Mattel Q3 2009 Earnings Call Transcript

Oct.16.09 | About: Mattel, Inc. (MAT)

Mattel (NASDAQ:MAT)

Q3 2009 Earnings Call

October 16, 2009 8:30 am ET

Executives

Dianne Douglas - Investor Relations

Robert A. Eckert - Chairman of the Board, Chief Executive Officer

Kevin M. Farr - Chief Financial Officer

Analysts

Sean McGowan - Needham & Company

Felicia Hendrix - Barclays Capital

Margaret Whitfield - Sterne, Agee & Leach

Jake Hindelong - Monness Crespi Hardt

Timothy Conder - Wells Fargo

Drew Crum - Stifel Nicolaus & Co.

Tony Gikas - Piper Jaffray

Robert Carroll - UBS Securities

John Taylor - Arcadia Investments

Linda Bolton-Weiser - Caris & Company

Gerrick Johnson - BMO Capital Markets

Hayley B. Wolff - Rochdale Research

Operator

Good day and welcome to the Mattel third quarter 2009 earnings conference. As a reminder, today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Miss Dianne Douglas. Please go ahead.

Dianne Douglas

Thanks, Operator. As you know, this morning we reported Mattel's third quarter 2009 financial results. In a few minutes, Bob Eckert, Mattel's Chairman and CEO, and Kevin Farr, Mattel's CFO, will provide comments on the results and then the call will be open for your questions.

Certain statements Bob and Kevin make during the call may include forward-looking statements related to the future performance of our overall business, brands, and product lines. These statements are based on currently available operating, financial, economic, and competitive information and they are subject to a number of significant risks and uncertainties which could cause our actual results to differ materially from those projected in the forward-looking statements. We describe some of these uncertainties in the risk factors section of our 2008 annual report on Form 10-K, as well as in our 2009 quarterly reports on Form 10-Q and in other filings we make with the SEC from time to time.

Mattel does not update forward-looking statements and expressly disclaims any obligation to do so.

Information required by Reg G regarding non-GAAP financial measures is available on the investor and media section of our corporate website, Mattel.com, under the subheading financial information and earnings releases.

Now I’d like to turn the call to Bob.

Robert A. Eckert

Thank you Diane and good morning. As I said during last quarter’s call, during the second half of the year we were anticipating continued pressures on the top line from several key areas, so it should come as no surprise that we are still experiencing the negative effects of foreign exchange, reduced shipments as our customers continue to tightly manage their inventories, and the fact that 2009 is an entertainment light year for us. That said, we are encouraged with the positive momentum we’re seeing at point of sale for several of our core brands.

Overall for the quarter, we are pleased with our efforts to rebuild margins by appropriately pricing our products, tightly managing costs and aligning our infrastructure with realistic revenue assumptions. We also made good progress on cash flow during the quarter, which continues to be a high priority.

Every year at this time, folks in the toy industry and those of you who cover it start to have what I like to call the early fall jitters and this year is no exception as we begin to work our way out of what has been the worst economic crisis of my generation. As you likely heard, retailers continue to be reluctant to make inventory bets and it will undoubtedly be a difficult holiday for parents whose job status and financial wellbeing are uncertain. So as we’ve done in the past, we’ll adjust accordingly but on the whole, the toy industry has historically held up well in difficult economic times and Mattel has had solid performance in both good times and bad.

As we move into the all-important holiday season, toy industry gurus as well as our retail customers have named Mattel and Fisher-Price toys to their must-have holiday toy lists, including Barbie Fashonistas, Little Mommy, Fisher Price’s Imagine Next Dora Links, Matchbox’s Rocky the Robot truck, Hot Wheels Trick Tracks, and my personal favorite, Mindflex.

As I’ve said every holiday season since I arrived at Mattel, there will be a Christmas and Mattel toys will be under the tree and we’ll likely sell more toys than anyone else. That said, I appreciate that many families will have to make choices this year when it comes to buying toys for their children. I am convinced that Barbie, Hot Wheels, Fisher Price, and American Girl toys will provide superior value for Moms and great play experiences for kids.

And our business priorities for the rest of the year are consistent with our goals and the progress we’ve made during the first three quarters to improve profitability, generate strong cash flow, and strengthen the balance sheet.

I will now turn the call over to Kevin Farr, Mattel's CFO, who will provide more detail on the quarter’s results.

Kevin M. Farr

Thank you, Bob and good morning, everyone. I will begin my review for the third quarter with a discussion of worldwide gross sales shown on exhibit 2 of today’s press release. Total worldwide gross sales for the quarter decreased 8%, including a 3 percentage point negative impact from changes in foreign exchange rates. The remainder of the decline was primarily driven by the continuation of retailers tightly managing inventory.

U.S. sales were down 2% and international sales were down 14%, including a 5 percentage point negative impact from foreign exchange. On a regional basis, sales in Europe were down 16%, including a 4 percentage point negative impact from exchange rates. Sales in Latin America were down 13%, including a 8 percentage point negative impact from foreign exchange. And sales in Asia-Pacific were up 3% including a 2 percentage point negative impact from changes in exchange rates.

I will now review our core categories and brands for the third quarter. Mattel girls and boys brands -- worldwide sales for the Mattel girls and boys brand segment were down 10%, including a 3 percentage point negative impact from changes in exchange rates.

Worldwide Barbie sales were down 8%, including a 4 percentage point negative impact from foreign exchange. Barbie sales in the U.S. declined less than 1% and Barbie sales in international markets declined 12%, including a 6 percentage point negative impact from foreign exchange. Our U.S. retail inventory levels for Barbie appear to be very tight as retailers continue to be cautious, even in light of the continued strength in consumer sell-through.

Worldwide sales of other Barbie girls brands were down 19%, including a 4 percentage point negative impact from exchange rates. Sales in the U.S. were down 3% while international sales of other girls brands were down 29%, including a 5 percentage point negative impact from foreign exchange. The worldwide sales decrease was driven primarily by sales declines in High School Musical and Polly Pocket, partially offset by higher sales of Little Mommy and Disney Princesses in the U.S.

Worldwide sales in the Wheels category were down 3%, including a 4 percentage point negative impact from changes in currency exchange rates. Worldwide sales reflected strong performance in Hot Wheels offset by sales declines in Tyco RC and Speed Racer product. For core Hot Wheels, which excludes Speed Racer, worldwide sales were up 9%, including a 5 percentage point negative impact from foreign exchange. Domestic sales increased 25% and international sales declined 3%, including a 7 percentage point negative impact from foreign exchange.

