Thank you for joining Packaging Corporation of America's Second Quarter 2019 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. [Operator Instructions]I would now like to turn the conference over to Mr. Kowlzan, and please proceed when you're ready, sir..

Good morning, and thank you for participating in Packaging Corporation of America's second quarter 2019 earnings release conference call. I am Mark Kowlzan, Chairman and CEO of PCA, and with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging business; and Bob Mundy, our Chief Financial Officer.

I'll begin the call with an overview of our second quarter results. And then I'm going to turn the call over to Tom and Bob who will provide more details. And then I'll wrap things up and then we'd be glad to take questions.Yesterday, we reported second quarter net income of $194 million or $2.04 per share.

This compares to a second quarter 2018 net income of $197 million or $2.08 per share, excluding special items. Second quarter net sales were $1.8 billion in both 2019 and 2018. Total company EBITDA for the second quarter was $376 million in 2019 and $382 million in 2018, excluding special items.

The $0.04 per share decrease in second quarter 2019 earnings compared to the second quarter of 2018, excluding special items, was driven primarily by higher operating costs of $0.27, higher converting costs of $0.05, lower volume in our paper segment of $0.04, higher annual outage expenses of $0.06, and a higher tax rate of $0.01.These higher operating and converting costs were primarily due to cost increases with labor and benefits expenses as well as indirect costs, such as repair and operating materials, outside services, equipment and building rental expenses, property taxes and insurance.

These items were partially offset by higher volume of $0.09 and prices and mix of $0.08 in our packaging segment, higher prices and mix in our paper segment of $0.16 and lower Wallula number three paper machine conversion related costs of $0.04, and lower freight costs of $0.02.Looking at the packaging business, EBITDA in the second quarter 2019 of $349 million with sales of $1.5 billion resulted in a margin of 23.2% versus last year's EBITDA excluding special items of $363 million and sales of $1.5 billion or a 24.2% margin.

We continue to run our containerboard mills to demand, as we lowered our inventory levels from the first quarter and maintained our industry leading integration rate by supplying our box plants with the necessary containerboard to establish a new second quarter record for box shipments per day.

Our employees did an outstanding job of running cost effectively, while balancing supply with demand and optimizing our containerboard footprint to minimize freight and logistics costs across the system.

We ended the quarter with inventories at the appropriate level to meet our seasonally stronger third quarter demand.I'll now turn it over to Tom who will provide more details on containerboard sales and the corrugated business in general..

Thank you, Mark. As Mark indicated, our corrugated products plants had record second quarter box shipments per day, which were up 0.3% compared to last year’s second quarter, in spite of the significant business loss we incurred at Sacramento container due to a purchase of two large sheet customers by another integrated.

Outside sales volumes of container board was about 16,000 tons below last year’ second quarter as we ran our containerboard system to demand and supplied the increased needs of our box plants.

Domestic containerboard and corrugated products prices and mix together were $0.16 per share above the second quarter of 2018 and down $0.09 per share compared to the first quarter of 2019.

Export container board prices were down $0.08 per share compared to the second quarter 2018 and down $0.04 per share compared to the first quarter of 2019.I'll now turn it back to Mark..

Thanks, Tom. Looking at our paper segment, EBITDA in the second quarter was $48 million, with sales of $238 million or a 20.3% margin compared to second quarter 2018 EBITDA of $38 million, excluding special items and sales of 251 million or a 15.0% margin. Our cup size and printing and converting volumes were slightly above the second quarter of 2018.

Overall prices moved higher during the quarter, but industry conditions seem to soften a bit in June. We successfully completed an annual outage at our International Falls mill and our mill system is currently running extremely well with increased focus on our most profitable products.

The lower revenues compared to last year’s second quarter are a result of the exit from the white papers business at the Wallula mill last year.

We continue to improve our profitability and margins in the paper segment, in part by exiting this business at Wallula, rather than continuing to allocate people and capital resources to it.I'll now turn it over to Bob..

Thanks, Mark. For the second quarter, cash provided by operations was $302 million and free cash flow was a record 210 million.

The primary uses of cash during the quarter included capital expenditures of 92 million, common stock dividends totaled $75 million; $78 million for federal and state income tax payments, net interest payments of 36 million and pension contributions of $4 million.

