Ford Motor Company (F) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Fourth Quarter Earnings Conference Call. My name is Emma and I will be your operator for today. At this time, all participants are on listen-only mode. We will conduct a question-and-answer session towards the end of the conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And now I'd like to turn the call over to Mr. Ted Cannis, Executive Director of Ford, Investor Relations. Please proceed, sir.

Thank you very much, Emma, and good morning everyone. On behalf of the entire Ford Management Team, I would like to thank you for taking the time to be with us today so we can provide you the additional details of our 2015 fourth quarter and full year financial results. Copies of this morning's press release and the presentation slides are available on our Ford Investor and Media websites. The financial results discussed today include references to non-GAAP financial measures. Non-GAAP financial measures are reconciled to the U.S. GAAP equivalent in the appendix to the slides. Today's presentation includes some forward-looking statements about our expectations for Ford's future performance. Actual results could be different. The most significant factors that could affect actual results are summarized at the end of this presentation and are detailed in our SEC filings. So presenting today are Mark Fields, our President and CEO; Bob Shanks our Chief Financial Officer and also participating are Stuart Rowley, Vice President and Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Global Accounting; and Marion Harris, Ford Credit CFO. Mark over to you.

Okay. Thanks Ted. And good morning everybody and thanks for joining us. I'm really pleased to review with you our 2015 full year and our fourth quarter results. And if you recall, last year on this call we promised a breakthrough year in 2015 and we delivered. We achieved a record company full year pretax profit of $10.8 billion. Looking at the business units, every business unit with the exception of South America was profitable. In Europe, we returned to profitability and we earned over $1.25 billion. That reflects the progress of our transformation plan. Asia Pacific had its best ever annual profit and of course North America and Ford Credit continue to deliver strong profitability for the company. We also generated our highest volume in 10 years and the most revenue in 12 years and our automotive operating-related margin came in at 6.8% and that was the highest since at least the 1990s. And in automotive-related operating cash flow, we came in at $7.3 billion and that was the best that we generated since 2001. We also at the same time grew our global market share and that's in large part due to the strength of our new products and a little bit of a sampling of that Explorer remained the best selling three-row SUV in the world. Mustang, which as you know we took global last year is the world's best selling sports car. F Series is America's best selling pickup for 39 straight years and the bestselling vehicle for 34 years in a row. We're also again America's bestselling vehicle brand for the sixth straight years and in Europe, we became the number one commercial vehicle brand and that's the first time we've been able to achieve that in 18 years. And turning to Lincoln, we delivered a second straight of U.S. sales growth and we also became the first luxury brand in China to top 10,000 sales in its first full year of operation. And of course along with this strong performance, we rewarded our shareholders with distributions totaling $2.5 million during the year and also growing our regular dividend by 20%. And I strongly believe that these results once again demonstrate that our plan, our people and our process are delivering and they're creating value for our stakeholders. Now, looking at the fourth quarter on the next slide, you can see it was another terrific quarter that helped contribute to our performance for the year. Our fourth quarter pretax profit of $2.6 billion was nearly double a year ago. Our net income came in at $1.9 billion and our automotive operated margin came in at 6.1% and that was up 2.7 percentage points from last year. Importantly, we also delivered strong topline growth with our wholesale volume and automotive revenue both up 12% and revenue was up 18% at constant exchange and we generated strong automotive operating-related cash flow of $2.1 billion for the quarter. We were profitable in all business units, except South America, including a record profit in Asia Pacific, a fourth quarter record in North America and another solid quarter from our Ford Credit operations and in Europe we delivered our third consecutive profitable quarter. So in sum, our profits improved, our market share improved and our margins improved delivering profitable growth for all of our stakeholders and we're also guiding to achieve equally strong or better results this year. Now, turning to Slide 4, 2015 was also a year of progress from an operating point as well. We successfully completed the 16 global launches that we planned. We improve quality and customer satisfaction around the world as we launched those products and we continue to invest for profitable growth in the future. And I believe of all our accomplishments, one of the most significant was delivering such strong results in the near term while expanding our business model for the future and we're growing and investing to be both an auto and a mobility company. ' And what this means is we're strengthening and investing in core business of designing, developing, manufacturing, marketing, financing and servicing great cars, trucks, SUVs and electrified vehicles. But also at the same time, we're aggressively pursuing emerging opportunities through Ford Smart Mobility with the most recent announcement of SYNC Connect and our plan to have the largest autonomous vehicle test fleet in the industry. And we're also working to transform the automotive customer experience with the introduction of FordPass. And as we do all of this, we're going to stay absolutely focused on accelerating the pace of progress of our One Ford Plan, delivering product excellence with passion and driving innovation in every part of the business. So with that I'll, turn it over to Bob, who will take us through some of the financial results.

