Delta Apparel, Inc.
Q2 2020 Earnings Call Transcript

Published: 3 May 2020

[Operator:]

Good afternoon to everyone participating in Delta Apparel Fiscal 2020 Second Quarter Earnings Conference Call. Joining us from management are Bob Humphreys, Chairman and Chief Executive Officer; and Deb Merrill, Chief Financial Officer and President of Delta Group.Before we begin, I’d like to remind everyone that during the course of this conference call, projections or other forward-looking statements may be made by Delta Apparel’s Executives. Such projections and statements suggest prediction and involve risk and uncertainty, and actual results may differ materially.Please refer to the periodic reports filed by with the Securities and Exchange Commission, including the company’s most recent Form 10-K and Form 10-Q filed today. These documents identify important factors that could cause actual results to differ materially from those contained in the projections or forward-looking statements.Please note that any forward-looking statements are made only as of today, and except as required by law, the company does not commit to update or revise any forward-looking statements even if it becomes apparent that any projected results will not be realized.I’ll now turn the call over to Delta’s Chairman and Chief Executive Officer, Bob Humphreys. Please go ahead.

[Bob Humphreys:]

Good afternoon and thank you for joining us on our fiscal 2020 second quarter earnings call. I’ll briefly discuss our business results, and how I how we’re managing through the business with the current COVID-19 pandemic. I will also highlight the parts of our business that have not been impacted by COVID-19.And in fact, have accelerating momentum given us confidence that Delta Apparel will prevail through this difficult period, return to growth and continue to drive value for all of our stakeholders. I will then turn the call over to our CFO, Deb Merrill for a more detailed discussion of our financial results and an update on the actions we are taking to strengthen our financial position, including an amendment to our US credit facility, which provides additional flexibility within our asset-based lending facility.Before I dive into our business results, I want to reiterate that as we navigate through this unique situation, our top priority remains focused on the health and safety of our employees, our customers and the communities we serve. I would also like to take a moment to reaffirm a few highlights we discussed on our Business Update Call on April 17th.While many states have implemented statewide and local shelter in place and safer-at-home initiatives, we’ve been able to stay open and operate our business in compliance with these orders. We did close our 15 branded retail locations in mid-March to be in compliance with guidelines for retail store operations. Like most retailers, we are monitoring local, state and federal guidelines to determine when and where it is appropriate to reopen our retail doors.Last week, we opened the Charleston, South Carolina Salt Life store and our Coast stores in Greenville, South Carolina, with enhanced safety protocols to protect our customers and our employees. We also expect to open the Salt Life store in Columbus, Georgia tomorrow and three Salt Life stores in Florida on Monday. We will continue to monitor developments in Florida, North Carolina and California to determine when it is appropriate to reopen the remainder of our Salt Life and Soffe retail stores.All 8 of our US distribution centers and all 7 of our digital printing facilities have been and continue to be staffed and operational to service the needs of our customers and consumers. While they have all remained open, many locations are operating at reduced schedules with more limited staffing in order to comply with local social distancing guidelines and current business levels. Our cut, sell and decoration manufacturing facilities in the US in New Mexico have also been operating since the start of the pandemic.Our facilities in El Salvador and Honduras have been temporarily closed since mid-March due to government mandated country shutdowns. Currently, El Salvador is scheduled to reopen in early May, and no word has come in yet on when Honduras will be allowed to reopen. We’re also waiting to learn what level of social distancing and other protocols may be in place, which could limit the number of employees allowed in our facilities when production begins.In support of hospitals and healthcare workers on the front line, as well as all Americans battling the spread of the coronavirus, we are producing face masks in our sole facility in Fayetteville, North Carolina, as well in our facilities in Honduras and El Salvador, which both have provisions to utilize small work groups for this purpose. The masks are being sold to the Department of Health and Human Services of the US government for distribution to local needs.In addition to the production of masks for the government, we are also producing and selling non-medical grade face cover ups in our US and Mexico facilities, the production of the face masks and coverings allows us to keep more workers actively employed and provides an additional revenue stream.Given that we operate the majority of our business based on at once orders, we have been and continue to be in a good inventory position with product located in our US-based distribution centers. The strength of our business model remains anchored in our broad geographic footprint across the US, Central America and Mexico, as well as the diversification of our sales channels combined with our unique business capabilities.Importantly, approximately 25% of our business has not been hurt by COVID-19, and in fact, has been growing in certain channels. Our military channel at over 5% of our revenue has