Superior Industries International Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 3.13 | About: Superior Industries (SUP)

Superior Industries International (NYSE:SUP)

Q1 2013 Earnings Call

May 03, 2013 1:00 pm ET


Kerry A. Shiba - Chief Financial Officer, Executive Vice President and Director

Stephen J. Borick - Chairman of the Board, Chief Executive Officer and President

Michael J. O'Rourke - Executive Vice President of Sales Marketing and Operations


Jimmy Baker - B. Riley Caris, Research Division

Jeff Linroth


Good day, everyone, and welcome to the Superior Industries First Quarter 2013 Earnings Conference. For opening remarks, I would like to turn the call over to Kerry Shiba. Please go ahead.

Kerry A. Shiba

Thank you, Kim, and welcome, everyone to our first quarter of 2013 earnings call. During our discussion today, I will be referring to a PowerPoint presentation, which is available on our website at

Joining me on the call today are Stephen Borick, our Chairman, Chief Executive Officer and President; and Michael O'Rourke, our Executive Vice President of Sales, Marketing and Operations.

I'll start today, as usual, with Slide #2 of the presentation, where I would like to remind everyone that any forward-looking statements made in this webcast or contained in this presentation are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially because of issues and uncertainties that need to be considered in evaluating our financial outlook.

We assume no obligation to update publicly any forward-looking statements. Conditions, issues and uncertainties that may be discussed from time to time include, but are not limited to, global competition, product pricing and mix, domestic and foreign market demand, commodity prices, including metal, energy and foreign currency, manufacturing capacity, including plans to construct a new manufacturing facility, productivity, capital investment, operating and manufacturing challenges and our strategic and operating plans. Please refer to the company's SEC filings, including our annual report on Form 10-K for a complete discussion on forward-looking statements and risk factors that may cause actual events to differ from those forward-looking statements.

Before we begin the formal presentation, I would like to turn the call over to Stephen Borick for some operating remarks -- or opening remarks. Stephen?

Stephen J. Borick

Good morning, everybody. Thank you, Kerry. So as you all know, we reported in line with estimates. I guess being in line with estimates is a good thing these days. It does make me happy, personally, because we have a lot of things that have shaken our profitability up a little bit in this quarter and we've talked about them before. I will say that we are working diligently and continue to recognize where we need to improve further in making a lot of, what I believe, good strides in that area. Yet, as you all know, the margins in the United States continue to be a difficult task and that's nothing new, and we've stated it before.

Part of that has finally gotten us to the decision process that has been made to add new capacity to the company. As we look forward, not only do we need the capacity based on potential business in the future, coming out of not only Mexico with the new OEM plants that are being built. But directionally, we believe that as we look at our competition overseas, there is continued opportunity to take back market share in the U.S. One of the questions with that obviously, is at what price level can you take that market share back? And thus it makes a lot more sense economically to build new capacity in Mexico, where we know we have greater margin opportunities.

So we're very, very excited about this decision. I will say that a new piece of news as of Wednesday is that, we have signed off on the footprint for the new facility. So we know what our size is, we know the building model, what it looks like today and we're actually going to have an official groundbreaking on the 15th of this month. All very important actions working with the partnership in the state of Chihuahua and the city as we move forward on this new endeavor. So stand by, good things, adding capacity, making inroads in our existing facilities. And I realize that there is some disappointments on our margins as I say nothing new, but we continue to work diligently and hard at fixing those issues where we can.

The other thing that was announced recently since we've last talked is the Board of Directors has continuously been looking at ways that we continue to improve shareholder value. Lots and lots of dialogue on that. Obviously, spending $125-plus million to build a new plant we believe is one of those value adds in the future to shareholder value for this company. But we also believe that trying to give something back to the shareholders during this period of time with our balance sheet, so there was a decision made to make an initial phase of repurchase of some of our stock. We haven't -- so that question will come up. We haven't made any purchases to date only because we're now putting the plan into full place and we do have that ready to go. And so we'll be looking at the opportunities going forward into the future on what our repurchase plan looks like.

With that I, again, want to thank all of the staff, management, our employees and our -- certainly our board and our shareholders for their continued long-term ability to believe in Superior and what we're all about.

And with that, I'd like to do it back to Kerry.

Kerry A. Shiba

Thank you, Stephen. And we will look forward to addressing your specific questions at the conclusion of the formal presentation.

