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Lifetime Brands (NASDAQ:LCUT)

Q2 2014 Earnings Call

August 05, 2014 11:00 am ET

Executives

Harriet C. Fried - Senior Vice President - New York Office

Jeffrey Siegel - Chairman, Chief Executive Officer and Member of Strategic Planning Committee

Laurence Winoker - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance and Treasurer

Analysts

Laura A. Champine - Canaccord Genuity, Research Division

Frank A. Camma - Sidoti & Company, LLC

Brian Freckmann

Jeffrey Matthews - RAM Partners, L.P.

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2014 Lifetime Brands, Inc. Conference Call. My name is Ian, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I'd like to hand the call over to Ms. Harriet Fried from LHA. Please proceed, ma'am.

Harriet C. Fried

Good morning, everyone, and thank you for joining Life Brands' conference call. With us today from management are Jeff Siegel, Chairman and Chief Executive Officer; and Larry Winoker, Senior Vice President and Chief Financial Officer.

Before we begin, I'll read the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are about to be made in this conference call that are not historical facts are forward-looking statements and involve risks and uncertainties, including the company's ability to comply with the requirements of its credit agreements; the availability of funding under those credit agreements; the company's ability to maintain adequate liquidity and financing sources on an appropriate level of debt; changes in general economic conditions, which could affect customer payment practices or consumer spending; changes in demand for the company's products; shortages of and price volatility for certain commodities; the effect of competition on the company's markets; and other risks detailed in Lifetime's filings with the Securities and Exchange Commission.

The company undertakes no obligation to update these forward-looking statements. The company's earnings release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Included in this morning's release is the reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP.

With that introduction, I'd like to turn the call over to Mr. Siegel. Please go ahead, Jeff.

Jeffrey Siegel

Thanks, Harriet. Good morning, everyone, and thank you for joining us to review our second quarter 2014 results, to get an update on our recent acquisitions and discuss our many other growth initiatives. The numbers we announced this morning reflect the investments we have been making to expand our business aggressively in 2014 and beyond.

During the quarter, Lifetime's consolidated net sales grew by 19% to more than $115 million. Most of this growth came from the acquisition of Kitchen Craft, the U.K.-based kitchenware company we acquired in January. Two of the other businesses we acquired during the first quarter also contributed nicely to our sales growth. Those businesses were: Built, a designer and distributor of lunchboxes, wine bags and baby accessories; and La Cafetière, a supplier of products to brew and serve coffee and tea based in the U.K. and Netherlands. We will begin shipping products from our fourth acquisition, Empire Silver, a U.S. manufacturer of sterling silver and pewter gift items in the third quarter.

As we discussed in our May conference call, all of these new additions to the Lifetime platform market their products under well-known consumer brands, offer us entrèe into new markets and classifications and, over time, will enable us to leverage our core capabilities and infrastructure. We have been moving through the process of integrating each business; taking the steps needed to ensure that the resources, assets and processes of the acquired companies are combined with our own in a way that achieves our strategic goals. In tandem with those efforts, we have made significant investments to build our global business.

As previously noted, we are now supplying Walmart in China. Currently, Walmart has about 400 supercenters in China, which are expected to grow to 1,000 stores. To support that business, we acquired sales and support teams and have made arrangements with a domestic 3PL operated to distribute goods within China. Our products are retailing well in the Chinese market. And once our teams are fully settled, we will aggressively pursue other large Chinese retailers.

We have expanded our Hong Kong-based sales staff by transferring 2 senior executives from the United Kingdom and we'll hire additional staff as that business grows. We also have committed to a new 12,000-square-foot showroom that will open later this year and have made arrangements for a new bonded warehouse in China to support that business. To ensure that we properly can handle the volume of additional purchases of new products, we have committed to expanding and strengthening our global sourcing and quality control teams. To that end, we have added staff and made investments in technology.

Lastly, we have added to our category management and design teams to support the development of new products in the global market. Together, these initiatives carry a big price tag, which we estimate to be approximately $5 million on an annualized basis. We expect to see a return on our investments beginning in this year's fourth quarter, and we expect a fuller return in 2015.

Larry will take you through our financial guidance in his remarks. I'll run through the highlights of the quarter quickly, focusing on our wholesale segment since that provides the vast majority of our sales.

