Eagle Materials Inc

NYSE:EXP

Earnings Call Transcript 2020-Q2

[Operator]

Good day, everyone, and welcome to Eagle Materials Second Quarter of Fiscal 2020 Earnings Conference Call. This call is being recorded.

At this time, I would like to turn the call over to the Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.

[Michael Haack, President and Chief Executive Officer]

Thank you. Good morning. Welcome to Eagle Materials' conference call for the second fiscal quarter of 2020. We are glad you could be with us today. Joining me today are Craig Kesler, our Chief Financial Officer; and Bob Stewart, Executive Vice President of Strategy, Corporate Development and Communications.

There will be a slide presentation made in connection with this call. To access it please go to www.eaglematerials.com and click on the link to the webcast.

While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during the call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of the press release.

Let me begin this morning by updating you on our announced plan to separate the heavy and light sides of our businesses into two independent publicly traded companies. The separation process is on track and is still expected to be complete in the first half of calendar 2020. If there are important developments that occur between now and then you can be assured that we will brief you in a timely manner.

After the separation, the company's Heartland Cement plant system will operate as a distinct pure-play. The business will be the largest U.S. owned cement producer and we'll have excellent future prospects. These cement assets and their productive capacity give this business substantial scale to stand-alone independently. The business also owned ample raw material reserves that will supply its operations over the long-term. Eagle's Light Materials business comprised of Gypsum Wallboard and recycled Paperboard has a long track record of superior margin performance.

These financial results are driven by sustainable low-cost producer positions in the U.S. Sunbelt markets with long-lived raw material reserves. The business has uniquely distinguished itself through industry business cycles and has achieved industry leading levels of customer satisfaction. In short, as per our previously announced separation plan, we are creating two independent benchmark businesses. Businesses that new and existing investors will be able to value based on each businesses distinct operational and financial results and future prospects.

We also stated in our press release that we continue to evaluate any additional opportunities to create shareholder value that may arise prior to the completion of the separation. We remain fully committed to that intention. To underscore this commitment about shareholder value creation is worth noting that during the first half of our fiscal year, we repurchased nearly 3.6 million shares or 8% of our shares outstanding and returned over $320 million to our shareholders through a combination of share repurchases and dividends, illustrating our confidence in these businesses and their prospects.

We made these repurchases without jeopardizing our financial flexibility to pursue any attractive growth or improvement opportunities that may emerge. That is all prepared comments upon today regarding the separation and share repurchases nor will we be able to answer questions about these matters at the end of the call today.

Now let me turn to our business results for the quarter. It was a record quarter for Eagle in terms of both our top and bottom lines, and the outlook for the rest of the year remains positive. First, the heavy side. Cement sales volumes for the quarter were a record 1.8 million tonne, 14% over the prior year and earnings were up 16%.

We're operating at high levels of capacity utilization and demand outlook remains positive. We are especially encouraged by U.S. – recent U.S. state level approvals for infrastructure spending plans in key states across our U.S. Heartland footprint, which should further attention the supply over the years to come.

Notably these states include Illinois and most recently, Wyoming. This past quarter, we acquired a small Concrete and Aggregates operation complementary to our cement footprint. While in general we tend not to favor downstream integration. This was a unique opportunity for us. We will always look favorably at these types of acquisition opportunities in geographies where our primary Cement operations are located and our criteria for growth investment both strategic and financial can be met.

We have a balanced strategy in Cement on growth and improvement. I would add much of our strategic improvement emphasis actually supports our growth intentions. We have a track record of consistent reinvestment in our business through cycles to lower costs, create more value for our customers and realize the full earnings potential of our assets.

Three of the specific ways we do this are by investing to optimize the match of our clinker capacity with our grinding capacity ensuring that we have terminal reach to serve customers on a timely basis with volumes they need and having the Cement storage capacity to ensure that our product is available when seasonal demand is greatest.

Our recent investments in a vertical mill in Sugar Creek, the expansion of our distribution network in Altoona, Iowa and the completion of our rail loading project in Illinois are a few of the most recent examples. All these investments lead to increased sales volume and better customer support. Identifying and pursuing these improvement opportunities, opportunities that lower cost, increased saleable volumes and provide better customer support and importantly doing all of these safely are the top priorities for me personally.