Thanks Mark. What I'd like to do is to start on Slide 5, which is our key financial summary. And the first thing I would ask you to do is just glance down the second and the fourth columns. Those are the year-over-years for the fourth quarter and the full year and what you'll see is everything is positive. So whether it's the growth factor, it's the operating results or the net income factors, cash liquidity, everything better than in 2015, whether the quarter or the full year. Now certainly we should recognize that, and we’ll talk about it later in the presentation that we’re seeing strong improvement from across most parts of the business, in fact all parts of the business in terms of the full year and we should recognize too that we’re benefitting from the big bet that we made on the F-150. We had the launch effects of that in 2014 and including in the fourth quarter and that was a big bet for the company and it's paying off for us. It’s certainly resonating with customers. It’s good for the environment and certainly as I said we’re reaping the rewards of that. Since I’m going to touch on most of these things in the subsequent comments and slides, I just want to highlight three things that I won't come back to later. The first down the page under operating results, let’s look at our earnings per share and operating basis, you can see that we came in at $0.58, which is up 93% from a year ago and $1.93 which is up 44%. Go down a bit further and look at the after-tax results, net income you can see we came in at the quarter at $1.9 billion that was up very sharply from a year ago and $7.4 billion for the full year up $6.1 billion. If you go up just a couple lines from there you can see the special items pre-tax charges in the quarter, we have $714 million that was almost completely explained by the re-measurement losses on our pension and OPEB plans. Okay, let’s go on to Slide 6, I’ve got three slides for the full year I’d like to touch on those first and then we’ll get into more details of the quarter. These are the absolutes of the quarter and you can see the record of $10.8 million and then as you glance across the segments, you can see everything that’s profitable in terms of the business units with the exception of South America. And if you look at the operations outside of North America collectively we made $223 million. To me the big story and one of the big stories that we want to get across today is the quality of the improvement across the business on a year-over-year basis. If you look below the charge you can see the changes. The $3.57 billion improvement at the company level, it was driven by North America $1.9 billion of financial services, a contributor over $200 million but we got $1.4 billion of improvement from the operations outside North America and going forward our whole strategy is to keep North America strong, strengthen it to the extent that we can. But it’s really the other operations we need to get them moving forward in a positive direction both in terms of profitability and returns that’s the big opportunity for us as well as the new opportunities and you can see we made great progress on that in the full year and I’ll touch on that in the quarter as well. Let’s turn now to Slide 7 and here we'll look at the key metrics for the company. This is the automotive sector for the full year. So just kind of looking across the page; wholesale is up 5%, revenue up 4%, 9% at constant exchange, very strong improvement in the operating margin 6.8% and the pre-tax results up 60%. And on the lower left, you can see the global market share which is up two tenths that was in South America and Europe and some favorable geographic mix effects as well. Let’s go on to Slide 8 and here we will look at the full year improvement. You can see $3.3 billion that was driven by $7.4 billion of improvement and market factors, volume, mix, net pricing all driving that in the positive direction. We did have cost increases, both contribution cost and structural cost. The one thing I’d like to highlight here we’ve broken out for the first time manufacturing and engineering separately and you can see with the manufacturing call out, that we’ve also indicated that it includes volume related effects. Some companies include variable and labor and overhead in volume, but we don’t do that. We put all that in structural cost, which is why we don’t call it fixed cost because we recognize that the downturn we’re able to respond appropriately whether it’s taking over time out, shifts, lines to be changed and so forth. And so hopefully that will help to understand better the cost and the nature of the cost that we're investing in the business. On the far right, you can see the ratification bonus related to the UAW agreement. I should note that within the results and all this sits in North America, we’ve got about $600 million of cost increases associated with the agreement. Most of that is the one-time ratification bonus. The rest of it is just normal cost increases related to wage increases and so forth and that’s sitting in our structural cost. All right. Now let’s move into the fourth quarter. I will start by looking at the absolutes on Slide 9, again very strong performance $2.6 billion and again glance across the page and you can see everything profitable with the exception of South America and again the collected results of the operations outside North America of profit of nearly $300 million. Again I want to highlight the story year-over-year, go below the chart first line, $1.3 billion, $400 million from North America about a $130 million from financial services, but more than 50% or $760 million coming from the operations outside of North America, again demonstrating the progress that we‘re making in getting the company more balanced in terms of the contributions around the world. Now let’s move to the key metrics on Slide 10, again growth in wholesale is double digits, same thing in revenue of 18% a constant exchange, a good margin for the fourth quarter of 6.1% and pretax results have more than doubled and on the lower left, you can see our global market share was flat. Let’s go on to Slide 11, and here we'll look at the change in our automotive sector results year-over-year up $1.1 billion. Very similar pattern to what we saw in the full year, very strong market factors. We had cost increases again look at the structural cost, you can see the manufacturing of 23.5. Almost all of that is volume related. The balance is explained by the UAW contract and then the gratification bonus to the far right. Okay. Let's go on to North America and here we'll start going through the business units. These are the key metrics. North America had very strong growth in the quarter. It was their best quarter of growth of the year. You can see wholesale is up 15%, revenue up probably nearly 20%. The operating margin very, very good at 8.2% traditionally for the fourth quarter is our weakest quarter and this includes the full $600 million of UAW related cost. So really strong result from North America and you can see the profits of $2.1 -- or $2 billion of 26%. You go below the chart you can see the full year, very strong factors right across the Board and again the margin came in at 10.2%. As we look at the guidance for the year we expect to sustain this level of benchmark profitability with margins about around where we actually ended up about 9.5% or higher. But I thought I would comment on this because it was certainly something that was discussed quite a bit at the Deutsche Bank conference earlier in the month when we provided our guidance. Let me just again put into context how we're seeing the North American business. It is performing and has been performing for years at benchmark levels of profitability and margins and then as we've mentioned in three of the last four years other than the year when we launched that F-150, its been operating at 10% or higher, which actually is at the high end of the range that we're targeting on an ongoing basis of 8% to 10%. Then in 2016 we expect the margins again to be in this range 9% or higher but unlike in 2015 when the year-over-year growth in the market factors far exceeded the cost increases, we expect to see a smaller improvement in the market factors while we'll continue to invest for profitable growth and this is reflecting mainly three factors. The first is the fact that we will see much less benefit in '16 from industry growth in the U.S. The second one is that we are expecting impact of the super duty launch, which takes place in the second half to have an impact. Now we've target a normal launch, but it’s still going to incur cost associated with such a large launch and we're going to have the normal volume ramp up curve that we have to climb. So it will have an effect primarily in the third quarter. And as mentioned lastly, we're continuing to invest for profitable growth this year and beyond not only in the traditional business, the core business, but also as we transformed Ford into an auto and a mobility company. So that’s how we see it. We're very pleased with the results. We think we’re going to sustain this level of profitability as we move into 2016. Okay let's go to the following slide on Slide 13 and let’s look at what happened in the quarter for North America, an improvement of $400 million strong market factors. Cost increasing related to the products which also drove the market factors, but also the structural cost, which were largely volume related and the UAW agreement with the ratification bonus also having effect which is over in other.

