Alliance One's (AOI) CEO Pieter Sikkel on Q4 2016 Results - Earnings Call Transcript

| About: Alliance One (AOI)

Alliance One International Inc. (NYSE:AOI)

Q4 2016 Earnings Conference Call

July 12, 2016 05:00 PM ET

Executives

Pieter Sikkel - CEO

Joel Thomas - CFO

Analysts

Hale Holden - Barclays

Stan Manoukian - Independent Credit Research

Dave Kuck - Wells Fargo

Operator

Good day, ladies and gentlemen. Welcome to today’s Alliance One Fiscal Year 2016 Year-End Results. At this time, all participants are in a listen-only mode. [Operator Instructions]. As a reminder, this call is being recorded.

At this time, I would like to turn the call over to Mr. Joel Thomas, Chief Financial Officer. Please go ahead, sir.

Joel Thomas

Thank you, Rachel. With me this afternoon is Pieter Sikkel, our President and Chief Executive Officer. Before we begin discussing our financial results I need to cover a few points. First you may hear statements during the course of this call that express the belief, expectation or intention as well as those that are not historical facts.

These statements are forward-looking and involve number of risks and uncertainties that may cause actual events and results to differ materially from these forward-looking statements. The risks and uncertainties are referenced in the Safe Harbor statement included in our press release and are described in more detail along with other risks and uncertainties in our filings with the SEC including in our most recent Form 10-K.

We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management’s expectations or any change in assumptions or circumstances on which these statements are based. Included in our call today may be discussion of non-U.S. GAAP financial measurements, including earnings before interest, taxes, depreciation and amortization commonly referred to as EBITDA and adjusted EBITDA that are not measures of results of operations under generally accepted accounting principles in the United States and should not be considered as an alternative to U.S. GAAP measurements.

A table including a reconciliation of and other disclosures regarding these non-U.S. GAAP financial measures is included with our earnings release issued today which is available on our website at www.aointl.com. Any replay, rebroadcast, transcript or other reproduction of this conference call, other than the replay as provided by Alliance One, has not been authorized and is strictly prohibited. Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents.

Now results for year 2016. For the fiscal year ended March 31, 2016, net income was $65.5 million or $7.38 per basic share compared to a net loss of $27.9 million or $3.16 per basic share for the prior year period, included in net income this year was $8.6 million of legal and professional costs loss Kenyan matter, $106.2 related to Zimbabwe reconsolidation, $17.2 million of loss related to Kenya green leaf sourcing, and $5.9 million of restructuring and asset impairment charges.

The net loss last year included $12.4 million of expense related to reserves for doubtful customer accounts, $9.1 million of restructuring and asset impairment charges and $14.9 million of loss related to Kenyan green leaf sourcing. Fiscal year 2016, exhibited the positive impact of the strategic and structural changes that we’ve implemented. It was the first year of reverse vertical integration initiatives in both Uganda and United States that improved full service sales of volume despite the continuation of global tobacco oversupply.

It was also a year in which we focused on strengthening our operations to improved efficiency, reduce costs and find ways to deliver value added services to our customers and it was a year in which we further adjusted our global footprint to align with future customer demand requirements. During the fourth quarter, we determined that uncertainty of our ability to maintain a controlling financial interest in our Zimbabwe subsidiary was eliminated and we reconsolidated it as of March 31, 2016, recording a gain of $106.2 million in other operating income.

In summation, it was a year of continuous improvement. We also faced a variety of challenges this year, a strong U.S. dollar reduced revenue, while oversupply leaf trading conditions continued. El Nino weather patterns affected crop quality and volumes particularly in the United States.

Additionally, in the course of restructuring and efficiency improvement program we discovered discrepancies in our accounts receivable and inventory in our Kenyan subsidiary. The impact of these changes versus last year resulted in total sales and other operating revenues decreasing by 7.9% to $1904.6 million.

Certain customers in North America changed their requirements during the current year from processing services to purchases of full serviced tobaccos. This shift in requirements resulted in increased North American volumes, tobacco revenue and tobacco costs which were partially offset by decreased processing volumes and processing costs related to changes in sales terms and weather-related crop sizes when compared with the previous year.

