Rogers Sugar Inc.

Good day, ladies and gentlemen, and welcome to the Roger Schubert First Quarter 2023 Results Conference Call. After the presentation, we will conduct a question and answer session, which will be open only to financial analysts. Instructions will be given at that time. Please note that this call is being recorded today, February 9th, 2023, at 8 a.m. Eastern Time. I will now like to turn the meeting over to Mike Walton, President and CEO. Please go ahead, Mr. Walton.

Thank you, Operator, and good morning, everyone. Joining me for today's call is Jean-Sebastien Couillard, BP Finance and CFO. During today's call, I will review the first quarter results of 2023 and trends in our industry. Please be reminded that today's call may include forward-looking statements regarding our future operations and expectations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. Please also note that we may refer to some non-GAAP measures in our call. Please refer to the forward-looking disclaimers and non-GAAP measure definitions included in our public filing with the Securities Commission for more information on these items. A replay of this call will be available later today. The replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website. Now turning to our first quarter results. We began fiscal 2023 with a strong quarter that saw the continuation of trends established in the second half of the last fiscal year. In the quarter, higher sales volume and improved pricing in our sugar segment drove an overall strong performance in the business. The sugar segment performance and the strength of the quarter showcases the continued strong demand for sugar and sugar-containing products. We are very proud of the fact that our Q1 adjusted EBITDA performance was better than any previous quarter. In the current period, our maple business began to see the evidence of some improved pricing with higher revenues. While the business continues to face high inflationary pressures and reduced global demand, we expect the impact of higher pricing to mitigate the impact of higher costs, especially as inflationary impacts recede. Now turning to the results in the quarter. In sugar, volumes reached almost 193,000 metric tons in sales, which is an increase of over 7% from the previous year. During the quarter, we saw growth in all three of our domestic segments, including notable growth in industrial, which more than offset the planned decline in exports. Our industrial segment increased by almost 12,000 metric tons compared to the same quarter last year, driven by continued strong demand for sugar-containing products in the domestic market and the United States. Our consumer business increased by 1,200 metric tons in the quarter from strong sales in eastern Canada. Consumer demand appears to have largely returned to pre-COVID levels on an annualized basis. Adjusted gross margin in the quarter improved as a result of higher average pricing for refined sugar products and strong demand when compared to the same period last year. This was partly offset by inflationary pressures on operating costs, which is an area our team is very focused on and has been managing well. Turning now to our Tabor beet crop, as I mentioned last quarter, unfavorable weather conditions in the latter stage of the growing period have reduced the expected sugar content from the beets. As a result, we expect to produce approximately 105,000 metric tons of sugar for the 2022 campaign, below last year's production of 120,000 metric tons. While this is lower beet sugar production than we anticipated, Tabor sugar production is within a good range for the business. It is important to remember that the Tabor crop is not yet finished, and next month is a key period for our beet processings. We will have a final number in the Tabor crop by the end of February, which we will provide in our Q2 results. We have also updated our sugar sales guidance to reflect the favorable North American market dynamics. We increased fiscal 2023 volume expectations by 15,000 metric tons to a record volume of approximately 805,000 metric tons due to the continued strong demand in the Canadian domestic markets. The majority of the additional volumes will be coming from our industrial segment. However, the full benefit of this growth will be partly offset by the lower contribution from beet sugar production. With anticipated beet sugar volumes down slightly, we will continue to leverage our unique operational flexibility to meet customers' needs by moving sugar east from our western operations and prioritizing domestic sales. In addition, over the holiday period, we upgraded operations at our Montreal plant, improving efficiency and streamlining processes, which has improved performance. Our Montreal plant is operating well and is expected to continue to run smoothly. Finally, we would like to share an update on our Montreal expansion project. We are advancing the design and planning aspects of the project, and the detailed engineering study is expected to be completed during the third quarter. During this stage of the project, we are proactively engaging with major providers and stakeholders, and we look forward to providing updates over the months ahead. Now turning to our maple segment. In maple, adjusted EBITDA lowered in the first quarter, largely due to lower sales volumes from existing customers and increased operating costs. It is worth noting that the revenue increased in the quarter as the impact of an improvement in pricing more than offset lower volumes. Sales volume lowered in the first quarter driven by lower demand from existing retail customers, competitiveness in the market, as well as the timing of shipment. We remain committed to the maple business and are encouraged by the recovery in pricing we have begun to see. Our order book is healthy, and we continue to focus on maintaining our share of the global market. Adjusted gross margin was slightly lower than the comparable period as we continue to be negatively impacted by lower volumes, less favorable customer mix, and higher costs, partially offset by improved average selling price. Before leaving maple, I would like to briefly discuss maple pricing and the 2023 maple crop. This year, PPAC set a price increase for the upcoming crop, which comes into effect on March 1st of this year. While it is a fairly large increase, we are confident in our ability to recover the higher commodity price through customer pricing. All participants in the maple business are faced with similar cost pressures, and we expect most maple sellers to pass this increase through to their customers. In regards to the size of the maple crop itself, we don't have much visibility into the crop as of yet as it finishes in the end of April. We expect to be able to provide an update with our next quarter results. Additionally, we are undertaking automation projects at two of our maple plants. Both will come online during the second quarter and will help to streamline operations and reduce variable costs. We will continue to monitor our operations and pursue automation projects where we see opportunities for further improvement. Finally, I want to say thank you to our employees who have helped start the year off strongly. Their hard work and dedication are key to our success. We still have three quarters to go, but we're off to a great start to the year. Over to you, J.S.

