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Sanderson Farms, Inc. (NASDAQ:SAFM)

F1Q08 Earnings Call

February 26, 2008 11:00 am ET

Executives

Joe F. Sanderson, Jr. – Chairman of the Board & Chief Executive Officer

Lampkin Butts – President, Chief Operating Officer & Director

D. Michael Cockrell – Chief Financial Officer, Treasurer & Director

Analysts

Farha Aslam – Stephens, Inc.

Christine McCracken – Cleveland Research Company

Kenneth Zaslow – BMO Capital Group

John Kohler – Oppenheimer & Close

Pablo Zuanic – J.P. Morgan

Robert Moscow – Credit Suisse

Operator

Good day everyone and welcome to the Sanderson Farms, Inc. first quarter 2008 conference call. Today’s call is being recorded. At this time for opening remarks and introductions I’d like to turn the call over to Mr. Joe Sanderson, please go ahead sir.

Joe F. Sanderson, Jr.

Good morning and welcome to Sanderson Farms first quarter conference call. With me on the call today are Lampkin Butts, our president and chief operating officer, and Mike Cockrell, chief financial officer. We issued a news release this morning announcing net income of $6.2 million or $0.30 per fully diluted share for our first fiscal quarter of 2008. This compares to a net loss of $2.8 million or $0.14 per share during last year’s first quarter. I will begin the call with some brief comments about general market conditions and grain costs. I’ll then turn the call over to Lampkin and Mike for a more detailed account for the quarter.

Before we make any further comments I will ask Mike to give the cautionary statement regarding forward-looking statements.

D. Michael Cockrell

Good morning everyone. This morning’s call will contain forward-looking statements about the business financial condition, and prospects of the company. The actual performance of the company could differ martially from that indicated from the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our most recent annual report on Form 10K and in the company’s quarterly report on Form 10Q, filed with the SEC in connections with our first fiscal quarter ending January 31, 2008 which Form 10Q was filed with the SEC this morning.

Joe F. Sanderson, Jr.

Our financial results for the first fiscal quarter reflect an improved poultry market during the first quarter of this year when compared to last year’s first quarter. Our results also reflect the higher prices for corn and soybean meal experienced by us and the industry during this period of time. As we expected, the markets for both corn and soybean meal have remained high and volatile and I expect that trend to continue at least through the 2008 crop year. Demand for corn from ethanol producers is expected to exceed 4 billion bushels by next year. This demand along with runaway wheat prices are fueling higher prices for all feed grains. The corn and soybean markets appear to be bidding for acres for the 2008 crop, and the markets will be closely watching the March 31 planning intentions report to see how farmers are going to react to the current market environment. Regardless of that report, however, I believe the markets are going to remain on edge and react strongly to every real or rumored event that might have a bearing on the quality or quantity of this year’s grain crop, or the demand for ethanol. The ethanol industry significant demand for corn has added new dimensions to attempting to predict grain prices. Not only will events that might affect the grain crops anywhere in the world impact prices, but also any event that might affect the supply of or the demand for fuel anywhere in the world will affect ethanol margins and therefore the price of corn and other grains.

Last Tuesday, for example, a report that OPEC might cut oil production moved the price of oil above $100 a barrel and the markets for corn and soybeans reacted as well by posting new contract highs. These moves only heighten the battle for planted acreage. This volatility in the markets make it difficult to develop a buying strategy for grain. But the bottom line is that feed ingredients cost will be significantly higher during fiscal 2008 than during fiscal 2007. We are currently on the market for our corn needs, and have priced approximately 11.4% of our remaining soybean meal needs through the end of fiscal year. In December we reported that had we priced our needs on that day, the day of the call, our cost would have been $55 million more this fiscal year than last fiscal year. Based on our cost through the first quarter, what we priced so far, what price we could lock in our needs for the balance of the year and taking into account increased volume for the year, that increase today would be more than $174 million.

While our cost will clearly be higher this year, the same was true last year. Last year’s increased grain cost added $0.06 per dressed pound to the cost of chicken. But the chicken markets increased over $0.12 per pound allowing us to offset the higher grain cost and earn healthy margins. Current grain prices indicate another $0.07 to $0.075 more in grain costs during fiscal 2008, which will once again require reaction from chicken markets if we are to maintain margins.

