Welcome to KP Tissue's Second Quarter 2018 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded today, Thursday, August 9th, 2018. I will now turn the conference over to Mike Baldesarra, Director of Investor Relations. Please go ahead, sir.
Thank you, operator, and good morning, ladies and gentlemen. My name is Mike Baldesarra. I'm the Director of Investor Relations at KP Tissue Inc. The purpose of this conference call is to review the financial results for the second quarter of 2018 for Kruger Products LP, which I'll refer to as KP LP going forward. With me this morning is Dino Bianco, the Chief Executive Officer of KP Tissue and Kruger Products LP, and Mark Holbrook, the Chief Financial Officer of KP Tissue and Kruger Products LP. The following discussions and responses to questions contain forward-looking statements concerning the company's activities. Forward-looking statements involve known and unknown risks and uncertainties which could cause the company's actual results to differ materially from those in the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements.
The company does not undertake to update these forward-looking statements except if required by applicable laws. There's a page at the beginning of the written presentation which contains the usual legal cautions, including as to forward-looking information, which you should be aware of. I'd like to point out that all the figures expressed in today's call are in Canadian dollars unless otherwise stated. The press release reporting our Q2 2018 results was published this morning and will be accessible from our website at kptissueinc.com.
Please be aware that the MD&A will be posted on our website and will also be available on SEDAR. Finally, I would ask that during the call to refer to the presentation we've prepared to accompany these discussions, which is also available on the website. We'd also appreciate that during the Q&A period, for you to limit your questions to two. Thank you for your collaboration, ladies and gentlemen. I'll now turn the call over to Dino Bianco, our CEO.
Thank you, Mike. Good morning, everyone, and thank you for joining us on our conference call today. We are pleased to report strong sales and volume growth for the second quarter as we continue to maintain our market share leadership position in Canada. In response to the significant negative impact of record high pulp prices and freight costs on our results, we announced on July 26 a price increase in our Canadian consumer business that will take effect in mid-October. This increase is expected to provide a small benefit in our fourth quarter results and mainly impact 2019. It should be noted that since we announced the last selling price increase in July of 2017, pulp prices have increased by over 20% and freight costs by approximately 10%. Let's turn to slide five of the presentation for our second quarter highlights.
In Q2 2018, revenue increased by 7.8% to CAD 338.8 million. Sales volume was higher in the consumer segment in all geographic regions. Adjusted EBITDA totaled CAD 26.7 million, which was down by CAD 10.6 million, or 28.4% over last year. This decrease primarily reflects the continued run-up in pulp prices and increase in freight costs. As I just mentioned, we have taken a pricing action to mitigate these cost increases, which I'll talk a little bit more about shortly. Let's turn to slide six of the presentation, which presents the market pulp prices in U.S. and Canadian dollars. As indicated in previous quarters, the NBSK pulp market prices in Canadian dollars and BEK, or eucalyptus pulp prices, rose sharply since the end of 2016. Q2 pulp prices also rose sequentially compared to Q1 and year-over-year in both U.S. dollars and Canadian dollars.
Pulp prices in Canadian dollars are now at historical highs. As a result, overall higher pulp prices had an impact on our Q2 results and will continue to have an impact for the remainder of 2018. Based on industry sources, we expect pulp prices in US dollars to remain high for the next 12-18 months, and the volatile Canadian dollar will also create further fluctuations in pulp input costs during that time. Let's turn to slide seven, which summarizes the situation we experience with freight costs. As you can see, these costs are now near all-time highs, and we expect that they will remain high over the midterm. Given the current tight freight market, our primary focus has been on securing carrier capacity to service our customers while at the same time trying to mitigate our costs.
On slide eight, we present the steps we have taken and the measures we will implement to counteract these high input costs, which have risen 23% since the July 2017 price increase announcement. As indicated in my introduction, one of the major steps we have taken is the announcement of our July 26, 2018, price increase, which will take effect on October 14 and start to have a positive impact in Q4 of this year. Our other initiative consists of our value creation program that was announced last quarter. This smart cost reduction program is much larger in scope and size compared to our previous programs. We are essentially doubling the size of expected savings compared to prior years. In Q2, we made further progress towards warehousing cost reductions, portfolio mix improvement, operating efficiency improvement in our mills, optimizing the production network, and SG&A cost reductions.