Thank you, Mike, and good morning, everyone. In the first quarter of 2023, our adjusted EBITDA was $33.5 million, an increase of $7.4 million from the same quarter last year. As Mike mentioned, we saw a continuation of the trend experience in fiscal 2022, and our higher adjusted EBITDA in the quarter was again driven by the strong performance of our sugar segment, which was partially offset by softer results in our maple segment. We anticipate the sugar segment will continue to perform well in 2023 as demand remains strong for sugar-containing products. Overall, we expect to continue to deliver strong and stable financial results in 2023, despite inflationary pressures across both of our business segments, challenging market dynamics in our maple segment, and lower expected beet sugar volumes produced at our Tabor facility. Let's start my remarks with a review of the sugar segment. Adjusted EBITDA in the sugar segment was $30.7 million in the first quarter, up 36% from the same quarter last year. A combination of increased volumes largely from our industrial segment and improved average pricing drove higher adjusted growth margins. Sugar pricing increases were largely driven by continued strong demand in the Canadian domestic sugar market, in particular from industrial customers producing sugar-containing products. On average, the pricing increases more than offset the market-based inflationary pressures on costs seen over the last few months. Adjusted gross margin increased in the quarter by 6.3 million, or 17% from the same quarter last year. On a per-unit basis, Adjusted gross margin increased by $21 to $195 per metric tonne. Distribution costs increased slightly in the first quarter due to higher freight costs and additional logistical costs incurred to support our supply chain as we continue to move sugar produced in the West to Eastern Canada to meet customer demand. We anticipate this trend is likely to continue throughout 2023 and 2024. We hope to address permanently the challenges of moving sugar from the West to the East with our proposed expansion project. Administration and selling expenditures decreased by $2.5 million from the prior year quarter, mainly because of lower share-based compensation expenditures. Our outlook for the sugar segment remains positive as we move through fiscal 2023. Underlying North American demand remains strong across all our customer segments, and we expect our increased pricing to continue to support our financial results and largely mitigate the ongoing inflationary pressures. As Mike mentioned, sales volume in 2023 are now expected to reach 805,000 metric tons and increase of 10,000 metric tons over our fiscal 2022 volume. This is an improvement from our original forecast for 2023, driven mainly by the strength of our key industrial segments. Overall, we anticipate that the domestic market demand will increase by more than 3% in 2023 as compared to 2022. Conversely, and as expected, export volumes should decrease by approximately 15% as we continue to focus our sales effort on meeting the growing domestic demand and capturing the strong economics available in the Canadian market. I will now move to our maple segment. Similar to the conditions we saw in fiscal 2022, Our overall maple results were weaker than the same quarter last year, as inflationary pressures continue to negatively impact our business. As a result, adjusted EBITDA in the first quarter was down $0.6 million, as lower sales volume and higher costs more than offset the benefit of recent pricing increases. In the first quarter, the benefit of recently negotiated contracts and higher pricing began to flow to our results. leading to an increase in revenue of 1.3 million, despite volume decreasing by half a million pounds. However, inflationary pressures continue to affect our operating costs, particularly as it relates to packaging, energy, and labor. As a result, adjusted gross margin was 7.7% in the quarter, slightly lower than last year's figures of 8.2%. Moving forward, we continue to expect our maple segment to show improvement as we progress through fiscal 2023. Building on the increases in revenue and average selling price this quarter, we believe the unfavorable financial and operating pressures will begin to improve, likely in the second half of the year. As the year progresses, we expect maple to recover and to deliver slightly improved financial performance over 2022, driven by the receding inflationary pressures and price increases on recently negotiated agreements. Before closing, I would like to highlight a few other related financial items. Our adjusted net earnings for the fourth quarter were $15.3 million or $0.15 per share compared to $11 million or $0.11 per share for the comparable period last year. Free cash flow for the last 12 months was $58 million, an increase of $16.9 million compared to the same period last year. The increase was mainly due to higher adjusted EBITDA, excluding non-cash impact. Our capital expenditures for fiscal 2023 are expected to be similar to last year, with spending mainly related to improvement of our current facilities and development of improved business processes to increase efficiency. For 2023, We expect our capital expenditures to be approximately $25 million on various capital projects in sugar and $1 to $2 million in maple. This estimate does not include our Montreal capacity extension project. As Mike mentioned, this exciting growth opportunity is progressing as expected and we will provide future updates when it is appropriate. Today, we are also announcing that the Board of Directors approved a payment of a $0.09 per share dividend in relation to the results of the first quarter and consistent with the dividends paid in previous quarters for the last several years. Overall, the first quarter of 2023 has continued with the same trends we saw in 2022. Ongoing strength in our sugar business is continuing to drive a strong and stable financial performance. A firm need for sugar-containing products across North America is providing strong demand for our sugar products and providing us with resilience to manage the prevailing high inflationary pressure. We are committed to our maple segment, and we will continue to manage this business closely, including its current challenging market dynamics. As inflationary pressures begin to recede, hopefully in the second half of the year, we expect to see some improvement in our results. With that, I would like to turn the call back over to the operator for questions.