I’m pleased to report that our Waco facility continues to move towards full production, and we expect the plant to reach full capacity in our fourth quarter. At this point I will turn the call over to Lampkin for a more discussion of the market and our operations during the first quarter.

Lampkin Butts

Good morning. As Joe mentioned, overall market prices for poultry products were higher during the quarter when compared to our first quarter last year. The average Georgia dock price for whole birds increased 10.3% during our first quarter, compared to last year’s first quarter, averaging $0.773 during the quarter compared to an average of $0.70 per pound last year. The Georgia Dock price for the week of February 20, 2008 is $0.7975 per pound, which compared to $0.75 per pound for the same week last year. Bulk leg quarter were also higher for the quarter compared to last year’s first quarter increasing more than 30.4%, reflecting strong export demand.

Final numbers for calendar 2007 reflected an 18.4% increase in the total volume of chicken products exported during 2007. Given prices last year this resulted in a 47.8 % increase in the value of exported chicken products. Bulk leg quarter prices averaged $0.41 per pound during our first quarter this year versus $0.314 cents per pound during last year’s first quarter. Leg quarters are currently trading for $0.42 per pound. The average price for jumbo wings was also higher during our first fiscal quarter than last year. The current price of $1.13 per pound is slightly above last year’s price. Jumbo wing prices averaged $1.08 per pound during the first quarter, up 12.2% from the average of $0.965 during last year’s first quarter.

Boneless breast prices were also higher during our first quarter, increasing by 6.7% when compared to the first quarter a year ago. Boneless breast averaged $1.31 per pound during the first quarter, and today the market for boneless is $1.47 per pound. Today’s market price is close to the five year average.

While chicken prices were higher during our first quarter when compared to last year’s first quarter. Our cost for feed grains were also much higher. The cost for corn, delivered during the first quarter increased 12.9% compared to our first quarter last year. The average cost of feed and flock sold increased 21.6% during the quarter over last year’s first quarter. Our cost will increase more during our second quarter. Chicken processed during our first quarter consumed less expensive feed than the chickens we will be processing during the second quarter.

We sold 504 million pounds of poultry during the first quarter, a 5% increase from the 480 million pounds sold during last year’s first quarter. We continue to expect an increase of between 17 and 18% in pounds processed during fiscal 2008 compared to 2007, or 2.34 billion pounds. This increase will come as we continue to move Waco to full production. Both our processing and our live grow out divisions continue to compete will in the industry however, we have many opportunities for significant improvements that we will work to capture during fiscal 2008.

Performance at our prepared foods division during the first quarter reflected higher input cost. Fresh chicken is of course, a significant raw material at foods and chicken prices were up compared to last year’s first quarter. We sold 19.4 million pounds of prepared food products during the quarter, compared to 21.4 million pounds a year ago. We will be installing new equipment at foods during the second fiscal quarter to make room for equipment necessary to produce more further processed and partially cooked chicken products. We believe this move will allow us to increase volume at foods, improve efficiencies at the plant, and improve margins.

Looking ahead we remain confident we will continue to improve our operating performance and sales execution. We have added significant new customers since opening the Georgia plant and I expect that sales momentum to continue. At this point I would like to turn the call over to Mike Cockrell, Chief Financial Officer.

D. Michael Cockrell

Good morning again. Our financial results during the first fiscal quarter reflects the improved chicken market environment described by Joe and Lampkin. Net sales for the quarter totaled $362.6 million and that’s up from $292.7 million for the same quarter during fiscal 2007. The $0.30 per share earned during the quarter compares to a $0.14 per share loss during last year’s first quarter. Our cost of sales for the three months ended January 31, 2008 as compared to the same three months a year ago increased 18.8%. The increase is a result of a 5% increase in pounds of poultry products sold in the first quarter, compared to last year as well as higher feed cost. As Lampkin mentioned, we sold 504 million pounds of poultry products during the quarter and that compares to 480 million pounds a year ago. This 5% increase in pounds sold compares to a 17% increase in pounds processed. We processed 552 million pounds of chicken during the quarter compared to 471 million pounds a year ago, which increase in pounds reflects the additional production at our new Waco facility. Because of the timing of export sales, some of those additional pounds were in inventory at the end of the quarter and not reported as pounds sold. Inventories increased $33 million since the end of the last fiscal year, or 27.6%. This increase is the result of a $16.8 million increase in processed chicken inventories, and a $15.3 million increase in live inventories.

