Stantec Inc.
Q1 2013 Earnings Call Transcript

Published: 9 May 2013

[Operator:]

Welcome to Stantec Inc.'s First Quarter Earnings Results Conference Call. With us today from Stantec management are Bob Gomes, President and Chief Executive Officer; and Dan Lefaivre, Chief Financial Officer. [Operator Instructions] As a reminder, today is May 9, 2013, and this conference call is being recorded as well as broadcast live over the Internet. It will be archived for future reference at stantec.com under the Investors section. Therefore, any members of the media who are joining the call today in a listen-only mode and who wish to quote anyone other than Mr. Gomes or Mr. Lefaivre are asked to please request permission to do so from the individual concerned. Before the call starts, there are a few words from Investor Relations.

[Crystal Verbeek:]

Thank you, Sam. Stantec management would like to make you aware of its Safe Harbor statement and to caution you that it will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 in the United States and applicable securities legislation in Canada. By their very nature, forward-looking statements require Stantec management to make assumptions and are subject to inherent risks and uncertainties. In addition, Stantec management will be mentioning additional and non-IFRS measures. You will find descriptions of these IFRS measures and their use and underlying assumptions in the management's discussion and analysis included in Stantec's 2012 and Q1 '13 financial reviews. I would now like to introduce your host, Bob Gomes. Please go ahead.

[Robert J. Gomes:]

Thank you, Crystal. Good afternoon, everyone, and welcome to our 2013 first quarter results conference call. Dan will provide a brief summary of our financial results for the quarter, and I will follow with an outline of our market outlook. We will then address individual questions. Today, we released the results of Stantec's operations for the first quarter of 2013. I'm pleased to report we started 2013 with positive results and a continued pattern of organic growth. The company's performance this quarter demonstrates we continue to meet our business objectives and execute our long-term strategy. Dan will now provide a review of our first quarter financial results. Dan?

[Daniel J. Lefaivre:]

Thank you, Bob. Good afternoon, everyone. As Bob just mentioned, the first quarter of 2013 was positive one for us. Our gross revenue increased 17.7% to $513.2 million compared to $436.2 million in Q1 '12. Of that increase, 5.2% was organic revenue growth, demonstrating a sustained ability to generate organic growth within the diversity of our business model. Our revenue was up 15 point -- net revenue was up 15.2% to $426.9 million from $370.5 million in Q1 '12 with all of our regions experiencing positive organic revenue growth. Gross margin as a percentage of net revenue was 54% in Q1 '13 with a slight decrease, due mainly to the growth in revenue in some of our lower-margin businesses such as oil and gas projects and in our Industrial practice and the growth of our U.S. Transportation market. Our administrative and marketing expenses were 41.1% of net revenue in Q1 '13 compared to 41.5% in Q1 '12. This improvement is a result of managing our costs effectively, which was slightly offset by an increase in administrative labor because of acquisition and integration activities that occurred in Q1 '13. Our income tax rate for Q1 '13 was 27.7%, up from 26.5% for fiscal 2012 because of the greater proportion of our income was earned in higher tax rate jurisdictions. Our net income increased 13.6% to $28.4 million from $25 million in Q1 '12. Diluted earnings per share increased at a more moderate rate of 10.9% to $0.61 from $0.55 in Q1 '12, due to an increase in the number of outstanding shares. Lastly, the company declared a quarterly dividend of $0.165 per share payable on July 18, 2013, to shareholders of record on June 28, 2013. Also, please note that certain figures for 2012 are restated due to the adoption of IFRS 10 and 11 dealing with accounting associated with consolidation and joint arrangements. This restatement had an immaterial impact on our 2012 retained earnings, basic and diluted earnings per share and cash flows. Overall, we were pretty pleased with our growth in Q1 '13 and with our consistent operating performance. Bob?