At this time, we are approximately 80% annualized run rate of total cost savings expected from this program, and we expect to reach 100% by the end of the year. We believe that these initiatives will allow us to improve our profitability within the next 6-12 months, as this should largely offset the significant rise in costs. I will now turn the call over to Mark, who will review the quarterly financials in more detail.
Thank you, Dino, and good morning, ladies and gentlemen. I'll now ask you to refer to slide nine, which summarizes our financial performance for the second quarter. Our revenues reached CAD 338.8 million, a 7.8% increase compared to last year. However, Adjusted EBITDA decreased from CAD 37.3 million in Q2 last year to CAD 26.7 million in Q2 of 2018. From a margin perspective, Adjusted EBITDA decreased to 7.9% from 11.9% last year and sequentially 8.3% in Q1. As Dino mentioned, record high pulp prices and freight costs continue to have a significant impact on our results. Our net income was CAD 1.6 million in the second quarter compared to CAD 9.9 million last year.
The decrease was primarily due to lower Adjusted EBITDA, an increase in interest expense, a decrease in foreign exchange gain, and higher depreciation expense, and that was partially offset by a decrease in the change in the amortized cost of the partnership units liability and a decrease in tax expense. In the quarterly segmented view on slide 10, consumer revenue increased by 10% year-over-year to reach CAD 277.5 million, while away-from-home revenue slightly decreased by 0.5% to CAD 59.6 million. Adjusted EBITDA decreased by CAD 2.7 million to CAD 32.2 million for the consumer segment and decreased by CAD 5.4 million to CAD -3.1 million for the away-from-home segment.
Similarly, margins decreased year-over-year in the consumer segment from 13.8% to 11.6% and decreased in the away-from-home segment from 3.8% to -5.2%. On slide 11, we review Q2 2018 revenue over Q2 2017, which was up by CAD 24.4 million, or 7.8%. The increase was due to the increased sales volume and consumer selling price increase that was implemented in Canada in Q4 2017, partially offset by the unfavorable impact of foreign exchange fluctuations on U.S. sales.
Looking at this regionally, sales increased by CAD 14.6 million, or 7.8% in Canada, by CAD 1.4 million, or 1.3% in the U.S., and sales also increased in Mexico. On slide 12, we provide some insight into our Q2 2018 Adjusted EBITDA, which decreased by 28.4% to CAD 26.7 million. This decrease was due to a significant increase in pulp costs, also higher freight costs, partially offset by increased sales volume, the Q4 2017 Canadian selling price increase, the net favorable impact of foreign exchange, and also the benefits from cost reduction initiatives and capital projects. Q2 gross margin decreased from 15%-10%, primarily due to the increase in costs I just mentioned.
On slide 13, we compare Q2 2018 and Q1 2018 revenue, which increased by CAD 15.1 million, or 4.7%. The consumer segment increased by 3.7%, whereas away-from-home increased by 11.4%. Q2 revenue was higher than Q1 due to normal seasonality. By region, revenue increased in Canada by CAD 13.7 million, or 7.3%, and in the U.S. by CAD 0.8 million, or 0.7%. Revenue also increased slightly in Mexico. On slide 14, we compare Q2 2018 and Q1 2018 Adjusted EBITDA. Q2 Adjusted EBITDA decreased by CAD 0.3 million due to the impact of higher pulp costs and increased freight costs, partially offset by higher revenue. Gross margin in Q2 decreased from 11.2% to 10%, primarily due to the same cost factors.
I'll now ask you to refer to slide 15, which sets out our balance sheet. Our cash position, including bank indebtedness, was CAD 15.8 million as at the end of Q2 2018. Overall net debt at the end of Q2 stood at CAD 477 million, up CAD 17.8 million, rather, from CAD 459.2 million at the end of Q1 2018. As at the end of Q2, we had CAD 204.5 million in current portion of long-term debt, related primarily to our KTG subsidiary. We're in the final stages to refinance this portion of the debt and have now extended maturity date of September 17th.
During Q2, as mentioned in our last conference call, we changed our long-term debt structure through the issuance of CAD 125 million seven-year senior unsecured notes, which was used to repay the revolver, and we gained CAD 25 million in additional liquidity. Our net debt to latest 12-month Adjusted EBITDA ratio is now at 3.8 x, up compared to 3.3 x at the end of Q1.
