Canfor Pulp Products, Inc. (OTC:CFPUF) Q1 2016 Results Earnings Conference Call April 28, 2016 11:00 AM ET
Don Kayne - CEO
Alan Nicholl - CFO
Wayne Guthrie - SVP, Sales & Marketing
Peter Hart - VP, Operations
Anojja Shah - BMO
Sean Steuart - TD
Paul Quinn - RBC Capital Markets
Daryl Swetlishoff - Raymond James
Amir Patel - CIBC
Good morning, ladies and gentlemen. Welcome to the Canfor and Canfor Pulp First Quarter Analyst Call. A recording and transcript of the call will be available on the Canfor and Canfor Pulp websites.
During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of each company's website. Also, the companies would like to point out that the call will include forward-looking statements, so please refer to the press releases for the associated risks of such statements.
I would now like to turn the meeting over to Mr. Don Kayne, Canfor and Canfor Pulp's Chief Executive Officer. Please go ahead, Mr. Kayne.
Thank you, operator and good morning. And thank you for joining the Canfor and Canfor Pulp 2016 results conference call this morning. I'll make a few brief opening comments about the quarter before I turn things over to Alan Nicholl, our Chief Financial Officer for both Canfor Corporation and Canfor Pulp Products Incorporated. Alan will provide a more detailed overview of our performance in Q1 after which, we will take questions.
In addition to Alan, with me today are Brett Robinson, our President of Canfor Pulp; Peter Hart, our Vice President of Pulp Sales; Wayne Guthrie, our Senior Vice President of Sales and Marketing; and Stephen Mackie, our Senior Vice President of Operations.
Canfor Pulp had another strong quarter with solid operational performance. Markets for pulp were steady in the quarter and our higher-grade premium reinforcing pulp continues to see solid demand. Looking ahead, we see modest price improvements for the second quarter as the industry goes through their annual maintenance shutdowns.
Looking forward, we are cautious about the back half of the year with additional tonnage expected to enter the market in both softwood and hardwood pulp. However, we expect our solid operational performance and high-value PRP focus to continue to benefit us.
Turning to the lumber side of our business, in the first quarter we continued to see the benefits of our U.S. South acquisitions. Pricing was solid for our unique, high-value specialty products, and spreads for wider widths improved during the quarter, a trend we expect to continue in Q2 and Q3.
Our Canadian mills continued to perform well in quarter one with solid productivity gains, cost improvements, as well as increased recovery of higher value products. Additionally, the weaker Canadian dollar improved realizations also contributing to improved profitability in the quarter.
In early April, we completed our purchase of Wynndel Lumber in Southeastern BC. And as with our recent U.S. South purchases, Wynndel produces high-quality, specialty products.
Looking at markets briefly, in China we've seen continuing improvements in underlying demand, order files are increasing, pricing is moving higher, and inventories are decreasing. We are confident we will achieve our targets in China in 2016.
In the U.S., we continue to see solid demand. As mentioned previously, we expect to see the usual seasonal improvement in spreads for southern yellow pine wider widths in Q2 and Q3, a clear trend that has occurred in each of the last four years.
Inventories overall appear balanced, and we expect supply to grow slowly during the year in line with demand. We expect pricing to slowly improve throughout the year.
With that, I'll turn the call over to Alan Nicholl to provide an overview of our financial results.
Thanks, Don, and good morning, everyone. As usual, my comments this morning will focus principally on our financial performance for the first quarter of 2016 by reference to the previous quarter. Full details of our results are contained in the Canfor Pulp and Canfor news releases, both of which were issued yesterday morning.
As always, you'll find an overview slide presentation on both the Canfor and Canfor Pulp websites in the Investor Relations section under Webcast. The presentation highlights consolidated and segmented results, and I'll be referring to this presentation during my comments.
For the first quarter of 2016, Canfor reported shareholder net income of CAD26 million or CAD0.20, up from net income of CAD2 million or CAD0.01 reported for the fourth quarter of 2015, and down from net income of CAD29 million or CAD0.22 a share reported for the first quarter of 2015.
On slide 3 of our presentation, we highlight various non-operating items net of tax and non-controlling interests which affect the comparability of our results between the quarters.
