Rush Enterprises, Inc. (RUSHB) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Rush Enterprises Inc. Fourth Quarter and Year-End 2015 Earning Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Rusty Rush, Chairman, CEO and President. You may begin.

Good morning everyone and welcome to our fourth quarter and year-end 2015 earnings release conference call. On the call today are Marty Naegelin, Executive Vice President; Steve Keller, Senior Vice President and Chief Financial Officer; and Jay Hazelwood, Vice President and Controller, and Derrek Weaver, Senior Vice President, General Counsel and Secretary. Now, Steve will say a few words regarding forward-looking statements.

Certain statements we will make today are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. As these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 in our other filings with the Securities and Exchange Commission.

Thank you, Steve. As indicated in our press release, we achieved revenues of $5 billion, and net income of $66.1 million or $1.61 per diluted share. For the fourth quarter, net income was $9.8 million or 24% per diluted share, on gross revenues of $1.2 billion. As anticipated, declines in the energy sector did have a negative impact on our overall financial performance in 2015. In the aftermarket, our parts, service and body shop revenues were $1.4 billion, with an annual absorption rate of 115.6%. During the fourth quarter, our aftermarket service revenues was $331 million or – on an absorption rate of $111.8 million. We began to see a significant negative impact of decreased energy sector activity through our parts and service revenues in October. This negative trend continued throughout the fourth quarter, as oil prices continue to fall, demand for aftermarket services in these rigs deteriorated. As a result, average aftermarket gross profit per day fell about 10% during the fourth quarter. We expect decreased activity in the energy sector will continue to negatively impact parts and service revenues throughout 2016. To help offset this decline in business we have implemented a broad and significant expense reduction plan across the company and continue to aggressively pursue initiatives to help generate incremental aftermarket revenues. When complete, we anticipate the expense reductions will help to offset about half the decline in the aftermarket gross profits. We believe that the typical seasonal increase and freight activity in incremental business from aftermarket initiatives will help replace the remainder of our decrease in the aftermarket gross profit. Turning to truck sales. We sold 16,874 new Class 8 trucks in 2015, accounting for 6.7% of the total U.S. Class 8 market. For most of the year, we were able to offset the significant decline in sales of energy related Class 8 new trucks with incremental, but lower margin truck sales to large over-the-road fleets. However, our Class 8 truck sales in the fourth quarter decreased about 28%, compared to the fourth quarter of 2014. In addition, used truck values decreased in the second half of 2015, due to a large supply of used truck inventory. As a result, we incurred a significant write-down for our used inventory values in the fourth quarter. We ended the year with our lowest used truck inventory levels of the year and we will continue to monitor used truck values and manage our used truck inventory closely in this very difficult used truck market. For 2016, ACT Research forecasts U.S. Class 8 retail sales will be 222,000 units, down 12.2% compared to 2015. Given the increased capacity, resulting from strong new truck sales market in 2015, decreasing freight trends, lower used truck values and ongoing softness in the energy sector, we believe Class 8 truck sales to be significantly less and currently forecast by ACT Research. Our Class 4-7 new truck sales, reached 11,241 units this year, up 13% over 2014 and outpaced the U.S. medium-duty market, which increased by 8.3% during the same timeframe. Rush’s Class 4-7 truck sales accounted for 5.2% of the total U.S. market, as we continue to stock ready-to-roll work trucks across the country allowing us to meet the needs of medium-duty customers benefiting from a healthy economy. Sales in the Class 4-7 new trucks to lease and rental, food and beverage industries, also contributed to our strong Class 4-7 new truck sales performance. ACT Research forecasts U.S Class 4-7 retail sales to be a little over 218,000 units in 2016, but relatively flat compared to 2015. We believe our Class 4-7 new truck sales will remain stable throughout this year. As in past years, we expect general and administrative expenses to be sequentially higher in the first quarter of 2016, due to employee benefits and payroll taxes. In the area of growth, we continue to invest in our long-term vision 2015. We acquired dealerships in Illinois, Georgia and Nevada expanding our network footprint to 21 states. New facility construction, renovation and expansion process, allowed us to increase service capacity in California, Ohio, Tennessee and Texas. We substantially completed the roll-out of our RushCare Rapid Parts call centers, began production of our new Momentum Fuel Technologies compressed natural gas fuel system and introduced a new telematics offering. We also implemented a new service management tool that will help provide real-time communication to customers with vehicles in our shops. Finally, I would like to thank all of our employees for their efforts this year and continued dedication to help keep our customers satisfied and up and running. With that, I will take the questions.

[Operator Instructions] Our first question comes from Jamie Cook of Credit Suisse. Your line is open.

Hi, good morning.

Good morning, Jamie.

I guess a couple of questions, one on the write-down on the new and used inventory, can you talk about was it broad-based, was it specific to one of the OEs and any color on sort of the model years, and do you think this is a Rush or geographic specific issue or sort of broad-based, throughout the U.S. And then my second question relates to how we think about parts and I mean I know you said with some other cost cutting initiatives you will be able to offset I think half of the drop off from parts sales, if you could just give a little color on, how you’re thinking about parts, how you’re thinking about absorption, as we think about 2016? Thanks.

Sure, Jamie. Let’s talk about trucks first, when it comes to the write-down. It's broad-based, Jamie. It wasn’t specific to one area or one individual brand or anything else. I'm not even going to go to specific year models per se. It’s just a basic overall drop in the used truck market that began in the middle of the year. And I think, I know when I was at your conference, I communicated that was going on to all investors or any folks I met. You can just see it across the board, the wholesale market is pretty dried up everywhere. The overseas market is dried up a lot. So when you look at used trucks, it's usually pretty easy to tell where they're going to go, right, a lot of times, because the supply side is limited. You know what supply in used going to be, you just have to look back three, four, five years, and you understand where the supply is going to be, depending on what market that truck is used in, and what typically gets sold in that secondary market. But it’s broad-based across and I’m going to tell you this, I wouldn't tell you that it's all over with either.

Okay.

As we go forward, I would expect there is going to be continued pressure on used trucks. That's not to say that something couldn't happen and demand would increase, but that's always, it's a balancing act, right, like anything in life, it's supply and demand. We know the supply side is going to continue rising, but I don't feel that good about the demand side, to be honest with you, to help offset that supply that rises, so you know, it wouldn't surprise me to see another, 5% hit or so. I don't think it's going to be some 15%, 20% total tank anymore, but I do believe that you're going to continue to see pressure on used truck valuations going forward, which lends itself to my comments, one of the biggest things that lends itself to my comments that I'm a little more embarrassed, I'm sorry on the Class 8 market, right.