[Robert J. Gomes:]

As Dan just outlined, our first quarter was a very good start to the year for us. We continued to perform well as we remain focused on our long-term strategy. We recognize that it is still a mixed market, but we believe our flexible and diverse business model will allow us to continue to evolve to achieve our growth targets. Now, I'd like to give you some highlights on our performance across our practice areas. With the strength of our acquisitions and our depth of expertise, we remain well positioned to respond to market opportunities in all our practice areas. In our Buildings practice, we continue to see opportunities in alternative project delivery despite the softening of some markets. In our Environment practice, our expertise in providing front-end and design services to clients interested in moving energy and resources to market continue to generate opportunities for pipelines and associated facilities such as providing the coordination, management and engineering analysis for the geotechnical aspects of the Kitimat LNG Export Facility in British Columbia. We continue to see good opportunities in our water business despite the stress on infrastructure funding. The continued global demand for energy and reliable -- relatively stable oil prices, our Industrial practice is also benefiting from an increase in demand for engineering services to clients who are exporting oil and gas to market. These opportunities have raised our profile and with our enhanced capabilities, we are increasingly being recognized as a top provider to the Canadian midstream sector of the oil and gas industry. Our 2012 acquisitions continued to increase our presence in local markets, particularly in the United States, allowing us to secure more design-build opportunities, most notably in our Transportation practice. One such recent project is Interstate 75 rest area design-build in Collier County, Florida where services include design, ecological permitting and landscape architecture. While the residential market in the United States is showing signs of recovery, we continue to leverage our expertise and ability to provide a variety of services to different segments in the urban development market, resulting in steady wins of new projects in our Urban Land practice. For example, we recently secured a project for the campus master plan for the Delaware Valley College in Doylestown, Pennsylvania. Services include facilities assessment, space utilization and campus planning recommendations. Overall, we were pleased with our performance in the range of the projects we have recently secured. This is just a small example that demonstrates the diversity of our expertise. As you know, we worked on thousands of projects for clients at the global and national level, as well as with local and regional clients. This range of both projects and clients allows us to perform consistently to mitigate risk and to adapt to market opportunities. Now I'd like to comment briefly on potential market conditions going forward. Our overall outlook for 2013 is a moderate increase in organic revenue with a target of 3% to 4%. We believe we can achieve this target with activity in a number of sectors and our stronger presence in the U.S. driving opportunities across many of our practice areas. In the first quarter of 2013, we saw no significant changes in our industry or market opportunities. This affirms we are on track to meet our original targets especially after the Q1 performance. And with a backlog $1.3 billion, which was a growth of 12% over last year, we are confident of our opportunities moving forward. We see continued strength in our Canadian operations with moderate organic growth in 2013. While we continue to maintain a top tier position as one of the largest firms in Canada and are well positioned to take advantage of a diverse range of opportunities in a relatively stable economy, we do expect to see maturity in some markets. In our U.S. operations, we are expecting stable to moderate organic growth in 2013. United States remains a very large market and we expect our performance to improve gradually throughout the course of 2013. Though optimistic, we do think that improvements in the U.S. will continue to be more gradual due to budget constraints and the general slowness of the economic recovery. We are seeing improvements in the economy already, it's just not occurring at the pace we'd all like to see. Our international operations outlook is moderate organic growth in 2013. International is not expected to have a significant impact on our performance as this makes up an only -- a small portion of our building -- of our business. Looking at our individual practice areas, we expect the following outlook for 2013

[Operator:]

[Operator Instructions] And our first question comes in from Michael Tupholme from TD Securities.

[Michael Tupholme:]

Bob, you revised up your outlook for 2 practice areas, Industrial and Transportation, but left your overall organic growth guidance unchanged for the year. I'm wondering if you can talk a little bit about how we'd reconcile that, the discrepancy, there?

[Robert J. Gomes:]

Well, it's just that it was a small change, both the Transportation and Industrial. Meanwhile, Buildings is certainly an area that even though it's stable, stable does potentially mean a smaller traction as well, so those ranges we give do have a little bit of flexibility to them. We just didn't feel strong enough that the increases on the 2 practice areas increased sufficiently to actually have us [indiscernible] increase it.

[Daniel J. Lefaivre:]

But at the same time, Michael, we had -- as you know, last year, 2012, we had a very strong second half of 2012 and that is also why we're a little bit cautious around our 3% to 4%.

[Michael Tupholme:]

Just in terms of a tough call?

[Daniel J. Lefaivre:]

That's right.

[Michael Tupholme:]

Okay. Second question, in the MD&A gross margin section, there's some discussion about the potential of seeing the Industrial practice areas gross margins pressured as oil and gas work grows. And I'm just wondering the 47.1% Industrial gross margin we saw this quarter, is that a representative base off of which we should think about margins moving lower from that base? Or is there anything unusual going on this quarter that would have maybe depressed that a little more?