The increase in live inventories reflects two things: first more live head on the ground to support our new Waco plant, and the higher cost of grain consumed by those chickens. We had approximately 6 million more head of chickens on the ground at the end of the first quarter versus a year ago and all chickens on the ground, as Lampkin mentioned, consumed more expensive grain. Our inventory of processed poultry increased $16.8 million during the quarter, approximately 90% of that or $15.1 million of this increase was processed poultry in inventory awaiting shipment into our export markets. Export inventories increased from 20 million pounds at October 31, to 44.2 million pounds at January 31 or 119% increase. That product has since been shipped.

SG&A expenses for the first quarter of 2008 were $13.8 million when compared to $12.5 million in fiscal 2007. The increase is the result of a slightly higher advertising accrual versus the year ago, partly offset by the absence during 2008 of administrative cost as Waco. SG&A expenses going forward should trend slightly downward compared to a year ago reflecting the absence of the administrative cost associated with the construction and start up of the new Texas facility. At the end of our first quarter, our balance sheet reflected the stock holder equity of $409 million and net working capital of $156.6 million. The current ratio was 2.8 to 1, our debt totaled $121.9 million and our debt to cap ratio was 23% at January 31. We spent $10.2 million on capital expenditures during the first quarter and we expect to spend $35.1 million on capital expenditures during the year and that is net of approximately $17.5 million in operating leases. The 2008 capital budget includes approximately $4.1 million in improvement at foods, as described by Lampkin, and $3.5 million for additional soybean meal storage at our Robertson County, Texas feed mill. Our depreciation and amortization during the first quarter was $10.2 million and we expect approximately $41 million for fiscal 2008.

With that we will conclude our prepared remarks and will now open up the call to your questions.

Question-and-Answer Session

Operator

The question and answer session will be conducted electronically. (Operator Instructions) We’ll go first to Farha Aslam with Stephens, Inc.

Farha Aslam – Stephens, Inc.

Could you just share with us Joe your thoughts on pricing going forward in the chicken markets?

Joe F. Sanderson, Jr.

Pricing?

Farha Aslam – Stephens, Inc.

Particularly breast meat pricing and leg quarter pricing?

Joe F. Sanderson, Jr.

Well, we have more clarity about leg meat pricing. I believe pricing for February was down from January by a couple of cents a pound and March production is up about $0.05 a pound. We are fairly optimistic about exports for the year and pricing for the year and therefore, we believe dark meat pricing will be in good shape. As far as boneless breasts, which changes every day, I have less clarity about that than the export market but based on what we see today, based on the number of chickens that are being placed, and the egg sets of about 218 million eggs a week, that’s about the same number we had last summer. I would expect boneless breast prices today, with no cutback in the industry to parallel what they did last summer. With one exception, the month of August; we believe the price of boneless breast meat got higher because of heat, we experienced it down here for certain and most people in the industry did. So with that one exception we think we’re going to see something like we saw last summer

Farha Aslam – Stephens, Inc.

Do you anticipate production cuts in the industry?

Joe F. Sanderson, Jr.

Probably, yes. I think we’re seeing - the last information we got was from December, and during the month of December half of the industry lost money. We think January will be more people will be losing money then and based on at least the next 90 days we can see in grain prices, we think we’ll see a lot of people posting red ink. I think as a result of that we could see some reductions in production.

Farha Aslam – Stephens, Inc.

Okay. And my final question Joe, is could you just clarify, you’re on the market for corn and soybeans? Could you just clarify exactly what your hedge positions are?

Joe F. Sanderson, Jr.

We have 10% of our soy for the next nine months priced, 90% unpriced. We’re subject to the market there, and we’re basically 100% subject to the market on corn.

Operator

We’ll take our next question from Christine McCracken from Cleveland Research Company.

Christine McCracken – Cleveland Research Company

Just wanted to dig a little deeper, you said that the industry is going to have to do something, you mentioned that you expect production cuts, we haven’t seen them yet. In terms of timing of when we might expect to see some kind of announcement, do you expect that to come so that production cut would hit maybe after the higher demand period in the summer, say in the early fall?

Joe F. Sanderson, Jr.

