Mary Gentry - VP, Treasurer and IR Mike Baur - CEO Charlie Mathis - CFO.

Bob Hahn - Raymond James Chris McGinnis - Sidoti & Company Keith Housum - Northcoast Research.

Welcome to the ScanSource Fourth Quarter and Fiscal Year 2016 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Mary Gentry, Vice President, Treasurer and Investor Relations. Ma'am, you may begin..

Thank you, and welcome to ScanSource's earnings conference call for the quarter and fiscal year ended June 30, 2016. With me today are Mike Baur, our CEO and Charlie Mathis, our CFO. We will review operating results for the quarter and full year and then take your questions.

A slide presentation that accompanies our comments and webcast is posted in the Investor Relations section of our website. Certain statements made on this call, including our expectations for Intelisys and expectations for the first quarter, will be forward-looking statements.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, those factors identified in the earnings release that we put out today and in ScanSource's Form 10-K for the year as filed with the SEC today.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. ScanSource disclaims any duty to update forward-looking statements to reflect actual results or changes in expectations, except as required by law.

We will be discussing both GAAP and non-GAAP results during our call and have provided reconciliations between those amounts in our slide presentation and in our press release. These reconciliations can also be found on our website and have been filed with our Form 8-K. Mike Baur will now begin our discussion with an overview of our results..

Thanks, Mary, and thank you for joining us today. We had a surprising and disappointing finish to our fiscal year with sales and EPS below our expected range. For the quarter, our non-GAAP EPS of $0.51 fell below our expected range due to lower sales volume and lower gross profit margins.

I'll open with some explanations for these shortfalls and we'll be describing actual results versus our forecasted range. But starting with sales. Almost all of our sales forecast miss was in the Worldwide Barcode & Security segment from weak point-of-sale big deals in North America and our networking business.

We expected big deals more in line with our typical trend that did not happen in the fourth quarter. The biggest miss in our forecast was the gross profit margin. Our forecast reflected a 10% gross margin, while our actual margin for the quarter was well below that at 9.4%.

The unfavorable difference was primarily in two of our business units in our Worldwide Communications & Services segment and included some unusual items. As a reminder, we use our gross margin as a barometer to determine our investments in SG&A to reach our profitability and return goals.

Strategic acquisitions are an important part of our capital allocation plan. In October 2015, we put together a team within ScanSource develop services strategy to help our VAR partners to build recurring services revenue. Our goal is to give our VARs a way to move faster toward services and recurring revenue opportunities.

In that process, we identified the high-growth recurring revenue telecom and cloud services market as a great opportunity for ScanSource. While complementary to our business, it's a market that is currently not being serviced by us or by many of our VARs.

We also identified Intelisys as the market leader with specialized expertise, market insights and outstanding partner relationships. It is the industry-leading technology services distributor to the world's leading telecom carriers, cable companies and cloud services providers, including CenturyLink, Comcast, Level 3, Windstream and XO.

This is a large and growing addressable market with approximately 10% currently being served by the indirect channel today. So it makes strategic sense to see if we could acquire the market leader and a company that seem to have a good cultural fit for ScanSource.

Although Intelisys was not for sale, we approached them in March and this afternoon, we closed that acquisition. Intelisys' acquisition summarized on Slide 4 is an important step in building a more predictable, recurring, high-margin revenue stream for ScanSource and for our VARs.

We also see opportunities for our VARs to sell connectivity along with products. We structured the acquisition with close to half of the purchase price we paid in earn-out payments based on a multiple of EBITDA over the next four years. We are aligned with the sellers to capture the profitable growth and returns from our combination.

We are very pleased that the experience and talent that Intelisys management team is joined in ScanSource becoming part of our Worldwide Communications & Services segment. In addition, to support the entry into the telecom and cloud services market, we announced new leadership for our worldwide business segments.

Buck Baker, formerly President of Worldwide Barcode & Security, has been named President of Worldwide Communications & Services; Paul Constantine and Tony Sorrentino have been named co-presidents of the Worldwide Barcode & Security segment.

With that, I'll turn the call over to Charlie to discuss our financial results in more detail and our outlook for next quarter..

Thanks, Mike. As Mike indicated, we're disappointed with our fourth quarter financial results as gross margins declined with lower sales volume. These 2 items are the primary reason for the negative EPS impact between the non-GAAP EPS of $0.51 and our forecasted range.