Finally, as we can see on slide 16, CapEx decreased to CAD 13.6 million in Q2 2018 from CAD 25.5 million a year ago due to the Crabtree Paper Machine project in 2017. Our expected CapEx for fiscal 2018 remains at approximately CAD 50-CAD 60 million and will continue to focus on high-return cost reduction and growth projects, which generally have three- to four-year paybacks. Thank you for your attention. I'll now turn the call back over to Dino.
Thank you, Mark. Let's flip to slides 17 and 18, where we present two strategic initiatives relating to our TAD2 project and our away-from-home, or AFH, business. TAD2 remains part of our long-term strategy to increase premium paper capacity, and we are convinced that the demand and market conditions are there to support this significant investment and achieve a good return on investment. We are currently in the final stages for a second TAD paper machine, and we are bringing many outstanding items to closure. At this stage, we are very confident that the final decision will be made during 2018. On slide 18, we'll talk a little bit about the away-from-home segment. We are progressing with our multi-year reset strategy to create a more efficient and focused manufacturing footprint.
In the second quarter, higher pulp prices and freight costs combined with a competitive environment where the main drivers behind are weaker performance and AFH. This segment is less flexible in terms of pricing, as prices will generally increase when customer contracts are renewed. Furthermore, while our AFH activities certainly need to achieve a higher level of profitability on a standalone basis, we must also recognize that they absorb an important amount of fixed costs from a consolidated result perspective. And as you know, the P&Ls of both our business segments are presented on a fully allocated basis. On slides 19 and 20, we provide a summary of our competitive position. Despite a challenging Q2, our business remains healthy as we continue to be number one in the Canadian market. As you can see, we are the overall leading tissue company in Canada.
We are the market leader in bathroom tissue and facial tissue, while having a strong number 2 position in paper towels. We continue to plan to increase our market share through strong consumer and customer support and continue to build our great brands. We are also very proud to announce that for a sixth year in a row, we have been ranked as the number one CPG company in Canada by the Advantage survey, which is conducted among major Canadian retailers. This clearly reflects our passion for strong customer service. Furthermore, as you know, environmental sustainability is a core value for us, so we are particularly proud of the honors we received for our sustainability practices, including an environmental award from Corporate Knights.
Finally, I would like to conclude the call with slide 22 that summarizes our objectives and the steps we have taken and will pursue for fiscal 2018, and also to make sure that we are set up strong for 2019. Our main objectives are to build revenue, maintain market share leadership, secure our private label activities, and focus on opportunistic growth for our away-from-home segment. In order to mitigate continuous pulp and freight price increases, we have taken appropriate measures, which include a price increase in Canada on our consumer business and an escalated value creation program that is much larger in scope and size compared to prior programs. In terms of CapEx for fiscal 2018, we are returning to more normal levels after two years of increased investments.
Our product portfolio will continue to leverage our TAD products' market potential as we are in the final stages for a second TAD machine. In the AFH segment, we are resetting the business to create a more efficient manufacturing footprint. In the U.S., we will continue to build a premium private label business and pursue our White Cloud customer diversification strategy as we work on improving the positioning of that brand. Looking forward, KP LP continues to have strong long-term business fundamentals. However, Q3 2018 Adjusted EBITDA is expected to be lower than last year and also reflect normal seasonality for many of the headwinds that I've described previously. Thank you for your time and attention. At this point, Mark and I will be very pleased to answer any questions you may have.
Thank you. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of Hamir Patel from CIBC Capital Markets. Please go ahead.
Hey, good morning.
Good morning, Hamir.
You know, on the price hike front, you referenced, I think it was a 23% increase in input costs since you announced the upcoming hike. We've also seen some of the US branded producers come out with list price hikes for the first time since 2011. What's stopping you from announcing a further hike now? I realize you're still working on the upcoming October one, but I'm just curious, is there any sort of contract pricing protection that maybe limits the ability to raise prices in a pretty subsequent fashion?
