WP Glimcher's (WPG) CEO Lou Conforti on Q2 2016 Results - Earnings Call Transcript

| About: Washington Prime (WPG)

WP Glimcher Inc. (NYSE:WPG)

Q2 2016 Earnings Conference Call

August 04, 2016 11:00 AM ET

Executives

Lisa Indest - SVP & CAO

Lou Conforti - CEO

Butch Knerr - COO

Mark Yale - CFO

Analysts

Andrew Rosivach - Goldman Sachs

Michael Bilerman - Citi

DJ Busch - Green Street Advisors

Floris van Dijkum - Boenning

Ki Bin Kim - Suntrust

Operator

Good day ladies and gentlemen, and welcome to the WPG 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 be given at that time. [Operator Instructions]. As a reminder this conference call is being recorded. I would like to introduce your host for today’s conference, Ms. Lisa Indest, Senior Vice President and Chief Accounting Officer. Ma’am, you may begin your presentation.

Lisa Indest

Good morning, and welcome to WPG’s second quarter 2016 earnings call. During today’s call we will make certain forward-looking statements as defined by the Federal Securities laws. These statements relate to expectations, beliefs, projections, plans, and other matters that are not historical, and are subject to the risks and uncertainties that might affect future events or results. For detailed descriptions of these please refer to our earnings release, and various SEC filings.

Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our press release, supplemental information packet, and SEC filings, which are available on the Investor Relations section of our website. Members of management with us today are Lou Conforti, CEO, Butch Knerr, COO, and Mark Yale, CFO.

Now, I would like to turn the call over to Lou.

Lou Conforti

Good morning everybody. After my update Butch and Mark will discuss operating and financial results which exceeded expectations. My objectives as CEO are straightforward, first lease every single square foot of space as possible, second, continue to improve the operating efficacy of the Company, in tandem these actions will result in increased cash flow to the bottom line. As it relates to strategic alternatives our premise is straightforward. Every viable option is under consideration. I am the antithesis of an entrenched CEO, and my sole purpose is to optimize shareholder value.

Increasing organic cash flow is the single most important task at the end. The onus of the burden rests upon every WPG employee to assume the role of leasing agent, place into perspective every 100 basis points of occupancy gain equates to $0.03 of FFO. After taking over the helm, it became apparent that we resembled what can best be described as an inverted pyramid, top heavy with reporting channel redundancies, the solution was clear, to streamline the organization. As reported two weeks ago we have reduced corporate overhead by 5 million on an annualized basis, and additional right-sizing measures will continue to be assessed and where appropriate implemented. These reductions have already improved the operating efficacy of the organization, by realizing our corporate infrastructure serves as support for our properties, not vice versa.

I’m in the process of visiting every single asset we own, I think I am at 18 and counting. The purpose of these visits is to arrive at an honest appraisal of the attributes which can be enhanced, and as importantly, identifying deficiencies and whether such shortcomings are correctable. I have got to admit I am really impress by the practicality and creativity of on-site management, as well as their frankness in addressing issues. They have reinforced the fact that retailing is hand-to-hand combat, best foot in the trenches, and not in a corporate suite. Under the leadership of Knerr, I would walk down any alley with this guy, and right-hand man Mastropietro and Ajdaharian, the rules of the road are now in place, and our troops are on the ground, now possess the latitude to participate in real-time decision making.

As it relates to financial prudence we continue to focus our efforts upon previously identified core and closed and open air retail venues. As a reminder, these account for 75% of our NOI. This fact has been given short-shrift, as has an AFFO payout ratio of 70%. I think of our portfolio akin to a normal distribution whereby the fat part of the bell curve, i.e. our core, will continue to garner the most attention. To date we continue to make progress on the elimination of unproductive assets, with disposition of four additional properties. We intend to accelerate these efforts over the near-term and use resulting proceeds for deleveraging, as well as select core reinvestment.

On a related note there is continued scrutiny regarding capital allocation for construction projects. Every single marginal unit of capital proposed should be subject to both absolute, as well as relative thresholds. Individual projects should compete for capital in the same fashion as WPG vies for your investment dollar. And of course a primary objective is to continue to improve our investment grade balance sheet. We remain committed to long term net debt to EBITDA ratio mandate of between 6 and 6.5 times.