So how would you – I mean you’ve been consistent saying that you think that the market will be worse I know what some industry experts are forecasting. Is it down worse than –I think at the conference, you were talking about maybe at least down to 15% to 20% or 20% like how are you thinking about things, just based on what you're seeing in the first two months of the year?

Based on what I'm saying, look at January's order intake, right? I think it was only, strip out overseas to Mexico, and you only have 14,800 units in the U.S. and Canada Class 8 order. And when you compare it back to where we were last year, when we had, what, four months in a row running over 40,000 units or right at it? Obviously that's going to have something to do with the backlog that's out there. When I was at your conference early December, I would've said if you could have given me, I'm going talk U.S. retail, I think, at that time if you remember, ACT was about 248. Well, they're down to 222 now, headed my direction, which I really would've preferred to be wrong, if you want to know the truth. But when I look at U.S. retail, Jamie, if you put a crooked number on the front, like a two, and add zeroes behind it, I might take that right now.

Wow, okay.

200 to 210, okay? I'm not buying – I understand people believe that there's built – which there are, there's more inventory out there, right? So there's folks that say, where you're going to sell 20,000 out of inventory, right? Maybe so, I guess we'll see. It's going to pick up the difference. Now production's going to be worse, because you're going to eat into the inventory levels that are out there, right, some accelerated inventory levels across, and I don't feel that we're in that bad shape from an overall inventory. Of course again like anything, your inventory, whether you're in good shape or bad shape, depends on what your stock truck sales are, right? You've got that numerator, denominator right? You've got inventory and then you've got sales, if sales slowdown off the shelf, then obviously you start looking worse so you have to balance that act. But as I said from a U.S. retail perspective, somewhere between on the 210 range and I would take it for sure maybe a little less right now…

Okay.

Just my feelings. It's just my feelings. And I think we'll just have to see how the year goes. It's still a little – and those used truck values are going to have – if you are trading a 2012 model last year, and you say you are getting whatever you're getting for it, just X number, they were getting 45 or 50 and you're getting $6,000 or $,8000 less, 12 months later for a 2013 model, makes it harder to trade right because you got to meet that balance sheet in other words you've got on that sheet right. You'd appreciate your product to. So that's going to be some of the headwinds that we faced and there's still supply out there. I’m not trying – because I’m not seeing doom and gloom or anything here but it’s going to be a lot tough.

Okay.

realist:

Okay. And then sorry, if I see also just on the – sorry the parts, it mean like how we are thinking about absorption…

I've got all the time the world to talk. You don't always show up and talk about good quarters, you show up every quarter, right. You know me. I'm showing up every quarter good or bad or indifferent, right. The parts and service business we saw in the fourth quarter we did take the margin deterioration as you can see. It was mainly on – and you say parts but I'm going to speak about it is parts and service because that’s how I reported, right.

Okay.

Remember that’s how I report parts and service…

Yes, yes.

So the parts areas it took more some margin pressure – more discounting okay. I mean when you get in these types of environments your customers are going to praise a little pressure onto you, right. For what business you took – and that’s just part of this environment. Look, we did a – let me step back a minute. I started last year and this phone call last year 12 months ago today. And I said you now we're going to lose $0.56 basically going into the year off of $1.96 and that's how we are going to start the year. And I thought we're going to do the best with an oil and gas perspective right but we hung in there a lot better than I thought from a parts and service perspective, we lost our truck sales, second through fourth quarter, as I always said 1,800 units or so that we’ve been – I’d say not just – I guess with the pinnacles of it. But then I’m going to get around your parts and services here. We hung in on the parts and service side. But I wanted to tell you from October, we started feeling it, very, very, I mean, because I think what you had – you had budgets that were put in place, that carried through part of all that year that replaced before, right as always – third quarter of 2014, right? So those budgets were already in place, you had – projects that continued. While obviously those projects ran out and everyone I think I just read everyone's releases in that business and trickle-down effect of it. And we really started feeling it in October and we felt it even again in December. And when I said we were off 8% to 10% the majority of that came out in certain regions. And that was a lot related – in certain regions about 20 plus percent, okay. And that was really felt in the fourth quarter, again, it came out strong and faster than I anticipated, my fault I guess. And we’re making, we’re working around making those adjustments we started in the fourth quarter, but really got going here in the first and we’ll continue making – through the first quarter, and hope we have everything in place, because as you look forward, yes, we’re making best, and I’ve been through the cycle. So we’re doing the right thing, which got make sure you do the right things, you don’t just go out there with a sickle and cut the whole yard to make you make sure you’re cutting the right expenses and doing the right things built around what you anticipate the environment today as you go forward. So, I mean, Jamie, I’m hoping as I said, you talked about we did $2 million gross profit a day in parts and service on a 14 day average, while lost 10% maybe.

Okay.

That’s simple, and if you got 20 working days in a month, you see I’m trying to make some – I’m trying to make some [indiscernible] try to make some very good expense cuts and I’m trying to get back $24 million to $30 million in G&A expense and I’m hoping that – there’s some initiatives we’ve got and also we typically have, once the spring is spunk, should I say you – typically your business goes up. Okay, once you get out of the way we always look forward – so look forward in November through February, right?

Okay.

It’s really clear if I say that. I’d say that is joking me of course. But typically our business will pick up on the back end and I’m hoping that combine with some of that typical seasonality, combined with some initiatives, with the initiatives probably a lot of more take place in the second half because we are really installing working very, very hard in a couple, I don’t want to get in – trade secrets. But things we’re doing around the organization that we are still going to maintain focus on, but it is a broad view and I'd probably ramble and talk a little more I hope that I don't mind as I kept telling everyone where we are at understanding where the organization is and where the organization is headed.

Okay, alright, thank you that was very helpful.

You bet.

No worries.

Our next question comes from Brad Delco of Stevens, your line is open.

Hey, good morning Rusty.

Yes, good morning, Brad.

Rush, I think maybe going on to Jamie’s question a bit more, when you think about parts and service in your comments about being able to offset, is it fair to – you think parts and service revenue could be down this year and you can offset half of that or

Yes.