And when you look at just a couple of comments we're coming off a strong year for Ford in the U.S. and as Bob mentioned earlier in terms of the investments, one of the stories within here is our new products have enabled strong pricing power with our transaction prices up over $2,200 versus last year and that was more than double the industry increase. And going forward this year, we're going to continue to focus on profitable growth while at the same time launching some very important high volume products like the Escape, the Fusion and as Bob mentioned the Super Duty. Let’s turn now to South America on Slide 14, there is a lot of very big macro trends that are sweeping across the global economy and certainly the strong dollar commodity -- weak commodity cycle is one and there is probably no region that’s more affected by this than South America and you can see it clearly in our results in the fourth quarter and the full year. You can see the wholesales were down sharply 39%. The revenue was actually down 52%, about 45% of that was related to weaker currencies. Margin of course down sharply and the results were down as well. If you look at the fourth quarter the same-store EBIT, when you get to the full year, you can see that we actually had an improvement in the results and that was related to the fact that we have a non-refit of the big Venezuelan devaluations in 2014. In terms of guidance, as we mentioned we expect our guidance or our guidance for that region is that it will be loss in 2016 and likely to be greater than what you're seeing today for 2015. Okay, let’s move on to South America on a year-over-year basis, down $108 million and if you look at the callout box on volume and mix you can see that it's more than explained by the industry decline. We had a 33% reduction in the Brazil industry in the quarter. Clearly we had a impact on the business, but I will tell you our team did a great job of doing what they can do with the things they can control. We had a strong pricing. We had very favorable results in terms of cost performance and I would highlight that within these positive cost factors we have you have over $100 million of negative impact from the very high inflation that we're seeing in Brazil and in Argentina. And then lastly I would call out the exchange we had over $100 million of bad news that came from the devaluation of the Argentinean Peso that came towards the end of the year as new governments started to take action to restructure the economy so it's good for the longer term of Argentina but certainly hurt the business in the fourth quarter.

Okay, let’s turn to Europe now which is a very good story around the progress that the team is making there. In the fourth quarter, we were profitable. That's the third consecutive quarter of profitability. We had the strongest growth among the business units in Europe in the fourth quarter. It was up 21% and wholesale is up 19% if your whole exchange constant and of course we returned to profitability with a positive margin. And the story on a full year basis is just as good. We had growth although revenue was down if you adjust for exchange it was actually up 8% and then of course the profit that Mark mentioned of $259 million. Now if you look in the lower left, you can see we also grew share in Europe. We were up six tenths of a point across the entire region that was driven by Britain and Germany and some favorable impact of the geographic mix of the markets. And we also had favorable market share among the Europe 20 and that was driven by good performance of the Mondeo and the Eco Sport. In terms of guidance for 2016 we expect the results for Europe to be higher than what they were in 2015. Now let’s turn to Slide 17 and here we'll look at the year-over-year improvement on the quarter from Europe. So up $428 million and going across the page most everything positive we had favorable volume and mix. We had higher net pricing. We had lower cost and if you go to the far right the other is largely the effect of the consolidation of our Ford Sollers and City in Russia. So really, really strong performance right across the Board in Europe.

And just to jump in here for a second, obviously we're pleased with our progress in Europe, but not satisfied and we just want to be clear that getting profitable in Europe is just the first step and our goal is to deliver a sustainable and a vibrant business despite the competitive and regulatory pressures that we're seeing and also the difficult business conditions in Russia.

Okay. Let’s go into Middle East and Africa. This is the only slide we have for this region. You can see we had growth in the quarter. We also had positive results and for the full year we had a profit of $31 million as the team continues to start to unfold the growth strategy that they developed put in place last year. As we move into 2016 we expect the results to be about the same if not better in Middle East and Africa. Let’s go into Slide 19 and turn to Asia Pacific, great story here. Wholesales were up sharply 16%, the revenue was up 38% if you adjust for exchange, a very strong operating margin and record pretax results in the quarter. If you look at the numbers below the chart, which are the full year somewhat quite as strong growth because the fourth quarter was clearing the big quarter of the growth in 2015. Very strong margin of over 7% and that record profit that we talked about earlier. On the lower left you can see the share in China was flat but we did improve the share overall across the region and that was largely due to favorable geographic mix. In terms of guidance, we’re expecting results in 2016 to be even better than that were in 2015. Let’s go to Slide 20 and we'll look at the improvement in the fourth quarter in Asia Pacific which was quite strong $349 million was largely driven by volume and mix and you can see it was industry a bit of share which is again geographic mix favorable stocks as the industry grew and we also got new products into the pipeline and the mix was very, very strong. Within this mix and other of $181 million you actually had $355 million of favorable mix that was largely the effect of the Edge which is hot and high margin, as well as good performance of the Mondeo and the Kuga. And you can see that the cost were pretty much flat and over to far right you can see other that is largely the royalties in China, so volume related as well. So very strong performance across the region and setting us up for another record in 2016.

And just focusing on China for a second, we delivered record sales in 2015 and we saw growth across the country, but the fastest growth actually occurred in the Tier 4 through six cities and as we started out this year what we're seeing is industry retail sales in January have started strong. They look to be in line with the sales rate that we saw in the fourth quarter of 2015 although they're moderating in the second half of the month versus the first half. But just a note to point out that as you know the Chinese New Year is very variable. Some years it falls in January, some years it fall in February. So we're really going to need to look at how sales perform across January and February to get a clearer view of how the industry is tracking.

Okay. Let's turn now to Ford Credit and on Slide 21 we've actually created a new slide. We wanted to be able to show you the absolutes that are important to the Ford Credit operations. On the far left, you can see a couple of growth metrics around contract volume, which was up 8% in the quarter. Managed receivables grew 12% as Ford Credit supported for its growth overall. Pretax result of $556 million that was up 31% and then we've got three metrics, which just represent the portfolio performance, which continues to be very strong and very robust and for those of you that want to understand more of course you can call into the fixed income call, which will take place later today and our team will take you through more insights and details into Ford Credit's performance, but the portfolio performance continues to be at very, very good levels and in fact compared to history low levels. If you look at the data below the chart, again growth across the Board there whether its volume or managed receivables of the profit of $2.1 billion and again look at those portfolio performance metrics are looking quite good and this is simply because Ford Credit has got a very clear point of view around its purchase polices. It’s been implementing those very consistently for a number of years. So for example in terms of high risk business continues to be about 5% to 6% of the portfolio and its performing very well as the data indicates. What I want to highlight on the left and I am not going to talk about it until I get to the next slide, but look at the debt $120 billion to support Ford Credit and the managed leverage of 9.5 to 1. We target 8 to 9 to 1. It's above that level because of the effect of the strong dollar as it translates the equity of our operations outside of United States. In terms of guidance, we expect Ford Credit to continue to be strong performer about the same if not better in 2016 than it was in 2015. Now let’s turn to Slide 22 and we'll look at the fourth quarter and year-over-year performance. Ford Credit, you can see that it was driven by the growth, the volume, favorable mix across the globe in terms of the products and services that it provides and favorable financing margin, which came from lower borrowing cost. With that let’s go into Slide 23 and we'll look at automotive sector cash and cash flow. This was a really great story in the quarter and also for the full year. If you go about a third way down the page, you can see the $2.1 billion of automotive operating cash flow the quarter, driven by the profits. And if you look at the full year the $7.3 billion record at least of 2001 again driven by the very strong profits and then you can see the uses of the cash flow there. On the lower left, you can see we ended the year at $34.5 billion of liquidity, a very strong level and then the automotive debt of $12.8 billion. I just want to stop by here because one of the things I just wanted to take a minute and comment on, we’d seen a number of articles that continue to be written about the very high leverage of Ford Motor Company and generally that point of view is because people are taking this automotive debt, they're adding it to the financial services debt, which is on a previous page and of course the business will look for how to leverage. But that’s not the way that investors should look at. It's also not the way that the credit rating agencies look at it. If you think about Ford Credit, Ford Credit is self funding, Ford Credit also self liquidates in a downturn at lower volume. And so you think about Ford Credit separately and then in terms of its own leverage you want to look at that managed leverage that I touched on and as I mentioned we've historically been within the 8% to 9% we target. A little bit above because of the translation effect in '15. but we're going to go back into a range in 2016. The key one in terms of the leverage of the company and the one that the credit rating agencies look at is this what's on this page, the $12.8 million and this is the lowest it's been since 2000 and its representative of a very good leverage position by the company along with where we stand on pensions and other things that the credit rating agencies look at. So we're in great shape in terms of the balance sheet but I just wanted to clarify that for everyone who had any questions about that. Okay I’m going to wrap up on Slide 24 and this is looking at the planning assumptions and key metrics that we provided at the beginning of the year, and what I'll say is we delivered. If you go to the very bottom of the Slide, you can see a new metric that we've added that we disclosed at the Deutsche Bank Conference earlier this month, which is our after-tax five-year average return on invested capital. We came in and at 16% 2015, which was unchanged from 2014 and in both years well above the cost of capital. So Mark back to you to talk about '16 and wrap it up.

