Kraft Heinz Company (KHC) — Q2 2016 Earnings Call Transcript

Hello, everyone, and thanks for joining our business update for the second quarter of 2016. With me today are Bernardo Hees, our CEO; Paulo Basílio, our CFO; and Georges El-Zoghbi, the Chief Operating Officer of our U.S. commercial business. During our remarks, we'll make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our press release and our filings with the SEC. We'll also discuss some non-GAAP financial measures during the call today. These non-GAAP financial measures should not be considered a replacement for, and should be read together with, GAAP results. You can find the GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation available on our website. Now, let's turn to slide two, and I'll hand it over to Bernardo.

Thank you, Chris, and good afternoon, everyone. For much of today's call we'll concentrate on second quarter numbers. I think it's good to start by providing an update on the progress we have made in bringing Kraft and Heinz together over the past year. Let's return to the three objectives of our strategy which were laid out at the beginning of our merger. First, deliver profitable sales growth. Second, achieve and maintain best-in-class margins. And third, capture a superior return of capital as an investment-grade company. On our last call, I said that we're off to a good start. Good. Not great. And I think that's how I should describe the first half of the year as well. It's true when you look at our top line performance and our progress in delivering profitable sales growth. The investments we have made in our global sauces franchise continued to improve category growth and market share gains in the United States, Canada and Europe. It's also the primary driver of the nearly 9% organic sales growth in our Rest of the World segment during the first six months of 2016. Our Big Bets investments and whitespace initiatives are starting to gain traction in markets around the globe, and we have more to talk about in the second half. George will talk about our performance in the West, including the impact of our Mac & Cheese renovation. Outside the U.S., the March launch of Heinz Seriously Good Mayonnaise helped us grow our business and our market share in every market where we have put it on the shelf. These Big Bets and new products are critical for us given the consumption headwinds in a number of markets and in a number of key categories. As an industry, we are in an environment where retail competition has intensified in our biggest and most mature markets, including the United States, Canada, the U.K., Continental Europe and Australia. Nowhere is this more true than in the U.K. where key category declines have been a significant drag in the first half, even though our market share trends have been improving. In this market, we must remain disciplined with our go-to-market activities, constantly balancing price, promotion, and distribution while we innovate to build our brands and drive profitable growth. As we have seen, this sometimes leads to a bumpy ride on a quarter-to-quarter basis. But our biggest challenge remains the fact that we continue to have a number of categories where consumption trends are working against us. While we're making progress against those opportunities and expect better performance going forward, our organic sales growth during the first half of the year was held back. Specifically in two of our biggest segments, we were down on an organic basis. Down roughly 1% for the first half in the United States, and down 3% in Europe, resulting in 0.3% total company organic growth for the first six months. So as far as top line goes, like I said, okay, not great. In terms of our second objective to achieve best class in margins, we have made significant progress in the first six months of the year with adjusted EBITDA growth of nearly 20% or just over 25% on a constant currency basis. This has been driven by a combination of savings from our integration program, commodity favorability in North America, as well as strong organic sales growth in the Rest of the World segment. In terms of our integration program, we delivered roughly $300 million of savings in Q2. But I am even happier to report that in Q2 we put a critical step behind us, one of the more risky activities we had in our agenda, which was the integration of the legacy Kraft and the legacy Heinz front office SAP models in North America. Now we are one face to our customers as a system-integrated company and we did this while keeping our K-through rate in the United States on target at 98%, with minor service issues in food service already addressed. In fact, we had very good execution around the world in Q2, with Europe remaining above its K-through rate target at more than 99%, Canada at 97% and our Rest of the World segment for the first time above 96%. Importantly, none of this would be possible without bringing our performance-driven culture to life. I know that on our last call, our Manage by Objectives, or MBO process, now covered roughly 6,000 employees worldwide. In Q2, we took another important step, launching our Ownerversity, a new global learning platform to support our culture, accelerate our vision and values, and help employees constantly deliver on our MBOs. Kraft Heinz Ownerversity provides a consistent training foundation across the organization. Last but not least, as part of our third objective, we have taken significant further actions to deliver a superior return of capital and continue to strengthen our balance sheet. As you may have seen during Q2, we closed the redemption and refinancing of our preferred stock, an important step in strengthening our investment-grade credit standing. With our Q2 results, our leverage ratio is now just below four times EBITDA based on our latest 12 months of results and we are on our way to achieving the goal of a three times ratio we were targeting for the middle term. Finally, our board of directors set a 4.3% increase in our quarterly dividends to $0.60 per share. Overall, we have made meaningful progress against the objectives of our strategy that will help lay the foundation for better execution and profitable growth going forward. Let's now turn to slide three to see what that means for Q2 financial results. On the top line, similar to Q1, we saw a foreign exchange drag of 4%. On an organic basis, however, net sales were down 0.5%. Pricing was up 1.6 percentage points, reflecting gains in all regions except Europe. Despite deflation in key commodities in the United States and Canada, primarily in dairy and coffee, volume/mix fell by 2.1 percentage points, as lower shipments, particularly meat and food service in the United States, more than offset gains from innovation in Lunchables and P3 in the U.S. and solid volumes of condiments and sauces globally. In EBITDA, we drove the strong dollar growth and margin performance both year-over-year and sequentially from Q1, despite the Venezuela devaluation impact that began in Q3 2015. This was driven by a combination of one, our strong cost savings performance, favored pricing relative to key commodity costs over the prior period, and profitable top line growth. At the EPS line, adjusted EPS was up 39.3% versus the prior period to $0.85, reflecting the leverage of our strong adjusted EBITDA growth playing through the P&L. Now I will hand it over to George and Paulo to talk more about how we did it in each reporting segment and what to expect going forward.

