Heritage-Crystal Clean, Inc
Q2 2013 Earnings Call Transcript

Published: 25 Jul 2013

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Heritage-Crystal Clean, Inc. Second Quarter 2013 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would and similar expressions identify forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Please refer to our SEC filings, including our annual report on Form 10-K, as well as our earnings release posted on our website for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. Also, please note that certain financial measures we may use on this call such as earnings before interest, taxes, depreciation and amortization or EBITDA are non-GAAP measures. Please see our website for reconciliations of this non-GAAP financial measure to GAAP. For more information about our company, please visit our website at www.crystal-clean.com. With us today from the company are the Founder, President and Chief Executive Officer, Mr. Joseph Chalhoub; the Chief Operating Officer, Mr. Greg Ray; and the Chief Financial Officer, Mr. Mark Devita. At this time, I would like to turn the call over to Joe Chalhoub. Please go ahead, sir.

[Joseph Chalhoub:]

Thank you, and welcome to our conference call. Last night, we issued our second quarter 2013 press release and posted it on the Investor Relations page of our website for your review. This morning, we will discuss the financial statements and our operations in the second quarter. And we will respond to questions you may have relating to our business. Our second quarter sales were $63.6 million compared to $62.3 million in the second quarter of 2012. Year-to-date sales increased 9.6% to $123.6 million compared to $112.8 million for the first half of 2012. In the second quarter of fiscal 2013, we produced 6.5 million gallons of redefined base oil at our re-refinery. This volume represents 93% of nameplate capacity for base oil production. Although the market price of lube oil increased slightly during the second quarter, lube oil pricing was still much lower than what it was in the second quarter of 2012. These lower lube oil prices negatively impacted our Oil Business segment revenues and profits for the quarter. During the second quarter, we have steadied the number of used oil collection trucks and service at 140. We continue to execute plans to increase the efficiency of our routes. During the second quarter, we collected used oil at an approximately annualized rate of 37 million gallons. We continue to implement the initiatives started at the beginning of the year. And we believe that these would have delivered improved results in our used oil collection business. However, we also realized that the full value of these improvements may not be evident for a couple of years. When we entered the Oil Business, we recognized that we would be exposed to commodity price swings and have ups and downs through the cycle. We remain confident that this is a good business that will provide attractive returns over the long run. We look forward to beginning to expand the capacity of our re-refinery during the second half of 2013, which will allow us to better leverage the fixed cost of our current operation. In the Environmental Services segment, we are pleased with our same range sales growth. We are especially pleased that we continued improving our segment margin during the quarter. Improving our margin in this segment has been a clear objective of ours for the last few quarters. In addition, our growth was made possible by our ability to continually add new customers. As of the end of the second quarter, we served over 91,000 individual customers located from 74 branches. We are also pleased to announce that early in the third quarter, we purchased certain assets of 2 anti-freeze recycling companies. We expect that these 2 acquisitions would contribute to continued growth in our Environmental Services segment. While the lack of profitability in the Oil Business in the latest quarter was disappointing, we continue to take steps to improve our efficiency in this segment in order to help mitigate the negative impact of current market conditions. The continued strength of our Environmental Services business provides stability to help us through the current downturn in the Oil Business. Our Chief Financial Officer, Mr. Mark Devita, will now further discuss the financial results. And then we would be open to calls -- to open the call for your questions.

[Mark Devita:]