Okay, thanks Bob. So as you go on Slide 25 here you can see the company guidance is unchanged from the outlook that we provided on January 12, and we expect 2016 to be another strong year for the company, one that features obviously sustained strong financial performance and returns, profitability across all parts of our business, except south America, a continued strong balance sheet and of course the next stage in the deployment of our shareholder distribution strategy. Now as always for our process, we're going to continue to monitor the business environment to anticipate or react to any changes that we see and take appropriate action. So to sum it up, before we get to the Q&A, we promised and we delivered on our commitments for 2015. We promised to restructure and invest in our operations around the world and we delivered both topline and bottom line growth. And this year our commitment is to accelerate our pace of progress even further by building on our strengths, but also we're growing lean. We're going to be focusing obviously on profitability and making tough choices to restructure where necessary. We're moving fast to expand our business model and we're on track to deliver both our near and our long term strategic objectives. And our commitment quite simply is to deliver continued strong results in 2016 and expand our business model to take advantage of the huge opportunities in the changing world. So with that, why don’t we just open the phone lines for your questions?

Thank you. [Operator Instructions] And your first question comes from the line of John Murphy from Bank of America. Please go ahead.

Good morning, guys.

Good morning.

Just a first question on cash flow, which was obviously very strong for the fourth quarter and for the full year, Bob as we look at the pretax profit that you’re looking at for the total company is going to be flat on a year to year basis. So I would imagine that's -- or up, but that’s not going to have too big an impact that would be negative on free cash flow in 2016. So why the same or lower for the free cash flow number for 2016? Is there something else going on below the line that either benefited on in '15 that would be a headwind in '16?

Yes thanks John. That’s a good question. Yeah there are two things to think about in terms of our call for 2016 and one of them is exactly what you mentioned. If you look and I am on Slide 23 here, if you look at the cash flow for the full year, you can see a favorable change in working capital and what we benefitted from was the fact that in 2014 we had the launch of the F-150 and there is a launch effect at the end of the year as well. So we had a drain down if you will that was unusual of working capital. We kind of restored that, replenished that in 2015 and benefitted from that. That does not obviously repeat in 2016. So that’s one of the factors. The other factor on the slide you can see favorable other than timing differences and at least based on what we're seeing right now for '16, we don’t think we're going to benefit same degree in that area of the cash flow statement as well. So those are the two factors that are causing us at this time to say that it will still be strong yet not as strong as what you’re seeing here on Slide 23. So I think you can get a sense that it's going to be a good number, but just not at the level that we're seeing right now. Now of course we're going to continue to work to try to get everything out that we can and we will update you in the year if things change.

Thank incredibly helpful. The second question just APAC, it seems like you it a real inflection point here in the fourth quarter. It was like a very significant step up on year-over-year basis but more important on a run rate basis. Is there anything that would change going forward here in the near turn? Just mitigate that step up because it is a big factor in the quarter.

John when you look at the run rate of the fourth quarter, so your question was for 2016, a couple of things, one is as you know in the fourth quarter we do have higher dealer stocks due to the seasonal increases as we prepare for the Chinese Lunar New Year selling season. Also we had a few product launches. So were stocking up on that. Obviously we have to keep an eye on, on what’s happening with the Renminbi in terms of the currency that’s impacting us. And of course we're going to continue to have investments particularly engineering in for new products, but also to meet the regulatory requirements. So we expect as you saw from the guidance to do better in Asia Pacific in 2016, but hopefully that gives you a little flavor of the run rate going in.

That's helpful and then just lastly, Brazil seems to be holding up very well for you and the industry. Obviously that's important for FMCC, but it’s also very important for pricing on the new vehicle side. What are you seeing on residuals and as we see this continent march on product cadence just ramping up, how important it is to keep supporting your residuals and how do you see that impacting pricing for the new vehicles?

Hey John this is Marion Harris. Residual prices recently or our auction values have been holding up pretty well. We've seen a little bit of weakness recently, but nothing material. And I think, as we look forward, with the growth in leasing over the last number of years, we do expect to see some higher auction volume coming through over the coming years and as such, we baked in or have planned some expectation lower used vehicle prices.

Okay. Thank you very much.

Okay. Thank you. And our next question comes from the line of Colin Langan from UBS. Please go ahead.

Great, thanks for taking my question. One of the big highlights today seems to be the opportunity to see profits improve around the rest of the world. Can you remind us of the longer term targets you have in those major regions like Europe. And I guess the attention may have changed from the last update a couple of years ago and then particularly Asia ex China, when do you think to maybe get that back to profitability?