We are well recognized for a strong operational performance position, but I want to assure you we still have a lot of runway in front of us to achieve the earnings improvement and find the prospects here are very exciting.

Turning to the light side. Results in the Gypsum Wallboard were more mixed. Volume was up 8% in the quarter to about 680 million square feet, but net sales prices declined 10%. Volumes reflect continued strength in the end-use markets notably the housing and repair and remodeling. We see this business still on trend for its low single-digit growth that we have been discussing, recognizing that pre-buy activity, hurricanes and the light seldom made growth a straight line.

Our price performance simply reflects pressures in the commodity market environment. I would add that pricing has been fairly flat since June. We remain close to a 10% market share of the U.S. Wallboard market today. Residential construction drives Wallboard demand and with fundamentals here clearly on the upswing, we look forward to coming – the coming year with a degree of optimism.

We are also currently enjoying an operating cost tailwind in Wallboard due to the lower recycled fiber costs for our Paperboard that we expect to remain with us for the foreseeable future. China's exist from the U.S. recycled paper market is a development that supports the near-term outlook for stabilized OCC costs.

In our Heavy Light business separation announcement we had indicated that we are also exploring strategic alternatives for our sand business and that process is under way. In the meantime, we are making adjustments that will continue to enable us to operate at roughly cash cost neutrality during periods like this where the business conditions are challenged and while we explore strategic alternatives.

That's all from me as far as the introductory remarks. Now let me turn it over to Craig to go through the financials for the quarter.

[Craig Kesler, Chief Financial Officer]

Thank you, Michael. Eagle's second quarter revenue was a record $415 million, an increase of 9% from the prior year, reflecting increase in cement sales volume and pricing, improved Wallboard and Paperboard sales volume and the results of recent acquisition in the Aggregates and Concrete segment. The acquired business contributed approximately $8.5 million of revenue during the quarter.

Second quarter earnings per share was also a record of $1.72 reflecting improved earnings from the Heavy Materials business and 12% reduction in our diluted shares outstanding. The current share count in Eagles lower share count on record. Also included in the quarterly corporate G&A cost is approximately $2.7 million of costs related to the separation process.

Turning now to the segment performance. This next slide highlights the results of our Heavy Materials sector, which includes our Cement, Concrete and Aggregates segments. Revenue in the sector increased 22% driven primarily by a 14% improvement in cement sales volume, improved pricing in both Cement and Concrete and the results of the recent acquisition. Operating earnings increased 20% again reflecting the improvement in sales volume and pricing.

Moving to the Light Materials sector on the next slide. Improved Wallboard and Paperboard sales volume was offset by a 10% decline in Wallboard prices, which kept Light Materials revenue nearly flat with the prior year. Quarterly operating earnings in our Light Materials business declined 11% to $49 million reflecting lower net sales prices partially offset by higher sales volume. Recycled paper cost continued their downward trend year-over-year and Republic margins were the highest in the last 3.5 years. In the Oil & Gas Proppants sector, second quarter revenue was down 41% and we had an operating loss of $5 million.

During the second quarter operating cash flow increased 44% to $134 million and capital spending was down slightly to $38 million. As we've noted earlier, we completed the acquisition of a small Aggregates and Concrete company during August with a purchase price of approximately $31 million. Also during the quarter we returned nearly a $120 million to shareholders through a combination of share repurchases and dividends, which represented 167% of our net earnings during the quarter.

Finally, on this last slide, our debt to cap ratio was 49% at September 30. While the Eagle's leverage has increased, it continues to be at the lower end of the range for our industry. We had $54 million of cash on hand at September 30, and we have ample operating cash flow and flexibility to meet investment opportunities as they arise.

Thank you for attending today's call. We will now move to the question-and-answer session.

[Operator]

Your first question comes from the line of Mr. Trey Grooms [Stephens]. Your line is now open.

[Trey Grooms, Stephens]

Thank you. Thanks for taking my questions and congrats on a great quarter. So, the cement business, cement volume very strong. Texas clearly strong and I think this is some of the best organic volume growth we've seen on the wholly-owned side in quite some time. And I'm sure there was some catch-up there from bad weather earlier in the year. But can you talk about how the demand shook out kind of within your plant network and maybe your outlook for the different markets here and there. I know there is some concern that some of the Midwest states might be slowing a little bit, but these results certainly wouldn't suggest that. So, any color you could give us on that, Michael it would be great.