[Robert J. Gomes:]

No, I think you know the decrease from last year, which is about 48.5% to this year at 47%, that's probably where you'll probably see the margin settle in at. I don't think you're going to see it continue to trend downward. It will probably end up resting in that mid-40% range for our Industrial group as that oil and gas business continues to grow.

[Operator:]

And our next question comes from Sara O'Brien from RBC Capital Markets.

[Sara O'Brien:]

The Buildings practice, you're still looking for a stable outlook despite several quarters of negative growth. Just wondering, I mean, can you get there, particularly if there is going to be some cost restructuring going on in the division and is it the U.S. that's going to drive that in the back half the year?

[Robert J. Gomes:]

Well, I think all the rationalization and the reductions have occurred. So I think that -- we've gone through that for a number of quarters now, so certainly we see that we're at that base now that we feel we can continue to grow more positively. And we see the opportunities actually on both sides of the border. We're working on the Pearson Airport right now, which is a big win for us working on some P3 opportunities in Canada, chasing those in a shortlisted basis and we're seeing some recovery as well in the U.S. So I think that, that recovery we see in the second half is going to occur on both sides of the border.

[Sara O'Brien:]

Okay. And then maybe just on gross margin in Canada coming down, is that more on a mix of projects or is it level of competition that you're seeing in the Canadian market now?

[Robert J. Gomes:]

It's probably both. I think it's probably more of a mix of the projects because Canada has most, if not all, our oil and gas work that we're doing in the Industrial sector. And Western Canada is, of course, lumped in Canada, so that's probably the biggest contributor to the margins in Canada. The competition side, I've said the same thing about competition, it's always there and we haven't seen a significant change. It's just always there and something you got to deal with. But probably the biggest contributor is the mix of projects in the Industrial group.

[Sara O'Brien:]

Okay. And maybe just lastly, on acquisitions, just wondered what your pipeline is looking like going forward into F '13 and F '14?

[Robert J. Gomes:]

It's good. I mean, it's been a quiet quarter obviously, but first quarter usually is. But certainly, we're seeing some good opportunities in a number of discussions and advanced discussions with companies. So I think you'll definitely see some things happen in the second quarter for us.

[Operator:]

And our next question comes in from Bert -- sorry, Tahira Afzal from KeyBanc.

[Saagar Parikh:]

This is Saagar on for Tahira Afzal. First off, your employee count from Q4 to 1Q '13 went from 12,700 to 12,000. Is that -- are you guys rightsizing the Buildings practice area or is there anything else that's going on in that mix?

[Daniel J. Lefaivre:]

No, I don't think there's any significant change in the mix of staff count from quarter-to-quarter, Saagar, nothing material anyway.

[Saagar Parikh:]

Okay. So just typical maybe seasonality or something like that?

[Daniel J. Lefaivre:]

Well, there is seasonality. You look at the Environmental practice and our field services, it does take -- it will pick up as we go through Q2 and Q3, so you will see something pick up in our field work as we get into the spring and summer months.

[Saagar Parikh:]

Okay. And then in terms of your oil and gas operations, you've mentioned they're growing at a phenomenal pace. They've impacted gross margins a bit. Could you dig deeper into your oil and gas business, give us some percentages on what really is leading the charge there? Maybe Stantec's positioning on pipeline projects and the North America petrochemical cycle, any additional color would be great.

[Robert J. Gomes:]

Certainly, it is the midstream sector of our business that -- and particularly in Alberta, that is strong right now. But the 2 acquisitions we did plus the previous position we had has really placed us in a different position to be able to now go after those larger projects. So it seems like every client right now is looking to figure out how to move their product to market and we are just positioned very well to provide them those assistance. And we're doing it both on the environmental services side, providing that upfront regulatory reviews and compliance reviews and routing. We're doing that in the oil and gas sector, doing it in the LNG area. And the actual engineering of the pipelines, we're working with all the major providers in Western Canada that are looking at what to do with their pipelines, existing pipelines, new pipelines. And these clients are very -- they're very particular of how they review this, so we're both working it with them on the front end as well as some design and estimating. So it's just a very good position to be in. There's all activities. We're just busy as a result of that. We're looking at rail opportunities for oil and gas as well affecting our Transportation group. So that oil and gas and the need to move product to market is probably the biggest driver of that in our position in that -- in the province here.