In the U.S., our business, overall, was challenged by the slow retail environment and uneven retail replenishment. As you have already heard from many of the leading U.S. retailers, the uneven economy -- economic recovery has continued to impact shoppers. In addition, in certain key retailers, stocks were replenished at a lower rate than retail sales. I'd like to note that beginning in July, retailers seem to have gone back to replenishing stocks more in line with sales.

On the Kitchenware side, traditionally, our fastest growing in highest margin area, there was some slippage year-over-year due in part to timing shifts. Several programs we have planned for the second quarter have moved to the back half of the year.

In Tabletop, we also had a slight decline in sales year-over-year, again, due in large part to changes in program timing.

In both Kitchenware in Tabletop, we expect sales for the second half and the full year to be over last year.

Sales in home solutions were up significantly due in part to the contributions of Built. In addition, in the Pantryware portion of this business, our Debbie Meyer-branded food storage products have been selling even better than we ever expected at retail. We've been working now to expand this line to facilitate what we believe will be a major increase in distribution. A large shipment of our innovative magnetic spice racks to a major retailer also contributed to our strong showing in this area.

Turning now to international. I'm pleased to report that Creative Tops, through which we have introduced Lifetime's Tabletop product lines to the U.K., recorded organic growth of approximately 45% in local currency year-over-year. Grupo Vasconia, our product company in Mexico, also turned in a strong quarter as the Mexican economy improved, and the company made progress with the integration of its Almexa acquisition. These showings illustrate the major growth opportunities that international markets offer. Those opportunities are particularly important at a time when consumer demand in the U.S. is essentially flat.

And of course, we expect the broad range of Kitchenware products that Kitchen Craft recently added to our U.K. housewares assortment to make an important contribution to our full year.

Moving now to Asia. As I noted, in the second quarter, we began supplying Kitchenware and Tabletop -- tableware products to almost 400 Walmart supercenters in China. To ensure the success of this program, we brought on new managers to oversee the development of our Walmart and Sam's China business. This same team will, in 2015, pursue sales to other large retail chains in China.

We're also in the process of completing our new 12,000-square-foot showroom in Hong Kong, which is expected to open in the end of September. The new Hong Kong-based international sales team we've been putting together will be based there, and they will coordinate our sales to customers we have targeted in over 100 countries that we do not have a physical presence in at this time.

Again, this investment comes at a cost, but we expect these initiatives to be major contributors for Lifetime's growth in the coming years. As you know, newness is a vital importance in our industry. With our exceptional and extensive design team, supplemented by our network of independent investors -- inventors, no one can match that number, breadth or quality of product offering. In total, we will be rolling out well over 4,000 new products in 2014. This is higher than in past years, reflecting the new categories and classifications we've entered.

One of the initiatives that we are mostly excited about is our new Guy Fieri-branded NCAP program. The line, which includes Tools & Gadgets, cutlery and cookware is being introduced at a major U.S. retailer and will begin shipping in this quarter. Also new and promising is a line of functional but decorative accessories, which we plan to introduce under the Mikasa gourmet basics brand. And we'll begin shipping our Mossy Oak dinnerware, drinkware and cutlery this quarter, for which we've achieved significant placement in several major retailers. Camouflage is a well-established brand and what we've initially shipped at the very end of the second quarter is selling extremely well at retail.

With that overview, I'll turn the call over to Larry who'll give you more details on our second quarter financial results. Larry?

Laurence Winoker

Thanks, Jeff. As we reported earlier this morning, net loss for the second quarter of 2014 was $3.2 million or $0.24 per diluted share as compared to net loss of $568,000 or $0.04 per diluted share in the 2013 period. Adjusted net loss for the quarter was $3.1 million or $0.23 as compared to adjusted net loss of $1.1 million or $0.08 per diluted share in 2013. A table which reconciles this non-GAAP measure to reported results was included in this morning's release.

Loss from operations was $3.2 million for the 2014 quarter compared to income from operations of $12,000 in 2013. Consolidated EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release, was $1.5 million for the current quarter and $4.3 million for the period in 2013. Consolidated EBITDA for the trailing 4 quarters ended 2014 was $41.2 million compared to $36.8 million.

