Aug 2, 2016
Executives
Jennifer Rice - Vice President, Investor Relations Boris Elisman - President and Chief Executive Officer Neal Fenwick - Executive Vice President and Chief Financial Officer
Analysts
Bill Chappell - SunTrust Brad Thomas - KeyBanc Capital Chris McGinnis - Sidoti and Company Kevin Steinke - Barrington Research Kevin Ziets - Citigroup Hale Holden - Barclays
Operator
Good day, ladies and gentlemen and welcome to the ACCO Brands Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Later, we will conduct a question and answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference is being recorded.
I would now like to turn the call over to Jennifer Rice, Vice President of Investor Relations. Ma’am you may begin.
Jennifer Rice
Good morning and welcome to our second quarter 2016 conference call. Speaking on the call today are Boris Elisman, President and Chief Executive Officer of ACCO Brands Corporation; and Neal Fenwick, Executive Vice President and Chief Financial Officer.
Slides that accompany this call have been posted to the Investor Relations section of accobrands.com. When speaking to quarter results, we also refer to adjusted results.
Adjusted results exclude transaction cost, restructuring, another one time and non-recurring charges and apply a normalized effective tax rate of 35%. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in this morning's press release.
Due to the inherent difficulty in forecasting and quantifying certain amounts we provide guidance only on a non-GAAP basis. For more information, see this morning’s press release.
Forward-looking statements made during the call are based on certain risks and uncertainties and our actual plans, actions and results could differ materially. Please refer to our press release and SEC Filings for an explanation of certain of these risk factors and assumptions.
Our forward-looking statements are made as of today's date and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session.
Now it is my pleasure to turn the call over to Boris Elisman.
Boris Elisman
Thank you Jennifer and good morning, everyone. I am pleased to report that we had a great second quarter.
We once again achieved organic sales growth despite a challenging industry environment as a result of solid execution of our business strategy that focuses on growing channels. Net sales increased 4% despite a negative currency translation impact of 2%.
For the first six months of 2016, sales are up 1% despite a 3% negative currency impact year-to-date. The first half results now in view, we are raising our 2016 full year profit and cash flow guidance which I will discuss in greater detail later.
As a reminder, on May 2, we completed the acquisition of the remaining interest in Pelikan Artline our former joint venture in Australia and New Zealand. We are currently in the process of integrating Pelikan Artline with our legacy ACCO Australia operations.
The new ACCO brands Australia is effectively twice the size in terms of sales and brings together leading brands and business, academic and consumer products. Consequently, our second quarter positive results were driven by the Pelikan Artline acquisitions as well as a strong back-to-school sell-in in North America.
Reported earnings per share were $0.57 compared to $0.25 in the prior year. Substantial increase was due to GAAP account in games associated with the Pelikan Artline acquisition.
Adjusted earnings per share were $0.25 versus $0.24 in the prior year quarter. The improvement was primarily driven by constant currency sales growth and improved gross margin.
We are especially pleased by the 5% sales growth at constant currency in our North American business. The result of broad school product sell-in to the mass and retail channels and also some of our office partners.
We are also happy to see good growth not just in note books, our traditional area of strength but also in school backpacks, portfolios and school locker accessories all areas that we entered fairly recently. Finally, we are seeing more of our customers feature our Five Star, AT-A-GLANCE, and Mead brands during back-to-school which demonstrates the strength and power of our brands.
This is our third year of improved back-to-school sell-in and we are working with our partners to ensure we have good sell-out during the BTS season. In our international segment, the results were mixed, while overall sales were up 5%, this was primarily due to the acquisition of Pelikan Artline.
On a comparable basis, sales decreased 8% due to volume declines resulting from the overall market softness and the non-repeat of pre-buys in some markets ahead of 2015 mid-year price increases. Sales growth in Mexico and Asia was offset by declines in Europe and Brazil.
The international macroeconomic environment remains challenging but we are pleased with how we are managing that business. Computer products grew top and bottom lines in the quarter with sales up 2% on a constant currency basis as we took market share and desktop accessories.
Our security and desktop accessories businesses continue to demonstrate growth in spite of a globally challenging personal computer marketplace. Operating income margin in computer products expanded by 220 basis points as we largely completed our exits of low-margin tablet accessories.