First, let me explain the variances to our forecast just to make clear what happened. I've included Slide number 5 showing the actual versus forecast for the sales and gross margins. As you see on this slide, the volume declined primarily in the Worldwide Barcode & Security segment.

However, the gross margin miss was primarily in the Worldwide Communications & Services segment. As we indicated on our last call in early May, we were forecasting organic sales growth to be slightly positive year-over-year and expected big deals to normalize.

During any quarter, our sales were back-end loaded with 40% occurring in the last month of the quarter. Also, as Mike indicated on our last call, KBZ is still the wild card in our forecasting and that was the case this quarter as well.

The $48 million decline in sales volume from the midpoint of our sales range occurred primarily in our Worldwide Barcode & Security segment and reflected an 8% organic sales decline year-over-year. This followed 4% organic growth for the first nine months of fiscal year 2016.

On a consolidated basis, the volume shortfall in net sales versus our forecast had a $0.12 negative impact on EPS. Our largest forecast miss was decline in the gross profit margin, a 9.4% versus 10% in our forecast. This had a negative EPS impact of $0.14. Most of the margin decline occurred in Worldwide Communications & Services.

The gross margin for the segment was 12.1% compared to 13.7% in our forecast. Network1 in Brazil contributed most to the margin miss due to cost reported in the fourth quarter, which we do not believe will be repeatable in the future. These costs related to issues surrounding the acquisition, integration of systems and processes in Brazil and Chile.

This represents the half the segment's miss. In addition, our North America communications businesses had lower-than-expected margins from the timing of vendor program recognition as well as a less favorable product and customer mix. Now turning to the quarter over prior year comparison on Slide 6 and 7.

Net sales for the quarter -- for the current quarter increased 2% to $877 million compared to $857 million a year ago. The dollar impact on sales due to foreign currency translation was a negative $7.5 million, as expected. Net sales in constant currency, excluding acquisitions, declined 6% year-over-year for the quarter.

Growth we had been experiencing in our wireless and networking business slowed down considerably this quarter. And looking at the gross margin comparison versus prior year, our fourth quarter 2016 gross profit was $83 million or 9.4% of net sales compared to $91 million or 10.7% of net sales a year ago.

Less favorable vendor programs combined with the above-described impacts led to the decline. SG&A expenses, excluding amortization of intangible assets and acquisition costs, were $64 million or 7.3% of net sales compared to $63 million or 7.3% of net sales in the prior year quarter.

For the quarter, bad debt expense increased to $4.8 million or 54 basis points sales due to increased reserves for specific accounts in North America and Brazil. As a percentage of sales, this is higher than our normalized level of 20 to 25 basis points. The increase in bad debt expense was offset by lower employee-related expenses.

Our fourth quarter 2016 non-GAAP operating income was $18.9 million or 2.1% of net sales compared to $28.6 million or 3.3% in the prior year quarter. Non-GAAP operating margins for the Worldwide Barcode & Security decreased 71 basis points from a lower gross margin and higher bad debt expense.

Non-GAAP operating margins for the Worldwide Communications & Services decreased 200 basis points as a result of the lower gross margin. Our effective tax rate was 30.5% for the fourth quarter 2016 and 34% for the prior year period. The lower tax rate was from U.S.

federal and state tax credits, a mix of more international business and less profitability than expected. For fiscal year 2016, our effective tax rate totaled 33.7%. For the fiscal year 2017 forecast, we are using a 34.5% effective tax rate. Fourth quarter 2016 GAAP EPS of $0.50 decreased 12% year-over-year and non-GAAP EPS decreased 23%.

Average diluted shares for the fourth quarter 2016 totaled 25.9 million, down 10% from the year earlier period as a result of share repurchases. Now, let me summarize our results for the full year.

Our fiscal year 2016 net sales of $3.5 billion represents a 10% increase from the prior year, but basically unchanged in constant currency, excluding acquisitions. The gross margin for the fiscal year 2016 was 10%, close to 10.2% for the fiscal year 2015 and consistent with our historical average for many years.

Non-GAAP operating income decreased 5% to $109 million. Our non-GAAP operating margin 3.1% from $114 million in the prior year. These results include $6.6 million of higher bad debt expense and an estimated $3.8 million negative impact of foreign currency translation.