It is crucial we diversify our local and national tenancy in order to capture a wider audience, expanding our dining, especially fast casual and entertainment options are a top priority and a recurring ask from local management. In addition professional services, such as health care, financial, et cetera, provides for interesting adaptive reuse opportunities. It is imperative as I visited our properties, it is imperative that we better respect the demographic constituency of our individual assets, and rest assured we will be proactive when it comes to introducing differentiated and impactful tenancy.

There also exists a symbiotic relationship between physical space and ecommerce, and I will be darned we are going to capture the nexus between the two, there is not a zero sum outcome. Plain and simple in this new world of Omni Channel, it is our intent to be the bricks which compliment the clicks. For instance, we are establishing a platform for those internet purveyors who want to beta test physical space, allowing for a treasure hunt experience similar to TJ Maxx, Marshalls, Ross. Another example that we are thinking about is Last Mile Delivery, by partnering with ecommerce distribution. We will continue to explore the utilization of innovative technology for operational infrastructure, as well as retail concepts.

In closing, I would like to clearly state that we are working our behinds off for you, with the unequivocal goal of increasing organic cash flow. This will be accomplished by grinding it out operationally, as well as smart capital allocation decisions. Thanks, and I will now turn it over to Butch.

Butch Knerr

Thank you Lou. We are pleased by our second quarter operating results, and have built on strong momentum established in the first quarter, comparable NOI increased 3% for our core portfolio, including 3.4% increase in our enclosed properties. While comp NOI growth for the community center portfolio was 1.5%, we are still forecasting growth for full year of approximately 4% for these assets. Core portfolio occupancy increased 50 basis points to 92.9% at the end of the second quarter, and sales per square foot at core enclosed properties increased 4.7% to $376 per square foot on a trailing 12-month basis.

Leasing demand remains strong. Year-to-date we have executed leases totaling over 1.4 million square feet, which is an increase over 30% compared to same period a year ago. In addition we have approximately 750,000 square feet of lease assigned but not opened at the end of the quarter. This represents $16.7 million in annual revenue. As Lou mentioned we are expanding our list of tenants to include more lifestyle options, such as restaurants, theatres, other entertainment uses, fitness centers, and specialty grocers. In fact in the past year these categories represented 140 new signings or openings, and over 650,000 square feet of lease-up within our portfolio. Restaurants were the largest contributor, with more than 120 new full service or quick service openings. At the same time, we are also focused on local and regional tenants that help to build loyalty and create a sense of community at our centers. Over the past 12 months we signed more than 160 new deals with these retailers, totaling over 367,000 square feet.

Most recently we signed two new deals with Artsy Abode, a great regional retailer with 14 stores. 11 years ago I helped them open the first location when I was at Simon, and I am excited about our continued focus on getting more of these types of local retailers into our centers. In addition to having the right mix of tenants, we are also aggressively driving traffic to centers through grass roots events. Our summer marketing campaigns have been outstanding, and a few events include, The Freedom Fest at Orange Park Mall, which drew over 8,000 people, The Summer Concert Series at Clay Terrace. The Farmers Market at Weberstown Mall, which has been ranked in Top 10 Farmers Markets on the west coast, and the Food Truck Wars at Seminole Town Center. These types of marketing efforts drive traffic to our centers, increase the frequency of visits, extend the length of stay for our guests, and more importantly, improve sales productivity.

Turning to our redevelopment projects, driven by increased scope, cost and leasing demand, we have approved additional investment of approximately $7 million at Jefferson Valley Mall. Even with these additional costs and due to the hard work of our leasing and development teams, we were able to increase the project yield by 100 basis points. Dick’s Sporting Goods, Victoria’s Secret, and Pink, and White Barn Candle, all remain on track to open before the end of the year, and we expect Ulta Cosmetics, Stone Rose Steakhouse, and 10 additional new tenants to open in the first half of 2017. At Lindale Mall, we were 100% leased on 21,000 square foot expansion, on schedule to open this year are Jared’s Jewelers, Carters, Kirkland’s, Oshkosh, and Panda Express. All of the development projects remain on schedule and on budget. We have several projects underway that will be completed in the second half of the year, and we are excited about the pipeline following those projects.

With that, I will turn the call over to Mark.

