SpartanNash Company
Q2 2008 Earnings Call Transcript

Published: 18 Oct 2007

[Operator:]

Good evening ladies and gentlemen, and welcome to the Spartan Stores, Inc. Fiscal 2008 Second Quarter Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. And ladies and gentlemen, I must remind you that comments made by management during today’s call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that involve significant risk and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such a difference include among others, competitive pressures among food, retail, and distribution companies, the uncertainties inherent in implementing strategic plans and general economic and market conditions. Additional information about risk factors and the uncertainties associated with our forward-looking statements can be found in the company’s earnings announcement, annual report on Form 10-K and our other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking Statement. It is now my pleasure to introduce your host, Mr. Craig Sturken, President and Chief Executive Officer for Spartan Stores Incorporated. Thank you Mr. Sturken, you may now begin.

[Craig Sturken:]

Thank you very much. Good morning everyone, and thank you for joining our Fiscal 2008 Second Quarter Earnings Conference Call. With me this morning are members of our team including Executive VP and CFO Dave Staples, Chief Operating Officer Dennis Eidson, our Executive Vice President of Retail Operations, Ted Adornato and Executive Vice President, General Counsel Alex DeYonker. Our Second Quarter financial results continued to show substantial improvement in both sales and earnings growth, which marks our sixth and seventh consecutive quarters of net sales and operating earnings growth respectively. We made steady progress during the quarter, and many of the business initiatives that are continuing to strengthen and favorably position Spartan Stores in a very competitive marketplace. These initiatives include assessing and integrating the retail operations of 20 Felpausch stores, ramping up the substantial new distribution of business with Martin’s Super Markets and expanding supply relationships with our existing distribution customers in Southeast Michigan. In addition, we made additional progress with our capital program related to upgrading stores from “The D&W and Felpausch acquisitions”. We are especially pleased with the performance of our core grocery stores, particularly our D&W Fresh Market Stores. During the past two quarters, we completed remodels of four D&W Stores, and so far the sales trends have been terrific. Additionally, today we are holding a grand opening for our recently completed 48,500 square foot Family Fare prototype store. This store serves as a replacement for an older smaller store and will showcase many of our latest merchandising and promotional ideas. These capital investment decisions along with our marketing and merchandizing programs, coupled with the state-of-the-art category management practices are continually improving our market position and making us even stronger market competitor. During the quarter we continued to make progress, integrating our Felpausch Retail Stores. We will complete our remodeling efforts for two Felpausch Stores and start one additional remodel during our third quarter. We also expect to complete a total of three additional remodels during the Fourth Quarter. These store remodels will be very comprehensive and allow us to better execute our promotional and mechanizing programs, as well as scientifically improve the customer’s shopping experience. In fact, the remodel of our Eaton Rapids Felpausch store was completed last week, and in the first week of reopening sales have exceeded expectations. The remainder of the capital program is currently being evaluated and will likely be substantially complete by the end of fiscal 2009. As you may be aware, we also announced the closing of five underperforming Pharm retail stores this quarter. These stores did not meet our performance standards; were located in markets that did not present favorable long term growth potential, and had near-term expiring lease agreements. While closing a store is never a desired event because of its effect on our associates and the communities we serve, we are committed to continuously strengthen our company and making the right decisions that best position us for long-term growth. From a distribution perspective, the transition of new business from Martin’s Super Markets is progressing on plan. We are very impressed with the outstanding Martin’s organization and with the cooperation between our two companies. Both of our organizations rose to the challenge of successfully integrating a substantially new distribution relationship. During the quarter, we also started to realize sale volume gains from our expanding business with distribution customers in Southeast Michigan as a consequence of Farmer Jack’s exit from that market. Consequently, we have seen substantial volume gain from many of our core distribution customers. Lastly, we are continuously striving to improve our operational efficiencies. Currently, we are evaluating a number of initiatives that will help improve our distribution network and sustain our competitive advantage. With that overview, I will turn the call over to Dave Staples for a detailed review of our Second Quarter Financial results. I will rejoin the call following Dave’s comments to provide you with an update of our business outlook. Thanks!