We are very pleased with the progress we made in that business to get back to growth and expand operating margins. Now that the first six months are behind us we are increasing our outlook for adjusted earnings per share and free cash flow in 2016.
We believe 2016 sales will increase low single digits and adjusted earnings per share will come in between $0.80 and $0.84. This includes eight months of contribution from Pelikan Artline.
Based on current spot rates, foreign currencies now expected to be close to neutral for the full year relative to adjusted earnings per share. Finally, we are raising our free cash flow expectations to approximately $140 million.
In summary, our strong second-quarter results were driven by sales growth and continued effective execution of our strategy. With the completion of the Pelikan Artline acquisition and strong back-to-school sell-in [ph], I am optimistic that profitable sales growth will continue despite the challenging macro and industry environments.
I will now ask Neal to provide additional details in our results. Neal?
Neal Fenwick
Thank you, Boris and good morning, everyone. Sales increased 4% to $410.1 million from $394.7 million in the prior year quarter.
The Pelikan Artline acquisition added 4% to sales while unfavorable foreign-exchange reduced sales by 2%. The underlying sales increase of 1% was primarily from our North American business.
Reported operating income decreased by $3.8 million due to restructuring and one-time charges of $5.7 million. Adjusted operating income increased to $51.1 million from $49.4 million in the prior year as a result of higher sales and improved gross margins.
Net income was up sharply to $61.9 million or $0.57 per share compared to a net income of $27.7 million or $0.25 per share in the prior year quarter. The large increase was substantially because of a $35 million gain from the revaluation to fair value of the company's previously held 50% equity investment in the Pelikan Artline joint venture.
Adjusted net income increased to $27.1 million $0.25 per share from $26.8 million or $0.24 per share in the prior year quarter. The improvement was primarily driven by sales growth and improved gross margin.
Turning to gross margin, reported gross margin and adjusted gross margin improved 80 basis points to 32.9%. The improvement was primarily driven by cost savings and productivity initiatives.
SG&A expenses increased 10% in the quarter and as a percent of sales increased 110 basis points to 19.4%. Excluding $1.1 million of one-time items adjusted SG&A increased 8% mainly due to the addition of Pelikan Artline.
As a percentage of sales, adjusted SG&A was 19.1% up 80 basis points versus a year ago. The increase was partly due to higher professional services fees and the non-repeat of a $2.3 million recovery of a disputed indirect tax in Brazil that had benefited the prior year quarter.
Turning to an overview of our segments for the quarter. In North America, sales increased 4% but on a constant currency basis grew 5% due to the strong back-to-school sell-in as Boris noted.
North America operating income increased 3% and margin decreased slightly. However, excluding $1.2 million of restructuring charges, North America adjusted operating margin improved 20 basis points to 18.9% primarily the result of sales growth, cost savings and productivity improvements.
In our international segment, net sales increased 5%. The Pelikan Artline acquisition added 17.4% or $16.8 million.
Foreign exchange reduced the rate of growth by 5%. On a comparable basis, sales were down 8%.
The underlying decline was primarily due to lower volume in part due to buy-forwards that occurred last year ahead of midyear price increases in certain markets that did not repeat this year. International operating income decreased due to $3.8 million of restructuring and one-time acquisition expenses.
Adjusted operating income increased 8% and adjusted margin increased 20 basis points primarily due to Pelikan Artline which added $2 million to adjusted operating income. This $2 million of operating income did not result in any additional net income in the quarter.
The removal of the below the line JV income which was previously accounted for using the equity method and increased interest expense as a result of the transaction offset the operating income from Pelikan Artline. Computer products net sales increased 1% and nearly 2% at constant currency.
The increase was due to increases in desktop accessory products. Computer products operating income increased $1 million to $3.2 million.
On an adjusted basis operating income increased $0.7 million and margin increased 220 basis points to 10.4%. The increase was due to the sales growth and improved mix as well as lower SG&A expenses.
Turning now to our cash flow and balance sheet. As expected, Q2 was a cash outflow quarter due to the buildup of working capital to support the North America back-to-school season.
Free cash flow was negative $54 million for the quarter and negative $6 million for the six months slightly favorable to last year-to-date despite the working capital investment required to support the strong growth in North America this year. As a result of our improved earnings guidance and anticipated higher EBITDA, we have increased our free cash flow target by $5 million and now expect approximately $140 million for the full year.