[Michael Haack, President and Chief Executive Officer]

Yes, no problem, Trey. Yes, when we look across the network, we've had good growth in all of our markets. We were a little more challenged, we're heavy into the oil and gas industry, which is primarily in our Oklahoma base. But other than that, Trey, everyone of our markets have performed better. We do see some infrastructure mills coming into play that should help us and give us some uplift here in some of the states that are most challenged, which is Illinois and also with Wyoming. So, we have a positive outlook on the markets.

[Trey Grooms, Stephens]

Okay, great. Thanks for that. And then the margins on the cement business made some good headway, but still down a little bit if my math was right. Can you talk about some of the cost there and maybe what you're seeing on that front and then how we should be thinking about cement margins as we look forward?

[Craig Kesler, Chief Financial Officer]

Yes, Trey. So, I'd prefer you to look at EBITDA margins as Michael has laid out last couple of calls based on investments over the last year and a half. So, depreciation is running higher, that's a big contributor. And certainly but even at that level the margins were down 60 basis points or 70 basis points. A lot of that is attributed to some fixed-costs that we had in some of our cement plants and then we did still see some freight increases. We talked about that last quarter especially in the Midwest where they were recovering from some of the flooding. But those are really the two primary contributors there.

[Trey Grooms, Stephens]

Okay. In the freight others that have had to deal with that as the year has gone on. It seems like it’s kind of lingering somewhat. Is that expected to ease as we get kind of going into this quarter here – the December quarter?

[Craig Kesler, Chief Financial Officer]

Yes, you'll start to see that and we saw that improved a little bit as we went through the summer and into the early fall shipping lanes are starting to open. So, yes, that should be behind – virtually behind us.

[Trey Grooms, Stephens]

Okay, perfect. And then last one for me. So, Michael, you mentioned Wallboard volume kind of on track for low-single digits and of course, quarterly there has been some pretty big swings this year. But this year we had in calendar 2019 clearly a pause in the housing market with starts, but it looks like that's improving the home-builder commentaries seems very good. The outlook for starts seems better. So, how are you thinking about the Wallboard demand looking out a little bit further maybe in the calendar 2020 with this backdrop of res clearly expected to improve?

[Michael Haack, President and Chief Executive Officer]

Yes, Trey, we see kind of the same trend that we've been talking about for a while now that we see steady growth in the low single-digits area. Like you said there was a pause mid-year with it, but it seems to get some more momentum now. And if we factor out some of the one-time events with hurricanes, pre-buys and everything we've been consistently in that low single-digit growth and that's what we're using going forward.

[Trey Grooms, Stephens]

Okay, fair enough. I'll pass it on and thanks a lot.

[Operator]

Your next question comes from the line of Jerry Revich [Goldman Sachs]. Your line is now open.

[Jatin Khanna, Goldman Sachs]

Hi. Good morning. This is Jatin Khanna on for Jerry Revich. Just a recent – just a question on the cement shipments. Actually if we apply normal seasonality to cement shipments for your December quarter that would imply year-over-year growth of about 9%. Is that the cadence, we should be thinking about or was demand pull forward particularly given the cement shipments that grew 14% sequentially for fiscal 2Q?

[Craig Kesler, Chief Financial Officer]

Yes. I would encourage you to look at over the last almost five or six quarters. We have seen a tremendous amount of wet weather across almost everyone of our markets. And as we’ve been talking about what ends up happening in those situations as projects don’t get canceled, they just get delayed, they get pushed out. And I think you’re seeing that in this market right now, where those projects, it’s been dry, right. We enjoyed a dry summer and into the early fall. And that’s a reflection. We don’t necessarily want to – we’re not giving guidance on quarter-to-quarter shipments in cement. But I think as we’ve been saying, we feel good about the underlying demand fundamentals of our business, we’re seeing encouraging signs at the state level or infrastructure spending. And at this point, we continue to see growth in our cement business.

[Jatin Khanna, Goldman Sachs]

Okay, thank you.

[Operator]

Your next question comes from the line of Adam Thalhimer [Thompson Davis & Co.]. Your line is now open.