[David Staples:]

Thank you Craig and good morning everyone. Consolidated net sales for the second quarter reached a six-year high, increasing 13.5% to $627.1 million from $552.6 million in the last year’s second-quarter. The increase was due to higher sales in both of our business segments. Gross margin for the quarter increased 60 points to 20.6% compared to 20% in the second quarter last year. The improvement was due mainly to an increase in the sales mix of higher margin retail sales and an improvement in retail gross margin rates partially offset by a volume increase in lower margin fuel and pharmacy sales. As a percentage of sales, second quarter operating expenses increased to 17.4% from 16.8% in the same period last year, reflecting the higher retail operating cost structure due to the recent acquisitions, and $1.3 million of favorable insurance related items have reduced last year’s operating expenses. Start-up costs attributable to the Felpausch acquisition amounted to approximately $0.3 million in the second quarter. Second quarter operating earnings increased to 11.9%, to $20.1 million from $17.9 million in the same period last year. The improvement was a result of strong overall sales growth, as improved gross margin rates were offset by start-up costs for our new business activities and the $1.3 million favorable insurance reserve adjustment in last year’s second quarter. Second quarter earnings from continuing operations before the non-cash charge related to the Michigan Tax Law change increased 19.6% to $11.5 million, or $0.53 per diluted share, from $9.6 million or $0.45 per diluted share in the same period last year. Earnings benefited from lower interest expense due to the private placement of Convertible Senior Notes and the amendment to our credit facility that took place in the first quarter. The earnings benefit was however, partly offset by the borrowings associated with the Felpausch acquisition and the higher networking capital requirements due to higher sales volumes. As described in our press announcements, the non-cash charge relates to a new Michigan State income tax law that was originally enacted in one form and then subsequently changed to correct the deficiency in the new tax code that would have had adverse financial consequences to businesses operating in the State. The timing of the two legislative actions fell between our fiscal 2008 second and third quarters, requiring us to record the non-cash charge in this quarter, only to record an equal credit in our fiscal 2008 third-quarter which has already been recorded. Consequently, the income taxes line of our financial statement increased by $2.7 million this quarter, but will decrease by $2.7 million in the upcoming third quarter. This transaction is strictly a non-cash accounting entry between two reporting periods that will have no effect on our annual net earnings. As a matter of fact, we are not even subject to the new tax rules until January 1, 2008. The other substantive issue related to the tax law change is that in the fourth quarter of this year and in the subsequent periods, the Michigan Business Tax will be classified as an Income Tax. Beginning in the fourth quarter, all provisions related to the tax will be included in income taxes in our financial statements rather than the past classification as Selling, General and Administrative Expense. Net earnings for the quarter before the non-cash State income tax charge rose to $11.9 million or $0.55 per diluted share, compared with $9.3 million or $0.44 per diluted share last year. Including the non-cash charge, reported net earnings were $9.1 million or $0.42 per diluted share. Turning to our business segment, second-quarter distribution sales increased 4.4% to $293.8 million from $281.5 million in the same period last year. The sales improvement was due to new distribution customers and expanding sale to our core customers, particularly in southeast Michigan. This gain was partially offset by the elimination of sales to the acquired Felpausch stores, as these sales are now reflected in our retail division. Distribution operating earnings improved 4.8% to $8.1 million from $7.8 million in the same period last year, marking our highest second-quarter operating earnings level in six years. The improvement was due to higher sales volumes and network efficiency improvements, partially offset by last year’s favorable Insurance Reserve adjustment of $0.5 million. Second quarter retail sales increased 22.9% to $333.2 million from $271.1 million in the same period last year. The sales improvement was due to the addition of our Felpausch Stores and solid sales performances across all of our retail supermarket banners. Comparable store sales excluding fuel rose 2.8% as a result of our newly remodeled stores, the opening of additional fuel centers and higher prescription sales from the acquired pharmacies. Second quarter retail operating earnings increased 17.4% to $11.9 million from $10.2 million in the same period last year. This is the highest level of retail operating earnings that we have reached since becoming a public company in August of 2000. The improvement was driven by higher store sales volumes in our acquisitions, partially offset by the $0.8 million non-recurring Insurance Reserve adjustment in the last year’s second quarter. I will now cover our outlook for the second half of fiscal 2008. We expect comparable retail store sales to increase in the low single digits in the second half of our fiscal year, and the acquired Felpausch Stores to add approximately $85 million to our consolidated sales for the fiscal year. On the distribution side, we expect to continue to generate incremental revenue from the New Martin’s Business and from the Farmer Jack Store closures in the Detroit area through our fiscal year end. We experienced some of the benefits of this business ramp up during the second quarter and expect additional benefits through year end as our customers continue to open the former Farmer Jack stores they acquired. We expect the additional business from our Martin’s relationship to be modestly accretive to earnings in fiscal 2008 because of the start-up costs associated with this new business. We expect to increase start-up costs as a result of the Felpausch acquisition of between $1.5 and $2 million for the store repositioning, remodeling, and employee training during the remainder of this year. The remainder of our Felpausch capital spending program is now expected to extend to our fiscal 2009 year, resulting in additional store remodels and promotional programs during that time period. We will provide more guidance on the capital program timing as we finalize our budget plans during the remainder of the fiscal year. Capital expenditures for fiscal 2008 are expected to range from $40 to $45 million, including the anticipated remodel activity of the Felpausch Retail Stores. Depreciation and Amortization Expense should range from $23 to $26 million, and interest expense should be approximately $12 million. I will now turn the call back to Craig.