I said probably, which means I’m hedging a little on the production cut Christine, probably. But I do think it’s probable what will happen. It’s hard to say, if it’s bad and ugly and deep in February, March and April, you’ll see the production cuts take place during that period of time. There’s still 25% of the industry still making money but I would expect to see those reductions come over the next 90 to 120 days. You’d see some of that July, August, September, likely.

Christine McCracken – Cleveland Research Company

When you look at your production obviously you’re still in the process of kind of ramping up. When you look out at your profit outlook is it that you view yourselves at kind of lower cost and so therefore you’re able to maybe wait longer to take production cuts, or is it that things aren’t bad enough yet for you to make cuts in your production?

Joe E. Sanderson, Jr.

We made cuts in 2006, and we made cuts in 2006 because our losses were very deep that was following Avian influenza I believe, and we made our cuts beginning in May. And our determination is based on our balance sheet, the ability to market and sell. Our outlook, ours is strictly based on Sanderson Farms balance sheet, Sanderson Farms shareholders.

Christine McCracken – Cleveland Research Company

Just on feed cost, I guess when you look at what’s happening today in the meal markets, are you trying to find other alternatives, protein alternatives? How much flexibility do you have to substitute other feed ingredients given kind of how quickly things are moving and your kind of market base feed cost outlook?

Joe F. Sanderson, Jr.

We least cost formulate every day, but there are not substitutes basically for corn and soybean meal and every other commodity that you might think of substituting, which is very little, the price of it is up as well. All of the proteins are elevated in price, wheat is out of the question, there was a time when we fed wheat before, we have fed Milo. We have brought DDGs in to our meals and tested them but the least cost formulation tells you, and I want to tell you that’s a minimal opportunity and I don’t believe that going to happen.

Christine McCracken – Cleveland Research Company

You mentioned that you were building some soy mill storage capacity is sounds like?

Joe F. Sanderson, Jr.

In Texas?

Christine McCracken – Cleveland Research Company

That’s not something you can use right away I assume?

Joe F. Sanderson, Jr.

No. It’ll be operable in March and that is basically because of the two plants in Texas and it’s not a strategic move to take advantage of anything.

Christine McCracken – Cleveland Research Company

With feed costs where they are it seems like profitability headed maybe down on these feed costs, why is the industry not cutting back on wheat?

Joe F. Sanderson, Jr.

I don’t think they’ve had enough pain yet. I think most people in the industry made money last year. I think half of them made money for the last six months. I just don’t think the losses have been deep enough and the signals have been strong enough to cut back. Once you get operations in place , you get chicken houses built and production lines put in plants and machines put in hatcheries. I think there’s limited amount of cutback that can take place, although it can take place and it hasn’t happened long enough and deep enough to prompt people to make production cuts. I do believe this next 90 days is going to be significantly different than the past 90 days though.

Operator

We’ll take our next question from Kenneth Zaslow with BMO Capital Market.

Kenneth Zaslow - BMO Capital Market

One quick housekeeping question, what percentage of your cost of goods sold is feed this quarter?

D. Michael Cockrell

At the end of the fiscal year Ken is was around 42%, this quarter it was 45.7%.

Kenneth Zaslow – BMO Capital Market

And that includes the hedges of soybean meal?

D. Michael Cockrell

That’s correct. That was the feed and chickens process.

Joe F. Sanderson, Jr.

I want to clarify something here for everybody. We do not really hedge in the traditional manner using financial instruments or any of our ingredients, we buy and price and I just want to clarify that for everybody’s benefit. We bought our meal, the portion we bought it from the producers and we priced them back earlier in the year. I just want to clarify that for everyone.

Kenneth Zaslow – BMO Capital Market

The other question I have is, if I look at your 10Q it says that it asking certain farmers about their debt level, but it seems like you renegotiated your debt covenants. Can you talk about that and what prompted you do to that, is it just the feed cost?

D. Michael Cockrell

We did that last year because we renegotiate our line of credit every year and extend our revolver a year. Last year Ken about this time when we renegotiated that, we were looking at very uncertain times in the grain markets and we just felt like it was prudent to ask for an additional debt to cap limitation. We were building a plant, we knew it was coming on line at a period of grain cost uncertainty, so we just asked for it and they were willing to give it to us.

