the third quarter of fiscal 2024 compared to operating income of $70.4 million for the same period last year. Excluding approximately $0.2 million of restructuring costs and $0.1 million of transaction-related costs, adjusted operating income was $75.5 million for 20.2% of sales for the same -- for the third quarter of fiscal 2024. Excluding approximately $1.2 million of acquisition costs, adjusted operating income for the third quarter of fiscal 2023 was $71.6 million or 20.4% of sales. Interest expense for the third quarter was $19.3 million compared to $20.9 million for the same period last year. For the third quarter of fiscal 2024, the company reported net income of $46.6 million compared to $36.3 million for the same period last year. On an adjusted basis, net income was $60 million for the third quarter compared to $53.3 million for the same period last year. Net income attributable to common stockholders for the third quarter was $40.8 million compared to $30.6 million for the same period last year. On an adjusted basis, net income to common stockholders attributable to common stockholders for the third quarter was $54.2 million compared to $47.7 million for the same period last year. Diluted earnings per share attributable to common stockholders, was $1.39 per share for the third quarter compared to $1.05 for the same period last year. On an adjusted basis, diluted EPS attributable to common stockholders for the third quarter was $1.85 per share compared to $1.64 per share for the same period last year. Turning to cash flow. The company generated $80.5 million in cash from operating activities in the third quarter of fiscal 2024 compared to $60.9 million for the same period last year. Capital expenditures were $9.5 million in the third quarter compared to $6.5 million last year. Free cash flow conversion this quarter was 152% and 116% for the full nine-month period. We paid down $60 million on the term loan during this quarter leaving total debt of $1.26 billion as of December 30, 2023 and cash on hand was $71.6 million. I would now like to turn the call back to the operator for the question-and-answer session.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question.

Hey good morning everyone.

Good morning.

Industrials was flattish in the quarter. And then also your -- looking at your fourth quarter outlook for revenue, it just seems a little bit lighter versus what you've seen so far through the year. Can you give us any color regarding what's driving these pieces? How much visibility you have? And if there's any downside risk to your updated 4Q revenue outlook?

Well, I think in terms of the aircraft and defense side, Kristine, the visibility is really good. It's really a matter of making it and we usually do a pretty good job there. So there's -- we don't see a lot of risk there. And on the Industrial side, the visibility -- mainly the visibility and the driver there is largely Dodge. And Dodge is a company that really doesn't have the kind of backlog or contract relationship with its customer base, because of its customer base as we do. And so, we're always extrapolating based upon economic demand and economic forecasts what exactly Dodge's sales are going to be. So, if there's any risk to the upside or to the downside, it's probably coming mostly from Dodge.

Great. And then I know it's -- we're already here in February. So, based on what you're seeing out of Dodge, what's the pace of ordering? And I know it's more of a brick and fix type business. What's the pace that's driving that? And I guess in terms of Industrial revenue, PMI now is trending higher. Is your outlook then for this quarter more conservative Mike?

Yes, I hope it is. I would say that here we are in February and Dodge's business is performing very well. So, -- and we only have about six weeks to go. So, what could possibly happen?

I guess on that -- sorry I'll sneak one more in. The first two years of the deal with Dodge, you've always talked about the years of the factory. And with the margins where they are you've clearly done your job there. So, can you give us an update where you are in terms of revenue synergies between legacy RBC and Dodge?

Sure Kristine, hi, it's Dan. On the revenue side as we talked about in the past we just don't have a lot of overlap on our OEMs. So, we're starting to see some nice traction there. We've been training the Dodge sales team on RBC product and we've been training the RBC team on Dodge products and we've been doing that both domestically and globally and we're starting to see some traction from those events. And I think that would just continue to be accretive to the topline over the next three to four years as the sales engineers get up to speed on these different products and these different OEMs that they're visiting. So, from that standpoint, we're feeling good on the margin side. I think you already kind of address that. But our gross margins for the nine months were up 220 bps and 160 bps fell down to EBITDA. So, we'll definitely gain leverage off the investments we're making on SG&A and we're definitely gaining the benefit from the synergies on the cost side and the SG&A side with Dodge. On the cost side, I think we still have some nice synergies still coming through for 2025, 2026, and 2027 on our in-sourcing efforts that were kind of long-term goals for us and those are moving along nicely. We're actually building out manufacturing facility space in Mexico to give us more capacity for US products in the United States for Dodge. So, that's going to be hopefully accretive to the topline and to gross margins. And we continue to work on consolidation in our SG&A to see what other costs we can continue to drive out between the two divisions.

Great. Thanks guys. Thanks for the color.

Thank you. Our next questions come from the line of Pete Skibitski with Alembic Global. Please proceed with your questions.