As a result, full service volumes were similar with a 1.1 improvement versus the prior year and were also affected by reduced requirement in some markets, as well as the timing of shipments in North America and Europe having additional impact. Tobacco revenues decreased 6.2% and average sales prices decreased 7.2% due to changes in product mix, the negative impact on pricing resulting from an oversupply of tobacco in the market and lower prices paid to tobacco suppliers in most regions due to a stronger U.S. dollar.

Gross profit decreased 7.3% to $225.8 million however, gross margin as a percentage of sales remained consistent with the prior year at 11.9%.

Changes in product mix, lower prices paid to tobacco suppliers across all regions partially offset by currency movements reduced tobacco costs overall as well as lowered average tobacco costs on a per kilo basis. SG&A decreased 9.8% to $123.5 million mainly driven by the non-recurrence of reserves for customer receivables that occurred last year. Decreased compensation costs, lower travel costs and the favorable impact of currency movements that were partially offset by increased legal and professional fees related to the Kenyan matter this year.

Restructuring and asset impairment charges were $5.9 million this year and mainly related to impairment of advances to tobacco suppliers and real property in Africa as well as changes in certain defined benefit plans as a result of our restructuring initiative that began last year. Charges of $9.1 million in the prior year are primarily employee separation charges. As a result of the cumulative impact of these various changes compared to last year, operating income increased to 107.4% to $201.8 million.

Interest expense increased 3.5% to $117.2 million from the prior year driven by higher amortization of debt costs and higher average borrowings. Cash taxes paid increased 25.8% to $20.4 million this year and income tax expense increased 47.0% to $32.2 million, while our effective tax rate this year was 35.1%. After excluding various items including the Zimbabwe subsidiary gain, legal and professional costs associated with the Kenyan matter, the impact of the curtailment of green leaf sourcing in Kenya, and including results from our Zimbabwe operation not included in consolidated results, adjusted EBTIDA was $189.6 million that was consistent with the prior year.

Our restructuring and efficiency improvement program that began implementation in March 2015 is on track to deliver over $35.0 million of anticipated recurring annualized savings with approximately 95.0% of targeted actions enacted and the remainder to be implemented over the next 18 months. Reduction of long term debt is a priority, but due to the challenges in Kenya we were unable to purchase any of our senior secured secondary lien notes during fiscal year 2016. There remain $720 million of face value outstanding and we plan to get back to reducing long term debt during fiscal year 2017.

Our liquidity at fiscal yearend remained in line with our internal expectations with available credit lines and cash of $626.3 million, comprised of $199.7 million in cash and $426.6 million of credit lines that excluded $13.1 million exclusively for letters of credit. Our internal forecasts anticipate improved sales and adjusted EBITDA for fiscal year 2017 when compared to 2016. Consistent with trends over the last several years, we are forecasting increased sales and adjusted EBITDA in the second half of fiscal year 2017 versus the first half of the year. Also during fiscal year 2017 we are targeting approximately $15 million of maintenance capital expenditures and an additional $7 million to $8 million to rebuild the Zimbabwe warehouse damaged by fire and covered by insurance.

Looking ahead, global supply and demand appears to be moving towards equilibrium with tightening in various origins and qualities. The ongoing El Nino will also affect crop sizes and global crop production will likely decrease further next year. Further into the future, we anticipate some manufacturers' possible vertical integration strategies will continue to reverse as they seek to gain additional efficiency benefits and further reduce costs while continuing to leverage compliant suppliers' capabilities. We are well positioned to meet customers evolving requirements and step further up the supply chain, responsible crop production is a requirement in today's business environment and our sustainability programs are key components of our plan to cost effectively secure leaf supply.

We have surpassed our 2020 targets for reducing greenhouse gas emissions, processing fuel usage, land fill waste and we have introduced agricultural labor practice programs with thousands of tobacco growers worldwide. Our global focus on enhancing both labor and good agricultural practices is essential to our customers, to our Company, and the local communities that we operate in.

Our worldwide team is committed to enhance the shareholder value, it is essential to recognize that our employees’ ability to adapt to change, perseverance in an evolving industry and focus on continuous improvement are positioning us for further success. Through execution of our well measured strategy and a continued commitment to proactively addressing opportunities and customer requirements, we are prepared to meet the challenges of our dynamic industry and strengthen our position as preferred supplier to our customers.

Rachael, we’d like to open up the call to questions at this time.

