Summit Materials Inc (SUM) 2015 Q2 法說會逐字稿

Greetings and welcome to the Summit Materials' second quarter 2015 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. [Rodney Nacier] of Investor Relations. Thank you, sir, you may begin.

Good afternoon. We would like to thank you for joining us today for Summit Materials second quarter 2015 earnings conference call. Today's conference call is hosted by Tom Hill, Chief Executive Officer; and Brian Harris, Chief Financial Officer. This afternoon we distributed a press release detailing our second quarter financial results with can be found in the Investor section of our website at summit-materials.com. During the call, we will also review our second quarter presentation, which is available by accessing the live webcast in the Investors section of our website.

I would like to remind you that management's remarks and answers to questions on today's call may include forward-looking statements which by their nature are uncertain and outside of Summit Materials' control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some risk factors that cause actual results to differ, please see the Risk Factors section of Summit's perspective dated March 11, 2015, filed with the SEC in connection with this IPO. In addition, we will refer to certain non-GAAP measures on this call. You can find reconciliations of non-GAAP measures for historical period, the most directly comparable GAAP measures in the press release.

With that I will turn the call over to Tom.

Thank you, Rodney, and welcome to our second quarter 2015 earnings conference call. Turning to slide 3, I will begin with a review of our operating highlights. Brian will then give you some more details on our operating and financial results. After this, we will open the lines for questions.

Shortly after market closed today we issued a press release announcing the planned launch of a secondary equity offering in connection with our amended S-1, which was also filed after the market closed today with the SEC. As a result of this, today's call will be limited to approximately 30 minutes, and during today's Q&A session we will not be able to answer any questions related to the planned offering. In the interest of time, we ask that you please limit yourself to one question and get back in the queue for any follow-ups. Our prepared remarks will be abbreviated to make additional time for your questions.

Moving to slide 4, we will begin with our operating highlights. We have had many exciting developments since the beginning of the second quarter. I'd like to take you through a few them. During the second quarter we had significant growth in net revenues and margins across all of our lines of business. We grew net revenue by 13%, to $329 million, compared to the prior-year quarter. Our acquisitive growth strategy drove the majority of this improvement. Our organic growth of 3% reflected steady underlying demand in all of our regions despite significantly worse than expected weather-related challenges, mainly in Texas and Kansas.

On slide 5, we had organic price gains across all of our lines of business including 5% in our core aggregates operation and 9% in cement. Our price gains reflect the benefit of our pricing initiatives implemented during 2014 and 2015, our market leading positions in the overall resilient pricing environment as the construction cycle picks up steam. Underlying demand was strong in each of our businesses with acquisitions providing a further boost to our shipments primarily in aggregates and ready mixed concrete. In Texas, our overall business momentum remained positive and we expect the tailwinds of increased construction activity and favorable legislation, such as Proposition 1, to drive additional volume growth.

As a reminder, Proposition 1 provides for $1.7 billion of 2015 funding for the Texas highway program. The Texas Legislature has also recently passed a bill that will further increase highways spending by an additional $2 billion to $3 billion. This bill goes to the voters in November and we believe there is strong support behind it.

Turning to slide 6, all of this favorable momentum allowed us to deliver further adjusted EBITDA growth of 28%, to $78 million, and expand our margin by 300 basis points, to 23.8%. We are capturing additional margin at each phase of our vertically integrated business, reflecting improvement in all of our regions. These regional improvements reflect a favorable theme consisting of a higher mix of materials and product revenue, stronger volumes, organic price improvement and the accretive benefits of our strategic platform and Bolt-On additions.

Approximately 38% of our profit growth was organic with 62% from acquisitions. Our ability to effectively integrate companies, leverage our vertically integrated model and manage our costs puts us in a great position to further improve our profitability as we continue to grow our business.

Turning to our growth story on slide 7. As you can see, we are executing on our strategy to further expand our business through acquisitions. In July, 2015, we completed our previously announced acquisition of the Davenport Assets, which is an exciting milestone for our Company and significantly advances our position as a leading cement producer in the Midwest. With the addition of Davenport, we are well ahead of our initial acquisition goals that we set in the beginning of 2015.