We continue to expect to use the free cash flow to reduce debt, repurchase shares or for acquisitions. Pelikan Artline will have a minimal impact on our cash flow this year due to the timing of the transaction, restructuring charges and the timing of its working capital cycle.
Page nine of our slide deck includes other assumptions for 2016 which have now been updated to reflect the Pelikan Artline acquisition. With that, I will conclude my remarks and move on to Q&A where Boris and I will be happy to take your questions.
Operator?
Operator
Thank you. [Operator Instructions] And our first question will come from Bill Chappell from SunTrust.
Your line is now open.
Bill Chappell
Good morning.
Boris Elisman
Good morning, Bill.
Bill Chappell
Few questions, I guess first kind of on and around Pelikan maybe some financial stuff. One, maybe can you give an idea of what free cash flow for the total business would be?
Had you bought Pelikan at January 1 on a pro forma basis? What kind of your expectation for this year would be?
Neal Fenwick
The free cash flow estimate, we talk about
Bill Chappell
You said it would be neutral this year, because of all those things.
Neal Fenwick
Yes, ex-synergies bill will be in the neighborhood of $15 million to $17 million.
Bill Chappell
Okay great. And then talking about synergies, I mean in this quarter it seems like Pelikan SG&A is a lot higher than the corporate average, is that a area of synergies or is that just kind of a normal business practice of it kind of in operating down there?
Neal Fenwick
It is an area of normal business practices because they invest a lot more in brands and marketing than a typical ACL [ph] entity does today certainly in Australia but but there are opportunities for synergies and as we mentioned when we talked about the Pelikan Artline acquisition we expect $8 million in annualized synergies and some of that come well with reducing SG&A.
Bill Chappell
Okay and then switching just to the computer products business just because it's fun. I realize this is the first time it had year-over-year growth in 16 quarters.
Is this a trend? Do you feel better that that business is now kind of to the right size and right probability where we can start growing again or is it too early to tell?
Boris Elisman
Well thank you for your nice comments and I certainly do hope it's a trend as I mentioned in my prepared remarks, I am very pleased with the turnaround that that business went over the last 18 to 24 months. It remains a difficult environment and we need to continue to execute really well and add more value to our products but I do think that the worst is behind us.
We’ve exited the commoditized tablet accessories business and commoditized parts of our business where we did not have much value. So I am hoping we will continue to execute well and drive growth and on the [technical difficulty] expect us to be in the double digits, yes.
Bill Chappell
Okay, great. And last one for me, just talking about Europe, you said it was down mid single digits in the quarter and certainly you have a pretty sizable position in the UK post Brexit.
Now, any thoughts, comments kind of expectations for that business over the coming and it certainly seems like North America as turned the corner and doing well but do you have any expectations for Europe?
Boris Elisman
Europe, as we said over the last couple of quarters has been fairly choppy. Specific to your question around Brexit, the immediate implication that we see is around currency and the weakening of the pound and that certainly will affect out translation but it is already baked into our guidance.
Beyond that, it's really too early to tell. And I think it will take a while to find out what the impact of Brexit is going to be.
Bill Chappell
Got it. Well, that’s all from me.
Congratulations on the quarter.
Boris Elisman
Thank you very much Bill, thank you.
Operator
Thank you and our next question comes from Brad Thomas at KeyBanc Capital. Your line is now open.
Brad Thomas
Hi good morning, Boris, Neal and Jennifer.
Boris Elisman
Good morning, Brad.
Brad Thomas
Tall congratulations on the momentum here.
Boris Elisman
Thank you.
Brad Thomas
Wanted to your know, you clearly off to a good start in terms of the sell-in and the placement that you're getting for back-to-school. Any initial or early data points that you're getting on how how that season is shaping up and how sell through could perform?
Boris Elisman
No Brad, it's really too early to tell. Back-to-school has really just started maybe a week or two ago and we are not going to get to the peak weeks until the second or third week of August.
So it’s too early to tell on the sellout. But we're really happy with how the sets look.
We did some store checks last week and think our retailer partners have done a great job showing our products and merchandise looks great and we are hopeful for a very good sellout season but we won't know until really September timeframe and obviously we will report on that at the end of our Q3.
