J M Smucker Co (SJM) 2007 Q1 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the J. M. Smucker Company's first-quarter 2007 earnings conference call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mr. Mark Belgya, please go ahead, sir.

Good morning everyone and welcome to the J. M. Smucker Co. first-quarter 2007 earnings conference call. I am the company's Chief Financial Officer and thank you for joining us. Also joining us from the company this morning are Tim Smucker, Chairman and co-CEO, Richard Smucker, President and co-CEO, Vince Byrd, Senior Vice President of our consumer market, Steve Oakland, Vice President and general manager of consumer oils and baking, Mark Smucker, Managing Director of Canada and Vice President of our international market, Paul Smucker Wagstaff, Vice President our foodservice and beverage market, participating in his final conference call Fred Duncan, Senior Vice President of special market you will be retiring at the end of this month.

After this brief introduction I will turn the call over to Richard for some opening comments; I will then review the financial results for the quarter and Tim will provide closing remarks. At the conclusion of these comments we will be available to answer your questions. If you have not seen our press release it is available on our website at Smucker's.com. A replay is available on the Website in downloadable MP3 format. If you have any follow-up questions or comments after today's call please feel free to call George Sent, Director of corporate finance and investor relations or me.

I would like to remind you that certain statements in this presentation and during the question-and-answer period that follows may view to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995. I invite you to read the full disclosure statement concerning such forward-looking statements in the press release.

I also want to point out that the company uses non-GAAP results for the purpose of evaluating performance internally. Additional discussion on non-GAAP information is also detailed in our press release. With that, I will turn the call over to Richard.

Thank you, Mark and good morning everyone and thank you for joining us. Let me begin by summarizing the key points for the quarter. First, we achieved good sales growth with a particularly strong quarter for our Smucker's and Jif brands. Second, despite significantly higher raw material cost over last year we converted our sales growth into solid earnings. And third, we continued to implement our strategy to grow sales and improve margins, specifically we restructured our Canadian business to focus on our core retail brands. We signed an agreement to sell our nonbranded grain based businesses and acquired the Five Roses retail flour brand, which complements our existing branded portfolio. We also continued to invest in new products. Last year we introduced more new products than ever before and there is a tremendous amount of activity focused on keeping the new product pipeline full.

And finally, our core brand continued to exhibit good growth with sales and share gain. We had a very strong quarter in our consumer strategic business area with good growth and record share for our Smucker's, Jif and Hungry Jack brand. We also recorded share gains for our Pillsbury brand. For Crisco, we are seeing improve sales in our new products and look for additional sales from expanding distribution of olive oil and the introduction of peanut oil with shipments starting in the second quarter. We will be supporting all of our brands with significant marketing and merchandising and will have additional new products for all categories during the seasonally strong second and third quarters.

Our special market segment also contributed nicely to our top-line growth during the quarter as each of the business areas in that segment showed year-over-year growth. For the quarter we were able to increase earnings despite significant year-over-year raw material cost increases. We have seen additional cost escalation and expect these pressures to continue throughout the year. We will look for opportunities to offset these cost pressures through both pricing changes, as well as by reviewing discretionary spending as evidenced this quarter with the decrease in SD&A costs. We have good momentum in our brands and our investments in growth platforms and the marketing support should lead to continued sales gain. We remain committed to our strategy which is to own leading North American icon food brands sold in the center of the store.

With this in mind, as I mentioned earlier, we announced the sale of our Canadian grain based food service and industrial businesses last month. This transaction is expected to close by the end of September. Also during the quarter we acquired the retail portion of Five Roses, the leading flour brand in Québec. Five Roses products include all-purpose and other specialty flours and complement our Robin Hood brand in Canada. The brand has annual sales of approximately $20 million in Canadian dollars.

I would now like to turn the call back to Mark to have him review the quarter's financial results.

Thank you, Richard. Sales for the quarter were up 3% compared to last year and up 5% excluding industrial. Our GAAP earnings per share were $0.50 this quarter and $0.51 in the first quarter of last year including restructuring and merger integration cost detailed in our press release. If you exclude these charges in both years earnings per share were $0.59 this quarter and $0.56 in last year's first quarter also an increase of 5%. Nearly all of the quarter's restructuring costs were associated with the pending Canadian divestiture, the non-cash charge of $7.6 million or $0.09 per share primarily reflects the write-down of long-lived assets being sold to their estimated fair market value and has been accounted for as depreciation expense. Transaction costs along with employee related expenses such as pension and severance, will also be included in the restructuring. As previously announced we estimate these costs will total 10 to $15 million and the remainder of the costs are expected to be realized over the next several quarters.