We ended the quarter with $569 million of cash on hand.I’ll now turn it back over to Mark..

Thanks, Bob. Looking ahead, as we move forward into the -- from the second into the third quarter, in our packaging segment, we expect seasonally higher containerboard and corrugated product shipments with lower prices as a result of the published domestic containerboard price decreases and lower export prices.

In the paper segment, we expect volume to be seasonally stronger, but prices and mix to move lower. Converting and other costs should be slightly higher. But operating costs and scheduled maintenance outage costs should be lower.

Considering these items, we expect third quarter earnings of $1.91 per share.With that, we’d be happy to entertain any questions. But I must remind you that some of the statements we've made on the call today constitute forward-looking statements.

The statements were based on current estimates, expectations and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC.

The actual results could differ materially from those expressed in these forward-looking statements.And with that operator, I'd like to go ahead and open up the call to questions please..

[Operator Instructions] Your first question is from the line of Brian Maguire with Goldman Sachs..

Just a question on the outlook for the third quarter, obviously, we saw some deterioration in index prices from the publication as you noted, just wondering how much of a, already recognized price declines will be in that $1.91 guide and how much of that you’d still have to flow through into the fourth quarter..

As we mentioned in the past, the published price changes impact the domestic containerboard volume fairly quickly. So all of the published price decreases impacted our domestic and trade prices to varying degrees during the second quarter.

But also keep in mind, we've talked in the past about how price increases roll through the box side of the business. And that also applies to price decreases.

And these businesses have various triggers and factors and timing mechanisms across our 18,000 or so customers whereby the vast majority of the changes will flow through typically over a 90-day period.

So, you'd have to expect and you can assume that the same cadence, once the published price index move down in March, May and June, and we’ll see that happen now.

So, we'll finish seeing the remainder of the price decreases flow through in this third quarter.Bob, you want to add to that or Tom, you want to add?.

No..

Just on the volumes, I think you noted that packaging volumes added $0.09 to EPS in the quarter. But I was just hoping you could reconcile that with the fact that the box shipments were down around 1.3%, just how did it drive that earnings contribution year-over-year..

Yeah, let me comment and then Bob can give you a little more clarity. Don't forget that as we exited the paper business last year, we brought Wallula up in June.

And so we had Wallula coming on and there was a change taking place between segments.Bob, you want to elaborate on it?.

Yeah. And on the packaging volume, Brian, with the work we finished up at DeRidder early last year, and of course the Wallula conversion, when you look at our volume, year-over-year, we actually reduced outside purchases by almost 75,000 tons. So -- and so now, we've internalized those tons.

So you get the benefit of OMEG [ph] tons, which is one of the, our high integration rate, provides us that benefit of OMEG versus outside purchases. And so you saw that, and that definitely has an income positive effect, even though volumes in total may not have moved so much..

Okay, so that is reflected in the volume number more than the input cost number?.

Right..

Your next question is from the line of Gabe Hajde with Wells Fargo Securities..

Tommy, you normally give us a little bit of insight into sort of trends into July. I was curious if you can do that for us and then touch on any particular end markets where you're seeing softness or strength..

Okay. Gabe, yeah, through 14 days, our billings and bookings are up about 5.8%. So we're starting out the month and the quarter very well. One of the key driver areas for us right now, going into the second half is the ag business out in the West and the Pacific Northwest.

It's, -- those crops came in late this year due to weather and but they're coming on strong now. So, we're very encouraged with the outlook going into the quarter..

And then if you can maybe comment at all, Mark or Bob, regarding capital allocation priorities and how you're thinking about, I guess, returning some cash to shareholders, whether it's through increased dividends or opportunities in the market otherwise?.

Yeah, regarding general capital spending, we're still on target for this year be in that low-400 area. And that's proceeding well in terms of, we’ve got the big Richland project that’s going to be coming on later this year. As far as uses of cash, the same, it's always applied.

You've got share buyback, dividends, capital spending, acquisition type opportunities, and we’ll continue to be opportunistic and look at the best value for shareholders. That's about as straightforward as it gets..

Your next question is from the line of Chip Dillon with Vertical Research..

First question is, we know that there is some changes in the marketplace, I guess, with lighter weighting taking place. And I was just curious, I know, you have just recently started up some virgin capacity at Wallula.

