Core-Mark Holding Company, Inc.
Q1 2013 Earnings Call Transcript

Published: 7 May 2013

[Operator:]

Welcome to the first quarter investor call. My name is Adrianne and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Ms. Milton Draper. Ms. Milton Draper, you may begin.

[Milton Gray Draper:]

Thank you, operator, and welcome, everyone. I would now like to read the statements about the use of forward-looking statements and non-GAAP financial measures during this call. Statements made in the course of this call that state the company's and management's hopes, beliefs, expectations, or predictions of the future are forward-looking statements. Actual results may differ materially from those projections. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our SEC filings, including our 10-Ks, our 10-Qs and our press releases. We undertake no obligation to update these forward-looking statements. We are holding this call to review our first quarter results and to answer any questions you might have. If you have additional questions after this call, you may call me at [phone]. Joining me today is the Chief Executive Officer of Core-Mark, Thomas Perkins; and our Chief Financial Officer, Stacy Loretz-Congdon. Also in the room is Chris Miller, our Chief Accounting Officer; and Greg Antholzner, our Vice President of Finance and Treasurer. Our line-up for the call today is as follows

[Thomas B. Perkins:]

Good morning, everyone. I'm sure that most of you have seen this morning's announcement of our new distribution agreement with Turkey Hill. This is a great win for us, and we are very excited to expand our partnership with Kroger. Turkey Hill is the largest of the Kroger convenience brands with 268 stores in Pennsylvania, Ohio and Indiana, which we started shipping this week. This is an important market share gain for us, and it's critical to our sales growth goals for the year. With the addition of the Davenport sales, our market share gains are looking pretty good for the year. The addition of the Davenport acquisition is going quite well, and I anticipate the rollout of Turkey Hill to go well, too. As I indicated in the last call, retail sales were soft in the early part of the year due, we believe, to the increase in payroll taxes and the sharp increase in fuel prices. This hit cigarette consumption particularly hard. In addition, as many of the retailers in the industry have indicated subsequent to our last call, we all face tough comps in-store because of the mild winter in 2012. That being said, we continue to believe that normal purchasing patterns will return as we head into the high season where comps ease. To give you more insight into the industry, I would like to discuss the recently released 2012 data from the National Association of Convenience Stores or NACS. This data indicated that C-Store count continues to rise, growing to almost 150,000 store locations. This number of retail locations equates to an impressive 36% of all retail locations in the U.S. It looks like the C-Store is here to stay. Single-store operators continue to dominate the industry, representing 63% of all those locations. Inside sales increased a modest 2.2% in 2012 across the industry, while pretax profits rose 3%. These are rather slow growth rates, and our goal is to help our customers grow their sales and their profits at much faster rates. We have an enormous opportunity to impact those growth rates in the next several years, but it's critical that we become business consultants where the -- our independent retailer in order to maximize that impact and help them become more profitable and more relevant to the customers. With over 75% of our sales coming from the C-Store space and with only a 4% market share, this presents a compelling market share opportunity. We estimate the total in-store C-Store opportunity to be about $170 billion. We believe we have the right strategies to help the C-Store operators improve their business and financial results, and the recent NACS State of the Industry Summit reaffirms our beliefs. At this event, the retailers concluded that the 3 pivotal business objectives that determine the relative success of the retailer were how well that retailer executed on the following

[Stacy Loretz-Congdon:]