Thank you, Bernardo, and good afternoon, everyone. Let's turn to slide four for a quick update on our performance in the United States. If you recall at the start of the year, I described one of our goals as delivering stable top line performance during a year of significant transformation. And so far, that's what we have done. We've been able to maintain solid momentum in the marketplace in a number of categories that we placed Big Bets on with new products and/or advertising support. This includes Heinz sauces, which grew at mid-single digits, driven by the introduction of barbecue sauce, year two of mustard and the share growth of ketchup; Philadelphia Cream Cheese, ready-to-eat refrigerated desserts; and Lunchables, which are all growing at mid- to high-single digits. However, these gains were more than offset by weak consumption trends in categories like roast and ground coffee, frozen nutritional meals, and hot dogs. On one hand, there are no new major categories that I would add to this list. On the other hand, we do need to move faster to adjust in the marketplace and ensure that these challenging categories do not mask the successes we are achieving with our Big Bets innovations and investments in marketing. Our new product initiatives for 2016 are working well, particularly the renovation of Kraft Mac & Cheese and Capri Sun ready-to-drink organic beverage, the introduction of Heinz Barbecue Sauces, and the introduction of Cracker Barrel Mac & Cheese. The second factor I would highlight is that our Q2 shipments were consistent with measured channels consumption, in line with our expectations from our last call. You may have seen recent SCANA data was affected by the timing of the 4th of July holiday versus the prior year. Adjusting for that, our consumption would have been down roughly 2% in the second quarter. Shipments were essentially in line with consumption. I would also note that we continue to add new business, or whitespace, in both food service and non-traditional retail channels during the second quarter. However, food service was down versus the prior year in Q2 due to program timing with customers, incremental commodity-related price declines as well as minor service level problems during the quarter. This brings me to our integration program execution. During the quarter, the bulk of our integration activity shifted to supply chain and operations activities, including an SAP integration go-live, which was completed in the quarter. Thus far, our service levels remain good for most of our product groups, with some challenges in the cold cut segment of our meat business as well as minor disruptions in food service in May that were quickly corrected. Overall, as Bernardo mentioned, our savings are coming in faster than planned, and we are achieving these savings without sacrificing quality. For the balance of the year, our key objectives will be two-fold. First, we must continue to execute our footprint integration while minimizing disruption. Second, we will step up our in-store activity, including a strong agenda of new product introductions we have planned for the second half. Look for new product introductions in our desserts, cheese, and frozen categories in the months ahead, following the rollout of our new Devour frozen meal this past month. As I hope you can see, it is an exciting time for Kraft Heinz in the United States. Our plate is full, and our opportunity for profitable growth is significant. Our job is to deliver in the marketplace. With that, I'll turn it over to Paulo to wrap up our comments.