Worldwide sales at our entertainment business, which includes games and puzzles and Radika, decreased 15%, including a 4 percentage point negative impact from changes in foreign exchange. The overall decline in entertainment was primarily attributable to lower sales of Radika and toys geared to last year’s three summer movie properties, Batman, Speed Racer, and Kung Fu Panda, partially offset by worldwide sales of toys geared to Toy Story and Toy Story 2, along with U.S. sales of Cars related product.

Fisher Price brands -- worldwide sales for Fisher Price brands decreased 6%, including a 2 percentage point negative impact from changes in currency exchange rates. International sales of Fisher Price brands decreased 5%, including a 4 percentage point negative impact from foreign exchange, while sales in the U.S. declined 6%.

Worldwide core Fisher Price decreased 4%, including a 2 percentage point negative impact from changes in exchange rates. U.S. sales of Fisher Price core declined 2% while international sales were down 7%, including a 5 percentage point negative impact from foreign exchange.

Fisher Price Friends sales declined 13%, which included no impact from changes in foreign exchange rates. Sales of Fisher Price Friends in the U.S. were down 21%, while international sales were up 3%, including a 1 percentage point negative impact from foreign exchange.

American Girl brands -- sales of American Girl brands were up 4%, reflecting the benefit of the November 2008 openings of our two new boutique stores in Boston and Minneapolis.

Now let’s review the P&L, which is shown on exhibit 1. Gross margin in this year’s third quarter was 51.3%, which compared to last year’s margin of 46.2%. The improvement was primarily due to price increases, lower input costs and royalties, as well as savings from our global cost leadership program, partially offset by foreign exchange.

Advertising expense was $197.1 million, or 11% of net sales, compared to 11.5% in 2008. Selling, general, and administrative expenses increased by $24 million to $385 million. As a percentage of net sales, SG&A expenses were 21.5% compared to 18.5% last year. The year to year increase is primarily driven by higher accrued incentive compensation partially offset by foreign exchange benefits, lower litigation related expenses of $4 million, and savings of $22 million related to our global cost leadership program. These global cost leadership savings were partially offset by severance charge of $18 million.

As you may have seen earlier this week, we announced that we have reached an agreement to resolve virtually all U.S. claims related to the 2007 product recalls subject to court approval. As a result, this quarter we recorded an incremental $5 million charge to reserve for product liability related litigation.

In the quarter, our global cost leadership program delivered overall net savings of approximately $23 million, bringing the year-to-date net savings to $73 million. In addition to the $4 million net savings reflected in SG&A, there were savings of roughly $15 million of cost of goods sold and $4 million in advertising. We are on track to deliver net savings of $90 million to $100 million for 2009 and cumulative net savings of

$180 million to $200 million from this program by the end of 2010.

Operating income during the quarter was $336.5 million compared to operating income of $315.3 million last year. The improvement was driven by higher gross margins and lower advertising, partially offset by the lower sales and higher SG&A expenses.

Interest expense was $19.3 million versus $20.4 million in 2008. The decrease in interest expense versus last year is primarily due to lower average borrowings.

Interest income was $1.5 million versus $6 million last year. The lower interest income was due to lower average investment rates, as well as lower average invested cash balances during the quarter.

Other non-operating income expense was expense of $14.1 million versus income of $6.2 million in 2008. The current quarter expense relates primarily to foreign currency exchange losses versus foreign currency exchange gains in the third quarter of last year.

This quarter’s income tax provision of $74.8 million compared to prior year’s expense of $69 million. We currently estimate the 2009 full-year effective tax rate to be 23% to 24%.

Overall, we reported net income of $229.8 million, or $0.63 per share, versus last year’s net income of $238.1 million, or $0.65 per share.

Now turning to cash flow and balance sheet, year-to-date cash flow used for operations was $319 million, an improvement of about $348 million as compared to the first three quarters of 2008, driven primarily by lower seasonal working capital requirements.

Our cash on hand at the end of the quarter was $324 million, down from $447 million in the prior year, primarily due to lower beginning cash balance of $618 million this year versus $901 million last year and lower short-term and long-term borrowings, partially offset by lower year-to-date cash uses for operations and capital expenditures.

Receivables were $1.45 billion, or 73 days of sales outstanding, six days lower than last year. Factory increased from $83 million a year ago to $126 million. [Prior to factory], days sales outstanding decreased three days.

Inventories at $606 million were down $145 million or 19% versus 2008. Our total balance sheet debt decreased by $519 million from the prior year, reflecting payments of $150 million of maturing long-term debt and $369 million of lower short-term borrowings.

Our debt-to-total capital ratio ended the quarter at 27.6%, which compared to 37.3% at the end of last year’s third quarter.

Capital expenditures during the quarter were $29 million, down from last year’s third quarter of $58 million.

So to summarize, despite the top line pressures, we’ve made progress in regaining the gross margins we lost over the last few years, executing our global cost leadership program, and tightly managing our cash and capital expenditures.

That concludes my review of the financial results. Now we’d like to open the call to questions. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll take our first question from Sean McGowan with Needham & Company.

Sean McGowan - Needham & Company

I have a couple of questions -- some of them are kind of quick here. Is Little Mommy now going to be included in the other girls, or I thought that was a Fisher Price product?

Robert A. Eckert

It is, Sean, a Fisher Price product but it’s always been included in other girls.

Sean McGowan - Needham & Company

Okay, not a big deal. Kevin, could you give us some more color on how much of the increase in SG&A was related to the incentive compensation increase and what we can expect for the full year impact?

Kevin M. Farr

Let me just go through the increase in the SG&A for the quarter. You know, third quarter SG&A expense increased by $24 million to $385 million and the year-over-year increase is primarily driven by higher incentive accrual and an incremental $5 million charge to the reserve for product liability related litigation, partially offset by foreign exchange benefits, lower litigation related expenses of $4 million, and gross savings of $22 million related to global cost leadership program, which were partially offset by $18 million severance charge.