[Craig Sturken:]

Thanks Dave. We are very pleased to report consistent and continuing revenue and earnings growth, and to be making considerable progress executing our strategic business plans. We continue to gain ground on our competitors, solidify our market position, and gradually nurture sustainable, long-term competitive advantage by differentiating our retail offerings and by maintaining consistent and high service levels. We are building one of the best retail grocery store franchises in our markets, and are expanding our best-in-class distributing network to new markets. During the remainder of the year, we will continue to upgrade select Felpausch Stores, bringing them up to the high performance standards that we expect. This will include additional store remodels, banner transitions, new marketing and merchandising programs, and store layout changes. We will also finalize our plans for the remainder of the Felpausch Stores. Well, we still have much more work left. We remain very optimistic about the potential of these stores as they are an excellent complement to our existing store base. In addition, we are working on fiscal 2009’s capital plan for the remainder of our stores, which will include several significant remodels, and one or two store relocations. We will provide more details about these plans as next year’s operating plans finalize. Our distribution division, we have finished most of the heavy lifting associated with assimilating the Martin business and expect the benefits of this expanded supply relationship to continue through the end of the fiscal year. In addition, we have the additional business to bring on with customers in the Detroit area, which will also contribute to our continuing Distribution Sales growth. We have identified areas in our warehouse network that will allow us to continue to improve our operating efficiency and capacity, and we are currently working very hard to realize these benefits. We will continue to look for expansion and consolidation opportunities for both our Distribution and Retail divisions in contiguous Mid-Western States as well as the current markets that we serve. Considering our strong year-to-date financial performance in light of the competitive environment and economic climate in our markets, we are increasingly confident about our long-term business prospects. As we move forward, we will continue executing the growth phase of our business strategy while further strengthening our business fundamentals and competitive market position. We firmly believe that significant and sustainable growth opportunities remain before us. We will now open the call for your suggestions.

[Operator:]

(Operator instructions) Our first question comes from Barkley Smith with Bank of America.

[Barkley Smith:]

Hi guys, it’s Barkley here. Just congratulations on the great quarter. Just really ask just two macro questions. First of all would be how you are seeing the climate up there in Michigan, it has been topic of discussion, jobs, etcetera?

[Craig Sturken:]

Well, first of all, it’s cold and rainy which is the way Michigan always is, but the job climate? Well, let’s face it, Southeast Michigan, the trade market that’s so reliant on the auto industry, they have issues. In Western Michigan however, we see things as much more stable and as the environment here segways from a manufacturing marketplace to one of service and health, we’d see the employment situation probably improving.

[Barkley Smith:]

And then in terms of the inflation, you have still not talked about the food inflation as far as I know. I didn’t note anything you did talk about how are you handling some of the problems that the folks are talking about?

[Craig Sturken:]

Well, you can’t ever deny that there is such a thing as food inflation. We feel that we are maintaining pace with food inflation. We don’t see it affecting our earnings. Food inflation has been around for many, many years and we deal with it on an everyday, every period basis.

[Barkley Smith:]

Thanks. Again, congratulations on a great quarter.