Additionally, we have included results for our KBZ acquisitions for 10 months in the current year, and KBZ performed very well. Our fiscal year 2016 non-GAAP EPS was $2.71, up 4% from the prior year non-GAAP EPS of $2.61. Now shifting to the balance sheet and capital allocation plan.

Our working capital measures are referenced on Slide 12 in our presentation. Our DSO at 57 days, came in higher than our typical range and reflect the aging of customer-specific accounts in North America and Brazil.

Our reseller financial services teams around the globe remained focused on ensuring appropriate underwriting standards are in place and finding ways to collateralize and recover what we have reserved. Inventory turns and paid for inventory days are within our typical range.

Our segment presidents ensure that we have the appropriate level of inventory to meet customer demand and are receiving the appropriate returns for the inventory we carry. Based on gross margins we achieved this quarter, our inventory turn should have been higher. Our balance sheet remains very strong. Turning to Slide 14.

At June 30, 2016, we had cash and cash equivalents of $61 million and debt of $77 million for net debt of $15 million. Our leverage totaled approximately 0.13x trailing 12-month EBITDA, which was below our targeted leverage of 1x. Our ROIC was 13.3% for the full year, which was impacted by the decline in our fourth quarter profitability.

We generated $52 million of cash from operations for the full year and completed a $120 million share repurchase authorization in June. The Board of Directors has approved the 22nd $120 million share repurchase authorization for the next three years.

Our capital allocation priorities remain the same; organic growth, strategic acquisitions and share repurchases.

We closed on Intelisys acquisition this afternoon under the agreement the all-cash transaction includes an initial purchase price of $83.6 million for 52% of the estimated purchase price and earn-out payments based on EBITDA over the next 4 years for the remaining 48% of the estimated purchase price.

Our current estimated range for total earn-out payments based on an EBITDA multiple is between $100 million and $150 million. But there is no minimum or maximum payment.

Intelisys' net assets are very small, so substantially all of the purchase price, which will include the present value of the estimated earn-out payments, will be allocated to the tangible assets and goodwill.

Therefore, post acquisition, our financial statements will include a significant increase in intangible amortization and change in fair value of contingent consideration.

Accordingly for the first full year after closing, we expect the Intelisys acquisition to be dilutive to GAAP earnings per share and accretive to non-GAAP earnings per share, excluding intangible amortization, change in fair value, and change in contingent consideration and acquisition cost.

I'd like to highlight a few things about the Intelisys business model. First, working capital requirements are very low, reflecting the services model. Intelisys gets commissions from its suppliers, referred to as gross commissions and then shares these commissions with its subagents.

This net amount that is the gross commissions less payments to subagents is reported as net revenues in the financial statements. For this first full year after closing, Intelisys' net revenues are estimated to total over $34 million, with a 45% to 50% estimated EBITDA margin.

With Intelisys, we are adding a small amount of top line revenue with a much larger impact to our bottom line margins and EBITDA. Now turning to our forecast on Slide 15, and I want to give additional color on the forecast.

We expect net sales for the first quarter fiscal year 2017 to range from $875 million to $925 million and non-GAAP diluted earnings per share to range from $0.60 to $0.68. The forecast does not include projections for the Intelisys acquisition.

Our forecast assumes a 3% decline in organic sales, which represents a 5% decline in Worldwide Communications & Services and a 1% decline in Worldwide Barcode & Security. In the forecast, we expect the gross margin to improve to 9.8% and a very small foreign currency translation benefit.

The foreign exchange rates used in our forecast are summarized in our presentation slides. I'd now like to turn the call back over to Mike..

Thanks, Charlie. We have 2 reporting segments, and I'll start with Worldwide Barcode & Security, which represents 67% of overall sales. Net sales of $586 million increased 5% year-over-year from the addition of KBZ. On an organic basis, net sales declined 8%.

Our POS & Barcode business in North America declined from weakness in our POS business, point-of-sale business, including our EMV payments business. Big deals that we expected to close this quarter did not happen, including some retail projects being put on hold with customer delaying purchasing decisions.

However, we do expect some of that business to materialize this next quarter. Turning to Europe. Higher prices introduced in the market last year have put more pressure on our gross margins there.