Our gross margin declined primarily due to increased restructuring charges. And higher raw material costs notably soybean oil, certain fruits such as strawberries and blueberries, and wheat both in the U.S. and Canada. Energy-related costs such as fuel, freight and packaging materials also adversely impacted margins for the quarter. We were able to offset the impact of the lower gross profit with a decrease in our SD&A spending for the quarter. Lower administrative and marketing expenses were partially offset by higher distribution costs. The decrease in marketing is more related to timing as we do expect full year marketing spending to be up over last year. Excluding merger integration and restructuring cost to both years our operating margins would have improved from 10.6% in last year's first quarter to 10.8% this year.

Sales in our U.S. retail segment were $353 million in the first quarter up 3%. Sales in the consumer business area were up 8% on strong performance of Smucker's, Jif and Hungry Jack. While sales in the oils and baking business area were down 4%. About one-half of the decline in oils and baking was due to lower industrial oil sales and the remainder of the decline was split between retail oils and baking. Pillsbury sales were essentially flat for the quarter. Uncrustables experienced another good quarter and sales across all channels increased approximately 21%. The growth was mainly in our consumer channel as we are continuing to expand distribution and getting good response to our new variety. With the start of back to school we would expect expanded distribution and new varieties to fuel continued growth in the school channels as well.

In the special market segment sales were $173 million for the quarter up 3% from last year and up 9% excluding industrial. The beverage area experienced strong sales growth in both its branded and nonbranded businesses, up 21% overall in the quarter. Our R.W. Knudsen and Santa Cruz Organic brands are well-positioned in the natural and organic area. The food service business area was up 5% driven mainly by the traditional food service market while Canada was up 4%. The growth in Canada was driven by the impact of favorable exchange rates and the addition of the Five Roses flour brands during the quarter which offset declines in baking and the planned rationalization of certain unprofitable businesses.

The tax rate for the quarter was 35% as expected compared to 34.4% last year. We continue to expect this year's full rate to be approximately 35%. The unfavorable impact on earnings per share caused by the quarter's higher tax rate was offset by the lower share count this year due to the Company's previous share repurchase activity. During the quarter there were no additional share repurchases against the 2.7 million shares available under the Company's authorized repurchase plan. However, for a substantial part of the quarter we were under a quiet period related to the sale of the Canadian business and were unable to enter the market to purchase shares.

As noted in our press release we are entering into a rule 10b5-1 trading plan to facilitate the repurchase of up to 1 million of our common shares under our previous authorization. The purchase period will commence on Tuesday, August 22 and the aggregate number of shares purchased will not exceed 1 million. I would now like to turn the call over to Tim.

Thank you, Mark and good morning everyone. We had a solid quarter with good sales growth and despite significant cost increases compared to last year, we were able to leverage the sales gains into comparable earnings growth. Like many food companies we continue to face cost pressures. We must be diligent in offsetting these increases whether by reducing discretionary costs across the organization or by pricing actions.

Last year we announced price increases in food spreads, peanut butter and in several other products. This quarter we also announced increases for our oils and baking products and on various food service and beverage categories. Despite these cost pressures we remained committed to investing behind our brands and recognize the long-term nature of brand building. It is important as a company that we look past the near-term effects of the cost environment and remain committed to our strategy.

This was evidenced by our announced divestiture of our nonbranded Canadian grain based businesses. On a day-to-day basis it is reflected in our willingness to invest in our brands, our customers and our consumers. We previously stated that we would expect sales this year to grow by our core growth assumption of approximately 4%. This assumption is exclusive of acquisitions or business rationalizations. The divestiture of the Canadian business will result in a reduction of approximately $100 million in sales for the remainder of this fiscal year. However, the divestiture is expected to have only a slightly negative impact on earnings in the current year. Excluding any restructuring related costs.

