Chanda Brashears - Cinemark Holdings, Inc. Mark Zoradi - Cinemark Holdings, Inc. Sean Gamble - Cinemark Holdings, Inc..

Michael Ng - Goldman Sachs & Co. LLC Eric O. Handler - MKM Partners LLC Robert Fishman - MoffettNathanson Eric Wold - B. Riley FBR, Inc. Julia Yue - JPMorgan Securities LLC James Charles Goss - Barrington Research Associates, Inc. Bill Baker - GARP Research Corporation.

Ladies and gentlemen, thank you for standing by and welcome to the Cinemark's First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I will now turn the conference over to Chanda Brashears..

Thank you, Crystal, and good morning, everyone. At this time, I would like to welcome you to Cinemark Holdings, Inc.'s first quarter 2018 earnings release conference call, hosted by Mark Zoradi, Chief Executive Officer; and Sean Gamble, Chief Financial Officer and Chief Operating Officer.

I would like to remind our listeners that certain matters that are discussed by members of management during this conference call may constitute forward-looking statements within the meaning of the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that may cause Cinemark's actual results to differ materially from the expectations indicated or implied by such statements.

Such risk factors are set forth and expressly qualified in their entirety in the Company's filing the SEC, including the most recently filed Annual Report on Form 10-K. The company undertakes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may include certain non-GAAP financial measures.

A reconciliation of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, in the company's most recently filed Quarterly Report on Form 10-Q and the company's website, investors.cinemark.com.

I would now like to turn the call over to Mark Zoradi..

Into the Spider-Verse, Aquaman, all remain in the second half of this year. Last quarter, we discussed our enthusiasm for the 2019 content, and that excitement continues to grow as we get more visibility into the films and their release dates.

The diverse film lineup skews towards family friendly films which historically play incredibly well throughout our circuit. We'll continue to execute our strategic initiatives and position our company to reap the benefits of this content strength. That concludes my prepared remarks.

I'll now turn the call over to Sean to address a more detailed discussion of our financial performance.

Sean?.

Thank you, Mark, and good morning, everyone. Before diving into the details of our first quarter's financial results, I'd like to remind you that beginning January 1, 2018, we adopted accounting pronouncement ASC 606 which affects how we recognize revenue for certain items.

In summary, other revenues will increase due to the inclusion of a significant financing component related to our NCM deferred revenue, as well as a change in the amortization method used for such deferred revenue. In addition, transaction fees will now be recorded on a gross versus net basis.

Finally, we expect a slight impact on admissions and concession revenues from deferring a portion of those revenues associated with the issuance of points to our Connections loyalty members. Further information about these changes can be found in footnotes of our 10-Q.

And as we indicated last quarter, we do not believe the adoption of this new pronouncement will have a material effect on our overall financial results.

Now shifting to our financial results, during the first quarter, our global company generated total revenues of $780 million and adjusted EBITDA of $193.4 million, which resulted in an adjusted EBITDA margin of 24.8%.

In the U.S., going up against last year's highest-grossing first quarter of all time, attendance declined 4.1% to 44.6 million patrons. However, that result outpaced the North American industry by 150 basis points, as Mark mentioned earlier.

Our outsized attendance results also drove a 10-basis-point outperformance in box office despite the challenging comparison we faced, having exceeded North American industry growth by 100 basis points in the first quarter of last year. We have now surpassed industry box office results for 33 out of the past 37 quarters.

Total domestic admission revenues were $349.3 million for the quarter and included an average ticket price increase of 2.2% to $7.83. This increase resulted from opportunities generated through our recliner conversions and other strategic pricing actions. Our varied food and beverage initiatives generated U.S.

concessions per patron of $4.57 which grew 4.6% to a first quarter record and yielded total concession revenues of $203.8 million. These revenue results were in line with last year despite this quarter's decline in attendance.

Domestic other revenues increased 140.6% driven primarily by the revenue recognition accounting changes I previously described. Overall, our U.S. operations delivered total revenues of $596.4 million, adjusted EBITDA of $155.8 million, and an adjusted EBITDA margin of 26.1%.

Internationally, attendance declined 14% to 23.9 million patrons as a result of a Hollywood film slate that did not translate as well to Latin American audiences as it did in the U.S. Additionally, we faced a challenging prior-year comparison with attendance results that were in line with our historic quarterly highs.