[Adam Thalhimer, Thompson Davis & Co.]

Hey, good morning, guys. Craig, can I just get you to expand on that a little bit because you talked about in Wallboard you said it’s kind of a low-single digit growth environment. What’s your best guess for cement, if you normalize weather?

[Craig Kesler, Chief Financial Officer]

Yes. So look, I would point you to the PCA those type of forecast cement demand over a long period of time grows low-single digits and that’s what we – the underlying business has been growing at for the last couple of years, but that’s been difficult for external people to see, right? We’ve seen whether it was Hurricane Harvey and Houston, a year ago, Midwest flooding of last – in the spring time. It’s been masked by significant weather issues and you finally seen a quarter where the weather is cleared the sun was shining and we were able to ship pretty well. So again, low single digits in cement is, what we typically see and against the backdrop of already high utilization rates.

[Adam Thalhimer, Thompson Davis & Co.]

And then in the past when you’ve had situations like this that catch-up period, I mean, is it all get caught up in a quarter or does it take a couple of quarters to flow through?

[Craig Kesler, Chief Financial Officer]

Yes, no. It doesn’t. It takes a little while. There’s been wet for so long that it does these jobs to drag out and you eventually pick them up.

[Adam Thalhimer, Thompson Davis & Co.]

Okay. One question on cement pricing. Last quarter, you talked about some competition. I believe in a couple of markets. Did that improve in Q2?

[Craig Kesler, Chief Financial Officer]

Yes, I would say, it’s always a competitive market, but we had price increases that went into effect in April across the majority of our markets. You’ve seen the price improvement that we saw this quarter is up about 2%. I’d say that’s been pretty consistent.

[Adam Thalhimer, Thompson Davis & Co.]

And then last one for me. Can you just give some additional color on this acquisition, where was it and what are the annual revenues you expect?

[Michael Haack, President and Chief Executive Officer]

Yes. So I’ll update you on that a little bit. When we look at acquisitions, typically, we don’t do a bunch of downstream acquisitions. When we look at what’s a favorable outcome for us. But we look at markets that we have cement and in those markets. We look at markets that have not a broad based, not 30 different operations in that for that our competitors in that market, and this one made our financial and strategic goals. It’s in the West, it actually will support our Nevada operation with it, and it’s in the renewable market area. We haven’t been a big buyer of ready-mix and we won’t be a big buyer of ready-mix unless it meets our strategic and operational goals that we see that adds value to our plant network.

[Adam Thalhimer, Thompson Davis & Co.]

Okay. And can you give, I mean, if I annualize kind of six weeks of that you had it in Q2. Maybe it’s a $60 million $70 million business?

[Craig Kesler, Chief Financial Officer]

It’s not that size. It’s a seasonal business in that marketplace. And so it’s significantly less than that. So it’s relatively small, but certainly an important addition to our assets.

[Adam Thalhimer, Thompson Davis & Co.]

Okay, thanks for the time.

[Operator]

Your next question comes from the line of Phil Ng [Jefferies]. Your line is open.

[Phil Ng, Jefferies]

Hey, guys. Good to see the strength in cement and you obviously sound pretty optimistic about the outlook. Can you give us an early rate on how backlogs are shaping up for cement for calendar 2020?

[Michael Haack, President and Chief Executive Officer]

Yes. We see kind of we discussed before, each of our markets had a good improvement. And as Craig talked about, with these backlog of projects as long as the weather holds out we see strong fundamentals in the market. Not only from our traditional end market users, but also from some of the infrastructure projects that we are optimistic that should come through with the announcements recently in some of the states we participate in. So it should be a solid demand picture going forward.

[Phil Ng, Jefferies]

Would you be able to help quantify that or at least directionally how it’s stacking up this year versus like last year at this time?

[Michael Haack, President and Chief Executive Officer]

Like Craig was saying we see low single digits growth and then the only variable in that will be what backlogs move into the projects that are held up that move into the current picture, but our model has always been in that low single-digit growth for the cement side. And then the backlog is going kind of wildcard in there of what that percentage will be, but we see it as a strong fundamental demand picture.

[Phil Ng, Jefferies]

Got it. And then could you give us some color if you and your competitors are out with any cement price increase for 2020. I believe, at least handful of guys are out with $8 increase. Just wanted some color around the magnitude and timing. And if you seen any difference in behavior better or worse?