We have discussed this transaction at length in the past, so I would just like to reiterate how excited we are to have completed this strategically important deal on what we believe are very favorable terms. It is early days yet, but the integration of these assets is going quite smoothly and we continue to expect this transaction to be immediately accretive to our earnings.

The market outlook for our expanded cement platform continues to be very positive in terms of both demand and price. As an added benefit, Iowa recently passed a $0.10 per gallon, or 45%, increase in the state's gas tax, which provides additional funding for Iowa's highway program moving forward.

Turning to slide 8, beyond Davenport, our acquisition game plan remains intact and makes us unique among top US construction materials company. An example of this is our June 2015 acquisition of Lewis and Lewis in Wyoming. Lewis and Lewis checks off all the boxes. It's an aggregate-based business, it's vertically integrated, it's a top player in its market and it's a very well-run operation.

As in many of our deals, we have known the owners for a long period time. The acquisition opportunity arose when one of the owners wanted to retire, while the other two owners wanted to stay on to run the business. Our integration and performance teams are already working with management to implement price optimization and best practices. This acquisition will also be accretive from day one.

Acquisition opportunities like Davenport are rare, but acquisitions like Lewis and Lewis are really the bread and butter of our growth strategy and a core focus of our development efforts. Our pipeline of potential deals remains strong and we remain optimistic about our ability to grow and add values to acquisitions.

With that, I'd like to turn it over to Brian, who will take us through our financial performance.

Thank you Tom. Turning to slide 9, we are pleased with the continued progress we're making to improve our price and profitability while enhancing our capital structure to meet our growth objectives. Beginning with the discussion on revenue by lines of business, as you can see, overall the news is very positive. Weather-related delays impacted our organic volumes in certain markets but the contribution from our acquisitions more than compensated for that in most cases. In our materials businesses, which includes aggregates and cement, net revenue for materials increased 30%, to $88 million, compared to the prior-year quarter.

In our aggregates operations, a 33% volume growth was led by our West segment, helped by the effect of 2014 and 2015 acquisitions mainly in the greater Houston, Texas; and Vancouver, Canada, markets. Our central segment growth purely reflects the demand improvement and our East segment also benefited from acquisitions. Average selling prices of aggregates moved higher in each of our regional segments to end the quarter up 5% year over year on an organic bases.

This was largely attributable to successful price increases implemented over the past 18 month, cycling into current project activity across most of our markets, which Tom discussed earlier. This sustained progress was partly masked by the reported flattish average price of aggregates which is a result of our recent acquisition activity in lower priced markets, specifically our acquired Mainland operations in Vancouver, have lower prices compared to the Company average due to their product mix.

In our cement operations, which for the second quarter consisted solely of our Hannibal cement plant, we were pleased to realize another quarter of solid price momentum. Average cement prices increased 9%, reflecting improving utilization rates and favorable market dynamics on slightly better volumes. In our products businesses, which includes ready-mix concrete and asphalt, net revenue increased 13%, to $173 million, compared to the prior-year quarter.

As you can see, our ready mix volumes had a strong move upwards, mostly driven by acquisitions. Average ready mix price, up 6% reported and 5% organic, also moved in the right direction, largely benefiting from the continued path through of higher industry cement prices, which is a very positive sign in our markets. In asphalt, volumes had a nice rebound in the second quarter, particularly in the West and Central regions, as we continue to work through healthy backlogs of activity, despite persistent challenging weather conditions, primarily in Texas. Asphalt average price growth of 5% is mainly due to a shift in product mix, which included a lower percentage of lower end base materials.

Moving onto our financial results on slide 10. In the second quarter 2015, we increased our further adjusted EBITDA 28%, to $78 million, compared to $61 million in the same period last year, generating incremental margins in excess of 50%. As a percentage of net revenue, our margin improved by approximately 300 basis points, largely as a result of our ability to increase prices organically across all product lines, the accretive contribution from our acquisitions and our active cost management.

Gross profit expanded 25.1%, to $115.8 million, compared to the prior-year quarter. And as a percentage of net revenue, gross margin improved 360 basis points, to 35.2%, compared to 31.6%. That progresses is partly attributable to a higher mix of net revenue for materials and products as a result of acquisitions completed since 2014, and also core profit improvement with each of our main lines of business. General and administrative costs for the second quarter were $40 million, representing 12% of net revenue, and were essentially stable compared to the year-ago quarter and in line with our near to medium term expectations. We reduced our interest expense for the quarter to $17 million, largely reflecting our repayment of debt in April, but I will provide an update there momentarily.