In the first quarter of 2016, a foreign exchange gain on long-term debt had a positive impact of CAD7 million of CAD0.05 a share, which more than offset a negative market adjustment on derivative instruments of CAD2 million or of CAD 0.01 a share.
After taking account of these adjustments, the first quarter adjusted shareholder net income was CAD21 million or CAD0.16 a share, compared to similarly adjusted net income of CAD8 million or CAD0.06 for the previous quarter.
Results for the lumber segment are highlighted on slide 5 of our presentation. The lumber segment recorded operating income of CAD33 million, a CAD32 million increase from the CAD1 million reported for the previous quarter after taking account of the one-time adjustments in Q4.
The increase reflected a full quarter of earnings from Anthony Forest Products, our most recent acquisition in the U.S. South, as well as a modest improvement in lumber market conditions, and a solid improvement in productivity, particularly at our Western Canadian sawmills.
Unit sales realizations were slightly higher in Canada, reflecting a weaker Canadian dollar and slightly higher U.S. dollar prices. In the U.S., higher benchmark pricing and improving prices for wider dimensions increased realizations in that region as well.
Overall, unit manufacturing costs were in line with the previous quarter, reflecting the impact from the aforementioned productivity gains, which largely offset a modest increase in unit log costs in Western Canada.
Lumber shipments were flat compared to the fourth quarter, but were up 16% compared to the first quarter of 2015, reflecting our growth in the U.S. South during 2015, and to a lesser extent, productivity gains.
Canfor's pulp and paper segment comprises the results of Canfor Pulp Products, Inc. As you can see on slide 6, Canfor Pulp reported net income of CAD23 million or CAD0.34 a share, compared to net income of CAD30 million or CAD0.43 a share for the fourth quarter, and net income of CAD28 million or CAD0.40 per share for the first quarter of 2015.
As you'll see on slide 6, Canfor Pulp had no adjusting items in the first quarter. In the fourth quarter of 2015, adjusted net income was CAD29 million or CAD0.42 a share. And in the first quarter of 2015, adjusted net income was CAD35 million or CAD0.50 per share.
The lower income on an adjusted basis in the first quarter reflected principally foreign exchange losses on U.S. dollar working capital balances in contrast to gains in both of the comparative periods.
Canfor Pulp's operating results are summarized on slide 7. The solid performance in the current quarter reflected a relatively balanced softwood pulp market, as increased customer restocking absorbed additional supply during the quarter. Pulp sales realizations were slightly lower, reflecting lower transaction prices and a lower proportion of North American shipments, partially offset by the weaker Canadian dollar.
Total pulp shipments were 10% lower than the previous quarter, reflecting a return to more normalized sales levels following a drawdown of inventory in the previous quarter. Unit manufacturing costs were moderately lower, principally reflecting lower fiber and maintenance costs.
Results in the paper segment were up from the previous quarter by CAD2 million, largely reflecting the positive impact of the weaker Canadian dollar on paper sales realizations, as well as an increased proportion of higher priced prime product shipments in the current quarter.
Looking ahead to the second quarter, the scheduled major maintenance shop times at Intercon and Northwood will reduce production by around 38,000 tons, and will have a related impact on shipments and earnings in the second quarter.
Turning to capital spending, capital spending in the first quarter of 2016 totaled CAD47 million, of which CAD33 million was in the lumber business, and CAD13 million was for Canfor Pulp. 2016's capital spend is projected to be around CAD150 million for Canfor and CAD75 million for Canfor Pulp.
During the first quarter, Canfor Pulp repurchased approximately 413,000 of its common shares at an average price of CAD11.87 per share. There were no shares repurchased for Canfor, recognizing that the Company is prioritizing debt reduction in 2016 after the significant growth that we've undertaken in 2015.
For the first quarter, Canfor Pulp's Board of Directors approved a continuance of a quarterly dividend of CAD.0625 per share. And at the end of the first quarter, Canfor, excluding Canfor Pulp, had net debt of CAD485 million with available liquidity of CAD145 million. Canfor Pulp has a net debt of CAD27 million with available liquidity of CAD121 million.
Net debt to total capitalization excluding Canfor Pulp was 26%. For Canfor Pulp, it was 5%. And on a consolidated basis, 24%.
And with that, Don, I'll turn the call back over to you.
All right, thanks, Alan. And operator, we'll now turn the call over to questions.