Thank you, Joe. It's good to be with our investors today for HCCI's second quarter 2013 conference call. Second quarter saw improvement in both of our business segments compared to the first quarter. In the Environmental Services segment, sales grew $3.8 million or 11.8% in the second quarter compared to the second quarter of 2012, and $8.1 million or 12.9% for the first half of the year compared to the first half of 2012. Of the 70 branches that we're in operation throughout both the second quarters of 2013 and 2012, the growth in same-branch sales was 9.6%. However, if we exclude the impact of those existing branches, which gave up territory and customers to new branches, the growth in same-branch sales was 10.5% for the second quarter. For the first half of the year, same-branch sales in our Environmental Services segment increased 11.4%. Our average sales per working day in the Environmental Services segment increased to approximately $600,000 compared to $580,000 in the first quarter of 2013 and compared to $545,000 in the second quarter 1 year ago. Operating costs in the Environmental Services segment increased approximately $1 million compared to the second quarter of 2012 and $2.3 million compared to the first half of 2012. We are very pleased that our operating margin was 27.8% for the quarter, which was up from 22.5% in the year-ago quarter. We continue to work to recover the impact of higher solvent and diesel costs experienced over the past few years, and had been successful at holding down costs while growing revenue in this segment. In the Oil Business segment, sales for the second quarter were down $2.5 million from the second quarter of 2012 as a result of continued pressure on lube oil prices. For the first half of 2013, Oil Business segment sales were up $2.7 million over the first half of 2012, as increased production at the re-refinery more than offset lower product prices. In the second quarter, our Oil Business experienced a loss before corporate SG&A of $0.5 million, which was a reduction of $1.6 million compared to our first quarter loss. In the first half, the Oil Business experienced a loss before corporate SG&A of $2.7 million. As was mentioned earlier, lower base oil selling prices negatively impact our operating margin during the quarter. We have seen positive results from our efforts to reduce cost and increase efficiency. We reduced both our internal cost of used oil collection and our transportation cost on a per-gallon basis during the second quarter of 2013 compared to the first quarter of 2013. Corporate SG&A was 11.1% of sales, up from 10% in the year-ago quarter. At the end of the quarter, we had $21.5 million of total debt and $41 million of cash on hand. We incurred $107,000 of interest expense for the second quarter of 2013 compared to interest expense of $146,000 in the year-ago quarter. We incurred $213,000 of interest expense for the first half of 2013 compared to $333,000 of interest expense in the first half of 2012 when we were drawing in our revolving loan. For the second quarter, we experienced income of $1 million compared to $1.2 million in the second quarter of 2012. Our basic and fully diluted earnings per share for the quarter was $0.06 compared to $0.07 in the year-ago quarter. For the first half of 2013, our income was $0.6 million compared to $1.5 million in the first half of 2012. Our basic and fully diluted earnings per share were $0.03 compared to basic earnings per share of $0.10 and diluted earnings per share of $0.09 in the first half of fiscal 2012. During the remainder of 2013, we expect to increase our internal collection of used oil, increase the efficiency of our transportation network and take advantage of enhanced economies of scale as we ramp up and expand our re-refining capacity. Our team continues to focus on the portions of the Oil Business we can control with the goal of improving the overall results in this segment. We are also very excited that we have been able to restore our margin in the Environmental Services segment to the mid-20% range. We were focused on continued revenue growth in this segment. Thank you for your continuing interest in Heritage-Crystal Clean. At this time, I will turn control of the call over to our operator, and she will advise you of the procedure to submit your questions.

[Operator:]

[Operator Instructions] And our first question comes from David Mandell from William Blair.

[David Mandell:]

So on the Environmental Services margin, were there any onetime benefits in there this quarter? Or is this level sustainable going forward?

[Mark Devita:]

We believe it's generally sustainable. The increase quarter-over-quarter was made up of a bunch of small different items. Probably the biggest singular item was the fact that we're internalizing some of that or reducing -- capitalizing on the benefit of reducing costs in our aqueous Parts Cleaning business related to purchasing chemistry from our subsidiary, Mirachem, that we acquired at the beginning of the fiscal year. And that was worth roughly 1% in margin. But that should be something that we would expect to continue on.

[David Mandell:]

All right, that's good. And then how much lube did you guys sell during this period?

[Mark Devita:]

6.5 million gallons in the quarter.

[David Mandell:]

Okay. So you sold and produced 6.5 million gallons?

[Mark Devita:]

Roughly.

[Operator:]

And our next question comes from Sean Hannan from Needham & Company.

[Sean K.F. Hannan:]

Sean Hannan. So I think I heard Joe that you'd mentioned 37 million gallons in terms of collection. I just want to make sure I understood that correctly. And kind of as a part b to that, what is the mix of the internal collection [indiscernible] the internal collection today versus external collection?

[Operator:]

Pardon me, one moment. [Technical Difficulty]

[Mark Devita:]

Sean, are you back?

[Sean K.F. Hannan:]

Yes.

[Joseph Chalhoub:]

Sean, your question was so difficult that we lost the line.