Thanks, Tom, and good morning to everyone. As a reminder to those that are new to the story, our first quarter contributes the least amount of profit to the year. Historically, the first quarter generates approximately 20% of our net sales and 10% to 15% of EBITDA for the year. For that reason, we don't get too excited by first quarter results either way. That being said, a little more sales momentum would've helped the quarter, but we are not deterred, and we always know there's more work to be done. Diluted EPS for the first quarter was $0.22 compared to $0.31 last year or for those of you who model EPS, excluding LIFO expense, $0.37 for the quarter compared to $0.46 last year, a $0.09 a decline. Foreign exchange and lower inventory holding gains both in cigarettes and food/non-food explain the majority of this difference. In addition, higher sales during the quarter would've helped lift total earnings and better leveraged our operating expenses. All that being said, for 2013 we are reiterating our guidance in all respects. We still are expecting diluted EPS between the $3.10 and $3.25 in 2013, which includes an estimate of $60 million for LIFO expense, a 40% tax rate and 11.8 million diluted shares outstanding. Excluding LIFO expense, our 2013 EPS guidance translates to a range of $3.90 to $4.05 per diluted share, a 10% to 14% increase over 2012 results. Our LIFO expense assumes some inflation in 2013. It hasn't occurred yet, but we still believe all manufacturers will need to adjust pricing in 2013. The proposed federal excise tax, or FET, on cigarettes would also impact our product cost when and if this part of the President's budget passes. Similar to prior FET increases, if passed, we would expect the corresponding manufacturer price increase to pass along the tax to wholesalers. Moving onto the numbers for the quarter, sales reached $2.15 billion or 22% of our full-year guidance. This represent the 2.1% increase of our last year's sales of $2.1 billion. Cigarette sales increased a modest 0.8% for the quarter. However, a shift in carton sales mix to lower taxing jurisdictions compressed growth. Excluding excise taxes, cigarette sales increased 3.9%. This increase was driven by the Davenport acquisition offset by 1 less selling day the loss of several non-key customers last year and a 4.2% decrease in same-store carton sales. We expect comparisons will ease as we progress through the year with the addition of Turkey Hill and Davenport and as we lap the store losses last year and move into easier comps towards the end of the year. More importantly, we are bullish on our ability to win additional market share. Our food/non-food sales were $682 million for the quarter, increasing $34 million or 5.2% over the same period last year despite lower product inflation and one less selling day. Same-store sales increased 4.2%. This increase in our food/non-food sales mix -- this increased our food/non-food sales mix to 31.8%, a total sales up from 30.9% during the fourth quarter of last year and drove gross profit improvement from these higher margin category. Now remember, a significant cigarette price increase could cause a shift back in sales mix back to cigarettes, but nevertheless, we are encouraged by our continued growth in the food/non-food category. We've recorded a healthy 5.4% growth in our food categories, not only from the addition of Davenport, but also from deeper sales in certain markets. On a comparable basis, food categories grew about 5%. Florida, in particular, had excellent growth compared to Q1 last year since certain of our VCI Fresh programs were introduced into that market during Q2 of last year. Fresh, fast food and snacks led sales growth in -- also in the category. In addition, we are seeing continued growth in electronic cigarettes, which are categorized as general merchandise due to their lack of tax, and in the smokeless tobacco categories. Both of these product lines are most likely displacing the consumption decline in our cigarette carton sales and have higher margins as a percentage of sales. Gross profit increased $5.9 million or 5.4% for the first quarter of 2013, while remaining gross profit increased $6.2 million or 5.5%. Margins increased 17 basis points for gross profit and remaining gross profit alike, bearing in mind that remaining gross profit excludes cigarette holding gains and LIFO expense. Cigarette remaining gross profit was flat or down 3.9% on a comparable basis excluding Davenport. Remaining gross profit per carton was also flat, but was compressed by the addition of Davenport. Excluding their contribution, we did see a 3.5% increase in the cigarette gross profit per carton. Food/non-food remaining gross profit increased 8% to $82.8 million for the quarter and margins improved 31 basis points despite a slightly lower product inflation, which compressed margins by 4 basis points and the impact of Davenport, which compressed margins by another 7 basis points. This lift in margins is a continuation of what we saw in the fourth quarter driven by our success in higher margin categories at a time when new larger contracts are not impacting our margins. We do expect to see some compression in margins during the second quarter as a result of the new Turkey Hill business. However, our return on investment will still be in check since larger accounts pay and turn over their inventory faster. As such, this new business will contribute favorably to our 2013 growth. We also expect Davenport's food/non-food margins will improve as they expand their product offerings and implement more of our marketing program. And we believe FMI, VCI and Fresh will continue to improve as we move into the summer months, all good stuff. Moving onto our operating expenses, we saw a 6.6% increase