For the quarter, [ECO] compensation was $14.9 million compared to $11.7 million in the third quarter of 2008, and consistent with GAAP and as we’ve done in the past, we’ve begun to accrue incentive compensation based on year-to-date performance. We don’t provide guidance on incentive compensation. However, you should be able to estimate a range for the full year referring back to historical payments. In 2006, we had a good year -- it was $94 million. In 2007, it was about $74 million and we didn’t hit our goals last year it was about $15 million. And we accrue that expense when we earn our operating profits and that is usually in the third and fourth quarter.

Sean McGowan - Needham & Company

Okay, so did I hear you correctly then that the increase in that particular component was only roughly $3 million in the quarter?

Kevin M. Farr

On incentive compensation expense? No, that was the equity compensation.

Sean McGowan - Needham & Company

Oh, equity, okay, okay.

Kevin M. Farr

The incentive compensation was higher. It was a driver of the year-over-year increase.

Sean McGowan - Needham & Company

Right, okay, thanks. And then the final question I guess is probably more for Bob but do you feel like at this point with your inventories down as much as they are in the third quarter, and given retail has been managing pretty tight and yet there’s Christmas coming, do you have the inventory to handle a late surge?

Robert A. Eckert

We do. We still have a lot of toys. Retailers still have a lot of toys. The good news is neither of us have as many toys as we had last year at this time. You know, remember, Sean, we went into this year or finished last year with retail inventories about 8% higher than the prior year, which was the first time we had gone in that direction in a while, as Christmas was disappointing. We started in the first quarter this year. Retail inventories as we calculate them were down low single digits versus the prior year. By the end of the second quarter, it was sort of mid- to high-single-digits now. By the end of the third quarter, we’re into the double-digit decline versus year ago. So I think inventories are pretty clean. I think that’s good. We do have inventory to respond if demand picks up but I think we’ve all in the supply chain managed expectations this year appropriately. Last year when the consumer confidence and the economy tanked as rapidly as it did, we had a little bit too much.

Sean McGowan - Needham & Company

Okay. Thank you.

Operator

We will take our next question from Felicia Hendrix with Barclays Capital.

Felicia Hendrix - Barclays Capital

I know you don’t comment on specific retailers and I’m not going to ask you to -- I’m just going to use one in particular as an example to help me ask the question. You know, Walmart has been discussing or has been implementing aggressive cost-cutting across the board. I think that we should expect that for Christmas. I’m wondering if you -- and again, not specific to any retailer but in general if you had to supplement the promotional baskets you’ve typically give to the retailers, if you’ve seen that grow, or are they taking that out of their own?

Robert A. Eckert

No, they compete, Felicia, with their own strategies and their own tactics and programs. Our promotional expense shows up between the difference of gross sales and net sales, so as you compare that over time, if you look at it on a quarterly basis, you don’t see large changes. We don’t really influence how a retailer decides to compete. We try to support them as best we can on their programs but how they choose to use our promotional funds, which I think are about 8% in any given quarter, maybe 8% this quarter at least, how they use those funds is really up to them.

Felicia Hendrix - Barclays Capital

Okay, I was just wondering if we were going to see a pick-up in the next quarter.

Robert A. Eckert

I don’t know. You know, that kind of depends on how the business goes and how the inventory moves and we clearly do want to work with customers to make sure they do clear their toy inventories for the year but again encouragingly, I don’t have any reason to believe that either the retailers today or Mattel have an excessive amount of inventory.

Felicia Hendrix - Barclays Capital

Okay, great. And then can you just discuss the strength in the domestic Hot Wheels?

Robert A. Eckert

Hot Wheels has really done well. The core has been working all year, basic cars has done well, monster jam has done well, trick tracks has done well. We started a television series called Battleforce 5 that has had very strong ratings, winning its time slot and really doing a good job and we are just starting now to see the POS pick-up associated with Battleforce 5. So certainly here in the U.S. the business has been performing very well. Even when you compare it to last year, which remember last year we had a lot of Speed Racer product, the Hot Wheels business itself has really overcome what we lost in Speed Racer.

Felicia Hendrix - Barclays Capital

Great. And then how is Fashionistas looking?

Robert A. Eckert

It looks great. I don’t have a lot of data on it yet but I have been in enough stores to tell you it really looks good, the advertising looks good. I believe the advertising starts this coming week, which I guess would be next week but it’s a very strong program, very strong campaign. I think retailers are optimistic about it. Certainly some of the pundits in the toy industry are excited about it and it looks really good.

Felicia Hendrix - Barclays Capital

That’s good to hear. Finally last question, Kevin mentioned this a little bit in his overview with entertainment but I was just wondering if there’s any kind of commentary you could make about the current Toy Story product that is out there now.

Robert A. Eckert

It also looks good at retail and we are seeing good movement of the Toy Story product. I think overall my conclusion is that we are probably through the bottom of our entertainment cycle. Cars is holding up very well as an evergreen property. The point of sale on Cars continues to look good and the shipments are starting to match the POS. Toy Story looks good. We have a lot of properties in the pipeline, as you know, and I’m hopeful that we have sort of been through now the bottom of the down cycle in our entertainment program.

Felicia Hendrix - Barclays Capital

That’s great to hear and by the way, I have almost the whole Cars movie memorized by now.

Robert A. Eckert

And I just saw yesterday, Felicia, a -- they call them Car-Toons, what do they call the little -- what does Disney call the little things, Kevin? Are they like Cars-Toons or something?

Kevin M. Farr

Cars-Toons, yes.

Robert A. Eckert

I saw one that I don’t think is yet on the air that is just fabulous. It is great content and the only conclusion I could come up with is there’s probably about 15 toys in there that we haven’t yet created. I mean, they’ve done just a marvelous job with that franchise.

Felicia Hendrix - Barclays Capital

Well, that’s great. Things sound like they are doing well.

Operator

We’ll move on to Margaret Whitfield with Sterne, Agee & Leach.

Margaret Whitfield - Sterne, Agee & Leach

Good morning, everyone. I wondered, Kevin, if you could give us how the incentive comp has run year-to-date for this year and last, what the comparison is.

Kevin M. Farr

I won't get into the details of that but I think what we’ve done is we’ve accrued what we thought so far we’ve done based upon our year-to-date performance. You know, I referenced back to 2006 we accrued 94 in a good year, 2007 74, and 2008 about $15 million. And we generally accrue that in the second half of the year and generally because the quarters are effectively equal, it’s probably half accrued in the third quarter and half accrued in the fourth. That depends but -- on our performance but that is usually how we do it.