[Michael Haack, President and Chief Executive Officer]

Yes. With all of our price increases, we evaluate all the markets we participate in. And we will have those discussions with our customers and determined by market-by-market basis of what those increases will be. We have not announced anything at this time, but we – our customers will be the first to know on what those price increases will be.

[Phil Ng, Jefferies]

Okay, thanks a lot. I appreciate it.

[Operator]

Your next question comes from the line of Josh Wilson [Raymond James]. Your line is open.

[Josh Wilson, Raymond James]

Good morning and thanks for taking my questions and congrats on the quarter.

[Craig Kesler, Chief Financial Officer]

Thanks, Josh.

[Josh Wilson, Raymond James]

On the theme of pricing, we’ve seen some of your competitors in Wallboard come out with price for January. What are your current thoughts on the outlook there for pricing?

[Michael Haack, President and Chief Executive Officer]

Yes. The outlook on pricing is the same as kind of with the cement. We’re evaluating what that price increase will be and we will again and we will let our customers know. They’ll be the first to know. We have not announced anything at this time yet. We know some of our competitors have announced, but we are independently looking at this and seeing what – and our customers will be the first to know.

[Josh Wilson, Raymond James]

Okay. And then regarding the acquisition, can you give us a sense of how its margins compared with the rest of the legacy business? And whether it had any impact on the margin or pricing in the quarter?

[Craig Kesler, Chief Financial Officer]

Yes. So it’s been a very attractive business for us, and it has a margin profile better than our other businesses and pricing wise it is a slightly higher prices markets than our average.

[Josh Wilson, Raymond James]

Thanks. And then last one for me. You talked about continuing to look for alternatives for Proppants. Any additional color you can provide on how that’s progressing or any sense of rough timing of when you might have more of an update?

[Craig Kesler, Chief Financial Officer]

Yes. So Josh, as we’ve always said, we are constantly looking at opportunities and weighing those in terms of the financial value that we are paying for and the return on investment and without getting into any details on that. That is a continuous process here and we’re confident look at those opportunities. And then as you’ve seen from us the other part of that capital allocation program is a share repurchase program. And it’s a balance between a desire to continue to grow the business, but at a good values with good returns and profitable growth and if those returns – those investment opportunities don’t meet our return criteria. We are happy to return that cash to shareholders as we’ve done.

[Josh Wilson, Raymond James]

Got it. Good luck with the next quarter.

[Operator]

Thank you. Your next question comes from the line of Keith Hughes [SunTrust]. Your line is open.

[Keith Hughes, SunTrust]

Thank you. On the share count, did it come in – the ending share count come in lower than the average share count in the quarter? And if so, what was, can you give us a rough idea of the number?

[Craig Kesler, Chief Financial Officer]

Yes. So it would have. We were buying shares during the quarter. So, yes, your exit number would have been lower than the average. And so it was 1.3 million shares that were repurchased during just this quarter.

[Keith Hughes, SunTrust]

Okay. And you had made some comments on share repurchase. Let me ask it this way, given the process you’re going under here. Are you – is your share repurchase ability, size, timing limited by what’s going on?

[Craig Kesler, Chief Financial Officer]

Yes. It’s certainly a discussion topic. I’ll tell you there’s always lots of factors as to how we go about the share repurchase program whether that is investment opportunities and weighing those, certainly looking at the financial, the capital structure of the company and making sure that the balance sheet is in good health, which it absolutely is. So there are a lot of factors that affect the pace at which we repurchase shares, and we are very comfortable with where we are leverages somewhere around two times and then that’s a very manageable number for Eagle. And so it’s a lot of factors not just an individual one.

[Keith Hughes, SunTrust]

Okay. So the pending split, just one of the factors, it’s not a limiting factor by any stretch. I don’t know. Is that correct?

[Craig Kesler, Chief Financial Officer]

Yes. And look, we announced the separation back in late May, and we were buying back shares post that. So it’s – there’s lots of factors.

[Keith Hughes, SunTrust]

Okay. Final question on Wallboard pricing. The price you saw in the quarter, was that roughly equivalent to what you exited the prior quarter at on a sequential basis?

