Cavco Industries Inc

NASDAQ:CVCO

Earnings Call Transcript 2019-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the Third Quarter and Fiscal Year 2019 Cavco Industries Earnings Call Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Director of Financial Reporting, Mr. Mark Fulser. You may begin sir.

[Mark Fulser, Director, Financial Reporting]

Thank you. And before we begin, please be advised the comments made during this conference call by management will contain forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations or assumptions about Cavco's financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies. All forward-looking statements involve risks and uncertainties, which could affect Cavco's actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of Cavco.

I encourage you to review Cavco's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Some factors that may affect the company's results include, but are not limited to, the risk of litigation or regulatory action arising from the subpoenas we received from the SEC, the risk of potential litigation or regulatory action arising from the SEC related internal investigation and its findings, potential reputational damage that Cavco may suffer as a result of matters under investigation, adverse industry conditions, our involvement in vertically integrated lines of business, including manufactured housing, consumer finance, commercial finance and insurance, market forces and housing demand fluctuations, our business and operations begin concentrated in certain geographical regions, loss of any of our executive officers, federal government shutdowns and extensive regulation affecting manufactured housing.

This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, Tuesday, February 5, 2019. Cavco undertakes no obligation to revise or update any forward-looking statement to reflect events or circumstances after the date of this conference call, except as required by law.

I'll now turn the conference call over to Dan Urness, President and Acting CEO. Dan?

[Daniel Urness, President and Acting Chief Executive Officer]

Thank you, Mark. We appreciate those joining our call today and listening in on the webcast. I will first discuss our market perspectives and provide additional corporate updates. Josh, our Chief Accounting Officer, will then provide a review of the financial results for the quarter, and I will follow up with additional commentary before our question and answer period.

Consistent with our experience working with prospective homebuyers, housing surveys have indicated that there are many U.S. residents that desire to be homeowners, but presently are not. Many of these individuals and their families recognize the unparalleled value of a manufactured home and they understand the quality derived from our factory construction process.

Millennials and Generation Y comprise the largest part of this group and claim 34% of the homebuying market. They are seeking new homes that are properly sized to match newly established households. They are cost conscious and looking for reasonably priced homeownership that allows them to maintain a financially flexible lifestyle. Meanwhile, baby boomers who make up 30% of homebuyers, primarily seek affordability but also want modern amenities and a low maintenance home.

These interests fit well with the characteristics of today's manufactured homes. Surveys indicate that a large percentage of manufactured homeowners are satisfied with their homes and are likely to recommend factory-built construction to others. We are proud to provide a wide array of attractive and affordable homeownership options for our customers.

Before I turn the call over to Josh to discuss our financial results, I would like to provide an update to the ongoing SEC matter that we disclosed last quarter. Although I do not have a lot to share since our announcement last quarter, the company received an additional document subpoena request from the SEC as described in our earnings release yesterday. Also, the previously announced internal investigation by the audit committee which is being conducted by outside counsel independent continues to progress. We are fully cooperating with the SEC and work to resolve this matter.

During the quarter, the company reviewed the sufficiency of its insurance coverage and decided to purchase additional directors and officers’ insurance. The policy premiums were $15.3 million, clearly elevated by the SEC issue which is covered by this new insurance. As noted in the press release, this sum would be incurred over the next seven quarters. Any additional adjustments are expected to be in the normal course of maintaining adequate D&O insurance for the company.

Before fielding questions on these matters, I want to let you know that we will not be disclosing further details at this time.

Now, let me turn it over to Josh for a financial review of the quarter.

[Joshua Barsetti, Chief Accounting Officer]

Thank you, Dan. Net revenue for the third quarter of fiscal year 2019 was $234 million, up 6% compared to $221 million during the third quarter of fiscal year 2018. Within the factory-built housing segment net revenue grew nearly $13 million, this is the result of higher home sales prices from input cost inflation and modestly larger home sizes, partially offset by a reduction in the number of homes sold.

Our results were impacted by the following one-time variances in net revenue quarter-over-quarter. The prior year quarter included production of a limited number of disaster relief units for FEMA, in addition this quarter's factory-built housing revenue includes $5.9 million related to changes made from the implementation of accounting standards whereby we recognize certain subcontracted pass-through services on retail home sales on a gross basis rather than net of associated costs as we did in the prior year period.