Kenneth Zaslow – BMO Capital Market

Then, the last question I have is where are you finding new customers? Where are you taking the share? I think you mentioned in your prepared remarks that you were gaining new customers around the country, I just didn’t catch exactly where you’re getting new customer. Can you talk a little bit about that?

Lampkin Butts

Out of our Moultrie plant which is a chill pack plant, we have sought a lot of new customers, North Carolina and South, along the East Coast, primarily North Carolina and south of there. We’re still working on Florida, out of that plant. And then, the new Waco plant has sold a lot of new distributors on the West Coast which when we built that plant we hoped to have better access to Phoenix, and Denver, and the West Coast for those fresh food service products.

Joe F. Sanderson, Jr.

All of the dark meat out of WACO is going to the West Coast, is it not?

Lampkin Butts

Most of that dark meat is going in the form of whole legs to the West Coast. We’re selling a few leg quarters out of there domestically.

Kenneth Zaslow – BMO Capital Market

Are you displacing the large players, or the smaller players?

Lampkin Butts

We compete against everybody it’s not any one company in particular.

Operator

We’ll take our next question from John Kohler with Oppenheimer & Close.

John Kohler – Oppenheimer & Close

Maybe I missed it, but did you talk at all, or maybe you can help us understand why you’re holding back on pricing some of the grain?

Joe F. Sanderson, Jr.

I just think at these prices levels and there are multiple reasons, but at these price levels we just don’ feel comfortable forward pricing anything. We think there’re a lot of uncertainties about acreage, for example, and once the acreage is know there might be some relief in the grain markets. We also think that when funds are long and on this amount of the crop it’s a bad time, it’s historically long, and we think that’s a bad time to be pricing. We’re not saying it couldn’t go up, I surely believe it could go up, I said that on the last call, but it’s just at these values, we just think it would be the wrong time to do a lot of forward pricing.

John Kohler – Oppenheimer & Close

Okay. Great. Also, on the increase in debt in the quarter, was that primarily just a seasonal issue?

D. Michael Cockrell

John there were a couple of things, one our cash position went up a little bit and we also had to fund that increased in inventories. I mentioned earlier that we had the $33 million in additional inventories. We had to fund that increase in inventories and our cap ex was actually right on depreciation so it was primarily just a working capital needs.

John Kohler – Oppenheimer & Close

You said that reversed you ship that $20 million or so?

D. Michael Cockrell

We mean pounds, that additional export inventory was shipped at the beginning of the quarter.

Operator

(Operator Instructions) We’ll go next to Pablo Zuanic with J.P. Morgan.

Pablo Zuanic – J.P. Morgan

Joe my question is more on the volume growth, should I worry about that 5% growth? I know you still keeping the guidance of 17 for the full year, but you had told us that the Waco plant would ramp up every quarter pretty much in an even manner. To hear you’re going to relocate the greater production share of production to prepared foods. Are you selling below expectations some of the output from Waco, or are things going as planned?

Joe F. Sanderson, Jr.

No. The Waco plant is on schedule. The Waco plant is processing 600,000 head per week, hey will begin another 25% the first of May. Then it will be an identical schedule to Moultrie, they’ll begin their fourth line probably in August and be at full production sometime during the fourth quarter. The process pounds were up 17% Pablo, which is exactly what we said.

M. Michael Cockrell

It is strictly the inventory and I may not have done a good enough job of explaining that but the inventor bulge that we experienced at the end of the quarter because of those export pounds is a naturally occurring thing. We accumulate product until we get enough to ship into the export market and then we ship it. At the timing at the end of the quarter, as it happened this quarter, we had more pounds of inventory. But we processed exactly what we were expecting to process and those pounds were sold, but the timing of that export sales held a number of pounds down compared to what you might have been expecting.

Lampkin Butts

Pablo, it’s really just the product was sold and priced and sitting in storage ready to go, but the ships where a little late getting in. We actually loaded three vessels the first week in February. Once they were loaded, they were invoiced but it was just the timing of getting those ships into port.

Pablo Zuanic – J.P. Morgan

Just, more of a technical question on grains, when you tell us you’re in the spot market, in us trying to model that, what’s the lead time? Normally, how many weeks of inventory do you have in your mills and then obviously, six to seven weeks to feed those birds? But just give us a sense of typical inventory in terms of weeks in grains.

Joe F. Sanderson, Jr.