Margaret Whitfield - Sterne, Agee & Leach

And could you give us the for-ex impact to the bottom line for this year and last in the third quarter?

Kevin M. Farr

This year in the third quarter it was a negative $0.10 impact to EPS and last year it was a positive $0.05 impact.

Margaret Whitfield - Sterne, Agee & Leach

$0.15 swing -- what was it in Q4 last year?

Kevin M. Farr

In Q4 it was a positive $0.02 impact last year.

Margaret Whitfield - Sterne, Agee & Leach

Okay, and then you mentioned, Bob, the inventories at retail are down double-digits. Is there any difference between the core brands in terms of how the inventories are at retail?

Robert A. Eckert

No, Margaret, you know it’s clearly some are up and some are down and some are down more but as you look at it, and we look at it by brand, we look at it by customer, we look at it by geography as best we can, I don’t think there is a big swing one way or the other.

Margaret Whitfield - Sterne, Agee & Leach

Okay, and I wondered -- I haven’t seen -- in September, at least, I didn’t see a lot of the products that are thought to be strong performers. Was there later shipping on some of the key properties for the holiday?

Robert A. Eckert

No, I don’t think significantly later. I’ve certainly seen some of them out at retail. I mean, some retailers may have taken them later or taken toys later. I think that’s clearly the case, that everybody over time is convinced that Christmas comes later every year. I don’t know whether or not it’s a self-fulfilling prophecy but the fact is it does come later every year and we probably ship the toys later every year but I don’t know that there’s anything particularly unusual. Kevin?

Kevin M. Farr

No, I don’t think so, Bob.

Margaret Whitfield - Sterne, Agee & Leach

Okay, and will we see some WWE and Thomas products at the end of Q4 or is it more Q1 of next year?

Robert A. Eckert

It’s really Q1 of next year.

Margaret Whitfield - Sterne, Agee & Leach

Okay, thanks and best of luck.

Operator

We’ll take our next question from Jake Hindelong with Monness Crespi Hardt.

Jake Hindelong - Monness Crespi Hardt

A few questions -- the first one, just looking at the inventory, your first and second quarter declines year over year were 9% and 13% and coming into 18% on the third quarter. Should we be thinking that there might have been a little bit of pull-forward even on revenue into the third quarter versus the fourth quarter?

Kevin M. Farr

No, I don’t think so. I think the decrease in inventories, our inventories is reasonable given our realistic revenue assumptions. And I think you were also seeing in the third quarter we are benefiting from lower cost in 2009.

Jake Hindelong - Monness Crespi Hardt

Okay, great and then just focusing on one property here, the Disney Princesses seem to be doing well in the U.S. Can you comment on how you view that property ramping next year and then in the out-years on the international?

Robert A. Eckert

It is doing well. We’ve had a very strong period with Disney Princesses. We are just now shipping product to support the Princess and the Frog, for which I’ve seen a fair amount of advertising and I think will be a very strong movie. We have a great relationship with Disney that on the Disney Channel, their number one show right now is Wizards of Waverly Place, which is in our girls business, and that’s doing well. They are releasing Rapunzel next year, which is their first big theatrical release in a long time, so they’ve done a great job with content. We think we’ve made some pretty good toys to support that content and the business is growing very nicely.

Jake Hindelong - Monness Crespi Hardt

And then can you comment on how you expect that to ramp next year in international?

Robert A. Eckert

I think it will continue to do well. We have a strong relationship with Disney and it has become more global over time. I don’t want to get into anything that is forward-looking but Disney has strong properties all around the world and we have an infrastructure to support that all around the world.

Jake Hindelong - Monness Crespi Hardt

Great, thanks, Bob and then just one more question for Kevin -- looking at the gross margin, can you talk about what the split was between benefit on royalties versus benefit on freight and logistics?

Kevin M. Farr

Going through the third quarter increase in gross margin, just to reiterate, it was improved by 510 basis points to 51.3 compared to last year’s second quarter margin of 46.2. The improvement was primarily due to our modest 2009 price increases, lower input costs, lower royalties, and savings from the global cost leadership program, partially offset by unfavorable foreign exchange.

With respect to royalties versus freight, I think it was more royalties had a bigger impact than freight. This quarter we benefited from lower commodity markets in late 2008 and early 2009 when we were buying inputs for our fall 2009 product line. We really hit a low of $30 in December 2008 and we feel good this quarter that we’ve made good progress on rebuilding our gross margins in 2009 as year-to-date gross margins is 48.1%, back to the levels we experienced in 2003. It’s our goal to sustain these gross margin levels and over time get back to our long-term annual goal of 50% of net sales.

Robert A. Eckert

I think one of the important things from my perspective is you all try and think about margins going forward is we clearly -- oil, the primary ingredient behind resins, was quite low six months ago. I think it was, Kevin, $30-some a barrel.

Kevin M. Farr

Correct.

Robert A. Eckert

It was probably I think $140-some a barrel last summer. I think it was $75 or $76 yesterday. So we’ve cycled through high commodity costs and low commodity costs and clearly we are benefiting from those lower commodity costs right now. What the future looks like, we’d all love to know.

Jake Hindelong - Monness Crespi Hardt

Got it, great. Thank you.

Operator

We’ll take our next question from Timothy Conder with Wells Fargo.

Timothy Conder - Wells Fargo

Thank you. Back to the question related to the retailers and promoting -- it would seem like, Bob, again you alluded to that, if I heard you correctly, as a percent of what you have planned, as a percent of the dollars of your dollars for promotions, however you classify it, co-op or whatever, that that really hasn’t changed year over year. Is that correct?

Robert A. Eckert

That’s correct.

Timothy Conder - Wells Fargo

Okay. And then also if you are holding price, it would seem like as you alluded to here are the dollars, Walmart target, you go use them how the best that you see fit and if you are able to hold price with those customers, again you are -- it’s not coming out of your hide, so to speak.

Robert A. Eckert

Yeah, and not every customer competes on price. Some people compete on the offerings that they have, the expertise that they have in toys and how they merchandise toys and some folks are more focused on price and our promotional allowances, our programs are designed to support whatever it is they want to do to compete in the marketplace.