Financial services segment net revenue decreased from approximately $900,000 in unrealized losses on marketable equities from this fiscal year's required implementation of new accounting standards where unrealized gains and losses on equity instruments are reported on the income statement instead of recording these amounts in accumulated other comprehensive income on the balance sheet. These losses are reported in revenue at our insurance subsidiary as investing is part of their operating business model.

In addition, financial services revenue was adversely impacted by $600,000 in costs associated with large claims from a storm in Arizona during the quarter. These decreases were partially offset by higher home loan sales volume and more insurance policies in force compared to the prior year. Consolidated gross profit in the third fiscal quarter as a percentage of net revenue was 21%, down from 22.5% in the same period last year.

Gross profit was also impacted by several one-time items. Prior year's quarter benefited from a $3.4 million favorable dispute settlement resolution. Additionally, last year, our insurance subsidiary did not experience any major weather events which resulted in lower claims for the quarter. As mentioned above, this quarter the insurance subsidiary experienced large claims from the Arizona weather event. Lossse from high weather related insurance claims are limited by our reinsurance contracts for loss events in excess of $1.5 million.

Selling, general, and administrative expense in the fiscal 2019 third quarter as a percentage of net revenue was 13.2% compared to 11.8% during the same quarter last year. The increase was primarily from $1.3 million of expenses related to the company's internal investigation and response to the SEC inquiry, and $700,000 in premiums related to additional directors and officers’ insurance policies purchased during the quarter. As a result of the company's purchase of additional D&O, we expect to incur approximately $2.1 million per quarter in selling, general, and administrative expense from the amortization of the policy premiums through the second quarter of fiscal year 2021.

Other income net this quarter was a loss of $318,000 compared to other income net of $1.1 million in the prior year quarter. The current quarter includes $2.1 million in unrealized losses on corporate investments that are now required to be recorded in other income this fiscal year as discussed in prior quarters. The effective income tax rate was 21% for the third fiscal quarter compared to 9.5% in the same quarter of the prior year.

The company's prior year tax rate was the result of the U.S. Government enacting comprehensive tax legislation commonly referred to as the Tax Act which caused a revaluation of our net deferred income tax balance and related income tax benefit of $5.6 million which was recorded in the prior year quarter. The Tax Act reduced the federal statutory corporate tax rate to 21% for the fiscal year ending March 30, 2019.

Net income for the third quarter of fiscal 2019 was $13.4 million compared to net income of $21.4 million in the same quarter of the prior year. Net income per diluted share this quarter was the $1.44 versus $2.33 in last year's third quarter. Comparing the December 29, 2018 balance sheet to March 31, 2018 the cash balance was approximately $193 million compared to $187 million nine months earlier. The increase was mainly the result of net income offset by changes in working capital.

Inventories increased from higher finished goods inventory at our company owned retail locations. Total commercial loans receivable increased from additional borrowings under the loan programs offered. In addition, the prior year balance included early payoffs that were received on several programs significantly deflating the balance. Prepaid and other assets grew mainly from cash paid for additional D&O insurance policies that will be in effect through Q2 of fiscal 2021.

Lastly, stockholders equity was approximately $509 million as of December 29, 2018, up approximately $52 million from the March 31, 2018 balance. On another note, after the quarter and as planned, we successfully completed the planned repurchase of the 205 securitized bonds held at our mortgage subsidiary resulting in a cash outlay of $19.4 million and a retirement of the related liability on our balance sheet.

Dan, that completes the financial report.

[Daniel Urness, President and Acting Chief Executive Officer]

Thank you, Josh. We are pleased to report these solid earnings for the December quarter. The company's backlog of orders was strong at $166 million at the end of the December 2018 quarter, although this is lower than last year by $41 million. The reduction in the backlog appears to be the result of a few factors. The previous year's December backlog included a number of FEMA disaster relief units as well as homes ordered as hurricane Harvey induced replacements.