experienced consistent performance throughout the crisis. We produce product for all branches of the military, including The Army, Navy, Coast Guard and Marines and are seeing strength across the board, particularly in our Navy and Marine businesses.Over 17% of Delta Apparel’s sales are generated through various e-commerce channels, including our branded consumer websites, our brands being sold through the e-commerce sites of our retail partners, and our digital printing business, DTG2Go. In fact, in April, both our Salt Life and Soffe consumer sites are on track to more than double their business from a year ago, with saltlife.com increasing about 120% from last year.In addition to the improved sale for Soffe products on our site, Soffe is also seeing growth coming from other e-commerce sites that carry Soffe products. The strength we’re seeing in our saltlife.com and soffe.com sites not only provide a nice revenue stream until brick-and-mortar stores can open, but it’s a clear signal that the Salt Life and Soffe brands have a strong emotional connection with consumers.But it’s also exciting with the trends we’re seeing in our DTG2Go business, in this time of supply chain disruption, and consumer restrictions on traditional shopping habits, the advantages of DTG2Go’s proprietary technology and unique fully integrated business model have become even clearer to the marketplace.Being the only digital print supplier in the world providing customers with a seamless fulfillment solution integrated with a vertical manufacturing platform, and broad geographic footprint is a tremendous competitive advantage. Our daily orders received in April have celebrated to levels similar to holiday season. DTG2Go is receiving more business from existing customers, as well as rapidly onboarding new customers that have been disrupted in their current supply chain during the pandemic.We also experienced further acceleration in the penetration of Delta catalog blank usage in the DTG2Go business, which jumped to 30% usage compared to 12% in last year’s second quarter and 28% in the December quarter. Although the order backlog is tremendous, we are somewhat limited in our production output, as we’ve had to make adjustments in our facilities to comply with the six-foot social distancing guideline and curfews implemented by certain local governments.In addition, our facility in Reno has been operating at only about 25% of its normal output based on restrictions in that area. However, we remain very encouraged by the positive trends we’re seeing for digital printing throughout this pandemic, and believe adoption rates for the on-demand supply chain model will meaningfully increase in the future as companies evaluate their ongoing business model post COVID-19. While we anticipate a leveling off of business as the US begins to open up, we do believe that we are uniquely positioned to exit this pandemic with a larger base of business and well positioned for continued growth.Our Delta Catalog business experienced an outside impact from COVID-19 pandemic, as much as the business is driven by traditional retail, events and corporate branding, as retail closed and virtually every event that involved the gathering of people was canceled, orders in mid-to-late March were nearly non-existent. We are slowly seeing businesses return as mass retailers are beginning to replenish apparel inventory in a disciplined way.We believe as the US starts to reopen, we will see certain businesses begin to pick up including ad specialty and promotional products, which historically have done well in post crisis situations. Overall, our catalog business does well during recessionary times, as decorated t-shirts, our product that allows consumers to make a modestly priced feel good purchase during tough times.In January, we launched our new distributor model providing our customers with a broader range of product categories with nationally recognized brands and products, including wholesaler exclusives, Original Penguin, Callaway and Jack Nicklaus lines of golfwear. We continue to view this new distributor model as a long-term additional revenue stream. As mentioned earlier, we are also now selling our Delta produced face cover ups, which we believe will be a staple item needed by small and larger distances. We are happy to be that one-stop shop for them with our distributor model as they also make their apparel purchases.Our FunTees business ended the second quarter with double-digit sales growth, as we benefited from our customer diversification that we’ve been working on for the past two years. As the supply chain partner, we offer full service supply chain management and technology along with our manufacturing platform, which is compliant, flexible in the products and retail-ready services it can provide and importantly, close to the United States market with nationwide distribution coverage.Along with our broad customers, we also began shipping retail direct programs, which successfully launched this fall, while currently impacted by the retail shutdown, we are confident that as soon as our direct to retail partners reopen, we’ll see the business continue to grow.To summarize, prior to COVID-19, we were experiencing broad based strength across all of our business segments. COVID-19 has forced us to act quickly and manage prudently. We’re operating on a solid foundation with approximately 25% of our business not being hurt by COVID-19, a significant portion of which is actually accelerating during these times. We are excited about the momentum we are seeing on our branded sites and in our DTG2Go business. Delta Apparel is uniquely positioned to exit this pandemic in a position to quickly return to profitability and growth.I’ll now turn the discussion over to Deb to review our financial results in more detail. Deb?

