Compass Minerals International Inc (CMP) 2006 Q1 法說會逐字稿

Good morning. My name is Marvin and I will be conference operator today. At this time, I would like to welcome everyone to the Compass Minerals 1st Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. [OPERATOR INSTRUCTIONS]

I will now turn the call over to Miss Peggy Landon, Director of Investor Relations. Please go ahead, ma’am.

Thank you, Martin. And thank you all for joining us on our 1st Quarter Conference Call this morning. With me here today are Michael Ducey, our President and CEO, and Rod Underdown, our Vice President and Chief Financial Officer.

Before we begin, I’ll remind you that today’s discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the company’s current expectations and involve risks and uncertainties that could cause the company’s actual results to differ materially. The differences could be caused by a number of factors including those identified in Compass Minerals’ form 10-K filed with the Securities and Exchange Commission on Friday -- excuse me, on February 24, 2006. The company will not update any forward-looking statements made today to reflect future events or developments. You can find reconciliations of any non-GAAP financial information that we discuss today in our earnings release, which is available on the Investor Relations section of our website at Compassminerals.com.

Now, it’s my pleasure to introduce Mike Ducey.

Thank you, Peggy. Good morning everyone. Thanks for joining us this morning. As you’ve read in our press release and as you probably have already surmised, the weather this quarter was significantly milder than last year. However, despite the mild winter and higher transportation costs this year, I’m very pleased to say that our earnings and EBITDA remains strong at $28.6 million and $60.9 million respectively. This is the first time since we took the company public that we’ve had a chance to prove what we’ve been saying all along, which is that our earnings are not as vulnerable to mild weather as one might think.

The 2005-2006 winter as a whole was actually about normal to slightly below normal because of the severe weather in the fourth quarter of ’05, offset by the unusually mild weather in the first quarter of ’06, which is a very unusual weather pattern in North America.

By contrast, the winters ending in March of 2004 and March of 2005, have had more severe than normal weather. We estimated that harsh weather in the 2004 and ’05 winter season benefited our sales by $25 to $35 million, and benefited operating earnings by $4 to $6 million for the 12 months ended in March of 2005.

Of course, the March quarter we just completed was extraordinarily mild. We estimate that our first quarter sales were about $45 to $50 million lower than they would have been in a normal weather period. By contrast, we estimated that our sales in the first quarter of 2005 benefited by approximately $15 to $20 million from a harsher than normal weather.

Our cost structure is quite flexible and we reacted quickly this quarter at several of our consumer deicing production facilities to moderate our inventories and control our costs. So the mild weather impact on our first quarter operating earnings was approximately $11 to $14 million, when compared to a normal weather first quarter. In last year’s quarter, we estimated that the harsh weather benefited our operating earnings by about $3 to $5 million.

As you saw, our costs of goods sold benefited from a $4.1 million insurance recovery this quarter. The claim was due to a temporary interruption of production at the Goderich mine in late 2004. That was a harsh weather season and because of the business interruption, we didn’t have enough salt to meet the incremental demand in some of our markets in the first quarter of 2005. This benefit in the quarter helped mitigate the impact of the mild weather.

While the winter as a whole was not out of the ordinary, we have implemented our mild weather strategies because the quarter was mild. Our mild weather strategies take advantage of the scaleable features of our production costs and SG&A to mitigate the impacts and lower our sales volumes. We’re also reducing our capital budget by approximately $4 million by delaying certain non-essential sustaining projects and postponing selected discretionary projects.

We also would have flexed our mine production hours down at our Goderich mine following the mild quarter, but as you know, our miners are on strike so a short-term layoff may not even be necessary.

We ended the quarter with more inventory than we would typically expect. Some of the additional inventory was due to the mild weather. We also built inventory at our Goderich mine in the first quarter because the lakes didn’t freeze, so we could continue to ship and as a normal safety precaution against the labor contract negotiations which we’re approaching. So our inventories are comfortable now.

When you look at the inventory on our balance sheet, it’s important to remember that the value of the tons on the ground is also greater than last year because of the higher shipping and handling costs we’ve incurred.

Based on our visual estimates of our competitors’ inventories and ours, we believe that there is about a normal inventory level around the Great Lakes, and a little above average on the river system.