[Craig Sturken:]

Thank you.

[Operator:]

Our next question is coming from Karen Short of Friedman Billings Ramsey.

[Karen Short:]

Hey everyone.

[Craig Sturken:]

Good morning.

[Karen Short:]

A couple of questions; just wondering while -- follow up of another macro, just wondering if you could maybe give a little color on what you are seeing from the consumer. What are you seeing from trading down? Are you seeing, I guess some changes in the competitive environment, has it gotten worse? Craig, I think at the beginning of the call you alluded to the fact that it was a very competitive marketplace, it’s always been competitive, has it gotten to the teams?

[Craig Sturken:]

It’s more of the same from a competitive standpoint. We really are faced with two of the toughest retailers in the United States, being Myer and Wal-Mart. They are not going to go away; we’ve learnt to deal with it and live with it, and we will march on. Your question about the consumer, what’s going on; nothing to report out of the ordinary except that our private label program continues to be very, very strong. We’ve just come off our fall private label sale and it was fantastic. It was just a terrific program for us and we think that it serves the needs and maybe the desires of the customers today.

[Karen Short:]

Great; and then this one I just wanted to follow up on the Farmer Jack stores. I think eight of the Farmer Jack stores were bought by your customers. I just wanted you to give some color on how many actually had reopened in the second quarter -- I mean, clarify that that eight is actually the right number.

[Craig Sturken:]

The total number of stores that our retailers will have open is 14.

[Karen Short:]

Okay.

[Craig Sturken:]

We were hoping for 15 but we got 14; and currently, nine of those stores are operating. So, and bettering our numbers is the benefit of those nine stores and we have five more to go.

[Karen Short:]

Okay; and then just on your comps a little bit, can you talk a little bit about traffic versus baskets and then also I guess, I was wondering if there was volumes at your store, was it largely inflation related?

[Craig Sturken:]

Well, actually the comps, the sales per transaction versus customer comp has more or less flattened out. We were having difficulty with customer comp and customer comp is slightly positive, we are around 1%, sales per transaction is slightly negative around 1%, it’s really not much.

[Karen Short:]

Okay and and so volume are slightly down?

[Craig Sturken:]

You mean tonnage?

[Karen Short:]

Well, volume at the store at the retail level.

[Craig Sturken:]

We are very flat.

[Karen Short:]

Okay. Thanks.

[Craig Sturken:]

Thanks.

[Operator:]

Thank you. Our next question is coming from Charles Cerankosky with FTN Midwest Research.

[Charles Cerankosky:]

Alright everyone, great quarter. If we are looking at the tax line Dave, can you give us an update on the NOL tax carry forwards?

[David Staples:]

Can you say that again, Chuck, I am sorry.

[Charles Cerankosky:]

Yeah, just focusing on the tax line at the start, can you give us an update on what you have left with the NOL tax carry forwards?

[David Staples:]

Yeah, we are pretty much through that at the end of the second quarter at this point, so there is always good news and bad news. The good news is, hey, we keep performing better than we ever anticipate; I guess the bad news is, we use up the NOL faster, so.

[Charles Cerankosky:]

Craig, comment on pharmacy trends, how has that been going for you, what’s your script count growing up?

[Craig Sturken:]

Well, script counts first of all are affected by the transition through multiple week or multiple month skus that are being written by the insurance companies and by doctors. In other words, I used to get a 30-day supply, and now I get 90-day supply. And that happens to everybody. Everybody is going through that. So that really is affecting the script count. The other thing that’s going on is generics. Generics has really changed the ring value of prescriptions, and everybody has seen the incredible numbers of the difference in the ring value of a prescription that is generic. So, that all adds up to a lot of pressure on the top line sales of our pharmaceutical business, which we are experiencing just like everybody else.

[Charles Cerankosky:]

Okay. Dave, I want to make sure I understand, in the retail segment in the second quarter you had about $300,000 of expense related to assimilating Felpausch and by that I mean the integration, training, etcetera factors.

[David Staples:]

Correct.

[Charles Cerankosky:]

Okay. Was that below or above plan? Are you happy with that number you indicated for the second half of the year? We are going to see $1.5 Million to $2.0 Million, so it’s going to pick up, and we still looking I think at a number of 4 to 5 total?