Thank you, George, and good afternoon, everyone. I will start on slide five and add a few notes on Q2 financials in the U.S. With organic growth, pricing was up 1.2 percentage points, primarily due to lower promotional activity versus the prior year and despite a headwind from deflation in key commodities. Volume/mix fell 3.1 percentage points, reflecting ongoing gains from innovations like Lunchables and P3, and strong volumes from our Mac & Cheese renovation that were more than offset by lower shipments in key categories but strongest in food service and, as George noted, in our meats category. In terms of adjusted EBITDA and margin expansion, as mentioned in our Q1 call, this was driven by integration program savings and, to a much lesser extent, favorable pricing relative to lower key commodity costs. While we have seen the benefit of pricing relative to key commodity costs for the past couple of quarters, we continue to expect commodities favorability to fade as we move forward. Let's turn to slide six where the key factors impacting Canada in the second quarter were essentially the same as what we saw in Q1. We still saw strong currency headwinds, but the negative 5 percentage point impact from currency in Q2 was half that seen in Q1. Organically, we were able to deliver net sales growth from pricing gains exceeding the related decline in volume/mix. Positive pricing of 3.1% was the result of significant pricing to offset higher product costs in local currency, and this more than offset pricing headwinds related to deflation in select key commodities. Volume/mix went down 1.9 percentage points, primarily from a decline in cheese due to a reduction in promotional activity versus Q2 last year as well as lower coffee and ready-to-drink beverage shipments. Adjusted EBITDA was up 27.2% versus the year-ago period, despite a negative 7.2 percentage point impact from currency. Adjusted EBITDA growth was driven by gains from cost savings initiatives and favorable timing of pricing relative to higher local input costs that were partially offset by unfavorable volume/mix. Similar to Q1, we saw a lot of EBITDA favorability this quarter in Canada. However, I would note that some of the upside was driven by favorable timing of pricing versus local input costs. Moving forward and with official raw milk prices now on the rise in Canada, we would not expect the commodity favorability in the first half of this year to show up in coming quarters. That brings us to Europe on slide seven. On our last call, I said that we felt better about the health of our European business than our Q1 numbers might indicate, specifically in terms of profitability. On the Q2 top line, as we saw with Q1 versus Q4, organic net sales growth was again better on a sequential basis. Organic net sales were still down, largely due to an increase in promotional activity in U.K. condiments and sauces versus the prior-year period. However, our volume/mix trend kept improving, reflecting gains from condiments and sauces in most countries that were offset by lower shipments versus the prior year in the U.K. At the same time, while constant currency EBITDA in Europe was down slightly versus the prior year, margins were up, both sequentially and versus the prior year. This was driven by a mix of manufacturing savings, lower pricing, and an increase in market investments. So while we are not all the way out of the woods, the health of our European business is indeed better than our Q1 numbers might have indicated, and we are continuing to invest in profitable growth as we move forward. Finally, we will look at the Rest of the World on slide eight. Here, foreign currency was again a significant headwind, roughly 24%, mainly due to recognizing the devaluation of the Venezuelan bolivar at the end of Q2 2015. In terms of organic growth, we saw high-single digit organic net sales growth, driven by a good balance of volume/mix and pricing. Pricing of 5% was mainly driven by pricing to higher local input costs in Latin America. Volume/mix was up 2.1 percentage points, primarily due to strong growth in condiments and sauces in all regions. As to EBITDA, we saw an 8.8% decline in adjusted EBITDA to a negative 34.5 percentage point impact from currency, 27.5 percentage points of which was from the Venezuelan bolivar devaluation. Constant currency adjusted EBITDA was up strongly in Q2, driven by strong organic growth. That covers our Q2 results. And before we go to the Q&A, I want to quickly update our expectations for financial performance over the near to medium term. From an organic sales perspective, I think it's important to echo Bernardo's and George's thoughts. We would expect from both an industry perspective and a Kraft Heinz perspective that consumer trends in an increasingly competitive retail environment are likely to remain headwinds in both North America and Europe. We remain confident in our pipeline of Big Bets, and we continue to lay the groundwork for whitespace expansion for Kraft and Heinz brands in both food services and international channels. However, as you have all seen, our starting point in most mature markets is declining consumption. Therefore, we have much work to do to simply get back to positive organic sales growth. As far as our integration program, all of our targets remain the same: savings and cost to achieve. We are still targeting integration program savings of $1.5 billion net of inflation in 2017. Below the line, the redemption of our preferred stock and related financing with new debt is expected to benefit EPS growth in the second half. As a result of the new debt issuance at today's currency rates, we expect our run rate net interest expense to be approximately 3.8% of the roughly $33 billion of gross debt outstanding at the end of Q2. So that's our update through the second quarter of 2016. We still have significant work ahead to realize our potential and set the stage for profitable growth in the future. We have a strong Big Bet pipeline with a strong agenda for the second half, and further whitespace opportunities to go after. At the same time, our footprint integration activity is expected to reach its peak in the second half of the year as well. As we've said before, in many ways we've benefited so far from a lack of business disruption. Making sure that remains the case will be a key area of emphasis for the remainder of the year. While we have had a solid start to the year, we must continue to execute well against the many opportunities we have to deliver profitable growth.