We would expect Europe to get to sort of a 6% to 8% margin, that’s what we're targeting. If you think about Asia Pacific, there I think it would be 8% or maybe it’s a bit higher because you've got the effect of the JV net income with no equity. So actually it could even be higher than that. Do you remember Stuart?

It's more like over 10%.

Over 10% on the basis that we report and then in case of South America, I would just go back to what we did, the previous nine years before this particular downturn started. We got very healthy margins there. So I think I would expect to see the same type of margins, but you have to think about South America over big cycles. You don’t look at it year-by-year so much as you think about okay what did I get over these nine years. What am I kind of suffering from right now and then it will come back once the worm turns again. So I think we think about it that way, but would expect to get very, very strong margins when the cycle turns once again.

And then when you think about your question around Asia Pacific outside of china, as you can see we've made progress and it's really in a couple of different areas. One is in the ASEAN markets we made a lot of progress and part of that was the industry getting better, but also we saw a lot of good mix on the back of our Ranger and Arius. The fruits of the labor of our Australian transformation plan are really starting to take hold as well as some capacity actions that we took in India. So we'll continue to work on that. We've seen some good improvement this year and we're going to work very hard to continue that in 2016 Colin.

Okay. Great. And any color on the pricing environment around the world? There’s been a lot of concern about Europe and China. How is it looking for you and how are you thinking about it the next year?

Well when you look at Europe, it’s still a challenging pricing environment, probably more challenging in the non-Euro countries like U.K. and Sweden as those currencies have strengthened against the Euro. But we're still seeing challenging situation there. I think the good news is when you look at our performance on the back of our new products we actually had positive pricing performance. So I think it's showing that the investments that we're making for our products are paying off. And China a little bit of a different story, we saw negative pricing in the industry of about 6% last year. We actually saw it probably peak at about 8% in the fourth quarter. Part of that was the purchase tax reduction and as we go forward into this year, we think we’ll see it in that 6% range and again we’ll see how we go going forward. And here in North America I think on the truck side it's pretty healthy. Obviously we're seeing more competition on the car side particularly the sedan side and given the migration we're seeing from customers.

Just one last question, I get a lot of questions around financing market in the U.S. it seem like Ford Credit's results were actually quite solid and stable. I think what are you seeing in the market? Are you seeing issues with the supply in particular? Any challenges out there that you're seeing in terms of the lending market product?

Colin, this is Marion. No, we’re really not. I know there is a lot of discussion about this, but with the exception of the trend in longer term financing we're not seeing any weakness in the consumer alone. In fact delinquencies which are a leading indicator were at an all time record low for us.

And I think our mix of higher risk is what always is 5%, 6% right?

That’s right. And so our underwriting same has remained consistent and our portfolio continues to be very robust.

Okay. All right. Thank you very much.

Okay. Thank you. Our next question comes from the line of Dan Galves from Credit Suisse. Please go ahead.

All right. Good morning. Thanks for taking my questions, just looking at the dealer stocks in the appendix pretty big increase sequentially like 11% globally and some of the markets are up year-over-year a lot more than in overall industry demand is. So I guess could you comment on the sequential increase in stocks? Is that normal for this time of year and then looking forward, can you give us any color on what you expecting in terms of year-over-year, full year production growth for Ford in 2016?

Dan this is Mark. When you look at the stocks again you have to put into relation where the market are going and in the U.S. for example when you look at in our day supply basis we're only up one day from 2014. So we think we’re in pretty good shape there. Europe, we're probably about four days above last year, but that’s taking into account the growth that we're seeing as we went from quarter-to-quarter and we’re actually seeing in January the growth in Europe continuing. So we think we’re in good shape there and in China as we mentioned earlier we do have the seasonal increases in stocks as we get ready for the Chinese New Year.

And in terms of what we are expecting for 2016 Dan, we do expect to see growth in volume in 2016, it's going to different by region. So we will have higher production, but we’re not going to provide any specific details at this time.

Okay. Got it and then on the North American margins obviously really solid right now. Are you stick into the 8% to 10% kind of long term number even thought the pension accounting change added a 100 basis points. Just wanted to ask that question and then how should we think about the margin level let’s say if -- have become more of a North America trend demand level or U.S. trend demand level in the $15 million range. How should we think about detrimental margin if eventually we do get a bit of a down tick in the U.S.?

Yeah, that's a good question. When we develop the 8% to 10% this was before, this was quite a number of years ago actually. So since then we've had this big reduction in interest rate which really drove very big increases in these re-measurement losses which is one of the reasons why after we saw that’s a current understood how the market was really quite sophisticated in understanding the company’s results when they treated in the way that we’re now treating it. And so we decided to move in that direction so that you could clearly see the operating performance of the business. So we developed 8% to 10% before that. So I would say we're back to where we were in terms of the effective it had on the business. And we developed the 8% to 10% and think of it as over a longer business cycle. It's not peaked. We’d actually like to maybe a bit below that and the downturn, but we’d like on average to be around that 8% to 10% and so we see that as something that we're aspiring to get to we think with the breakeven that we have with North America that’s probably where we would be. But going forward, as we've said, we’re operating at this 10% level in fact in two of the last four years, I think we were over 11% from that. So we clearly can go higher and we'll continue to work to do that and certainly Joe is working to stay at the level that we've been in the last several years and do even better if possible, but we’re operating at benchmark levels and the results speak for themselves.

Okay. Thanks very much. Appreciate it.

Okay. Thank you. And our next question is from the line of Pat Archambault from Goldman Sachs. Please go ahead.

Thank you very much. Just a couple of follow ups, I guess for the North America profit walk for the fourth quarter on Slide 13, just wanted to understand how we see those cost playing out over the course of 2016. We appreciate the detail here. I think it’s very helpful, but there seems to be some moving parts that will affect distinct parts of the year right. We have the anniversarying of the launch or the ramp of the F-150, the launch of the Super Duty and then presumably there is also opportunities that you have to take cost out of the existing F-150. So, how do those things interplay as we think about the cost performance versus '16?

Yeah, I think what you will see in 2016 as that you'll see as I mentioned earlier you'll see less tailwinds of those tailwinds from the market factors in terms of the cost you will see less of an impact on the contribution cost and particularly the product cost because we had the big effect in 2015 versus '14 because of the F-150, but also have the Edge and Mustang and some other products. In 2016 you won’t see such a big effect. So I see much less of an increase in contribution cost in North America than we saw in 2015. And then in terms of the structural cost, we'll have an increase. A lot of that will be in manufacturing, it will be in engineering and some of the other aspects of the business including frankly some of the initiatives that we're working in smart mobility. But I think overall you'll see much less of a cost increase in North America in '16 than we had in '15 but it will be largely driven by the performance and contribution cost.