May be more specifically is there a number that says we are going to have $20 million of expense savings and diesel starting to flow through in the second quarter. Anything that sort of could be…

Yes, I think that is what I just said, anyway., Brad, as I said if I’m – somewhere in the mid-20s, somewhat in that range overall. It is not going to get I mean, when I say it is probably be 20 not 24, 25 it's not going to get started you – these things you have to do. It is broad you through every bit of the organization. The organization is a little large than it was last time I went through this really. You shouldn’t manage like that all the time at the same time it really should start to flow back flow through mostly in Q2. Q1 as you know I have a lot of comp calls, and a lot of faxes and a lot of – you can always look back to Q1. Historically I guess this year, so we get hit with a lot of industry evens out for the rest of the year. But we are diligently working on that, but at the same time, you are not going to always save the way to total greatness. You got to make sure to make some of that revenue back. So we are focusing on that side of it too, right. It’s a double edge sword, but the answer to your question parts and service is going to off from a top line perspective in 2016. I don’t think there is any question, okay. Now, can I offset or some of it, I am planning on it, okay. I mean if – as I said if you are off $4, if I get right now, I get $2 every gross perspective and $2 from expensive perspective, at least set a balance to that, right. And that’s how you have to approach start doing that.

Yes, that makes sense. And then in terms of the value of inventory, just wanted to be clear that this was related to with both new and used and nothing related to your lease portfolio or

No, this was just new and used inventory, nothing related, no, no. I am very comfortable with our lease portfolio. I like the 20 years plus speak to that, we’ve never – when it comes to our lease portfolio there has never been a year that we had a loss in gain on sale. I may have a bogeyed with one year, but I have never had year, while I had a loss in gain on sales. We typically run our depreciation schedule very conservatively and all of that. So…

I knew you record on that I just wanted to make sure that we didn’t break that record.

No, no, nothing like that, it’s strictly inventories and mainly weighted towards the used side, okay.

And then Rusty, or maybe this question is more appropriate for Steve, you kind of have a countercyclical cash flow model. I mean, obviously when you're inventory levels start falling, their off a decent amount of cash and your floor plan sort of comes down with it. When do you think we will start to see that play out if we are going to be in this prolonged, call it, weaker demand environment?

Brad, I am not sure…

I am not sure about the cash flow…

Falling, I mean, truck sales up and down. I mean, those are – from a inventory stocking standpoint, that is a cash neutral equation, because before everything going up, we’re going down, it’s just the incremental gross profit that falls in the bottom line. So, actually, you’re going to cash flow better with some more trucks, right.

Yes, I mean, I guess maybe I was looking at just from where your debt levels are, I mean, I know how you look at adjusted debt levels, but they were up relative to declining truck sales. And so I guess that maybe a concern for some investors. So I guess, how should we think about your debt levels relative to your inventory levels and when might – we see both of those sort of your down in tandem?

I mean, depending on what happens with the truck market. If it’s off 20%, you will see our inventory levels adjust accordingly, but again, before close to 100% of our inventory balance, so that will go down. There are some other debt items that happen in the quarter. We did finance some real estate, so maybe you are – maybe you’re lumping that end. We finance some existing real estate and we bought in a property and financed it. So we added about $40 million worth of real estate debt in the quarter and that might be what you are seeing in your numbers that you…

I think that’s probably what for me often. And then may be just last, Steve, can you give us gross margins by truck segment?

Yes, it was 6% in Class A, 6.6% medium-duty, 6.1% light duty, 3.8% on used.

And that’s where you took the hit on the write off?

That’s correct.

Yes, that’s correct.

Alright guys, thank you so much for the time.

You bet.

Our next question comes from Neil Frohnapple of Longbow Research. Your line is open.

Hi, good morning, gentlemen.

Good morning.

Just a quick follow-up to Brad’s question on the leasing business and I know you have talked on the profitability side. But would you expect leasing gross margins to pick up in Q1? And I guess just a quick follow-up…

Sure.

This business delivered another strong quarter of revenue growth in Q4. So just curious on your expectations are for sales within the leasing business in light of the overall market weakness.

Right. Well, first off I expected our margins as I said on the last call to be up in Q4 and one about 11.5% I wasn't real pleased with that. I do believe that we will get back to more historical margins you know probably in the 14 in the low-teen range, right. That's where I was counting on for Q4 but we didn't quite get there it's taking a little longer. I took a quick cursory glance at the January numbers we are getting there. okay. So hopefully that's indicative of what we will see, okay, as we go forward. From an overall revenue growth we have budgeted out at 8% in the leasing division next year with back to more normalized margins. So we hit versus not flat – 2015 was not a good year for us in the leasing business compared to some of our historical results. I expect 20116 to get back in line with more of our historical results in the leasing business. And be something to the good for us next year okay.

Okay, so that’s great to hear. And then Rusty, what’s your expectations for Class 8 truck sales in Q1 really just trying to understand the outlook given some of the share shift that can occur quarter-to-quarter.

Well I haven't really looked at the queue for Q1. Our anticipation is probably, we’re going to be a little softer than we were in Q4. Now I’m going to say 10%, 15% and from there they are somewhere in that range. Our deliveries I would expect I'm not sure about the market though I really haven't studied the market from the quarterly perspective. I would expect it to start slowing down. Whether it’s – it’s going to – I don't look for it to be a rising environment as we go through the year, would be my comment. Okay? If we started one down I don't expect that number to start bouncing upward as we go through the year based upon what we have been seeing from an order intake perspective and a cancellation rate perspective and the only thing as I said some people it will be how much they put away overall around the country and inventories really

Okay that’s helpful and just one final one, on the medium duty market, I think you mentioned stable demand throughout the year. And…

Yes.

Component supplier yesterday was talking about maybe some excess medium duty inventory in the channel not as high as the Class 8 side. But just any thoughts you can provide on that market in general?

Sure.

Do you anticipate maybe some modest growth?