Overall, we would expect earnings per share to grow in line with our core growth assumption. We believe we have a good momentum as we enter our seasonally strong second and third quarters. Some of the reasons for our enthusiasm include, we are unveiling a new joint peanut butter and jelly campaign which will promote Smucker's and Jif together for the first time on television. During the quarter we are introducing two new Jif commercials which extend our popular choosy moms campaign to grandparents. And we recently introduced new campaigns for the Smucker's and Bick's brands in Canada. In the baking area we have commitments for in-store product displays which will leverage the iconic doughboy.

We have also introduced many new products that we think will support growth in the upcoming quarters including organic food spreads, Jif To Go and peanut oil and our increasing distribution on our olive oil and ultimate deserts kits. And we will be running another multi-brand event in the U.S. and Canada this fall as we continue to leverage our portfolio of brands. The event was very well received last year and we'd expect similar reception with this year's plan.

So, in summary, first we achieved good sales growth in the quarter; second, we converted the sales growth into solid earnings; and third we continued to implement our strategy to grow sales and improve margins with portfolio changes, a strong new product pipeline and growth and share gains in many of our core brands. Although we are cautious about the cost environment we have a great start to the year with positive momentum. We thank you this morning for your time and now we are happy to answer any questions.

(OPERATOR INSTRUCTIONS) John McMillin of Prudential Equities.

Good morning everybody. Basically you are keeping your fiscal '07 earnings growth target identical to what it was when you reported the fourth quarter, is that correct?

That is correct, John.

And then just in terms of announced price increases for what you've taken and whether or not there was any retail buy in of any of it in this first quarter, can you just kind of review what was done and whether or not there was any kind of trade impact?

John, this is Vince Byrd, I will speak to the consumer items. First of all last year we had taken price increase in the first quarter as well. And then this year we announced on several other segments, but some of those were actually before the beginning of the fiscal year such as potatoes. But to answer your question specifically we do not believe there is any significant buy in.

Hi, John, Steve Oakland. In the oils and baking business, oils price increases went out this week, so those price increases obviously will effect next quarter. Baking price increases were out much earlier than that but they again go into effect this quarter not in the first quarter. But also in those commodity businesses it is pretty standard trade practice that the buy ins are contractually limited; we have a pretty tight policy on that due to just the nature of those businesses. We try to minimize those and none of that was in the first quarter, that will affect the second.

So if organic sales in the quarter was up 5%, roughly what percentage of that was volume versus price? I guess is there any currency in there from Canada?

Yes, there is some exchange rate impact on that 5%.

And a rough breakdown between volume and price?

Most of it is volume, we don't give specifics but it was a good volume quarter.

And if oil and baking was down 4, it does imply some big numbers for Jif and Smucker's. Could you give us those numbers?

John, as you know we typically don't give it by brand. But I think as we said in the script we were up 8% for the quarter. And that follows last year where we were up 7%. It is fairly equal amongst the brands.

Just a longer-term question because there's been a lot of discussion about uses of soybean oil in areas to promote fuel and -- I don't know anybody that uses more soybean oil than you do for a number of your products including peanut butter; I guess Unilever would be close. But this move up in soybean oil might be more than just a cyclical trend and might have some secular implications. What does that mean for the company longer-term if anything? And are you reviewing it?

Well, hi, John, Steve Oakland. Absolutely we review it. There are two things, we sell both soybean and canola oil. Globally the canola oil business is much more impacted by the fuel markets. Canola oil makes a better bio-diesel fuel basically than soybean does. So we've seen that price and those prices separate more than historical levels and those are probably going to be longer-term impacts. The amount of soy, soy was chased in the energy markets, there is no question this year. There is a lot of capacity coming on for bio-diesel fuel over the next year or two. But there is also a lot of room for capacity in the farming community. So we think over time we will see acreage shifts; we will see acreage go from CRP to soy. The farmers are pretty efficient, there is a lot of room left in South America. South America has a big influence on the crop. So we may see some price movement, we've seen this business be very price transparent historically. We've seen some of the most volatile markets in years. And been able to pass those up and down. So I think we focus more on the brand and the value and will price it where we have to to be competitive.

And just my last question. Your share repurchase is certainly something to be applauded. But does it signal kind of less deals out there?