Our adjusted net earnings per share attributable to Summit Material, Inc., was $0.32 and excludes certain one-time items associated with our IPO and loss on debt financing's. On a GAAP basis, we reported a net loss per share of $0.01. For your modeling, I'd like to remind everyone that we calculate EPS on net income attributable to Summit Materials, Inc., which represents the number of Class A common shares available to public shareholders. For our reporting purposes, the number of Class A shares was approximately 26.6 million shares in the second quarter. We expect our corporate taxes to remain relatively immaterial going forward as a result of the utilization of NOLs in the short-term and the benefits of the tax receivable agreement in the longer-term.

Moving onto our balance sheet and liquidity on slide 11. In April, we redeemed $288 million of aggregate principal amount of our expanding 10 1/2 senior notes as par for some premium and accrued unpaid interest totalling $43 million. At June 27, 2015, we had cash of $13 million and outstanding debt of $827 million. Subsequent to the end of the quarter, we had a few debt capital market transactions which we detailed in today's press release and on slide 11, mainly in connection with Davenport. Of particular highlight, in July our $350 million 6 1/8 bond offering met strong investor interest and was upsized twice to accommodate a larger group of investors.

In our credit facilities, our amended term loan was an all-around success for us. We were extremely pleased to expand the facility and extend the maturity while lowering our rate by 1/4 of a percentage point. In July, we paid $370 million for the upfront cash portion of the Davenport transaction, and earlier today we used a portion of the remaining proceeds from our debt offerings and refinancings to pay down an additional $183 million aggregate principal amount of our outstanding 10.5% senior notes.

On a pro forma basis, for all of these transactions since the quarter closed at June 27, our total debt outstanding would've been $827 million and we would have total liquidity of $158 million, including $30 million of cash and $145 million of available liquidity on our revolving credit facility. As in the past, we will remain disciplined with our capital allocation, and we continue to expect to target a net EBITDA leverage ratio below 4.75 times at the end of 2015.

Beyond 2015 we expect to delever over time as our EBITDA grows. In regards to our outlook for the full-year 2015 on slide 12. Our business is moving forward according to our plan so far in 2015, and as we look to our market opportunity in the second half of 2015 we are revising our further adjusted EBITDA guidance upwards based on the completion of our Davenport acquisition. We now expect to be in the range of $265 million to $290 million versus $235 million to $255 million prior.

We would like to be clear: the inclusion of Davenport accounts for the entire increase in our EBITDA outlook and as we clarified last quarter, this range also includes up to $10 million of EBITDA from additional 2015 acquisitions such as Lewis and Lewis. For context, Davenport produced adjusted EBITDA of $55.6 million for the 12 month period ended March 31, 2015. Our outlook for Davenport's impact on our full-year 2015 results only captures the success of period beginning on July 17, which was the closing date of the Davenport transaction.

For the full-year 2015, we continue to expect our organic pricing to improve across all of our business lines. We also expect to achieve organic volume growth in our aggregates, cement and ready mix concrete businesses as well as in our asphalt, in addition to the incremental volumes from our acquisitions since 2014. We expect to incur capital expenditures excluding asset sales between $80 million and $90 million for the full-year 2015, with the increase reflecting our expanded operation platform coupled with our continued long-term expectation for CapEx to approximate 6% to 7% of net revenue. We expect to generate positive free cash flow for full-year 2015, largely weighted towards the second half of the year.

And with that, I'd like to turn the call back to Tom for some closing remarks.

Thank you Brian. The success of our strategy was demonstrated in our second quarter results. We continue to make solid progress on achieving our full-year goals. With the Davenport acquisition, we have enhanced our materials earnings exposure and overall profitability as we integrate these unique assets. Beyond this transaction, we have a strong pipeline of targets across our businesses to broaden our footprint while also remaining focused on growing volumes, prices and profits in our existing markets. As we move into the second half of 2015 our full-year outlook is supported by the improvement in demand we are seeing in our residential, nonresidential, and infrastructure end markets. This improving demand will help us to drive profitability while also continuing our tried-and-true acquisition strategy.