from $104 million last year to $110.9 million for the first quarter this year. Davenport represented most of this increase. As a percentage of sales, we did see deleveraging on softer sales, noting a 22-basis-point increase. A couple of points to be made here. Q1 is ladened with fixed costs when our sales are generally softer than the rest of our quarter. So we do expect improvement in operating expense percentage relationships as the year progresses. Second, we do adjust wages and provide merit increases at the beginning of each year. So it's not unusual to see some weakening and percent relationships from the first quarter of each year. For example, in 2012, first quarter was 23 basis points higher than the full year, and in 2011 Q1 OpEx was 50 basis points higher than the full year. Third, as we increase our non-cigarette sales as a percentage of total sales, you will see operating expense percentages increase. This is due, in part, to the lower sales price points for these categories. Basically, the percentage relationships will change when you sell less cigarettes, which have a very high price point. Lastly, as we continue to roll out more for Fresh and other categories that require a cold channel and special handling, our operating costs for those categories are higher. However, as we said before, the net variable contribution for those higher margin categories are double those of traditional categories. As we drill down into our cost, warehouse and delivery expenses were $67.7 million, an increase of $4.3 million or 6.8% over the first quarter of last year. As a percentage of sales, warehouse and delivery increased 13 basis points due primarily to the deleveraging on softer sales dollars. In addition, we did not reduce the workforce on softer sales in Q1 since we knew we needed to ramp up staffing for the new Turkey Hill volume and the seasonality lift expected as we move into the summer months. We don't want a repeat of last year, where a few divisions were not prepared and had to spend excessive overtime and temporary help dollars to service our customers's needs. SG&A expenses increased $2.8 million or 7.1% again primarily due to the addition of Davenport. SG&A expenses as a percentage of sales increased 9 basis points from 1.9% to 2% due to deleveraging of fixed costs. Moving further down the income statement, our effective tax rate for the quarter was 36.6% versus 36.8% for the first quarter in 2012. Both periods benefiting from various tax credits and other discrete items recorded during the first quarter. We are still guiding to a 40% tax rate for the full year. Our tax rate is impacted mostly by the distribution of profits at the state level, foreign taxes and other credits available to us. We will continue to monitor our rates and revise them accordingly as the year progresses. Moving to cash flows, free cash flow was approximately $63 million this quarter compared to $88 million generated during the first quarter last year. As a reminder, first quarter cash generation benefits significantly from the selloff of heavy inventory levels carried at the end of the prior year to support holiday needs and LIFO layer targets. At the end of 2011, we had higher levels of inventories than the end of 2012, which resulted in less free cash flow this quarter versus the same period last year. As a reminder, we measure free cash flow as adjusted EBITDA plus or minus changes in working capital, less CapEx, cash taxes and cash interest. We paid down most of our outstanding debt and use $3.5 million to repurchase approximately 72,000 shares during the first quarter. We did not spend any cash on dividends since we had accelerated the first quarter dividend into the fourth quarter last year. We recently announced our second quarter dividend, which puts us back on schedule. We're still forecasting free cash flow for the year to be between $55 million and $60 million, an increase of over 10% compared to 2012, depending of course on any unusual year end activities. And we still expect approximately $30 million in CapEx this year even though first quarter spending was light due to the delay of certain projects. For example, with our natural gas initiatives, we are timing the spend on our CNG fuel stations to align with the availability of CNG tractor, which you may have heard that some manufacturers are experiencing delays in fulfilling the demand for higher power units. Moving on, average debt for the first quarter was $34.3 million compared to $24.8 million in the first quarter of last year. The increase was largely due to the Davenport acquisition. We're moving into spring and similar to last year, you will see debt usage increase at the beginning of summer and taper off at the end of summer. Trade loading for inventory price increases may also impact average debt positions in any given quarter. Our capital allocation positions support our key strategies and focus on ensuring we have sufficient capital to fund CapEx, inventory purchasing opportunities, dividends, share repurchases and acquisitions. To summarize, we had a decent quarter, especially considering weak consumer demand. However, first quarter is historically our weakest quarter, and we seem to be in line with past experience. We do expect sales comps will get easier as we benefit from our expanded partnership with Kroger servicing their Turkey Hill stores and sell deeper into our existing accounts. The former may compress margins, but I'm hopeful the latter will help to offset that impact. With this lift in sales, I would expect to see greater operating expense leverage. And with that, I'd like to thank all our employees, our vendors, our customers and you, our shareholders, for your continued support. Operator, you can now open the line for questions.