So let's begin with a detailed discussion. Generally, we'll follow the same format as the last call. As usual, I will begin with a very brief overview just to set the overall context. If you would like to refer to the data, Slide #13 shows the condensed comparative income statement for the first quarter.

As you'll see on that statement, revenues for 2013 increased about 2% from the same period of last year, and that was on a flat unit sales volume. Gross profit was down $3.6 million, while net income and EPS were down $1.8 million and $0.07 per share, respectively.

With this brief overview in mind, if you would please now turn back to Slide #3. I will begin the detailed discussion of our first quarter financial results and some of the key underlying factors that affected the business. Slide #3 is titled North American Vehicle Production versus Superior Shipments. This is where we frame the market environment in which we operated.

Let's first take a look at North American vehicle production, which as most of you know, is an overall indicator of the demand driver for our products. As usual, I also will provide some perspective on customer and product mix in the next couple of slides in an effort to help you understand any distinctions between the overall market and our specific performance.

So looking at the chart in the upper left, the market just about reached 4 million units in the first quarter of this year, up 1.1% over what also was a strong Q1 of last year. Although it is not shown on the chart, you need to go back to the second quarter of 2006 to find a stronger individual quarter.

The first quarter also increased on a sequential basis, up approximately 5% over Q4 of 2012. The trailing 12-month build rate remained about the same as last quarter at 15.4 million unit -- vehicles. This data isn't on the slide, but when looking at the vehicle category, passenger car volume increased 3.5%, while the light-truck category was down just less than 1%. As most of you realize, the light-truck category also includes vans and crossover vehicles.

Turning to the chart on the right, Superior's first quarter unit sales volume essentially was flat year-over-year, increasing 30 basis points and continuing to reflect the impact of our manufacturing capacity constraints. The small volume increase resulted in our share of the market staying relatively stable, but only a very minor 20 basis point decline.

If you would now please move to Slide #4, we will peel back the production analysis by major customer. The chart on the left shows our top 5 customers individually with the remainder of the OEMs grouped together in the last set of bars. For each customer, we provide year-over-year production volume comparisons for the quarter, including our product category breakdown between light trucks, which is shown in blue and passenger cars, which is shown in red. We also show the aggregate comparison by vehicle category in the chart on the right. To remind you, the total industry context of -- the total industry context -- excuse me, total production was up just over 1%.

Here are a few key observations. Ford is the #1 customer on our portfolio. Assembly rates for Ford at plus 16% increased at a substantially higher pace than for the industry overall. The growth rate was strong in both vehicle categories at plus 21% for vehicle -- or for passenger cars and plus 14% for light trucks. Commentary on the slide provides some details about the major programs driving the change. We are a new supplier on the current Escape and Lincoln MKZ, and we also sell into other programs noted except for the C-Max and the Focus.

GM is our second largest customer. Their Q1 production rate was down 6% when compared to the same period last year. The year-over-year decline was about equal in passenger cars and of light trucks. Most of you are aware of our strong overall position in the GM light-truck programs especially for the GMT900. We were not affected by the passenger car volume declines that are noted on the side.

Chrysler's rate of production fell about 5% with a wide disparity between passenger cars, which read plus 28%, and light trucks, where production declined 15%. We are concentrated heavily in the light-truck category at Chrysler.

Production for the international brands and aggregate mirrored the overall market growing at 1.2%. For the OEMs affecting Superior, Toyota was down 2%, while Nissan was close to plus 5%. BMW and Volkswagen reflected the overall market.

Turning next to Slide #5, which is titled Superior Shipments Year-over-Year Comparison, let's take a look at what drove the company's year-over-year volume changes for the first quarter. We are using the same chart format as just shown except now the focus is on Superior's unit shipments.

I mentioned previously that our market share was about flat. While you can't really discern it from the chart, our mix of sales to domestic versus international brands basically was unchanged. While our position at Ford provides the most notable comparison between years, there were quite a few changes in the mix.

Before discussing individual customers, let's start with the overall comparison by vehicle category, which is shown in the chart on the right. We grew at about 14% of the light-truck category, while declining close to 27% in passenger cars. Our improvement in light trucks was fueled by substantial shipment growth to our largest customer, Ford, with increases on the Escape, the F-Series, Explorer, Flex and Edge. We also grew, albeit much more modestly, in the passenger car category with Ford, that was on the Fiesta, the Taurus, and the Lincoln MKZ.