John, this is Mark. No, I don't think so. I think that over the last 18 months, two years we've made a commitment in terms of share repurchase as a strategic use of cash. But we clearly view acquisitions as a key use of the cash and we do feel that there will be opportunities come available as we've talked over the last few years.

Okay, thanks a lot.

Christine McGlone at Deutsche Bank.

Good morning. First question, how much did the profitability of the Scottsville facility contribute in the quarter?

Christina, this is Mark again. We won't get into specifics on how much it contributed. What I can say is that we have seen profit improvement over our what we would call a venture for the overall Uncrustables, both in the retail and food service channel. So if you look at it as a total venture there was profit improvement over the prior first quarter.

I will say, it's Richard, it is still relatively significant in the total. So it's not a major factor for the first quarter.

And does that profitability improve as the fiscal year progresses or will it be relatively flat just because of the piece of new product introductions?

I think it will continue to be affected by the rollout of new products. I wouldn't see a quarter over quarter improvement necessarily, it will be contingent upon our marketing spend.

Okay. And that brings me to my next question. In terms of marketing, so it was down in the quarter but it's more of a timing issue. It sounds like second quarter and third quarter are going to receive the bulk of the spending. What are you planning, how much are you planning to increase it for the year? And then can you compare the timing of the quarterly spend versus last year? I don't remember if last year it was the same pattern or if it was more evenly distributed.

I would say obviously because of the seasonal nature of some of our businesses you're going to see more of it into second and third quarter. I guess in terms of overall spend obviously we will be up over last year, I'm not sure that we want to say how much. But I would say it is comparable to what you saw last year. Clearly it will exceed our sales growth and will be up for the last nine months.

So you mean the pattern comparable to last year?

The overall spend.

Okay.

The increase.

Okay. And then in terms of year-over-year changes in raw materials I think someone had commented that you see cost escalating. So would we see the environment kind of worsening as the fiscal year progressed or how would that pattern work?

If you did catch that, we did say escalation of certain areas of cost have or are going up more than we originally thought when we spoke to everyone in June. But as we have in the past we will continue to try to cover those with watching our discretionary spend and pricing activity.

I would add, that there is a couple, specifically peanuts, or unknown at this point. So it's a little bit too early to tell whether in total we will be dealing with cost increases or not in that particular segment.

And, Steve, if is Pillsbury sales were flat in the quarter what happened to Martha White sales, were they down pretty significantly?

You know actually Martha White was down for the quarter. And if you look at the integration of the IMC brands we really got out ahead of the Pillsbury thing first. And we needed to have it ready and all of the packaging and formulas and promotional material ready for this year. Martha White did take a little bit of a back seat to that, there is a lot of things we are transitioning case pack and UPC codes and those mechanical things. This is our slowest quarter, this is the best time to do it seasonally. But it did suffer from that activity.

Okay, and did your competitors increase pricing in baking?

We have seen price increase in other price increases in baking. As far as the major mix competitors, no, actually we matched some of their pricing, they had gone up before us.

And then I guess Mark, could you give us an idea of what a good share count would be to use for the year?

Yes, probably around 57 million shares would be a good use; as we buy the shares on our 10b5-1 plan of course that will be weighted over the remaining part of the year.

And then last question the sales for industrial I don't know why they are still there; I think I'm confused with the timing of how -- when that business sales lapsed.

That is a fair question. There was a little bit of spillover last year in the first quarter that I commented on but those sales now are out. So you will not see that kind of compact going forward.

Okay, thank you very much. And good luck, Fred.

Thank you.

George Askew of Stifel Nicolaus.

Hi, George Askew with Stifel Nicolaus. Good morning, everyone. Just a couple of quick questions. On operating margins clearly we saw the modest margin expansion here in the quarter, 20 bips by my calculation. And Richard of course you mentioned it is part of your strategic goal sales growth and margin expansion. At this point in the year are you confident or comfortable in operating margin expansion for fiscal '07?

Yes, I think we definitely are.

Okay, excellent. And then in terms of the 10b5-1, Mark you kind of addressed this a moment ago but is there a set timeframe in which that needs to be fulfilled? I know there is discretion obviously as part of that program. But is it the kind of thing you would expect to be done by the end of the fiscal year?

There is a set time period George, that will be built into the time and we actually are finalizing that. But if you look at our last one, we did fill that reasonably quick so we would anticipate a similar response. But we do have the flexibility of putting an end date out in the future if we so choose.