During the second quarter of 2014, the company realigned its reportable business segments and now reports 3 segments, as that are: U.S. wholesale, international; and Retail Direct. The U.S. wholesale segment is comprised of the businesses that are managed from the U.S. and then sell its products to retailers and distributors. The international segment is comprised of our businesses that are managed outside the U.S., which are Creative Tops, including La Cafetière's European business, and Kitchen Craft. The Retail Direct segment, which is unchanged, consists of our U.S.-based business that sells a limited collection of the company's products directly to consumers through its Internet websites. All prior periods reported have been revised to reflect this new segment alignment. This segment alignment reflects the manner in which management assesses performance and allocates resources.

The U.S. wholesale segment -- for our U.S. wholesale segment, net sales this 2014 quarter decreased 28% [ph] to $85.1 million. The decrease reflects a decrease in Kitchenware and tableware sales. Kitchenware's decrease was due to lower sales volume, in part due to the timing of program launches versus the prior period. The tableware decrease was primarily attributable to lower sales volume on category weakness for dinnerware products, partially offset by higher Flatware volume. The decrease in the Kitchenware and tableware product categories were partially offset by an increase in home solutions product category. That increase reflects successful programs for the Pantryware products line and the inclusion of Built New York acquired in March of this year.

The wholesale segment gross margin was 35% in the 2014 quarter compared to 37.4% in 2013. This decrease in gross margin reflects actions taken to create opportunities to expand our market share. U.S. wholesale distribution expenses as a percentage of sales shipped from our U.S. warehouses were approximately 10.4% in the second quarter of 2014 and 10.3% in the quarter of 2013.

U.S. wholesale SG&A expenses were $20.6 million, which is 24.2% of net sales in the 2014 quarter and 18.7% or 21.8% of net sales in the 2013 quarter. This increase is primarily due to the acquisition of Built New York, initiation of sales in China to Walmart supercenters and investments in talent to grow our domestic businesses. Excluding these gross initiatives, SG&A grew by approximately 3%.

For our international segment, net sales in the 2014 quarter increased to $26.6 million from $7.5 million in the 2013 period. Of this increase, $14.7 million represents sales from Kitchen Craft and La Cafetière, which were acquired during the first quarter of this year. The organic increase of 59%, 45% in local currency, was due to higher volume from a Creative Tops. The 2013 period was adversely affected by the anti-dumping duties imposed on Chinese ceramics by the European Union.

The international segment gross margin was 32.2% in the 2014 quarter compared to 21.3% in 2013. The increase in margin is a result of the decreasing pricing promotions for Creative Tops and the inclusion of Kitchen Craft, which is in a higher-margin product category.

International distribution expenses were approximately 11.9% and 10.3% in the 2014 and '13 quarters, respectively. The increase is primarily due to the inclusion of Kitchen Craft, which has a higher proportion of sales to specialty customers than the segments in other businesses.

International SG&A expenses was $6.1 million in the second quarter of '14 and $2.3 million in the second quarter of 2013. This increase is primarily due to the inclusion of Kitchen Craft. As a percentage of net sales, SG&A decreased to 23% in 2014 from 29.7% in 2013.

Now for our Retail Direct segment, net sales were $3.6 million in the 2014 quarter versus $3.7 million in 2013, and its gross margin was 69.7% in 2014 quarter versus $71.7 million in 2013. This reflects changes in promotional discounting. As a percentage of net sales, Retail Direct distribution expenses were approximately 28.6% in 2014 and 29.3% in 2013, and SG&A expenses were $1.9 million and $1.8 million in respective periods.

With respect to nonsegment items, unallocated corporate expenses decreased by $300,000 to $2.8 million in 2014 period, which was primarily attributable to a decrease in employee-related and professional expenses.

Interest expense increased to $1.7 million from $1.1 million last year. This increase in the current period was due to higher average borrowings on our recent acquisitions, which was partially offset by lower interest rates from the refinancing.

The company recorded an income tax benefit of $1.6 million in the 2014 quarter and $500,000 in 2013 quarter. The effective tax rate for this 2014 quarter was 32.8% versus 42% last year. The lower effective tax rate this year reflects results in the U.K., which was taxed at a 21% rate.