We feel, as I said pretty flat to may be slight growth. I mean based upon where we’re sitting right now, our backlog and I don’t feel bad about our inventory. So there could be some more broadly based, little more inventory in some areas, maybe some particular brand per se, I’m not going to say all brands. So I don’t believe that to be the case right now, where we are sitting at. And I hope that holds true, as we continue throughout the year. But as I said, medium-duty we feel good about, leasing we feel we’ll get back, that’s a plus for us going into 2016. Medium-duty at least flat, if not up a little bit we’ll see. It’s still early in the year, it’s just February. There is a lot going to happen is an election year. So who knows so I would tell you – the medium-duty business is always, I will tell folks that, it’s had a little bit more of a general economy, right? You’ve got big leasing companies and you’ve got the general economy, those were two big drivers. And so medium-duty accelerated as fast as Class 8 did early in the cycle. It always tends to run a little bit longer at the end. So, I think that’s really where we’re at. So we feel good about the medium-duty business and the leasing business going into the year.

Great. That’s’ very helpful. Thanks for the time Rusty.

You bet. No worries.

Our next question comes from Brian Sponheimer of Gabelli and Company. Your line is open.

Hi. Good morning, guys.

Good morning, Brian.

I guess from an opportunity perspective, what’s your sense of the M&A market out there Rusty and potential to continue to add to your footprint given some concerns for broader weakness?

Well, the M&A market, I haven’t seen a lot – I don’t really seen it yet. But I would anticipate, as we get further into the year that it will, there will be phone calls being made around. It always happens when you – when after you hit a peak and started going in the other direction a little bit. I would anticipate the last quarter to be honest with you – the last three months, I’ve been focused on our sales as much as I have anything. But, because it’s just what we’ve had to deal with here. But I would anticipate that there would be opportunities that were present themselves as we get further into the year. And we plan on being in position both from an operational perspective, and from balance sheet perspective to take advantage of something it will make sense for us as we get into the year.

All right, I appreciate that. And then just talk about customer acceptance of – wouldn’t have that rolling out now, given how big that – how important that is in your own footprint?

Steve?

The customer, there’s nothing, the product is good, okay. There’s nothing wrong with the product. It continues to be the same issue we’ve had, you feel like you’re beating a dead horse, right. It doesn’t go away and that’s the overhang of used trucks, right. I mean, remember we are only three years past the last – when they start, when they comings into the product, right. Three years since they switched – from just strictly a 13 leader platform with MaxxForce to a Cummins engine, it’s been three years ago this past January, last month. So typically this is we probably got another 12 to 18 months of overhang on the used truck values until they get down on the – customers balance sheet to where, at least there’s someone you can navigate them somewhat because the total dollar and there is not so large in the gap between actual real value, excuse me, and what it is on the balance sheet is there. The products – no problem with the products. I think we saw the medium-duty product, they got them lined up and actually had some gain I think in share last year, slight gains share, medium-duty share last year which was a positive, which is a good thing, right? It’s been hard to find that silver lining for a while. Secondly, the Class 8 truck they just came in and announced towards last week, they just finally got back into the construction business, when I say the heavy duty construction, the mixer business, the dump truck business and that type of business they didn’t even have a product, right? They would fit into that marketplace so that was the first new truck that they had put out in forever. When I say that, ever since all this – the engine debacle we’ve had to deal with. So those are good points. But it’s not an air, water and stir business, right? It takes work and it takes time and it takes working through more than anything that we used truck overhang, as far as a product, there’s really no issues with the products got there right now. It’s just still the same thing that we talked about forever and ever, over and over, is the overhang. And all I can tell you – I’ve kept saying, I hope everyday it goes down $2 on somebody’s balance sheet theoretically and goes down $1 at street level. And you continue to close that gap from a valuation perspective to what it is on books. And then you got to go, win back the customers, right? Because you’ve got to win back their confidence. And I think, I know we’re working at it very hard, and I know the OEM also.

All right. Thank you, guys.

You bet.

Our next question comes from Joel Tiss of Bank of Montreal. Your line is open.

Hi, guys. How is it going?

Hello, Joel.

Is there any way to tell if you’re losing market share on parts or gaining market share?

Well, there is an overall basis. I mean, I know we were hit. I mean, mine was pretty real specific, it was just in the fourth quarter. I can look at the regions and most regions – if I look out West, if I look at the Southeast, if I look at Florida, I look at Georgia, I’m not losing share, I’m not losing share in Tennessee. When I say that, I mean, I can look at my year-over-year from a seasonal perspective where I’m at. The parts business supposedly was about $26.5 billion last year. I know we’re about 4% of it. Okay? But what happened is, we lost a specific large amount in the energy sector in Texas and Oklahoma and some areas of Colorado, some also here. So there’s a way to see what you are putting your sales against the overall, what is your total parts business is. But ours was region specific where we took the hits, man. It’s not like – by the way, those are annual reports, you don’t get anything like on a monthly or a quarterly report to look at to see how it trends, right? So I don’t know of any reports to give you that. There’s no one that gets that dice at deep, because that’s something they have to. I don’t think the tools were out there to get it on that type of basis, Joe. But you just mentioned we get an annual parts number, right?

Yes, it’d probably be meaningless on a monthly or weekly basis anyway.

Yes. You’re right about that, I would agree with you wholeheartedly. But, no, I mean, look, the effects of where we’re at, remember I’ve got more stores in Texas and I do anyplace, add-in Oklahoma and we do. As I told my folks that we do a great job and we’re going to offset it, we’re going to do some great – we’re going to do some – we got some great things going on for the future. It’s just it seems like all the arrows came out of the quiver in Q4 to be honest with you. And we’re headed our way. We’re going to make the adjustments. I’ve been doing this for a long time and we’ll get better. We had parts of the country that were up and we still have parts of the country that were up. I mean, I can certainly tell you, January, from parts and service perspective, started trending slightly up, but I’m not ready to buy it yet. Okay? I got to a feel little longer. I got to see a couple of $3 drawn together here from a trend perspective. You have to make that adjustment inside your dealerships, I mean, these customers all of a sudden go away totally, you have to make adjustments. That doesn’t mean there’s other business, go out there capture it, but sometimes you have the capacity issue too. So you take it as a refocusing and it’s going after may be other types of business, and we’ve done it in the past and we will do it again.

And then with all your years of experience, all the cycles you’ve seen, is this sort of supply demand imbalance likely to work itself out in 2016? Are we going to have kind of a hard adjustment, but then we get back into balance or you think it’s going to bleed over into 2017?