The only thing I would add Pat is as we look at the cost particularly Bob mentioned the contribution cost, we’re also going to get the full year benefit of the price tower that we're seeing from these new products whether it’s the Edge of the Lincoln MKX or the F-150 particularly in the second half of last year, we get the full benefit of that.

Got it. Makes sense, one just addition to there on commodities, I think if I’m paraphrasing you guys correctly at the Trade Auto Show that was fairly small positive and likely offset by FX I think it was maybe the commentary, even since then commodities have continued to go down, is there may be a potential upside risk there just given where some of these things are cracking.

Yeah, we saw -- I am not looking at the number, but I think was $930 million of good news on commodities for the company and a lot of that in North America and '15 and then we had the $249 million of exchange. Things are moving in fact since we talked at Deutsche Bank, things that moved, if we look at this year and I just got with the team yesterday and we've looked at this, I think we'll still see positive performance from commodities. It won’t be quite as great based on what we’re looking at right now as it was in 2015, but it will be positive and we will have some headwinds on the exchange. So I think the net of the two at the moment again it changes every day as you highlight it, but the net of the two won’t be quite as strong as it was in '15. The other thing I would just highlight so everyone understands is that we basically of all you locked in about a third of our commodity's exposure either through contracts largely on steel and/or hedging that we do on some of the base metals including aluminum, which is the second largest exposure that we have. The other thing is that our policy on hedging for exchange is basically to have the operating exposure that we have identified across the full year largely hedged on key currencies, not every currency because we leave some un-hedged because we believe that they naturally are hedged with some of the commodities. But we lock in some of those commodities 100% operating basis at the beginning of the year and that’s the position that we're in right now. So we do that not to play the market but we are trying to reduce the volatility both in terms of the impact of commodities and the impact of exchange -- operating exchange.

Okay. Great. Thanks, appreciate the color.

Okay. Thank you. So your next question comes from the line of Brian Johnson from Barclays. Please go ahead.

Yes, good morning. Most really probably for Mark is it I’m believe Joe on the phone, if we think about overall environment in North America just around energy prices, it's almost like the opposite of 2007, 2008 we’ve got gas prices approaching $1 in some places. apparently your pickup truck sales and light truck sales overall are very strong but within your results, can you give us a sense of what the drag is on cars maybe recap some of the capacity actions taken. And then with regard to the light trucks since this low gas price hasn’t been lost on others, we heard from a competitor in your suburbs yesterday about adding SUV and pickup trucks capacity, some of the Asians seem to be converting cars to CUV capacity and how do you see the capacity situation in the industry for light trucks verses cars going forward?

Well Brian for your first question if you can tell me where that gas station is that’s selling gas for a dollar. I'm there because that’s a good price, but we're seeing gas prices here in the Detroit Area about $1.50. As you think about the second part of your question on SUV capacity, we think given our view of where the market is going that I think we're well positioned to capitalize on both SUV and trucks and we have opportunities to -- in terms of capacity we're nearly there, but we have opportunities to add line speeds, work during some of the shut down periods etcetera. So I think we're well positioned there. And in terms of the car capacity as you know we did take some down time in for example our Michigan assembly plant to make sure our stocks in line for vehicles like our Focus, but overall we'll just continue to work our process and you know our process, its always matching production to demand and we'll adjust as necessary. And just two more things on the truck piece of it and we're getting a little bit more specific. You may have seen the other day, we announced in Ohio assembly facility we're actually adding super duty capacity and also at our Louisville assembly plant where we make the Escape, we are actually putting in some increased line speed. So we will watch the market and be balanced in our inventories and focusing on profitable growth.

And to jump in on that, those are the types of cost that show up in that volume related aspect of manufacturing social cost. So obviously they come in but we think they can also come off in a down turn.

And in terms of the mix versus -- or the pricing versus contribution cost variance in cars, are you seeing pressure in pricing in cars? And so is there a tale of two cities within the profit walks that you're not -- that obviously wouldn't show it, but just directionally?

Well in the marketplace it's very clear what you’re seeing is a percentage of variable marketing as a percent of the transaction or the MSRT, it is clearly higher on the car side and I think that's reflective of the segmentation shifts that we're seeing. And there's a number of our competitors that really want to defend that. We want to make sure as usual, we're taking a balanced approach to profitable growth and as we said, we will just work our process of matching production to demand.

Okay. Then just finally on that, why not over the midterm have more plants that can flex back and forth like the one here in Chicago? Between cars and light trucks.

Well as you know if you looked actually over the last seven or eight years as you look across our plants, we have increased the flexibility and I think you can assume that going forward we're going to continue to walk down that path because we've always said, we want to make sure we position ourselves for market changes. So I think you can be assured we're going to continue down that path.

Okay. Thanks.

Okay. Thank you. Your next question comes from the line of Joseph Spak from RBC. Please go ahead.

Hi. Thanks for taking the question. I guess just going back to some of the announcements and comments around Detroit and then, Mark, again you talked about this transformation into more of a mobility company. It's clear that partners are going to become important. I think you have already seen that with some of your announcements. I realize it varies depending on what you are trying to do, but can you give us some sense as to how you go about that process? Especially since you could build the case that in some areas, depending on the partner or the function, that could theoretically distract the consumer from the Ford brand and potentially even marginalize the brand.

Well to answer your question Joe when you look at where we're heading we said we were transforming into an auto and a mobility company because it’s really important that we don’t lose sight of our core business as I mentioned on our remarks upfront. But when we look at partners and first off in some cases, I’ll use an example of the Amazon relationship that we have. That really came out of an idea from one of our folks in our Pala Alto facility and it happened to also bump into one of the Amazon folks in the valley. So part of it is just discovery that happens. The other piece is as we identify a need in the marketplace, we look within ourselves and we say what are our core competencies and in some cases we convince ourselves. We can fulfill that need on our own. In other cases we can say listen there are other great companies out there that we can approach and partner with. So that’s kind of the process that we're going through to identify these opportunities and then to execute them.

Okay. Thanks for the color guys.

Okay. Thank you. Our next question comes from the line of Rod Lache from Deutsche Bank. Please go ahead.