Equity and earnings was $41,000 in the current quarter versus $92,000 in 2013. In the 2013 period, Grupo Vasconia recorded income from a recovery of value-added taxes that increase our equity income in that period by $700,000. Grupo Vasconia's reported income from operations improved significantly in 2014 quarter to $2.2 million versus a loss of $600,000 in the 2013 quarter. Increased sales volume from both the aluminum and Kitchenware businesses contributed to the turnaround.

Now turning to our financial position. At June 30, 2014, the leverage ratio that is total indebtedness to the last 12 month's EBITDA was 3.6x. The increase in leverage compared to the year end 2013 was due to the acquisition of Kitchen Craft. On a pro forma basis, as if Kitchen Craft was included from the beginning of the LTM EBITDA period, the leverage ratio was 3.2x. At quarter end, availability under the revolving credit facility was $52.6 million.

As noted in our earnings release, we are reaffirming our projected full year sales guidance of approximately $600 million, of which approximately 5% is expected to be organic and 15% from consummated acquisitions.

We continue to expect gross margin to be in line with the 2013 as an increase from international is expected to offset any decline from the U.S.

Distribution expense as a percent of net sales is expected to increase modestly from 2013. SG&A as a percentage of sales is expected to be in line with 2013, which includes acquisition cost, purchase accounting amortization and the additional investment activities to grow our business.

Our income tax rate for the full year is currently projected to be between 35% and 37%. Capital expenditures are planned at $5 million to $6 million. And for the full year, diluted weighted average sales outstanding are projected at 14 million.

This concludes our prepared comments. Operator, we're ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Laura Champine at Canaccord.

Laura A. Champine - Canaccord Genuity, Research Division

Could you give us some more information about why you think that gross margins will be flat for the year? They came in below us for this quarter, so any information you've got about improvement of the U.S. wholesale environment later in the year? Or what drives that goal?

Laurence Winoker

Yes. A lot of it was timing of programs. Jeff's made some comments generally of what happened in early part of the quarter, but we think it's the programs that we have in plan in the balance of the year that we expect will recover some of the declines in gross margins that you saw in this quarter.

Laura A. Champine - Canaccord Genuity, Research Division

And can you tell us more about those programs? Whether it's -- which type of retail channel or what categories they're in?

Jeffrey Siegel

Well, I can give you an example of one. Early -- actually, at the end of last year, we were -- one of our division presidents brought a potential large program to us from one of the of the bigger retailers, and it was a low-margin program. Lower than we normally take. But with that retailer, we knew we had to do that. But the division president assured us that, that was all going to be a plus. It turns out it will be a plus on the annual basis, but it was not a plus in the quarter. So we had a low-margin business in one of the divisions that, on an annual basis, it wouldn't be that way.

Laura A. Champine - Canaccord Genuity, Research Division

And Jeff, is that just because volumes are going to scale up as we move through the year?

Jeffrey Siegel

Yes, very much so. Volumes scale up and a lot of the -- program timing sometimes affects us quarter-to-quarter. And in this case, it affected us pretty severely.

Operator

We have another question for you, this one is from the line of Frank Camma at Sidoti.

Frank A. Camma - Sidoti & Company, LLC

A couple of questions. So if I did this right, I'm coming up with organic growth for the quarter of about 2%. And I think for the 6 months, roughly the same here, 2% to 3%, which is kind of in line with category. But your -- for your sales guidance, you're holding steady at about 5% for the year. I was just wondering what gives you the confidence that you're going to see a -- especially in light of kind of a weak retail response here, what gives you confidence?

Jeffrey Siegel

Well, it's not only in the U.S., our business in the U.K. with Creative Tops, which we've had now for several years, is doing very well. So that's certainly going to add to it. The U.S. rate will be slower than the -- rate of growth would be slower than the rate of the growth we're having in the U.K. But overall, with the programs that we have -- that are already in place and the commitments that we have for the full season, we're pretty confident in the numbers.

Frank A. Camma - Sidoti & Company, LLC

Okay. And you mentioned that Walmart right now has 400 centers there in China. Are you in all of those 400 centers today?

Jeffrey Siegel

Yes, it's actually just a little under 400, and we are in all of them. But we haven't rolled out the full program yet. We've rolled out Kitchenware and kitchen knives, but the Tabletop part of the program is rolling out in this quarter, in the third quarter. I got to tell you, I'm very surprised how well our products are selling at retail. In China, they're all under the Farberware brand, which seems to be embraced by the Chinese people right now. So we're very, very enthused with what's happening right now.