Okay. Good, I will leave it with that and talk with you a little later. Thank you.

Eric Serotta of Merrill Lynch.

Good morning. I just wanted to get some additional background into what the dynamics in the consumer oils side. You commented that the retail oils I guess were down, account for about half of the overall 4% decline attributable to oils and baking and you commented that Crisco was flat -- I'm sorry -- that Pillsbury was flat. That implies a pretty steep decline in Crisco if I'm not missing something like you said Martha White was down. Could you give me some additional color into whether that is an appropriate conclusion? And why that was down in the quarter?

Hi, Eric, Steve Oakland. Crisco was down. Again a seasonably small quarter for us. And as Mark commented earlier the timing of our marketing spend we find it much more efficient if we stack those marketing activities. So two things are at play here. First of all we have marketing activities and customer promotional activities that we know are happening in the core quarters of second and third fall bake. So we needed to protect those. And we had a very volatile and uncertain cost environment. And so if there is any quarter we are going to be conservative until we get a really good look at what our costs are and our committed pricing is going to be, it's the first quarter.

We have those things pretty much locked in right now, we've taken our pricing action this week literally to assure that we are funded properly for those things. And we just think it's the most efficient way to make the whole year. We don't really look at it from quarters. The oils business especially is so driven by customer performance that you really have to manage it by customer on an annualized basis because the trade funds balance the pricing balance the promotional support.

Sure and you commented on -- I guess you touched upon the raw material visibility that you have on the Crisco side. I'm wondering whether you guys could comment a little more broadly on the visibility you have to some of your other raw materials for the rest of the year? I know you don't like talking about specific hedges, but could you talk about your visibility into flour and particular sugar and fruit? Or at least in aggregate?

Well fruit, we pretty much know what fruit is; that is the one roughly during the summer season we get most of our fruits in with the exception of grapes and those come in October. So we pretty much have a good understanding of what the fruits are. Vince mentioned peanuts don't come in until the middle -- late winter, early in the next year. So we think that is going to be a decent crop but you never know until it comes then. So that one we are waiting a little bit. Flour, Steve.

You know flour obviously is traded in Kansas City and Chicago and the hard what/soft wheat, soft wheat was great year, hard wheat was not. Those are high costs. And obviously we've got to have the product in the bag or pretty close to it for fall bake right now. We know what the fall bake prices are; they are coming off a little bit so Easter bake probably looks a little bit better. But those are traditional futures markets.

And we do hedge and so we take the best position we think we know at the time and so we have some hedges.

And it matches our -- the nice thing is our customers work so far out now that we can line those things up with customer commitments.

And then potatoes would be the other one, we won't know until the beginning of the new calendar year roughly.

And then moving on you mentioned higher distribution costs in the quarter. I'm wondering whether you could give any color on whether you saw any benefits from the revamp of the distribution network from last year, were the higher costs really driven by higher energy prices? Did you see any benefit from that distribution network retooling?

Eric, this is Mark. Yes, we clearly saw a benefit as we expected and have seen during the last 6 to 9 months. Service levels are dramatically improved over the same period last year so it is functioning. The cost is not where we want it, and we continue to work at that service levels. But certainly played out as we expected. When you look at the overall increase, just a couple of comments, part of the increase was actually associated with our Uncrustables business. The business is up dramatically over last year and the volume of that obviously is driving some of the increase in distribution. We've also done some realignment in our Canadian distribution network and we've seen some, just some higher costs in one of the areas in Calgary where we are. But the overall DC that we've got in place in the U.S. is actually, it's up slightly. But one good story is from a cost perspective it actually compared to sales is the lowest point of the last four quarters. So we are seeing some improvement. And we would expect that to continue over the course of the year.

Great. Thank you very much.

Farha Aslam of Stephens Inc.

Good morning. Just a couple of questions, going into fall bake could you share with us some thoughts of what you are doing differently this year versus last year now that you have IMC under your belt for one additional year?