Yeah, thank you, Hamir. Good question. Let me talk about that in our three different segments. So in Canada, we announced the consumer price increase that will be effective mid-October. And that price increase will essentially return us to normalized margins at today's cost inputs. It will not obviously cover any of the loss margin we've had over the previous months given high pulp, but at least set us up in a normalized margins range for the cost input that exists today. So that is a forward that'll be a forward benefit for us, a little bit in Q4, but a forward benefit for us as we start to get our margins back to normal levels on the Canadian consumer side. On the away-from-home business, we have and continue to do selective pricing.
It's a little more nebulous there because it's contract-based, and as those contracts expire, which they all expire at different times, and the amounts are generally lower, and it is less visible to the market what happens there. So that's why you're not seeing the benefit on AFH in the results so far. You'll see some of that start to come through as we go through the rest of 2018 and into 2019, but at lower levels than we have priced our Canadian consumer business.
On the U.S. consumer business side, we are a price follower in that market given we are a private label supplier, and there are many large players that manage and dictate pricing structures in the U.S. We have done sheet count reductions, which I have talked about before, as part of effective price increase by reducing sheet counts to match national branded player moves. Now, in light of what we are hearing, major players announcing price increase in the U.S., we will also relook at our pricing structure as it relates to our U.S. business.
Thanks for that, Dino. That's really helpful. Obviously, Canada has imposed some tariffs on U.S. tissue imports. Just curious, how much did that weigh on EBITDA in the quarter, and has that changed how you run some of your products in Canada?
Yeah, thanks, Hamir. That's a good question. First of all, let me state as a company, we are opposed to tariffs. They create an unnatural barrier. They create uncertainty in the marketplace. They delay and confuse consumers, customers. They have impacts on investment decisions. So generally speaking, as an organization, we are opposed to tariffs, even though in some cases we may win from that, in some cases we may lose from that. As it relates specifically to the tariffs that were announced on July 1st by the Canadian government in retaliation to U.S. tariffs on steel, as you know, tissue was an impacted category, and there was a 10% tariff applied to all finished good tissue imports into Canada. So that'll affect every manufacturer, branded or private label supplier, away-from-home supplier differently in the marketplace based on their North American or global footprint of manufacturing.
I'm happy to say for us, most of the product that we sell in Canada is made in Canada. Very, very high percentage. We have a small percentage of our business that comes from the U.S., and it has had a small, fairly insignificant impact on margin and cost. And I'm also happy to say that most of the product that we sell in the U.S. is generally sourced from the U.S. as well. So I think we are well balanced as it relates to any tariff strategy. The wild card obviously now is how do others react in the marketplace given their impacts may be different? And we are watching that very closely, not only on our consumer business, but also our Away-From-Home business.
Thanks for that, Dino. I mean, I guess I was under the impression in the past that maybe some of the you've done some product improvements on the towel side in Canada that maybe some of that was tied to the US operations, or have you maybe repositioned the sourcing to the Canadian mills for that product?
No, I think you're correct, but it's a very small part of our total portfolio, Hamir. Very small.
Okay, sure enough. That's a very small segment.
It's only one segment within our towel, by the way. It's our premium segment. It's only one small segment within our total towel business.
Right. Okay. That's all I have for now. I'll turn it over. Thanks, Dino.
Thank you.
If there are any additional questions at this time, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Sean Steuart from TD Securities. Please go ahead.
Thanks. Good morning.
Good morning, Sean.
A couple of questions with respect to TAD2. Can you talk about your thinking and how it's evolved around long-term pulp costs and how that might affect returns for that potential project over the long run?
That's a good question. Obviously, we are continuously monitoring and updating our model as we look at all the factors that go into TAD2, including where we put it, where the markets that we will serve will be. We expect longer-term pulp to normalize. So this is a long-term decision, as you know, and we are taking a long-term approach as it relates to pulp, a competitive environment assessment, Canadian exchange, all those factors. We're going to view that on a very long-term basis because this is a project that is a long-term project, a significant investment, as you know, and critical for our continued success as an organization.
And then just following on that, your cost of equities has been compromised, arguably, given the share price pressure. I presume that has some bearing on your thoughts for progressing with the project as well.
I would say that it has not had a significant impact on the way we are thinking about financing the project, to be honest with you. So I can't talk about the specifics as we are looking at a capital structure that will work and provide good return for shareholders and any partners that invest. But I would say that it is not a major determining factor of how we're looking at that project at this point.