International admissions revenues were $103.3 million, which declined 14.1% versus last year as reported, and were down 10.5% in constant currency. Our reported average ticket price of $4.32 translated to a constant currency increase of 4.2% that was primarily driven by inflationary price growth.

International concessions per patron was $2.43 as reported, and grew 7.7% in constant currency. However, as a result of lower attendance in the quarter, concession revenues decreased 10.5% to $58 million as reported, and were down 7.3% in constant currency.

International other revenues were $22.3 million, which increased 32% as reported and 40.8% in constant currency. This increase was predominately driven by the aforementioned revenue recognition accounting changes, and also benefited from incremental screen advertising and growth in promotional income.

Overall, total international revenues were $183.6 million as reported with an adjusted EBITDA of $37.6 million and an adjusted EBITDA margin of 20.5%. As expected, foreign currency translation returned to a headwind in the first quarter causing an approximate 3.5% drag on our reported financials.

And while future currency fluctuations are difficult to predict, if current rates continue to hold, we would expect a sustained mid to high single-digit percentage headwind throughout the remainder of 2018.

As a reminder, the vast majority of our international operating expenses are transacted in local currency, including film rental and facility lease expenses. So the impact of currency exchange is predominantly translation-based and not transaction-oriented.

Shifting back to our worldwide consolidated results, first quarter film rental and advertising costs as a percentage of admissions revenues increased by 10 basis points year-over-year to 53.2%. This slight increase was driven by a marginally higher concentration of larger films as a percentage of total box office.

Conversely, concession costs as a percentage of total concession revenues decreased by 10 basis points in comparison to the prior year as a result of product mix across our global circuit. Salaries and wages were 11.9% of total revenues and grew 110 basis points compared to the first quarter of 2017.

This increase was driven by reduced leverage over our base level of fixed labor resulting from this quarter's decline in attendance as well as increases in wage rates, health insurance claims, and staffing at new and recently remodeled theaters.

Facility lease expenses as a percentage of total revenues declined by 30 basis points due to reduced percentage rent.

Meanwhile, utilities and other costs as a percentage of total revenues increased by 270 basis points, driven predominantly by the recording of transaction fees on a gross versus net basis associated with the new revenue recognition accounting standards.

And G&A for the quarter increased by 50 basis points as a percentage of total revenues, driven by inflation, the timing of filling open positions and professional fees. G&A was also slightly impacted by an increase in 401(k) benefits that we enhanced following last year's U.S. tax reform changes.

Collectively, first quarter pre-tax income was $87.3 million. Our first quarter's effective tax rate was 28.8% and net income attributable to Cinemark Holdings, Inc. was $62 million or $0.53 per diluted share. With respect to our balance sheet, we ended the quarter with a cash balance of $474 million and a net debt position of $1.6 billion.

We remain dedicated to prudent capital planning and we successfully completed yet another amendment to our senior secured credit facility during the quarter which included an extension of its maturity by approximately three years as well as a 25-basis-point coupon reduction to LIBOR plus 1.75%.

These changes improved our financial position by further extending and staggering our debt instruments as well as benefiting our annual cash interest by $1.7 million.

We are extremely pleased that the consistent strength of our balance sheet continues to provide us the ability to opportunistically take advantage of favorability in the debt markets and drive meaningful improvements in our debt structure. Shifting attention to our U.S.

footprint, we operated 339 theaters and 4,566 screens in 41 states and 102 DMAs at quarter end. During the quarter, we opened 1 theater and 12 screens and closed 1 theater with 7 screens that was at the end of its lease term.

We have signed commitments to open 3 theaters and 30 screens during 2018, and 9 theaters representing 94 screens subsequent to 2018. We expect to spend approximately $91 million in CapEx for these 124 screens. We also anticipate closing approximately one to two additional theaters during the remainder of the year.

Internationally, we operated 194 theaters and 1,398 screens in 15 countries across Latin America. As of quarter-end, we had signed commitments to open 9 new theaters and 49 screens during 2018, and 2 theaters representing 12 screens subsequent to 2018. We anticipate spending approximately $37 million in CapEx for these 61 screens.

Additionally, we recently added 3 theaters and 19 screens as a result of the Brazilian acquisition we completed in April that Mark previously referenced. Consistent with our prior comments, we continue to view Latin America as a long-term growth opportunity and we anticipate adding between 50 to 75 international screens per year in the near-term.