Question-and-Answer Session

Operator

Thank you [Operator Instructions]. We’ll take our first question from Kevin [indiscernible] with Citi.

Unidentified Analyst

My first is on the outlook for ’17, you think -- you had mentioned that you expect higher sales and EBITDA. Do you expect higher volumes in 2017, or fiscal ’17, I should say?

Pieter Sikkel

We have to see about the volume for 2017. We have seen a reduced crop size in Brazil, but at the same time we’re seeing increasing crop sizes in United States and various other markets where we have opportunities to make up the potential shortfall from the Brazilian market. So, as we progress through the year, and I think because of our global footprint, we do have opportunities to potentially increase our volumes but it's a little bit early to say when those will go for the full year.

Unidentified Analyst

Okay, so sounds like the guidance is more around better pricing because of moving towards more equilibrium, at least at this point?

Pieter Sikkel

Yes, we do expect some pricing improvements on the tobacco on an average basis around the globe.

Unidentified Analyst

And how much of the vertical integration that you know about already, obviously there is more to come, is already in the ’16 numbers and how much more could we expect in ’17 and beyond?

Pieter Sikkel

It’s hard to give a percentage, certainly it rolled over into the first and second quarter of fiscal ’17, but the exact percentage that’s in ’16 versus ’17, I don’t have in front of me, right now.

Unidentified Analyst

On the free cash flow we were a little bit surprised with where you guys ended. Do you think that’s just timing, is there something with respect to year-end that was unusual or that caught you off guard in any way?

Pieter Sikkel

We had a lot of -- the back end weighted nature of the year and the timing of sales resulted in a lot of receivables right at year-end. And so those receivables are being converted to cash one by sound [ph] receivables into our various securitization programs, but also through the collection of cash and so, when you look at that increase year-over-year in receivables of about $119 million that is a big driver of cash just on the other side of the year-end.

Unidentified Analyst

One thing that I wanted to clarify was on the Zimbabwean debt that you’re adjusting your debt balance for, I think, its $84 million. Can you maybe walk us through why we shouldn’t be considering that as part of the capital structure?

Pieter Sikkel

It's a complex structure, is the first point that I would put out there and we’re looking at a couple of different structures that would help to alleviate this problem going forward. And so, upon reconsolidation under U.S. GAAP it puts us in a position where certain components of how we fund the Zimbabwe structure essentially get double counted. And so the $84 million that you’re referring to is picked up in the balance sheet upon -- or I should say based on the way the structure is set up, it gets picked up in an initial funding either as a reduction in cash or an increase in debt at a subsidiary right up by the top of the structure.

And then as we work our way down that debt is also picked up at the Zimbabwe level. And so there is a double counting basically of about $84 million. And again it's an anomaly related U.S. GAAP and there are some structures that will likely allow us to not have that issue in the future, and so we’re working on that.

Unidentified Analyst

So it's a matched on the assets side?

Pieter Sikkel

It is, it is, so if you -- yes, that's exactly right.

Unidentified Analyst

And, I'll let others ask questions, but if I could just get one more in on your thoughts around the 35 million cost saves [ph], how much will still flow through in next year and what is the -- and how much cash spend do we need to -- do you expect will still be in '17?

Pieter Sikkel

Well, the cash spend associated with achieving 35 million is largely already behind this. There will be some in the future, but it's not a big number. And so, when we look at next year we had late getting layered in through the year and if you recall we talked about the fact that as we were -- in June and September you really were seeing the beginnings of that layering effect and by the time we got to the fourth quarter of fiscal '16 you were really beginning to see a full impact.

There were some other items, they got ticked up in SG&A related to the Kenya matter that didn't allow you the fuller sheet, everything that we were able to achieve in SG&A and then a component in cost of goods sold. So as we're going through this year now you should be seeing about 95% of what we believe we've achieved. And again there should be some nice improvements in SG&A again as we move the year as you start to see that 95% really come through.

Unidentified Analyst

So, the year-over-year improvement in EBITDA that you referenced, I understand the sequencing of the year, but in terms of year-over-year improvement what do you -- should we expect that to be more balanced throughout the year or will that be weighted towards one after the year more than that?

Pieter Sikkel

It'll definitely weigh towards the back end of the year because as the sales come through, so will the profitability. So.

Operator

Our next question comes from Karru Martinson [ph].