[Mark Devita:]

Well, we heard some of them. We were roughly a 2/3, 1/3 mix as far as 2/3 was internal collection for the quarter and about 1/3 was third party, helped us with the other party we used to run[ph].

[Sean K.F. Hannan:]

And then if you weren't collecting externally, what would we be looking at for margins?

[Joseph Chalhoub:]

If we were not buying all from third parties?

[Sean K.F. Hannan:]

That's right.

[Joseph Chalhoub:]

Well, basically, our objective is to run the re-refinery at full capacity and sell the output. And so in our mind, there's now an option. What we cannot collect, we would buy from the market to supply the plant and run it at full capacity. Otherwise, the margins of the business would deteriorate significantly.

[Gregory Paul Ray:]

Yes. I'm not sure of the assumptions behind your question. But as we said, we collected 37 million gallon rate, an annual run rate during the quarter. And if we've not bought any oil from third parties and only process what we collected ourselves, our margins and profitability would've been significantly diminished from what we reported. We are making incremental profit on the volume that we buy from third parties.

[Sean K.F. Hannan:]

Right. So I guess where I'm going with that, and I think there's a way that some of that can be kind of derived from your comments, Greg. The internal collection, I believe, has not been quite at the level of efficiency as you've desired. That's part of the focus in you addressing your transportation network. I believe that the margins for internal collection are a little bit more of a drag today. Whereas the external collection helps provide a little bit of an offset or a balance. I want to understand if that assumption is still correct, and how that's moving.

[Gregory Paul Ray:]

Yes. Well, first, let me give you -- it's just a slightly different color and answer to this. Because our internal collection costs on a fully loaded, fully absorbed basis are higher than our marginal costs for buying used oil from third parties right now. And you said that they weren't quite what we desired, and I guess I'd say there's 2 reasons that our internal costs are higher. One had been that we have some correctable inefficiencies, some sloppiness in the system as we were growing rapidly that had built up that we definitely wanted to work out of the system. And two, it's naturally less efficient because we have a younger, less dense route, which has improved a route network, which was improving all the time. That's the biggest reason for the difference, is this young immature route network. And as we've mentioned, that's going to take us probably several years of continued effort before we get the increased volumes and density to be as efficient as somebody who's taken 20 years to build up a dense route organization. The more controllable short-term inefficiencies related to transportation, logistics, rail car demurrage and other things that we've been working on would probably accomplish the significant amount of the improvement that's possible for us to achieve at this time. So we've squeezed out some of those costs that we could work on, but the longer-term gain while pushing our costs lower through increased loading of the trucks and routes is going to take more time. We think that eventually, when we've done all of that, our own internal collection cost is not only at parity with third-party costs, but probably is lower than third-party supply costs. More importantly, there's a strategic element which is that we think it's essential for us to have a substantial portion or preferably 100% of our appetite satisfied from internal collections if we can achieve that goal.

[Sean K.F. Hannan:]

That's very helpful. And then so when you look at those costs today, what you're able to manage, what's in your control. You're most of the way through, if I heard you correctly, in terms of what you feel you can achieve for your own efficiency is low-hanging fruit with that transportation network. And is there anything further you can really accomplish that you feel on your end through a lower pay for oil? Or is some element of that already kind of becoming embedded in theses efficiencies you're speaking to as well?

[Gregory Paul Ray:]

Well, I'd say the pay for oil issue is another one I didn't touch on yet. It's sort of an entirely different category. So I'll personally stick with the cost issues. I don't think we've achieved all of the cost savings that are related to just being more careful and efficient and logical about our operations. But we've gotten most of those. And I can't really quantify for you whether there's still a couple pennies left on the table that we can squeeze out of the system. But it's not a big number. The efficiency gains we get as we get more route density over several years are much larger than that. And we're working through that now. And we certainly think there's still plenty of room to more fully load our trucks, which in many cases are only running at 50% or 60% of what we'd consider full capacity for a vehicle. So you can just appreciate that when you have the fixed cost of the truck lease and the driver overhead and things like that, there's a lot of room to spread those costs out over more gallons. And we're going to get bigger improvements there. Now to turn to your other comment around pricing, none of these cost things I talked about really relate to street pricing at all. We are desiring to reduce what we pay on the street for used oil. We've made some efforts to work on that. And I guess the simple way to describe it is that over the second quarter, if we break that down into 3-, 4-week periods, which was the way we do our accounting, we made small sequential improvements or reductions in what we pay generators on average, each of those 4-week periods during the quarter. But only very small improvements. We believe that we continue to be at the low end of the industry spectrum in terms of what we're paying generators for used oil. And we certainly know that some generators -- excuse me, some collectors have indicated that they expect to put in place price changes and pay less for used oil. But we're not seeing that in the market at this point in time on a broadscale basis.