Mark Yale

Thanks Butch. Let’s now turn to balance sheet, where we continue to take steps to improve our capital structure and liquidity. During the second quarter we completed the transition of Chesapeake Square and Merritt Square Mall back to their respective loan servicers. Through this process we were able to reduce our debt load by approximately $115 million. Discussions continue regarding the transition to the respective services on River Valley Mall, Southern Hills, and Mesa Mall, with exits most likely in early 2017. When factoring in the Valley Vista Mall, the property we expect to transition back to servicer in second half of next year, we are looking at a total of nearly $400 million of debt reduction, with an aggregate debt yield of 9.3% on these loans, this will prove a very effective way for us to continue to delever the Company.

On a pro forma basis assuming the completion of these transfers, and factoring in the full $13 million of annual integration synergies, as well as the recently announced $5 million of reduced corporate overhead, our net debt to EBITDA would stand at 6.7 times. Outside of the planned give-backs, and with the recent refinancing of our Weberstown Mall property, we have no remaining 2016 debt maturities. That service coverage in 2016 is projected to be approximately 3.5 times, and most importantly, we entered the second quarter of 2016 with over $700 million of available liquidity between credit facility capacity and cash on hand. It is also important to remember that the Company has a very strong unencumbered pool comprising 55% of our total estimated 2016 NOI, with over 80% of this NOI, or $255 million coming from our community centers and Tier 1 properties.

Now let me turn to our quarterly financial results, our adjusted FFO for the second quarter was $0.43 per diluted share, falling within the upper end of our guidance range going into the period, outperformance at the property level was partly offset by dilution associated with the default interest on River Valley Mall, Mesa Mall, and Southern Hills. Adjusted FFO excludes the impact of $29.9 million of merger restructuring and transaction costs, along with $34.1 million of net gains on the extinguishment of debt, all incurred during the second quarter of 2016. NOI contributions from our core portfolio were generally ahead of our expectations for the quarter at 3%. In terms of the contribution from redevelopment, approximately 160 basis points of our quarterly growth were driven from these activities.

Finally in terms of our outlook, we reaffirmed within the release previous FFO guides in range of $1.76 to $1.82 per diluted share on an adjusted basis. The guidance excludes the impact of merger restructuring and transaction costs, and net gains on the extinguishment of debt, the guidance now assumes that the transfers of River Valley Mall, Mesa Mall and Southern Hills will not occur until early 2017.

Potential upside to previous guidance for these delays is more than offset by default interests that we are expecting to accrue on these loans through the date of transfer, when factoring the updated timing and related default interest, the incremental drag from our original guides, associated with the property give-backs is approximately $3.5 million for the full year 2016. The guidance also includes charges of $2.9 million for hedging effectiveness, recognized through the second quarter of this year. Accordingly we are pleased that we have been able to absorb these items, and still be in a position to hold our annual guides. While our year-to-date NOI growth currently stands at 3.6%, we are expecting to feel the pressure from lost space and rent reductions from The Sports Authority, Paxson, and Aero bankruptcies during second half of the year, negatively impacting annual 2016 growth by nearly 100 basis points. Accordingly, we are maintaining our existing core comp NOI growth range of 1.5% to 2.5% for 2016. We are also introducing FFO guidance for the third quarter of 2016 in a range of $0.42 to $0.44 per diluted share. We expect core comp NOI in the third quarter to be up 1% to 2% compared to year prior. Now we would like to open the call for any questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of Andrew Rosivach with Goldman Sachs. Your line is now open.

Andrew Rosivach

Lou, I wanted to ask you kind of a big picture one. I feel like when we have spoken that you kind of feel like the strategy that everybody has is sell the bottom is getting a bit crowded. And I’m curious, kind of strategically, potentially what you could be doing otherwise. One that we have thought of is for you to potentially be a more consolidator as an example, but feel free to push me in another direction?

Lou Conforti

I actually don’t believe that selling the bottom, nor quite frankly selectively culling the top, where there are folks with better average weighted cost to capital than us, I think both, I don’t think, absolutely everything is on the table, and culling of assets, and making this Company stronger will be my primary focus. I think about it, as we have a sweet spot. That sweet spot is our core, it is akin to doing a bunch of you cannot do bicep curls before you do lots of sit-ups, and we are going to work on the sit-ups right now, and even if it means culling additional non-core to left of that normal distribution, and indeed selectively to the right, that is what we will be doing. With the primary operational focus of increasing cash flow.