We are now happy to take some of your questions. As a reminder, we will not be able to answer any questions regarding the proposed secondary launch that we announced this afternoon. AND please limit your Q&A to one question. Operator, can you please open the lines for Q&A?

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead of your question.

Thank you for taking my question today. First, primarily focused on pricing for cement and aggregates. We saw some nice price increase for cement in quarter. Is it your expectation for momentum for price increases could prove as the year progresses, as lower price projects roll off? And likewise, with aggregates, a little bit more clarity on what drove the 5% organic increase? Mainly want to get a better sense of how much of this is regionality versus product mix versus just pure price increases in the market? Thank you.

Thanks, Kathryn, this is Tom. Certainly on the cement side, we see good momentum on the pricing side. As we get close to demand exceeding domestic supply, we would hope that we maintain or grow our cement price increases. And certainly, our early days at Davenport, we're seeing good pricing environment on the Mississippi. So I'd be very optimistic about continued success on the cement side.

I'll let Brian give you some of the details on the aggregate pricing, but certainly every market is different. Again, this is the ultimate local business. We have seen very strong pricing in the Texas market, less so in the middle part of the country and some reasonable in the Mountain states. But, Brian, do you have some detail?

Sure, on the aggregate side, on a pro forma basis, that is taking into account all the acquisitions. The average selling prices for aggregates consolidated was up by about 7.1%. That was strongest in the Western region, where it was about 8.9%. The Central region was about 6.5%. And the East was a little lower, in the 1% to 2% range.

Thank you.

Thank you. Our next question comes the line of Rob Hansen with Deutsche Bank. Please go ahead with your question.

Thanks, I just wanted to ask about the Lewis and Lewis acquisition. I wanted to get some numbers around it in terms of, at the very least, what the last 12 months' revenue was, how much you payed for it or what kind of multiple you did, and how you sourced the acquisition?

The acquisition -- our regional manager out there has probably known that family for 20 years. They did run a very limited process there, but the process was targeted at us as the buyer. We are not, at this stage, prepared to give details, but Brian?

Yes, the Lewis and Lewis acquisition will provide EBITDA that's consistent with the guidance that we gave, including up to $10 million of EBITDA from acquisitions during the course of the year and that is consistent with part of that overall number.

So will you fully hit that with this or is that it?

It's part of the overall strategy and so it will be contributing to that $10 million.

Okay, got it, thank you.

Thank you. Our next question comes from the line of Stephen Kim with Barclays. Please go ahead with your question.

Yes, thanks very much, guys. You gave in your presentation an interesting statistic. I think you said year-over-year profit growth contribution from organic was 38%. I just wanted to clarify, was that a gross profit number, or what profit was that? And in particular, would we be able to get an adjusted EBITDA growth contribution number from you?

I think we gave the adjusted EBITDA growth was $78 million -- the 28.4%, to $78 million.

From organic?

No, that's a combination of both that's reported.

Right, it was the segmenting of the two I thought was very interesting. You gave a breakout on slide 6? And you just said profit, I wasn't clear what profit that was? You know, what metric?

That is EBITDA.

Perfect. Great, thank you very much.

Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead with your question.

Good afternoon. I'm wondering if you could just talk about the range of midyear price increases that you're implementing across the product lines and region? I appreciate that it is a market-by-market decision, but I'm wondering if you could give us a summary overview, are you folks building pricing momentum as you go through the year? And then specifically, can you just comment on your ability to get price increases in asphalt in the West, pretty impressive price increases in the context of the move in input costs and how sustainable is that?

Just touching on the product groups. On cement, typically in the North where we operate, it's not very typical to get a second price increase later in the year. Season ends in the late fall, so it has not been typical for another price increase. So we don't expect one in cement, but we certainly do expect a good increase come January 1. No one has come out with that price increase yet that I know of in our market. So on the cement side, we should see continued strength on the price side, but no additional price increase at this point.

On the aggregate side, we are seeing good strength and we have announced a couple of -- in some of our local markets in Texas, some significant high single-digit price increases in some of the local markets in Texas. That would be probably the only area that we are seeing those follow-on price increases.