Good evening, everyone. Can I ask you about your revenue management practices, what you've found out so far, what innings you're in with that? It's something that everybody is talking about across the industry, as you optimize promotional spending and price points. Is there a lot more in there? Linked to that, I'm getting from investors that people are worried that the relationship with the retailers may be weakening as you pull back on some of that promotional activity. How do you respond to that at this point? Thank you, and I'll pass it on.

Thank you, Alexia. This is George here. I'll take these questions. First, if you're wondering which inning we are in, we are in the pregame. What we have done in revenue management is to establish the infrastructure to manage across 30 to 40 categories in the U.S. What you have seen so far is not what we have realized from revenue management. This is yet to come. What you have seen so far is some improvement due to the minimization of negative ROI promotional activities and not going into large, deep discounting promotional activities. The availability of merchandising has reduced at retailers, which means the average price per pound has gone up. The relationship with retailers is very strong. We work as straight partners because we are both in the industry here to serve the consumers that are changing rapidly.

Great. Thank you very much. I'll pass it on.

Good evening. Thanks very much for the question. Kind of a follow-up question. I wanted to ask how you measure returns on investments on the promotional activity you're speaking of, this reduced promotional activity. Because presumably there's a loyalty algorithm, where you generate repeat behavior in future periods. Whether in some of your more commodity-influenced categories, like meat or the portfolio more broadly. But we've read and heard at a recent conference how loyal usage is down. And that might alter that math. I'm wondering how you think about that repeat behavior and that future potential maybe habitual dollars you might get, or you might lose by managing down those promotional opportunities. Thanks.

Jon, thank you for your question. George again. There are a number of variables here, and they are not the same by category. It depends on our position, whether we are the market leader, how we measure our relative market share, the brand equity strength, and the ability to price, and our relative market share to other competitors. That's one piece driven by consumer demand. The second piece is our profitability posture, which depends on commodity pricing at the time. It is not one thing that fits all. It depends on a number of variables.

But – thank you. But I guess in your management of promotion, George, would you have done the same thing with this portfolio five years ago regarding managing those promotions? Or have variables changed in the marketplace recently leading you to say that you have a negative ROI on what were perhaps positive ROI promotions before? I'd just like to understand that.

No, the difference between now and five years ago is consumers' attitudes towards brands and categories have changed significantly. The availability of merchandising has reduced, hence you wouldn't have done these things five years ago. That’s not due to the way we operate or measure promotion, but rather due to changes in the marketplace.

Thank you. That's very helpful.

Good afternoon.

Hi, Andrew.

Just two things for me, I guess. First, I think you mentioned $300 million in synergies in the quarter. I guess on an annualized basis at $1.2 billion, but correct me if I'm wrong that you still have the bulk of the manufacturing synergies still to come, I guess, starting in the second half. I'm trying to get a sense if the $1.5 billion you are pointing to starts to seem increasingly conservative or not based on some of the numbers I laid out.

Hi, Andrew. Thanks, this is Paulo here. Right, we are just over $300 million in savings for the second quarter and again, if you annualize this number, you are going to get to roughly $1.2 billion which is around 80% of our current target for 2017 of $1.5 billion. The majority of the organizational and zero-based budgeting savings have already been implemented; however, we still expect some more savings to come from the zero-based budgeting bucket. Going forward, the majority of the savings we expect will come from the footprint initiative we have. That being said, I think it's important to keep in mind that these savings should also offset the expected inflation that we have for the following year. Our target is $1.5 billion net of inflation for 2017. We will continue to update our expectations every quarter but no changes in our estimates so far.