The other topic that many of you are looking for an update on is how the strike at Goderich is progressing. The strike began on April 14th. And to date, the strike hasn’t had enough of a material impact to affect our 2006 full year results. We have resumed discussions with the union. And we’re working to resolve the issues so that our employees can be back to work as soon as possible.

Turning now to the details of our first quarter results, our highway deicing sales volumes declined 26% year over year, and our general trade volumes declined by 14%, which is virtually all due to the weak consumer deicing sales. We have improved pricing in both our general trade and highway deicing product lines, which, combined with our mild weather cost mitigating strategies and the business interruption insurance recovery, helped keep our margins consistent.

Our sulfate of potash sales were down 7% from the prior year due to the heavy rains in California which has prevented the growers from getting into their fields. We expect to make up this volume because demand for SOP remains strong. And we continue to expect our full year volume to be about the same as last year. The price improvements that we introduced over the past 12 months more than offset the lower volumes and gave us a 12% year-over-year gain in SOP sales.

Our first quarter transportation costs remain considerably higher than in the first quarter of 2005 and frankly, I don’t see any reductions in transportation costs happening this year. Barge shipping costs have been dramatically higher from all of our suppliers and that impacts the cost of delivering deicing salt on the North American river system from our Louisiana mine. We understand that increased barge rates have affected all the shippers. Plus, rail rates are higher now. And the rising cost of fuel we think will continue as fuel surcharges are implemented.

Before I turn the call over to Rod Underdown, I’d like to make one last comment about our mild weather management strategies. Despite the cost structure adjustments I discussed earlier, I don’t expect us to be stagnant this year. Our priorities for using our operating cash flows, which were a record $112 million this quarter, remain the same -- to maintain our facilities, reduce the debt, pay a dividend, invest in the company and look for prudent growth opportunities. In short, it will be business as usual.

Now, I’ll let Rod discuss the results in greater detail.

Thank you, Mike. Our first quarter sales of $217.9 million represent a 14% decline from sales of $254 million in the first quarter of 2005. To put this into perspective once again, our salt sales volume decreased by about 1.4 million tons, or 25% and SOP volumes declined by 7% year over year. Obviously, our first quarter sales benefited from improved pricing across all of our product lines. Our highway deicing salt price improvements reflect the gains we made during last year’s bid season. Our general trade salt product line is benefiting from the price increase we have been successfully implementing beginning in November of last year. And our SOP sales reflect the implementation of several price increases over the last 12 months. Our most recent SOP price increase announcement was effective for February 1st of this year.

We also had a $1.1 million foreign exchange benefit in the first quarter of 2006.

Shipping and handling costs were lower in the 2006 quarter by $6.7 million because of the lower volume. As a percent of sales, shipping and handling costs were higher by about 2.5%. And as Mike said, we believe we’ll see similar year over year increases during the remainder of 2006.

Our product sales, which eliminate the cost of shipping and handling, were $141.6 million this quarter, or a 17% decline from product sales of $171 million in the prior year quarter. Despite the lower sales volumes and higher relative shipping costs year over year, our gross margin increased from 28% of sales in the first quarter of 2005 to 30% of sales in the first quarter of 2006. In part, this reflects the benefit to the cost of goods sold from the $4.1 million business interruption insurance proceeds, which Mike mentioned earlier. However, it was also due to production management and internal cost controls.

Natural gas costs were approximately $2.7 million higher than in 2005 for the quarter, but approximated market prices with our hedging program. Our expected usage for the remainder of 2006 is more than 80% hedged at prices which approximate or are just above current market prices.

As we said in our release, SG&A costs declined by 5%, primarily reflecting lower variable compensation expense.

We began to see the benefit from the December refinancing of our 10% senior subordinated notes this quarter with a year-over-year decline in interest expense. The benefit of our refinancing was partially offset by accreted interested on our discount notes. In addition, the interest you see on the income statement for the first quarter of 2005 is reduced by $700,000 for interest allocated to our discontinued operations. When these factors are combined, we netted a 10% year-over-year improvement in interest expense.

Our income tax expense declined for a number of reasons. First, as you’ll recall, we had a $5.4 million charge to income taxes last year because we repatriated funds from the U.K., which resulted in a foreign exchange gain for tax purposes in 2005. We also had lower pretax earnings this quarter than in the prior year. But, most importantly, we began to see the benefit of the completion of some of our tax planning efforts. This wasn’t a one-time benefit this quarter. We expect similar, though slightly varying, effective tax rates in future quarters.