Asphalt? Asphalt is probably the toughest one for you guys to model and for us to model just because it relates so much to the type of liquid asphalt that you're using, the price can move around. But we are seeing good margin growth on the asphalt side, and we also expect that to continue with the reduction of input costs and a good solid market.

Thank you.

Okay, Jerry, take care.

Thank you. Our next question comes from the line of Todd Vencil with Sterne Agee CRT. Please go ahead with your question.

Thanks, good afternoon, guys. Tom, can you take a shot at maybe quantifying the impact of weather? And relatedly cement volumes were up only 1%? Was that a weather impacted number?

I have always shied away, for a couple of decades now, about trying to quantify the impact of weather. Some of the problems with that is, what is normal? It is so hard to define, and the weather impacts our different businesses in many different ways. For instance, in Houston, where most of your concrete is pumped, you can get a heavy rain and be pouring the next day.

In Austin, where a lot of our asphalt paving is over base, when it rains heavily on a Monday, you tend to be out of business for a number of days. I've always shied away from trying to quantify it. It's, I think, very difficult to do. On the other hand, as you all know, we had -- May and June were incredibly wet in Texas and Kansas. Those markets are plus or minus 50% of our EBITDA and certainly it had an impact.

And on the cement, was it an impact as well?

Yes, especially in the Kansas market. In the Kansas and Missouri market it would've impacted our cement demand.

Perfect, thank you.

Thank you. Our next question comes from the line of Adam Thalhimer with BB&T Capital Markets. Please go ahead with your question.

Congrats on the strong quarter. Can you give an update on the utilization at your Hannibal cement plant? And maybe if you're starting to see a pickup in that region?

We are going to be about 1.1 million tons out of capacity of 1.25 million short tons now, is what we speak. Again, it was wet for a while, so we are starting to see the demand flow through. I do believe that we are going to have a strong second half. I think all the markets are recovering. Iowa would probably be the best of the markets that we are in.

It's going to be a bit confusing for a little bit as volumes shift around between Hannibal and Davenport. But overall, the early days as we are at or above expectations as far as daily volumes in our combined cement operations. So, yes, we see demand getting better. PCA forecasts demand to exceed domestic supply in 2017. I hope that's a few quarters earlier than that.

Great, thanks, Tom.

Thank you. Our next question comes from the line of Robert Wetenhall with RBC Capital Markets. Please go ahead with your question.

This is actually Collin filling in for Bob, thank you for taking my question. You reported a strong incremental gross margin for both materials and product, around 65%. Can you detail the drivers of the strength and possibly quantify them? And do you anticipate this to continue throughout the rest of the year?

I can't give you all the details behind it, but there was obviously a good portion of that that was driven by a mix improvement in our business. We had a number of underlying drivers, notably the cost of fuel is quite a big factor in the year-to-date. Diesel costs alone are about $5.3 million below the prior year.

We also saw some pass-through on the construction side of our business was lower because the sales revenue was lower there, so the mix effect was more biased towards aggregates and cement. That was a help for the overall margins. We saw some improvement in repair maintenance costs. It was a number of factors that were driving the margin improvement.

Great, thank you very much.

Okay, Collin, thanks.

Thank you. Our next question comes from the line of Ted Grace from Susquehanna. Please go ahead with your question.

Thanks, good afternoon, guys. Tom, I was wondering if you could take a step back and help frame guidance. I know you've left it unchanged ex-Davenport. Can you say mark-to-market where we are year-to-day? Are we right on top of plans? There was weather impact in the quarter. On unchanged guidance, should we interpret to mean we're going to catch it all in the back half of the year? Could you help give us some color around those issues?

You know we are tracking roughly to plan despite the weather. Margins are better, and obviously revenue is a little bit down. The last three weeks have been relatively dry and we are seeing some momentum on the volume side. So I'm optimistic going into the second half of the year. I believe if the weather gods cooperate, we're going to have a strong second half.

Within that is there any discernible changes or expectations for Texas versus Kansas or Missouri or Utah or any other key states?

I would say -- a couple of little anecdotes, I would say that Houston so far has been holding up better than we expected. I think permits are on track with last year. We certainly expected to see a decline there and our people on the ground in Houston say they are going to be flat out the rest of the year. We are seeing some slowdown in Midland/Odessa, it's a very small part of our business but we definitely are seeing the impact of the decline in drilling, finally.