Frank A. Camma - Sidoti & Company, LLC

Good, good. And do you have any idea of -- and then you also mentioned that Walmart plans to get to about 1,000 supercenters there over time. Do you have any idea of like what their estimated time frame is for that?

Jeffrey Siegel

No, I don't. That was -- that really came from a senior executive at Walmart that I met with in China. He told me that their plan is to go to 1,000 Walmart stores plus the Sam's stores, which they currently have only 10 of them, which are doing very, very well for them. So I'm sure they'll expand that. Walmart is nowhere near the largest retailer in China. I believe they're #4. So there's a huge opportunity for us to grow there with other retailers. We're going to concentrate -- in the near term, I'm making sure the Walmart business is really going exactly the way we want it to go. And that -- we should have that well done by -- before the end of this year. And starting in 2015, we will approach the other large retailers in China with programs that we think could do well for them as well.

Frank A. Camma - Sidoti & Company, LLC

Okay, great. And just a couple of quick ones. Just on the showroom that's opening up in Hong Kong, you mentioned that that's going to give you access, I think you said to 100 countries where you don't currently don't have offices. Am I correct about that?

Jeffrey Siegel

That's correct. We currently do business in many countries where we don't have a presence, but we don't have any centralized sales operations to really sell all of our business into those countries. We have identified -- actually, over 100 countries and we've also identified the retailers within those countries that we're interested in doing business with. We have an international sales staff of about 5 now that will funnel customers to the Hong Kong showroom. And we really have high hopes. They're very big investment for us. We believe that this will really pay off, and it will pay off quickly.

Frank A. Camma - Sidoti & Company, LLC

Okay, great. And then just the final question is, jumping back to the retail environment here. Were you surprised about that -- I mean, the restocking really -- especially at like Walmart, really began last year, at least for the many of the companies that I cover. Were you surprised -- because I don't think you really experienced that last year, were you surprised by the kind of acceleration in this quarter or was that anticipated? Just kind of get your thoughts on that.

Jeffrey Siegel

We -- frankly, on the number of retailers, we did not anticipate that they would not be ordering up to retail sales. And they were -- and frankly, in the -- especially in May and June, less so in June, but more so in May that they really did not replenish goods that were sold off the floors of the retail. That, we've seen a marked change in July, so things are gettings back to normal. And whatever the new normal is, but it's -- they're getting back to normal. And so they're now all replacing products that they sell, which is certainly a very good sign for the fall.

Operator

[Operator Instructions] And we have another question for you, speakers, this one's from Brian Freckmann at LS Capital.

Brian Freckmann

Just a quick question, kind of looking out further. You guys have taken this business to what looks to be about a $600 million run rate. And looking out into, let's say, FY '15 at whatever growth rate you guys will guide to. Where do you guys see the leverage coming from? It seems like the gross margin side is kind of what it is and probably, it's something you'll battle for. Can you kind of help me understand some of the initiatives you've talked about in order to sort of think about how '15 looks and where you guys kind of leverage this pretty significant top line going forward?

Jeffrey Siegel

Yes. Well, we expect the top line to continue to grow. Some of the businesses that we acquired were small but have great potential, such as Built and La Cafetière. Even though we expect them to be profitable, they're small and yet they have huge potential to grow. So we're go -- and as -- on a global basis, not only in the U.S. or in Europe, so we do -- we will get a lot of leverage by growing with companies that we've added into our infrastructure, that would include -- that includes the Empire Silver business, which goes into our silver business, which we view as -- is going to be terrific, we believe. We have Built, which has a huge potential. We have La Cafetière and as you know, coffee is one of the hottest categories there are and they are -- they have the right kind of a line to really expand on. They were a cash-soft [ph] company. So we get a lot of synergies and leverage out of making sure those companies grow within our infrastructure, as well as continuing doing what we do and growing into other countries. It's just something we expect.

Brian Freckmann

I'm sorry. Maybe -- I wasn't talking about the revenue growth, I was talking about kind of as you guys grow the revenue, do you guys have sort of a long-term goal you could share with us in regards to sort of, let's call it, EBITDA profitability as a percent or operating income or something where you guys feel that as you grow the revenue from here on, you might incrementally be able to drop incremental dollars to the bottom line versus sort of when you were underscaled at $400 million or something along that line?