Unidentified Analyst

When you guys look at the cost savings, just to drill down a little bit more on that, the 95% of them being -- actions being taken I mean is that to imply that we should look at kind of 95% of those cost savings being -- flowing through the numbers or kind of $33 million benefit to 2016 or how should we think about that?

Pieter Sikkel

No, no. Again as I just mentioned a minute ago they were getting layered in through the year, okay. So, as we look at the first quarter that will -- really the fourth quarter and into the first quarter, you have about 95% of them in place. So, you'll see SG&A come in further this year by the amount of the cost saves that will be flowing through SG&A, that you'll now see a full year of, as well as the impact related to cost of goods sold which is significantly smaller, but also coming to cost of goods sold.

Unidentified Analyst

Since they’re approaching from a different angle, how much of the 35 million target would you feel that was achieved in flow through in your 2016 results?

Pieter Sikkel

So, the way to kind of think about it is, we got about two thirds of the -- just over 35 million, that is SG&A related and that occurred [ph] that is cost of goods sold related and we were layering it in as we got into the back half of the year, it was really kind of starting to come on in the end of September and then the quarter into December, quarter into March that's when we really had the big chunks flowing through.

Unidentified Analyst

And when you look at the opportunities on the reverse integration, you got some of hiccup there, I mean we certainly know that’s been tropical [ph] in the industry, how much is that is still to come when you guys talk about -- talk to your customers, how far does that trend kind of have to run?

Joel Thomas

Well we strongly believe there're continuing opportunities and I think you've seen announcements from ourselves and obviously our competitors have various opportunities, those have been taken up in the last year, but it doesn't end there. And whether we're looking at the reversal of leaf growing and processing operations or our continued growth into various value added products or even with the joint venture that we're part of in and E-Liquid and E-Liquid production. In all of those there're continued opportunities for a reversal of manufacturers self-production, so we're constantly in discussions of those opportunities all over the globe.

Unidentified Analyst

And you guys now are -- you reviewed all of your subsidiaries, obviously Kenya was an isolated incident, I mean how do you feel about the control that you have in place today in terms of all of your units and how they report up?

Pieter Sikkel

We have taken a number of steps to further strengthen our control environment, in particular looking at our African operation and also structuring that up into our European operations and really across the entire platform best practices and we feel as though we have a very good control environment and we're going to take additional steps throughout the year to strengthen it further. We operate in some places that are more prone to challenges and so you have to be very vigilant with regards to your approach, to make that you've got the strongest controlled environment that you can have, so we're constantly looking at it, its dynamic and are really working to assure that we don't have problems like we've had here recently in the future.

Unidentified Analyst

Okay and just lastly for me, and you bond buyback authorization is kind of $50 million carve out in the revolver, I think that's on a manual basis, does any of that -- is that any of that allowed to rollover or would you look at 12 months period as just the straight 50 million and then kind of when do you feel like you'll be back at the market to exercise that?

Pieter Sikkel

Irrespective of what the documents we provide for, we've identified the range of about $30 million to $50 million a year and that's the range I think we feel comfortable with, we're more heavily weighted to the back half of our fiscal year when we think about where free cash flow is coming through and so we'll move carefully and profitably as we begin to further reduce our long-term debt as we get into this next year.

Operator

Our next question comes from Hale Holden with Barclays.

Hale Holden

Just two and half quick ones, on the commentary in your scrip and also in the K related the move in the U.S. to finish products from more processed tobacco, it's not totally clear to me how that kind of flows through to margins and of extra plant utilizations, so if you can give us any color on how we think about that going forward or what that means sort of some financial impact?

Pieter Sikkel

So what occurred was that we had a move with a customer where the business with them in North America had been primarily processing only business, where we would total process their tobacco. And this year we moved to a model that was focused on full service sales to them. And so full service sales will have a lower margin percentage, but bigger margin dollars associated with them because you have to sell the green tobacco in addition to the processing services that you provide. So that’s what we were describing in the K, the press release and also in our prepared remarks.

Hale Holden

Understood and then on the balance sheet, Joel, is the reason you've ended the fiscal year with the revolver drawn which isn't kind of seasonally typical, is that because of the accounts payables, so should we think about the revolver balance having to come down after year end?