[Deb Merrill:]

Thank you, Bob. As we discussed with our preliminary results two weeks ago, while our second quarter sales were negatively impacted by COVID-19 during the last month of the quarter, our strong gross margin performance more than offset the decline in sales and drove solid earnings for the quarter with diluted earnings per share up 46%.Turning to our results in a little bit more detail, our second quarter fiscal 2020 sales were down 6% to $96.7 million in line with the preliminary results we provided with our business update. Prior to COVID-19, we are on track to deliver sales growth of approximately 9%. We achieved another quarter of strong gross profit and gross margin results, registering year-over-year and quarter-over-quarter growth despite the unplanned headwind of temporary plant curtailment costs.The healthy gross margin performance was driven by manufacturing process improvements and integration efficiencies. Our EPS for the quarter came in at $0.19, nearly 50% increase compared to EPS of $0.13 in the prior year second quarter, adjusting for the approximate $2 million of pre-tax or $0.20 per share of plant curtailment costs. We achieved adjusted non-GAAP EPS of $0.39, which represents over a 200% increase compared to the prior year.For the second quarter, our Delta Group and Salt Life Group both registered sales declines of approximately 6%, as they were both impacted by COVID-19 during the final month of the quarter. Within our Delta Group, which represents roughly 87% of our second quarter sales, the strong growth in our FunTees business was more than offset by the decline in our catalog business in March related to COVID.Prior to early March, our activewear business was on track to deliver strong sales growth. Salt Life experienced nearly 20% growth in e-commerce in the March quarter and we are seeing strong growth in the Salt Life retail doors and apparel sales before the March retail shutdown.Gross margins increased 290 basis points to 21.3% versus 18.4% in the prior year, and a 60 basis point increase compared to our first quarter results. In addition to lower raw material costs, we benefited from the conversion cost efficiency compared to the prior year. Adjusting for the plant curtailment expenses that we spoke about, gross margins would have been 23.3% during the March 2020 quarter and improvement of 490 basis points from the prior year and a 260 basis points increase from the fiscal 2020 December quarter.SG&A expenses were $17.9 million, representing an incremental $800,000 of expenses compared to the prior year, which with that increase primarily related to investments in our distribution expansion, given the significantly lower sales base in the quarter, SG&A expenses as a percentage of sales increased to 18.5% compared to 16.6% in the prior year second quarter.Operating income increased to $3.6 million compared to $2.7 million in the prior year second quarter. The $1.7 million increase in Delta Group’s operating income is attributable to the strong gross margin expansion, partially offset by the lower sales and higher distribution expenses. For the Salt Life Group segments, the operating income declined $1.3 million and this primarily attributable to the lower sales, as well as the newly enacted tariff on imported goods, coupled with lower income from adjustments to the contingent earn-out liability in the current year compared to the prior year.Net income for the quarter was $1.3 million or $0.19 per diluted share, compared to $900,000 or $0.13 per diluted share in the prior year period. Excluding the temporary manufacturing closure costs that were expensed during the quarter, net income per diluted share for the second quarter of the fiscal 2020 would have been $0.39, which represents the 200% increase over the prior year.Looking ahead, as we have already discussed, we do expect our overall third quarter performance across our segments to continue to be negatively impacted by the COVID-19 crisis. The sales level is expected to be dramatically lower than the prior year. None of us knows when the US will begin to fully reopen and what the impacts will be at retail. A great deal of uncertainty remains regarding the level of recovery and the steepness of the recovery curve.Also, as Bob mentioned, our plants in Honduras and El Salvador remain in temporary shutdown under government orders and the degree of this impact is difficult to determine. So while we are unable to give details of what all this means on our forward results, rest assured that we’re taking all actions we can to prudently navigate through these difficult times.Those actions have included, reducing our capital spending in non-critical areas, reducing fixed costs, temporarily furloughing or permanently terminating approximately 300 employees in the US, suspending share repurchases and taking advantage of the payroll tax deferrals and credits afforded to companies of our size under the CARES Act.We ended the March quarter with over $30 million of available funds for the business, including over $9 million of cash on hand. I’m pleased to report that earlier this week, we secured a bridge amendment to our US revolving credit facility with our lenders. The amendment provides additional flexibility to tap into the availability provided into the company’s asset-based lending arrangement.The amendment, among other things, adjusts the financial covenant provisions through the end of fiscal year 2020 to effectively lower minimum availability threshold and remove the fixed charge coverage ratio covenant passes. This effectively gives us approximately eight $8 million to $10 million of additional funds to utilize in our business between now and the end of the fiscal year. Additional details of the terms of the bridge amendment can be found in our quarterly financial statements, which were filed this afternoon. While we believe this amendment gives us the necessary flexibility to operate our business in the near-term, we are also looking at other available debt financing options that may be prudent.As mentioned earlier, we expect revenue in our June quarter to be dramatically less than the prior year. It’s even with the trend of higher gross margins we’ve seen in recent quarters and the current steps we’ve taken to reduce our fixed costs, we believe that our June quarter will not be profitable. As a reminder, in our March quarter, we incurred about $2 million in costs associated with two weeks of manufacturing curtailments in El Salvador and Honduras and these facilities are yet to reopen.While recent weeks and the coming months will be typical, we believe the company is well positioned to navigate through this. We continue to have great opportunities in front of us to gain market share and operate profitably once we get through the impact of COVID-19.Let me now turn the call back over to Bob before we open up for questions.