Andrew Rosivach

Lou, if we like use sales per foot of the normal distribution, what is that fat part that you talk about?

Lou Conforti

It is such a intellectually kind of inferior metric, quite frankly, when we think of productivity, and what the appropriate denominator is, I don’t know if you and I have chatted about that, so I will refrain from speaking about sales PSF. I just don’t think it is the right metric.

Andrew Rosivach

Gail and I have written a whole report on it, but it is kind of the best thing that we have. Let me just sneak in one for Mark. Do you still have room for a bond deal in your guidance? Do you still expect to do a bond deal between now and the end of the year?

Mark Yale

Two different questions. We do have accommodation later in the year for a bond deal. Certainly something that we talked about we would like to do. The good news is we don’t have to do that at this point anytime soon. We have over $700 million of available liquidity today. We expect to finish the year somewhere in that neighborhood. So we certainly are in a position where we can be patient. What I can tell you is we are keeping abreast and monitoring the market day-to-day, we know where the market is, and when it is the right time for the Company, the Company will be ready. And we are optimistic that we are able to do that within a reasonable time period.

Andrew Rosivach

Do you have any sense of has the market harder or easier for you to do an offering say in last 90 or 180 days, and has any of the changes in management and what have you created any challenges?

Mark Yale

I think it’s actually, it is incredibly I think it’s perhaps made it easier with a clear unequivocal focus, and as it relates to what the industry is allowing and listen, this is really predicated upon, what the industry is allowing in terms of debt capital markets, we have seen a couple of interesting issuances over the last Mark, 30 days.

Operator

Thank you our next question comes from the line of Christian McElroy with Citi. Your line is now open.

Michael Bilerman

Hey, it is Michael Bilerman.

Lou Conforti

Hey Michael.

Michael Bilerman

How are you doing Lou?

Lou Conforti

Good buddy, how are you?

Michael Bilerman

Fantastic. Your quote I think you said on the call also is that every viable option is under consideration. And I will hang on the word viable. Does that mean that there are some things that are not viable that would not work? Are there certain transactions or alternatives that are just a no-go because of some rationale, maybe it is a tax basis in the strip assets, maybe it is the management agreement? I don’t know if there are other things that would inhibit a certain transaction from occurring?

Lou Conforti

No, every viable option is under consideration. And we will work toward solving any issues that indeed might come up, whether they be tax oriented or otherwise. I will tell you one thing, we will negotiate from strength, and this is a Company with a large unencumbered asset pool, a healthy robust, whatever the right word is, AFFO payout ratio, everything is under consideration. Whether it be sum of the parts or the whole. And we will take it from there.

Michael Bilerman

And you talk about negotiating from business of strength. I would assume that the Board in this most recent strategic alternatives process was highly involved. Why wouldn’t that have been negotiating from a position of strength previously?

Lou Conforti

No comment, Michael. Next question. Come on.

Michael Bilerman

You are not going to provide any sort of color as to sort of the write-off of the..?

Lou Conforti

It would be inappropriate, no.

Michael Bilerman

You think about location of the Company, most of the number of employees up in Indianapolis, the headquarter being Columbus driven by the merger with Glimcher, Mr. Glimcher is no longer at the Company, nor is his name on the door, do you think about the right headquarters, especially with a more streamlined decentralized process, how do you sort of evaluate company location?

Lou Conforti

We have excellent talent in both Columbus and Indianapolis. But quite frankly our talent really is in Johnstown, Tennessee, it is in Peoria, I can go on and on and on, I have been to every one of these places, indeed we will be from an efficacy standpoint, we will do what is right corporately, but my primary focus is to franchise our local management. We are always thinking about making things more efficient, we will corporately find where the best talent is.

Michael Bilerman

And the other thing in terms of your quote of being shareholder fiduciary, first and foremost, how do you balance your common shareholders versus your unit holders in that process?

Lou Conforti

Our common shareholders are to the extent that it is differentiation between a OP unit holder and common is I think some strategic decisions. Our common shareholders are our primary objective. Plain and simple, our primary motivation for acting in the best fiduciary interests.