Joel Thomas

Well, I think really there are focuses when you look at the revolver balance and what we've talked about before is since you really have to look at cash, you know it’s payable to banks and then also inside of long-term debt, the portion that's the revolver, because that's where the revolver resides on the balance sheet. And so when you look at the asset side of the balance sheet, we had cash up, we had our receivables up, we had our inventory up and other receivables up.

And so those who were financed with the combination of those payable to banks as well as the revolver, okay. And so part of that was that we have the Zimbabwe subsidiary being -- we consolidated this year, but we also had the timing of the receivables that were a result of the sales that occurred at the end of the year. And so those receivables are highly cash generative, it just didn't happen before the balance sheet period and so we're obviously seeing that now in the other side of the balance sheet period. And so I think it was probably more of a timing issue more so than anything. And those were the main asset accounts that impacted the increase in the debt [ph].

Hale Holden

Understood and then on the potential bond buyback, how do you [indiscernible] might be later this year, so sort of two questions associated with that, the first one is, of the 199 million odd cash how much is onshore and available to repurchase the bonds or could you use tax efficiently to do that? And the second part of it is you've obviously set out a year of you plan last year while you weren’t able to do it because the financials weren’t current, so there are any plan of sort of catch up from last year's miss or accelerate, blend the two year together?

Joel Thomas

So a very large portion of that cash is readily available with a much smaller portion that can't be dividend up and other things that can be done. So I would say that a very large portion that clashes is readily available. With that said as we are working through some of these challenges from this last year, we made I think a conscious decision to hold a little more cash as we were working through the very signs that we were working through, and there was a cautious decision there.

And so as we look at the debt repurchases. How much of that cash or cash that we have do we want to use to buyback debt. And generally speaking, what we’ve talk about is that the cash that is available to repurchase long-term debt is truly surplus cash from the operation, that’s kind of the way we think about it. And so cash that is on the balance sheet or larger receivable balances, there is a component of that, that is profit -- that is related to profit, that is available or soon to be or is surplus cash that can be used to pay down debt, the rest of it right, is working capital related and either has to be reinvested in the business or has to be used to repay working capital Alliance before we started the next season.

So it’s really the surplus cash within those numbers that’s available to buyback long-term debt. And so, we will step I think very carefully as we go to buyback debt and there may be some opportunities to buy some additional debt this year beyond maybe what we would have been inside of that $30 million to $50 million range. But I think, we kind of want to wait and see as to how the year kind of firms up and we may step in a little bit earlier this year in a small way and then kind of build as we see the results coming through the year.

Hale Holden

All right. Got it. Thank you very much for the time. I appreciate it and congrats on getting current [ph].

Operator

Our next question comes from Stan Manoukian with Independent Credit Research.

Stan Manoukian

First question, I was wondering if you can dissect the impact of non-recurring issues on your EBITDA. It’s a little bit unclear to me, the bridge between EBITDA and adjusted EBITDA for 2016. What is this negative $16.7 million in Kenya and then you add 16.8 million, can you explain this? And also you are adding back 8.6 million from professional costs and then on other hand you’re adjusting that the impact in SG&A from Kenya in another part of 10-K was actually 6.5 million or so. Can you elaborate on this please?

Joel Thomas

Yes. Well, maybe take the first part of that. Little over 6 million you’re referring to is related to the quarter. The 8 million that you’re referring to of legal and professional is for the full year, so that would be the difference there.

As it relates to the 16.7 million in the reconciliation of adjusted EBITDA that moves from GAAP net income down to adjusted EBITDA. That 16.6 million relates to our Kenya green leaf operation and we have exited that operation going forward. So one of the points that we’ve heard loud and clear from a number of investors is, what is the actual cash flow generation of your company if you exclude the green leaf operation that you’ve now exited?

And so that’s what we’ve done in that reconciliation table.

Stan Manoukian

So in another words, if you haven’t had Kenya in 2016. Your sort of cash flow generation, cash EBITDA would have been 8.6 million more, right?

Joel Thomas

Okay. Well related to Kenya green leaf purchases, the purchasing operation. That’s the portion of the Kenya business that we’ve exited. And if we had exited that at the beginning of the year, if it had not been there, we would have had 16.6 million of additional EBITDA.