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you want to ask a question, please press star followed by the number one. If you want to withdraw your question, please press star two. Your question will be pulled in the order they are received. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from George Dumas from Scotiabank. Please go ahead, Mr. Dumas.

Yeah, thanks. Good morning, everybody. Congrats on the results. I just want to talk a little bit about the sustainability of the strong gross margins of sugar kind of as we go through the year. Any comment there? Maybe any one-timers that we should maybe be cognizant of this quarter?

Sorry, hi, it's JS here. Well, the margin was strong, I think, over the recent quarters as contracts are being negotiated. I think we've seen some improvement in pricing. I think we don't see this as changing anytime soon. As we move forward, though, there's always a bit of seasonality. The first quarter is usually the quarter where we have some of the product mixes favorizing a bit of a greater margin.

Okay, thanks. I know we're fully hedged, but I just want to talk about maybe any implications we're seeing at all to our business, maybe from the higher global sugar prices that you want to call out.

Yeah, I mean, our hedging program is fairly cumbersome. So we haven't, you know, for us, we don't believe it's going to have an impact on our financial results. Price have been difficult to predict at times. And, you know, if you look through a long, long period of time, they've been going up and down. We haven't seen any impact on customer demand right now. It's actually been the opposite. Demand for sugar in Canada is actually very healthy. and so we don't expect having any impact of significance because of the high price of sugar right now.

George, if I can add to that, as you know, most of our pricing is a flow-through agreement, and that's what makes Canada so attractive is the ability to use the number 11s. So the volatility in number 11s have virtually no impact to our EBITDA.

Okay, thanks for that. And just one last one on maple. Can you Can you quantify the price increases that you expect for this year?

Yeah, that'd be hard to put a number to that, George. The PPAC price is out, and some of those pricing changes will come over time as contracts come up for renewal, but the PPAC price is to all buyers, all bottlers of maple syrup, and so everybody's got the same price increase to deal with, and I don't think there's any choice but for it to be passed through to the customers. Okay, thanks, guys. Thanks, George.