At GM, our number 2 customer, we were down 15% overall. The decline currently reflects loss of the Malibu program, which we have commented on in prior calls. We did see some gains on several GM passenger car programs including the Chevy Volt, the Impala and the Cadillac ATS.

In the light-truck category, we were at plus 4% on the GMT900 as this platform moves closer to the changeover to the new K2XX. We also saw a nice increase for the Buick Enclave.

At Chrysler, our business largely is focused on light trucks. The 4% overall gain reflects our entry onto the Ram Truck platform since Q1 of last year, as well as a significant increase for the Town & Country van. Partially offsetting these gains was a production ramp down on the outgoing version of the Jeep Grand Cherokee that occurred during the quarter.

We have a large year-over-year pick up at Toyota, where we were up 20%. This growth reflected big gains on the redesigned Avalon. One more item that stands out on the slide is the annual rate of decline at Nissan, and we've talked in previous calls about the ramp down on the Sentra. A decline on the Maxima program somewhat reflects the change in vehicle production rates.

Behind the Sentra, the largest decrease was in shipments for the Altima. We previously had experienced declines on this program due to a model changeover at Nissan. However, our share of the new platform has not materialized to the degree that we expected.

If you would now turn to Slide #6, we can look at the sequential sales volume comparison. The changes going from Q4 of last year to Q1 of 2013 told a bit of a difference story for both the market and Superior.

Let's start with the context of what happened in the market. As I mentioned earlier, Q1 assembly rates were up 5% on a sequential basis. The growth rate was a bit higher for passenger cars than in light trucks, but the gap was not large. The mix between domestic and international brands tilted about 100 basis points in favor of international.

Ford showed the largest sequential increase from the domestic of plus 7% that was driven by the F-Series truck and the Lincoln MKZ. GM was also up 4% while Chrysler declined about 3%. The international brand and aggregate grew about 8% sequentially with 10% improvements occurring at both Toyota and Nissan.

Now let's take a look at Superior. In contrast to the year-over-year comparisons where our first quarter shipments were flat, the sequential comparisons shows an overall decline of 2.5%. Once again, there was some substantial differences when you look at the underlying mix.

On the plus side, we saw a large 19% gain in Toyota with increases on both the Avalon and the Camry. We also were up modestly at Ford. Declines in Chrysler and GM were driven by the light-truck category. The change for Nissan is similar to the year-over-year comparison I just described, just less pronounced since the Sentra decline largely played out by Q4 of last year.

I would like to comment on one additional item and which is noted in the headline on the slide. We have seen some some fluctuation in customer demand that began in Q1 and have continued thus far into the second quarter. The directional shift points towards some slight sequential softening and a more pronounced decline when compared to what was a very strong second quarter of last year.

I next would like to turn to Slide #7, which focuses on net sales dollars in a year-over-year comparison for the first quarter. The slide is in the familiar format used in the past, so I will just move right to the data.

At the top, you can see the 30 basis points unit volume increase, which is shown on the first side of the data table. This change contrasts with a 2% increase in sales dollars shown on the second line of the table. The remainder of the data breaks apart the components of the sales dollar comparison. There really isn't a lot to comment on this quarter, and I will point out that the aluminum price component fell and reduced net sales by $3.1 million, although much of this impact was offset by increasing metal content or average weight of the wheels. My only other comment is with respect to the last line on the schedule, which is labeled price mix. This comparison again was positive, which was the third quarter in a row when looking at year-over-year changes.

If you would now please turn to Slide #8. Let's review what happened with gross margin. The volume impact is of course negligible based on very small change in unit sales. The next item is mixed rate, which again was positive. Just as a reminder, this amount will not match the price mix item shown on the previous side as gross margin is affected by the cost impact of price changes in addition to the sales price impact.

The next 2 items, again, are not material, so let's go to aluminum timing. As you will recall from previous discussions, our commercial agreements generally provide a mechanism to pass aluminum price changes through to the customer. However, the timing of when such adjustments are recorded differs depending on the specific customer involved and it can range from monthly to semi-annually.

At the same time, our procurement cost for metal moves monthly with changes in the market. As a result, even though metal price adjustments running through sales eventually will track the market for aluminum, timing differences between sales and cost of sales can cause a short-term variance.

The next item is labeled Plant Performance. This item fundamentally measures the change in manufacturing cost performance from period to period. This item does exclude the impact of any operating cost items listed separately for this quarter, for example, depreciation.