Brad Thomas
And then just as we think about uses of cash and how you all are thinking about the capital structure. Could you just give us your latest thoughts given you know the strong performance in the stock and the positive outlook for cash flow and of course the potential to maybe do some restructuring of your debt you know in the quarters ahead?
Boris Elisman
The strategy really hasn't changed for us. We continue to use our free cash flow for debt reduction, evaluate the accretive acquisitions and we will look at opportunities for share repurchases as well.
As far as your question on bond refinancing, as you know bonds become callable next spring and as we get closer to that time, we will evaluate specific strategies that that can potentially address that.
Brad Thomas
Great and so with that potential to call the bonds next spring, you know is there any thought that maybe you hold off a bit on the share repurchase activity to give you more flexibility or you would have a balanced approach heading up to that amount?
Boris Elisman
Well yes, I think as mentioned before there are many factors that are involved in our decision whether to repurchase or not to repurchase shares. So it's hard to tell because those factors are fluid and we have, you know flexibility in our capital structure and will do what's in the best interest of the shareholder.
Brad Thomas
Great, thanks again Boris and congrats again.
Boris Elisman
Thank you, Brad.
Operator
Thank you. And our next question will come from Chris McGinnis at Sidoti and Company.
Your line is now open.
Chris McGinnis
Good morning and thanks for taking my questions and congrats on a nice quarter.
Boris Elisman
Good morning, Chris.
Chris McGinnis
I guess just quickly, can you maybe talk about kind of the environment since the FTC ruling on Staples and Office Depot and how that is impacting, maybe currently your thought throughout the year?
Boris Elisman
We haven’t seen much change in what happens. As we talked before we haven't baked any implications from the possibility of merger just given the timing of where it was coming in in the year.
So really did not affect our sales outlook in spite of what we see in the marketplace. The two companies continue to execute on their strategies.
We are working well with them. The consolidation impact that we saw with Office Depot-OfficeMax coming together over the last couple of years certainly a lot less now than it was for the last couple of years and we are working with them on a good back-to-school, so nothing extraordinary to report there.
Chris McGinnis
Great, and I am just thinking about the guidance and where we are right now in the strong back-to-school already. You know what kind of has happened I guess in North America itself I guess probably being the biggest risk to hit the numbers and you know how strong is the back-to-school marketed need to be for you?
Boris Elisman
Well we always want to have a great back-to-school, this is our third consecutive year of growing our back-to-school presence and it builds on the prior year. So if we have a great back-to-school this year, a good back-to-school this year it bodes well for next year's selling as well.
So we are working very, very hard with our channel partners to have a good back-to-school. There are lots of things that go into into guidance, the second half of the year becomes much more weighted towards international market.
There would be still out more uncertainty and have a lot less visibility to what's going to happen. It also lot more heavily weighted towards our paper-based calendars and and that’s a very peaky season, so we don’t know how that’s going to play out.
And finally, starting really September on it becomes more weighted towards office channels as opposed to consumer retail channel. So, we feel good about the overall number.
We raised our guidance but a lot of the year still to be delivered and we are going to be working very, very hard to ensure that we can meet or exceed our expectations.
Chris McGinnis
Grat, thanks again for taking my questions and congrats.
Boris Elisman
Thank you.
Operator
Thank you and our next question comes from Kevin Steinke at Barrington Research. Your line ins now open.
Kevin Steinke
Good morning, everyone.
Boris Elisman
Good morning, Kevin.
Kevin Steinke
So on the increased EPS guidance, was the key driver to – giving you confidence to increase their guidance that the margin side of things. I think your sales growth outlook remain the same.
So just kind of trying to get a sense of what gave you the confidence to increase the EPS guidance?
Boris Elisman
We feel better about FX being more neutral than it was in the prior quarter. We feel good about our execution on the productivity initiatives.
But we did not raise the sales guidance because as I mentioned on my previous answers there is just a lot of uncertainty still left in the year just associated with a international environment and the calendars in office channel. So we feel better about our ability to deliver on the earnings.
Single digital – low single-digit sales growth is nothing to sneeze at. So we're pleased with that as well.
But not necessarily [ph] to make it any stronger than that.