Well, first off from an oil and gas perspective, I’m not going to say anything good about 2017 yet either. But when I look at the overall market, let’s talk about that because that’s where we’re focused on right now. Because oil and gas were exact and I don’t think anybody sees and [indiscernible] call this is it right now, here’s the management’s feedback up. Overall I think that we’re going to get to some – first comment, we’re going to get a little better balance this year. And our [indiscernible] built the economy, right? It’s always the biggest driver. I think we had a lot of good new truck sales in the last couple of years, the fleets, about it – it’s the lowest age in 10 years. So you know, I don’t see a cliff, though I still don’t, but I do see a more stable flat run rate of what truck sales will be. I really do over the next couple of years. To be honest, it’s 200,000 Class 8 U.S. retail this year in 2016. But, remember that’s the average guys. So if that would get in 2017, I’m not going to feel that terrible about it. I am going to feel bad if we don’t figure out how to get our parts and service business backup by refocusing on some things we’re doing on, we will. So, but I don’t – from a truck sales perspective, I don't look for any bounce back of 230 to 40,000 U.S. retail [indiscernible]. I would hope we can just where we end up 2016 if it’s in the numbers I’m talking about, I hope we maintain in 2017. That's what I think.

And then based on all the pieces you’re giving us about saving cost and working on the mix and all that. You think you can stay close to flat in 2016 versus 2015 on EPS or that’s just going to be too much…

Joel, Joel, Joel, you know, I never go there if – I’ll give you – try to give some macros about it, but I’m not really go there right now. I’m ready to see this first quarter, as I told I think I told some folks when I saw them in the December. But let me, get me through March, get me through March and let me see how things are improving. Well, I’ve got 30 days or one month end of this was 10 days of February already. And I need to see certain parts of the country and how they’re going like. I’m not ready to call the year yet to be honest with you. As we’re in transition, I mean that transitionary moment and that’s – it’s hard to say exactly where – where everything likes both from a revenue perspective and from an expense perspective. Just because you run through the place onetime and you squeeze it down, let me run back through it twice. So, let me work the year that's all I can as…

All right. Well thanks very much for being so generous with your time. Thank you.

Always, Mr. Tiss…

Our next question comes from Bill Armstrong of C.L. King and Associates. Your line is open.

Good morning gentleman.

Good morning Bill.

With inventory write down, I know most of it was used, but you have some new there. Could you just talk about that, was that maybe some order cancelations or what was going on there with the new truck write down?

No, just as we came into a New Year, a New Year model, we reviewed our stock inventory and made a few adjustments, okay. It was just normal. Most of the abnormal was more used write down, okay. It was normal – we look – we started New Year model. Remember the truck business, when you start January 1, 2016, you’re starting to build 2017 models. I would say – maybe we just skip a year, so we can get back to normal [indiscernible] from a year it is, right. But, no – Bill, that’s nothing really out of norm there. It’s really the use were focused hard on the used and hopefully we caught at all. We did take our inventory levels down and used. I was happy about that. But because you have to be able to – I haven’t been able to trade different trucks and just keep a very, very close eye on valuations. Sometimes in the truck business, but people don’t understand about used inventory is the fact that when used inventories drop – valuations drop, you've already got them on the ground in you may already be doing a deal with the customer to where you've got six months run of trucks coming in trade but you've already committed to a price. So sometimes, you’re doing deals you know that really aren’t good right, but you have made that commitment out there and given the size of this industry and it's a small industry, you know you start backing up on your commitments and you’re not long for the world and that’s something I have never really [indiscernible] for the world and not short for the world. So you know when it comes from a business perspective and your credibility, so you have made those commitments and you have to stick with them because what will happen is used truck values gets dropped, right. And you have got commitments out there and then you have also got inventories and so you have to make adjustments on your inventory and then stock it up on your commitments out there for us and I don’t feel bad about any long, big commitments that we have out there right now that route around going forward. So, I hope we were able to manage our inventory to where the market is at the time as we go forward. Look we were very blessed as an industry for the last three years from used truck. I had the best used truck margins I have ever had in the last three years. And you know this is just the other side of the coin.

Got it. And then just back to SG&A, there weren’t any nonrecurring or unusual items in the fourth quarter were there?

No, not outside of write-down and that was obviously on G&A. No, actually G&A, G&A you could sort of [indiscernible] G&A, right. So you know when you look at G&A, it wasn’t terrible in the quarter. You could start to see some slight decrease in it, but not to where it needed to be to catch up. It wasn’t 10 points, which is where my parts and services business went, okay. So, we’re going to work harder on the G&A, and we’re going to work harder on the revenue piece, shifting our focus and raising our revenue and gross profit parts and services and other areas, okay. And that’s what we’re going as I’ve stated three or four times here on the call. That’s the focus. But, no, the answer to your question that was – non-reoccurring thing.

Got it. And I wasn't quite clear earlier. I know you got a seasonal increase in G&A in the first quarter.

Correct.

And you're still working on reductions what sort of run rate should we be looking at like after all that settles as we move forward through the year?

I mean I know where I want to be, I was still working through here in Q1. As I said I don't just take a sickle and walk through the yard. I've got to cut where cuts need to be made and we’ve been spending countless hours across this company making those adjustments and are still making those adjustments. So they should fully be in effect by Q2. You will see them start taking effect in Q1. Steve, I mean from a run rate, I mean as I said I look at it like I was trying to take from an annualized, if I had them all done, where I hope everything to be by the end of Q1, it would be an annualized G&A, remember you got to strip that out that’s hard for you guys to do. But – I'm looking for G&A to go up about $24 million on an annualized run rate. That's truly when I’ve told my organization I want to done. So that's a couple of $1 million a month out of G&A, right on an annualized run rate. So that's the focus of the company. And actually I’ve got a little higher for them hoping to writing the number, so that's not part to manage.

You mean an annualized reduction of $24 million.

Yes, an annualized from a G&A.

Okay.

