CCL Industries Inc

TSX:CCL.B

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, ladies and gentlemen. Welcome to CCL Industries' second quarter investor update. [Operator Instructions]The moderator for today is Geoff Martin, President and Chief Executive Officer; and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen.

[Sean P. Washchuk, Senior VP & CFO]

Thank you. Good morning, everyone. Welcome to our second quarter conference call. We'll jump right in here.Starting on Page 2, we have a disclaimer regarding forward-looking information. I'll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2020 annual MD&A, particularly the section risks and uncertainties. Our annual and quarterly reports can be found online on the company's website, cclind.com or on sedar.com.Moving to Slide 3. For the second quarter of 2021, sales increased 15.1% and with organic growth of 20.5%, acquisition-related growth of 1.5%, partially offset by 6.9% negative impact from foreign currency translation. This resulted in sales of $1.41 billion compared to $1.22 billion in the second quarter of 2020. Operating income was $235.5 million for the 2021 second quarter compared to $163.6 million for the second quarter of 2020, a 51.4% increase, excluding the impact of foreign currency translation. Geoff will expand on our segmented results of the CCL, Avery, Checkpoint and Innovia segments momentarily.Included in the second quarter results was an $8.8 million increase in corporate expense due to an increase in short-term and long-term variable compensation expenses for the comparative periods. Consolidated EBITDA for the 2021 second quarter, excluding the impact of foreign currency translation, increased approximately 31% compared to the same period in 2020. Net finance expense was $14.1 million for the second quarter of 2021 compared to $15.9 million for the 2020 second quarter. The decrease in net finance costs is due to a lower average debt outstanding for the comparative periods.The overall effective tax rate was 25.5% for the 2021 second quarter, up slightly from 25.1% effective tax rate recorded in the second quarter of 2020. The effective tax rate was impacted by recent amendments to U.K. tax legislation enacted into law during the quarter, partially offset by a reduction in valuation allowances due to improved profitability at certain subsidiaries of our company. This effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions with different rates.Net earnings for the 2021 second quarter was $153 million, up 55%, excluding foreign currency translation compared to $103.9 million for the 2020 second quarter. For the 6-month period, sales increased 14%. Operating income increased 31% and net earnings increased 36% compared to the same 6-month period in 2020. 2021 including results from 11 acquisitions completed since January 1, 2020, delivering acquisition-related sales growth for the period of 2%, organic sales growth of 12.1% and a foreign currency translation headwind of 4.7% to sales.Moving to Slide 4. Basic earnings per Class B share were $0.86 for the second quarter of 2021 compared to $0.58 for the second quarter of 2020. Adjusted basic earnings per Class B share were $0.89 for the 2021 second quarter compared to adjusted basic earnings per Class B share of $0.59 for the second quarter of 2020. The increase in adjusted basic EPS to $0.89 is primarily attributable to an increase in operating income, resulting in $0.36, a $0.03 reduction in tax expense attributable to the net impact of the new U.K. tax legislation, increasing deferred taxes for future timing differences, offset by a reduction in tax valuation allowances. And these improvements offset by $0.05 negative impact from foreign currency translation and a $0.04 increase in corporate expenses.For the 2021 6-month period, the $0.40 increase in adjusted basic earnings per Class B share was largely due to the $0.47 increase attributable to operating income, offset by a $0.07 negative foreign currency translation impact, with an increase in corporate expenses of $0.06, offset by a reduction in tax expense of $0.05 and lower interest expense of $0.01. This resulted in adjusted basic earnings per Class B share of $1.71 for the 6-month period of 2021 compared to $1.31 for the 2020 6-month period.Moving to Slide 5. For the second quarter of 2021, free cash flow from operations was $94.7 million compared to $145.7 million in the 2020 second quarter, an increase in cash taxes paid, net capital expenditures, coupled with the retrenchment of net working capital. Cash reduced free cash flow from operations and cash provided by operating activities for the second quarter of 2021 compared to the second quarter 2020. For the last 12 months ended June 30, 2021, free cash flow from operations improved $109.7 million compared to the last 12 months ended June 30, 2020. The comparative improvement is attributable to the improved cash flow from operations and reduced capital spending for the comparative periods.Moving to Slide 6. Net debt as at June 30, 2021, was $1.26 billion, a decrease of $128.6 million compared to December 31, 2020. The decrease is principally a result of debt repayments during the first 6 months of the year, partially offset by a decrease of cash on hand for June 30, 2021, compared to December 30, 2020. The company's balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was 1.05x, declining from 1.24x at the end of December 2020. Liquidity was robust with $693.3 million of cash on hand and $1.2 billion of available undrawn credit capacity on the company's revolving bank credit facility. The company expects to repay the portion of its long-term debt from free cash flow or using its revolving credit facility before it comes due.The company's overall average finance rate was largely unchanged at approximately 2.3% at June 30, 2021, and December 30, 2020. The company's balance sheet continues to be well positioned as we move through 2021.Geoff, over to you.