But would you be interested in buying from others, recycle boards saved in your -- some of your Western box plans?.

Chip, my answer to that is no. And, we will always buy some board from the outside market. But that's generally specialty grades. Now, keep in mind when we were -- our integration, it basically got nowhere 100%.

We’re open market buyers for general, containerboard meeting and liner board, but in general, as long as we can supply our own, we wouldn't be interested in any kind of joint venture or partnership with anybody.Tom, you want to elaborate on that?.

Yeah, I’ll just talk about the end market a little bit, Chip. We really see the end market moving much more towards performance based products, which we consider recycle having a little more difficult time getting there.

So, we've got a long term reputation for meeting quality standards and adding value and doing all those other sorts of things, even though it's a commodity product to some extent, and we're certainly not going to be in a position where we're going to perhaps risk that reputation over aligning ourselves with somebody with recycle board..

And just as a quick follow up, you mentioned, Mark that [indiscernible] CapEx for this year, I know it's early days, but can you at least give us some directional guidance in terms of where that number could be next year? If you have any inkling at this point, not that we'd hold you to it.

And then if Bob, could you just remind us of the maintenance expense per quarter in the second and then what it will be in the third and the fourth. I know you've given it in the past, I don’t know if that’s changed either..

Chip, regarding capital spending, we always give basically one quarter updates. And then for the New Year coming up, 2020, we’ll give you an update in January. I think let me answer a little bit of that this way. We've identified some very good opportunities for us.

We've got some efficiency cost take out opportunities in the mill side, as we always do that we will spend some small amount of capital on, very risk free high return capital for next year. And then, we've got some projects in the box plants that we're going to continue to aggressively go after that.

It not only adds capacity opportunity, as we grow the business, but also it's some of the new technology will take cost of, but we'll wait until January and give you next year's number..

Chip, on the outage impact in the second, it was $0.18. We expect it to be around $0.08 in the third and somewhere, $0.14, $0.15 in the fourth..

Your next question is from the line of Mark Connelly with Stephens..

Mark, if I could just follow up on that question about the box plants. I think you're saying that the reinvestment in the box plants is still primarily focused on productivity.

But is there sort of a directional trend that you're trying to take your equipment as well to meet some sort of changing performance expectations of the market?.

Well, I think, you got to look at this way, it's a twofer. You get two bangs for your buck here. With any new capital spending, we have going on in the box plants, you theoretically are going to improve your capacity opportunity.

But also from a technology point of view, you're making the overall process more efficient in terms of unit labor input for a conversion unit. So we're looking at that, as in the last few years, as we've reached, in many cases, some capacity limitations in these box plants, it behooves us to take advantage of the technology that's available.

And as we've also said earlier this year, we also have the manpower to execute in a very effective manner. The big projects are done in the mill.

So with the new engineering technology organization, we have a very broad capability to go ahead and engineer and construct these box plant projects through in-house PCA personnel.Tom, you want to have a little more?.

Yeah. Mark, I think the best way to put it is, is that, our reinvestment in the box plants is driven by profitable growth and operating efficiencies, which are really driven by our customers’ demands and their needs. That's primarily, as I said many times, I mean, we don't build it and hope they will come.

And we really react to what our customers’ needs are..

Just one more question. Your white paper performance is obviously a little better than what the industry is telling us is happening overall.

Are you surprised, as you go out to the market, do you see what the AMPA [ph] numbers are showing with these huge drops, and you're just outperforming that by a mile, because we see a disconnect between the AMPA numbers and what's going on in the market? And I'm just curious whether you do?.

Well, regarding volume, our marketplace is such that our customer base relies on our logistics and distribution capability. And so we really have a great customer mix that relies on our capability to take care of their needs, generally going from a B2B type of a distribution for them. And so, we worked really hard.

And this goes back to comments I've made over the last five years at one of Boise strengths that was built over probably four decades was that logistics supplies capability for their customers. And so, we aren't seeing what the general marketplace is seeing.

And don't forget too, we've got just a nice tidy business, I'll use that term, we got I Falls in Jackson supplying the North American system, and we're pretty well in balance. So, we're feeling pretty good about our business in particular..

Your next question is from the line of George Staphos with Bank of America Merrill Lynch..