And in Brazil, net sales decreased 11% year-over-year in local currency even more when translated into US dollars due to higher sales from the fiscal printer transition last year. Local currency appreciation pressure margins in Brazil as a result of holding U.S. imported inventory.

These margin pressures should subside as the inventory and stock is sold. Our team in Brazil lowered average inventory balances due to market conditions and to reflect lower expected sales growth. Our Networking and Security business in North America had a good video surveillance camera quarter, with our sales for some vendors reaching record levels.

However, it was a challenging quarter for our Networking and Wireless business, including some consolidation activity and delays in the E-Rate buying season. KBZ was recently named the fiscal year '16 Cisco Collaboration Growth Distributor of the year.

KBZ is currently gearing up for the federal government buying season, and this business can be difficult to predict given the bid process and larger size of some of these projects. Now to our second segment, Worldwide Communications and Services, which represents 33% of our overall sales. Net sales of $292 million decreased 3% from a year ago.

Overall, sales in North America declined year-over-year while we had good growth in local currency in Brazil and Europe. It's an interesting market environment for our communications business, as some of our top vendors are either being sold or exploring strategic options.

In addition, cloud offerings are providing customers with new alternatives to consider. In North America, we had solid quarters with our Unified Communications vendors and good growth with complementary AV vendors. We continue to gain momentum with our newer vendors Mitel and Unify by recruiting and growing the reseller base.

In Europe, we grew year-over-year in a challenging market, but missed our sales forecast. With our Imago and legacy ScanSource teams coming together, we have good opportunities to cross-sell our vendor solutions. Network1 had good local currency growth, which strengthened SMB service providers and Unified Communications vendors.

And in Brazil though some -- we're seeing some customers delaying purchasing decisions for the larger enterprise projects. We're pleased that we got a regulatory approval for Intelisys acquisition last Thursday and successfully closed earlier today.

We want to welcome all the Intelisys' employees to the ScanSource family, and we look forward to telling you more about our Intelisys business. We'll now open it up for questions..

[Operator Instructions] Our first question comes from the line of Brian Alexander from Raymond James..

Hi, guys. This is Bob Hahn calling in for Brian. Just real quick on the growth decelerating in the second half.

Can you just elaborate a little bit more just in terms of kind of why you expect some of these larger deals to perhaps fall in to the current quarter and then I have a quick follow-up as well?.

Yes, Bob. This is Mike Baur. We saw in the March quarter that there was some slowdown in our POS deals, in our Barcode business unit and our segment, and we saw that happen again in the June quarter. And so we certainly didn't expect that.

And then we started looking at against what we expected that was the big surprise and then when we look at where we were growing over the last year-and-half, a lot of the growth we've been talking about on multiple occasions was from our networking and wireless vendor community, and a couple of those vendors are currently -- or have been acquired.

And so there has been some disruption in that opportunity for us. So that really was a surprise to us as well as our wireless networking business had been doing really fantastic, and it slowed down significantly in the June quarter..

Okay.

But it sounds like you at least expect some of the large deals got pushed out to come into the next quarter?.

Yes, that's right. In our barcode space, we talk about our point-of-sale retail business and those are generally large transactions with our key vendors there. And we do believe that a number of those deals do get pushed out to the September quarter..

Okay. And then just a quick follow-up.

Just in terms of your guidance, do you expect some of the -- I guess, looking at the guidance, revenue is down, but you also have the acquisition in there, but just thinking about the margin declining or some of the pressures that you saw in the current quarter, do you expect that to continue?.

Yeah. Bob, this is Charlie. No, we expect there to be improvement in the gross margins from the June quarter to September quarter as we indicated this going from increase from almost 40 basis points.

And the reason is because some of the margin decline that we experienced in June was so called onetime in nature, we believe, will not be repeatable because of the issues with the acquisition and integration in Brazil.

The other thing was the timing of the vendor programs and the recognition of those, and that contributed to the June declining margins and that's a timing issue of which we believe will come back in September as well..

Okay, great. Thank you..

Thank you. And our next question comes from the line of Chris McGinnis from Sidoti & Company..

Good afternoon and thanks for taking my questions. Can you just -- just for the KBZ, it sounds like you're still trying to wrap your hands around it, I think. I know it's been a good acquisition, but it sounds like maybe the timing of that was the -- like one of the main reasons for the miss in the top line.