Regarding overall CapEx, we spent $80.2 million in the first quarter, including $17.9 million on new builds, and $62.3 million on existing theaters that was predominately associated with recliner conversions.

We continue to anticipate spending approximately $350 million of CapEx during full-year 2018, of which $120 million is designated for new builds both domestically and internationally, $80 million is for core maintenance of existing screens and in line with our historic run-rate, approximately $10 million is associated with completing the renovation of our headquarters building, and the residual $140 million is for cash flow generating projects that include additional Luxury Lounger theater conversions and varied food and beverage initiatives.

We continue to expect that our annual depreciation and amortization will increase to approximately $260 million to $270 million in 2018 as a result of these capital expenditures. In closing, I would like to thank all of you for your time this morning.

And I want to echo Mark's enthusiasm about the strong pipeline of film content that lies ahead as well as the progress we are making and benefits we are deriving with regard to our strategic initiatives as we work to maintain our ongoing financial strength and consistency of our results.

Crystal, that concludes our prepared remarks, and we would now like to open up the lines for questions..

And our first question comes from the line of Michael Ng with Goldman Sachs..

Good morning. Thanks for the question. I just have a housekeeping question for Sean, one for Mark, and one for whomever would like to take it. Sean, thanks for all the details on the accounting change.

I just wanted to follow up, was there any impact from ASC 606 on EBITDA in the quarter?.

There was a slight impact on EBITDA. The biggest driver of that was the interest gross up of our deferred NCM revenue. As shown on our income statement, you'll see on the line that says interest expense – NCM, the magnitude of that adjustment was about $5 million, which effectively is the EBITDA impact for the quarter.

The amortization timing of our NCM deferred revenue also yielded a slight benefit; however, that was largely offset by our loyalty program deferrals. Also just wanted to note that our EBITDA margin rate really didn't have much of an impact as a result of the change.

The benefits that would have been derived from the NCM interest gross up were basically offset by the impact of shifting from net to gross accounting on transaction fees..

Okay. Thanks. And just as a follow up to that.

Should we see a similar EBITDA contribution for each of the quarters going forward? I guess, is that NCMI deferred revenue pretty consistent quarter-to-quarter?.

Yeah. It's pretty consistent. So, I think that's a pretty safe assumption..

Okay. Great. Thanks. And then, Mark, thanks for all the color on your premium initiatives like XD and VR.

How do initiatives like virtual reality fit into your strategy overall? Specifically, do these generate positive returns in isolation or is this something that helps convert more people to traditional movie going?.

Michael, as I indicated, we are just starting here. We have THE VOID, which we're incredibly excited about here in Dallas and Spaces in San Jose, both at premium theaters for us. And we're going to make a huge effort in terms of marketing each one of these.

At this point, I think it's a little early to say what kind of effect they're going to have in terms of a rollout or how broadly we would go with them. But we're very, very optimistic about it.

We have a good partnership with them, and we think from a return standpoint that we have a very good opportunity to create a positive return on it, but I think it's too early to make any predictions on that..

Okay. Great. And then, lastly, I was just wondering if you could comment on your outlook for the rest of the Latin America box office this year. Are there any U.S. films that you think will translate particularly well? Are there any other notable local language films that you see on the horizon? Thank you..

Well, in regards to box office, we've been very pleased with how Avengers has done, particularly in Brazil because it's been so strong there. And then, as we look forward and we see things like The Incredibles and Jurassic World, these are the kind of movies that particularly index extremely well in Latin America.

And then, even going into third and fourth quarter, you have things like Wreck-It Ralph and action adventure films like Venom.

So – and I think that the Latin America box office for the remainder of this year, especially the second quarter, looks to recover somewhat off of first quarter, and we're pretty positive about what the remainder of the year looks like..

Okay. Thank you, Mark. Thank you, Sean..

Thanks, Michael..

Our next question comes from the line of Eric Handler with MKM Partners..

Yes. Good morning, and thanks for the question. A couple of questions for you guys. First, granted, it's a relatively small acquisition that you made in Brazil, but are you starting to see maybe that this is the tip of the iceberg and we're starting to see a thawing in some M&A activity, be it in the U.S.

or Latin America?.