[Geoffrey T. Martin, President, CEO & Director]

Thank you, Sean, and good morning, everybody.I'm on Slide #7. Highlights for capital spending for the year, $132 million spent so far, $127 million net of disposals. I just want to point out that we're planning to spend $340 million for the year in total. So capital spending in the second half of the year will be much heavier than it was last year, around $200 million and change.Moving on to Slide 8, highlights the CCL business, very strong quarter, mid-teens organic sales growth, very strong in North America, up in the high teens, low double digits in Europe and Asia Pacific and up high single-digit in Latin America. We saw strong sales gains in Home & Personal Care, Food & Beverage and CCL Design, slightly down in Healthcare & Specialty due to the pandemic tailwinds in the prior year and the same at CCL Secure, although their profits were up.So moving on to Slide 9. The 2 joint ventures we have, one in the Russia, one in the Middle East, very strong results, particularly given the problems of foreign exchange in both jurisdictions.Slide 10, results from Avery. Strong recovery in all regions and all products. So we've seen a really big, strong bounce back this quarter at Avery. One laggard that remains is Badges, although it has improved considerably, sequentially, it's still far below normal, but much better than it has been. Our back to school selling has been strong. We have faced a number of logistic issues, especially supply of critical raw materials from China with the many freight problems and challenges importing from that country into the U.S. currently today, and that may affect replenishment sales in Q3. Inflation has also been a factor.Slide 11. Checkpoint. Also big recovery here, especially in the Apparel Label business. You have to remember in the second quarter of last year, large parts of that industry were completely shut down. So we've seen a particularly strong bounce back there, but also strong in merchandise availability with nonessential retailing coming back. In the crisis last year, we had still some good business with essential retailing, that's not essential as the part has really bounced back there.Record profitability in the second quarter, well above Q2 '19 and above the previous Q2 2018 high watermark.Slide 12. Results for Innovia. This one really surprised us a little bit. We had very good pass through of the higher resin costs. But the profit change really was aided by improved mix. So we've done a fair amount of pruning of low-margin product lines, especially in the acquired Polish operation and of the plant in Mexico, and that really helped our mix in the quarter that has just gone through. Productivity gains, especially in the U.K. and large Mexican plants also augmented results. And the Polish plant, EcoFloat investment, is on schedule and as planned for the second half of 2021.Slide 13. A few comments on our outlook. I just want to point out that the third quarter last year was a record quarter for the company. Earnings were up 18% last year in that quarter on a normal comparative period in 2019. So that's quite a high bar on today's foreign exchange rates, especially to the weaker U.S. dollar. Avery will improve over the second half of 2020. That's a typo on that slide. So it's the second half of 2020 and the delta which will improve really depends on back-to-school. We do expect checkpoint progress to continue, but at a more modest pace, although RFID will still be a source of strength.We also see some supply chain issues in apparel due to rising COVID restrictions in Asia. We had a part in Bangladesh shut for 2 weeks in the month of July due to government-imposed restrictions after the Eid holiday there. So there's still some challenges in the Asian apparel supply chain appearing as we speak. CCL Design expects a strong second half. And although automotive is much better than it was last year, I think as we get into the third quarter, the chip shortage is beginning to reveal itself in some glory. And we expect some challenges for that, particularly in the third quarter and maybe in the fourth quarter, too. But it's certainly a recovered industry compared to how it was in Q2, in the latter part of Q1 last year. We do have some strong new business wins coming in electronics, which will probably offset that.Food & Beverage and Home & Personal Care are both expected to be solid. Healthcare & Specialty comps remain difficult for the second half of the year, especially in the Ag Chem space. CCL Secure, the most difficult challenge, an extremely elevated Q3 hurdle based on the high-margin windfall orders we received in 2020 from the cash shortages in many developed countries around the world, but the comps returned to normal in the fourth quarter.Innovia still has to navigate continuing resin volatility, and we have to manage well the EcoFloat investment in Poland, and there are no more easy comps to come.So with that, operator, we'd like to open up the call for questions, please.