Timothy Conder - Wells Fargo

Okay, and Kevin, in the question on for-ex earlier, the benefit in the quarter to the bottom line, is there any for-ex -- back to our friends of capitalism in Venezuela, is there any for-ex impact in that other expense line? And is that netting against the for-ex number that you responded to the earlier question?

Kevin M. Farr

Yeah, I think it was actually negative. You can see it in other non-miscellaneous expense. Of the $0.10 negative impact to EPS for the quarter, about $0.05 related to Venezuela.

Timothy Conder - Wells Fargo

Okay, so that $0.05 was in that -- okay, okay. And then lastly, Bob, could you give us a little more color on market share, both domestically and maybe EU and anything else? I know it’s a little harder internationally to get that granularity but anything you can do from that standpoint? Your market share in the quarter at retail and then year-to-date?

Robert A. Eckert

I focus on year-to-date. The quarterly splits and even when you get by brand and sometimes by markets, it’s a little bit too granular as we try and match up what we think is reality versus what we get from outside sources is a little tough. Let me just tell you on a year-to-date basis, the market shares have been fairly consistent all year. My recollection is the toy industry, as measured by NPD here in the U.S. was off just a little bit, you know, some number like between 1% and 2%. We were down a little bit less than that, just a touch less than that, and it’s pretty consistent with what we’ve shipped here in the U.S. and what we see at point of sale. So I try and triangulate these things and my sense is what we are getting out of NPD here in the U.S. at the kind of macro level on a year-to-date basis, which has been pretty consistent all year, I think is pretty accurate.

As I think about Europe, boy, it varies quite a bit by market. I think the European economies in general are in worse shape than the United States economy, higher levels of unemployment. We’ve lost some customers as they were unable to sort of get the cash to support their operations. I don’t recall what the market level numbers are but I think as we’ve seen for most of this year, our share is down a touch in Europe, largely because some of the local manufacturers that have kind of play systems and here I would use Lego and Play Mobil as examples, they’ve done a really good job over the past year or two building their brands and building system kind of programs, like we have ImagineX here in the U.S. -- building play systems that I think work particularly well in a tough economy.

Timothy Conder - Wells Fargo

Okay, so the combination of that plus maybe their willingness to go with some customers that maybe you guys don’t want to take that type of credit risk, that’s behind the market share losses in the European?

Robert A. Eckert

That I don’t know. I don’t know why or what somebody else does. I just know who is doing well and I really -- I can't tell you how they think about their business.

Timothy Conder - Wells Fargo

Okay. And then last question regarding Fisher Price, you’ve articulated for a year or so that you continue to see that as probably your best international opportunity, given the under-penetration, if you do a comparison relative to North America in markets that you guys are already in and looking to go into. How do you see that ramping over the next year or two?

Robert A. Eckert

Fisher Price is a very strong business for us, both here in the U.S. and internationally. We started this year pretty slow on Fisher Price outside of the U.S. We had some pretty good declines in the first quarter and the second quarter as we in retailers were working off some of their inventories. I was -- you don’t want to say encouraged because I think in U.S. dollars internationally, or at least in constant currency, I believe Fisher Price was down 1% in the quarter in the third quarter. So while it’s not an improvement, it certainly is an improvement in trend -- that is a lower decline and strategically we continue to think infant, preschool, and Fisher Price is a tremendous business, both in the U.S. and overseas.

Timothy Conder - Wells Fargo

Okay, great. Thank you.

Operator

We’ll take our next question from Drew Crum with Stifel Nicolaus.

Drew Crum - Stifel Nicolaus & Co.

A couple of questions on the entertainment properties -- were there any shipments of Princess and the Frog in the third quarter? And in addition to that, Masters of the Universe has traded hands as far as the studio production is concerned. Can you give us any update there and do you feel like you need to have a theatrical release in order to launch that product at retail?

Robert A. Eckert

I do believe we did ship some Princess and the Frog in the third quarter. We would have had to because I’ve seen it on the shelf, so I don’t think it was a significant amount but generally we ship six or eight weeks before a movie breaks, so we probably did ship some in the third quarter. And I know some is at retail.

As it relates to He-Man, Masters of the Universe, we do think a theatrical release will be helpful in supporting a relaunch of that brand. I don’t know whether we would say that it’s really necessary but I think it’s going to be a big deal and I think we are aligned. We’ll have to see -- you know, we don’t exactly decide what and when a movie is made but we do have a relationship now on Masters of the Universe that I think is going to be a good program, so it’s still -- I think, Kevin, it might be a 2011 movie? I don’t know that we have a date yet but that is sort of what I am thinking about and I think that’s when we’ll relaunch the brand.

Kevin M. Farr

Right.

Drew Crum - Stifel Nicolaus & Co.

Okay, and moving on to the gross margins, pricing was obviously an important component of the gains you saw there. Can you just talk about the need to keep pricing higher in order to sustain gross margins, and maybe specifically what you are planning for pricing in 2010?

Kevin M. Farr

I’ll cover that one. You know, we made good progress in rebuilding our gross margins in 2009 as our year-to-date gross margins are 48.1%, back to levels we experienced in 2003. We’ve not finalized our pricing for 2010 but it will be consistent with our approach in maintaining and slightly improving our margins over the long-term by aligning our prices with our expectation of costs and executing our continuous improvement programs across our supply chain.

As Bob said, going forward it’s impossible to predict commodity prices. Oil is $76 today compared to $30 in December of 2008 and $147 in the summer of 2008, and that said, we are working on cost reductions and we are striving to sustain and improve our margins over time to 50% gross margin rate.

Drew Crum - Stifel Nicolaus & Co.

Okay. One last question, guys, just given the improving cash flow profile, any updated thoughts on revisiting the share buy-back?

Robert A. Eckert

No. I think as we’ve said consistently this year, our priority is to generate cash and strengthen the balance sheet. Share buy-backs are just not a high priority for us right now.

Drew Crum - Stifel Nicolaus & Co.

Okay, fair enough. Thanks, guys.

Operator

We’ll take our next question from Tony Gikas with Piper Jaffray.

Tony Gikas - Piper Jaffray

Kevin, could I start out with you and just attack this gross margin question from a different angle -- so could you just break down maybe roughly the improvement to gross margin by productivity, lower input costs, and pricing? Maybe those three, and then a couple of other questions -- Barbie down 8% in the quarter; how does that compare to your internal expectations? That’s a lot of promotional activity going around that brand this year. And also what do you expect for FX impact in the fourth quarter? And then I have a follow-up.