Thank you. We will now take questions from financial analysts. [Operator Instructions] Your first question comes from Anojja Shah from BMO. Please go ahead.
Hi there. We were hoping to get an update on the U.S./Canadian lumber trade negotiations if possible.
For sure. It's Don. I'd be happy to do that, although it'll be pretty brief. But overall, I mean, from our understanding, the USTR in the United States and the Feds continue to talk, continue to try to figure out if there's a deal to be done here.
Of course, we've been supporting and we continue to support that. We're hopeful, of course, that we'll be able to do something. Of course, there's lots of challenges. Time's running out. We think that we're getting - we don't have a lot of time left here to try to get a deal. But we're certainly hopeful that that's what will occur.
But I guess on the same vein, we're also prepared for other outcomes if they were also to occur. So that's really all I can say at this point. Probably, hopefully we'll know more here over the next two to four weeks.
Right, okay. Thank you. And then, do you think Canadian producers would ever accept a quota-based approach?
Well, I can't speak for anybody else other than ourselves, but I mean, I think that in terms of Canfor's view on that, we would not - quota is a very challenging option for us for sure, and we would have a difficult time agreeing to anything to do with a quota.
Okay, thank you for that. And then if we could just get a quick update on the Chinese market. I'm not sure if I missed it - and your volumes into China?
Yes, for sure. Maybe I'll pass that on to Wayne to give you some comments on that. Wayne?
Yes, on the lumber side, it's steady. It kind of bottomed out in late 2015. And it's been steadily improving ever since. I think we're not going back to the heydays of 2013, but I think lumber shipments out of Canada into China for 2016 will be about on par with last year. It is - it's a little bit better than we expected. It's improved better than we expected. Inventory levels are in good shape in China.
And I think that the consumption of our lumber over there has changed a little bit from a pure construction play to a lot more consumption in manufacturing, in industrial packaging, and in furniture. So I think that evolution's continuing here. Our volume will actually be off a little bit, we think, by the end of 2016. But only because with a little bit better log, we're producing less low-grade, so that's going to impact our volume. But the market is steady there.
Peter, maybe on the pulp side, you got a few comments you can make around China as well?
Thank you, Don. Yes, right now we're seeing positive traction in China through the second quarter, particularly as the industry goes through its spring maintenance. And overall, China buys approximately 30% of the world's softwood. And that typically goes up every year. So we expect that to continue.
Great. Thank you very much. And if I could just ask one last one. Any impact from the recent strengthening of the Canadian dollar on your lumber and pulp businesses? Do you have some specifics around that?
Yes, well, I mean, I think that, I guess our view on that is that the dollar's going to do what the dollar is going to do, period. And we're really more focused on what we can control. And that's really around the controllable at our sawmills and our pulp mills, making sure that we're getting the max utilization out of everything, and the best recovery and productivity we can possibly get. And we're certainly seeing that, and that's what we're really heavily focused on. And of course, we like to see a lower dollar maybe. But at the end of the day, it's going to do what it's going to do.
Okay. Thank you very much.
Thank you. Your next question comes from Sean Steuart from TD. Please go ahead.
Thanks. Good morning, everyone. Couple questions. At the Canfor level, you weren't active on your buyback in Q1 despite a weaker average share price through the quarter. Wondering, Don, if you can comment on capital allocation priorities?
You've levered up the balance sheet a little bit to facilitate some of your recent growth. And I guess what I'm wondering is, is there a bias to preserving liquidity in advance of potential softwood lumber trade action? Does that factor into your short-term capital allocation decisions?
Yes, for sure. Maybe Alan you can talk first and then -
Yes, good morning, Sean. I made the point about our debt reduction focus, and I think you touched on it in your initial comments. Clearly, we've grown quite significantly in the last couple years. We're very, very pleased with our U.S. acquisitions. They're all running very well.
But as you've noted, our debt to cap has risen somewhat. And we've typically guided before to wanting more a trend 20% debt to capital or something. And we've always, I think, been on record as saying that's one of our top priorities. So what you're seeing there is really more of our focus on having a strong balance sheet. It's not being driven by what you indicated maybe you thought might have been the case in your latter comments there.
Got it. And second question is on log costs in BC. Your largest competitor is expecting 4 to 6 dollars per cubic meter inflation come July. Is that consistent with what you guys are expecting for your BC interior mills?