[Sean K.F. Hannan:]

That's helpful, Greg. Last question before I jump back in the queue, do you have a blended cost per gallon that you're willing to share for what you are able to achieve today?

[Joseph Chalhoub:]

On the oil collection?

[Sean K.F. Hannan:]

Correct.

[Gregory Paul Ray:]

We don't choose to disclose that, Sean. I appreciate your asking and why it would be helpful. But we haven't been publishing that. And I think you can understand why it would be competitively and commercially sensitive.

[Operator:]

And our next question comes from Kevin Steinke from Barrington Research.

[Kevin M. Steinke:]

I wanted to follow up a little bit more on the Environmental Services margin. And you mentioned that, that could be sustainable going forward. Does that mean that the price increases that you implemented have mostly been realized? Or is there more room to go there?

[Mark Devita:]

Yes. They've been pretty much fully implemented. You'll see a quarter over a year ago quarter, you'll see that realization rate, probably will be at similar rates to where it has been the last couple of quarters. So if that, other than comparing year-over-year, quarter-to-quarter, we'll be at around the rate probably that we're at now. So we don't see any other big bump coming until we implement our next event. Usually, we look at this every year and specifically in the fourth quarter typically, as I'm sure you're probably familiar so...

[Gregory Paul Ray:]

Yes. I agree with what Mark said. I'd add that we feel very pleased with the good market acceptance of our last round of price increases. That's allowed us to restore margins to what we think of as a healthy level. And we do our price increase typically each year in the November timeframe and sort of phase it in over a month or 2. So it's in effect at the start of the new year. And we'd expect, where we sit today, to be able to do the same thing again as we look ahead to the coming couple of quarters and be able to implement another price increase.

[Kevin M. Steinke:]

Okay, great. And Mark, in your prepared comments, I believe you mentioned that you've been successful in holding down costs in the ES segment. And you did mention, I believe, the benefit of the aqueous side of things. But are there other costs that you've been successful on holding down in terms of solvent or anything else that we should be thinking about?

[Mark Devita:]

Solvent, mineral spirits solvent was -- we had a minor uptick there. And that can be, as you followed us now for a little while, as crude impacts things like the cost of mineral spirits and other related products that affect our business, you can see swings from quarter to quarter. In our inventory, for instance, we can have write-downs sometimes due to lower cost to market factors. We didn't have any of those things this last quarter or at least anything of note. So those are always possible in future quarters. And we use this annual gain back to benefits of lower cost inventory in subsequent quarters. So we try and walk everyone through that. But we didn't have any of that, what I would call noise in this quarter certainly compared to Q1. So in general, we haven't seen a lot of increases there. So it's more about route density. We've been able to drive better revenue, a lot of it through better price, and simply maintain other things we've done really well that we've had increases in previous quarters, our disposal costs. We didn't have a great additional improvement from Q1 to Q2 this time. But over the past several quarters, that's been one where we've also had some benefit.

[Kevin M. Steinke:]

Okay. And on the Oil Business side, how was the expansion of the re-refinery tracking? Has that begun? And is that on plan currently?

[Joseph Chalhoub:]

Yes. It is on plan. We have, as we speak here a couple of weeks ago, we've taken a regular shutdown. And we do this every quarter for equipment cleaning and general maintenance. And at that time last week, we've done some tie-ins and put some equipment towards the expansion. And as we said earlier, we expect the expansion to be completed by the middle of next year. We will see some benefit in the second half of this year. And taking the capacity beyond the initial design of 50 -- nameplate design of 50 million gallons and towards later on in the fourth quarter.