I wanted to first dig in a little bit to the cost trends you talked about in the quarter, Mark and Bob. Can you remind us, was the quarterly and for that matter, a year trend that you've been seeing in things like labor and benefits, have there been any things that have been affecting it more than normal.

Was the quarter performance more or less as you'd expected on these operating costs? And could some of these projects that you're working on over time, take a little bit of the edge off of what we'll see in inflation in 2020 and 2021?.

Yeah, George, I would say that, costs were actually, as far as what we expected in the quarter. We're actually a little better than we thought. And I think, as we look into the third, we are seeing some of that. Last year, that was certainly going from 2 to 3, a lot of inflation that was still coming through. This year, I don't think, we're seeing that.

Actually, all in probably, all the operating costs should be a slight positive this -- going to the third quarter this year..

Okay. Would you say just related to the projects, in the box plants, are they probably more -- I know, you said Mark, you get a twofer.

But is the benefit more so in terms of the ability to grow into the future or do you get disproportionate benefit in terms of margin over time from those investments? How would you have us think about that?.

Again, each plant is unique, each project is unique. And again, it just depends, quite frankly, just depends on how you're going to run that particular operation. So again, it's -- there's no one formula that fits all..

Mark, you had mentioned that you had industry leading integration, which we obviously would know intuitively having, given all that you say across the quarters, over the years, but could you provide an integration level that you expect for the year or where you came in during the quarter? If you had it, that would be helpful? And then I had one last question.

I'll turn it over..

Yeah, our integration is sitting in the low-90s percent area..

And then lastly, back to the earlier question on near term July or recent July trends.

If we extract agriculture, are you seeing a similar improvement, call it low to mid-single digits across all of your end markets, and relatedly one of the things that we've been seeing in the markets over the last, I'd say couple of years, we've had kind of a weak end of quarter month, as customers are still somewhat concerned about the macro look, so they pull inventories down.

And then as we enter the new quarter, there's some rebuilding of stock. So one, what do you think in other end market, if you can share that data? And two, would you agree that we've had that kind of hand to mouth ordering de-stocking and restocking over the last couple of years? Thanks and good luck in the quarter guys..

George, you're quite observant, in my opinion. Yes, that has been the trend in the past. We start out the quarter, quite strong, and we get a little weaker at the end of the quarter. I think that we saw more de-stocking this past first half of the year probably than we've typically seen.

And I think that's driven by a lot of the questions regarding the global marketplace. Of course, the export markets have definitely been impacted, as the rest of the globe slows down some.So, outside of ag, I mean, I think our business has been relatively stable. And I think it is strengthening going into the second half.

I feel more optimistic about it. However, that's one prediction, but I can tell you that I'm hearing from our customers that they feel better about the second half of the year as well.

So, I think they've adjusted their business to kind of meet the global demand right now and the domestic demand and feel somewhat confident about the growth prospects going forward..

Your next question is from the line of Mark Wilde with BMO Capital Markets..

Mark, I wondered, in the release, you do call out that you're running to demand and I wondered if you could just give us a little bit of color on how you kind of are managing the downtime or the flow back. If it's just reducing production across the system or if you’re taking some smaller machines out, just a better color on that..

We've been really, this was some commentary back from the April earnings call. It's pretty evident, if you look at the math, Wallula obviously is not running to its design capacity. So we've got the extra capacity there. So essentially, we're running Wallula slowed back. And so that's accommodating the Pacific Northwest and West Coast needs.

And then from time to time, through the quarter and through the first half of the year, some of our machines have run at a slower pace. But we've been able to flex that, as Tom needed tons and outside customer orders have to be filled. So that's how we've been addressing the running to demand..

And then just as we think about the startup at Richland, how much of an impact will that have and when would just start to build some inventory in front of that..

We're planning on having Richland up at the end of the year and it will be a very positive impact for the Wallula mill. Our plans are to supply all of the medium and liner board that Richland will consume from Wallula. So that's about 18 mile drive up the interstate.

And so 2020 should be a very positive year for how the Wallula mill runs its business in terms of ramping up its production capability. We're very optimistic..

Last one for me, you're sitting on about $6 a share in cash. So I imagine Bob Mundy is getting kind of sore from hauling all that cash, but just help us think about managing that cash versus putting some of those cash to use in other ways, and how are you doing to take that cash balance..