As this going to go with truck sales, I’m not going – that’s going to be a variable cost. It’s going to be a percentage truck gross profit. That's always going to move with the truck sales margin. But on an annualized run rate of about around $24 million annualized run rate, what our goal is inside the company because right now if you look – where I was at when I talk about parts and service gross profit. I mean honestly, it’s of 8% to 10% which is $48 million somehow million, right. I won’t get some of it back, because I’m plan on that coming back. The fourth quarter was just a very – it was a transitionary quarter. I mean these stores all of a sudden that business dropped on like overnight, they can’t go replace it now. I trust in the competitiveness in the quality of people I have in the organization, we will get some of it back somewhere trust me, okay? But you can't do it overnight. And it has to be then to replace that you have got combine and expense cutting with refocusing and may be some other areas. The truck business is not just the oil and gas business, is just not the construction business, is just not the refuse business, it’s all the above. The overall business, so sometimes maybe you've got to refocus your efforts, but you don't do that over a cup of coffee one morning. You do that with a focused purpose about what you're going after and what you're doing and you're just going to have to trust we've done this a few times.

That makes sense. Thanks very much for that color.

You are welcome.

Our next question comes from Art Hatfield of Raymond James. Your line is open.

Hey, good morning everyone.

Yes, good morning, Arty.

When we look at fourth quarter market share numbers, is that kind of the right number to think about for a run rate for 2016 or do we see the deterioration?

In this, look, I would have hope that it is going to be, I don't see any further, no. 6.1 for Class 8 we better not get lower than that.

Okay, okay.

I would look that as a bottom, somewhere between there in seven.

Okay.

Look, last year in Q4, I think I hit eight and I said guys that's not real, okay.

I understand.

Because remember I’m still dealing with the headwinds of Navistar.

I understand.

One day I'm going to get that bump, I know it. I just haven't gotten it yet, right. So as we keep working over those used truck hangover. But I would say that should be a drop number for fourth quarter. If not I'm looking across the table right now the guy who runs all the heavy duty truck sales, I'll be after him, go ahead.

Okay, well. If you do could you videotape that for us we would appreciate.

You got it, Arty.

Okay. Hey, and I probably calculated this wrong, because I'm not able to strip out parts inventory but just on the back of the envelope, I'm calculating about 120 days with the truck inventory on the lot. Is that, tell me that that number is wrong.

Well, what you've got, Arty, remember, in inventory you’ve got a blend of stuff is already getting ready for delivery stuff within inventory.

Right.

So when I tell you 120 days if that's everything down there that’s probably Arty, I don't have that number in front of me right now I'll be honest, okay.

Okay.

I mean I would be remiss, even if I don't know, I will tell you – I don't have that number in front of me, look at that number before I got on here, so.

Okay. Let me ask you this, not knowing that number and whether or not that number is right. Can you tell me kind of do you manage to a certain range of days that you want in inventory or is that not the right way to think about it.

No, no. There's no question, Arty. In 120, from a stock perspective, it’s not bad, okay.

Okay.

That’s not bad. I sometimes run in the six, anywhere between three months and six months – four months and six months.

Okay.

Because that's the true stock. Okay? Six months, that's true stock. So and then you've got to look at new and used, you got to split that apart still, so okay.

Okay.

And also – a lot of it also has to do depending on what it’s not that – we do not have long lead times right now, but a lot has to do with lead times, right? So when you had lead times out there, we’re sometimes stock a little more inventory.

Got you.

I don’t, I guess the easiest way we can tell you is, I don't feel bad about our new truck inventory right now. And as I said, our used truck inventory is down probably 400, 500 units when we started Q4. Now I think looking forward we will probably have to go up 200 or 300, but as long as I can keep somewhere between 2,000 – on a sales levels are there, right.

Right.

January was – I'll be honest was not a good used truck sales overall absolute number. But we’re saying the first 10 days of February is picking up some. So with that 10 days, I’m not – ask me to trend everything off of 30 days to 40 days. And then promise you something that I might say okay back ends were up a little bit right.

Right.

So backend picked up may be, may be they picked up two or three points from where they were running in December and January on a per day but I'm not ready to call that the total trend yet. I'm hoping and I’m hoping people were working like I talk about brag on them and we’re getting that done but I don't feel bad about my truck inventories right now to be honest with you so hopefully we have managed that through the year.

Okay. That’s commentary is very helpful. Just I want to clarify something to – just to make sure I understood you right. When you are talking about the kind of mid-20s roughly G&A savings that is something you're working on now. And you will hit that run rate at a later point, you don't expect to see that fully effect the first quarter.

No, sir, that, I do not take that the first quarter totally. The first quarter's always typical [indiscernible] late history it always is for us.

Right.

Even though we get expensed out everything just from a seasonal perspective. But at the same rate I can tell you, we’re gaining on that expense cutting number as we speak.

Okay.

And we’ll continue to gain on it and a better I’ll be in place by the end of March and I would expect, I would hope that we will see the effects of it, the full effects of it sometime in the second quarter, right, sometime in the second quarter. If not I'm not doing my job, okay.

Okay. No, no, fair enough. I appreciate that. I just wanted to make sure I understood right and I think I did. Last two quick questions. Rusty, you’ve been through so many of these cycles and one of the things I kind of want to get your thoughts on is on the energy side. Clearly in the past there has been consolidation in that market as the cycle is dropped down. We may see that going for whether it's through bankruptcy/liquidations or acquisitions. How do you manage your customer base in that environment if you’ve got a customer that's in trouble and goes away? Have you been able to kind of pick up business from the acquirer in the past kind of just – I'd just like to get your thoughts on how you dealt with the energy industry consolidation through cycles?

There's always a lot more losers and there are winners. Okay?

Right.

It’s not an equal one-for-one ratio of deal, because the winners will be the big ones right?

Right.

There will be three of four losers get one winner out of the deal, right, because they had the same power of the balance sheet and wherewithal to do it because the others were riding on the rim. They were leveraged up too much or whatever. You're going to continue to that is going on as we speak. You will have opportunities sometimes where than people would deeply we saw at a couple of times late in the year, during the middle of the third and fourth quarter last year. We went to held out and help the customer deeply. The problem is they had to be able to take that hit, right?

Right.

So because – I'm not going to take them out and take losses on it, right.

Right.

We will help. So that’s, the best thing you can do is be a good partner for those that are going to survive.

Okay.

So when it does come back, they will remember you and we've always done a pretty good job of that. That's why we're pretty decent at it, when it comes to when the oil business is going but as I said we always do a really nice job of it when it's going good. We have to be there to support our customers that are going to survive in the downturn and we will. I don't see any because of all my receivables, I don’t care, this or that, I don’t have any balance sheet risk okay? I’m not financing trucks I’m not the one carrying [indiscernible] so there is no balance sheet risk to us in this. The only thing we can do is be there for those that survive and try to help the ones maybe that are – if they need to be fleet bumps in cash if they can and break their covenants and go broke, we will be there for them. Okay, we’re just a phone call away and that goes for any customer in any industry we’re in.