[Craig Kesler, Chief Financial Officer]

Yes. So as we said back in the last call on July, prices had really been flat since June and that was consistent throughout this quarter.

[Keith Hughes, SunTrust]

Okay, thank you very much.

[Operator]

Thank you. Your next question comes from the line of Zane Karimi [D. A. Davidson]. Your line is open.

[Zane Karimi, D. A. Davidson]

Hey, good morning, gentlemen.

[Craig Kesler, Chief Financial Officer]

Good morning.

[Zane Karimi, D. A. Davidson]

So, are the proppants losses this quarter effectively or you’ll be expecting going forward. And are there any opportunities for improvement even if the market environment doesn’t really change?

[Craig Kesler, Chief Financial Officer]

Yes. I think, look, we’re very proud of that management team and the way they were effectively able to keep the set of cash flow breakeven level business and the environment that they’re operating within. And so on an EBITDA basis and it was actually an inventory impairment in that business during the quarter. But absent that it was effectively a cash flow breakeven quarter in a very tough environment.

[Zane Karimi, D. A. Davidson]

Thank you.

[Operator]

Your next question comes from the line of Mr. Paul Roger. Your line is open.

[Unidentified Analyst]

Congratulations on Q3. Can I just follow up on some of the questions on the outlook? I mean clearly you sound quite confident so do your competitors and yet when we look at some of the other data like for example the outbound contract awards. They have been quite weak this year. How do you reconcile your outlook comments with that type of data and are you concerned about that at all?

[Craig Kesler, Chief Financial Officer]

Yes. I think, we would suggest that as you look at the U.S. economy. You’ve got sustained job growth, you’ve got low interest rate environment. Those are generally very good factors for construction activity in the U.S. As we pointed out a little bit earlier, we are actually also have states that are starting to become a little more creative to support infrastructure spending within their own states. So Illinois being a perfect example of that, and Wyoming more recently. So contract awards, there’s lots of day to look at, but in terms of talking to our customers, they are starting – they see good volumes ahead as well. And so and it’s our markets, we’re not across the US. But in our markets, we are seeing good demand levels.

[Unidentified Analyst]

And just a follow-up question on the M&A side. A few of your competitors have also talked about the pipeline improving recently. Is that something you’ve seen and could you be interested in maybe doing something a little bit bigger than the deal you’ve announced today or will all that pretty much have to wait until the separation next year?

[Craig Kesler, Chief Financial Officer]

So there’s always a pipeline of opportunities and we’re constantly weighing those opportunities against our return criteria and that’s about where we would lay them.

[Unidentified Analyst]

Perfect. Thanks a lot.

[Operator]

Thank you. Your next question comes from the line of Kevin Hocevar [Northcoast Research]. Your line is open.

[Kevin Hocevar, Northcoast Research]

Congrats on a nice quarter. Can you talk about the competitive environment in Wallboard? It seem like in the June quarter, there were some pretty intense pricing competition that seem to just completely go away here and this is really at the end of June. So can you kind of talk about what changed there and why do you think that was able to stabilize? Was it just a function of the kind of underlying indicators housing getting better volumes are good in the quarter or just curious your thoughts there?

[Craig Kesler, Chief Financial Officer]

Kevin, I guess, I would suggest there’s always a competitive marketplace that doesn’t change, but certainly over the summer as interest rates fell, you can look at sale – housing sale trends, housing store trends those things started to improve. And right after the end of the day what impacts the business as demand improving is a good thing.

[Kevin Hocevar, Northcoast Research]

Okay. And then the $2.7 million of costs that you incurred this quarter related to the separation. Do you have an expectation for how much of that will continue going forward?

[Craig Kesler, Chief Financial Officer]

No, we will certainly quantify that for you as we go quarter-to-quarter. You can imagine there is some long hole in the fence around the process through the IRS going through the SEC reporting process. So you’re incurring costs and they’ll fluctuate a little bit as you go forward here, but we’ll certainly quantify that for you.

[Kevin Hocevar, Northcoast Research]

Okay, great, thank you very much.

[Operator]

We don’t have any questions at this time. Mr. Haack please continue.

[Michael Haack, President and Chief Executive Officer]

Yes, I just want to say, thank you for participating in today’s conference call and webcast and we look forward to talking to you early next year.

[Operator]

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect. Have a great day.