[Operator:]

[Operator Instructions] And we have Andrew Wolf from BB&T Capital Markets.

[Andrew P. Wolf:]

When you set the guidance last quarter, was this -- were you contemplating winning Turkey Hill or something similar to that? Or is this sort of helping to make up for a light first quarter?

[Thomas B. Perkins:]

No, no. I think when we do our guidance, we anticipate market share gains. And I think it just so happened that Turkey Hill was one of those market share gains that came our way.

[Andrew P. Wolf:]

Okay, that's good to know. And I think you said you had 6 contracts you are bidding on since last quarter for around $570 plus million. Now that number's down to $400 million. Is that because some have been decided against you and some like this one have been decided for you or?

[Thomas B. Perkins:]

Yes, little bit of both and some are going to be coming in towards the latter part of the year that we won. So, yes. And that number will ebb and flow based on new opportunities. So ones will fall off that we win or we don't win, and then new ones will be added to the list.

[Andrew P. Wolf:]

Okay. And then you spoke a couple of times about some customer losses. Is the run rate -- I mean, was there -- is it a little higher than normal? Is there a negative swing on customer losses that you're calling out? And would it be more on the chain side or on independents?

[Thomas B. Perkins:]

They are midsize chains, and a lot of them are located in Canada, primarily cigarette accounts. And we had, in Calgary, and we talked in the past about some of the issues we faced in Calgary. We really had to make some decisions on some of the customers we are doing business with, and to make that division in our Canadian region more profitable. So really, it was a conscious decision to lose some of those accounts. Primarily, cigarette driven and I think that's why some of our cartons are much lower in the first quarter of 2013 versus 2012.

[Andrew P. Wolf:]

Okay, yes. Because I saw that in your queue, sort of my last question here. So is that why the Canadian sales are down like they are?

[Thomas B. Perkins:]

Yes, it is, Andrew. And I think what we're doing now, we're in the process of adding new accounts that are more profitable and are really aligned with our strategies, which is growing our food/non-food categories. And I think we'll, as the year progresses, I think we'll see great success in the Canadian region from that.

[Andrew P. Wolf:]

Just the last follow-up on that. So the net income -- sorry, the pretax income in Canada had a negative swing of, I think, $500,000. But so did the foreign currency transaction. Is that empty at the pretax or did the actual core business delever?

[Stacy Loretz-Congdon:]

It was primarily due to the cigarette consumption decline that drove that, and we should start to see us lapping some of that in the second quarter and then again in the fourth quarter as we move through the year. But again, as Tom indicated, we are seeing improved food/non-food sales margins that increased as a result of kind of shifting off this heavy index of Cigarette business in Canada.

[Andrew P. Wolf:]

And if I can just ask one more. Just on the other tobacco, is that where e-cigarettes would be recorded? And are you distributing e-cigarettes? And is that as hot a category as you sort of hear or read about?

[Thomas B. Perkins:]

Yes. We have -- e-cigarettes is in our general merchandise because it's not a taxed product today, and we sell quite a few different brands of e-cigarettes, and we definitely are experiencing the same growth that the e-cigarette companies are expressing in different trade journals and periodicals.

[Operator:]

And we have John Lawrence from Stephens online with a question.

[John R. Lawrence:]

Yes, Tom, would you take a little deeper dive into -- you talked about Florida, you're seeing some of the improvement down there on some of the initiatives. When did that -- was there any -- I guess second quarter of '12, is that when one of the first areas you targeted was sort of the new revamped model, or can you sort of walk us through that a little bit?

[Thomas B. Perkins:]

Yes, if you think of the -- go back to the timeline of Florida, as we opened that new distribution center in the third quarter of 2011, and, sure, really the whole focus of that division was to ensure we had a seamless transition for the -- an integration of the Circle K business in Florida. And so that really took about 3 to 6 months just to make sure everything was going well, which it was, with the traditional business. And then as we got into the second quarter, we started to add other categories along the Fresh and dairy and bread, etc. categories. And also, we were able then to start focusing on picking up independent accounts in Florida out of that building, and we started to see -- and we're starting to see our strategies and our programs be implemented in those independents. So I anticipate that growth just to continue out of that region.

[John R. Lawrence:]

Secondly, on Turkey Hill, can you give us a little bit of a backdrop? What were they doing before? How did this come about? And sort of, sort of the needs they have?