Operator

Thank you. Our next question is from the line of DJ Busch with Green Street Advisors. Your line is now open.

DJ Busch

Thank you. Lou you talked about the higher threshold for some of the redevelopments. It seems like some of your lower productivity centers may need redevelopment either now or in the near future. And those may not come with that strong of returns, or may not hit those thresholds that have been in place or that may be in place now. But they are necessary to keep the cash flow stable. I guess with the new kind of strategy, does this mean that in these cases these centers may likely find themselves moving into non-core bucket, or out of the portfolio, as opposed to getting these redevelopment dollars?

Lou Conforti

It’s a good question. Reality there is a very delicate balance between maintaining or not allowing for degradation of cash flows. And understanding what is the net present value impact of a marginal unit of capital that we might invest. I don’t have a blanket answer. I think anyone that would, it is kind of silly. These are nuanced differentiated assets. And every single one will be dealt with accordingly. I will tell you that just having both an absolute and relative, kind of relative value approach, is something that will be implemented here, so I am giving you kind of a circumlocutious, kind of a crummy answer, but it is a work in process, and we will evaluate every center, and to the extent that we maintain cash flows in some of our lower tier centers, we will do everything possible, but we will not be stupid with respect to allocating dollars.

Butch Knerr

And DJ, this is Butch, one thing that I would add is that as we have done through our portfolio, these are going to be tenant driven redevelopments, where we have commitments from tenants that is where we spend these dollars and these assets. I think that is key to remember. That is how we have run our development so far.

DJ Busch

Okay. And then Lou, you talked about Last Mile Delivery a little bit in your prepared remarks. Which I find pretty interesting. Where are you in that it seems like that is probably, early in that process, where are new that process of those negotiations, and have you found retailers occupying those malls or centers where you’re considering that option to be open-minded to that idea?

Lou Conforti

Yes, and we might even be a bit further along than you might think. This is something that I have thought about just in general in terms of just capturing the nexus between ecommerce and physical space, and I will tell you, in our middle America retail venues, I actually think that we are very, very well-suited for interesting concepts as such. And I think that is the tenants and the commerce purveyors would both be excited, because there is a reciprocal benefit.

DJ Busch

And then are there any hurdles from like municipality standpoint, or getting entitlements to change some of the usage there?

Lou Conforti

I’ll tell you something. This is kind of somewhat anecdotal. Because we tend to represent a large portion of the tax revenue, so to me, we are going to move and this is a bit of adjunct or a bit. We want to move dining and interesting things into center court. To the extent we need a, we want to bring in a local craft brewer and we want to get a license, an ordnance or something. We have a bit of negotiating power from that standpoint. We are important to these communities, and to the extent we can enhance and maintain our presence, we will work with the municipalities, they will work with us.

Operator

Thank you. Our next question comes from the line of Floris van Dijkum with Boenning. Your line is open.

Floris van Dijkum

Thank you. Question for Lou, in terms of the strategy it sounds like you have not quite made up your mind what WPG will look like in a year’s time, obviously everything is subject to strategic transactions that could occur in that period. But it does not sound like you may be reducing significantly the number of properties that the Company owns, or do you think you will be culling it?

Lou Conforti

You think we will be, I did not hear the last part?

Floris van Dijkum

Sorry I said…

Lou Conforti

Let me make it perfectly clear, we will be culling, we absolutely will be culling, and I think as I stated, eliminating unproductive assets, that we intend to accelerate these efforts over the near term, use resultant proceeds for deleveraging, so certainly that culling will occur. In 2 or 3 years, all I know is that we are going to increase cash flow. We will take advantage of the marketplace opportunities quite frankly, but increasing cash flow, getting us operationally stronger, will allow us to effect the right strategic alternative, if indeed, if and when they come to fruition.

Floris van Dijkum

Right. But isn’t one of the things that is required for you to potentially act as a consolidator, as Andrew alluded to, or doing other things is getting the valuation up, and that means, getting a lower cap rate assigned to you, which means upgrading the portfolio. I guess part of that is, if you cull the lower, that would significantly impact your theoretical warranted cap rate. You seem to be dismissing that in some ways when you said that you are looking at cash flow, but it is not also the quality of cash flow that is important going forward? I guess that is my question.