Thank you for that clarity. I think last quarter you helped at least to dimensionalize the magnitude of the P-NOC favorability in the first quarter. I was wondering if there was a way you could help us quantify that a bit in terms of how favorable that was this quarter as well?

No, sure. When you think about our North America EBITDA growth, our North America EBITDA grew around $350 million. Again, just over $300 million came from the savings initiatives and the rest pretty much is coming from commodity favorability in the second quarter.

Thank you very much.

Hey, good afternoon. Just wanted to follow up on the comments you've made about how challenging the environment is and declining consumption. Can you talk about how that might affect your planning over the next year or two versus originally in terms of where you reinvest or how much you reinvest? Then, does it have any effect at all as you look out further at potential acquisitions? Does it affect the way you're thinking about the returns in these markets given that declining consumption looks like it's going to be with us for a while? Thanks.

Thank you, Bryan. I will answer your question on the environment and pass it on to Bernardo to follow up the second part of your question. The challenging environment is nothing new. However, it has accelerated a little bit over the past 12 months or so. We are dealing with that by investing more in new product development programs in line with where consumer trends are now and where they are going in the future, and we are increasing our investment and supporting our big brands. This is the best way to deal with consumers. We are not throwing money to try to get quick sales. We are resisting that temptation, believing it's better for us in the long term to invest in sustainable growth. For the second part of your question, I will pass it on to Bernardo.

Thanks, Bryan. Regarding the second part of your question on how this correlates to M&A, I think George answered it well. We're excited about the prospects of the business. We have a lot to do here still to fix some categories, apply more focus on the categories, and push our agenda of profitable growth. In respect to M&A, we really don't comment on speculation and hypotheticals. As Paulo mentioned, our integration is going well, but we still have important milestones to overcome in the next 6 to 12 months. We are always looking for further opportunities, but outside that we won’t comment.

Okay. But it's safe to say that the environment hasn't changed your perspective on value creation in this industry?

No, it's not. We believe that with or without acquisition we have a lot of value creation potential in this business.

Yeah. I was wondering if you could just touch on innovation a little bit and two things in particular. One, some of these Big Bets, how many of those are legacy from, say, Kraft's pipeline pre-deal or have come to market since the acquisition from scratch? Just trying to get a sense of timing and how the approach works. And then just related to that, how do you think about when you do introduce a new brand versus an existing one, what causes you to think that it made sense to launch a new brand and the spending related to that versus using one of the ones you might have had already?

Yeah. Thank you for your question, Michael. A number of new products started in the past 18 months, usually the cycle it takes to do a new product, and we have a stage and gate approach. The Big Bets that we launched this year were independently worked on before the merger, and we launched them in Q1 and Q2. They weren't affected by any disruptions during the integration process. The three big ones for us this year have been Heinz Barbecue Sauces, which was launched early this year and is doing very well; Cracker Barrel Mac & Cheese is another premium one, which is our best-selling new product; and Capri Sun Organic. It takes at least 12 months to put something like this together, so they all started pre-merger and were worked on during it. We also launched a new brand called Devour, which we just launched in the marketplace in the frozen meal segment, about two months ago, and that was started in late last year, so that happened after the merger. We are excited about providing significant marketing support for that new brand. The reality is some started before, some started after, but none were affected or disrupted by integrating the two businesses.

Have you had an ability to accelerate the launches just by removing some of the layers of management or by working with a leaner organization?

Sure. You always have faster decision-making in an organization like ours.

Hi there. You've mentioned several times the risk of business disruption during the supply chain integration. It comes to mind Oscar Mayer in particular for me, because I know that closure in Wisconsin is particularly sensitive. I wanted to know if you could tell me specifically where you are at in migrating that manufacturing, what caused the disruption, and what you're doing to work your way through it.

Thank you, Rob. First, I'm pleased to tell you that our service rate across Kraft Heinz in the United States has been really good. It’s in the 98% CFR. We have isolated issues in cold cuts, where the demand and capacity are not matching during the footprint. We will be over it very soon; it's affecting our sliced meats business. We know what needs to be done. It's a capacity issue, and as we have new lines coming on stream, that will be resolved over the long term. It is not something that will persist for a long period of time. We believe the rest of the portfolio is in very, very good shape, with some of the best CFRs I've ever seen in the rest of the portfolio.