[Operator]

[Operator Instructions] Your first question comes from the line of Adam Josephson with KeyBanc.

[Adam Jesse Josephson]

One on translation. Geoff or Sean, based on current Canadian dollar exchange rates, what magnitude of drag would you expect if these rates persist through the end of the quarter?

[Geoffrey T. Martin, President, CEO & Director]

Sean, do you want to handle that one?

[Sean P. Washchuk, Senior VP & CFO]

Sure. Adam, I think the way you have to think of it is U.S. to CAD. For every 1% move in the U.S. dollar-CAD relationship, we would take a 1% or $0.01 change in EPS on an annualized basis. So look at the year-over-year exchange rates and what you expect for the back half of the year compared to where we're at now and where we were last year. And about a 1% move is a $0.01 change on an annualized basis.

[Geoffrey T. Martin, President, CEO & Director]

So I think in the second half, Adam, it will be mid-single-digit cent EPS, something like that impact if the rates stay where they are.

[Adam Jesse Josephson]

For the second half as a whole, not per quarter?

[Geoffrey T. Martin, President, CEO & Director]

Correct. It's a bit difficult to model because you've got some offsetting currencies around the world, too. So the Australian dollar is strong and a few other places. So we did have some offsets.

[Adam Jesse Josephson]

You don't normally provide much in the way of explicit quarterly guidance, Geoff. So I'm just wondering what you see more forthcoming than normal about -- you're thinking about 3Q and even for the second half of that matter? And when I look at consensus, consensus already expects an earnings decline of about 4% in the second half. So I'm just wondering what prompted you to be as forthcoming as you were in both the release and presentation about your second half thoughts?

[Geoffrey T. Martin, President, CEO & Director]

Well, just to remind everybody, Adam, in the second half, just to remind everybody, the first half the comps are very easy and the second half is difficult. That's -- and the currency is, I think, something that not everyone has picked up on before the latter part of the last quarter. So I think it was also just to remind everybody about the translation impact. The 2 big impacts in the second half of foreign exchange translation and that Q3 quarter, we had CCL Secure in Q3 last year, where I think we made something over $20 million, and we will be lucky to do 25% of that this quarter.

[Adam Jesse Josephson]

You mentioned the supply chain issues in apparel resulting from rising COVID restriction in Asia. Are there any other aspects of the delta variant that are causing you particularly concern regarding the second half?

[Geoffrey T. Martin, President, CEO & Director]

Not particularly. I do think we'll get through it because governments are very much keen in, I think, in all parts of the world to get through this. So -- but the part of the world that's difficult at the moment is the Asia Pacific, the Indian subcontinent, Thailand, Indonesia, Malaysia, Australia, these countries have all got sort of pretty severe restrictions in place at the moment. We're currently able to operate, but there are certain times when Government act and they acted in Bangladesh in July. So we were closed down for 2 weeks -- an additional 2 weeks on top of the Muslim holiday there in July. There was the shutdown. There may have been some restrictions also in Thailand. But it's not material at the company level, but it's bothersome.

[Adam Jesse Josephson]

On Innovia, you mentioned the results were surprisingly good to you and mix was a big help there. Can you just talk about exactly where that came from? And then given how all the segment handled resin inflation in 2Q, how much reason do you have to be concerned about 3Q along those lines?

[Geoffrey T. Martin, President, CEO & Director]

Well, we've got hurricane season to get through in the U.S. So when you -- these days we're all mindful of what the weather can do to resin supply. So we're slightly somewhat cautious about that. But we did a good job of managing the pass through, not 100%, but a good chunk of it. Because a lot of our customers, when resin was going down last year, changed our arrangements to be more real-time and the move to resin, so that benefited us when the curve went the other way. But the big impact this quarter was really mix and getting out of some of the low-margin volume we had, particularly in Poland and particularly in the plant in Mexico.

