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Copa Holdings SA (NYSE:CPA)

Q3 2007 Earnings Call

November 15, 2007 11:00 am ET

Executives

Joseph Putaturo - Director of Investor Relations

Pedro Heilbron - Chief Executive Officer

Victor Vial - Chief Financial Officer

Analysts

Jim Parker - Raymond James

Mike Lindenberg - Merrill Lynch

Rodrigo Goes - UBS

Alexander Green - Citi Investment Research

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings Third Quarter 2007 Earnings Release Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session (Operator Instructions).

As a reminder, this call is being webcast and recorded, November 15, 2007.

Now I will turn the conference call over to Joseph Putaturo, Director of Investor Relations. Sir, you may begin.

Joseph Putaturo

Thank you very much, Cynthia, and welcome everyone to our third quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings and Victor Vial, our Chief Financial Officer.

First, Pedro will open up with an overview of the third quarter highlights, followed by Victor, who will discuss our third quarter financial results. Immediately after, we’ll open up the call for questions from analysts. We kindly request if you could limit yourself to one question with a brief follow-up so we can accommodate most questions.

In today's call we'll discuss non-GAAP financial measures. A reconciliation of non-GAAP to GAAP financial measures can be found in our third quarter earnings release which has been posted on Copa Airlines' website, copaair.com.

In addition, our discussion will contain forward-looking statements, not limited to historical facts that reflect the Company's current beliefs, expectations or intentions regarding future events or results.

These forward-looking statements involve risk and uncertainty that could cause actual results to differ materially and are based on assumptions that are subject to change. Many of these risks and uncertainties are discussed in our annual report filed with the SEC.

Now I would like to turn the call over to our CEO, Pedro Heilbron.

Pedro Heilbron

Good morning to all and thank you for participating in our third quarter earnings call. I would like to begin by thanking all of our co-workers for their continued efforts. It is their hard work and dedication that makes us a world-class airline with a solid business model.

For the third quarter, Copa Holdings net income came in at $46.8 million, excluding an $8 million non-recurring gain related to insurance proceeds in excess of aircraft book value, net income came in at $38.8 million or 4.2% above third quarter '06. Diluted earnings per share came in at $0.89.

Despite high fuel costs and lower yields, Copa Holdings continued its profitable growth through an 18% capacity expansion, while remaining one of the most profitable airlines in the industry. For the quarter, Copa Holdings operating margin came in at 17.6% and net margin at 14.7%.

During the quarter, our team made significant progress in consolidating Copa Airlines' position as the leading intra-Latin American carrier.

Copa Airlines began service from its Hub of the Americas in Panama City to four new destinations. On July 15, we began service to Washington, D.C. and Punta Cana in the Dominican Republic.

Washington, D.C. is our fifth U.S. destination with a large metropolitan area, which is not well connected to our region.

Our new flight to Punta Cana is our third destination in the Dominican Republic and seventh to the Caribbean region.

On July 18, we began service to Guadalajara, Mexico's second largest city and one of its principal centers of industry and culture. Guadalajara is our third destination in Mexico.

On August 15, we began service to Cordoba, Argentina's second largest city and a major industrial center. Copa Airline also provides service to Buenos Aires twice daily.

We're very pleased with the performance of these new routes, which nicely balance and increase the scope of our network, which now serves 40 cities in 21 countries throughout the Americas, offering more and better options for intra-Latin American travel than any other airline.

We're also very pleased with the strength in demand for travel in Panama and the region, no doubt a resource of continued economic growth, as well as increased regional commerce, trade and tourism.

Panama's economy in particular is growing at a rate of more than 9% this year; even before the full start of the Panama Canal expansion work and several other major projects, which should positively impact the economic growth in the coming years.

Strong demand and a growing preference for Copa Airlines network for intra-Latin American travel allowed the airline to grow capacity by almost 23% during the quarter, while maintaining very strong load factors.

As we mentioned in our second quarter earnings call, Copa Airlines did experience lower yields during the third quarter, due to several factors which include the deployment to new destinations and frequencies in the third quarter and a significant increase in average length of haul.

Yields were also affected by some challenges we encountered in revenue management and actions by competitors in selected markets. Nevertheless, in the fourth quarter we expect higher yields quarter-over-quarter as we have addressed these revenue management issues, in addition to having successfully increased fares and fuel surcharges in several markets throughout our network.