Robert A. Eckert

Let me start with Barbie while Kevin figures out how not to get too granular on the gross margin question. But while he’s working on that, I’ll tell you Barbie continues to do well at POS. Certainly here in the U.S., Barbie is still up double-digits. Market share continues to grow, whether we measure Barbie against the doll group or against total toys, so the brand is reenergized, the retail sales have responded, and if those trends continue the shipments will take care of themselves over time.

We are also making progress, and I think this is important strategically, and we’ve covered this in analyst day recently, we’re making progress broadening the popularity of the line and that really is important, so we’ve got less reliance on the younger aged princess entertainment today, things like Thumbelina or even Three Musketeers today, and we are seeing better performance across fashion, like Fashionistas, the I Can Be part of Barbie, and Classic Barbie. So we are feeling as good about Barbie today as we have felt in a long, long time.

That said, we’ve got to continue delivering great products and great marketing programs but we are clearly on track.

Kevin M. Farr

And then with gross margins, I’m not going to get much granular than I did but really it was the modest 2009 price increases, the benefit of lower input costs due to oil being like $30 a barrel when we were buying the inputs for our fall 2009 line, and the global cost leadership program. That was offset by -- partially offset by unfavorable foreign exchange.

With respect to your next question with regard to for-ex in the fourth quarter, I can't predict for-ex. I can tell you what it was last year. The Euro averaged about a $1.32 in the fourth quarter. Today it’s about $1.47 and it’s been hanging out at that $1.47, $1.45, $1.47 range for at least the last three months or so.

Tony Gikas - Piper Jaffray

Okay, and then it sounds like American Girl store performance is doing fairly well. Are there plans for more boutique stores in the next year?

Kevin M. Farr

There may be. We have been pretty tight on capital spending this year in total and specifically for American Girl in terms of expanding their retail presence, just because of the economic environment we are in and the fact that there’s so much pressure on malls today and new stores today. We just weren’t sure -- well, let me put it this way -- we were not going to open new stores this year. That was our plan for the year that we wanted to see how things shake out in commercial real estate and in-store properties before we make an investment.

Having said that, the stores continue to do well. It continues to be consistent with our growth plans for the brand, so I do think we will be opening more stores over time. I just can't tell you today when or where.

Tony Gikas - Piper Jaffray

Okay, and then last question -- can you remind us of the level of Toy Story product sales in the movie year during Toy Story 2? What was the size of that product line?

Robert A. Eckert

I don’t know. I honestly don’t know and I don’t know that I have it handy. I know it was over $100 million. It’s a big business.

Tony Gikas - Piper Jaffray

Okay, thank you, guys. Great job.

Operator

We’ll take our next question from Robert Carroll with UBS.

Robert Carroll - UBS Securities

Not to beat a dead horse but on the gross margins, is there any sort of pass-through causes linked with commodity costs in place for the price increase from earlier this year?

Robert A. Eckert

No, we don’t have pass-through clauses like one way or the other. Are you talking us with retailers or vendors supplying us?

Robert Carroll - UBS Securities

More with you guys to retailers, where in order to make retailers more sympathetic to the price increases, make it contingent upon certain commodity price levels.

Robert A. Eckert

No, we don’t tie -- we’re value-added. We create things. We don’t price based on commodities sold.

Kevin M. Farr

Yeah, and you see that in our gross margins in 2008 when oil hit $147 a barrel -- our gross margin suffered and this year we received the benefit of costs being lower than we expected.

Robert Carroll - UBS Securities

Okay, so basically it could be sticky going forward?

Robert A. Eckert

Well, we never get into going forward. As you know, our goal is to try and maximize the gross margins and clearly we are working on that and making some progress.

Robert Carroll - UBS Securities

All right, thanks a lot, guys.

Operator

We’ll take our next question from John Taylor with Arcadia Investments.

John Taylor - Arcadia Investments

I’ve got a couple of questions too -- so it seems like toy sales in the U.S. anyway at retail have done a little better than what many merchants expected early in the year. I’m wondering if with the NPD numbers down a minus whatever, you know, a lot of people came in with minus double-digit expectations so if that’s the case, are you seeing any change in their level of confidence as it relates to what it is they want to have on shelf for the holidays?

Robert A. Eckert

I don’t know whether I would describe it as a change in confidence -- my sense in talking to retailers is that their view, or at least their hope is that the worst might be behind us here in the U.S. That said, I don’t think anyone is particularly sanguine about how they view the upcoming holiday because there is still a really high level of concern about unemployment both here and in Europe.

So I think the year is largely playing out the way many of us had expected, which is the toy business will likely hold up relative to some other businesses that has historically but it’s not going to be a great year. Maybe it won't be a terrible year but I don’t think I’d describe it as increased confidence. I think I would describe it as the lack of new negative news every day at this time of the year is really helpful. Last year at this time, you’ll recall every day we got up with bad news. Right now we are getting up with sort of -- we are where we are and we can deal with that and retailers can deal with that.

John Taylor - Arcadia Investments

Okay, and then I want to -- you know, this is going to sound funny -- most people don’t beat on you for having too low inventory but there have been a couple of questions about that. So if you look at the base last year, I wonder, can you give us any sense of how much of that you kind of wish you really didn’t have or what was on the water that ended up just becoming a problem once the world started to melt down? I mean, is there a way to get it kind of a normalized number as a basis that we can kind of triangulate the minus 19% against?

Robert A. Eckert

Well, I think you take 8% off the top. You know, when retailers finish the year with 8% -- I think that was the number -- more goods than the prior year, that’s at last 8% too much, at least. Their trend has been to try and become more efficient and reduce inventory. Our goal is always to try and become more efficient and reduce inventory. So I don’t recall how our inventory finished in the fourth quarter. Do you remember that number, Kevin, off the top of your head?

Kevin M. Farr

I don’t. It was up -- obviously we didn’t hit our sales goal for the year last year. There was more inventories at retail and also I think, J.T., there was also higher costs in that inventory when you looked at it last year because of the fact that our input costs were much higher last year than they are this year.