Okay, George. Can I ask a follow-up? I thought I heard several months ago that you were working on trying to improve manufacturing processes in cheese, so that you could provide retailers and consumers with fresher processed product, so it might taste better. Did I get that right? I haven't heard much about it on the calls. Is there anything being done to improve the quality of the product?

Yeah, you may be referring to the Farm to Fridge Fresh in Six Days on the Philadelphia farm fresh campaign that we did. We put new technology in place and renovated a product segment over a year ago. We are very pleased with the performance of this brand, sustaining mid- to high-single digit growth and gaining market share from its already strong position. That’s one of the technologies we are focusing on. However, we ensure to look at every category within our portfolio to see what we can do to improve the quality of our product and provide what consumers really want.

Okay, great. Thank you.

Good afternoon, folks. Thank you for the question. Two questions, if I may. First, on some of the problem children that you cited in the prepared remarks. I think you said ground coffee, some of your processed meats, and frozen meals. You've given us innovation on frozen meals and talked about some supply chain fixes on the processed meat side. Can you talk about what the planned fix is on the ground coffee side?

Yeah. Thanks for the question, Jason. Regarding coffee, I like to break it down into segments because we are seeing a tale of two worlds in coffee. One is the roast and ground coffee, and the other is pods coffee. The pods business is very healthy and has been growing for years, but the growth has slowed recently from double digits to mid-single digit growth. That being said, we have innovated greatly in this category over the past few years and continue to do so. The roast and ground category has been in persistent decline for quite some time, as consumers are moving into the more premium and pod business. We will bring some innovation to this category, but the bigger innovations are coming from the pod side, and that’s where we expect growth to continue in the future.

Okay. That's helpful. Effectively, the category is migrating, and you'll migrate with it and manage the decline in roast and ground. I think that’s a fair paraphrase. The next question is on international. You've given us some details in terms of your Big Bets and mentioned that Planters is going to China, as well as talk from the retail community in Brazil about heavy investing to support innovation. Can you walk us through what you’ve been able to do so far with Kraft brands abroad?

Yeah. Hi, Jason. It's Bernardo. With 2016, we always stated that our focus is on establishing ourselves through the Kraft brand, setting up the supply chain, getting the foundation right, and preparing to push further in 2017 and beyond. That said, it’s true that Planters and Mac & Cheese in the U.K. were launched at the end of the first half and continue to gain distribution. We have solid plans for Planters to enter China this year and for Mac & Cheese to launch in Brazil this year. Additionally, we are looking at a couple of other markets in the Middle East and Europe focused on part of this portfolio. As we have always said, we aim to select fewer but bigger brands and segments in about 8 to 10 countries to establish ourselves explosively over the next two to three years, and we continue to follow this path.

Great. I really appreciate the incremental color. I'll pass it on.

Good afternoon. Quick question on cash flow; I wanted to get an idea. I think this year is the peak CapEx year for yourselves, and I was wondering how we should think about it. With the majority of the footprint action being completed this year, should we expect a step-down next year?

No, that's correct. We expect the majority of the CapEx initiatives from the footprint to be executed during 2016.

Okay. And then a quick follow-up question. When we think about the combination of Kraft and legacy Heinz, each asset base brings its own distinct qualities and functionality. What do you think is the most incremental sense in terms of strategy? International distribution? More U.S. cash flow? Exposure to faster growing categories? What does the portfolio need from here?

Hi, Steve. I don't think it's one or the other. As George mentioned, we have discussed expansion. We saw the best performance in the second quarter in Europe, even though it's not where we wanted it to be. When considering your question and the footprint we have from a manufacturer’s standpoint, I think we can aim for profitable growth across mature markets like the U.S., Canada, Europe, and in more emerging markets and whitespace opportunities like Brazil, Russia, and China. I wouldn't select one or the other. After the footprint activity, especially in the United States and Canada, we will have the capabilities to really push our agenda of profitable growth.

Thank you, and thanks, everyone, for joining us today. For the analysts who have follow-up questions, Rishi Natarajan and I will be around to take them. For anyone in the media with follow-up questions, Michael Mullen will be available. Thanks once again, and have a great evening.

Thank you all, I appreciate it.

Thank you.