I would not put it as the tip of the iceberg. I don't think – I think what this was is was this was a opportunistic M&A acquisition for us. They were very good theaters in strong markets in Brazil, and we were able to pay a reasonable price for it. I think it would be overstating it to call this the tip of the iceberg.

We're clearly very aggressive at looking for acquisitions like this, but I don't think this is indicative that all of a sudden we're going to see significantly more. It doesn't mean that we won't continue to look both in this country and throughout the 15 countries we operate in Latin America. But I wouldn't want to overstate that..

Got it.

And then secondly, since, Mark, you brought up – you mentioned Pizza Hut as your new pizza choice in 34 of your theaters, I'm just curious since you're going to be rolling this out in a lot more theaters, when you switch to Pizza Hut, does that improve any of your metrics in terms of spending or purchase intentions?.

I'll tell you this, Eric, it increases a lot of pizza buying. Having a branded pizza like Pizza Hut there that is prepared fresh for the guests and having the branding of Pizza Hut behind it, I mean, this is Pizza Hut pizza. And so, it has improved our sales of pizza significantly, and that's why we will continue to roll this out across the circuit..

Got it.

And then just one last follow up for Sean going off of the last question with Michael Ng, the quarterly impact of ASC 606, if $5 million is sort of the run rate for adjusted EBITDA, what – how should we be thinking about the revenue impact on the other line as well as the other operating expense line?.

Oh, I think you're going to see consistency there as well. That one is – you can see, as what we disclosed, we've got on a total company basis about $27.5 million of other revenue for this quarter, and it will be – of an adjustment. We anticipate it'll be somewhere around that on a quarterly basis going forward as a result of the impact of this.

And a big chunk of that minus the amount that's recorded as interest expense is offset in the other expense line..

Got it. Thank you very much..

Thanks, Eric..

Our next question comes from the line of Robert Fishman with MoffettNathanson..

Good morning. I have one for Mark and one for Sean. Mark, while I understand Cinemark has many years of experience dealing with many different issues in Latin America.

I'm wondering just given the changes in the global political landscape, combined with the current macroeconomic issues going on there, how does the board and the executive team think about the longer term appetite for risk in the region? And related, aside from the current pause on new mall development, does this make you rethink further LatAm expansion, maybe especially in Argentina right now?.

Robert, thanks for the question. Relative to Latin America – and I'm glad you pointed it out – we've been operating there for 25 years. I'm very familiar personally with Latin America having developed many of Disney's distribution companies there 20 and 25 years ago. We have seen this over and over again in Latin America.

You go through the ebbs and flows of political and business disruption, but what happens, and especially when you look back over history, even in times of high inflation or high unemployment or disruptions in the government, people continue to go to the movies.

And we saw it – if you look – if you go back to maybe one of the worst times in Latin America, 2001 – excuse me for Argentina, much worse than the current environment. People continued to go to the movies. So movie-going is relatively inexpensive. You don't have to travel for it.

It is the most economical way for people to get out of their homes and enjoy time with their families.

So, this hasn't decreased our enthusiasm for Latin America simply because we're very used to operating there with extremely experienced teams and film content continues to improve and do well for Latin America, especially the family content, which we see coming forward in the latter half of 2018 and into 2019..

Okay. No, that makes sense. And Sean, given Cinemark already operates efficiently with strong margins, can you just help us think about what levers you still have to keep driving margins higher in both U.S.

and LatAm, especially on the expense side, with film rental, salaries, and other operational overhead?.

Sure. I mean, I think one area of that is obviously just trying to continue to offer premium options that people will select to upgrade to, those tend to have richer margins that boost it, and ongoing productivity initiatives.

Clearly, like any other retailer in any space there's going to be those cost pressures that we all face, but we're working on a whole range of projects, which serve to do more with less.

So, things as simple as just using more kiosks in theater lobbies to defray some of that labor and be able to redeploy that to revenue generating activities, moving more of the transactions onto your phone, there's things of that nature that can help us to automate or simplify processes and just make them more efficient.

So, I would say those are two of the big areas that we kind of look to as ways to sustain and hopefully, continue to improve margins..

If I could, just one more related to that.

So, is the investment in Movie Club right now, is that inflating expenses in the U.S., like, do we see any noticeable impact of that yet?.