Okay. Just one other question with respect to the value creation program. You indicated the expanded size, and you talked about this last quarter. Can you remind us what the dollar figure associated with that program is? If we're expecting 100% of it to be finished by year-end, is there a dollar figure you can tie to that?
Yeah, I can't remind you because we've never given you a number for that program. I guess what I would say is it's twice as much as we've normally done. And I would say a good bet is we've normally done amounts that are at least offsetting inflationary costs across our business. And the new one is more than that. At the same time, I would tell you we are not doing, and I mentioned this in the Q1 call, we are not doing anything that's going to create long-term damage to our business. I mean, there are other costs we could have taken out and taken drastic actions. We have chosen not to do that. Everything we are doing is in the realm of smart cost management and efficiency.
Understood. Okay, that's all I have for now. Thanks, guys.
Thank you.
Thanks, Sean.
Your next question comes from the line of Paul Quinn from RBC Capital Markets. Please go ahead.
Yeah, good morning.
Good morning. Just trying to dial on this value creation program. I'm confused as to why you can't put a number around that. And what do you consider? So maybe another way to approach it is, what do you consider normal inflation across your business on an annual basis?
Well, it's not just our business. Normal inflation can be anywhere from 1%-3%. So I think if you think about that, we operate in an environment that has those kind of wage increases, those kind of input cost increases, etc. So I would think that's a safe range.
Okay, so if I take the midpoint of that range at 2% on your sales, it's like CAD 25 million a year. So I'm therefore guessing that the value creation program is about CAD 50 million annually?
You could do that math.
Does that make sense to you?
Well, I would continue to say that we have doubled what we do in the prior years. In prior years, we generally try to offset inflation, and that inflation number ranges from 1%-3%. You can draw your own conclusions from that.
Okay. What's the hesitancy around putting a number on the value creation program? I'm just kind of confused as to, I mean, other people have you come out with a cost savings program, and it's not anything that's I mean, I'm not asking for a detailed breakdown between each of the initiatives. I'm just curious as to why you can't come up with a number.
I think I would say to you, the number and the initiatives do evolve and change. Some are offsetting costs. Some are offsetting opportunity costs. Some have some investment upfront and then deliver a benefit later on. So there's a lot of moving pieces in there. It'd be easy for me to say, "Hey, we're shutting a facility or doing X, and I can give you a number with that." This has got many moving pieces across many parts of our P&L, and that's why I don't want to tie us or box us into a specific corner.
Okay. Maybe just flipping over to maybe you could just remind me how you break down your business into Canadian consumer, U.S. consumer, away-from-home in terms of revenue percentages?
Oh, yeah. Well, and certainly that's reflected in our financial statements we're going to get published today. So if you'd like, I could give you some Q2 numbers for that. But when we talk on the call, we don't specifically break out our Canadian and U.S. revenue for each segment. So we show the consumer business in total for North America and similarly away-from-home for North America. So it's not a disclosed number that we would provide.
Right. So all I'm trying to get to, Mark, is, I mean, the way that you've described the price hikes is in those three buckets. So I'm just trying to understand the price hikes offset against what the size of those buckets are. What's a good way to bridge that?
Well, a rule of thumb, I think, for our business right now is that we have about one-third to 35% of our sales are in the US in total. That's about as far as I would go with that. We don't actually separate out our consumer business between the US and Canada for reporting purposes.
Okay. So then back to the price hike, it sounds like you guys are going to do a pretty decent job on the Canadian consumer side where that price increase is going to get you back to a normalized margin. Looks like on that 35% of sales in the U.S. consumer side, you're really having to follow the U.S. market and whatever happens there, which I suspect is going to lag cost pressures. And then it looks like the away-from-home, just because you have to wait for that contract renewal, is going to lag as well. Is that fair?
I think that's a fair way to look at it, Paul. The only thing I would say is our away-from-home has been doing some price increases. So we're seeing some of that in our P&Ls. Obviously, not enough to offset the significant pulp and freight costs. And some of that will start flowing through in the back half and in 2019. In the U.S. consumer business, we have not done any action on a price change. We've done sheet count reductions as we follow the market, but nothing on a price change. And we are currently evaluating that relative to our competitiveness.