The Utah market, the nonres side is very strong. I would say res is up, but not as far up as we thought it would be. Vancouver, demand is probably slower than we expected. The impact of large projects tailing off has been a little bit more than we expected. Still doing fine, and there's a lot of big projects coming up, but we are probably a little softer there. The rest, Kansas, Missouri and Kentucky would be sort of as we expected.

Okay, that's helpful. The last thing on guidance, just so we understand it, $30 million to $35 million EBITDA contribution from Davenport. What's the assumed full-year pro forma EBITDA generation that that asset will produce, just so we know how to run rate it when we think about modeling?

The nearest number we can give you was the one we disclosed, which was the LTM as of the end of March of $56 million.

Okay, that's great. Thanks a lot, guys. Good luck this quarter with the offering.

Thank you. Our next question comes from the line of Brent Thielman with D.A. Davidson. Please go ahead with your question.

Hi, good afternoon. I guess taking a step back, with this absence of a longer-term highway bill, where among your larger contributing markets do you feel like it's hurting you the most? Where do you feel you could see the most upside if something did eventually come around there?

I think these short-term extensions have been going on for so long that the state DOTs have sort of gotten used to it. The softest highway program would be probably in Kentucky, and a little bit in Kansas, but those are state issues, not federal. I think these state DOTs have just gotten used to these short-term extensions as we have been having them for years now.

I got to say on the highway side, on the federal highway side, I do see -- I've been pretty negative on a longer-term build. I've probably have gone from cynically pessimistic to just pessimistic now. I do think there's a chance in the fall, with the Senate passing their six-year bill, which by the way had only three years of funding to it, which is always nice. But I do think there is a little bit of momentum potentially to get a bill early in the fall. If it stretches much past that, I don't think we will get one, but I do think there is a chance.

On the states and with our acquisition of Davenport and the Iowa highway program getting a boost with proposition 1 and the $2.5 billion that is going to come out of this new legislation, which I do really believe is going to pass in November. Texas is going to be extremely strong with or without a highway bill. You read about it, we are not in the states that I know of, where the states are holding projects because of the lack of certainty on funding. I think they all recognize that, despite all the huffing and puffing, that worst-case scenario is they are going to get an extension at the existing funding level.

Okay, thanks for that comment. Appreciate it.

Thank you. Our next question is a follow-up from the line of Stephen Kim from Barclays. Please go ahead with your question.

Our next question comes from the line of Trey Grooms with Stephens. Please go ahead with your question.

Good afternoon. A quick question, and I may have missed it since my phone line actually dropped off during the call. On the acquisition pipeline, Tom, I know you mentioned several months ago you had three LOIs in the process, and I see here Lewis and Lewis. Can you give us any update on those other two that were going on out there?

And then also with the Davenport acquisition, does that change your view on how you are targeting acquisitions at all from a size standpoint, in light of some of the potential opportunities that could arise in the cement industry in the back part of this year possibly, or maybe in the next year? Just trying to get a sense for if you have appetite for large acquisitions, given the Davenport acquisition that you are kind of in the process of integrating?

I think one is, the pipeline is still very strong. We did sign a definitive agreement last week on another mid-sized deal which we would hope to close in the next 30 days. That deal and Lewis and Lewis will get us very close to the $10 million that we had mentioned on the last call.

We always have an appetite for the larger deals; we have good access to capital. It has to make sense and we need to be able to create value, and we are very disciplined on making sure that that's the case. I think Davenport is an example of a very good-sized deal that we can create a lot of value on. And we'll see what comes up over the next few months. But the pipeline's quite good, Trey.

Thanks a lot.

Our next question comes from the line of Stephen Kim with a follow-up. Please go ahead with your question.

Sorry about that, I had some technical difficulties, but my question was exactly the same as Trey's so I think I'm all good. Thanks.

Okay, Steve, take care.

Thank you, ladies and gentlemen. There are no further questions at this time. I would now like to turn the floor back over to Management for closing remarks.

Thank you, operator, and thank you again, everyone, for joining us today and for your interest in Summit Materials. We look forward with speaking to you again in the near future.

Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.