Hey, good morning guys. Nice free cash quarter again.

Thanks.

So, maybe just to start there. I had a question on inventory. You guys booked a lot of inventory back in 2023 I think because of supply chain issues but a little bit more slowly in the first half of this year. But it looks like working capital was really kind of de minimis growth here in the third quarter. So, should we expect your inventory needs to slow going forward? Maybe your supply chain is becoming more predictable maybe. But just was wondering if that should that growth should slow going forward even as your revenue grows particularly in aerospace?

Yes. I think I said, aerospace or industrial would be up a few percent. And yes -- where is the aerospace? What is the aerospace in the fourth quarter?

I'm trying to think. Well, I wouldn't feel good. I think it's going to be in that neighborhood. It will be between 15% and 20%. I don't have the 2025 plan in front of me, and I don't remember all the details of it. But I think it certainly is -- nothing is backing off. I mean, it's a matter of getting the materials and training the labor. For the most part, we have the capital equipment although some of it's being augmented and then executing. And so I think, we'll be in that 15% to 20% neighborhood for several quarters.

Okay. Okay. And have you guys seen any big labor challenges in terms of getting the people you anticipate needing?

Yes, we're always being challenged there. It depends upon what part of the country you're talking about. But certainly in the Northeast here that's not an easy solution. We've brought some innovative solutions. We've planned with the growth in our population by plant has to be in order to meet our plans, and we are out recruiting people and doing interesting things in order to attract people to our plant. It's pretty dry here. We're being successful, but it's -- it comes at a great labor investment. The Southern California, it depends upon exactly where in Southern California your plants are. And I think for the most part, we're okay there. We're fine in Mexico in all the plants in Mexico. And we're pretty good in the South Carolina also. So I think the major pressure is pretty much in the Northeast. And we have people working on that.

Got it. Okay. Appreciate it guys. Thank you.

Yes.

Thank you. Our next questions come from the line of Andre Madrid with Bank of America. Please proceed with your question.

Hi. How are you guys?

Yes. Good.

You said material on 737's at 42 with new orders inbound at 47, but with the recent announcement of the production freeze the FAA and post production freeze, how are you guys thinking to a more prolonged freeze impacts what moves out on your end? How can we think about that? And is that something you guys are kind of factoring in the moment? Or is it really not of concern?

Well, right now, we're listening to Calhoun's conference call and trying to understand exactly what his direction was, and we've concluded that this direction was to maintain their rates -- their planning rates on the MAX. And that's kind of what we came away with. So we're doing the same. And I think Boeing is in a tough place. I mean -- they have customers who need the planes are screaming for the planes. They have a long backlog. They have just now getting their supply chain to perform for them. And I don't think they want to tie in on it at this point and slow everybody down. So I think they're going to be using some working capital in order to bank some of these components. And if it's a year, it's what 150 planes. Well, then they have 500 planes on the tarmac at one point in time and have all that working capital tied up there it seems like 150, which when you're only buying -- you're only stocking the components would be would be a small change for them. They certainly can afford it. So I think they don't -- I think their options are limited and I think they have to maintain rate.

Understood. Got you. And then pivoting again to industrial, I know it was touched on a little bit already, but maybe to get back in and just really clarify. How much of the softness do you think could just be attributed to diminished end market demand versus actual issues, because it really doesn't seem like there's anything on your front, but I might have that wrong. I mean how much -- can you maybe just talk broadly about the demand drivers long term on that side of the business?

Yeah. Well on the industrial side, we see markets of mining and metals performing pretty well for us even during this period. Food and beverage areas these are important areas for us. That’s doing pretty well. Oil and natural gas is doing real well for us. And that's been offset by what we consider aggregate and general industrial and semicon. So I think aggregate is a big one. It's an important one to us. It's very dependent upon this. It's -- this infrastructure bill could be a big aid to the aggregate business. And so we'd expect a little pickup in the overall industrial demand through our FY 2025 and that's kind of what our budgets are based on. And so that's how we're making the call.

Fair, fair. I see. I’ll leave it there. Thanks so much.

Thank you. Our next questions come from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your question.

Thanks. Good morning.

Good morning, Steve.

For 3Q, if I assume your EBIT margin in Aero and your corporate expenses were pretty similar sequentially, it suggests the Industrial margin was down maybe 300 basis points versus 2Q. First of all, is that right? And second is that just from revenue being down? Or is there a mix in there? And how are you thinking about 4Q Industrial margin?

Well, I think the Industrial margins were down and I think it's mix driven. And based upon the way we forecast, it's mainly a Dodge issue. And basically, the way we forecast Dodge going forward, it's hard to tell exactly what that mix is going to be. So I suspect there will be no more deterioration than it was in the third quarter. And so worst case we have some pickup.