Stan Manoukian

I see, okay. And then I’ve notice that both your largest competitor [and as to- your company, well you guys have been experiencing some increasing demand in working capital. So naturally, it occurs to me that this is -- it might be a structural issue versus -- rather than cyclical issue. And I was wondering if you can elaborate on this and tell me a little bit more, what your expectations are about your working capital usage and has it derived from some issues with your customers or what is it, is in an industry issue?

Pieter Sikkel

There are a couple of items for us. One if we look at our Ugandan operation, where we’re handling the green leaf sourcing for one of our customers there and then also the reversal of VI, not only in Uganda, but also in the U.S. That has increased working capital requirements related to both of those markets. In addition though this year, we had a timing issue related to receivables and our ability to monetize those and get the cash.

So if you look at the biggest drivers of the increase in working capital this year, cash up about $56 million receivables up a $119 million, other receivables up $42 million and then inventories up $51 million, so there was about $269 million right there and of that there is roughly about $84 that we've already discharged that was related to in our company arrangement and is included in that other receivable category.

And so, when you look at the increases in our debt for the year both the notes payable to banks and the revolver primarily, but just the increase of long term debt you got about $326 million and again you got about $84 million as we've already discussed that's a double count. So, you're up about $242 million notes payable and long term debt after adjusting for that double count item.

So, when you compare the working capital items better up and you compare the debt that is -- you can see the offsets directly. And so you got a little bit of it that's Zimbabwe related, you got a little bit of it that's a reversal of VI [ph] and Uganda and also in the U.S.

Stan Manoukian

Well, yes I understand that. But, my question is more related to the ratio, do you think that there receivables increase is a restructural sort of shift in the industry for both you and your competitor or it is --

Joel Thomas

No, the receivables are really timing more so than anything. And that's the biggest increase, so it's timing issue. Those became cash very quickly on the other side of the year end.

Stan Manoukian

And lastly, I was wondering if you can elaborate a little bit and tell us a little bit more about your volume deriving from China?

Pieter Sikkel

Volume deriving from China?

Stan Manoukian

Well, I mean demand, demand deriving from China and how does it compare with last year?

Pieter Sikkel

Total volumes for China, we have seen over the last several years' steady improvements in those volumes between ourselves and the joint venture China, Brazil tobaccos that we have in Brazil with China tobacco and so we've seen steady progress in those volumes and we have obviously continued plans together with the Chinese to potentially continue to grow those volumes.

At the end of the day off shore tobacco and grown outside of the Chinese domestic market is generally cheaper it's of better quality, it fits the type of cigarette the Chinese are manufacturing today and the Chinese consumers smoking and we continue to see and anticipate positive growth in that business.

Operator

Our final question comes from Bryan Hunt with Wells Fargo.

Dave Kuck

Hello, it's actually Dave Kuck on for Bryan. Most of ours have been asked already, but just one question. You specifically cited the U.S. dollar as a driver of the lower gross margin in Q4. Can you clarify how the strength in the dollar has been negative on gross margin, given that I believe you all are sourcing tobaccos in local currencies and as well as paying labor expenses in local currencies?

Joel Thomas

Yes, sure, sure, sure. David, the way to kind of think about that is that generally speaking when you see dollar strength and you can pick a number of different countries where you had weakness versus the Dollar. You are exactly right that the costs that we experienced in local currency both for buying tobacco and to pay our workers comes in by the amount of the depreciation, an offset to that though is the inflation and how fast the inflation erodes the depreciation of the currency, so that's one factor.

But the other issue is, is that our customer also sees the depreciation of that local currency and we all understand what the depreciation factor has been versus the inflation and so that can result -- while we see lower costs, it also can bring revenue in as well. And so, what you end up with many times is similar to improved gross profit margin percentage, the question is does the difference in the change in the costs versus the revenue provide a similar higher or lower dollar profitability. And so that's one of the drivers in the fourth quarter related to dollar profitability pressure.

Operator

There are no further questions at this time. Mr. Thomas I would like to turn the conference back to you for any additional remarks.

Joel Thomas

Thank you, Rachael and thank you for joining our call this afternoon. The call will remain available for playback for any interested persons through 8 PM on July 17. Our financial results on Form 10-K as well as other information can be accessed on our website www.aointl.com.

Additionally, I’m available by phone should anyone have further questions. Again, thank you for participating in our conference call this afternoon.

Operator

This conclude today’s conference. Thank you for your participation. You may now disconnect.

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