[Saagar Parikh:]

Great. And then last question from my end. One of your peers recently had took down numbers because of issues happening in Eastern Canada in terms of some other E&C contractors out there. Does that provide an opportunity for you guys, the issues that are going on in Eastern Canada, eventually once everything settles down? You guys don't do a ton of work in Eastern Canada, so does that present a potential upside for you guys in '14?

[Robert J. Gomes:]

Well, let's refer to Eastern Canada as Québec because I think that's what you're referring to .

[Saagar Parikh:]

Sorry. Exactly, yes.

[Robert J. Gomes:]

We do a lot of work in Ontario and a lot of work in Atlantic Canada, but Québec is probably what you're referencing. And yes, we don't. We have a small presence in Québec doing environmental services with one client. So we're cautious. We see that as potentially an opportunity, but I think you said the word that once all these things get resolved, we will see if that's potentially an opportunity for us. We've always taken a very cautious approach to entering the Québec market. And as I've said a number of times, it is a very different market than the rest of the Canadian market. And I think that's now being sort of evidenced in what's going on. So for us, we're still taking a wait-and-see approach and it potentially could be an opportunity for us in the future.

[Daniel J. Lefaivre:]

I think to be clear, Saagar, we aren't seeing the same kind of retraction in our Eastern Canadian operations as maybe some of our competitors are that maybe are more centered in Québec.

[Robert J. Gomes:]

Yes.

[Operator:]

And our next question comes in from Sara Hughes from Cormark Securities.

[Sarah Hughes:]

Just a question on the margins on the Buildings side of things. I know you've seen pressure in this market for a while, but they have -- gross margins have remained fairly stable in the last few years, around the 55% level. How do you see that going forward? Are you comfortable that just given even though pricing is pretty competitive out there you can sustain those margins or are there any risk longer-term?

[Robert J. Gomes:]

No, I think the margins will continue to be in that mid-50 range. That's where they've come back to now. There was a small decrease last year that was more project driven, and again, I'd say systemic to what we're doing in that practice area. It is one of the lower higher-margin business, but it is definitely a competitive business. We feel that the sectors we're in, things like higher education, health care are less competition but certainly competitions there, but don't see that as driving margins back down. We're pretty comfortable that they will be in that mid-55 range.

[Sarah Hughes:]

Okay. And then just lastly, the organic growth was obviously quite strong this quarter and even last year. How much would you characterize it coming from just overall market conditions as opposed to coming internally and you guys getting better at cross-selling and some of the acquisitions helping you on that end?

[Robert J. Gomes:]

Well, everything you said is part of the strategy, so I'd point -- it's all part of the strategy. Certainly, being in certain markets like the oil and gas market has assisted our organic growth, but our positioning by doing acquisitions in that market allowed us to respond to that. Cross-selling is happening. We're cross-selling better between our environmental services group and our engineering groups. So certainly,we're seeing that happening as well. Plus we've reached a critical mass in the U.S. where we're starting to get some synergies and starting to develop some ideas of how we can work together. So all of those things, the market, the acquisitions, the cross-selling all have contributed to that organic growth increase.

[Sarah Hughes:]

And do you think in terms of your cross-selling abilities, changes you've done over the last number of years, you're pretty much there or do you have more improvements that you can do internally that really generates more of that?

[Robert J. Gomes:]

You can always improve. I mean, that's the goal. It is an ongoing program, setting up account managers, having those account managers leverage as many services as they can. Those services are -- you can only leverage and cross-sell when you have a very good relationship with your client and so working on those client relationships is also part of the strategy. So you can always get better at it. It's really executed as part of our ongoing business planning process. So we don't believe we're as -- at the top of the game yet and we see improvements building even further growth opportunities.

[Operator:]

And our next question comes in from Bert Powell from BMO Capital Markets.

[Bert Powell:]

Just going back to the gross margins and just looking at all the mix and what you've got on the backlog and understand the commentary around some of the oil and gas margin pressures, is there anything that you see there that would have you rethinking your target range or is this, as part of what's this quarter is, part of what's there is seasonality as well?

[Robert J. Gomes:]

We still believe there's some seasonality in that. We do expect our margins to get back to our range of 54.5% to 55.5%. It's at lower end mainly because the busiest part of our business right now is the industrial engineering side. What will pick up very quickly is the environmental services side of that oil and gas business, which is a higher-margin business. Because of winter, you can't do a lot of though fieldwork. So when we get out in the field, that will drive up some of the revenue growth there along with the margins. So we're pretty comfortable. It'll probably stay at the lower end of that range, but we're still comfortable that we'll get back into the range.