We also experienced an order rate decline during the late fall and winter months in certain markets beyond what is normal for a typical seasonal winter slowdown. Specifically this slowdown appears to have been primarily concentrated on lower price point homes in the south-central and southeastern states excluding Florida. While the cause is not clear there were several factors at play. One is the rising mortgage interest rate environment during most of 2018. Within the manufactured housing market interest rate increases can have a definitive affordability impact on those customers seeking to finance their purchase at our lowest price points. In addition, home product prices in general are higher than a year earlier further impacting affordability.

Separately, we believe a retailer home inventory buildup caused by anticipatory order volume during most of 2018 when new home delivery times were even longer immediately caused a slowdown in new home orders recently. Retailers need to work down any such excess inventory.

Another factor impeding some homebuyers may have been headline driven concerns related to investment markets and global trade issues. These concerns aside, we believe the need for affordable housing remains and core economic strength will continue to drive demand for our homes. While we cannot predict future order flows, we believe the underlying demand for affordable housing and the quality of our products will translate into positive order rates as we enter 2019.

We also note the order rates remain strong for our higher price homes, characterized by larger square footage and more amenities. We will continue to monitor overall order rates and work to meet desired home delivery times for our customers.

And now, Demetrious we would like to open up the line for questions.

[Operator]

Thank you. [Operator Instructions] And our first question comes from Daniel Moore with CJS Securities. You may proceed.

[Daniel Moore, CJS Securities]

Good morning, Dan, good morning Josh, thanks for taking the time and the questions.

[Daniel Urness, President and Acting Chief Executive Officer]

Good morning.

[Daniel Moore, CJS Securities]

I wanted to start with FEMA units. I am wondering if you would be willing to disclose how many units we shipped to FEMA last fiscal Q3 and fiscal Q4? I know that was kind of the height of the peak of shipments to that end market, so trying to get a sense for kind of unit growth ex that one time if you will?

[Joshua Barsetti, Chief Accounting Officer]

Sure, Dan this is Josh. So we haven’t historically broken out the detail of FEMA unit shipments and don't intend to do that today. What I will say is that we did as we recorded have FEMA shipments in Q3 of last year and also in Q4 and the Q4 numbers last year were actually more meaningful than they were in the Q3 period, so an impact on both quarters more so in Q4.

[Daniel Urness, President and Acting Chief Executive Officer]

And then Dan, maybe I'll jump in too. Well we don’t disclose it is as Josh says, we certainly look and we don't know the number of FEMA homes the entire industry built and there were a number that we try to attempt to factor that out, and as we do so, we look at what we think the industry will report for all of 2018 which just ended compared to 2017 excluding FEMA and we think it's in the high-single digits.

[Daniel Moore, CJS Securities]

Helpful, I appreciate it. Is the – the reason for that question is, Dan you gave great color in terms of some of the factors that may be impacting order rates, I'm wondering to what extent crowding out you know dealers buying ahead, trying to get ahead in line at this time last year may have impacted order rates as you look at it on a year-over-year basis?

[Daniel Urness, President and Acting Chief Executive Officer]

Yes, and again we don’t really know the details there, but there is - last year we mentioned we had in addition to FEMA there was direct orders related to hurricane Harvey which was such devastating event. It resulted in some additional orders last year. This most recent, I guess, period we didn’t have the size of storms, but still some pretty devastating storms in certain areas of the Southeast, and those have not translated yet into significant orders for our company, and we don't think yet for the industry based on a number of factors. So, that's potentially part of it, but there could be some anticipatory like we mentioned orders coming in whether it is for that potential business or otherwise.

[Daniel Moore, CJS Securities]

Got it. Switching gears, one more if I may. In terms of the average selling price ticking higher, can you give us a sense for how much of that increase was driven by mix shifting higher versus pass-through of raw materials?

[Joshua Barsetti, Chief Accounting Officer]

Sure, so both actually had an impact on that ASP during the quarter. We certainly had some pricing increases, but mix played a part especially compared to last year. We’ve certainly produced more multi-section homes this year than we have in the prior period, and so that increased the ASP a little bit there. And then as you know Dan, with those multi-section units, they have a higher sales dollar associated with them and also typically they are higher auctioned homes as well which kind of raises that sales price also.

[Daniel Moore, CJS Securities]

If you had to rank order one or the other, which should be the bigger impact?

[Joshua Barsetti, Chief Accounting Officer]

Price.