Yes, for sure, Sean. Maybe I'll just talk about that a bit because there's lots of areas around log costs. Maybe we should just talk briefly on it. First of all, we've guided before, and we're still consistent with that, 4% to 5% is what we've said the last few quarters. And so that's clearly still what we feel.
I think though - and there's a bit more to it - in addition to that, I think it would be safe to say from our operations standpoint, from our viewpoint, is that we're also - through that, we're seeing a better quality logs in some cases as well as we green-up from the post-beetle era. Not to say we still don't have that in some areas for sure. But definitely, the quality of the overall has improved along with some of those increases that we're forecasting
Which gives us an opportunity, and we're seeing it, in terms of improving our top-line growth. And that's the direct result of additional specialty products that we have been focused on for some time. But I think there's even more opportunity going forward here. And I think - so there's that.
The other part of it is, I mean, as you're aware, we've spent significant dollars in capital over the last several years. And we're seeing - we saw it this quarter, we saw some of it last quarter. But as we now operate at full production rates, we're certainly starting to see the productivity increases at all the mills that had capital to a positive degree, as well as a conversion cost as well. So we're seeing some of that which we think will further mitigate some of the price inflation that we will see on logs overall.
And I think the other part of it is, we also believe in British Columbia, just talking in British Columbia, that we've taken the tough medicine ourselves. We believe our fiber position now, as a result of the 8 or 10 mills that we've shut over the next 10 years - from a fiber standpoint, we believe that we're well-positioned there going forward. But on the same breath, there's still, we believe, in the Province, going to need to be probably another five or eight mills that are going to still have to make some of those tough decisions.
So from our standpoint, it's a long-winded answer, Sean. But just wanted to give you a little more color there around that whole log cost piece because it's something that we spent an awful lot of time and will continue to because it's pretty important. So hopefully that gives you a little bit broader explanation there.
No, that's great detail. Thanks very much, Don.
Thank you. Your next question comes from Paul Quinn from RBC Capital Markets. Please go ahead.
Yes, thanks very much. Good morning, guys. Just a question on North American lumber markets. Just where you characterize inventory levels at right now - it seems like we had a first rally a couple months ago, and now it looks like we've got a second rally in lumber prices - whether you think this is sustainable as well?
For sure. So maybe I'll pass that on to Wayne here. Wayne, you want to give Paul a --?
Sure. I think inventory levels are pretty lean here, Paul. I think most of our customers, and a lot of them are pretty sharp buyers, I think they thought there'd be a bit more of a pullback here in Q2, which is typical. But you're right. Things have started to rally a little bit quicker than we thought.
To us, it's very clear that business was a little bit better than they expected in Q1. If you look at the actual number of starts, it was much better than the seasonally adjusted headline. I think the guys got caught by surprise with a little bit better business in their back-end buying, not because they're speculating at these numbers, but because there's demand out there that's maybe a little bit better than they expected.
So we think inventory - I know for ourselves, our inventory's in very good shape. I don't remember it being in such good shape going into Q2. And I think our customers are quite - I mean, no one's talking about running away, but they're quite bullish and need more lumber today. So lumber prices will always be volatile, so I'm not sure about the word sustainable. But we do think prices will be a little higher in the second half than they were in the first half of this year.
Okay, great. Thanks, Wayne. And maybe, Don, you referenced the five to eight sawmills coming out of BC in the future. Just wondering if you see any of those mills having some tough financials given where lumber prices and the Canadian dollar is specifically now. Is there - do you see any movement in 2016, or is this going to be 2017 sort of wait to see what happens on the trade file?
Yes, I mean, good question. I think the trade file issue for sure, depending on the outcome there could certainly speed up any decisions around that without a doubt. I think that's probably the single biggest impact we'll see. And then of course, just overall pricing levels as we go through the balance of this year.
If it was to stay at relatively low levels, I think with some of the bidding behaviors that we're seeing out in the marketplace and some of the pricing for particularly the purchase wood that pretty much everybody in the Province has to get involved in, that could also have an impact.
But I mean, there's been several reports out in the last 12 to 18 months that have really articulated what I've said in our view around the number of mills at least that have to, at some point here, go away.
Okay. And then just back to the trade file, I mean, you guys sound hopeful, which is probably typically Canadian on getting a deal before the summer. But if that doesn't happen, can you walk us through what happens on potential litigation or action from the U.S. Coalition and what the timing of potential duties would be?