Hi, Steve Oakland. The IMC brands I think it was really fundamentals at first, it was the product, the packaging and now the distribution and there were core customers in the South and in baking markets where we didn't have distribution in. We've been able to fill those. Now we need to take those things out and communicate them. We are doing a lot of that in-store, Tim mentioned in his presentation, we are leveraging the doughboy, we've got some really unique merchandising vehicles that will be across the country this year. So it's really the same things we do on our other brands. The one other thing in the oils business, the one new fall bake item is peanut oil. And we've had great acceptance across retail channel and not a big item in most of the country but a very big item seasonally especially across the South. So a nice new entry and it fits great with the brand.

And then my final question is in terms of marketing and the change in marketing spending, would that be a penny or two this quarter or not that significant?

It's probably about a penny, it's not a significant amount.

Thank you very much.

Ann Gurkin of Davenport.

Good morning. Just wondering, I see more reports and studies on the organic business and can I just hear a little bit your strategy to enter into that faster growing segment? I know you have products and are you shifting more marketing that way or more of your innovations skewing that way?

Just a second, let me just before I turn it over to Paul. We've been in organic for a number of years; in fact we through our beverage business helped establish the organic standard in the U.S. So it is not new to us. So just as an overall comment. Paul.

Hi, this is Paul Wagstaff. On the beverage side as Tim mentioned we've been in organics for a number of years; those products continue to do very well for us and we see expanding some of our product launches in the organic area. So again we are very comfortable and pleased with our product line.

And then I would add from a consumer perspective I think you are aware that we've introduced three new organic food spreads, we put organic into our natural peanut butter. And those products are doing well and those would be more mainstream as opposed to where Paul was speaking to which primarily would serve the health food channel and obviously some grocery channels. But in addition to that we are looking -- we've been challenged to look at other product lines to see where an organic opportunity might present itself.

Great, thanks.

(OPERATOR INSTRUCTIONS) Karen Lamark of Merrill Lynch.

Good morning. On the buybacks can you comment on the potential that you might buy in the open market beyond the 1 million shares as part of the 10b5-1 plan?

Karen, this is Mark, we will continue to look at -- I think I mentioned earlier we have an authorization from our Board of 2.7 million shares. And the reason we put the 10b5-1 plan in place is it gives a little flexibility around blackout periods. So we have purchased in the open market in the past and we see that as obviously another viable option. But we'll just sort of see how it goes against our original plan.

Okay, and then separately. With respect to portfolio changes are there any other divestitures of noncore more commodity like businesses that you are considering, a la the Canadian asset divestitures? Thanks.

This is Richard. Probably not. We are actually in pretty good shape. Our portfolio is pretty rationalized at this point in time and what we have left are basically our core brands. We feel good about that.

Thank you.

Chuck Cerankosky from FTN Midwest.

Good morning everyone. Looking at some of these rollouts you are talking about can you kind of give us an update where you are in the rollout of the olive oil and the Ultimate Desert kits? And what kind of rollout pace we should expect for the peanut oil and the organic food spreads and also the Juice To Go?

Speaking about olive oil, we really took that into 5% of the country, really Texas and Florida for tests. We learned a lot. That will go to about 25% of the country; that starts shipping in September. Those commitments have all been made but we will start shipping that in September. Peanuts oil is available nationally but it is really a Southern and a little bit of the Midwest phenomenon. That is already out, it will ship October November as well just because of the Thanksgiving nature of it.

And then on some of the consumer products Jif To Go, for example, is primarily a test opportunity. We have expanded Uncrustables significantly in terms of the new items and we continue to actually try to gain distribution, incremental distribution on the cheese side. And organics are pretty much, have also launched in the first quarter although there is a little more pipeline to fill in the second quarter. So I think overall we are probably where we want to be with a little bit more to come though in the second quarter.

Are you saying the organic fruit spreads are rolled out nationally?

To the most part we took a measured approach in terms of because of the fruit availability, I have to get back to you with the specific ACB at this point.

All right, thank you.

That is all the time we have for questions today. Gentlemen, I will now turn the conference back over to you to conclude.

Well, again, thank you very much for your interest today. We are excited about the progress to date and look forward to another great year. So thanks a lot and have a great day.

Ladies and gentlemen, if you wish to access the rebroadcast after this live call you may do so by dialing 1888 203-1112 or 1-719-457-0820 with a pass code of 2844407. Or by accessing the Website for a downloadable MP3 format. This concludes our conference call today. Thank you all for participating and have a nice day. All parties may now disconnect.