Kevin Steinke
No absolutely, yes, that makes a lot of sense. So you know talking about the gross margin, it was again quite strong so maybe just give us an update on the progress of your productivity initiatives and maybe where you see gross margin trending for the rest of the year?
Boris Elisman
Yes, we had a goal of about $30 million in productivity improvements this year. We are tracking to that goal and I have very high confidence that we will be able to execute that goal.
Our long-term margin – gross margin range expectation is 32% to 33%. I do believe that we will come in closer to the higher end of that range this year because primarily because of the productivity improvements that we are delivering in the business.
Kevin Steinke
Okay that's good to hear. In terms of price increases internationally given the changes in foreign-exchange recently where – what are your thoughts on price increases going forward internationally?
Boris Elisman
We did a lot over the last 18 months pretty much in every country as the dollar strengthened. For the last few months it is staying relatively flat with one exception which is the pound sterling.
So my expectation is that not much is going to happen outside of the UK this year and then as we get closer to the fall we will do a analysis of what we need to do for next year for January timeframe and we will make the appropriate decisions that time. But we've seen by and large we’ve seen the dollar versus foreign currencies stabilize and we are able to manage through productivity whatever other variations exist except for the pound sterling where we will have to take some action.
Kevin Steinke
Okay and in terms of the the synergies from Pelikan, you mentioned the $8 million again. Have you kind of determined a timeline or a timeframe of achieving those synergies?
Boris Elisman
Yes we are estimating about 18 months or so. So we are just beginning the integration process.
We will have very little this year that will be benefiting us. But we had to accelerate and then as we converge on a one IT system sometime in the middle of next year that will help further accelerate the delivery of synergies.
Kevin Steinke
Okay, thanks for taking my questions and congrats on the nice quarter.
Boris Elisman
Thank you very much Kevin.
Operator
Thank you and our next question comes from William Reuter of Bank of America. Your line is now open.
Unidentified Analyst
This is, I am actually Genini [ph] on Bill for today. Thanks for taking our questions.
Boris Elisman
Sure.
Unidentified Analyst
So you mentioned overall market softness affecting the international business. Can you just talk a little bit more about what regions you saw particular weakness in versus which markets performed particularly well?
Boris Elisman
We are seeing weakness in Brazil and that should be nothing new to anybody on the call. That macro weakness continues.
Although I’m pleased with how we’re executing the market still very, very soft there. We saw continued weakness in Europe and you know Europe has been from a macro perspective around zero growth rate for a long time, so it continues to be very, very choppy in Europe and our sales were weak there.
And then we saw little bit of a macro weakness in Australia as well, and that's driven by what's happening in China in the commodity markets. Japan did well and that’s more of a share gain for us in Japan, overall is not doing great.
But we’ve gained share. And Mexico is okay.
Mexico, where growth there is a little bit better than U.S. and we are benefiting from that.
Unidentified Analyst
Great and then lastly from us, you mentioned using free cash towards acquisitions. Can you just maybe talk a little bit about what sort of acquisitions you are looking at and if there is a target leverage that you would like to standard after any acquisitions?
Boris Elisman
Yes as I mentioned before acquisitions are a key part of our growth strategy. We evaluate three types of acquisitions consolidated acquisitions which are primary driven by synergies, emerging markets acquisitions and we are being a little bit more conservative there just given where emerging markets are at this point in time.
And then near adjacencies where we can leverage our core competencies but moving in little bit faster growing areas. So we look at all of those and we evaluate them on a case-by-case basis and the ones that make strategic sense for our shareholders and make financial sense for our shareholders are the ones that we are likely to pursue and that's kind of an ongoing broad statement.
As far as leverage is concerned as I talked before we want to get to a range between 2 and 2.5. We are on our way to reduce our leverage ratio this year.
If we do an acquisition it certainly may spike temporarily and get over three temporarily but in that fairly short-term we do expect to drive it below three and then over time get it to that to 2 to 2.5 times EBITDA range.
Unidentified Analyst
Allright, thanks so much.
Boris Elisman
Thank you.
Operator
Thank you, and our next question comes from Kevin Ziets at Citigroup. Your line is now open.
Kevin Ziets
Hi good morning, thanks for taking the questions.
Boris Elisman
Hi Kevin.