In aggregate, we estimate the year-over-year change in plant cost performance at a net $4.1 million negative. The Q1 variance continues to reveal a rather despaired results when making comparisons between operations in Mexico and those in the U.S.

We remain very pleased with the overall manufacturing efficiencies being achieved in our Mexico operations. Our ongoing goal is to try and keep these facilities filled to take advantage of lower costs and improve on operating efficiencies. We also were pleased to see signs of stability and improvement being achieved in our smaller U.S. facility.

After making certain key capital upgrades in 2012, some of which did not become operational until the fourth quarter, the cost performance of this location is beginning to reflect much greater stability. Operating disruption has been reduced by replacing certain aged and unreliable equipment, while overall efficiency also has been enhanced by improving factory layout and product flow.

We still face significant challenges to achieve similar improvements in the largest of our 2 U.S. facilities, which also happens to be our oldest plant. These challenges not only relate to the facility's age and equipment reliability but also for manufacturing process capability in the face of an increasingly challenging product mix.

We continue to face up to these challenges with urgency and commitment of capital. Our capital spending for Q1 of 2013 was almost $8 million in total, which compares to $23 million spent in the entire year 2012. We also newly approved almost $10 million of projects during the first quarter, over 2/3 of which are targeted at our largest U.S. facility. However, we do remind everyone that a relatively long gestation period exists before many of the benefits of increased capital spending will begin to be realized.

In the meantime, we remain focused on several manufacturing process initiatives with objectives to improve throughput efficiencies and to reduce cost. Improving equipment reliability remains a high priority.

We are reallocating product mix to our factories where possible to better match process capabilities with technical product requirements. In the face of fluctuating demand, we also reallocate production to better leverage our low-cost operations in Mexico whenever we can. This process can cause temporary operating challenges as it has thus far in Q2. So we must be careful to balance the risk of potential disruptions against the run rate cost reduction opportunity. As a final note on the slide, capacity utilization in the first quarter remains very high.

Turning next to Slide #9, there really is not a lot more to highlight regarding first quarter 2013 income performance. At this point, you also may want to refer to Slide #13 which is the condensed comparative income statement for the first quarter. SG&A expense increased $500,000 for Q1. The increase primarily reflects charge for some minor accounts receivable items during the quarter. The effective income tax rate for the current quarter was 28%, which compares to 38% for Q1 of 2012. For the current year, the tax rate benefited from certain credits recognized from changes in law, as well as from the settlement of an income tax audit in Mexico. For the prior year, the tax rate was affected negatively by changes in our liability for uncertain tax positions, in other words the FIN 48 accruals.

Please turn next to Slide #10, which addresses the balance sheet and cash flow. These statements are shown on Slide numbers 14 and 15, respectively. Cash and short-term investment ended the quarter at $190 million, a decline of approximately $17 million during the quarter which reflects lower cash provided by operations. The decline primarily results from high accounts receivable and inventory-related equipment -- I'm sorry, inventory-related investment.

Accounts receivable increased roughly $15 million compared to unusually low balances at the end of 2012. Lower values at the end of last year largely reflect the impact of taking maintenance shutdowns at the end of 2012, during which very little shipping occurred. The inventory investment is up about $6 million, of which about 1/2 is for raw material and prepaid aluminum about $5 million. These increases are timing related, basically.

Higher finished goods inventory partially reflects the impact of demand fluctuations and an increase in WIP inventory, the majority of which occurred in the U.S., is expected to help smooth the flow of product between individual manufacturing operations. There also were some customer-driven inventory pre-builds for certain new programs where expected demand may exceed available capacity. I discussed capital spending quite a bit previously and the working capital and current ratio both remain strong.

If you now please turn to Slide #11, we'll provide a brief update on our plans for the new manufacturing facility. Since the time in March when we made our initial announcement about the new facility, as Stephen mentioned, we now made a site selection. The new facility will be built in the city of Chihuahua, which is the location of our 3 existing plants in Mexico. More specifically, the new site is adjacent to the location of our most recently constructed facility. This location will provide some cost and resource leverage that a more distant location would not provide. We are pleased that as part of the site selection, we will receive governmental support in the form of various incentives that relate to employment tax, real property and employee training. Steve also mentioned that just this week, we have arrived at a final decision regarding the footprint of the plant itself.

In addition to adding capacity, this investment will continue to lower our overall cost structure and leverage our already existing strength that we have in Mexico. I believe the remaining items on the slide have been addressed previously during our year-end 2012 conference call.