That has had a small impact on our advertising and promotion line, as well as to a certain degree our theater payroll line as we've had ambassadors in our theaters to just basically drive awareness of the program. Those are things that, since it's a new program, are at a little bit of a heightened level now, but will come down over time..

Okay. Thank you both..

Thanks, Robert..

Our next question comes from the line of Eric Wold with B. Riley..

Thank you. Good morning. Two questions. I guess, one, thinking about the Disney-Fox combination a little bit further, I guess it's pretty well anticipated that if Disney chooses to reduce the combined studio film output, there's a good opportunity for other studios to pick up those titles.

But if that happens or if that does not happen, have you done the calculation that if all Fox titles are kind of moved up to the Disney rent scale, what impact that could have on your P&L, what potential offsets you could have to that?.

Eric, no, we haven't done that. At this stage of the game, I think that's a little premature. Clearly, we don't know for certain what's going to happen relative to Disney-Fox or any other company that might come in and try and complete that acquisition. So, at this time, we've not run any of those numbers..

Okay..

The other thing that I would just add to that comment is, obviously, our film rental deals are on scales. So, part of that is just also determinate of the level of performance of those titles. And so, it's a range. The higher the – the bigger the title, the increased film rental it'll carry and vice versa for smaller performing titles..

And then I guess, last question, what are your thoughts on some of the various pricing tests that are being done throughout the industry by other exhibitors, weekend surcharges, Tuesday discounts, different seat pricing within the auditorium, et cetera? What if any of those are you testing or thinking about rolling out this year and what are your thoughts in general?.

Eric, let's start with Tuesday discounts. Cinemark really brought that to light several years ago. So that's just been standard operating procedure for us across the majority of our circuit for several years. Discount Tuesday is synonymous in most of our markets with Cinemark.

In relation to highly variable pricing, again, we've been doing highly variable pricing for many years. There's been additional – usually, the highest price of the week is on a Friday or Saturday night. So we've had that kind of pricing in place for quite a while.

And then, we do steep level of variable pricing down the line for seniors, children, military. So, relative to significant variable pricing, it's something that we have a lot of experience in doing. Relative to discount Tuesdays, it's been in place for several years..

Perfect. Thank you..

Thanks for the questions, Eric..

Our next question comes from the line of Julia Yue with JPMorgan..

Hi. Thank you.

Given how far along you guys are with the recliner conversions, I'm wondering for the portfolio of converted screens right now, how much pricing increase have you taken at this point? Are there still some centers that you haven't taken up in order to get more people to come visit and experience the theaters or is it kind of behind us now?.

Yes. Thanks for the question, Julia. I would say, yes, there is still increased potential. If you look at our overall average ticket price for the quarter of 2.2% growth, that trailed the industry somewhat. Part of that is just tied to our overall pricing philosophy and how it plays to balancing price versus attendance to optimize box office.

But part of that is also because a lot of those recliners that we completed during last year were towards the second half of last year. So, as they've been ramping up, we haven't taken as much price as we potentially can over time.

So, short answer is yes, we think that there's incremental opportunity in those recliners as they kind of get to their full scale and are fully up and running..

Got it.

And then, given the strong results you talked about with your XD screens, a small percentage of total screens but generating outsized box office and kind of what you're doing with the marketing initiatives, does this change your views, I guess, potentially on rolling out additional peel-off (00:41:33) screens or increasing your presence there?.

Julia, no, it doesn't change it at all. I mean, every opportunity we have, whether it's a new build or any existing theater, if we see an opportunity to put an XD screen in there, we absolutely want to do it. One of the things that we have done philosophically when we – well, we've done two things.

One was operationally where we added certification of THX because that just adds to the brand awareness that this is really, really high-quality screens.

But relative to new screens or converting any screen within an existing theater, we want to make sure that the size of that screen and the size of the auditorium is commensurate with how we're developing the XD brand. So, we won't go below a certain size depending on that particular theater.

So, the only limitation for us within our existing circuit to adding more is size of existing screens. And in every new development, unless it's a very small footprint, we will always try and put in a new XD screen..

Got it. Thank you very much..

Thank you, Julia..

Our next question comes from the line of Jim Goss with Barrington Research..

Thanks a lot.

Regarding THX certification, is it a certification of existing systems or is it a software-based overlay or are there any physical modifications involved and at what costs?.