In the third quarter, Copa Airlines continued its fleet expansion with the delivery of three EMBRAER-190 and one Boeing 737-800. Since then, Copa has received the remaining aircraft scheduled for delivery in 2007 and will end the year with a fleet of 37 aircraft consisting of 26 Boeing 737 NGs and 11 EMBRAER-190.

Also, another important matter we brought out during our last quarterly call was our pilot situation. As we mentioned, global demand for pilots has created some retention issues which combined with our growth needs and some delays in our training pipeline, while all manageable factors have required us to make some operational changes and minor capacity adjustments for 2007.

With this in mind, we entered into early negotiations with our pilots' union and reached a new collective bargaining agreement in November that will be in place for more than four years with next negotiations not coming due until August of 2012.

We believe this new agreement will significantly improve our ability to retain and hire the pilots we need to continue growing without compromising our Company's long-term cost structure or competitiveness.

We're also pleased with the progress we continue making in the pilot recruitment and training fronts. Our training pipeline is currently full and we believe we're in a good position to carry out our plans for 2008, which we expect will result in an over-20% capacity growth for the airline.

During the quarter, our team has also kept focus on future opportunities by entering into several long-term strategic alliances.

In August, Copa entered into a comprehensive codeshare agreement with AeroMexico, whereby Copa has placed its designator code on AeroMexico operated flights beyond Mexico City to 17 Mexican cities and AeroMexico in turn has placed its designator code on Copa Airlines operated flights between the Hub of the Americas in Panama City to Mexico City, Cancun and Guadalajara.

In September, Copa Airlines formally entered into the global SkyTeam Alliance. As part of the global alliance, among many other benefits, Copa Airlines passengers earn OnePass miles on all flights operated by SkyTeam partners and are eligible to redeem their OnePass miles for reward tickets on any of SkyTeam's 790 global destinations.

On a more recent note, in October, Copa Airlines and KLM announced a broad codeshare alliance, which will enable passengers of both carriers to travel more easily between both airlines' networks. This agreement came at the same time KLM announced direct flights between Amsterdam and Panama City to begin in March of 2008.

The new service, which conveniently connects with Copa's afternoon bank, will offer numerous connections to beyond flights operated by Copa Airlines from its Panama haul.

These alliances continue to significantly expand the global and regional scope of our network and commercial appeal of our product. Additionally, Copa Airlines also continued receiving important recognition during the third quarter.

The Airline was named by SkyTrax for the fourth consecutive year as Best Airline in Central America and Mexico and the Caribbean, as well as Best Cabin Staff in Central America and Mexico and the Caribbean.

Copa was also included in Fortune Magazine's top five best companies for leaders in Latin America for 2007.

Now turning to Aero Republica. During the third quarter, we also continued enhancing our consolidated network by further increasing the international connectivity and fit into Copa Airlines' hub.

In July Aero Republica began a second daily frequency from Bogota to Panama City. Copa and Aero Republica combined now serve this important route four times daily. More recently, in October, Aero Republica began service from Columbia's fifth largest city, Bucaramanga into Panama City.

Although Aero Republica's international load factors in the third quarter have performed quite well, they did experience a year-over-year drop in load factors during the third quarter. Mainly as a result of weakness in the Columbian domestic market, mainly the leisure market and increased capacity and promotional activity, including for discounts in the domestic market from their main competitor.

I should add that despite this weakness in the domestic market, which resulted in lower year-over-year load factors, Aero Republica's financial results have improved significantly, benefiting from higher domestic fares, growth in their international operations and a stronger local currency.

For the third quarter, Aero Republica's year-over-year international capacity as a percentage of total capacity doubled to 12% with international load factors coming in at 68%, significantly higher than its domestic load factors.

Aero Republica is also benefiting from the renewal of its fleet as this modern gauge EMBRAER 190, which for the third quarter represented 24% of their total capacity, is significantly more efficient in fuel consumption and maintenance costs.

Aero Republica's top line growth for the quarter was 28% on a modest 2.6% capacity expansion. As a result, Aero Republica came in with a 16.8% operating margin for the quarter. For the full year, we expect Aero Republica to hit the high end of the 5% to 10% operating margin to which we’ve guided earlier in the year.