[Adam Jesse Josephson]

And presumably those benefits are sustainable, Geoff?

[Geoffrey T. Martin, President, CEO & Director]

Right.

[Adam Jesse Josephson]

Yes. 2 other ones. The large transaction that was announced about a month ago in the label converting industry. What did you make of it, particularly the multiple? And what do you think it says about the going multiples in the label industry these days?

[Geoffrey T. Martin, President, CEO & Director]

Well, I think our stock price multiple seems to now be the going rate to buy anything in the industry. We've seen multiple space, quite small businesses that are really highly elevated. So it's challenging at the moment. So there's a lot of money chasing a few deals. And some of the prices that are being paid, in our opinion, are pretty ridiculous. But that's just our opinion. You have to ask others what they think.

[Adam Jesse Josephson]

And one last one. I mean, you don't give guidance, I think, for good reason.

[Geoffrey T. Martin, President, CEO & Director]

Yes.

[Sean P. Washchuk, Senior VP & CFO]

Yes.

[Adam Jesse Josephson]

[ Depletion ] at the world is always uncertain. How would you characterize your level of uncertainty about what's to come in the months ahead compared to whatever it might have been historically? I just -- not just a variant, but Brazil is hiking interest rates because of very significant inflation there. Obviously, there's very significant inflation elsewhere. Just talk about what your level of visibility into the next few months compared to whatever you would consider normal?

[Geoffrey T. Martin, President, CEO & Director]

Well, we've been facing difficult external circumstances. So it seems like forever. So I wouldn't say today it's more elevated than they were last year in the middle of the pandemic. So we're more confident than we were in March and April and May last year, for sure. And we've got -- and some of our businesses has still got some runway left on the bounce back, particularly the Avery. So I think it's just we had a -- like many companies, we had a very strong recovery in the second half of the year last year. So the period of easy comps is gone. And on top of that we've got the U.S. dollar weakening pretty significantly. So those 2 impacts, just making it -- the business is doing pretty well right now. But externally those 2 things are making the situation a little bit difficult.

[Operator]

Your next question comes from the line of Walter Spracklin from RBC Capital Markets.

[Walter Noel Spracklin, MD & Analyst]

So starting with Avery. And you mentioned and looking at your different divisions, it is the one that hasn't -- that is still kind of below pre-pandemic on a fairly meaningful basis. And I believe last quarter, you had indicated, Geoff, that you did expect it to be up year-over-year, albeit on a tough comp. Are you getting more encouraged? I mean it looked like a great quarter. Things seem to be coming back. You mentioned a few of the driving factors. But is it -- are you getting -- if you were to take that, expect it to be up year-over-year, I think it was actually in the fourth quarter call you said that. Do you feel better about this division? Are you -- do you expect it to be performing better than you -- than when you gave that guide or that comment in the fourth quarter with respect to Avery?

[Geoffrey T. Martin, President, CEO & Director]

Well, we made in the second quarter of 2018 and 2019, we made about $45 million in both of those 2 quarters, 2Q '18, 2Q '19. This year, we made $38 million, but at a very different foreign exchange rate. So if you normalize foreign exchange to make it constant, we would have been in the sort of low 40s. So they're not far off the pre-pandemic level. The business is still a drag in badges. So sales of some categories of badges declined 90% to 95% in the crisis. They have bounced back. So the business has got profitable again. And as events continue to absolve, and particularly in the U.S. and Europe, which is where that business is based, that's really the thing that has to occur. The other business that's still difficult at the moment is the ring binder business and the comments I made about China and the difficulties we have there. It's all around the importation of ring for the back-to-school business. So the world's supply of rings pretty much for the whole planet, it all comes out of China. And just getting them out of there and getting them shipped to where we need them shipped has been quite challenging in the current environment. So just to give you a frame of reference, an emergency 45-foot shipping container out of China today costs $45,000 versus $4,000 2 years ago. I mean that's how much the world has changed. So those are our 2 underlying comments, sort of on the downside of Avery. But on the upside, the label business has really returned to normal. And internationally, it's in very good shape. So we're very confident about Avery, both for the coming quarter, the second half and the year-over-year growth.