So finally, in summary and conclusion, please turn to Slide #15. North American vehicle production remain strong. We benefited from our strong position at Ford during the quarter. We continued to run our factories at very high utilization rates. Our operations in Mexico continue to run smoothly with the challenges in the U.S. continuing especially at our largest and oldest facility. However, there are some improvements beginning to show at our smaller U.S. plant. And as just discussed, we continue to push ahead with our new wheel plant and our liquidity remains strong and continues to support our investment.

Our Form 10-Q for the first quarter of 2013 will be filed later today with the SEC. And once filed, the 10-Q will also be available on our website at

So with that, I'd like to thank each of you for attending the conference call today for your kind attention. And we'll now open the lines to your questions.

Question-and-Answer Session


[Operator Instructions] Our first question today is from Jimmy Baker from B. Riley & Company.

Jimmy Baker - B. Riley Caris, Research Division

So mix was meaningfully positive for you here in the quarter not just helping sales but as you pointed out gross margin by $2 million. I'm just hoping that you could talk about your expectations for the impact of mix for the balance of the year? If we should expect a similar level of benefit over the next several quarters?

Stephen J. Borick

I think, directionally, we'll continue to benefit from the mix chain. I would not predict it sequentially that it'll keep growing as the year progresses. We have a lot of the low price business from 2009 weeding itself out of the portfolio. So substantively, we're in better shape overall. But I don't think you can expect to continual sequential decline -- or improvement from mix changes.

Jimmy Baker - B. Riley Caris, Research Division

Okay. That makes sense. And then should we anticipate any meaningful impact to your business resulting from the K2XX changeover either in terms of market share on that platform or its impact on your mix?

Stephen J. Borick

I think, I'll turn that one over to Mike to talk...

Michael J. O'Rourke

Thanks, Kerry. Jimmy, the market share would be about equal with the GMT900. Basically, we're the mainstream supplier on that platform 17- and 18-inch wheels and we see that continuing on K2XX.

Jimmy Baker - B. Riley Caris, Research Division

Okay. And then -- and I think Stephen mentioned that you'd be breaking ground here in just a couple of weeks on your new Mexican facility. Just hoping you can help us understand the pace of the $125 million spend, how we should think about that being spread across the next couple of years and if you'll be expensing much of that prior to it coming online?

Kerry A. Shiba

First of all, we're having a groundbreaking ceremony on the 15th because the government wants that. I'm hoping to see us turning dirt in the next 60 days. So we're still -- so what we have today for everybody is a pretty good fix of large capital items but we are now going into a full-blown negotiation process to get our final cost. That is really being undertaken now over the next 30 days. So I think we'll have to wait to give you a little bit of color on that once we get a better comfort level. We're trying to be a little bit different at how we're going to approach our deposits on all this large capital and payment program. So we're going to see how the vendors listen to that. We'd like to spread a little bit more evenly on the cash flow, so give us a little bit of time and certainly by the time we get to the August meeting we'll have a permanent [ph] fix on that.

Jimmy Baker - B. Riley Caris, Research Division

In the more near-term the second quarter, we'll not see any large cash flows...

Stephen J. Borick

No, no, not at all. There may be deposits that we end up before the quarter is over. But I don't see a lot there. I think it will be starting really in the third and moving forward.

Jimmy Baker - B. Riley Caris, Research Division

Okay, that's helpful. We'll look forward to an update there later on. And then just last one for me and I'll pass it off. Any guidance on your intended use of the buyback? I mean, you clearly have the ability to fund that from your balance sheet immediately but do you intend to kind of spread that equally across a given period or approach it more opportunistically? Just any color there would be helpful.

Stephen J. Borick

Right now, I would say, opportunistically, we're going to work with the board in 2 weeks to really talk through. Kerry and I have had in-depth conversations about our philosophy. I want to make sure that everybody understands that returning capital needs to be done in a way that long-term has super benefits because I've looked at share repurchases many, many times both here and other places and you get pushed into a share repurchase, and at the end of the day you wonder why you did some of it when you look at where prices are. So this time around we really want to be cautious because we have so much capital and we need it to spend and we need it to just to do it when we see the opportunities. So we're going to start out there and see how that goes and we'll take it from there once we get running on it.


Our next question is from Jeff Linroth from Leaving It Better LLC.

Jeff Linroth

I really appreciate the effort on the U.S. facilities. And can you talk just a little bit about the potential to at least increment capacity a little bit over the next 12 months and then possibly even a little bit more about the 12-month period after that because I'm interested in what's going to happen between now and the time you get to opening up the Chihuahua plant?