These results are as, on a standalone basis, so when you factor in their fleet traffic to Copa Airline; their contribution is even more significant. During the quarter, Aero Republica continued with its fleet modernization plan, taking delivery of two additional EMBRAER 190 aircraft and currently have a fleet of five EMBRAER 190 and eight MD-80 aircraft.

During the fourth quarter, Aero Republica will receive two additional EMBRAER to end the year with seven EMBRAER 190 and six MD-80. As a result, by the end of the year, the airline will have the youngest and most modern fleet in Columbia, having reduced its average fleet age from more than 17 years at the end of '06 to slightly above seven years by the end of '07.

So in summary, Copa Holdings' third quarter was marked by a significant fleet capacity and network expansion, lower yields, which show a considerable improvement in the fourth quarter, better year-over-year results at Aero Republica, despite lower load factors, and more importantly, continued execution and strengthening of our business model.

For 2008 we expect a strong demand environment, driven mainly by solid local and regional economic growth. Our preliminary 2008 guidance, which Victor will discuss further, calls for significant capacity expansion with increasing unit revenues and stable X-fuel (ph) unit cost.

Therefore, and despite anticipating continued high fuel costs in 2008, we expect Copa Holdings will continue delivering industry leading margins and earnings growth next year, driven by a fundamentally strong and proven business model which is being executed by a world class team.

Thank you. Now I will turn it over to Victor, who will go over our third quarter financial results.

Victor Vial

Thank you, Pedro, and good morning everyone. Thanks again for joining us today. As always, let me begin by joining Pedro in thanking all of our co-workers for their efforts and hard work. I'm pleased to report that for the third quarter Copa Holdings net earnings, excluding an $8 million non-recurring gain, reached $38.8 million, which represents a 4.2% year-over-year increase and diluted earnings per share of $0.89.

Capacity for the quarter increased 18% compared to Q3 '06 as total ASM reached approximately $2.1 billion, with Copa Airlines, which accounted for 80% of it's total, growing almost 23% year-over-year, while Aero Republica's capacity grew 2.6%

On a consolidated basis, load factors for the third quarter decreased approximately 1 percentage point year-over-year to 74.4%. However, on a segment basis, Copa Airlines' load factor for the quarter remains strong, at 78.5% compared to 79% in Q3 '06 while Aero Republica came in at 58.2% for a 5.3 percentage point decrease.

Yields during the quarter declined 1.6% year-over-year from $0.162 to $0.159 driven by a decrease of 8.2% in Copa Airlines' yields, which were impacted by new destinations and frequencies added in 2007, which accounted for 8% of Copa Airlines' total capacity for the quarter.

A 7% year-over-year average length-of-haul increase, more competitive activity in Mexico, Central America and some Caribbean markets, and revenue management challenges we faced as a result of our transition in June from a two bank to a four bank up-structure.

This transition involved adjustments to our flight schedules, which resulted in changes to historical traffic flows, making demand forecasting more difficult, which in turn resulted in allocation of more inventory to lower-fare classes despite strong underlying demand.

It's worth noting that the necessary measures have been taken and we're seeing a significant improvement in yields, which should carry through this fourth quarter. With respect to Aero Republica, the yields for the quarter came in 32% above last year as the result of an increase in domestic fares, growth in international capacity and the strengthening of the Columbian currency.

Operating revenues for Copa Holdings increased 14.7% compared to Q3 '06, reaching $264.6 million. On a segment basis, Copa Airlines operating revenues increased 11.6% or $21.1 million, while Aero Republica delivered a 28% or $13.7 million increase.

Regarding passenger revenue, which accounted for 94% of our operating revenues, Copa Holdings saw an increase during the quarter of 14.5% or close to $32 million, from $218 million in Q3 '06 to $249 million in Q3 '07. From the standpoint of unit revenues, route revenue for available seat mile, or RASM for Copa Holdings came in at $0.126, reflecting a 2.7% year-over-year decrease. RASM for Copa Airlines came in at $0.121 for a decrease of 9%, which on net of adjusted basis translates to a drop of 6%, while Aero Republica's RASM increased 25% to $0.146.