There's not significant cost associated with it, but we did go and have each one of our theaters reviewed in order to get the certification and THX has been known for this for many years. We love the collaboration with them.

And relative to us having to do significant changes, no, but relative to us to make sure that everything is tweaked properly in our XD screens, yes, we went and did that. But is there a big capital look that we're going to be incurring because of it? It will be very insignificant..

Okay.

So, the branding comes with not that much outlay?.

That is absolutely right..

Following up a little bit on what Eric Wold was asking about. I was wondering to the extent that Disney was talking last night about their stressing of quality over quantity even without Fox as an addition.

Now, I'm wondering if you have quantified any impact on your film rent margins so far to the extent that you do have the scales and that they've taken a larger share of the box office.

I'm sure you'd take that trade any day, but have you noticed any impact you'd attribute to their quality over quantity strategy?.

I would answer it this way, Jim. If you kind of look over the course of our history, we haven't had a significant fluctuation in our film rental rate.

It's probably at the higher end of the rate now, given that over the last few years, box office has been driven by a concentration of larger films or driven by a higher concentration of larger films than it has in the past. So, I don't – and a lot of that has come from Disney.

So, I think if you just look at the relative movement of that over time, it would suggest that there isn't a significant effect of that to be expected..

Okay. One last thing. You were discussing your success with your Movie Club so far, but I assume you're probably also getting some admissions from MoviePass.

I wonder how you could compare the throughput in both of those areas?.

Nothing has changed for us relative to MoviePass. We continue to accept the MoviePass card as long as they abide by the existing agreements. So it's not overly significant to us. It's in the same kind of category in the 4% to 5% range in terms of attendance on MoviePass.

So, we don't see it as overly significant, but relative to their go-forwardness, their future, and go-forward, it all just depends on whether or not they continue to abide by the existing rules and regulations that have been set up..

All right. Thanks for the questions. Bye..

Thanks, Jim. Appreciate it..

And our next question comes from the line of Bill Baker with GARP Research..

Yes, hi.

Can you just drill down a little more about the operating expenses, and salaries, and wages, and utilities please?.

I'm sorry. First of all, welcome to the call, Bill. Can you – Sorry -.

Thank you. Thank you..

Can you just elaborate on that, what aspect that you're looking for?.

Yeah. I guess just there's been wage pressure out there generally, and I see that it's something like a 10%-ish increase in salaries and wages. And you buoy (00:47:26) kind of lower end wage portion of most employment out there. And the utilities numbers, I know those can vary and sometimes you guys provide a little color on that as to....

Sure..

...why it flips (00:47:42) up or down. So..

Sure. Okay. Thanks. Well, just starting with the utilities and other, really the increase you're seeing there this quarter, it's driven by the revenue recognition accounting changes with ASC 606. If you were to remove those in the aggregate, our utilities and other expenses would be essentially flat year-over-year.

The salaries and wages that we're seeing on a global basis, a part of that is driven just by wage-rate pressures, either in the form of just general inflation. You have inflation both in the U.S. and certainly inflation internationally as well as minimum wage hikes.

There's clearly a certain level of fixed labor that we need to keep in the theater to run those theaters. So, in a depressed attendance environment, we lose some of our operating leverage over that base level of fixed labor.

We see that particularly in our international business with some of the additional government restrictions that come into play on how much flexibility we have with that labor. The other thing we're seeing this quarter in our – in that line item, we've got some health insurance claims that are a little bit higher than normal.

We're a self-insured company, so we have some of those higher claims that comes through to our cost line, so that's playing in there.

And then there's also a little bit of impact of some of the margin-generating investments, such as new builds, our recliner conversions and some of the food and beverage initiatives that we've been working on which tend to have a little bit lower efficiency in the early timeframe but then improve over time as we're generating more revenues.

I mentioned earlier, too, one of those would also include the Movie Club ambassadors that Robert had asked about earlier on the call. So, that's really the drivers of the salaries and wages component of what's going on with that line and as well as the utilities and other..

Well, thank you very much for a very complete explanation. That's very good. Thank you..

Thanks, Bill. Appreciate it..

At this time, there are no further questions in queue. I will now turn the call back to the presenters for additional or closing remarks..

Thank you, all, very much for joining us this morning, and we look forward to speaking with you again following our second quarter. Bye, now..

This concludes today's conference call. You may now disconnect, and have a wonderful day..