Yeah. Steve, I'll give them to you right now. So you'll see it in the Q later, but the Aerospace margins we had a really strong quarter. The margins were 41.2%. So they continue to escalate as I've talked about in the last few calls. Industrial margins were 42.8% this quarter. But I kind of want to go back to what Dan said earlier in the call that for the nine months, gross margins are up 220 basis points for the full year consolidated. So we're well ahead of what we had said earlier in the year and feeling really good about it.

Got it. Thank you for that, Rob. Some other industrial companies have been guiding to a softer organic growth environment for the first half of 2024 calendar and stronger in the back half. And I know Dodge is in a backlog basis business, but how are you thinking about general cadence of industrial revenue through calendar 2024. Is there anything different from what you'd expect from your own normal seasonality?

We're not seeing it. I mean we're off – since the first of January, the Industrial bookings have been very encouraging. So the economists predict one thing and it seems like the economy does something else. So I don't think anybody expected the GDP growth that we saw in the third quarter or we're projecting it earlier. And so I think the – I think we're just steady as she goes. As I said earlier we're taking it one month at a time.

And so if there is weakness in industrial that you're seeing right now it is on the Dodge side whereas legacy I think you said is more stable or was up year-over-year while Dodge was down?

Well, the legacy business is more like the RBC aircraft business in that it's servicing OEMs, principally on an 80-20 basis. And so there's long-term POs and there's contracts and there's all that sort of thing that ties it together. And so it's much easier to forecast it.

Got it. And just one last one. As you look across the M&A landscape, are you seeing more Industrial deals than Aero? And what are the relative sizes of deals that you see across the two segments?

I'd say, the Industrial sizes are in the $100 million to $200 million kind of range is what we've been seeing coming by. And some of the Aerospace businesses are larger than that. And they sort of come and go. We're looking – we're a little picky about exactly what we want in our space. And so I think during the third quarter we worked very hard on one and sort of missed the grade. So we're all recovering from disappointment this quarter and looking at other potentials.

And just to clarify those are deal sizes or revenue?

Revenue.

Got it. Okay. Thank you.

Thank you. Our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your questions.

Hey, guys. Good morning. Sorry to just go back to the guidance question again for the fourth quarter. I guess to have Industrial revenue up a few 100 basis points sequentially, that implies on a year-over-year down kind of mid- to high single digits. I'm just trying to tie that together with your commentary about the January bookings being better. So would you expect 2025 Industrial to be less negative than the down kind of mid- to high single-digits that is kind of implied by your fourth quarter Industrial revenue? Does that make sense? Or is that how you start the year anyway?

Yes. I think the fourth quarter Industrial revenue will be -- as we said, will be up a few percentage points based upon what we're seeing so far in the quarter. There doesn't seem to be much difference about that. I think the -- is the issue of the Aerospace projection?

I'm sorry, I'm trying to just discern. Your -- I think you're talking sequential improvement but I'm just trying to think of that on a year-over-year basis, I think sequentially up a few percent translates down, I don't know 7% or 8% year-to-year? Or is that not the right math?

That seems very high. I don't suspect that it's going to be down 7% to 8% year-over-year.

Okay. All right.

I'm a year-over-year guy too, Seth. And yes, I think the Industrial revenue year-over-year is going to be up a few percent in the fourth quarter.

Okay. All right. That's super helpful clarification. Thank you. And I just wanted to go back to the comment around the Mexico capacity add. Can you just -- I apologize if you've talked about this more in the past but is that replacing -- are you moving capacity from high-cost markets to Mexico? Or is that just incremental capacity? And what will that be serving? Thank you.

Well, we just completed -- we expect to complete this quarter a plant in Takata, that's about 100,000 square feet. And that will be pretty much earmarked for the Dodge business. And so we will move manufacturing from the US to Mexico for Dodge for the purpose of opening floor space in one of the Dodge plants, where we have new manufacturing equipment arriving and no source base to accommodate it. And so, we're sort of playing musical chairs there with one of the Dodge plants. And -- so the new equipment that's arriving in the plant will be for increased volume on product lines that are very successful but constrained by production. So that's the first phase of Takata -- that's our first phase. Our second phase will probably be for lower-cost manufacturing of some of the Dodge products and maybe some insuring re-shoring some of the supply chain.

That makes super helpful and makes total sense. Thank you for clarifying that. That’s for me.

Thank you.

Our next questions come from the line of Pete Osterland with Truist Securities. Please proceed with your questions.