Looking at the expense side, operating expenses grew in line with capacity, increasing 17.6% year-over-year or approximately $33 million. Unit cost or cost per available seat mile, CASM, decreased less than 1% year-over-year to $0.104 while CASM X-fuel remained flat year-over-year at $0.07 and decreased 4.1% compared to Q2 '07.

Now turning to Copa Holdings main operating expenses compared to the third quarter of '06, fuel expense increased 17% as a result of a 16% increase in gallons consumed, due to increased capacity and a slight year-over-year increase in the all in average price of jet fuel, which Net of Hedges went up from $2.33 in Q3 '06 to $2.34 in Q3 '07.

Salaries and benefits increased 23.6%, mainly as a result of an overall increase in upgrading headcount to support increased capacity and the effect of the Columbian currency appreciation against the U.S. Dollar.

Passenger servicing increased 33%, mostly as a result of increased capacity and passengers carried and costs incurred as a result of more weather related cancellations and delays. Commissions increased 1.9%, for most part a result of a 14.5% increase in passenger revenue, partially offset by a lower average commission rate.

Reservation and sales increased 28.7% mainly due to more passengers carried and additional costs related to global distribution systems at Aero Republica as a result of increased international flights.

Maintenance, materials and repairs decreased 2.6%, mainly due to fewer major maintenance events at Aero Republica, partly offset by higher capacity and additional major airplane overhaul events at Copa Airlines.

Depreciation increased 39.4% due to additional aircraft repairs. Aircraft rental decreased 3.9%, primarily driven by an adjustment to the aircraft rental line in Q3 '06, related to supplemental rent in the Aero Republica segment, in addition to less aircraft and engine rentals in Q3 '07.

And flight operations, landing fees and other rentals combined, increased 26.5%, for the most part due to increased capacity and more international flights at Aero Republica. Other operating expenses increased 16.3% year-over-year, mainly related to lease termination costs of two MD-80 aircraft in the Aero Republica segment.

Other non-operating income and expense totaled an income of $4 milion in Q3 '07. This balance is primarily composed of the $8 million one-time gain we mentioned earlier. Excluding these non-recurring gains, the total is a non-operating expense of $4.1 milion.

Looking now at the Company's earnings, Copa Holdings' third quarter consolidated earnings, excluding the $8 million non-recurring gain and before interest, taxes, depreciation, amortization and aircraft rent, EBITDAR, increased 10% to $75.5 million, while EBITDA margin decreased only 1.2 percentage points to 27.4%.

With respect to operating earnings, Copa Holdings operating earnings for the third quarter increased 3.3% year-over-year to $46.7 million, while operating margins came in at 17.6%, again delivering one of the highest operating margins in the industry.

Moving on to the balance sheet, total property, plant and equipment increased approximately $100 million in the quarter to $1.1 billion, mostly as a result of the acquisition of five aircraft, three EMBRAER 190s and one Boeing 737-800 delivered to Copa Airlines, in addition to an EMBRAER 190 delivered to Aero Republica in September.

Debt and capitalized leases at the end of the quarter totaled $1.1 billion, of which bank debt totaled $830 million, out of which approximately 44% is U.S. Ex-Im Bank guaranteed debt. 40% of our Ex-Im Bank debt has been fixed for 12 years at an average rate of 4.7% and our aggregate blended rate to date stands at 5% and 3.75%, one of the most competitive costs of financing in the industry.

Lastly, liquidity remained strong, with Copa Holdings ending the quarter with $288 million in cash, cash equivalents and investments and approximately $34.5 million in committed lines of credit. Total liquidity including committed lines of credit at Q3 '07 represent approximately 33% of last 12 month's revenue.

So in summary, we saw some pressure on yields during the quarter the necessary measures have been taken and we're seeing a recovery of yields, which we expect to continue during the course of the fourth quarter. As a matter of fact, October yields for Copa Airlines show an increase already, in the range of 9% over Q3 '07.

Demand during the quarter continued strong at Copa Airlines, resulting in stable load factors and significant capacity growth. We continue to strengthen our balance sheet and liquidity position. Aero Republica is profitable and continues to expand its international operations, thereby contributing to the strength of our network. And again, Copa Holdings continues delivering some of the highest margins in the industry.

Looking forward, with respect for our full year 2007 results, we're updating our guidance as follows. Our capacity guidance remains unchanged at plus-or-minus 8 billion ASMs, representing a year-over-year growth of 16%.