[Bert Powell:]

Okay. And then, Dan, just for G&A for the quarter, was there anything anomalous in terms of integration costs?

[Daniel J. Lefaivre:]

No. As you know, Bert, we did 4 acquisitions in the fourth quarter. So there are some integration costs where people are -- were training. We're putting people through the program, integrating them into our systems. We, essentially, in the -- at the end of the quarter, we had 3 of the 4 acquisitions fully integrated and the fourth one we finished a couple of weeks ago. So we're -- most of those integration costs have been incurred in the first quarter. Now, it's just training and getting people up to speed on our business processes and systems.

[Bert Powell:]

Okay. And then just sticking with the acquisition side of things, is there anything that you guys are tracking, or can you comment on the market for doing something larger than you've done in the past, like are we -- is the market coming to the point where we can start to see thousands of employees added?

[Robert J. Gomes:]

Well, I mean, our history has been that smaller to midsize firm and that's still where most of our focus is. We've always categorized it as just continuing to hit base hits and advance runners around the plate. So we're very comfortable in that space. We're very comfortable at integrating those companies, and there's lots of those companies around. So with 7 acquisitions last year, it added 1,100 people, you'll probably see more of that. That being said, there are larger firms out there, we've always been talking to larger firms. We'll always continue to talk to larger firms. Will you see more of that in the overall industry? Potentially, as time advances and the firms get more mature, they either continue to advance their own strategies or sell and join somebody else. So I think that will be something that probably you'll see more of, but I wouldn't expect that overnight. It'll be a relatively slow process. That is something that those firms -- it's going to take a while for them to get to that point. So for our strategy, we just continue to execute on that smaller to midsized firms and continue to integrate them and continue to grow.

[Daniel J. Lefaivre:]

And just to finish on that note, we've still got capacity in our capital structure to handle not only the small firms, but any larger opportunities that may come our way.

[Operator:]

And our next question comes in from Anthony Zicha from Scotiabank.

[Anthony Zicha:]

Bob, the Industrial practice has experienced strong organic growth since Q4 '10 at double-digit rate, but how sustainable is this? And what do you see as the future drivers, will it be the same? And can you give us an idea of what proportion is repeat business in that segment?

[Robert J. Gomes:]

Okay. So that's a few questions in one little batch there, Anthony. So I'll start with is double digit-type organic growth in that Industrial group sustainable? As we're now comparing to -- advance into the Q2, Q3, Q4 in 2013, we're going to be comparing to some pretty good growth in '12, so you'll probably see that growth will continue but the actual percentage will definitely drop. But we still see opportunities for growth in both the Mining business as well as the oil and gas business. How much of that is repeat business? It is the same clients that we're working for essentially time-after-time, the TransCanada pipelines, the Enbridge pipelines, the Vales, the BHP Billitons. So it's -- they're larger projects, they're ongoing jobs and they're leveraging that relationship to continue to advance doing more projects for those types of clients. So when you say repeat client, it's a very small group of oil and gas clients and a very small group of mining clients that we're really leveraging those relationships to do more work for them. So Mining, Oil and Gas is strong. Power, as we said, isn't as strong. So again, that will [indiscernible] contribute to the fact that you will see slower growth rates overall in the Industrial group, but that being said, still see growth opportunities.

[Anthony Zicha:]

Okay. One last question. Could you please remind us on your growth strategy in international markets and when we expect to see an acquisition overseas. I acknowledge that it's a small proportion of the business, but things may change.

[Robert J. Gomes:]

Yes, we've been really consistent with our view in international. Our presence in international right now, it's about 4% of our business. Half of that is mining, which we're very comfortable doing because we're doing it for world-class clients in international locations. But it's really North American staff doing that work in international locations. The only work -- 2% of the work is actually in offices in Dubai, India and London, England, and a small office in the Caribbean. Our position here is we're happy with the offices we have. We're looking at those businesses, determining if we can leverage services. But at this time, we're not really focused at all in doing any kind of acquisitions. We're definitely focused on growing those businesses organically and maintaining a presence there where we can, where it makes sense, where you can make money. But it's a pretty uncertain international space right now and I think we're seeing it from a lot of our competitors. And I think for us, we just want to continue on our focused strategy, which is let's get a mature presence in the United States. Let's get to that point first before we start looking at creating another emerging presence somewhere else internationally. So at this point in time, I think we're at least 3 years away, Anthony, from doing any kind of international acquisition at least.