[Daniel Moore, CJS Securities]

Price, that's what I assumed. Perfect, I will jump back in queue, I appreciate the color.

[Operator]

And our next question comes from Greg Palm with Craig-Hallum Capital. You may proceed.

[Greg Palm, Craig-Hallum Capital]

Yes, good morning, thanks. I was hoping you could provide a little bit more color on the demand environment, you know I'm more or less looking for some additional details on the inventory environment out there, whether it's at your own retail stores, the independents, I guess what specifically did you see maybe your end that has trended differently than recently?

[Daniel Urness, President and Acting Chief Executive Officer]

Well, I think that we can – we placed a lot of emphasis on the coming spring and even summer selling season. We don't have any reason to believe that it won't be good. I think that what I described was the fall and how we had a decline in order rates. We attribute that like I mentioned to some of the deep-south areas and south-central and lower price points, but we think that that inventory isn’t excess of the – it should be able to be worked through.

And for the industry perspective overall, that it should provide an extensive hangover as we go into 2019. So we think that there's good prospects. The economic and demographic factors that we look at closely, whether it be consumer confidence or whether the lower unemployment rates all bode well, and we see a meaningful continued demand going forward. It's still a little early to talk about a trend and how that's looking so far, but as we get into later this quarter and certainly the spring, we will know more, but we feel good about it at this point.

[Greg Palm, Craig-Hallum Capital]

Any chance that weather played some sort of role? I know Texas specifically was pretty wet in the fall and I guess just piggybacking on your answer there, any change in order rates specifically in January or is it still little bit too early to think about spring selling season?

[Daniel Urness, President and Acting Chief Executive Officer]

A little early. We see decent traffic in January, and I think that provides us some confidence. A little early to talk about order rates and strength there yet, but we think it will come back as I mentioned. The overall strength in our higher price point homes is still there though and I think that continues good.

The weather, you mentioned earlier probably wasn't a factor, and the Southeastern and surrounding parts of the country had significant dampness, and that makes it difficult to set homes. That has been discussed as another issue, of course that would be temporary, and we don't have a good way of tracking that. But overall, the weather events -- they come and they go, but really get these homes and that can [ph] impact things quarter-to-quarter a bit. The overall demand picture is as described and is as we expect going forward.

[Greg Palm, Craig-Hallum Capital]

Yep, understood. Shifting gears to finance and environment, you made some comments in the release and on Fannie and Freddie and some progress under Duty-to-Serve, so wondered if you're willing to expand upon that and really interested to get your thoughts on MH Advantage and the opportunity for that specific program there?

[Daniel Urness, President and Acting Chief Executive Officer]

You bet, happy to, and just as a reference both agencies, Fannie and Freddie have initiated now pilot programs for mortgage loans that include land and the manufactured HUD Code home, and that home has it complies with certain building specifications qualifies for these new mortgage programs. And we've begun building a few of these homes, facilitated by the programs in some of our factories and so we're excited about that. The programs certainly are welcome and they're a positive step towards greater involvement by the agencies to support the manufactured home buyer.

The programs are of course designed to overcome a variety of challenges in the manufactured home lending space, including ongoing longstanding appraisal limitations and so far our experience with the programs has been good. We've been able to see the development. It will take time.

It will take education, but we're seeing the right steps be put into place so that education can take hold whether it be the retailers that sell the homes educating the public and making these programs available to them, the appraisers that are involved that have more latitude or the manufacturers and their recognition of the standards and getting to a point where these are produced. I think the industry is embracing it. I think that it's very attractive to consumers.

We're already seeing some traction. It will be building slow, but for the long term which is the way we look at this, we think it's a great additive. The ability for the homebuyer and the exciting thing too is that both of these agencies are still planning and moving forward with future launch of pilot programs for chattel lending, and we think that will be a welcomed and appropriate addition. We'll have to see how those programs look, but we hope to see them in 2019.

[Greg Palm, Craig-Hallum Capital]

Very good to hear. Last one as it relates to the corporate update I understand you can't really say much additional there, but curious the D&O policy was I think maybe a big surprise at least the size of that. I mean is that something it felt like you needed as a precaution, just kind of curious to get a little bit more color on that?