We're slightly reducing our load-factor guidance from plus-or-minus 75% to plus-or-minus 74%. This represents a 1-percentage point increase with regards to 2006 and a significant capacity increase. We are increasing our RASM guidance to plus-or-minus $0.127, which represents a 2.5% year-over-year RASM increase. And we're maintaining our CASM Ex-fuel guidance at plus-or-minus $0.069, which represents less than a 2% year-over-year increase.

However, mainly as a result of higher Jet fuel prices, we are lowering our operating margin guidance from a range of between 19.5% to 21% to plus-or-minus 18.5%.

Today, we're also providing Preliminary Guidance for 2008 as follows. Capacity growth of 17% from a range of 8 billion ASM to a range of 9.3 billion ASM. Load factor of approximately 75%, up from approximately 74% in 2007, RASM in the range of $0.129, up from a range of $0.127, CASM Ex-fuel, in the range of $0.07, slightly up from a range of $0.069, and operating margin in the range of 17% to 19% compared to plus-or-minus 18.5% in 2007.

With that, I'd like to turn over to Pedro for closing remarks.

Pedro Heilbron

Thank you, Victor and again, thank you all for joining us today. While we're pleased to report these third quarter earnings results and the progress we have made on several fronts, we're also very much focused and committed on effectively tackling the challenges ahead.

Our team, supported by a successful and proven business model, strong and growing regional economy and progress made at Aero Republica, gives us confidence we can continue delivering world-class results going forward.

At this time, we will be happy to open up the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) We will take our first question from Jim Parker with Raymond James. Please go ahead.

Jim Parker - Raymond James

Good morning to all. It appears and I underline the word "appears", but it appears that in Columbia, with regard to Aero Republica, based on the aviation authority figures, that Aero Republica's market share is declining in perhaps the third quarter, at least September, it's down like six percentage points and I'd like to know why this is happening?

And while you're suggesting that it's doing very nicely feeding international traffic into Panama City, would you assess this loss of market share and is it troubling to you and what do you intent to do about it?

Pedro Heilbron

Okay, James, this is Pedro. It's not troubling to us. There has been a reduction in their market share. I don't know if it's as high as six points, but there has been a reduction. If you can recall what we've said about Aero Republica from the beginning, it fits nicely into Copa Airlines' network and into our strategy.

We never intended to dominate the domestic market that's not where we see the potential of their profitability and our main local competitor has been increasing its domestic capacity. We have not; we have been emphasizing Aero Republica's international expansion.

So, what's going on, Aero Republica is expanding internationally at a nice pace, actually doubling versus last year the percentage of its revenues that come from international routes? They're also adding the EMBRAER 190s, which accounted for 24% of their flying this quarter versus zero the previous quarter, a much more efficient aircraft.

So, when you add that up and include also higher fares, domestically, which already may have an impact on market share, versus a competitor that has been more aggressive, it ends up yielding better results. So again, to summarize, Aero Republica is yielding better financial results and we're not out to conquer the domestic market. We're going to have enough presence to fit our overall strategy and grow internationally.

Jim Parker - Raymond James

Okay. Just quickly, a second question regarding fuel surcharges. Do you have an assessment of the net impact of this surcharges year-to-year what they might be?

Victor Vial

When you look at surcharges that we've been implementing since last year, they represent roughly 9% to 10% of our total revenues. And since the last call, we've been increasing surcharges pretty effectively.

When you look at the year-over-year increase in jet fuel prices and you try to figure out how much of the surcharges. How much of the increase is being called a surcharges, I would say it's roughly in the neighborhood of about half of the increase.

But you also have to take into account that we've been raising fares as well. So you can't just look at it in terms of the fuel surcharge, but also fares are contributing to cover the increase in fuel.

Jim Parker - Raymond James

Yes. Okay. Thanks.

Operator

And we'll take our next question from Mike Lindenberg with Merrill Lynch. Please go ahead.

Mike Lindenberg - Merrill Lynch

Yes. Good morning, all. A couple questions. With the entrance into SkyTeam, Pedro or Victor, have you come up with, you think, the annual net contribution will be, whether it's revenue costs. And obviously, you probably have to invest.