Our cash taxes were $6.7 million this quarter compared to $11.4 million in the 2005 period, reflecting our lower pretax earnings and tax planning. We now estimate our cash taxes to be around $20 million in 2006.

Our net income for the quarter was $28.6 million, or $0.88 per diluted share. This is essentially the same as prior year, excluding the special item in 2005. In essence, the mild winter weather impacts in 2006, were offset by the business interruption insurance proceeds, lower interest expense from our refinancing and a lower tax rate resulting from tax planning.

Our EBITDA declined by 8%. And our adjusted EBITDA declined by 9% from the prior year quarter, which, needless to say, we’re quite proud of when comparing such a mild weather quarter to last year’s severe weather quarter.

Our cash flows from operations were $112.6 million compared to $90.6 million in the 2005 quarter. Year over year, the change is primarily due to weather-related working capital changes, as well as lower cash spent on income taxes and interest. Since our milder March quarter resulted in a lower level of receivables, we expect much of this year-- year-over-year improvement in cash flow from operations to reverse during the second quarter.

Our capital expenditures were $9.3 million this quarter, compared to $4.2 million in the prior year quarter. The difference reflects the expansion projects which we began last fall. The final phase of the magnesium chloride expansion and the new mill at Goderich mine, should be completed by late summer.

As Mike mentioned earlier, we now expect our capital expenditures in 2006 to be approximately $36 million. And our expected 2006 depreciation and amortization estimate remains unchanged at approximately $40 million.

We voluntarily made a $10 million principal repayment on our new term loan and we repaid the entire $31 million balance that was on our credit facility at December 31st, which helped reduce our debt from $615.9 million at December 31st to $581.2 million at March 31st. This represents a leverage ratio of 3.3 times 12 month trailing adjusted EBITDA.

Our debt net of cash declined from $568.8 million at December 31st to $480.4 million at March 31st. And while this is a seasonal low point for net debt, this represents a net leverage ratio of 2.7 times trailing adjusted EBITDA. Of course, our cash balance remains significantly higher than in the prior year. And we’re still analyzing the best use of our cash to add shareholder value.

Before I conclude, I want to discuss our results on a trailing 12 month, or what we call a full winter basis. Although we typically give our estimate of the effects of a sub or below-average weather on the first and fourth quarter sales and operating earnings, our estimates of the impact of more severe than normal or milder than normal weather, are slightly more reliable on a full season basis.

This season, our sales increased by 7% winter over winter, despite the fact that the prior winter ending March, 2005, was above average by $25 to $35 million in sales as we reported last year. The sales increase is due to season-over-season price improvements in virtually all of our product line. Our normalized operating earnings improved by more than 15% season over season. To calculate the normalized operating earnings, we eliminated the benefit of the business interruption insurance recovery from this season’s results and we eliminated the effect of last season’s above average winter that we reported. This calculation is a non-GAAP measure that the company has estimated. However, it is an evaluation we use to measure the season over season progress of our underlying business. And it tells us that we have continued to grow the value of that underlying business on a winter-over-winter basis.

Now, I’ll turn the call back over the Mike.

Thank you, Rod. All in all, I think our Compass team has done an excellent job at managing those areas of the business over which they have control and of moderating the impact of the mild first quarter weather. And I hope our results of this quarter illustrate why I like to say Compass Minerals is the best performing salt company in the world.

Now let’s open the call. Marvin?

[OPERATOR INSTRUCTIONS]

Our first question comes from the line of David Begleiter with Deutsche Bank.

Hi. This is James Sheehan sitting in for David Begleiter. Can you give us an idea of your price expectations and ice control next year given the weak season so far?

I prefer not to do that. I’d rather-- We don’t update on the winter weather progress until the end of the second quarter results, which we’ll update you on. The speculation is premature, I would say right now.

Yeah. And if I could add to that, James, the full winter season, as we reported in our results, was about average. The first quarter was well below average as we reported. And as we reported last quarter, the fourth quarter was significantly above average. And as we mentioned in the earnings release, our inventories, both ours and sort of where we estimate based on physical observation of others, we think around the Great Lakes area is about average. And in the river system it’s slightly about average.

Does that include customers’ inventories?