John Taylor - Arcadia Investments

Okay. And then let me see -- on the -- of the accrual for the -- you know, the settlement accrual and so on, you added $5 million in the quarter. So what is the total standing at now? Or how much in gross has been accrued for that and how much has already been paid out? Can you give us an update on that?

Robert A. Eckert

I think we’ve accrued $21 million in total, which is net of an insurance benefit, so that the total amount with the -- I think it was $5 million we added this quarter, Kevin, is $21 million. I don’t know that anything has been really paid out yet.

Kevin M. Farr

No, the settlement is still subject to court approval but we would expect to probably pay it out over the next year or so.

John Taylor - Arcadia Investments

Okay, and somebody, I don’t know, the estimate of $50 million, does insurance cover the delta between the 50 and the 21?

Kevin M. Farr

No, I think this was a claims based settlement and the redemption estimate has to be made and we feel good about the estimates that we’ve made, so our estimates, $21 million net of the recovery from insurance so the gross amount would be about $27 million and I can't really comment on how other people have estimated it. But we feel good about [inaudible].

John Taylor - Arcadia Investments

Okay, all right -- I’m sorry, say that again?

Kevin M. Farr

I said we feel good about our reserve.

John Taylor - Arcadia Investments

Okay, good. And last question, Fisher Price Friends, I wonder if you could talk a little bit about what’s going on there and what’s on the product side to cycle that and get that either stabilizing or going up again?

Robert A. Eckert

Friends is still a bit soft, some of the properties haven’t done as well as we had hoped, if you -- even if you look at some of the TV ratings of some of the Friends properties. That said, we are encouraged by some of the newer properties, like Disney Handy Mandy has done well. Dora Links, which is the new doll that we’ve introduced with Nickelodeon, it’s kind of Dora aged up and targeted to keep Dora fresh, it is very early in Dora Links but certainly the websites that have promoted Dora Links, like Amazon or Target.com or Walmart.com, the business has been very strong.

So I think our relationship with Nickelodeon and Disney is very strong.

John Taylor - Arcadia Investments

Okay, great. Thank you.

Operator

We’ll take our next question from Linda Bolton-Weiser with Caris.

Linda Bolton-Weiser - Caris & Company

Can you just comment if you still think the tax rate should be about 27% for 2010? And if that’s still unclear when you would know for sure, like when the government decision or whatever would be made on that?

Kevin M. Farr

I think as I mentioned earlier, for 2009 we expect the rate to be between 23% and 24% based on current tax laws. There is a provision that sunsets at the end of 2009, so our expectation as you’ve mentioned is that our tax rate next year would be around 27%.

Linda Bolton-Weiser - Caris & Company

Okay. And then can you just comment -- I know you don’t like to say a lot about competitors but Avon is marketing for the holiday season three dolls that are very similar to American Girl dolls and they are branded under the Madame Alexander brand, and they are actually comparing them to American Girl when they market them. And they are priced at about $30, compared to American Girl at much higher. Do you have any thoughts on that or do you think it will take market share from American Girl or just expand the category for that type of doll?

Robert A. Eckert

Well, you never know but we’ve had competition with American Girl -- I mean, we’ve had some -- I’m sure Avon has some great products and we have worked with Avon in the past and it’s a great company and I have a lot of respect for Avon, so I’m not focusing my comments directly at them but certainly over time there’s kind of been a history of cheap knock-offs to American Girl and we have a lot of competition this year. Fortunately American Girl is a very strong franchise and continues to do well.

Linda Bolton-Weiser - Caris & Company

Okay, and then I think we read something in the media about a Barbie live action movie coming -- can you give a little bit of details on that and the timing that’s expected?

Robert A. Eckert

Yeah, we don’t have the timing specifically. But we have announced a partnership with Universal, I believe, for a Barbie live action movie. It is consistent with what the brand has done in entertainment. You know, we have a pretty good history with DVDs. We have a very strong history licensing the brand out and with what’s going on in the movie business today and the studios wanting to tap into intellectual property like we have or like our competitors may have, we think the time might be right for Barbie to go on the big screen.

I don’t think the timing -- there’s any chance the timing would be before 2011 and we don’t have a specific date but we are clearly working with some -- with some producers who have a very strong history in the movie business and we just think given the kind of iconic nature of Barbie and given where we are going with Barbie, the timing might be right for a Barbie movie.

Linda Bolton-Weiser - Caris & Company

Okay, and then can you just talk a little bit more about the other girls category, High School Musical, and Polly Pocket, with the declines? I know that you were going to be putting more marketing behind Polly Pocket, so is that still the plan or is that just going to continue to be a diminishing property?

And then with High School Musical, I thought there were some new characters or something but is that more a 2010 effect that would help High School Musical or was that supposed to help 2009?

Robert A. Eckert

Well, High School Musical and Polly both declined this quarter. I think it’s sort of a natural decline in High School Musical and fortunately we’ve got a lot of other very strong Disney properties that are compensating for that.

As it relates to Polly, we still have work to do in Polly. I had hoped we would do better right now than we are. We are making some changes in the 2010 program behind Polly but we consider Polly a core business and we like all of our core businesses to grow and we’ve got work to do on Polly.

Linda Bolton-Weiser - Caris & Company

Okay. Thanks a lot.

Operator

We’ll take our next question from Gerrick Johnson with BMO Capital Markets.

Gerrick Johnson - BMO Capital Markets

A question on Fisher Price -- out at retail it looks like you got a lot more Imaginex than Geotrax out there, so I’m wondering where the weakness in the core is during the --

Robert A. Eckert

It really tends to be in the higher priced segments of Fisher Price, like Power Wheels and Baby Gear and even some of the higher priced toys. We’re hoping that the higher priced toys move later this year and they do clear before Christmas but we are certainly working with retailers to make sure we have strong promotional programs to support those. The good news on the Baby Gear business is it’s been a great growth business for us over the last several years. It’s been slow for the last year. I think it may have bottomed out and we are starting to see some improvements at point of sale but it’s too early to declare victory but I feel a little bit better about Baby Gear today than I did six or eight months ago.

Power Wheels, on the other hand, you know, it’s high priced in this environment. We’re just kind of holding on with it.

Gerrick Johnson - BMO Capital Markets

Okay, and how do you feel your entry into the construction category is going?

Robert A. Eckert

It’s very early and we’ll have to find out but we think there is an opportunity for some building products targeted to a younger aged segment and we’ll see how it goes.