Mark Yale

Floris, this is Mark. I think it is proving out the cash flow, we will embrace the core of this portfolio. We think there is stable steady cash flow with the right management and the right investment that we can grow, as Lou said. We want to be opportunistic in terms of culling, taking the proceeds, and addressing our balance sheet, and enhancing leverage, and reducing our leverage, and we think that combination of those two will to your point, will address our cost to capital to the point where we can maybe be a bit more offensive.

Floris van Dijkum

Great. Thanks Mark. Can I ask maybe this question for Butch, in terms of what caused the dip in same store NOI, in the strip portfolio, in your shopping center portfolio? Was there one some sort of rebate you gave to a tenant, or something that could cause that to drop?

Mark Yale

Hey Floris it is Mark, really two things, it really had to do with last year second quarter 2015, we had some favorable activity on bad debts, as well as a nice tax refund that did not repeat itself this year, so if you neutralize for those, the growth rate would be much closer to where we are forecasting for the full year.

Lou Conforti

To reiterate we think we come in at approximately 4% on an annualized basis for that portfolio.

Floris van Dijkum

Okay. Great. In terms of last question, in terms of dispositions I know these things are very, very tough to negotiate, and have a long lead time, but as you think about it over the next 12 months, can you put a number on terms of outside of the 400 million of debt reduction you will do that way, can you estimate what you think you will be potentially looking to sell over 12 months, or 18 months?

Lou Conforti

It is real difficult for us. I will tell you we’re going to ardently continue to prune. I just think it would be, I really don’t, we don’t want to put a number on a notional number right now. Sorry.

Floris van Dijkum

Okay. But you will be putting presumably you will be putting individual malls on the market over the next 6 months?

Lou Conforti

Yes.

Floris van Dijkum

And do you have any on the market today?

Lou Conforti

No comment.

Floris van Dijkum

Okay. Thanks, guys that it is for me.

Lou Conforti

Thanks.

Operator

[Operator Instructions] next question comes from line of Ki Bin Kim with Suntrust. Your line is now open.

Ki Bin Kim

Thanks you touched on all of the major points already. Have you guys discuss weighed you think the buyer pool is, or private equity what have you for, I would say non-A plus malls and I know that you don’t want to put a sales per square foot number on it, but anything like below 400, how deep is that pool of buyers, and if you did contemplate some asset sales going forward, do you see it being more one-off, a couple here, or is it more bigger in scale?

Lou Conforti

The reality of that is that there are opportunistic buyers of these assets, and whether they be my old, whether they be private equity, whether they be a regional mini-aggregator, so much of this is the correlation is looking at capital markets, what kind of financing they can get, and I think that it is a bit more nuanced than anything under X dollars per square foot. And so it is really a deal-by-deal basis. I will tell you that there is portfolio interest. Does that help?

Ki Bin Kim

Yes. And is there any difference in terms of appetite or performance difference between what I consider some of the malls that are the only mall in town, which pre-Glimcher merger, it was a big chunk of the portfolio, versus just being the seventh mall in the city, are you seeing any real divergence?

Butch Knerr

Yes, Ki Bin this is Butch. Yes, I think that there is certainly more stability when it is the only mall in the marketplace, and I think that this is demand for those, but I would also say that when you think about Northlake in Atlanta, we sold that asset and those guys are going to redevelop that asset, and I think that there is an opportunity for that out in the world today.

Ki Bin Kim

Okay. And lastly, as the merger and split off from Simon and Glimcher has evolved, there is shared service agreement that was in place which is winding down now, and I am not sure how much on the actual leasing side or the actual business side this was overlap, but is there any incremental difference going forward, given the change in management where there might be maybe a rethinking of that agreement or rethinking about the broader relationship between assignment and the ODG?

Lou Conforti

I would say the agreement with Simon expired in May.

Butch Knerr

In May.

Lou Conforti

In May, and we are operating these assets, and fully operating these assets and we don’t see that changing.

Operator

I would turn the call over back to Mr. Lou Conforti for any closing remarks.

Lou Conforti

Thanks everybody. Our absolute focus is to increase cash flow, and that is about it. We are going to get back to work, and we will see you next quarter. Take care everybody. Bye.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, you may now disconnect. Everyone have a great day.

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