Stephen J. Borick

I think it depends really on the market and we're seeing stars [ph] about 15 2. There's a lot of model changeover. So I'd say we're in this quandary period as to how the new models are going to play out with the consumer. Is the consumer at a point where 15 2 to 15 5 stars [ph] where we go for the moment. As we see that unfold over the next 60 days, we're readjusting our capacity utilization where we can to make sure as Kerry said, we bring forth as much value out of our Mexico plants and keep a balance in our U.S. plants. As we try to use that opportunity, by the way, to further improve operating efficiencies in our U.S. facilities that languish a bit by having a little breathing room instead of running those things at -- to high-capacity utilization that there's never a time to step back and give ourselves some opportunity. So trying to balance that as where we're at for the moment as we watch the market unfold over the next 60 to 90 days.

Kerry A. Shiba

Jeff, if you look back to 2012 and compare it to 2011, I just try to recall the numbers at the top of my head, but I think we went from about 11.7 million units to 12.5 million last year. And if you turn the dial back about a year, we were actually quite nervous about being able to make it through the first half of 2012 because of capacity constraints. And we still squeezed 800,000 million -- or 800,000 additional units out of our footprint. We don't have many major capacity de-bottlenecking projects that we could point to, but as we continue to improve lower scrap rates and improve process-to-process flow and all the things you work on constantly in a factory, I think it's fair to say that there'll be some capacity creep that will be available. As Steve mentioned, a lot depends on where this kind of uneven market goes over the next quarter and what you can expect short term.

Jeff Linroth

Okay. Let me just put it in a different way. Yes, let's just assume that we don't have anything really from an industry perspective going hard in one direction or another. If you have an opportunity to sort of choose a focus between maybe dialing back on output and increasing margins obviously because you get closer to that sweet spot of utilization and possibly maximizing your ability to take on sales. Can you talk just a little bit about how you think in balancing those as you start to enjoy some improvements, you get to sort of choose a little bit between those 2.

Stephen J. Borick

You sound wonderful, like a panacea, and I like that. And we think about that all the time as far as what we're going to do. We know, hands down, and we said it to the market and we said it to our shareholders and everybody on this call that in order to improve margin, we want to keep all of our facilities in Mexico full. And in some cases, we try to push them even further. And on the same sense, we don't want to diminish the opportunities that we see developing in the U.S. on balance. And so trying to figure out how to balance that, how -- is a very interesting task day in and day out. Mike and his team are doing a good job with it. I don't think there is a really good solid answer except as we see improvements as we are so in our smaller U.S. plant, we're seeing some very nice slow gradual improvement in their margins and their EBITDA numbers and it gives me more comfort to keep that plant at a certain level while we work through some of the issues at our larger U.S. facility. But further than that, I can't give you good answer.

Kerry A. Shiba

Yes, Jeff. I think you'll recall also there's a lead time involved in most of this business that can stretch for up to a couple of years to qualify for new programs. So to a large degree, the die is cast and it's just going to depend on what vehicle demands occurring in the marketplace for the programs that we're on. There can be short-term -- shorter-term takeover opportunities or opportunities to take a program that's not favorable and try to offer it back to the marketplace and through our customers that those situations are tend to have a huge impact on what we're doing.

Jeff Linroth

Yes, I do appreciate the difficulty involved in balancing that. Last one is, any update at all on the financing of the plant facility? I'm very interested in that. Anything you could give on that?

Kerry A. Shiba

We still have directional expectation to put in probably a revolver. At this stage, we -- our outlook does not show that there is an expected draw on that capacity. We would put it in as kind of just a backstop facility in case something unusual were to occur that we can't predict today. So even if we put a facility in place, I don't think you should expect to see any change in our capital structure per se as a result of that.

Jeff Linroth

That's very helpful. That's exactly what I needed. And last thing I just want to make a comment. Thanks a lot for the color on the share buyback. It's right with my hope and expectation that you'll exercise care on that.


And that's all the time we have for questions today. Gentlemen, I'll turn the conference back over to you for additional or closing remarks.

Stephen J. Borick

Well, again, thank you, all, for your time and attention today. And we'll look forward to talking to you in 3 months.

Kerry A. Shiba

Thanks, everybody. Have a nice weekend.


And that does conclude our conference today. Thank you all for your participation.

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