[Bob Humphreys:]

Thanks, Deb. We are operating the business prudently, managing through this uncertain period. Our fully integrated and diversified business model is allowing us to not only continue to operate and generate sales, but has also created an opportunity for Delta Apparel to expand our reach with existing customers and garner new customers in certain sales channels.We are in a good financial position to weather the current storm and I’m confident that we’ll emerge from this pandemic stronger and ready to profitably grow our business. I want to thank our Board of Directors and employees who have truly been amazing for their patience and hard work throughout this difficult period.Operator, we’ll be glad to open up the call for questions now.

[Operator:]

Yes, thank you. [Operator Instructions] We’ll now take our first question from Dana Telsey of Telsey Advisory Group. Please go ahead.

[Dana Telsey:]

Good afternoon, Bob and Deb, thank you very much for the insightful information. As you think of this time period, I just would love a little bit more context of unpacking as you think the balance of the fiscal year and how you move through this. How do you think of the level of cash burn and the orders that come through? And how do you see the manufacturing facilities coming back? Because given the fact that not everything comes back automatically to 100% operation. How do you think of the flow through and the cadence? Thank you.

[Bob Humphreys:]

Okay, well that’s a lot of important information and important questions, and I’ll address some of it and then let Deb jump in as well. But, you know, we’ve gone through April with the same availability as we started. So our cash burn there was very little, the way we manage through that, but again, I let Deb speak more to that.I think it is important to realize that our Mexico sole facility and print facility is still operating, and so we can use that to fill in our inventory levels as we need to. We can also do private-label programs through Mexico in print and package and have them retail-ready. So I think our diversification, the manufacturing is helping us a bit in this situation.And so I think the next thing that will be an interesting and important call is when and how we open up our other manufacturing facilities. We would like to be able to start producing product in El Salvador sooner than later. We have product that we can run in there now and garner you know sales from it.And then our two plants in Honduras mostly produce our blank inventory and some private-label programs, and so we will look and see what our inventory levels are in our US distribution centers and how business is picking up and then make a decision on when and how to open up those facilities as the government allows us to do so.Also on the cash burn, as we sell our existing inventory that’s highly cash positive to us, particularly when we’re reducing that, but I’ll let Deb talk more about that and cash burn and availability.

[Deb Merrill:]