As we stated in the past, the customers maintain very little inventories in their control. Usually it’s a just-in-time-type process where the suppliers maintain the depots close to the distribution point. And so we would estimate that the customers control very little inventory at the moment. Except some customers are prebuying inventory because they expect prices to rise in the future. So we are seeing some salt move right now at last year pricing.

Okay. Thank you very much.

Our next question comes from Mike Judd with Greenwich Consultants.

Good morning. I actually got cut-off earlier on. I had a power outage here. But in case I missed it, did you comment about what you thought the tax rate on an ongoing basis would be for the rest of the year? I don’t know if you already talked about that.

I did briefly mention that the benefit that we received in the first quarter was not a one-time item due to some tax planning that we did. It is a sustainable benefit into the future. So you can expect to see a rate that would approximate the first quarter rate, though it may vary slightly based on the mix of income between taxing jurisdictions. It should be close to the first quarter rate.

Which was around 24%, right?

That’s correct.

Okay. And secondly, in your sulfate of potash business, can you talk about in the second quarter how volumes have been and just about general market conditions in general? Thank you.

Sure. As I mentioned earlier, the decline in volume that we experienced in the first quarter, the first market to start buying our SOP is in the California market, in the valley for vegetables and nuts and that type of operations. And as you may or may not know, that area of California in the first quarter had I think the highest amount of rainfall in over 100 years. So, as you could imagine, there is a large delay in time on application. So we were something in the neighborhood of down 6.7 thousand tons. The domestic business we expect all to gain back in the second quarter. It’s not that the crops are foregone. They will be using fertilizer as soon as they can get in the field. And we’re starting to see the pick-up of that now.

Okay. And what are -- What’s happening in the MOP business in terms of prices? I know you don’t have an MOP business. But what is happening with MOP prices?

MOP prices are down about $5 to $10 a ton. And some spot prices now have dropped $10 to $20 a ton. Offshore, they’ve even gone down more than that, some place around $40 to $50 a ton. So there’s a lot of pressure on MOP pricing right now, being escalated by the Chinese. They are refusing right now to negotiate new positions. So MOP pricing is under pressure. But as we stated in the past, SOP does not go to the same crops that MOP fertilizer does. So we don’t expect to see any short-term impact on that.

Thank you very much.

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Our next question comes from the line of Bill Young with Credit Suisse.

Good morning. You didn’t mention anything about Minosis. I figured I would check up on that one.

Minosis -- the waste continues to ramp up. We continue to make progress on contract awards on that area. Our document storage business continues to grow nicely in volume. The number of boxes that we have underground continues to improve. We’ve added sales people to support the growth of the business on the document storage side of it. And we see the results of that strategic effort to grow the business.

And Bill, it is still pretty much a break-even business for us as we continue to invest more to grow the top line. So, we -- I would say we haven’t reached critical mass. But the revenues are growing nicely there.

Okay. You expect to get profitable when?

We are expecting it to get profitable this year. And I think in total, Minosis, putting the waste and the boxes together, we should see a profitability in that business this year.

Okay. Great. Now, with regard to the strike, one thing I can’t understand is why your workers would strike during the off season, particularly after a warm winter. But, that’s a separate issue. Where do you see the negotiations going as far as-- What’s your best guess how long the strike could last? And also, have you had a strike like this in the recent past?

I’ll answer your latter first. We -- The last strike we had was a two week strike in 2000. So it was-- We’re on a three year contract up there. Second of all, to respect the rights of the negotiation process, we don’t want to negotiate in the press. So the only thing I can go back to is my comments and saying we are meeting with them currently. We’re meeting with them today. Progress in negotiations to date have been slower than we would have hoped to be. But, progress is being made. And we hope to get it resolved without any impact to the business.

The key issue was wages or--?

Again, I -- The wages always are an issue in a strike, the monetary side of it. But there’s issues that need to be resolved at the bargaining table. And I prefer not to negotiate those outside of the room that the bargaining group is meeting in.

Well, negotiating -- Telling us what it is isn’t exactly negotiating in public, but, what the issues are.

Yeah. The issues always center around monetary benefits for the workers.

Okay. Okay. Well, great. Thanks for the update.

Our next question comes from the line of Mary Beth Connolly with Goldman Sachs.