Thank you. Your next question comes from Michael Vanay from TD Securities. Please go ahead.

Hi, thanks, and congrats on the solid results. I just want to continue on the maple, and then we'll go back to the sugar, but Can you just remind me the size of the PPAC increase and the timing then when it kicks in?

The PPAC increase was announced publicly. It's $0.20 a pound, and it takes place in April, I believe, April 1st.

Okay. So what's the, I guess, the process for you to get that passed on? And when does it start? And other grocers usually require... three months on a lot of their increases. But is it different in your case if it's a commodity-based pass-through?

That's a great observation, Michael. It is a commodity-based pass-through in most of the agreements. And it starts with the new crop. So most packers, and especially ourselves, as we said, we bought a lot of syrup off the field last year. So we're holding syrup from last year's crop. So we'll have that time to be able to transition to new costs of feedback as this contract come up for renewal with our customers.

Okay. So we shouldn't really, it sounds like you have some inventory to get you through a quarter or so before you can pass through the price. Is that a good summary?

Yeah, Michael, we held inventory for the contracts we have in place until they come up for renewal. And mostly it's never a perfect matchup of course, but, uh, That is our strategy. It always has been to get us through when we commit pricing to have a syrup on hand to manage those costs.

Okay. And when do most of those contracts come up for renewal?

They're just like any other business, staggered based on customer needs and timings to the market. But a lot of them will come up after the crop is finished, which most retailers like to wait until the crop's done and see what the size of the crop is because it influences availability of syrups. So through April to September, we'll manage most of those new agreements.

Okay. And then once you get through passing on the cost and catching up to some of these inflationary pressures, do you still see an environment where you can get back to double-digit gross margins maybe by the second half of the year?

Hey, Michael. It's JS here. I think... Double-digit gross margin is obviously our long-term goal. I think there's a lot of things right now, including inflation and pressure on costs, that will dictate that. I think that would be probably a bit of a stretch in the short term this year, but I think when we look more into a two- to five-year extended period, that's definitely where we believe this business is going to go.

Okay. And then just finally on maple, I can't recall if I saw a volume guidance for the year, but I think you were expecting volumes to increase for the year. Is that still the case? And you talk about protecting your global market share, but the volumes are down year over year. So are you losing share because you're being more strict on passing through your cost increases than maybe some of your peers, or is it just low, weak demand in general?

Yeah, Michael, we're seeing a weakening in demand because of food inflation globally. Maples tends to be seen as a luxury product. So we've mentioned that in previous discussions that we expected some erosion in global demand. We've seen that in some large markets, the United States and Europe, early in the year. And those realities were looked at when we put our business plans together for 2023, and they were envisioned and reflected in how we're running the business.

Okay, so back to the volume growth expectations, should we expect it to be down then for the year?

I think, yeah, it's a reasonable expectation when we looked at it. It's not because we're losing market share. It's really more because of global demand that is a bit softer than what we had last year for the reason Mike just explained. I think it's a fair assumption, Michael.

Okay, and then Onto the sugar side, it was a very impressive gross margin number. How did mix come into play there? Because exports can be both high and low margin. I just assume that the product, the volume reduction in export is likely due to the lower volume business being pulled back or whatever, but the liquid market and industrial were also stronger than consumer. So how do you, you know, how much was mix-up factor and where else, and is the rest simply just, you know, passing on cost inflation?

Well, I mean, I think there's a few things here and then you hit on a few. There are obviously inflation that were passed through and some of our costs. But I think the main driver of our gross margin is demand. Demand is strong. And it's been for, you know, I think for three or four quarters in a row. I think, you know, starting second quarter last year, we saw a significant increase in demand. And, you know, I think we've been navigating this in a very positive way. If you look at the economics of sugar, are still favoring Canada. And if you look at the sugar-containing products coming from our industrial sector, the demand has been very, very strong. And so it puts us in a position where demand is strong in the market, and obviously there's impact on pricing. So I think that's where I think that we would attribute the increase in gross margin.

Okay. And other than yourselves... Have you seen anybody else trying to add capacity, whether it's domestically or through imports?