Kevin Ziets
First was on just in terms of how retailer are planning the season? We certainly heard a lot about tight inventory controls.
I don’t know if they can afford to do that with just a small window for back-to-school but if you could just talk about how they are managing the season sort of if you are selling was any later this year versus prior years and some of that?
Boris Elisman
No from a retail perspective, we haven’t seen that. As I mentioned we expanded ourselves, so actually we are very pleased with the amount of inventory that they brought in for the back-to-school season.
As we talked about before it's a very short season and if you don't have the inventory, it's almost too late to replenish it
Kevin Ziets
Right.
Boris Elisman
When you're in the peak of the season. So no, we have not seen them behavior.
Some of our online eTail partners are a little bit – operate little bit more on a just in time manner. Still they don’t bring in inventory as close or as far from the peak as the retailers do.
But that’s typical of how they do it, so it’s not anything usual.
Kevin Ziets
Okay that’s all for and then in terms of the space that you picked up or can you say whether there is a mix shift at all in that and then I am curious if you think retailers are in general devoting more space to office products or less back-to-school or are they, are you taking space from somebody else and if so if you cloud characterize to that might be?
Boris Elisman
Yes, any question about the mix, it's really too early to tell. We haven't seen the solid information so I really can’t comment on that.
We are very pleased with the expansion of our sets just in general in the presence of our brands and the retailer set and they wouldn't do that unless they had a good experience with us last year. So we are glad that it is working for them and certainly it's working for us.
As far as the space is concerned the amount of space allocated to back-to-school is staying roughly the same. It is a seasonal isle and they set that pretty much every year and that's where a lot of the inventory goes.
And then if I look at the regular set, over the last few years certainly the space that mass retailers have been dedicating to office products has expanded. So Walmart, Target they both carry a lot more types of products than they have five years ago, so.
Kevin Ziets
So on the seasonal space are you taking share from more private label or is it just other brands or?
Boris Elisman
I think it’s little bit of both. They are not expanding space.
Kevin Ziets
Right.
Boris Elisman
So the fact that have a better share there, we are taking share little bit of both from other brands as well as private label.
Kevin Ziets
Okay great and lastly, I don’t know if you’ve quantified this before but how big is e-commerce as a channel at this point?
Boris Elisman
We don’t have a precise number. Our biggest e-commerce customers 4% of our sales but a lot of smaller e-commerce partners buy through wholesalers and we don't have visibility to how big that whole pie is.
Kevin Ziets
Okay appreciate you taking the questions.
Boris Elisman
Thank you very much Kevin.
Kevin Ziets
Thanks.
Operator
Thank you, and our next question comes from Hale Holden at Barclays. Your line is now open.
Hale Holden
Thank you for taking the call. Just two quick ones.
By channel, you mentioned you know strong back-to-school sell-in in mass office retailing and etailing and I was wondering if one of those channels was outperforming the other or if the mix was kind of consistent across all three?
Boris Elisman
Just as a broad color statement, mass and etail are outperforming the office channels. I don’t have enough color between the two but that’s kind of where it’s going.
Hale Holden
Got it. And then separately when it’s probably two more quarters before we start to see the Brazil results kind of flat line and stop being a drag from a comparable leases, is that a way to think about it?
Boris Elisman
I don’t know.
Hale Holden
Allright.
Boris Elisman
I mean, it got to be turnaround there, I don’t know. I mean, I think we are doing as well as we can.
Year-to-date our business is still up in Brazil even though it was down in Q2 it’s up year-to-date. We do expect macro environment to be weaker in the second half of the year but you know our sales will depend on and profits will depend on how we execute, so it’s too uncertain to me to take a position.
Hale Holden
Okay, thank you very much, Boris. Appreciate it.
Boris Elisman
With a very strong Q4, with a back-to-school down there in southern hemisphere.
Neal Fenwick
Thank you, Hale.
Operator
Thank you and I am showing no further questions at this time. I would like to turn the call back over to Boris Elisman, President and Chief Executive Officer for closing remarks.
Boris Elisman
Thank you. In closing, I would like to thank you for being on the call this morning.
We are pleased that we could deliver a great second-quarter and look forward to reporting on the results of our back-to-school season in North America and our next call. Until then enjoy the rest of your summer.
Operator
Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect.
Everyone have a great day.