Good morning. Thanks. I apologize if you’ve already addressed this somewhat. But I just wanted to touch briefly again on SOP pricing. Obviously up a lot in the first quarter. And can you talk a little bit about what you’re seeing to date in the second quarter? And then sort of your projections for the year? Are we looking at-- I would assume that something quite as high as we saw in the first quarter? But could it be as high as 10% pricing increase year over year for the full year? And then secondly, just wanted to touch on the operating margins from that business. Obviously, again, a big jump in the first quarter. But sort of what order of magnitude are you expecting to see for the full year?

Okay. We’ll divide that up a little bit. I’ll take the first one. And let Rod address the second. On a pricing format is we’ve always said pricing lags in that business because of the contracts we have and how we have to stage those and bring them into line. And as you remember, we had a $20 price increase on February 1. So, yes, we would continue to see some price improvement on the SOP business to further reflect the full implementation of the $20 a ton price increase which was announced. So, while we’ve had a nice year-over-year gain, we would further expect some gains in selling prices as we implement all of the price increase.

And Mary Beth, as we’ve mentioned in the past, there is a mix effect on a quarter-to-quarter basis depending on the quarter. Some quarters are more heavily weighted towards domestic business, which is the case of the second quarter. Domestic business tends to have a higher price for us than the international business. And that is more heavily weighted towards the third quarter. So, we typically tell people to look at the year-over-year and not the quarter-on-quarter price changes for an expectation of what to expect.

The first quarter price was reflective of the two or three -- I think it was two -- price increase announcements that we implemented in 2005 and then just a partial reflection of the February 1, 2006, price increase. So as we go through the year, and offset any other price movements in the price of the product -- either announced price increases or anything else -- then we would expect that that gap year over year and the price improvement would narrow but, nonetheless, be higher than what the prices were in the prior year period. And that really brings us to margin which is for 2006, we don’t see any tremendous increase on our cost structure in 2006 beyond what we’ve seen in the first quarter with some higher energy prices. So, as those price improvements are-- continue to roll through the rest of the year, I guess, you can probably do the math from what you can expect, what could be expected from the margins. But the cost isn’t going to be - We aren’t projecting that it’s going to be impacted any further than what it has been in the first quarter.

There is, however, a supply contract that we have for some raw materials in that business that will push costs higher in the 2007 year.

Okay. Great. Thanks.

[OPERATOR INSTRUCTIONS]

Our next question comes from the line of David Silver with J.P. Morgan.

Morning, David.

Hey, good morning. I had a question, I guess, about the general trade business. I know that volumes are down. And there was a reference in your comments or in the release about reduced consumer deicing sales. And I was wondering if that effectively accounts for all of the volume difference on a year-over-year basis? And if it does, or maybe you could relate the change in the average price to the change in the sales mix or the composition of your general trade sales. In other words, did the average unit of salt in that group go up by about 6.5%? Or was it kind of a mix effect due to the different composition of the business?

As you would expect, our general trade business in the first quarter is heavily weighted on volume to deicing salt. So all of the, actually I think Rod can give you the details here. But, all businesses excluding deicing business performed extremely well during the first quarter of this year. The deicing, both the premium deicing and the standard deicing product was severely impacted by the mild winter. So, we still feel very, very good about the mix of the business, where it’s going, the growth that we’re making. You will not see the kind of decreased volumes going forward as we get into the second and third quarter, which is more traditional salt applications. You’ll continue to see general trade business perform extremely well.

Yeah, David. I guess maybe to answer the second part of your question, which I think-- Did I hear it right? You were wondering about whether there was any mix effect on the price?

That’s right. I mean, would you-- How would you characterize the change in the average price if you were to separate out the mix effect?

Yes. It is interesting that I would say it’s almost no effect on the average price. Although that’s interesting how that works out.

There are a variety of deicing products that we have on our product line. We have some basic deicing products that sell for lower prices, such as just basic bagged rock salt. And then we have some much higher end products that are more pure and have some enhanced melting point characteristics and other characteristics about them that make them more valuable. And those are some of the highest priced products that we have.

But the mix effect on the loss of the sales, of the deicing sales, in this quarter did not have an impact. In other words, the loss of those sales, the mix of those, was about the mix of the sales price that we had for the quarter. So the price increase that you’re seeing is more indicative-- is indicative of the price increase for the year, without mix effect.