[Kevin M. Steinke:]

Okay. Should we think about that normal plant shutdown that you just did having any meaningful impact on capacity utilization in the third quarter here? Or is that not meaningful?

[Joseph Chalhoub:]

Well, typically, we have these shutdowns every quarter. And this was a little bit more extended by a few days. And we're a little bit too early in the quarter. And we're expecting to get up to the rates you've seen in the last couple of quarters. We're over 90% of the initial 50 million-gallon nameplate capacity. And we're obviously driving this thing to go up beyond that and beyond the 50 million gallons.

[Kevin M. Steinke:]

All right. One more question for me here. You referenced a couple of acquisitions you made in the third quarter, antifreeze recycling. How large were those acquisitions? And what made those particular businesses attractive to you in that particular market?

[Joseph Chalhoub:]

Yes. We have been -- antifreeze is a common waste stream from most of our customers. And we haven't had a proper way of managing this. And we have historically been shy from servicing some of the customer that had large volume of antifreeze. And so in size -- and anyway, just to finish my thought in here, what we have done is we've identified 2 companies that are bringing us the technology and operational experience in managing the spend antifreeze and recycling. It's a relatively low capital business for recycling, but they have good technology that we have evaluated to recycle antifreeze and be able to offer it to the customers back as they finish their product so that meets FTN and other standards. And so the 2 acquisitions totaled in revenue $6.3 million. And we expect to add another couple of million dollars in our first full year of operation.

[Kevin M. Steinke:]

Should we, just one quick follow-up on that, should we think about those -- that as a service that can be just rolled out with your existing infrastructure of trucks and recycling technology? Or is there something incremental that the acquisition has brought on or that you need to invest in?

[Joseph Chalhoub:]

Well, the first reason why we did this thing is we didn't have a full menu in our Environmental Service business. We were uncomfortable, the state offering, the removal of used antifreeze from some customers, but not all customers. And then we would ship the antifreeze for disposal. And the first objective here is to correct this thing and have the internal capability to recycle antifreeze and build on that business. We are in the process of evaluating our strategy at how to proceed with this business.

[Mark Devita:]

If I can add to that. When we think about the brand's business, we are picking up antifreeze now. And this gives us a way to route the material we pick up and manage it for recycling. And so that'll be sort of a natural fit with our existing branch business. In terms of if you're sort of modeling this out and thinking about capital, which I kind of heard as part of your question. If we sort of keep this at the scale of that or modest growth, there's not any substantial incremental capital requirement. We'll only be talking about putting more capital into the business to the extent that we want to grow it more aggressively. And our first step is to sort of learn and integrate what we're doing before we put together the ambitious plans. And as Joe said, it's not a terribly capital-intensive business from everything we've seen. So it probably is going to be something that -- our need to sort of budget the capital for modest growth isn't very significant.

[Operator:]

And our next question comes from Michael Hoffman from Wunderlich.

[Michael E. Hoffman:]

On the -- let's start with the Oil Business. Straight out, can this be a profitable business on the current 50 million gallons in the current lube environment?

[Joseph Chalhoub:]

The contribution -- from a contribution, margin before SG&A, the answer of that is yes.

[Michael E. Hoffman:]

And how do you do that?

[Joseph Chalhoub:]

Get to this -- run consistently at the 50 million gallons. We were pretty close in the quarter. And we were running at 90%. And we are now seeing we are 93% of the capacity. And we haven't fully implemented the -- as you heard earlier from Greg, there's still a little bit more stuff from the efficiencies of the transportation outside of the oil collection. The oil collection trucks are far from being efficient. And so we have room in that area as well. We don't want to aggressively go in and load these trucks up and move the price on the street up. And so we want to be able to do it through build up relationship over a period of time without going in and paying the big dollars at the Wal-marts of the world. And so we have quite a bit of room on our collection. I see Greg in here. Do you want to add?

[Gregory Paul Ray:]

Well, just to say, as Joe's defined the answer to the question, we're pretty close to that point in the second quarter. We were -- profit before SG&A for oil was negative, $0.5 million on $26 million of revenues. We've got still a 2% deficit. And as Joe said, making up that last $0.5 million in the quarter was just doing a little bit better on cleaning up the operations, on getting a little bit more density on the trucks. And then running a few percentage higher rate in the plant kept us above breakeven. Now the bigger answer to the question is in the current economics for lube prices. How do we do better than that? The answer is we get the street price lower. And we've heard lots of talk from people about that. And as I said, we think that we're at the low end of the spectrum and continuing to drive our costs lower on the street. But we can only make a certain amount of progress because the differential between our pricing and competitors remains large.