[David Staples:]

By the time you get through next year, because really, a large percentage of that after the first quarter relates to your re-grand opening expense, your promotion, as well as you re-laid out the store, there is some training that goes with that, but mostly are resets. So, mostly it has to do with the remodel activity and will go in sync with that. And so as we pushed out a few remodels out of the second quarter into the third and then the fourth, and then as this plan moves through next year, we’ll still stay relatively on track on to that number, it’s just spread out over somewhat of a longer timeframe.

[Charles Cerankosky:]

Okay, but it is $ 4 to $5 million total?

[David Staples:]

Yeah, it will still be that ballpark.

[Charles Cerankosky:]

And when do you think you’ll be done with that?

[David Staples:]

Well, we think we’ll be late next year because in a couple of markets I think we will really put some nice touches on those markets. So it will go through the end of next year, it could trickle into following year depending on timing and what we do with a couple stores, but we expect to be substantially complete by the end of next year.

[Charles Cerankosky:]

I guess we should, when thinking about what kind of operating margin to apply to your retail segment, it could drift up a little this year, but maybe a little more pressure next year because more expenses being pushed into fiscal 2009?

[David Staples:]

Yeah it will be a little off because then if we end up 4 to 5, we were 500 in Q1, 500,000, 300,000, and the one-and-a-half or two, we actually should be half or better this year. So, you probably spend about the same or a little less next year actually.

[Charles Cerankosky:]

Right; if you take the 800 year-to-date, plus the one and half to two puts you at 2.3-2.8, and we are talking 4 to 5. You’ve got a little more than half of it probably behind you this year, so it shouldn’t put more pressure on.

[David Staples:]

Well the other thing is, there is a benefit for this investment. We will do better in those stores where we made the investment this year, and that is part of an offset for the future investment.

[Charles Cerankosky:]

Got you, thank you.

[Operator:]

Our next question is coming from Perry Caicco with CIBC World Markets.

[Perry Caicco:]

I know it’s very early on Felpausch, but I wonder what you have learned about Felpausch customer base, how they have responded to specific parts of your programs and is there any sort of change or new thinking in how you see that store base unfolding specific to banners or format changes?

[Craig Sturken:]

Well Perry, we mentioned it earlier in our presentation, we chose one store to do as a test to be sure that we had our formula right in making the change. And Eaton Rapids, Michigan, it is sort of an isolated store, it doesn’t affect any other markets. We are just overwhelmed with the response on the part of the consumer. We had it right, plus the conversion to the Family Fare banner, which is what we did there, it had no negative impact on the customer because you always worry about the banner changes. Is it a good thing or a bad thing? The banner change was great. What we did in the way of modifying a store’s format really has turned out to be great. We are very, very pleased with that and we expect to see that kind of response going forward. What we are going to get is a more loyal customer out of the deal because we are in a better spot to fulfill all of their shopping needs with the changes that we are making.

[Perry Caicco:]

Has that early success altered your thinking in terms of perhaps being more aggressive with the Family Fare banner or on the ?

[Craig Sturken:]

Well, that’s a good question. You are not the first person to ask this question.

[Perry Caicco:]

Okay.

[Craig Sturken:]

You look at this and say, Geez, should we speed up the entire investment process? And frankly, we are considering how we are going to look at that. The one thing that is very important though, is that we don’t disrupt what’s going on in the balance of our business; and its very tempting to look at Felpausch and saying, “My goodness, let’s marshal all the troops, put them all over there,” but we have this other part of our business that’s very important, what’s going on with the Farmer Jack stores, what’s going on with Martin’s. So, I hear we are saying, I have heard it from someone else, and it’s tempting, and we will let you know if we change our schedule.

[Perry Caicco:]

That’s fair. I wonder what’s driving your improved margin rates in the retail segment considering that you are battling with some pretty heavy contemplation and some pretty heavy retail price action by Wal-Mart. I guess I am assuming that private label and perishables are part of that?

[Craig Sturken:]

Yeah, I want to give it back to Dennis Eidson.