[Thomas B. Perkins:]

They were serviced Eby-Brown, which is one of our competitors. And they, in turn -- my understanding is they, for whatever reasons they had, they shut down their distribution center in Maryland that was servicing Turkey Hill, and so Turkey Hill needed a new supplier. And we were the perfect choice for them.

[John R. Lawrence:]

Great. Any release of how large this is or anything like that?

[Thomas B. Perkins:]

No, I can't release that. Normally, from a press release perspective, when we do announce it publicly, it's usually greater than $200 million, but that's all I can say.

[Operator:]

And we have Peter Black from Wynnefield Capital online with a question.

[Peter F. Black:]

Just one question to clarify what Stacy said. Did you say that you expected free cash flow for the year to be about $65 million?

[Stacy Loretz-Congdon:]

$55 million to $60 million, that's correct, absent any acquisitions at the end of the year or unusual events at the end of the year that might temporarily take that number down. I usually call that out in the fourth quarter call.

[Peter F. Black:]

Okay, so basically then -- I mean you've already generated almost that amount just in the first quarter. So we should assume that your -- the inventory number, you'll have a, at some point, a big reversal on that number, and you could see -- is it possible that you could see a quarter where you have negative free cash flow?

[Stacy Loretz-Congdon:]

If you look at the quarter on a stand-alone basis, yes. I usually report on year-to-date, but first quarter is always strong because we're fleshing through the LIFO inventory or bringing inventories down to normal levels as we start to build inventories for the summer months or for any inventory speculation. You'll see the free cash flow get absorbed. And as we move towards the end of summer, you'll see ebb and flow. So I usually advise not to look at it on a quarter-by-quarter basis, I kind of forecast for the full year.

[Operator:]

And we have Chris McGinnis from Sidoti & Company online with a question.

[Christopher McGinnis:]

I guess just 2 things. One on the Turkey Hill announcement. Does this open up the opportunity to bid on the rest of Kroger's business as well as on the convenience side?

[Thomas B. Perkins:]

Well, we do -- well, of the convenience store divisions today now with Turkey Hill, we do 668 stores. And I think in total, they have about, I want to say, a little over 800 total stores. So we have a lion's share of their business today.

[Christopher McGinnis:]

Got you. And then just on the expansion to the Southeast, you've had some time there, and I understand that there's a new improvement in the way you're delivering your value-added services. But has that region, I guess on an organic basis, outperformed the other regions just because it's a newer platform to deliver your value-added kind of products?

[Thomas B. Perkins:]

You know, we are. And I'll point to Forrest City groceries that we bought in Forrest City, Arkansas. And we really see a foothold being gained, especially with our Fresh offering, dairy and bread, and in our marketing programs that they did not have in the past. And they really did a really good job last year, but we're just seeing that momentum continue to build in that marketplace. And again, we're bringing programs to that marketplace that they did not have before. And so it definitely gives us a competitive advantage in that market. And I think the same thing we're seeing in Florida now that we have a distribution center in Florida, same type of deal. And once we're seeing our marketing programs get implemented in Davenport, and once we get that conversion finished in the third, fourth quarter of this year, we'll see that momentum gaining steam also.

[Christopher McGinnis:]

And I guess -- I know I believe Mike has talked about it before, but what is the, in 1Q, the -- not to say that -- it always gets off to a slow start. Is it just because of the seasonality? But you would figure that you would outperform a little bit more just because of the service offerings that you have and the likely share gain that you would get from that.

[Thomas B. Perkins:]

In one of the comments at the CEO summit I was at last week, and there were both suppliers and retailers there, and the suppliers in particular, the beverage guys, really spoke of their real soft volumes in the first quarter of 2013 versus 2012. And I think really it's because of the real mild winter we had in particular areas in the Northeast and in the Midwest. And so the comps -- last year, I remember Mike saying the comps -- first quarter last year was, I mean, was incredible growth rate. But again, we caution people that that was unusual, and I think that this is more of a normal first quarter for us because of the cold weather. And unfortunately, cold weather does -- I don't like to use the weather term too much, but it does impact traffic at the convenience stores.

[Christopher McGinnis:]

Sure, no, I understand. And then I guess just lastly, the Turkey Hill already have most of these, I guess, offerings in terms of the fresh food. And is VCI maybe new to them? Did they take all of the...