Can you maybe just what -- maybe talk about where you're at with the acquisition and I guess, just the understanding of the model itself and just maybe give us some -- a little bit more insight on that?.

Yes. Chris, this is Mike. Part of the challenge for us, for ScanSource with the KBZ acquisition is principally, as you know, around one big vendor and that vendor has a different quarterly year than we do. And so for example, in this past quarter, ScanSource quarter ends on June 30 and KBZ key vendor ends in July.

And so it's interesting how that has affected behavior in the channel to focus on the vendor’s year-end push, and it takes the pressure off of them closing business, which we normally would see in our June quarter. So, and it's because it's such a big part of our business now, it can definitely affect our ability to be accurate on our forecasting.

So what we're seeing is the shift of business from a timing perspective and then secondly, as we said in the last quarter, because there is this government business that's embedded in KBZ, which for us still is fairly new, having a significant amount of federal and in some cases state but federal business, it is larger deals and they do go through a bidding cycle and we still are just now approaching our first year with KBZ.

So I would say we've learned a lot in these first couple of quarters. And hopefully, by the time we get to the end of September, we'll have a better handle on how to better forecast these guys. But that's part of the challenge for us as we don't believe it reflects the strength of the business, but reflects the timing of the revenue..

Okay. That makes sense.

In Q2 -- just I guess, revisit the Brazil, I guess, just what's happening in the marketplace, sounds like you're actually maybe gaining share on an organic basis because -- can you just walk through the environment, are the competitors closing down and maybe on an organic basis, how are you growing actually?.

Chris, help me with that you're talking about our Barcode or the Network1 business, just unclear..

Network1..

Yes. So Network1 for us is still a -- still kind of, again, new business for us growing in markets where there are not as many competitors. You're exactly right. And so in the Network1 case, we have a large line card and we're in multiple growth businesses down there, not only as are we in the Communication business like we are in the U.S.

and Europe, but we're also in the network security business down there with some key vendors. And so our profile for ScanSource offer in Brazil is quite different. We've got a much larger line card than a typical ScanSource opportunity and it's because there are fewer distributors in Brazil.

So we are able to take advantage of that opportunity and that's why we still believe that Network1 growth potential is significant, and it's where we're still making, frankly, a big bet for the future..

Okay. And just digging in on the new deal, Intelisys deal.

I know it won't have much of an impact in the current quarter obviously, but I thought it would have helped maybe a little bit earlier, but can you maybe just talk about the margin structure of that business and how much it can help to the profits for the overall company?.

Yes. Chris, this is Charlie. So as we indicated for the full year after acquisition of over $34 million of revenue and a 45% to 50% EBITDA margin. And that's pretty evenly spread in their business. So you can take that number and really come up with a monthly EBITDA, it's $1 million or more..

Okay. Great. Thanks. I appreciate that.

And that just -- that should really start to get into the mix in the December quarter, I guess?.

That's correct..

Okay. And then just on the guidance, it seemed a little bit weaker even if there is some bigger deals coming in at least on the top line than I was expecting.

Am I been a little aggressive in my estimates for acquisition? But the growth rate seems to be a little bit slower than, I think, I would have expected and can you maybe just walk through what's happening? If the deals are being pushed out, any confidence in the customer base, are they scared of the market that's out there? Or is it one of these large deals getting pushed out, maybe just provide a little bit more details on the customer base and what's happening there?.

Chris, I think we've got a couple of things going on. Specifically, the big deals are in our North America POS business. That's where it is primarily big deal orient, it has been historically. And it's hard for us to really predict how many of those big deals will happen in the September quarter.

We feel sitting here on August 29 that we at least have almost two months visibility into this quarter, but also as we said on the call, our business is heavily weighted on the last month of every quarter, about 40% is still yet to happen.

So having said all that, we believe we have decent confidence in the POS & Barcode business big deals coming based on the forecast we've given. I would say that the more challenging aspect of the growth in our forecast is KBZ.

And the second piece is we've been having this large growth until last quarter -- this past quarter in the networking and wireless business, and some of those vendors have recently been acquired, and we now have more competitors with those vendors.