[Michael E. Hoffman:]

Okay. So to hold on those spreads a little bit, you made a suggestion, Greg, it's a couple points. And 95% is sort of the magic number on utilization? Or is it really -- just so we're not splitting hairs here.

[Joseph Chalhoub:]

95% of capacity?

[Michael E. Hoffman:]

Yes.

[Joseph Chalhoub:]

No, not, no. We should be able to run at nameplate capacity. And I know we are satisfied. Anything over 90% is typically good for this kind of -- any refining operation is good, but...

[Gregory Paul Ray:]

Yes. I might not have been clear. What I was trying to say is it's a couple of points or maybe 200 basis points of negative margin in the Oil Business that we have to overcome. And that's the couple of points I'm talking about. And so increasing the plant utilization from 93% of nameplate to 100% of nameplate can go a long way towards making up those missing 200 basis points.

[Michael E. Hoffman:]

Okay. But it would take the whole -- it would take to be at nameplate to do it? That's what I'm trying to understand. Or how sensitive and close because 7 points is, from a -- way back in my manufacturing days, 7 points is a pretty healthy lift.

[Joseph Chalhoub:]

Yes, absolutely. At the 7 points, we would expect a lot more than a couple of percentage here. This is outside of the collection. This is just from the processing side.

[Michael E. Hoffman:]

Right, right. I get that. Greg, I get you didn't want to answer a price per gallon blended number earlier, but could you frame what is the collection -- what's the cost of goods sold percentage of the feedstock versus processing costs? How do I think about that? Is it greater than 50, less than 50?

[Gregory Paul Ray:]

I'm going to see if our CFO, Mark Devita, is willing to take a stab at that so that we can be consistent with what we tell people generally.

[Mark Devita:]

Yes. It's spread around 50. And I'm not trying to be evasive. It depends on what basis, dry basis and how you're looking at the gallon, but...

[Michael E. Hoffman:]

But that -- I mean, that helps. I mean, if you can move these pennies a gallon we get -- that gives us a sense of some of the leverage of that.

[Joseph Chalhoub:]

Exactly. No there's no question, the used oil cost outside of the processing efficiencies the used oil cost is the single most important factor in the economics of the business today. And so as we get more efficient, without driving the price of oil on the street hub and seeing a reduction of the price on the street is still quite a bit of uplift here at today's price of lube oil.

[Michael E. Hoffman:]

Right. And then on the collection side, why not -- maybe park a few of the 140 and buy a third party for now and get some improved economics and allow time to be your ally on improving the density of maybe a fleet of 120 and then to start incrementally add 20 more trucks in. Why not pull back a little bit? And there's so much collected volume out there. And there's 1 or 2 very big collectors you could source from. And they ship by train. And it's pretty low delivery cost. Why not do that?

[Joseph Chalhoub:]

Okay. Well, it's a good question. And my back is still full of signs of bad experience with third-party collectors. And we've been hit negatively in the past on relying on third party and didn't get it. And today, we're long. We have to think strategically how far did we want to go. We have parked 11 trucks and have parked a fleet of additional truck that we had -- we stopped acquiring these trucks, but we're in the process of building them. And it wasn't too long ago. 1.5 years ago, to purchase third-party oil, we would have to pay more of our own cost, which was not very efficient at the time. We still have to pay even more than that. And the other factor is we are taking the plan from 50 million to 75 million gallons. That's a big block, the 25 million gallons. And it's prudent for us to not to reduce the number of trucks from 140 down to 120. I don't think we see much of it, a difference in our economics. We're getting relatively close to the third-party oil cost.

[Operator:]

[Operator Instructions] And I'm not showing any further questions. Thank you for your time and interest. We are grateful for your support. We invite you to join us on our next conference call. Thank you. This does conclude today's program. You may all disconnect. Everyone, have a great day.

[Joseph Chalhoub:]

Thank you.

[Mark Devita:]

Thank you.