[Thomas B. Perkins:]

There definitely will be opportunities. They are definitely one of the better-run convenience store chains, and they have to be because they compete against some really well-established chains like Sheetz and WaWa. And they're on par with those guys. So they have been doing a lot of the things that we impress upon our own retailers and we brought to our own retailers today. But there will be opportunities for us.

[Operator:]

And we have Mike Haney from Benchmarks Partners online with a question.

[Unknown Analyst:]

Just a question. Absent a revenue increase number for Turkey Hill, is the mix within Turkey Hill consistent with kind of that 70, 30 mix that you guys presently have right now, cigarettes and food?

[Thomas B. Perkins:]

Maybe a little bit higher skewed towards cigarettes only because of the tax rates, the excise taxes for that region. But pretty much, it's along those lines, but maybe a little bit 72, 28 or something like that, but it's really because of the excise tax rates in that region.

[Unknown Analyst:]

Okay. And did I hear you correct, Stacy, that you said it would compress margins initially?

[Stacy Loretz-Congdon:]

Yes. Again, any larger account that we normally have, they have a little bit more pricing leverage, but they do pace after and the inventories turn much faster, so our return on net invested assets is usually very healthy. But we do expect compression in our margins both in the cigarettes and the non-cigarette category.

[Unknown Analyst:]

And I can assume that the revenues that you will start clocking those beginning the 1st of May or something like that, that you will be up both feet on that?

[Thomas B. Perkins:]

Yes, we actually started the rollout of the stores this week. Actually Monday we made our first delivery. And we'll rollout all the stores in the next 2.5 weeks, and they'll be full-blown by the -- before the end of May.

[Operator:]

And we have John Koller from Oppenheimer online with a question.

[John Jay Koller:]

It's Oppenheimer & Close. My question just relates to capital expenditures. I guess the $30 million figures expected for this year, that includes about, I think, $15 million in maintenance. I think in earlier calls, there was another $8 million that was called out for the compressed natural gas. Is that still on target for this year? And then if you could just give some idea what the remainder would be spent on, that would be great.

[Thomas B. Perkins:]

Yes, that's still on target for this year. Again, we talked a little bit about the tractor availability. And we're sort of -- it seems like the industry and especially from large vehicles perspective like we have are sort of getting ahead of what the manufacturers are able to produce. And so we're definitely monitoring that closely. The rest is going to be for expansion, either in additional freezer or cooler space, additional trailers for increases in our business and our volume in market share wins, and also some investments we'll be making in our Davenport acquisition also.

[Operator:]

And we have Nelson Obus from Wynnefield online with a question.

[Nelson Jay Obus:]

Yes, Atri [ph] been giving some indications, some of the other cigarette companies, that they are looking to increase cigarette prices, 3% or 4% the rest of this year. Is that factored into any of your projections?

[Thomas B. Perkins:]

We normally do -- we normally plan a modest price increase on cigarettes, and that's in our guidance. If it's more, that's great for us. And I think everything I'm seeing and then reading is that, that will continue this year as the 3% to 4% increase in prices.

[Operator:]

And we have Andrew Wolf from BB&T Markets online with a question.

[Andrew P. Wolf:]

Just wanted to ask if maybe you could comment on the kind of cadence of the sales during the quarter and after the quarter? In other industries, let's say, like restaurants, which have some at least food, a little bit of overlap with C-Stores and Foodservice, they saw things get better through March and April and as things warmed up a little bit and I guess people adjusted to a little less disposable income.

[Thomas B. Perkins:]

Yes, Andrew, definitely our -- the weakest month we had was January and February, and I think that was when the taxes hit -- increase hit in January and the fuel spike in February. And as we got into March, we did see volumes increase, in particular in cigarettes. And then as we're seeing in April today, we are seeing it getting back to normal patterns, where cigarette is coming to where they should be. So we definitely are seeing our sales grow stronger as the weather heats up and the prices on gas stay at a lower level than it was in February.

[Operator:]

[Operator Instructions] We have no further questions at this time.

[Stacy Loretz-Congdon:]

Well, thank you for your participation in our conference call and for your interest in Core-Mark. The first quarter was marked with some encouraging results, particularly in the health of the non-cigarette business. With the addition of significant new market shares coming on board, we remain quite positive for the year and for the high season in particular. If you have follow-up questions, please give me a call at [phone]. Thank you, and thank you, operator.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.