So we're seeing some competitive market share threats in that business and that was a business we were enjoying very healthy growth a year ago. So I would point you to that direction would be an area that surprised us frankly in the June quarter.

We didn't expect the growth to slow down with those vendors like it did, and they were material to the growth trajectory on our organic business. That's why we're -- frankly with the Imago business that we acquired and the KBZ business and the Network1, those are the three areas for primary growth on the top line right now..

All right. I appreciate that detail. Thank you and I think that’s it for now. I appreciate it, really appreciate the color..

Thank you. [Operator Instructions] Our next question comes from the line of Keith Housum from Northcoast Research..

Good afternoon, guys. Perhaps, you can shed a little more color for me on the magnitude of the three different components for the gross margin miss between the Brazil and Chile systems, the mix and the vendor incentives..

Hey, Keith, this is Charlie. So I think as I indicated in there, it's approximately half and half to the mix there -- to the miss from the Network1 and then the timing and recognition of the vendor programs..

Got you. Half and half. Okay. Thanks. And then your bad debt expense, considerably more than, I guess, what I was expecting in prior quarters.

Is there anything happening in the bad debt expense that perhaps suggested that maybe, that number maybe higher going forward? Or is this unique one-time items?.

Yes. So we look at this -- again, on the bad debt, this is a expense -- bad debt expense as a non-cash charge here of which we have to make judgments on the amount of reserves that we're putting on specific customer accounts, and we do that every quarter and we think we have made the appropriate level reserves for this quarter..

Mike, this is Charlie.

Is there anything that concerns you going forward that that number maybe elevated compared to prior year, just on broader scale?.

Yeah. The bad debt expense is higher, but there is nothing that, that concerns me. And the intent and what our FS team is focused on is to recover all of these reserves that we put on there. And we have a pretty good track record of doing that.

Whether that happens or not on this case, I'm not sure, but that's certainly the intent and why we set up these things the way that we do so that we can collect fully..

Okay. And then Charlie, just in terms of trying to convert the Intelisys guidance that you guys have provided in the call here to EPS.

Are you thinking $0.02 to $0.03 for the first quarter on top of the numbers that you gave for the rest of the company?.

Yes. That sounds pretty reasonable, yes..

Okay. And then in terms of the Unified Communications and the slowdown, I guess, 5% that you're expecting decline in the next quarter.

Can you provide a little more color on the shift between -- and the magnitude between, perhaps, what's just the overall loss in the market as it's probably a little more towards the cloud-based environment versus the more competitive nature from the vendors shifting around?.

Well, Keith, I think -- this is Mike. I think it's multiple things happen at the same time. And one of the callouts, as you heard was we've had vendor -- lot of vendor activity meaning at the corporate level. We've got vendors, we got acquired and maybe being acquired or some exploring strategic options. And so I think that affects the bar channel.

So I think the bar channel is going through some -- they got some challenges to decide where do they make their bets for the future. And some of those bets are clearly with alternative offers like cloud offers and that's one reason why we believe the Intelisys acquisition fits perfectly with some of the challenges that those communication bars have.

Those bars have to find a way to get higher margins and they will love to have that be a recurring profitable business. And Intelisys and their partners provide that. And we believe that many of the communication VARs today are not fully participating in the opportunity that they may be walking by today.

And so that's why that business is -- the whole communications bar channel has a lot of challenges to it today, and we're trying to provide a solution for the VARs that we believe they will benefit from while some of our traditional vendors are going through some challenges..

Okay.

So is it kind of possible to kind of break it up between what's perhaps effecting it more? Is it the market shift versus the vendor shifting around, including more competitors?.

I would say there is less market shift that's happening today. So I don’t believe that you got this massive change yet. I think it always -- and when I talk about it, I'm talking about through the SMB business, right? So we have VARs who do participate in large enterprises, and I think they see the shift to cloud and other alternatives sooner.

I think the SMB business is just now seeing that. So I think, but our business primarily being an SMB business, I think we're just now realizing and seeing the impact of that. I think it's gone on the floor now with large enterprise and it's just now becoming an issue for our channel. So it's -- I think it's new for our channel..

Okay, thank you..

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to management for any closing comments..

Great and thanks for joining us today. We expect to hold our next conference call to discuss September 30th quarterly earnings results on Monday, November 7, 2016..

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