Yeah, we've seen, you know, Canada, Michael, as you know, has always been a competitive market, and we're not new to this. We've been in the business for more than 135 years, and we have a great track record of service. We've seen the sugar industry, as you know, evolve with innovation, new competitors, changes in consumer preferences, expert opportunities. And we see new entrants, both large and small, enter the market over time. And as we've reported, and I spoke in my comments, we're addressing the continued growing demand for sugar with our capacity expansion in Montreal, and we feel confident in our ability to respond to the evolving market. Rogers is, you know, given the breadth and the 135 years in business, we're positioned to continue to successfully grow in the Canadian market, and we're committed to it.

Excellent. Thank you.

Thanks, Michael.

Thank you. Your next question comes from Andrew Leno from National Bank. Please go ahead.

Good morning. Thanks for taking my questions and congrats on the good quarter. I'll continue my first one. It's on the sugar. I'll continue with that. And in terms of the question, it's more kind of, how much visibility do you have into the special industrial market being strong in Canada and for how long, right? Like how do you see this demand evolving, but especially when it comes to the end consumer? I mean, there's reports out there that saying that demand will drop at the end consumer for sugar-contained products just because the prices are so high.

Yeah, Andre, thanks for your question. That's always an interesting question for us as we look at the business and And as you know, I've been with Atlantic for over 40 years, so I've seen some of these trends come and go. The difference is it's not consumption. The market we're servicing isn't all the sugar being consumed in Canada. Only about 50% of it is consumed in Canada. The rest of it goes into sugar-containing products to a market that is 10 times the size of ours in the United States. So it's very durable, and the sugar economics favor the production of goods in Canada for shipment to export markets. And that's why you're seeing other news releases that we've all seen publicly about manufacturers, global manufacturers, adding capacity and, in fact, building new plants in Canada to take advantage of these number 11 sugar values.

That's great. Thanks for the call, Mike. The other question is a bit more administrative, but on the admin costs, especially sugar, I mean, they were down quite a bit from last year on stock, on share comp. And you mentioned that you expect them stable for 2022. I just wanted to clarify, I mean, stable versus what we saw in Q1 or stable as an overall cost in 2023 versus 2022?

That's a good observation. It's JS here, Andrew. We expect the overall admin cost to be stable in comparison to last year with the exception of share-based compensation, which could be a bit volatile. in the sense that there's a cycle right now that's going to end at the end of this year, and the financial markets are difficult to predict, and this cycle is directly based, is directly calculated with the stock price. So as stock price moves with the market, then it could have an impact on share price compensation and hence on our administrative costs. But the other part of our administrative costs are expected to be stable.

Okay. Thank you. And another question, and I'm not sure if you want to touch at this point, but for the expansion that you plan in Montreal and in Toronto, I think, again, there are some reports in the media that you're looking for a loan from Quebec institutions for around $65 million in debt. Can you talk about that process? Number one, how is it going? And number two, if you can give us any color on on the rest of the cost for that expansion?

Good question. We are in the midst of doing the detailed engineering process on finalizing all the plans for the expansion, and that will drive the final amount of capital that we're going to need to invest. And we're looking at different options for financing this project with the main objective is not to overstretch our balance sheet. One of the items that has been discussed and has been discussed in the media is the discussion we've had with Investee Small Quebec for support in regards to the project. The discussion has been very positive. We're quite happy with the way the discussion and the reception we've been given. I think everybody acknowledged that Lantic, the Montreal plant, is significant. It's part of the tissue of the East Montreal manufacturing sector. And also people understand that sugar is at the center of the global food chain. So there's sugar in a lot of products. And for our customers to continue to grow, I think they need access to sugar. So this was all considered in some of those discussions. We will come out with a formal financing plan when we're ready to launch the project. But I think from those discussions that were in the media, they are true. We have been working with IQ in order to get support from the government for this important project.

Thank you very much. Congrats again on the quarter.

Thanks, Andrew. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Nevin Joachim from BMO. Please go ahead.

Good morning. Thanks, guys. You have Nevin sitting in for Steve today. On the sugar segment, I wanted to confirm, was there any lingering positive impact this quarter from the competitor challenges that you guys called out in Q4?

No, there was no hangover from that at all. This is a clean quarter, and it sets the results of our own business activities.