Yes, well, I mean, not to skate around that, Paul, it's hard to say exactly because what we're facing this time around is there's kind of a lot of uncertainty around that. Literally, the Department of Commerce can do different things. They're pretty flexible.
But from what we do know, it's a standstill ends, I think it's October 15th, Alan, or thereabouts anyway. And by the time that there's probably what we've heard - and whether that's true or not, hard to know until we're in that - but that it'll probably be three to four months after that before there's actually duties collected.
And that will be retroactive, no doubt, though back into mid October, but we probably won't actually see any collections done until some time in the first quarter of 2017.
And in terms of trying to comment on, I think what you're referring to is TVD versus and ADD and how all that works at this point. Hard to know yet. I mean, we're doing a lot of our own modeling for different scenarios, of course. But at the end of the day, I can't really comment much more on it than that.
Great. Thanks very much for the color. Best of luck.
Your next question comes from Daryl Swetlishoff from Raymond James. Please go ahead.
Thanks and good morning. Don, in your initial comments just on the Chinese market, you mentioned that you're hopeful that you'd achieve your targets for 2016. I was hoping you could share some of those. Are they volume, grade, end use, or a combination of those?
Yes, I think there's a few parts to that. But again, if it's - maybe Wayne, you've been doing a lot of work on that, so maybe give Daryl some comments there.
Yes, I think it's all of those, Daryl. As I mentioned, our volume on an absolute basis overall might be off a little bit because of our higher grade mix. And while we've got the push on in China to try to move up that chain a little bit. We had a really good first quarter on the high grades there. A little bit slower in the second quarter. But I think over the course of the year, we'll stay on track of achieving that higher grade focused into China.
Geographically with the Russian influence, you want to have a little bit of focus on the southern half of China because you're going to get away from your biggest competitor. And we're still trying to develop some interior cities.
Last think on China, we've tried hard to get some material volumes of yellow pine going there. Haven't really had too much success yet, but we think over the next year or two, we'll start to move material volumes out of that region as well.
What sort of mill net - or not mill net, but what sort of net profitability difference would there be to get the yellow pine versus the SPF just on transportation?
Well, we got to find - oh, I see what you mean. So if you look at the yellow pine price matrix, there's huge spread between some of the discounted lengths and some of the premium lengths because it's really a North America focus down there.
So what we're trying to do, Daryl, is take some of those items that are clearly over-supplied in the U.S. market that we think would offer good value for our Chinese customers. And by doing that, we think we can get rid of some of those discounts that we're having to take down in America. So it'll actually be positive, but that'll take some time to develop.
Okay, makes sense. Sticking with just lumber prices and the markets, and Don, again, you mentioned that the spread with wides narrowing in the second quarters as, I think you said, typically the case. What would normally be the drivers of that seasonal change between narrows and wider widths in the southern yellow pine?
Wayne, why don't you talk about that?
Yes, maybe if I could jump in there. So just to clarify, Daryl, we said that actually Q2 and Q3 are positive for the spreads in wides. And historically, if you go back and look at the last few years, that's been the case. Building season is part of it.
What we're seeing the bigger impact today though is that some of the weather that's impacted the west and central zone mills, they have not been able to get in and get the real big timber out. So there's been a lack of supply of wides.
Often, they're derailed over to the east side, and if you look at the east side, wide prices come up substantially here. And that's because there's just a little bit of a lack of supply right now. Now we're going into the building season, so we'll get a little run on demand as well.
So I don't think 2 by 10 will set any records here, but I think we'll go back to the positive spreads for Q2 and Q3. 2 by 12 is really, really strong, and that's because it's very thinly produced. There's very few producers around that can make material volume, and we're lucky to be one of them. So we're enjoying that 2 by 12 really, and we expect that to continue for a while.
That's very helpful. Thanks, guys.
Thank you. Your next question comes from Amir Patel from CIBC. Please go ahead.
Hi, good morning. Wayne, just following up on Daryl's question there. On the 2 by 12, what proportion of your southern yellow pine volumes is that?
We don't actually release the actual number there, but I can tell you it's a very small number on the east side, which is typical of east side mills. But it's a substantial part of our mix the further west you go. So sorry, we don't release the actual number, but I can tell you it's a big part of what we do on the west side.