[Walter Noel Spracklin, MD & Analyst]

Moving to Innovia, Geoff, you had -- I believe when you first looked ahead to post the re-organ in Mexico or the new plant start up. I believe you were guiding us back then to a kind of a low double-digit margin, which subsequently went, and I'm referring to EBITDA margin, it subsequently went up to the mid-teen range. And now we're nicely trending above 20%. Is north of 20% the new normal? Or is that mix that you mentioned more temporary? And should we look more at 20% or less than that as a normalized margin for Innovia?

[Geoffrey T. Martin, President, CEO & Director]

So these are the margins the business is making when we bought it. So we've done a very good job of cleaning it up and sorting it out. I think we'd have to wait and see what happens in a declining resin market. What happens when resins are rising, you do have some inventory of lower price resin in situ as prices rise, you have the benefit of that. That's typically offset by price increases, you don't get quite through. So it usually ends up being a wash. So what we're curious to see what happens is what happens when resin prices fall, if they were to fall dramatically. We then have high-priced inventory in our silos. And what the impact of that would be as prices fall on the pass through. So that's probably the thing we've not experienced yet, that could happen if the resin supply situation normalizes in 2022. But as an ongoing, run rate is high teens, 20 -- low 20s is probably as high as it's ever going to go, Walter, if that answers your question?

[Walter Noel Spracklin, MD & Analyst]

It does. That's great. And lastly, on the CapEx, I notice a small increase, I think, in your CapEx spend. Any -- are you getting -- can you give us a little bit of color around any interesting projects that you're looking at new projects? Are these growth initiatives? What areas you're focusing your attention just from a capital expenditure standpoint?

[Geoffrey T. Martin, President, CEO & Director]

Well, that's probably the most interesting one, is all around the electronics business, the CCL Design. We're building a couple of new plants in China, one of them is very big. It's a $25 million project and some new business wins behind that, that will be coming in 2022 and the latter part of 2021. So that's probably the main thing. I think also, we have to bear in mind, we could have failed the CapEx in the crisis for liquidity reasons. So some of this is delayed projects now coming back to the fore. And it takes a bit of time. The machine building industry has also got its challenges with availability of raw materials and chips and steel and aluminum and all the rest of it. So getting the machines you want on time today is also not easy. So we've had some delays in getting the equipment we need and parts for the business, we'd otherwise would have liked to have had it earlier.

[Operator]

[Operator Instructions] Your next question comes from the line of Stephen MacLeod from BMO Capital Markets.

[Stephen MacLeod, Analyst]

I just had a couple of questions. On the CCL segment, you had a nice -- another nice quarter of good margin growth. And I'm just wondering if you can point to any specific margin drivers that maybe were driving the Q2 strength?

[Geoffrey T. Martin, President, CEO & Director]

Q2 strength, CCL, Steve, is really driven by the recovery in the automotive business, another big factor. So CCL Design Automotive was in the [ toilet ], obviously in 2Q last year and it bounced back pretty strongly. So CCL Design margins were up quite significantly in the quarter as a result of that year-over-year. And Food & Beverage also bounced back, so the on-premise issue that has really hurt that business. That's almost the other big change. So they were the few main changes margin wise. CCL Secure, also had a good quarter, but it had a good quarter last year, and the delta there isn't as big. So the 2 margin impacts on the operating margin were really Food & Beverage and CCL Design.

[Stephen MacLeod, Analyst]

And then I just wanted to confirm. I thought in one of the previous questions you mentioned something about CCL Secure. Would you say that you would be lucky to do 25% of what CCL secured last year in Q3?

[Geoffrey T. Martin, President, CEO & Director]

Correct. Yes. So I'd say headwind in Q3 at CCL Secure, the EBIT of the order of $15 million to $20 million. So we had a really -- when I say windfall, I meant windfall. So we had those big orders that came in last year in a number of jurisdictions for top-up orders at premium prices. And this year they're absent. That's the delta quarter-on-quarter. So we had an exceptional quarter in Q3. Q4 was normal and we expect Q4 to be normal. So it's really going to be a Q3 phenomenon.

[Stephen MacLeod, Analyst]

And did you say that last year's windfall was $15 million to $20 million?