One week. We have about one week’s worth of inventory of soybean meal and corn in each of our mills. You’ll see an increase in the cost of goods sold every week, compared to our first quarter.

Pablo Zuanic – J.P. Morgan

Just this issue about gross profit per pound, you mentioned last year revenues had gone up $0.12, feed cost up $0.06, this year you’re looking at feed being up $0.06 to $0.07. You’re making the argument that all those breast prices may not be as high as last year, I think the issues comes we’re now in the January quarter, so I could make the argument that over the next nine months pretty much in every quarter, gross margins should be down year-on-year, maybe that’s stating the obvious. How would you think about that?

Joe F. Sanderson, Jr.

I would think that’s a very logical argument. If we see prices the same as we did a year ago, and basically wing and dark meat are there, and breast meat’s there and the Georgia dock is close. If we see the same prices we saw a year ago, our gross margins is going to be down.

Pablo Zuanic – J.P. Morgan

Okay. Then one last one Joe, how bad things have to get for you guys to cut back on some of your action plan? You said in 2006 you did cut back, so it is feasible that you could also scale back some of your plants? Or you don’t have that flexibility, once you have Waco up and running you want to reach 100% capacity by the end of the fiscal year?

Joe F. Sanderson, Jr.

We’re not looking at market share or anything like that, our deal is based on what our shareholders expect out of us and earnings per share, that’s the bottom line. We have the flexibility to cut back just like we did in 2006 and if it makes financial sense for our shareholders we will do it. We’ve cut back before, and sometimes we didn’t, but we cut back in 2006, we did exactly what we told the market we were going to do, and we went back to full production in January of 07 when frankly, we were profitable. The industry lagged us two or three months, we’ll do the same thing. If it’s good for our shareholders we do it, if it doesn’t make sense, our balance sheet will have a say about that too, where our balance sheet is and what plans, what’s happening. We’re not opposed to cutbacks, we just didn’t need to do it last year and we didn’t.

Pablo Zuanic – J.P. Morgan

Just one last one on the export market and I know exports are not a big focus for your guys like it is for the other companies in the industry, but when we think of Brazil and some of our other producers, do you think that they’re facing even higher feed cost than you are? And as a result they are losing somewhat a competitive edge, and as a result the export market for US chicken producers look better than they have over the last two years? Is that a fair statement or is it similar across the board?

Joe F. Sanderson, Jr.

I think that’s fair. I think Brazil is facing a couple of obstacles, I think the value of their currency has elevated and I think the price of their corn I understand is actually higher than ours is. So that should be some opportunity in the export market for us

Operator

We’ll take our next question from Robert Moscow with Credit Suisse.

Robert Moscow – Credit Suisse

I wanted to know, the USDA reported cold storage data in January that was pretty elevated in chicken it was up 16%. Is some of this due to the timing that you’re talking about here where you had chicken in inventory and maybe it shipped overseas in February?

Lampkin Butts

I think what you’re saying is right, there were a couple of things that happened for the month of January compared to December and even a year ago, most of that increase showed up in leg quarters and breast meat. In January there was a lot of products that wasn’t really backed up but slow shipping, ice breaking vessels were hard to book so there was a little build up just from that and I think all of that will clear and be fine on the dark meat side. There was also a lot of boneless breast, a lot of further processors that buy bulk boneless as frozen product that they use during the year to further process and cook, a lot of that product was put up in December when the boneless market was at a low point so that product went into inventory in January and it should come out fine. But, even though those stocks were up, other than a bad year like 06 when we say inventory go up to over 900 million pounds, most of the time these inventories will run 600 to 700 million in January 766 million, so we’re not alarmed at this point. We’ll continue to watch it, but I think that product that was the boneless breast that was frozen for further processing was part of it and just a little bask up on shipping the leg quarters for export was the rest of it.

Joe F. Sanderson, Jr.

The fact is boneless breast meat prices increased during the month of January and so today that is not a concern for us. If e saw that over the next 60 to 90 days it would become a concern and the first thing you’d see would be the price of boneless start declining.

Operator

It appears we have no further questions at this time. I’d like to turn the call to our speakers for any additional or closing remarks.

Joe F. Sanderson, Jr.

Thank you for spending time with us this morning. We look forward to reporting our results to you throughout the year.

Operator

Once again this does conclude today’s call we do appreciate your participation. You may disconnect at this time.

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