Fair enough. And just in terms of production growth for the year in the south, what are your expectations for volumes?
Yes, on an annual basis and maybe where that trends in 2017?
I think in terms of capacity, we're running probably 90% of rated capacity. The number we typically put in our annual report's something close to that. Clearly, a margin focus takes precedence over just pure volume. But we are working on a few upgrades as well, and we expect to get some more volume out of a couple of our mills here before the end of the year and into next year. But roughly 90% of what you see as rated capacity.
Thanks, Alan. And then just, Don, a question on the glulam business. It seems like there's now some assets up for sale with, I guess, Rosboro. Is that a market which you'd be interested in growing in more? Or is it still - I mean, I guess you just got into it a few months ago, so --?
Yes, I think it's too early to tell. I think we're certainly pleased with it, for sure as for what we've seen so far. I was down there myself a couple of weeks ago seeing both the plants in Georgia and the one in Arkansas. And definitely a unique business.
And I think what's encouraging for us is if you look at the increased vertical integration that we've started to see, all the raw material that goes through those two plants, which is pretty significant, comes from our own sawmills. So it's a really opportunity to add value.
And they've got a great brand. The brand, that Power Beam that they manufacture, which you're probably pretty familiar with, has a pretty solid reputation around the United States, particularly on the east side. So far, first of all, we like what we got into there, and I think we'll have a better view of that probably in a year's time in terms of what we may want to do further.
Okay, thanks. That's helpful. And just following up on Sean's questions on the log prices. You talked about BC. What are your expectations in the U.S. South and Alberta?
In the U.S. South, we see real modest inflation in terms of log costs, if any. It'd be mostly probably flat. But maybe with the order you might have a little bit here and there. But for the most part, not much changed there at all. And in our case anyway, we've got significant available timber at every single operation that we have from South Carolina, North Carolina, and then all across the Deep South.
We really, really like the fiber position that we're in down there. And it's big fiber for the most part. It gives us a lot of options, a lot of flexibility, which I think in these markets nowadays, that's something that you want to have if it's possible to have. And we really believe that's a strength that we've developed over the last 10 years. And going forward, we should be able to capitalize on that even further.
In terms of Alberta, there's lots of things in Alberta. We're a relatively small producer in Alberta, but an important one. And it's been an important area for us for sure. And there's some additional concerns there that we have that we didn't used to have, didn't have to consider so much.
And whether that's from the species at risk, whether it's the caribou, whether it's the CBFA, there's lots of different issues, I guess, that we're facing there that we didn't before. But still, it's still a very good place to do business, and we're real pleased with our operation at Grand Prairie there with the CAD45 million or so, Stephen, that we put there in capital. So hopefully that answers your question.
No, it does. And just a final question on the softwood lumber file. If duties were to hit, what - I'm assuming you would maybe flex some of your volume more into offshore markets - but what would you say in 2017 is the amount of volume that would still be crossing that border into the U.S.?
You're talking just from Canfor's point of view?
Yes, Canfor from your Canadian mills south.
Yes, just a really difficult question. What I will say - I mean, just hard to answer at this stage. But what I will tell you though, we think we're equipped for it and prepared for it and it's mostly from the standpoint is our growth in the south continuing? That's been aggressive. We've got lots of options there. Looking at even going forward what we might do there.
The whole focus on the fiber side and the higher value and the top-line concentration along with the controllable focus. And even in Canada really with the capital that we've spent to make sure that, notwithstanding any duties that we may be faced with, at least we know that we're as competitive as we can be and have a solid fiber base on a relative basis. And that's really all we - that's controllable. That's all that we can really focus on.
Clearly, the offshore business that Wayne and his guys and Stephen and his guys in the operations side in terms of lumber and Peter and Martin and Brett on the pulp side, I mean, clearly it's been a focus to keep diversifying. And I think it's a wise thing to do, and we'll continue to do it not only as a company, but as an industry.
Okay, great. Thanks, Don. That's all I had.
Thank you. There are no further questions. I will now turn the call back over to your presenters.
Thank you, operator. And thanks, everybody, for joining the call. And look forward to talking to you at the end of Q2.
Ladies and gentlemen, this concludes today's conference call. We thank you for participating, and we ask that you please disconnect your lines.
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