If you look at our net debt to EBITDA ratio, we're sitting probably at around 1.3 historically. If you went back to 2007, we were below 1. So, our cash, we're feeling really, really good in terms of the world around us. We've taken all the risk off the table over the last year with our big conversion projects.

We've got some really good high impact projects taking place in the box plants at low risk, immediate return activity.

But again, I think, as we look at the world around us and some of the uncertainty, we feel pretty good about building somewhat of a warchest, shall we say, for any opportunity, that may present itself, whether it could be a stock buyback, any type of acquisition opportunity, so we're feeling good, but again, we are, we are and have been living in an uncertain world.

And so, we're feeling pretty good about where we are with cash.And we don't feel compelled that we have to go out and quickly utilize that. Each dollar of cash that's sitting in the bank right now, it's certainly not going to waste. And, again, one of our virtues has been patience.

And I think we're exercising that virtue very well in terms of how we look at the utilization of cash for the future returns to the shareholders. So you got to just bear with us..

Your next question is from the line of Anthony Pettinari with Citi..

Mark, in your comments, I think you said white paper industry conditions seem to soften a bit in June. Just wondering if that was a comment on the demand side or the supply side, maybe with some imports coming in or if you could just elaborate on that.

And then maybe it's too soon to tell, but is it possible to say how July has trended on the white paper side?.

Yeah. First part of your question was demand softening up in the June period. And part of what we, we typically start seeing the back to school buying and we see that now in July, but we did not see the typical earlier June back to school activity. So that was pretty fundamental.

We saw that it was pretty evident, but things have taken off and they're strong right now. So again, we're feeling really good with where we are in July and I'd have to use the term, we're pretty well flat year-over-year with where we are.And then you commented about imports. Imports are up.

But that's -- don't forget that’s to fill a big hole that the industry couldn't fill when some of the industry capacity came out in the earlier part of the year. And so that was a given that everyone expected..

And then on the corrugated side, looking at the quarter, you had lower shipment growth than you usually do, but you had the Sacramento loss.

Putting aside that loss, I was wondering just how shipments trended versus your expectations kind of going into the quarter? And then for modeling purposes, is it possible to remind us when that business loss started to impact your shipments?.

This is Tom. Actually, our last quarter’s performance would have been significantly higher, obviously without that loss. It's a pretty good sized number. And so we feel really good about the trend going in.

And of course, where we are through the first 14 days that I reported that includes that loss in Sacramento, so that should give you a little idea of the momentum, we have at least going into the quarter.What was the second half of your question?.

In terms of when it started to impact your shipments?.

Yeah. That was in the fourth quarter of last year is when it really started to impact our shipments. So we've got a tough comparative going forward until we get to the end of the year..

Your next question is from the line of Mark Weintraub with Seaport Global..

So just following up on that, just to clarify.

So does the fourth quarter comparison get easier on the box shipments or is it first quarter of next year?.

It gets slightly easier in the fourth quarter, but the real move will be in the first quarter of the following year..

Okay.

And is it possible to sort of give a rough sense, is it like a 2% to 3% type impact or could you give us any indication as to the magnitude from Sacramento?.

It's somewhere in the 1.5% range, something like that..

Okay, great.

And then would it be possible to get a sense as to how much the caught up at Richland order of magnitude might be?.

Not at this time, I don't think that's appropriate really to talk about that. That's driven by a number of different factors. Certainly, customer demand is one of the key. That's the key element of us putting in Richland, but also keep in mind that we've been supplying that marketplace from a number of different plants quite a ways away.

So we're going to be able to take advantage of those transportation savings, both from the box plant and from the mill. So, Richland is going to be an outstanding project that's going to start out in very good shape..

And just one other one. One of your competitors this morning was talking about lower wood cost third quarter versus second quarter.

I realize this tends to be a very local market here, could you give us more color as to what's been going on with your wood costs and how you see them playing out for the balance of the year?.

Mark, again, it's localized regional and it’s weather impacted. We're pretty flat. Wood cost has been behaving itself throughout the country this year. So we're in a pretty good place with overall wood cost..

Your next question is from the line of Adam Josephson with KeyBanc..

Bob, just one on guidance for a moment if you can help me.

In terms of the 3Q guidance, what is implied in there in terms of the sequential change in paper price mix, just if you can give me any sense of that?.