Laurence Winoker

Yes, I mean, today -- I mean, our EBITDA is less than 10%. Our goal is certainly to get there and above. And we think we'll get there, and I think we've talked about this in the past and it certainly is difficult -- a little difficult to get in the gross margin line, although, to some degree, you can because we don't run our own factories. But we do get leverage because we have initiative to -- in Asia, to find factories where we can use our buying power. Talk about process [ph], sell a lot of -- like can openers to get savings. So -- but the easiest way for us to get that leverage is on the distribution and the SG&A line because -- I mean, we're getting bigger. And so at some point, we're going to have to increase the infrastructure but we still think we have a fair amount of room. We'll -- we did spend some and we are spending some money in SG&A to help grow the business. But we still think there's a fair amount of leverage there and in our distribution capability to pick up some EBITDA points more easily than certainly we could do on the gross margin line.

Brian Freckmann

Okay. So you guys certainly have a -- the goal to get EBITDA to a 10% number.

Jeffrey Siegel

That's right.

Laurence Winoker

Yes.

Brian Freckmann

And any -- I mean, sort of big picture, is that 18 months possibility? Is that 24 months? Is there sort of -- as we model these things out, kind of trying to figure out the drop down, is there sort of -- just kind of a roadmap you could give us?

Laurence Winoker

Yes. I mean, we think about that more over, let's say, a 3- to 4-year period to get above 10%.

Operator

We have another question for you. This one's from the line of Jeffrey Matthews at RAM Partners.

Jeffrey Matthews - RAM Partners, L.P.

I just wondered how much of your business is done with retail -- online retail partners versus in-store? And what the trends there are? Are they better trends for you than -- at brick-and-mortar retail?

Jeffrey Siegel

It's -- online retail is a combination of strictly online retail, like an Amazon, as well as traditional retailer's like the Bed, Bath & Beyond and Macy's that have an online component. We aggressively go after online business. We don't break out the percentage, but I can tell you, the overall online business is absolutely increasing, and it's increasing at a high rate every year. And that includes business we do with only -- with strictly online retailers and business we do with brick-and-mortar retailers that have online components. And it -- with us, it varies greatly by product classification. For instance, it's a -- a very small percentage of our Kitchenware business because not many people go online and buy a peeler. But it's a very big percentage of our Dinnerware business. Consumers go online and purchase dinnerware, which is rather heavy. A service for 8 can weigh up to 60 pounds, and they will buy that online and have it sent to them. So it does vary, but it's something that we do focus on. We have groups within Lifetime that focus specifically on making sure that our business online with retailers is growing.

Jeffrey Matthews - RAM Partners, L.P.

Got it. And if I could also ask one more about cost of goods and what's happening with China, and are you moving anywhere else to address your cost of goods?

Jeffrey Siegel

We haven't experienced anything significant in China, but what we do is we try to leverage our strengths. And I'll give you a quick example. Between Lifetime and all of our global partners, we use somewhere between 12 million and 15 million can openers a year. So about 6 months ago, we started working with factories to automate the production of those can openers. We narrowed down the working parts to make it easier for the factories, and we've been able to automate it and eliminate most of the labor. And frankly, we significantly lowered the cost of can openers of the company, which is just starting to come at our inventory now and really more so will be in 2015. We will continue to do that throughout the business. It's a -- one of the key things we're working on now is to, again, use our size, our scale within the world that we're in to help factories to automate production of our products, which, perhaps, our competitors can't do.

Operator

There are no further questions at this time, so I'll now hand the call back to Mr. Siegel for closing remarks.

Jeffrey Siegel

Thank you. As we've said several times, over the next few years, we expect our organic growth in the U.S. to be between the rate of the increase in GDP and perhaps up to double the rate of the increase in GDP. Our experience today has shown us that the potential for growth is exponentially higher for us outside the U.S. By accelerating our investments in global growth, we believe we can more quickly capitalize on this opportunity.

We look forward to bringing you up-to-date after the third quarter. Thank you, all.

Operator

Thank you, ladies and gentlemen for joining today's conference. That concludes the presentation, and you may now disconnect. Have a good day.

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