Hey. Good morning. A month or much lower, this morning and thanks for taking our questions. First just had a question on raw materials, we've heard about some tightness in the bearings market stemming from lack of material availability. And just wondering, if you were seeing anything like that where there any challenges procuring materials or any additional cost inflation? Just any color there would be helpful.

Yes. Well, I mean in Aerospace and Defense, materials are more exotic than not and difficult to get. If your planning horizon is short, you're going to be buying it from third parties at extremely higher prices. So your planning horizon needs to be long and long is probably 60 weeks. And the special grades of stainless steel are -- and that's really the only way to acquire them. And overall I think in the aerospace business from what we hear from customers that keep coming to us is that bearings are really hard to get, and so that's music to our ears. And that's part of the reason why we're generating so many contracts with people to supply them over a longer term. Unfortunately it takes us a long time to get that material. So to turn that into revenues isn't the most immediate thing, but it turns into revenues over time. And very often customers are willing to pay a premium if you have to buy steel from a third party at a high price and are more than willing to absorb the price difference. So I would say there's a lot going on in our business right now with regard to supply chain.

Very helpful. Thank you. And then just turning to industrial. What are you seeing within your distribution sales channels in terms of customer inventories? Are they generally rightsized? Or have you seen any signs of destocking activity there?

Yeah. I mean, we haven't seen much destocking. As far as I can tell, they're rightsized to a little bit heavy, but not -- they're not overwhelmingly heavy.

Great. I’ll leave it there. Thank you for taking the question.

Thank you. Our next questions come from the line of Joe Ritchie with Goldman Sachs. Please proceed with your questions.

Hi. Good morning. This is Vivek Srivastava on for Joe. Thank you for the question. My first question is on the industrial market. Just if you can provide some color on how the trends are diverging between original equipment versus aftermarket sales growth and potentially how is January trending? That would be helpful.

On the industrial side or…

On the industrial side, correct.

Yeah, Vijay, let us refer to our charts here for a minute. I don't think we would have that on how we're trending right now, because we'd have to break that information down how much has come into distribution, how much is coming in through OEM. But Rob I think you have the industrial OEM and the industrial distribution.

Yeah. So the industrial OEM for Q3 was $79.4 million effectively flat year-over-year and industrial distribution was $165.3 million. So again very close to last year. So it's not as if one was diverging if that's your question.

Yeah. No that's definitely helpful. Thank you. And then I noticed on the food and beverage market you said it's going on well for you guys. And we are hearing from your peers that it was actually one of the softer markets for them. So just maybe wanted to zoom in on this end market? And why you are seeing better trends than some of your peers? Is it more market share driven? Or is it a product offering?

Yes. I mean, I don't think we can speak for our peers but I would say that we spend it's a priority for us. So we direct a lot of attention to that market both in terms of calling on customers identifying, problems problem solving product development new product introduction. So it's active for us. It's -- it performs well for us, but we have to work at it. It doesn't -- it's not on autopilot.

Great. Thank you.

Thank you. Our next questions come from the line of Pete Skibitski with Alembic Global. Please proceed with your questions.

Yes. Thanks, guys. A couple of questions on margins. One on gross margin it sounds like if you kind of hit your mark for the fourth quarter gross margin it sounds like for the full year fiscal 2024 you'd be up at least maybe 1.5 points call it roughly. So I'm just wondering for fiscal 2025 do you see the ability to move it up another point or so on the gross margin line?

Well, I think it's very encouraging. I don't think that the margins on the Industrial side are going to do much better. Maybe they will. But others there's not a major mechanism there that's going to drive that that I can see. On the aircraft side there is a major mechanism in that as volume increases. We still haven't gotten to 2019 level of absorption in our aircraft plants. So our aircraft margins are still trailing what we measured in 2019. So as the volume increases in most of the aircraft plants the volume is increasing and it's increasing at a rate that as we talked about getting the labor and getting the materials and getting the planning straight and is challenging. So that is leading to better absorptions and better absorptions obviously lead to better margins. So we'll see that mechanism improve our performance next year and in this quarter.

Okay. Got it. And then just -- Rob I just want to understand one thing. I think when you talk about Industrial in the third quarter I think you were talking about EBIT of around $42 million. And so I'm just trying to understand...

Yes, I was talking gross margin. I was talking gross margin percentage. So 42.8%.

Okay.

Yes. 42.8%, Yes.

Got it. Got it. Okay. Not a problem. Thanks, guys.

Sure.

Ladies and gentlemen, there are no further questions at this time. And now I would like to turn the call back over to Dr. Hartnett for closing remarks.

Okay. Well, I think, that completes our conference call for the third quarter. I appreciate everybody's questions and participation. And we look forward to talking to you again in May. Good day.