[Geoffrey T. Martin, President, CEO & Director]

No, the delta difference. So the difference between where we like it to make this year and what we made last year is of the order of $15 million to $20 million at EBIT.

[Stephen MacLeod, Analyst]

Just turning to Avery, you mentioned about just the supply chain issues, you had a strong back to school. But you talked about supply chain impacting potential replenishment orders. How much does replenishment usually impact Q3? Like is there any way to quantify or in terms of magnitude?

[Geoffrey T. Martin, President, CEO & Director]

To quantify because we -- last year we had the fiasco of all the school restart in the U.S. and Canada, which I'm sure you remember well. Retailers this year are assuming, I think, that some validity the back to school will be normal. So typically, what you get is you have to sell in order because it usually goes out in the latter part of June and the early part of July this year and mostly in the latter part of June. And then in July and August, you get top-up orders from retailers. And if you have the inventory, you can sell it, obviously the selling season is extremely short for back to school. So if you haven't sold it by September, you're done. So if we don't get the ring supply we need, it could have effect our ability to keep retailers supplied with what they need during that sort of replenishment period. So that's the challenge at the moment.

[Stephen MacLeod, Analyst]

And then maybe just finally, just on Innovia. I just wanted to clarify. You did a very good job managing through resin inflation in Q3 -- Q2, sorry. But I guess what you're saying is Q3, you can manage the resin price inflation in a similar way, but I guess you're just saying that the hurricane season is a bit -- creates a bit of uncertainty on supply. Is that right?

[Geoffrey T. Martin, President, CEO & Director]

Resin is still going up. It's creeping up now rather than leaping up, but it's still going up. And in the U.S. and Europe now, resins are double the price of resin in China. And there are so many difficulties importing from China at the moment. I mean, I don't think any -- not many people in the world I know are thinking about sourcing from there. And China is a net importer of resin anyway. So if the world did that, there will be no availability anyway. So the real challenge has really been what's going to happen in the future. And the hurricane season, you worry about that every year because it knocks out of the cracking plant, the usual impact short-term. So we'll have to wait and see what happens.

[Operator]

Your next question comes from the line of David McFadgen with Cormark Securities.

[David John McFadgen, Director of Institutional Equity Research]

A couple of questions. So you talked about the badge business, how it's improved a bit, but it's still down, I guess, compared to normal levels, say, 2019. Can you give us an idea how much it would still be down compared with Q2 '19?

[Geoffrey T. Martin, President, CEO & Director]

It's still down 60%, 70% over 2019. I mean, actually the event badge part of it, that's [indiscernible] concerts and sport events things and business conventions and things like that, that dropped 95% in the crisis, and we're back at sort of 25% of normal level.

[David John McFadgen, Director of Institutional Equity Research]

I mean, it should continue to improve a fait bit.

[Geoffrey T. Martin, President, CEO & Director]

I suppose. We're expecting it, I mean, it improved in July, but it's a long ride back until the conventions and sports events and attended sports events, non-attended sports events don't use many badges. So attended sports event, until that becomes normal, it's still got a ways to go. It's about $100 million business as part of Avery.

[David John McFadgen, Director of Institutional Equity Research]

And then just on that, can you give us an idea of how the direct-to-consumer performed and binder specifically in Avery in the quarter?

[Geoffrey T. Martin, President, CEO & Director]

Well, direct-to-consumer performed very well with the exception of badges. And binders also performed quite well because of the selling for back to school. But we had some inflation challenges in resin supply, a lot of it revolved around freight.

[David John McFadgen, Director of Institutional Equity Research]

And then just on the balance sheet. Obviously, you guys have a very low leverage. I think on the last conference call, there was a question about, is this the optimal capital structure? I think you thought that it was below optimum level. So are you looking at a potential substantial issuer bid or something?

[Geoffrey T. Martin, President, CEO & Director]

Well, there's no, of course, issuer bid out there, and we'll see what happen.

[David John McFadgen, Director of Institutional Equity Research]

And could there be any...

[Geoffrey T. Martin, President, CEO & Director]

You're not going to get any more than I just commented.

[Operator]

There are no further questions at this time. Please continue.

[Geoffrey T. Martin, President, CEO & Director]

Okay, everybody, thank you for joining the call, and we look forward to talking to you in November for the third quarter. Thank you very much for today's time.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.