Okay and I didn’t imply that you had balance sheet risk I was more thinking about talked about maintaining market share or even maybe opportunities to grow market share.

Yes, I mean, but the problem is not purchasing, right.

Right, but…

Where there is no CapEx budget there is no CapEx budget, right. So what you – you can help them on the downside of it if they’re having to de-fleet if they’re having issues here if they’re needing to and sometimes I think that it’s hard to see when someone does have huge layoffs sp we can help with mobile service and things like that where it’s influence – where its variable cost to them, we’re just where they needed and those types of things. So those – we’re out there for that. Okay, we are someone has to take his employee count, headcount down, just because we can’t afford it. But you does need some services, so we’ve already seen some of that we’re helping out.

Okay.

The problem with this – you did have step about heard the other part, but you are there to help out from all those perspective.

I get that, I guess is what I’m really poking at then is have you seen in the past in the downturn would you have been helping people or in essence ended up creating opportunities for customer acquisition when things have turned around in past cycles.

I will let the performance of our organization during the up cycles speak for itself. Okay?

Fair enough. Fair enough.

I challenge anyone, we do a heck of a job. Excuse me, when it’s going right. We just have to manage this side of it and I think I’ve been through it numerous times on these calls, will refocus on some of the areas, they may not be, it may just be – it may not be, it’s not going to totally replace it but we’re going to replace it with other revenues and other areas, that’s a good thing about the truck business is just not one segment of the market and you can focus on it and do it. It’s a transitionary thing, we’ve done it before and we will balance that with expense cuts and will hopefully – we will just perform as we go forward.

Thanks. Last question and then I will pass it on. And this will be – this is a huge what if question, and I kind of hate to ask it but…

No, you don’t. You don’t hate to ask it [indiscernible] go ahead.

Well, no because it is a what if question and I’m just curious what if Navistar doesn’t make it. Have we done any contingency planning on that? And theoretically how is that affect the business and what would you have to do, if they don’t survive?

I don’t think they’re just going to shut down and go away. I don’t – I have no – if that happen, I guess I can think about it, you tell me a good contingency plan for it. Okay?

I mean, you would have to hire me for that.

Yes, give me a good – give me a good plan. I don’t explore, if you got to the worst of the worst and I’m not going to start spelling out the B word or anything else, if that happen, but it’s not going to just shut down.

Okay.

Okay. I think you will – I think we still all know that something they’re going to be around. I still believe, remember the reason is because why, what are the biggest barrier to entry in this country, guess what distribution, it’s the billions of dollars of private investors to create these business distribution service networks and that’s why you don’t see people coming for both sides of the ocean, either side of the ocean and just not showing up. We build trucks all over the world just showing up selling their trucks here. They’re going get services. It’s not like buying and selling cars. I mean, this is a commercial product that makes a living for someone and puts food on the table for their family. And if you can’t support, people don’t buy trucks they will pretty [indiscernible]. Okay, it’s that simple. So those viable piece they have is, forget their products I know some valuable thing that goes with that organization is the distribution network. Here it’s simple, so that distribution network will not disappear I don’t believe because there are other people that would like to be in this country. Maybe if with – if something ever happen and I don’t expect anything to happen. I’m confident that they will maintain I’m confident with where they’re at from a debt perspective long-term, but they will continue to maintain. I don’t believe that’s going to happen. I believe that will continue to maintain where there at now and I believe once we get through this overhang of used trucks that they will get back into their rightful spot.

Well, just a quick question on that given where the share price is, maybe something is happen privately we haven’t heard but why do you think nobody’s made kind of a public run at this thing? Given what…

I’m not going to get in, now you’re asking me to get deep into my regular things, I know where I’m at and I’m not going there, Artie. Okay.

Okay. Fair enough.

But, don’t – do not discount the viability of the Navistar brand going forward. I realized what it looks like from somewhere on the outside, but that distribution network, that brand is going to make it long-term and I believe that.

I agree with you, I just kind of wanted your thoughts on – I don’t know…

No conjecture on my part, though.

Perfect thank you.

Our next question comes from Tim Robinson of Susquehanna. Your line is open.

Hi, guys. Good morning.

Good morning.

I was wondering if you could talk about how new truck pricing performed in the quarter and maybe give us your expectation for 2016?

Sure. Our new truck, I think, we’re down about 4,000 year-over-year, we’ve not see Q4 to Q4, let me get the sheet here. I think we were down, but a lot of that had to do with mix. I was still selling a lot of oilfield business with bodies and rig and stuff up and doing all kinds of work. And what’s that – my pricing from OEMs stand I thought you’re talking about pricing where we were, our sales?

Yes. For you, just thinking, kind of figure out how apples-to-apples pricing performed?

I know we were down I’m going to look at the number here for you. I just know it was down. That was a mix issue with more over the road break business, fleet trucks and less specialty trucks. It always comes to be in a mix, remember oil and gas. Steve you want to comment.

Yes, so that was right, 4,000 I guess. I thought, I remember reading that. There’s a lot of numbers I read to before this. So yes it’s 4,000. We were down year-over-year 4,000 in the quarter. Though that’s what I remembered and we were. But that was strictly a mix issue, I’m not going to say it’s a pricing from, anything to do with OEMs or anything like that, only a mix issue.

Okay. And then as we go into 2016, presumably energy is…

Probably in line with where I was in Q4, fourth quarter, I would imagine folks will do like they typically do and try to get a little increase at the first of the year, but I imagine the market will dictate will dictate whether it’ll holds or not. And I would expect it to be similar to what Q4 was.

Okay. And then when you said that you hope to manage new truck inventories in the year. I guess, are you meaning that absolute inventory levels are going to come down with lower sales or do you think that inventory days are probably at the high-end year range and maybe those will come down too?