[Dennis Eidson:]

Hi Perry. You are exactly right. Craig touched on the private label a bit earlier in the call, but private label has really been the driver for us. Perhaps you know that profitability os significantly better than on the branded side, and we treat our private label as really a strategic plank to our whole go-to-market offering and its paying great dividends. As a matter of fact, on both side of the house we actually just got done with the Fall sale where we ran TV and Spartan brand products across the state of Michigan and Northern Indiana in markets where we don’t even have corporate stores supporting our independent customers which, as far as we know is pretty unique from a wholesaling perspective.

[Perry Caicco:]

So, that is fine. And then just one more question, if I could, Craig, I guess with the sort of weak Southeast Michigan economy and I guess with Wal-Mart’s heavy promotional programs, I am wondering, does that change the environment for acquisitions among the independent base in the region?

[Craig Sturken:]

Not that I can tell. Honestly, our retailers are doing very well. Again, if we just take the private label story, if we increase the penetration of private label in the retail customers that we supply, their profitability is enhanced also. So, there is no extraordinary pressure on the retailers from a profit standpoint to say, well now is the time to get out. It is probably just the opposite, but the likelihood of our continuing to march down the road of acquiring retailers that we supply is always there, and we are their exit strategy and as time goes on, it becomes attractive for them and we will be there to work with them.

[Perry Caicco:]

Is it possible that the retailers that are not in your system are more likely acquisition candidates at this point?

[Craig Sturken:]

I would love to be able to tell you that. Yeah. You may have to ask somebody else on another conference call, but that is a big part of our strategy.

[Perry Caicco:]

Okay, that is good for now. Thanks Craig.

[Craig Sturken:]

Okay.

[Operator:]

Thank you. We have a follow-up question coming from Karen Short of Friedman Billings Ramsey.

[Karen Short:]

Hey, I just wanted to ask a question on the operating margin side and distribution. Craig, you alluded and and touched briefly on some initiatives that you are working on to improve operating performance. Can you maybe elaborate a little bit on that and maybe see if you can direct some color on what the margin expense and opportunity is?

[Craig Sturken:]

Well, really as we grow our distribution business, we are looking for efficiencies. And systems and technology are there for us to implement, and frankly we have been so focused on growing the business and bringing direct channels on board this year. We haven’t made any major changes there, but there is a lot of opportunities for us to incorporate both technology and maybe expertise from other people such as consultants that know how there is a better way to do it. And we know that there is upside for us on the efficiency standpoint. We benchmark our company against everybody else, and we realize that there are tremendous upsides for us. As well as we are doing, as much progress as we have made, we know that there is upsides.

[Karen Short:]

Is it fair to say it is a multiyear type of initiative?

[Craig Sturken:]

Oh yes. As a matter of fact I think it is probably a continual initiative.

[Karen Short:]

Okay, great thanks a lot.

[Operator:]

Thank you. Our next question is coming from Chuck Cerankosky with FTN Midwest Research.

[Charles Cerankosky:]

Craig, if you can elaborate on that same subject relative to the outlook and the distribution business presented in the press release. You are talking about some fourth quarter benefits as a result of some improvement initiatives there and I was wondering if you could expand on what was briefly mentioned in the press release.

[Craig Sturken:]

One of the things that we are doing -- and Dave just reminded me okay, is that we are re-flowing and re-whacking a major part of our grocery distribution center here in Grand Rapids. As you know, we have added many SKUs in order to take care of Martin’s. We have added many SKUs to take care of our retailers on our Southeast side that have taken over these Farmer Jack stores that had a mix of product that was different and unique. And we just, sort of, dropped that stuff into our business. Now we are going through the process of re-racking and re-flowing our distribution centers, so that we can put this product where it belongs. And that will have a big impact on the efficiency and the travel time of the people in our distribution center. And that will be ongoing throughout the fourth quarter and in the next year, Chuck, so the benefits will occur over time.

[Charles Cerankosky:]

Is there a way to put a basis point improvement target on that?

[Craig Sturken:]

I don’t think that our supply chain guy would ever let me do that.

[Charles Cerankosky:]

Okay, Craig, thank you.

[Craig Sturken:]

Okay.

[Operator:]

Thank you Mr. Sturken, there are no further questions at this time.

[Craig Sturken:]

Well, I would like to thank everybody for being part of our second quarter conference call. We look forward to our third quarter conference call down the road. Thank you!

[Operator:]

This concludes today’s conference. Thank you for your participation.