Okay thanks, Bob. You know, Dana a couple of call outs and some Bob alluded to, but I’ll just give a little bit more color on it. You know, we are basically now through our month of April. And as we said about 25% of our business has not been really impacted in some areas are certainly growing as we went through April. We see revenues at about that 25% from a year ago. But the great thing is, is that every single week that has gone by during the month of April, we are seeing revenue increases week-to-week.And so we’re just now starting to see areas of the country beginning to open up. And so we would hope to see that weekly increase continuing and potentially reaccelerating as more of the country begins to open in May. So I think hopefully that kind of set to the tone for where things are and the growth areas and I think that should open up as week-by-week things start happening in the country.A couple of things on that liquidity, as I mentioned briefly, we did end the March, we had said with approximately $30 million of liquidity between the cash on hand and the availability under our credit facility. It’s great to report that we still have about $30 million of liquidity available to us. So we’ve been able to navigate through these last five weeks, is really not going through any of that. So you know, part of that is as Bob mentioned, as we sell our inventory and we’re not replacing that, it can become very cash flow positive to the business. And so we would expect to see that happening as we navigate through the upcoming month.Bob also mentioned obviously, we would like to be bringing manufacturing back online and especially for our private-label business. The good news is, is that we have been able to support that with our Mexico operations that certainly have an order book that as our El Salvador operations can begin, that we do have products that we can manufacture and generate sales from that. So with that, I think that we’d answered the different sections that you had, Dana. But if you can follow-up once, please let us know.

[Dana Telsey:]

Just two quick follow-ups. You’re having new customer wins lately, which is encouraging. Can you hold on to those customers after this crisis? And how do you think of the onboarding costs? And just on the gross margin and SG&A, how do you think about the inventory backlog for others that brings in promotions and your ability to manage gross margin? And how much of your SG&A costs are fixed versus variable? Thank you.

[Deb Merrill:]

Sure –

[Bob Humphreys:]

Deb I’ll let you say that one.

[Deb Merrill:]

Yeah, great and I’ll jump in there with that. The great news is that with you know, DTG2Go business, because that is such a technology-driven business, that’s where we’re really gaining our customers right now. And that onboarding cost is not significant because of the technology that we have. We have garnered a number of new customers in that and have more that are currently wanting to partner up with us now.We realistically, all of that business at the current level is at, we would not expect for it to continue at its current level, we think that that will level off some. But as I said, we also have new customers that are still wanting to onboard. But the ones that we did onboard where their supply chains have been disrupted, I think the positive thing is that DTG2Go has been there to support their business during that.And I think as everybody starts exiting the heart of the COVID-19, people are going to take a look at what their supply chain and what their fulfillment networks are, and have really come to realize the benefit that we have at DTG2Go with those benefits, including the geographic seven locations. So we have been able to navigate through in those where we have locations to remain open and there’s a lot of places that have not been able to do that.And then you couple that with the integrated facilities that we have with the – in our own distribution centers that we have, and you know, again, through these times for various and sundry reasons, the supply chain of even blank garments has been impacted. But we’ve been able to maintain with our supply of our Delta blank to support that.So I think those strategic advantages that we have, have really come to light, how powerful those are to businesses and we would like to believe that that will continue as they want to make sure they have a backstop for any future disruptions that could occur. So we feel positive about what we’re achieving and positive about how we’ll exit and continue with a nice strong growth path for DTG2Go.As you were mentioning in SG&A, you know, again, we talked a lot about the steps that we’ve taken to lower the costs in there. Lots of people are asking obviously about a fixed versus variable cost scenario and what percentages are and I mean we did feel like that’s kind of a tough question, because lots of times things that you think are fixed costs actually become variable cost, then you figure out that while you might have thought it was a fixed cost, you really don’t need it and you’re able to reduce those fixed costs as well.So, I mean, at the end of the day, you have absolutely worked through and took this action on the things that we could reduce. We also thought through the additional levers that are out there depending on how the recovery happens. And so we obviously have those in our forefront, but we believe that we had taken the prudent actions to reduce to the level of business that we have now and eliminate those unnecessary short-term expenses and we’ll continue to evaluate that going forward.

[Dana Telsey:]

Thank you.

[Operator:]

We’ll now take our next question from Jamie Wilen at Wilen Management. Please go ahead.

[Jamie Wilen:]

Hi, fellows there. Rather nice results in the midst of all this. A couple of questions about DTG2Go. You talk about running at basically holiday levels that you have some plants which have to be running at various levels of inefficiencies, because of the spacing requirements and probably some labor difficulties in hiring people. Are you running your plants at capacity right now?

[Deb Merrill:]

Yes, we are running it at what we will call, the new capacity that we have and what I mean by the new capacity is based upon what the output that we can get for the hours that we’re working, because we are not, so at holiday season, we run 24/7 during that time period and we are not running overnight again, that comply with curfews in different areas. So we are at max capacity for what the times that were opened at the different facilities we are, and the output that we can get.Right now our incoming orders are exceeding our ability to produce those orders, which means our backlog is increasing every day. We certainly are working to get this as much output as we can, while still keeping our employees safe and complying with the restrictions that are out there. But you know, I’d say right now we are running just as full and working on every bit of ways that we can get more production through under the guidelines we have.