I think it’s reflecting, if you remember in prior conference calls, we said we had a very substantial price increase that we put in in late last year. And also, some of that goes into effect immediately. Some of that goes into effect as the contracts come due. And I think what you’re seeing in those results are the success that our group is having on moving the prices up in the market place as a whole.

And, David, one last thing I’ll say, and this could help everybody maybe to put a little bit more understanding to just how the deicing results affect our general trade business with the consumer deicing. In the second quarter of last year, we had right around 500,000 tons sold in that business. And effectively, in the second quarter of the year, there’s no deicing sales. I mean, there might be the occasional thousand tons or something. But, it’s a very minimal amount of deicing sales in Q2. So that kind of represents our baseline non-seasonal business in that particular product lines-- in the general trade product lines without deicing sold. Then the remaining quarters have-- The third quarter has some early buy deicing salts. But really the fourth and the first quarters have the effect of the consumer deicing salt in them. So, last year’s quarter of five -- it was 626. This year’s first quarter was 541 -- a pretty significant decline in volumes that’s almost entirely effectively all due to consumer deicing volumes.

Okay. I wanted to ask a question, I guess, about the comment in the release regarding the substantial increase in your barge rates that went into effect January 1st. So I was wondering how you would-- if you could characterize that either qualitatively or quantitatively or however you feel you’re comfortable with? And can you maybe discuss how that might affect your bidding strategy going forward? I mean, I’m assuming -- It sounds like these barge rates are going to be in effect for a while. So you’ll be bidding now for stuff that might be delivered some time in the future.

That’s correct.

If you could just talk about that issue?

Well, from a competitive standpoint, I’d rather not talk about exactly what our rates are. I can tell you that our contract expired the 1st of January. We have renegotiated with our major supplier. There was a significant price increase that we absorbed in that business. And that cost is not an insignificant number on a delivered basis. We do anticipate that the whole industry has absorbed those type of rates going forward. We would anticipate that the bids this season in the southern area of the country with the river system, the competitors will reflect those cost increases in the bids that go forward. So, while the cost has increased significantly, we feel comfortable that we’re not at a disadvantage to our competitors from the delivered cost standpoint. And that the bids hopefully will reflect those as they come out.

Okay. Thanks. And I guess the last question, if I could just touch on-- Rod, you discussed the refinancing of the 10% cash pay securities in December. And you talked about a lower overall interest expense in the first quarter. I was wondering, could you give us an estimate for what your all-in refinancing rate is for the $325 million refinancing that was completed in December?

Yes. The interest cost on the term loan is right around the 6.25% range. We had locked in about $250 million of the term loan at 4.87% plus 150 basis point spread on the LIBOR. So we have 2/3 to 3/4 of that locked in over the life. And the remaining piece is floating with LIBOR. But that’s got to be somewhere in the 6.25 to 6.5% weighted average rate.

Okay. I apologize for making you repeat that. I do remember reading that in the annual. Thanks a lot.

Hey, David?

Yes?

I came back. I was kind of unfair maybe on how I was describing the barge rates. So maybe I can put it in context of what market rates have done to kind of help you a little bit. We’ve always said that the delivery cost of product is about 30% or so of the bid price that is out there. And bid prices now are probably somewhere in the neighborhood of $35 or so. So, if you look at it and you say what as an industry has barge rates done? They’ve essentially more than doubled in the last 12 to 18 months. So you can see that that’s a very significant cost that cannot be absorbed by the industry. Does that help any?

Yes, it does. Thanks for that clarification. I appreciate it. I wasn’t trying to make you say anything you didn’t want to say.

You can understand what costs represent. 30% of your cost is out there. We’d rather not be specific. But I can be general from an industry standpoint of what we think.

I was wondering how timely or how often those rates change. And then maybe how you were thinking about it in terms of formulating your bid strategy.

Okay.

Thank you.

There seem to be no further questions. Do you have any closing remarks?

Yes. Thank you, operator.

Before we conclude our call for the day, I also want to one more time reiterate that Compass has been in business for a very long time. And we’re accustomed to the occasional mild winter quarters as we just experienced. We expect them and we plan for them. In fact, I believe that our ability to accommodate dramatic differences in weather is one of the key Compass strengths. We believe that we demonstrated that strength this quarter. And we look forward to demonstrating our discipline throughout the remainder of the year.

Once again, thanks for joining us today. Goodbye.

This concludes today’s conference call. You may now disconnect.