Okay, great. And then on the maple segment, it sounds like all of the improvement you're expecting this year is going to be margin-driven. Just wondering if you can quantify that. Are you guys expecting to get back to 2021 EBITDA margins this year and then longer-term margins When could we expect to see margins returning to the 8% to 9% range?

Well, I think a lot of it is based on global economics and especially pressure on costs. I think we are expecting those to recede in the second part of the year. So I think if you look at our third and fourth quarter, we would expect them to be more aligned with what we've seen in the previous year, in 2021. But overall, I think considering the pressure on cost and what Mike was talking about earlier about pressure on demand for a good like maple syrup, I think the outlook might take a couple more quarters to go back to the type of run rate on margin that we had in 2021. But in the longer term, as I mentioned earlier, from two to five years, this is definitely a goal that we expect is achievable.

Okay, great. That's it for me. Thanks. Thanks, Evan.

Thank you. Your next question comes from Michael Van Aelst from TD Securities. Please go ahead.

Thanks. On Tabor, what was the weather impact that decreased the sugar content?

Yeah, Michael, we had a hail event, if you recall, back in the fall or in the early spring in the early plantings. that defoliated about 5,000 acres of beets, and so they were slow to recover, and the sugar content in those particular beets was low. But overall, we're seeing lower sugar content in beets pretty much throughout North America this year. It's just a phenomenon of nature and growing, and we're managing it well. The plant's still running. It's too early to call the final number, but we've taken a different approach in processing the beets to make sure we get every grain of sugar out of them that we can. And the team in Tabor is doing an excellent job in dealing with that this year.

Okay, great. And then just in terms of the contract for beets going forward, I think you've got this last year, if I'm not mistaken, of planting, and then you've got to come up with another contract that has to be negotiated. Is that correct?

That's correct, Michael. We are in the process of negotiating with the Alberta growers right now.

Okay. Is there any concerns that they want to cut back? I mean, I've seen some farmers in the U.S. cutting back on the number of acres that they allocate to sugar beets. Are the economics different in Canada than in the U.S. for sugar beets?

That's a good question. I have seen George's article as well. It's definitely not been brought up in our discussion we've had with the growers in Alberta.

Yeah. All right. Thank you.

Thank you. Your next question comes from Fred Tremblay from the Giants. Please go ahead.

Thanks. Good morning. Most of my questions have been answered, but maybe digging a bit deeper on the cost inflation side in Maple and your outlook there, maybe just curious on which bucket in terms of cost you'd expect some inflation easing in Q3 and Q4? Are we talking mainly, you know, packaging or labor and sort of just what gives you confidence in that, you know, easing outlook for inflation? Is it based on, you know, signed agreements for packaging or just maybe any detail there will be helpful. Thanks.

It's a good question because everybody's looking at inflation, trying to figure out where it's going to ease up first. Two areas mainly, I think, when we look at this. I think packaging is one. Packaging costs for us in Maple are obviously significant and the pressure has been there. And there are two ways to attack this. There's a way through automation. I think the increase in costs have actually forced us to look at automating some of our process. We're in the midst of doing that in our Granby plant and also our digitally facility, and these things will kick in in the second half of the year. The other areas that, you know, for us is important is on distribution, carrier fees, and fuel charge and things like that. So we have seen a bit of a relief on gas price. And obviously, I'm not going to speculate here on where fuel price is going to move. But I think we've seen the peak that we've seen in last year is starting to go down. And we're expecting to be able to benefit from some of those in the second half of the year and going into 2024.

And Fred, I can add to that. We're seeing the global supply chain challenges ease up. So We're getting more availability, better timing on inbound goods like packaging and freight coming in, and more predictability and able to ship finished goods out with especially overseas shipments. As you know, most of our product is an export. And, you know, the one thing that hangs out there is, as I said earlier, the PPAC price increase of 20 cents a pound on new crop, that pricing, that cost, and that pricing will have to be passed on immediately to customers in all negotiations and And that's the challenge that the whole industry is facing right now, and I frankly don't believe there's any choice but to do that, and that's what we're working towards.

Thank you. Congrats on a good quarter.

Thanks, Fred. Thanks, Fred.

Thank you. There are no further questions at this time. You may proceed.

Okay. Thank you, everybody, and we'll talk to you next quarter. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.