[Jamie Wilen:]

Can you give us a ballpark for what you might expect your volume to be in that business this year?

[Deb Merrill:]

Well we’re not – I mean, no, we’re not like giving it for a whole outlook, but I would say right now we are back in growth mode in that business and based on the order book I would certainly expect to see that strong growth carry all the way through, you know, June and really, you know, through the end of the fiscal year.So I’d say that back half of the year, we would expect to be back on growth path and growth pace that we had been talking about before, you know, we went through our holiday season, with the challenges with the shortened calendar there, but these last two quarters we think we’re back on that trend we’ve been talking about, which, you know, coupled that with the Delta garments you know, should be in the double-digit growth rate and the much higher production utilizing the Delta garments.

[Jamie Wilen:]

Will this require more capital expenditures for new equipment?

[Deb Merrill:]

At this point in time, the equipment that we have, we think should support the business again, as we can open up the rest of the facility timeframes that we have. So we don’t anticipate any short-term expenditures, but again, we’ll see how we end through the summer to see if there would be any requirements before we go to the holiday season.

[Jamie Wilen:]

Okay. Over to the Salt Life side. What percentage of your Salt Life sales now are coming from online sales as opposed to retail?

[Bob Humphreys:]

Well it’s really the vast majority. You know, because so much of our retail customer base, you know, has closed right now. So you know, we are still shipping some small retailers and anticipate them starting to open up in the Carolinas and Florida, you know, in the coming week or two, but there’s not a lot of wholesale business there right now.

[Jamie Wilen:]

Okay. And industry pricing with – you know, I mean, everybody’s in a state of flux and cotton prices have changed. And everybody’s trying to reduce their inventory. What – you know, how do you look at industry pricing and margins moving forward?

[Bob Humphreys:]

Yeah. Well I would say in general, it’s too soon to tell. But we haven’t seen, you know, an ordinary discounting out there or anything like that so far.

[Jamie Wilen:]

Okay. And lastly on the mask, you’re making – is that a $10 million masks a week?

[Bob Humphreys:]

Well we didn’t say $10 million a week. I don’t think we published a number. Have we, Deb?

[Deb Merrill:]

No, we have not.

[Jamie Wilen:]

Okay. But you will use that basically to keep your print run and keep your employee best care that you’re going to have to pay anyway it’s not really profit center, but during these more difficult times, it is covering some of the overhead I would assume.

[Bob Humphreys:]

Exactly, and you know, it’ll be particularly in these, you know, the next month or two when obviously revenue is challenged, there’ll be a nice additional piece of revenue that will be meaningful to us.

[Deb Merrill:]

And Jamie I just wanted to also clarify that in El Salvador and in Honduras right now, while we are manufacturing those, it is a very small workgroup that we have the permit to utilize for them. So I don’t want to give the impression that, you know, the vast majority of our workforce is able to work because of that, it is a very minor work group that we have done it to allow us to manufacture the face masks right now.

[Jamie Wilen:]

Okay. And lastly as far as the distributor model that you just actually got started before things slowed down. Are you seeing any traction there and how much inventory have you had to accumulate to get this thing start?

[Deb Merrill:]

Yeah. So, Jamie, overall the amount of inventory that we invested in is not significant you know, and probably kind of a rounding number to our overall inventory level is not a significant amount. We were starting to get a little bit of traction, but as you know, we really just launched it at the end of January that really had only started marketing it in February right before this hit.So two things to tell about any traction, although there’s certainly interest in it, and I think as things kick off and now, we are again, providing our Delta produced face coverings to again, these small businesses that this whole one-stop shop is what we were going after. I think the path will get back on pace once again, businesses get back starting and people are looking for their product.

[Jamie Wilen:]

Okay. Thanks fellows. Nice quarter.

[Deb Merrill:]

Thank you.

[Operator:]

[Operator Instructions] And currently there are no further questions. I’ll turn it back to the presenters. Please go ahead.

[Bob Humphreys:]

Okay, well thank you all very much for joining us on our earnings call today. And we’ll look forward to update you in about three months on the third quarter results. Thank you.

[Operator:]

This concludes today’s call. Thank you for your participation. You may now disconnect.