There's probably some CapEx in order to get your systems up sort of in-sync with the SkyTeam standards. Do you have any estimate of that?

Victor Vial

The investment is not material, Mike. On the top-line side, it's very tough to say because you don't know how much of that you're already realizing from inter-line. But we do know there is going to be incremental revenue. We'll have a better idea during the course of the year in 2008.

But right now, we're not too sure, tough to say. And it's not included in our RASM guidance for next year.

Mike Lindenberg - Merrill Lynch

Okay. And then, my second question. Pedro, I think you talked about some of the benefits of AeroRepublica and you talked about the feed traffic to Copa. Do you have an estimate of what percentage of AeroRepublica traffic that, what percentage gets fed into the Copa system?

Pedro Heilbron

We do. I'm not sure when I'll give out those numbers. I do have to think a little bit but it's meaningful and it makes the investment worthwhile.

Mike Lindenberg - Merrill Lynch

Okay. And then, just my last question, what is the age of retirement for pilots in Panama? Is it 60 like the U.S.?

Pedro Heilbron

It's 65.

Mike Lindenberg - Merrill Lynch

Okay.

Pedro Heilbron

And as, with the advance of medicine and healthcare, a person at 65 today is healthier than a person at 60, 20 years ago.

Mike Lindenberg - Merrill Lynch

I know. I just, I was hoping it was 60 so that maybe you had the opportunity to go to 65 and then it would mitigate the pilot retention issue. But you're already there. And I guess based on the rules that went into place last year, they're free to fly into the U.S. It's not a problem, right?

Pedro Heilbron

That's correct.

Mike Lindenberg - Merrill Lynch

Okay. All right. Great. Thank you.

Pedro Heilbron

Thanks.

Operator

And we'll take our next question from Rodrigo Goes with UBS. Please go ahead.

Rodrigo Goes - UBS

Good morning, guys. Just one question. You mentioned in the release that you're seeing more competitive activity in Mexico, Central America and some Caribbean markets. Would you give a little detail a little more, where that competitive pressure is coming from? What airlines in particular are adding capacity and what specific routes?

Pedro Heilbron

Yes. Hi, it’s Rodrigo. It's basically a couple of the Campos. In the third quarter, we saw a lowering of fares by TACA in intra-Central American markets. It's not a significant percent of our revenues, but it was a small factor.

We also saw, earlier in the year a new flight from Mexico to Panama from Mexicana. And also we saw from TACA, new flying from their San Jose hub to Santo Domingo and Havana in the Caribbean. So that's basically the additional competitive pressure.

Rodrigo Goes - UBS

Okay. Not much from American Airlines just yet from the U.S. and would you anticipate them being a bit more aggressive in netting capacity?

Pedro Heilbron

Well, American has announced a new flight from Dallas-Fort worth into Panama, but we do not compete in that market, so that will have hardly any effect on us. And Delta has announced a four times per-week flight from JFK to Panama.

That will be competition but, again, it's four times a week and it's a small percent of our ASMs.

Rodrigo Goes - UBS

Okay. Perfect. Thank you very much.

Operator

(Operator Instructions) We will take our next question from Alexander Green with Citi Investment Research. Please go ahead.

Alexander Green - Citi Investment Research

Hi. Good morning everyone.

Pedro Heilbron

Hi Alex.

Alexander Green - Citi Investment Research

Hi. Can you just talk about the improvement that you expect then, in November and December, because of the October numbers weren't. I guess, won't get you to the full-year guidance. How much of an improvement do you expect there?

Victor Vial

Well, when we look at yields in October compared to the third quarter, you're seeing approximately a 9% improvement compared to the third quarter. And we think that is going to continue to be the case.

We still see a strengthening of yields, further in November and December. So, we expect yields to be approaching the levels that we were seeing before in the second quarter.

Alexander Green - Citi Investment Research

All right. Thank you.

Operator

(Operator Instructions) And gentlemen, it appears we have no further questions at this time. Mr. Heilbron, I will turn the conference back over to you for closing comments.

Pedro Heilbron

Okay. Thank you all for participating in our third quarter earnings call. We look forward to seeing you participating in our fourth quarter call early next year. Thank you all.

Operator

Ladies and gentlemen, this will conclude today's conference call. We do thank you for your participation and you may disconnect at this time.

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