Gerrick Johnson - BMO Capital Markets

Okay. And lastly, some sort of update on Bratz -- where do we stand with both the litigation and perhaps where the product would be headed later in 2010 and 11?

Robert A. Eckert

Well, we plan to launch Bratz dolls in the spring of 2010. The dolls look terrific. We know girls and through research, we’ve probably talked to more girls and their parents than any company on the planet, so we are confident that the new line of dolls will really resonate with girls and we are quite excited about the prospect of launching it. So we are moving ahead with a launch next year.

As it relates to the litigation, you know, we are continuing in the court through a process to see either A, whether we can resolve the litigation, or B, whether we continue with what amounts to phase 2 of the case, which includes things like trade secret theft.

Gerrick Johnson - BMO Capital Markets

Okay and how much litigation expense was in this quarter, related to MGA?

Robert A. Eckert

We don’t go through kind of case by case. I know for sure we’re not going to get into case by case legal expense. I can tell you it was down $4 million, right?

Kevin M. Farr

Down $4 million, yes.

Robert A. Eckert

I don’t know if that was all MGA or whether that included some of the product liability issues.

Kevin M. Farr

It was both, yeah.

Gerrick Johnson - BMO Capital Markets

Okay. Thank you very much.

Dianne Douglas

Operator, we’ll take one more question.

Operator

We’ll take our next question from Hayley Wolff with Rochdale Research.

Hayley B. Wolff - Rochdale Research

On the litigation expense, how much do you anticipate moving forward? I know it depends on whether you go to phase 2 with MGA but assuming you don’t, is there a substantial amount remaining at --

Robert A. Eckert

You answered the question. Our view of this has always been this is about doing the right thing, about protecting our intellectual property, about making sure that employees of this company know that when they create something, we will protect it and we will help them work on a collaborative environment and keep the intellectual property here at Mattel. So we will invest whatever it takes for however long it takes as long as somebody wants to continue litigating this. The facts are friendly. We got a good verdict in phase one of the trial and as I said, the evidence for phase 2 of the trial is compelling.

Kevin M. Farr

Let me just put it in context I guess between 2008 and where we are at in 2009 on legal fees -- as we’ve said, we’ve incurred significant legal fees over the last couple of years related to MGA and recall related litigation. For full year 2008, we incurred incremental legal costs of $37 million, primarily for MGA litigation, and $15 million of legal settlements primarily related to recall related multi-state settlements. For the first nine months of 2009, litigation related legal costs decreased by $37 million, primarily for MGA litigation. So it is encouraging that we are a step closer to resolving the recall related litigation but again as Bob said, we’re going to invest in legal fees as required because we think they are a good investment to date.

Hayley B. Wolff - Rochdale Research

Does the fact that they are changing the judge in the Bratz case have any impact on anything?

Robert A. Eckert

No, I wouldn’t want to speculate on anything like that.

Hayley B. Wolff - Rochdale Research

Okay. The timing of Fashionistas, when did that ship? Did that ship in the third quarter? Or is that a fourth quarter ship?

Robert A. Eckert

It started in the third quarter because it’s on shelf today, with pretty good presence on shelf and the advertising begins I believe it’s like this weekend or early next week, so the advertising support is just about underway so the product is on shelf, so we clearly shipped some in the third quarter.

Hayley B. Wolff - Rochdale Research

Okay, and I know you don’t like to talk about the gross margin and the sustainability but you talked about the price of oil and it’s doubled now versus last year -- do we then think about gross margin as going in the other direction next year, at least as it relates to the input costs or is it -- or you are --

Robert A. Eckert

Well, we don’t know. If you could tell me what the price of resins are going to be in January, February, March when we are building next year’s toys, I can give you more insight. We are just not that good at predicting those things.

Hayley B. Wolff - Rochdale Research

But if we assume they are at the current levels and fast-forward those?

Kevin M. Farr

I think there’s been a lot of volatility in the inputs costs over the last few years, particularly resins costs. Today we are seeing declines in resins costs from the record high levels in the summer and fall of 2008 that we experienced as we are buying inputs for spring 2009 line, so while spring 2010 versus spring 2009 could benefit from lower resin costs. Conversely, fall 2010 could be negatively impacted by input cost pressures versus Fall 2009, since there’s been a steady recovery in oil prices as Bob said to about 75 or 76 yesterday. Driving resin costs and oil-based related costs up with it -- that said, commodities are impossible to predict. It’s been from $76 today to $30 last December and $147 in 2008, and if you look at our gross margins, there’s many factors that impact our gross margins like input costs, like freight and distribution costs, royalties, FX, mix and tooling, just to name a few.

It’s hard for us to predict gross margin as complex since there’s a lot of moving pieces and not always good transparency or predictability but we’ve made good progress rebuilding our gross margins in ’09 as year-to-date gross margins is 48.1%, back to levels in 2003. We are going to continue to execute global cost leadership programs and other cost and manufacturing efficiency programs and then we are going to price our products appropriately to sustain our margins and over the long-term we are striving for 50% gross margins.

Hayley B. Wolff - Rochdale Research

The gross margin in this quarter was impressive, so kudos to that. One last question -- Walmart has been out talking about SKU reduction in the toy category and we don’t think about that as a net benefit to the large manufacturers. When do you start thinking about sustainable market share gains from this vendor consolidation at retail? Or will these other brands just find other outlets?

Robert A. Eckert

I don’t know and I don’t get a lot of control over what a retailer is going to carry. I can tell you that we are well-aligned with large customers who want to have a more efficient SKU profile. It’s a key initiative here at Mattel. We are going to reduce our SKUs next year by quite a bit and the following year by more, so we know -- we’ve done the analysis and a lot of our competitors have done the analysis. You can take some number -- 10%, 20%, 30% of the SKUs and end up with 1% or 2% of your sales and a profit level that’s on a good day not even that.

So we want to get more efficient. I think a lot of our retail customers want to get more efficient and I think that’s good for everybody.

Hayley B. Wolff - Rochdale Research

Great. Thank you, guys.

Dianne Douglas

Thank you all for participating in the call today. There will be a replay of this call available beginning at 11:30 a.m. Eastern Time today. The number for the replay is 719-457-0820 and the pass code is 5422939. Thanks again.

Operator

Again, ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!