[Daniel Urness, President and Acting Chief Executive Officer]

Sure, of course we mentioned that the company reviewed the D&O insurance and determined that additional coverage would be prudent, so we certainly recognize that it's costly and clearly this is because it does cover certain risks associated with the SEC issue. The fact that we have wanted to get this out there and disclose it, it has financial impact or financial results, so we think that's important. We are prepared to describe it further, but we think it's - we thought it was helpful and certainly important to outline the cost associated and the fact that we have the recent additions of the D&O coverage because they are definable and meaningful.

[Greg Palm, Craig-Hallum Capital]

Okay, All right, great. I'll leave it there. Thanks for the time.

[Daniel Urness, President and Acting Chief Executive Officer]

Thank you. I appreciate it, Greg.

[Operator]

And our next question comes from Alvaro Lacayo with G. Research. You may proceed.

[Alvaro Lacayo, Gabelli & Co.]

Good morning, Dan. Good morning, guys.

[Daniel Urness, President and Acting Chief Executive Officer]

Good morning, Alvaro.

[Alvaro Lacayo, Gabelli & Co.]

Just a question, I know you mentioned it in the prepared remarks, but I just missed it, just a year-on-year backlog numbers this year versus last year's quarter? And then I wanted to make sure that I understood the inventory comment correctly, even though there's been an inventory build you think that most of this inventory will be worked through over the next quarter, two quarters, or how do you see that dynamic sort of evolving and what that might mean for order rates over the next 12 months?

[Daniel Urness, President and Acting Chief Executive Officer]

Sure, so first just to cover those backlog numbers again, our backlog this quarter was $166 million and that's down $41 million from the year earlier. And then talked about several reasons, but specifically as you mentioned the excess inventory, we think it is concentrated in certain markets not the entire country we serve.

Obviously, most markets that we sell central and southeastern excluding Florida and the lower price points, and the level of the excess inventory is difficult to ascertain. We know it's there and it's really a function and it is reflective in the low order rates that are resulting in these areas for these types of homes. But yes, we think it will - we don't have a measure of how long and in what manner the retailer should be able to work down our inventories.

We just anecdotally have been working to gain an understanding of that and then speaking with retailers they are working and we're, what we're doing is helping in any way we can. We're also addressing any product development needs and opportunities that will assist in providing broader ranges of products for retailers that as they work down their stock in a certain range or type of home that not only can they replace that with the same home, but alternatives that are similar or approach similar markets.

The quarter work down or two quarters we're not sure of, but we feel confident that the need for affordable housing is certainly strong and the ability for buyers to purchase the home is increasing with new loan programs that we described and are coming forward. But I don't have a prediction for you on how long, but we don't feel like it's excessive and will have too large of an impact or carry over impact into the year.

[Alvaro Lacayo, Gabelli & Co.]

All right, thank you. And in the past I believe you've mentioned or we've discussed the potential of bringing some capacity online, some idle capacity you guys have had and there was some discussion about potentially bringing online at some point in the near term. Just wondering if that's still the case in terms of future plans for capacity? And then secondly, if you could just go through cost inflation by buckets, if maybe you can just talk to me about raw material inflation, labor inflation and freight inflation and if you could put some percentages behind that year-on-year what you're seeing through the business?

[Daniel Urness, President and Acting Chief Executive Officer]

Sure. So speaking about additional capacity first, in two of our areas that we already serve, we have idled sister plants that are right next to operating plants. One is in Florida and the other is Mississippi. And in a couple of cases we are certainly looking at the factors that go into opening these idle facilities and the reasons why we haven't done so already. In Florida, the case is primarily labor constraints.

The order rates are good in that area and make a case for increasing production by opening an additional plant, but before that we are still working on increasing production to higher levels in our existing factory there and labor being our primary constraint in doing so and so until we get to higher levels of utilization in the existing plant it makes it a challenge to define opening a new plant.

The Mississippi plant is certainly an option as well. We want to get higher rates of utilization there. Labor is also a concern, but in addition some of the constraints we talked about with respect to inventory in that part of the country is a current factor that we're watching and we'll have to work through both of those issues. But it's available and at the appropriate times we can move forward on those initiatives.