Well, as we said in the release, it's lower on average than it was in the second quarter because as we said, it started to soften a bit in June, and that sort of will carry through into the third. So on average, it's down, we didn't quantify obviously how much down, but it's 15, 20 bucks possibly..

And just Tom, on your demand commentary for a moment, you talked about, obviously, the global economy having slowed and your domestic customers just becoming more cautious, managing inventories more tightly. But then you also talked about expecting a second half improvement, and that's because your customers are doing so.

So I was just trying to tie those two together.

What is driving your customers to expect a second half improvement, just given the slowdown in the global economy that you were talking about?.

What I'm really referring to Adam is the fact that, there was significant inventory reduction that took place throughout the first half of the year. That's basically done. And people feel good about the consumer demand and the economy here in the United States, which is obviously where we've got our large footprint.

However, some of our customers do export. So they've adjusted to all of these dynamics that have gone on globally, and I think, feel pretty good about the second half of the year.

Also, as I said, we've got some segments, agriculture, being one of them is a big segment that really is driven much more in the second half of the year, especially given the weather related issues that we had out on the west coast and the Pacific Northwest..

Your next question is from the line of Edlain Rodriguez with UBS..

One quick question on the e-commerce end market. You have companies like Amazon, like they're taking all sorts of actions to reduce packaging materials.

What kind of impact do you expect this to have on the industry? And is this something that keeps you awake at night?.

This is Tom. I'll answer that real quickly. I think over the next couple of years, Amazon's initiatives are going to still be net neutral to the business. It's easy, I think, on the surface to make assumptions that it's probably going to impact the corrugated box business, but I think there's some puts and takes here.

One is, is that as we get into this ship in own container or SIOC, as it’s referred to, you're going to have a lot more products that are going to have to gravitate towards corrugated. Because, there still is no better product that can compete and when it comes to containing, protecting and marketing large products.

So our customer base is very attuned to this and they're asking for a lot of redesign.That redesign has been significant, because keep in mind that they want to protect their brand, they've got to make sure now that that brand goes through, it goes through a longer cycle of handling, all the way through Amazon fulfillment centers and distribution centers and all the way to the customer.

And they want that box to be in perfect shape by the time it gets there. And they also wanted to advertise their product. So I think as Amazon requires more of these larger products to be ready to ship in own container that I think we're going to get some growth from one market and a little less from another market..

And one quick one on uncoated free sheet, could producers have done a better job managing the supply reduction that happened in the industry without inviting so much in terms of imports, all of a sudden like price increases have to be rolled back.

Could the industry have done a better job managing that supply demand issue?.

Let me answer it this way. If you go back and if you -- I've been in this industry for 40 years now. And uncoated free sheet back then was a world supplied product, the Europeans and then was Americans. And then it's spread out through South America and Asia. So imports have always been a factor. So that's how I am going to answer that..

And we have a follow-up from the line of Gabe Hajde with Wells Fargo Securities..

Thank you guys. I'm curious from an operational perspective, you brought up something interesting, Tom, I think kind of value through the supply chain, particularly thinking about e-commerce. And one of the things that you guys have differentiated yourselves with has been high customer touch and customization, things like that.

When I think about branding through the e- commerce supply chain, and porch bandits, I think is they're called, have you had any inquiries or discussion dialog with customers as to kind of dumbing down what might be found on the outside of the box versus depending if it's going through a retail chain or something like that?.

Gabe, I think it's a mixed bag, quite frankly. But I would say the trend is more towards, are customers really interested in protecting their brand and advertising their brand in any way they can. And when you're talking about a, especially just SIAC, as I mentioned, you’re talking about a product not showing on a shelf.

So guess where the best place to advertise your product is, on the box. And that fits us very, very well, because as I've said many times, I mean, we're focused on this hard to do, we're very focused on helping our customers grow the business and adding value in any way we can.

And, that really is a core competency that we have and we can take to the marketplace and all of our 18,000 plus customers have various needs, when it comes to that kind of value..

[Operator Instructions] I see that there are no further questions.

Do you have any closing comments?.

Yes. Thank you, everyone, for joining us today and we look forward to talking with you in October during the third quarter call. Have a nice day. Bye-bye..

This concludes today's conference call. Thank you for your participation. You may now disconnect..