When I look at – you can see, when I look strictly at my stock inventory, what we go in-process to delivery trucks which are a lot of what we have even more than where our true inventory is, okay. Most of the trucks you see, that we have there in our floor plan or out in our balance sheet, that’s most of those are spoken for. There either getting bodies put out, they’re getting this done or having that done. Those are sold trucks, there’s a piece of that that is true stock inventory. Remember 80% or better what we sell is ordered for specific customers, I think sometimes people lose sight of that. Over 80% of what we sell is for a specific customer and so we already ordered that way. And we – medium duty we stock more than – already– medium duty we stock more sales come out of medium duty than they do heavy duty out of stock. Or I’ll say 80% I’m speaking about Class 8. So, but say 20% of our Class 8 sales are truly out of stock. So we would manage our true stock inventory, what we see the market trending, right. The problem is you’re watching reversed, you’re watching front lines and behind, right? In your murk [ph] because you’re already going through those months. But we will try to anticipate where the markets are as we go forward to the best of our abilities. So from a true inventory perspective as I said earlier, I feel fairly comfortable as to where we are at right now. Sometimes what you see, what you believe is inventory, I like to see it higher, because that means I have got more trucks in the process of delivery which means I’ll be catching more, okay. Again 80% of our heavy-duty trucks are ordered for a specific customer, you don’t want that to be down too low, okay?

That’s right. And I apologize if I missed this. But did you talk about your expectations for the non-energy component of parts and services in 2016?

Well to pick it up and do a better job, that’s been the big focus. As I said, if – most of the country, now, a little spot here or there. The majority of all that we lost in Q4 was in the energy sector. There’s a couple of spots that were hurting a little bit but the majority of it, 75% of the downturn in parts and service in Q4 was in the energy-related. We expect the other parts to be up okay. Now, our goal especially with the focus in those areas is going to shift, or arising that our other pieces and our other market segments whether it be construction, refuse, over the road, medium duty customers any of that were going to focus some of the effort that have been focused towards the only gas areas in those parts of the country towards that. We’ve always been fairly successful with that. We will continue. Look, we are still, the one thing for sure is, we are still getting that Navistar network is still very new. So we’ve got a lot of things that we do on the other side of the house that we continue to implement on the other side of the house and get better at over on that side. So I still think there’s a lot of good upside left in that as we continue to integrate all those acquisitions in to our culture going forward. So I don’t have a number for you. As to what it will go up but it’s not going to go up that much at all. They are energy loss, some on the energy loss.

Got it. Okay, that’s it from me. Thank you very much for your time guys and best of luck this year.

Yes, you bet.

Our next question comes from Todd Maiden of RBC Capital Markets. Your line is open.

Hey, guys. So we talked about 1Q 2016 being down sequentially 10% to 15%, probably another step down in 2Q, this is on Class 8. And then you’re thinking maybe level from the another step down in 2Q and may be you get a little bit of help, a little seasonality in the back half. Is that how you are looking at the year right now? I know it’s early.

Yes, I’m not ready for Q2 to be off for Q1 yet to be honest with you.

Okay.

I’m looking for those two quarters to be flat and yes if I was going to look right now I would have booked all the business. I hope we would pick some business up in Q3 and Q4 and some of those deliveries, and some fleet deals we are working on, might come together and we might pick up some deliveries in Q3 and Q4. So, I’m – right now if you look at my overall year, and if I say the market is off 20 them are probably going to be off 22, okay are right at that same number but that puts you in that 16,000 sum on last year. You knockout 15% to 20% – somewhere in the 15% to 20% range, we probably, right now unless I can still sell into it as I always tell everybody, right I can get fortunate and we can sell into it and do a better job creating some opportunities. We’re working at it.

So right now you’re thinking 15% to 20% off year-over-year?

Yes, I would say that.

Okay.

If you look at overall answer, that is where I am going to range you.

All right. And then the fall off in 4Q year-over-year in Class 8s, between the Navistar and PACCAR dealerships, was it anyone bear the brunt of that more than the other?

Yes, – and here to look over. Well, what do we got Steve? Yes, we were – if you look percentage wise it was off about 25% on the Peterbilt side and on the Navistar side it was probably off about more like about 35% in Class 8.

Okay.

But there is more volume in the Peterbilt side, so blended into 28%. That, you got me?

Got you. All right, perfect, thank you.

Yes.

Our next question comes from Bryan Lee of Private Management Group. Your line is open.

Hi, Rusty, thanks for taking the question.

Sure.

Obviously, real positive comments on the Navistar side, but same time you’re still seeing another, say, 12 to 18 months of overhang there. But with that being said and the good new product out there with an underappreciated distribution network, do you see them finally taking share on the Class 8 side this year? And then second question is, obviously larger fleet guys are – done adding to the fleet, but still probably around flattish. But what you’re hearing from your smaller independent customers and if you could remind us just what percentage of truck sales come from those smaller independent guys. Thanks.

Okay. Well, I mean Navistar will continue to work itself out. When it comes to taking the share, they might have a point or so, but I'm not looking for any five point rise. But they need, it would be best if they did have – hopefully show up better what’s their point or so. So it's really important that they get back medium duty share as much as anything, okay. Their growth in medium duty and also maintain a nice growth in the bus side, getting back on that, will be important to their overall profitability of the organization or the managing where they’re at. When I look at, what we have on Navistar – what’s the next question?

Just on the part…

I’m going to tell you that, I would look for most of it. They're all feeling the same things right now, okay? I’ll be honest with you. You don’t see – I'm seeing a little bit softer truck sales, a little bit softer [indiscernible] rate from smaller fleets, just like I am from larger. I mean, that number you saw come out like I said was only 14,800 in the month of January, that include Canada and the U.S. from an order intake perspective, I think it’s pretty broad-based across. So I don’t – I can’t pick on one certain area as to where that is. I would say that we’re hopefully we’re working a couple of other larger fleet deals that will help us out later towards the latter part of the year. But, right now, they're not [indiscernible] to be honest with you. So I don't see – I mean, there's pockets, right? There's always some pockets across the country that are better than others. I’ve got certain areas, the countries are better than ours. Right now, Florida is in good shape, you look across there. The West Coast is decent. When it comes to true order intake right now, this part of the country, I'm talking from is doing the biggest divestiture. So, as I said, I’ll try to get whenever I hope for the number [indiscernible] would be for the year earlier and hope we can do better, so that’s where I’m at.

Okay, great. Thank you.

There are no other questions at this time. I’ll just turn the call back over to Rusty Rush for any closing remarks.

Okay, folks. We appreciate your time and we look forward to talking everyone in April with our first quarter results. Thank you all very much.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.