Good morning, everybody. Just a couple things. First, you've been asked this in some ways, strategy in passenger cars. Obviously, some competitors are acknowledging that in some markets like North America passenger cars are going to be tough for as far as the eye can see, assuming oil stays where it is. And you see what GM is doing with capacity and yesterday FCA saying they are going to outsource the Dart and the Chrysler 200. Haven't heard anything along those lines from Ford. Is the bottom line that you just have to accept lower margins in certain segments in order to have a balanced approach, or is there a plan to address the passenger car situation more broadly?

Well as you know Rod we're always looking to be as efficient as possible and to your point, in every product that we bring out we want to make sure we're earning our appropriate return on that. As you think about small cars and just cars in general, we believe very strongly that it’s important to have a balanced portfolio because it’s to anticipate changes in customer demand, changes in the economic environment or the regulatory environment. So as we go forward, we're going to be very focused on this and understanding in some cases what do we do on our own. We're always open to talking with others and as we go forward because we realize that we have to be very realistic around what is the type of revenue that these vehicles will be able to command and make sure we have an appropriate cost structure to earn a reasonable return.

So I guess that's TBD on the plans there. I appreciate the color you provided on the structural cost inflation and where that's coming from. Could you just give us a sense of maybe bracketing how we should be thinking about structural cost inflation in North America as we look out to 2016 in the base case? And in a slowdown, how much latitude do you have to moderate that part of your cost structure?

Well in terms of 2016 over '15, I think you'll probably see less effect of these volume related costs because of what we've seen -- what we've done last year coming off of '14 where we had a lot of down weeks and that sort of thing and also just we had a really big increase in overall volume year over year. I don’t see that happening to the same degree in 2016. We'll still have some volume related cost and Mark just referred to a couple of them, but I don’t think that will be as much of a factor in '16 versus '15. But the key point which is what you mentioned Rod and I think someone else just touched on, but the key point is that we just want to highlight that our structural costs aren’t necessarily fixed cost, that we've got the ability when volume changes or the economic cycle changes to go in and do something about it. I think you can see an example of that in South America, where despite really big headwinds on inflation we're actually getting net reductions through actions of the team we're taking including around some of these volume related factors, but we're probably across the business and that flexibility is there. I think the way that perhaps we were showing and talking about the structural cost that wasn’t clear and so we just wanted to make that understandable to the investors.

Okay, thanks. Then just two more last things. One is any color on how you are feeling about credit costs? Obviously, benchmarks and spreads have widened a little bit in certain markets, subprime, ABS. Even the Ford Credit CDS has widened slightly. If that continues, is there something -- is that something the industry absorbs or do you think that gets passed along? And then just a point of clarification on your Asia earnings guidance for 2016 in the context of I think you said minus 5% pricing. How are you feeling about Asia this year?

Well let me answer the Asia question, I may have Marian respond to your other question about the credit spreads. So we've factored that in and I think Mark actually mentioned that we were assuming about 5% or 6% reduction in pricing in China. So we have factored that in and we actually came in line at about that level I think on 2015. So that is consistent with our guidance of higher results in '16 versus '15. Marion?

Okay, Rod and you’re absolutely right credit spreads have been widening out a bit and that has affected us and the industry. But on the other side of that the base rates have not gone up as much as we had anticipated either and so the actual all-in cost to the consumer hasn’t really flown through yet.

Okay. Thank you.

Okay, thank you. Your next question comes from the line of Matt Stover from Susquehanna Investment Group. Please go ahead.

Thanks. Most of my questions have been answered and I don't want to beat a dead horse, but I kind of want to think about this car problem or car issue because it feels like it's deja vu all over again with the industry. I know you guys are in a much different place versus FCA in terms of your product and your balance sheet. But I do wonder if you think about this program over the course of the next five years, if there -- or 10 years rather, if there's an opportunity for you to more significantly restructure the cost structure of your small and mid cars. And what I'm specifically speaking about are the transmissions and engines, referring back to some of the work that you've done with GM on transmissions in the pickup truck market. Are there opportunities for you to husband some capital investment as you think about these new programs to fundamentally improve the cost structure of them as their near term demand seems uncertain, but long term demand seems more necessary.

Yeah, thanks for the question Matt. And you're right. It's a little bit like looking at the crystal ball and your view depends upon the point that you're at and right now obviously we’re seeing customers migrate more towards small and medium size SUVs. But in simple answer to your question, yes, we're looking at all opportunities because we want to make sure that we get a good return on our invested capital as you saw we’re measuring that and we pay a lot of attention to that as a company. So we’re going to always look at different opportunities to improve the profitability of all of our vehicles including our small cars.

Just out of curiosity from a timing standpoint, has the Board okayed the next-generation Fusion and Focus or is that still something in front of the Board?

No, we don’t talk about what decisions have been made by the Board etcetera, but obviously you're seeing the launch of the freshened Fusion that we showed at the North American International Auto Show.

Okay. Thanks Mark.

Sure.

Okay. Thank you. So our next question is from the line of Ryan Brinkman from JPMorgan. Please go ahead.

Great, thanks for taking my question. Maybe a couple really on the latest that you are seeing in terms of demand in China and the U.S. The stock market seems -- the industry market seems actually quite great in both of those countries, but the stock market seemed to sort of reflect the price to the automakers and the suppliers that investors think that these markets could decelerate maybe materially over the short run. So just what you are seeing there, the latest, for example, in China the big surge in 4Q; does that pull ahead from future periods? And if so, which future periods? Because industry forecasters, like IHS, they are increasing their outlook for 2016 thinking it pulls from 2017, but the investors we talked to think it pulls from much sooner, like as soon as this quarter. So any color you can provide on what you are seeing in China in January, etcetera that would be helpful. Then in the U.S., too, December was a little bit softer than the preceding months. Are there any signs that the U.S. is really slowing on an underlying basis? Are there any real reasons to think it might slow as the stock prices, including your stock price, seems to maybe imply?