Labor is part of the cost inflation that you mentioned and asked me to talk about. That particular component we don't see declining or changing positively any time soon. We think it's going to continue to be a challenge, not only from a cost standpoint, from availability and retention perspective. Training is important, especially given the complexity of our products. So the cost we don't see letting up and we're going to have to continue to manage and work through that situation.

Materials pulled back some during the quarter that we're reporting on and while that's the case really driven by commodities, primarily lumber and lumber related products, it was a factor that we're not counting on going forward. We're looking at we think an inflationary situation with respect to materials, commodities, other component costs that would be affected by tariffs as we watch that unfold and we think that freight is also one that is going to for reasons including labor costs, one that we'll be watching closely as well. Generally my sense and our sense is that we have - we're still in an inflationary environment for these components and we have to manage through that accordingly.

[Alvaro Lacayo, Gabelli & Co.]

All right, thanks very much.

[Operator]

[Operator Instructions] And our next question, we have a followup from Daniel Moore with CJS Securities. You may proceed sir.

[Daniel Moore, CJS Securities]

Thank you again. I'm just trying to delineate a little bit further demand trends. Dan, would you give us a sense for what you described the kind of lower or low, low price points roughly what percentage of business are we talking about there?

[Daniel Urness, President and Acting Chief Executive Officer]

Well for the industry it's certainly meaningful for Cavco it might be a little bit lower. We have a focus on numerous price points around the country. This year it is pretty meaningful though. There's a lot of volume there. I don't have a percentage or a specific calculation, but it's probably anywhere in the 20% to 30% range. So it's a meaningful component. But the affordability factor plays a part in all the ranges of the products, but we're seeing it mostly in that range at least this last quarter.

[Daniel Moore, CJS Securities]

Understood, helpful. I know you don't like to get into guidance, just trying to get a sense for calibrating SG&A given the comments around legal expenses - ongoing amortization of D&O insurance. As we look at the December quarter, how should we think about that as a run rate or sort of incremental growth versus that run rate is for SG&A?

[Joshua Barsetti, Chief Accounting Officer]

That's it's hard to estimate kind of going forward what that SEC expense component is going to be Dan. As this investigation has continued, obviously we're incurring expenses related to that and one would assume that as it winds down those expenses will wind down as well. But it's difficult to kind of give you an estimate of what that looks like going forward. It probably wouldn't be unreasonable to use December as a starting point for that. We will continue to bring these out separately on our teams call as long as we are dealing with these and where we can we will provide additional information on the go forward component like we did on D&O this quarter.

[Daniel Urness, President and Acting Chief Executive Officer]

And I think one component to pay attention to there is that D&O piece too obviously you have that number on a go forward basis for the next seven quarters. So that's $2.1 million in SG&A just related to D&O, so then any additional cost Dan, legal or otherwise related to the matter would be on top of that.

[Daniel Moore, CJS Securities]

Understood, that is all noncash going forward after the initial payment.

[Daniel Urness, President and Acting Chief Executive Officer]

That D&O piece correct and as a clarification Josh you could tell him how much in December and then afterwards.

[Joshua Barsetti, Chief Accounting Officer]

Right, Dan. So cash event for those D&O policies was $5.4 million in the December quarter, $9.9 million of that was in the January month, so that would be a fourth quarter cash event.

[Daniel Moore, CJS Securities]

Very helpful, and lastly, I'll take a shot at least, how much actual coverage was purchased under that new policy?

[Daniel Urness, President and Acting Chief Executive Officer]

It was additive and we don't have the disclosure amount to give you additional details and such, but we wanted to ensure that we had the coverage at an appropriate level, so that's why the purchase was made.

[Daniel Moore, CJS Securities]

Understood, I appreciate the color once again.

[Daniel Urness, President and Acting Chief Executive Officer]

Thank you, Dan.

[Operator]

Thank you. Ladies and gentlemen, this now concludes our Q&A portion of today’s conference. I would like to turn the call back over to your President and Acting Chief Executive Officer, Mr. Dan Urness for any closing remarks. Sir, you may begin.

[Daniel Urness, President and Acting Chief Executive Officer]

Thanks Demetrious. And thanks everyone for joining our call today. We appreciate it and we look forward to reporting again next quarter. Good bye.

[Operator]

Ladies and gentlemen, thank you for attending today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.