[Operator:]

[Operator Instructions] And our next question comes in from John Rogers from Davidson.

[John B. Rogers:]

Bob, I had a bad connection at one point. But your comments earlier about 3% to 4%, was that organic growth for the entire business this year?

[Robert J. Gomes:]

That's correct, John.

[John B. Rogers:]

Okay. And then secondly, in terms of the acquisitions that you did especially in the fourth quarter and what you've built in so far, what's the run rate for those acquisitions if you don't -- in other words, if you don't do additional acquisitions? How much have you built into the pipeline for this year now?

[Robert J. Gomes:]

Built into the pipeline from a perspective of...

[John B. Rogers:]

Net revenue, sorry.

[Robert J. Gomes:]

Net revenue. We were looking across the table. Dan, he's got the same look in his face and I'm....

[John B. Rogers:]

I know Dan knows.

[Daniel J. Lefaivre:]

We've looked at organic growth as a 3% to 4%. But like we said, with the addition of 1,100 staff, some of that revenue growth that you've seen, $52 million of it in the first quarter relate to some of our acquisitions last year. So you look at that and you can kind of anticipate some of that including our -- continuing in Q2 and Q3.

[John B. Rogers:]

Okay. But I mean, it's something over $100 million, is that fair?

[Daniel J. Lefaivre:]

I think that's somewhere in that order of magnitude.

[Robert J. Gomes:]

Yes, if it there was 1,100 employees, you do the math. About $100,000 per employee, yes, that probably would be a fair estimate.

[John B. Rogers:]

Okay. And then the other question I had was, Bob, you referenced Kitimat and some of these other projects where you're doing front-end work and initial analysis on some of these very large projects. If those -- and some of the pipeline work -- if those projects go through, does that substantially increase Stantec's opportunity or is most of your work at the very front end?

[Robert J. Gomes:]

No. Definitely, it does increase our opportunities. So I would say in the -- specifically, you mentioned Kitimat, the LNG project. We don't have a lot of engineering expertise that could fill in behind that project. If the project is approved, we'll do some facilities assistance. We'll do some infrastructure. So it will improve. We'll have some engineering opportunities. But I wouldn't say that they are significant. When it comes to pipelines, we do a lot of the work in pipelines, doing again the permitting, the routing, the compliance work, environmental audits and we have a very strong midstream oil and gas pipeline group then that can follow in and actually is already working with the clients and doing some of the engineering preliminary work and estimating and providing them assistance. So as these projects get approved, then our engineering capabilities kick in and we have great opportunities. We've been leveraging that for additional revenue growth. So definitely, see this as being something that's sustainable for us over the short term. Short term is a -- probably a 3- to 5-year window as these pipeline opportunities are vetted. So we see this as a great position. We would like to get them approved so we could actually go design them, but I know our environmental scientists are really happy to keep analyzing them. So we get the benefits on both ends.

[John B. Rogers:]

And are there specific large projects? I mean, there's obviously a lot of focus on Keystone and projects across British Columbia but -- that are particularly important to Stantec or...

[Robert J. Gomes:]

At this point in time, I think we're working on -- I've asked our guys specifically that which pipeline projects we're working on and I get a bit of a facetious one saying just about every pipeline project in Western Canada and Eastern Canada. So TransCanada pipeline's east pipeline that's going across Canada to refineries in Québec and to New Brunswick, we're working on all of that work. We're working on gateway projects for Enbridge. So basically, 4 out of 5 projects right now and we are doing front-end work both from an engineering and environmental services side within Canada. That is -- that's reflected in the growth that we have seen and that's why.

[Operator:]

And there are no more questions at this time. Please continue.

[Robert J. Gomes:]

Great. If there's no more questions, I'd like to thank you all for joining us today and close our call by saying that we're confident in our business strategy and ability to adapt to the marketplace. We'll take advantage of our strength and presence to achieve profitable growth and provide sustainable returns to our shareholders. I look forward to speaking with you again in the near future. Thank you.

[Operator:]

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.