Okay. The last question, sorry for the difficult nature. I'm just trying to understand. I mean, lots of pressure on you guys. But this Away-From-Home business, I mean, it's been negative here for a while. Are you guys sort of mid-pack in terms of asset quality and profitability, i.e., is that business kind of broken right now just because of the cost and pressure? And does the industry have to look at a different way of pricing to be able to offset some of these input costs?
Yeah. I mean, obviously, it's a great question. We are disappointed by those results as well. We've got a couple of things going on. We've got the AFH reset, which I'll talk a little bit more about. It's a multi-year program. And then in the middle of doing that, we've got significant cost pressures in the market with respect to fiber and freight, which unfortunately has disproportionately hit our away-from-home business. And then on top of that, when you're delivering small EBITDAs like this, any small number change will have a big impact on the bottom line. I do want to remind you, as you know, that this business does absorb a lot of overhead as a fully allocated basis. So what I would say to you is we are doing back to your question around assets.
I would say that our Away-From-Home assets are a mix, just like they would be in our consumer business. We have some older assets. We've just invested in some new assets. And we bought the Metro business a few years ago, and we had a mix of assets. And so we are continuing to invest in our Away-From-Home business, not just to consolidate and create a center of expertise as it relates to converting assets, but also trying to upgrade and continually upgrade our asset structure. So as it relates to that question, I would say our cost competitiveness is probably middle of the pack and getting better on that one. So I would not say we're advantaged or significantly disadvantaged in that area. We are approximately halfway through creating our centers of excellence as it relates to product efficiency and effectiveness as it relates to Away-From-Home.
We've implemented a phase one. We're in the process of implementing a phase two. And as you do that, you invest the money, but you don't necessarily get the return right away. There's a bit of a lag there. So you're seeing a little bit of that play its way through on away-from-home as well. I would say longer term, and this business has proven it, that this business can deliver a strong margin, particularly with some of the changes we're making. And if we can get our price cost margin back in line, we'll have a good fixed cost structure. We'll have a good operating network. And I think this can continue to be a very viable and strategic business for us.
Okay. Maybe just a bonus question just while I got you on here. Have we got a geographic location for TAD2? And has that decision as to where you put that been influenced by the tariffs?
We are currently looking at three sites, U.S. and Canada. They're all three active. We do have a site that's kind of emerging as a potential lead. And the answer on tariffs is no, it did not have an impact. Again, back to the earlier question, we're making a long-term decision here. That asset, regardless of where it goes, will be viewed as a North American asset within its geographic profitability distribution range, but it will be viewed as a North American asset. And we have not been influenced by tariffs in any way on that decision.
All right. That's all I have. Best of luck, guys.
Okay. Thank you, Paul.
Thanks, Paul.
Your next question comes from the line of Hamir Patel from CIBC Capital Markets. Please go ahead.
Hi. Just one follow-up from me. In terms of Q3, I know you gave the guidance of lower year-over-year. Just curious, are we expecting it to be lower quarter-over-quarter as well? Because it seems like the price hikes are going to be more of a Q4 story.
Hi, Hamir. Yeah. When we look at Q3, we usually have a good seasonality in Q3. So if you look at our pattern, our trend over the last three, four years, Q3 is typically our highest quarter. So sequentially, you can factor that in. But we still have the same headwinds in front of us in terms of fiber cost, freight, and so on. We don't see any change in that. So until we see the consumer selling price increase go through the market, and that's likely to have full impact in 2019, we're still going to face those headwinds.
The only thing I would add to that, Hamir, it's a bit of a wildcard, is whenever you announce pricing in any consumer category, you're going to have some increased customer activity prior to the price increase. So we don't know if that'll do anything on the volume front as it relates to exiting September quarter. So we'll keep an eye on that. It's hard to predict what will happen there, but that could have an impact on our Q3 as well.
Okay. Great. Thanks for that. That's all I have.
Thanks, Hamir.
Yep.
There are no further questions at this time. I turn the call back over to the presenters.
Well, thank you, everybody. Thank you for joining us on this conference call this morning. We look forward to speaking with you again in November following the release of our third quarter results. Have a great day. Thank you.
This concludes today's conference call. You may now disconnect.