Okay, Ryan thanks for the question. In China obviously as we mentioned, when you look at the stock market volatility, that’s endemic of the country that's moving from an investment and industry led economy to one that's consumer led. And actually when you look at the components of GDP growth there, the services in the consumer portions of that are actually growing while some of the industry ones are coming down and we view that as a good sign. It's going to be a big bumpy as they go through that transition. As we mentioned in the fourth quarter you usually see a more production by the industry and by us that’s normal as we get for the -- get ready for the Chinese New Year. We're going in we're in line with our stocks going into January, into China. And as I mentioned China started off -- the month is starting off strong. We have seen it moderate in the second half verses the first half, but as I mentioned, we really have to wait and see how January and February play out because of where the Chinese New Year falls this year and we will get a good sense for that. But our view is that the market will grow in China this year and a lot of that on the back of the response we've seen from the purchase tax reduction. In the case of North America in terms of the industry, we don’t see the cycle being over. Obviously the consumer sector drives the majority of the economic growth. All the metrics we're seeing, wages growing, jobs growing, low interest rates, low energy costs, those types of things are really putting more spending power in the hands of consumers and when you marry that with the demographics of the inventory of vehicles that are out there, they’re the oldest they’ve ever been, pickup trucks also in particular are very old. So we think that bodes well. As we get into January what we're seeing it will probably be a solid month for the industry, but as you know January is always a bit of a difficult month to call, right because it’s a small industry. There’s lots of seasonality. Of course I hate the turn January always into a weather report, but there’s always storms and obviously we have that big one on the East Coast. So we could see an industry maybe around 17 million units, maybe somewhere around there, but I think it’s a little bit of a tricky month, but what we're seeing in our business, commercial sales continue to be strong and we will report out on February 2.

Okay. That's helpful and encouraging color. Thanks a lot.

Sure.

Okay. Thank you. Our next question comes from the line of Emmanuel Rosner from CLSA. Please go ahead.

Hi. Good morning, everybody.

Good morning.

So I appreciate all the color on the profile from North American margins and certainly understand the issue of maybe less industry growth this year and then the Super Duty launch. It also feels like there's a decent amount of it that has to do with investments, maybe not necessarily just for the short term but for the longer term of the business. Can you give a little more color on that? It just feels, maybe in comparison with some of your competitors, that you seem to be investing more heavily maybe. Can you either put that into buckets or how should we think about these investments and what they are going towards?

Well I think let me start with, I think we said that at Deutsche Bank, but our CapEx for the company for this year is expected to be about $7.7 billion. I think we came in at $7.1 billion in 2015. So you can see that, that will be increasing again as we invest for our future growth. As I look across the business more broadly and I think you were talking specifically Emmanuel about North America, is that correct?

Yes.

There I think we will see higher engineering. The spending related will go up because we've been ahead of the curve in terms of the spending. The DNA is catching up. So that’s probably going to be around $0.5 billion alone. And then there is additional investments that we're making to support some of our more future opportunities around Ford Smart Mobility, which we're not going to break out, but clearly that is something that is ahead of us as well. So around product refreshment, powertrain investments to support regulatory actions, and Ford Smart Mobility and obviously we expect all of them to pay off which they’ve done over the little last six years.

Great. And then still on the topic of investments, just wanted to ask a little bit more about where you stand now in China. I know you've opened a lot of factories and capacity over the past few years, including in 2015. Is there more to do? Do you have more in the works or are you pretty much now working at filling this capacity and maximizing what you have?

Well from a capacity standpoint we're at 2.7 million units across Asia and when you look at China in particular we're at 1.9. We are adding our Harbin facility a little later this year. So I think we're in good shape Emmanuel from a capacity standpoint and when you look at the investments as Bob mentioned earlier, the investments on the product freshness in China, but also meeting the regulatory requirements of powertrain and those type of things and also Ford Smart Mobility.

Great. Thank you very much.

Welcome.

Okay. Thank you/ [Operator Instruction] So our next question comes from the line of Christina Rogers from the Wall Street Journal.

Hi, guys. Thanks for taking the question.

Hi Christian.

First off on the UAW profit sharing, how much will that cost in absolute turns? Is this a matter of just taking the 93,000 per worker and multiplying it by the workforce? And when will that payout be booked? Is it in the first quarter? And my second question is also on the shift and demand to trucks. Auto Nation's Mike Jackson just said America has gone truck-crazy and it sound like there is opportunity there for you to increase production on those vehicles, but I’m wondering will you be taking down passenger car capacity to do that?

Okay, Christina on your question on UAW profit, its generally in line, but again the profit sharing checks when we say on average is 93,000, so it depends on how many hours have been worked by the employee etcetera. And that profit sharing check will be paid in the first quarter and its booked in the first quarter as well. When you think about trucks obviously we have our capacity, it’s a medium term thing, but in general when you look at trucks just focus on F Series for a minute, we’re going to have -- we expect actually our volume on F-150, we think there is upside opportunity this year to grow it versus 2015 because we now have the availability of regular cabs and super cabs and so we didn’t have a lot of availability of that and so that will give us some good entry points both from the mid and the entry level price points. So we think we have about opportunity to grow at least our volume in F-150, but over the longer term, again we'll make our assumptions around what we think the segmentation is going and make appropriate capacity changes. No and just in the short terms as we talked about earlier, line shift beat or lines beat adjustments and working shutdowns.

And just to clarify, we pay it in the first quarter -- about 1,500 of that was paid in the fourth quarter that was -- and we accrue could -- we accrue that throughout 2015. We accrue in advance.

With the total charge look like in the first quarter for the payout to have…

Well, it’s a cash outflow, it’s not a profit hit because we accrued for it during 2015. So that profit recognition is behind us. It’s in the results that you're seeing today.

Okay. Okay. And then regarding the passenger car capacity, will you be looking to take that down as you increase volume on the truck and SUV side?

That will be based on our view of segmentation going forward. So that will be part of our business planning process.

Thank you.

Okay. Thank you. So your next question comes from the line of Bob Gritzinger from WardsAuto. Please go ahead.

Hi, thanks for taking my call. I noted that you’re dropping out of the Japanese and Indonesian markets in the coming year are there other small volume market that you are considering pulling out of.

Well, obviously we announced Japan and Indonesia. We’re going to follow our normal process and we’re committed to serving global markets, but also at the same time, we’re committed to aggressively restructuring parts of our business where we don’t see a reasonable path to sustain profitability or a return on our investment over a reasonable period of time. So we’ll continue to work that process going forward, but nothing to announce.

Okay. Good. Thanks for taking my call.

You bet.

Okay. Thank you. We have no more questions at this time. So now I would like to turn the call back over to Mr. Ted Cannis. Please go ahead.

All right. Thank you very much everybody for joining the call today and we’ll see you soon.