Q3 2021 Franco-Nevada Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Franco Nevada corporations Q3, 2021 results conference call.
This call is being recorded today November the fourth 2021.
At this time all lines are in a listen only mode and following the presentation, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero four the operator I would now like to turn the conference over to your host Barnaby Tech. Please go ahead.
Thank you Michelle.
Everyone. Thank you for joining us today to discuss Franklin, Nevada third quarter of 2021 results.
Accompanying just call it the presentation, which is available on our website at Franco a dash, Nevada Dot Com, where you will also saying I was full financial results.
Great President and CEO Franklin, Nevada will provide some introductory remarks, followed by San deep Red C. S O a Franklin, Nevada, who will provide a brief review of our results. This will be followed by any period.
I work full executive team is available to answer any questions.
We would like to remind participants that some of today's commentary may contain forward looking information and we refer you to a detailed cautionary note on slide two at this presentation.
I will now turn the call over to <unk>, President and CEO Ah Franklin Nevada.
Bobby.
Good morning, and thank you all for attending uncle.
Ah business delivered a strong third quarter setting the stage for a record here.
This fight portfolio served as well with good contributions across precious metals energy in Idaho.
I'm proud of the top ESG rankings will receive in this quarter, we again achieved a prime ratings from the ISS rating agencies.
We recently added to our community programs committing to fund the water supply infrastructure to communities Roundup cause. We're also partnering with continental resources to fund the project for solar powered water recycling.
2021 is a strong growth here for the company driven by the ramp up of corporate Panama and the new contributions from Haynesville Kaunda softly on the volley iron ore royalty.
Of a core assets and demeanor was a stand up the promo for the quarter with Cobra, Panama also generating rickles quarterly production.
Despite volatile line oil prices, we're well on our way to achieve our guidance for the ball they royalty this year.
The energy shortage, playing out globally is pushed up both oil and gas prices are energy revenues or two and a half times larger this quarter than a year ago.
This includes the recently acquired Haynesville natural gas royalty package, where we're getting the benefit of drilling on some high royalty intersections.
The energy price Spike highlights the power of diversification and out portfolio.
We expect to meet Agio sales guidance range for the year.
And with our energy prices have raised our energy guidance for the second time this year.
Cost inflation continues to take it's toll and the gold sector, particularly with the high energy prices.
On the country of though margins have widened due to the inflation protection nature of our business model.
I believe the only time, we've had higher margins was before we started screaming which was right after all right.
Growth for the next number of years will come from both might expansions and new minds.
Panama is the largest driver.
Last week first quantum provided more detail on its construction and commissioning plans to expand the mind from its current 85 million tonnes per annum.
To achieve 100 million tons per annum by the end of 2023.
Detour Lake was in the news this quarter.
First with a 10 million ounce increase to its MNI resource taking it up to 30 million ounces, including reserves and then with the merger between acne Coequal. It took me like.
In terms of new minds.
That are snotty construction is on track construction of Hardrock started this week.
And we expect Valentine Lake escape Creek, and Stibnite Gold mines will follow over the next few years.
We've seen exploration success on to have a pipeline of longer term copper royalties sogo published amazing resource on the Tundra Llama America deposit on the same concession has all Paula which appears to be a viable large scale open pit.
And Hudbay reported ongoing success and its drilling at the couple will targets Rosemont. They expect an initial resource by year end and a P. A in the first half of 2022.
We've seen multiple bids from wild and BHP for control of neurons in their ring of fire Nicolin chrome deposits.
Hi, there would be a great partner to develop the region and their interest is a terrific endorsement of its potential.
A car business development priority is precious metals and our team is active generating opportunities to finance the development and construction of new minds.
We're also open to adding other mining commodities, if good assets come to market.
In summary, Franklin, Nevada continues to deliver with record financial results built in growth and tremendous longterm optionality the.
The companies that free cause total available capital of 1.6 billion and it's growing it's cash balances.
Now hand, it over to send it.
Thanks, Paul Good morning, everyone. The company reported strong financial results for key three 2021 yesterday, which continued to showcase the strength of Franklin about his diapers portfolio.
Ah royalty stream assets, both mining and energy continue to perform well either in line or ahead of expectations as Paul mentioned, a strong third quarter has set the stage for a record financial year for the company.
As you turn to slide three at the presentation, we have highlighted the cold and cold equivalent ounces sold for three nine months ended September 30th 2021 and 2020.
Overall Geo sold increased over prior year for both periods for the quarter Geo sold of 146495 was 9% higher than prior year.
But a quarter, we had strong performance from a number of key assets for precious metals main contributors recovery, Panama and to Mina and Guadalupe all of which produced ahead of expectations.
In addition, we benefited from deals delivered and sold from the condo stopped later precious metal stream acquisition completed earlier this year.
We did have a weaker quarter from candle area, which was expected based on the revised guidance issued by Monday might need for a change in mind sequencing at.
At antique Mackay Jia sold or lower based on lower rates anticipated also in third quarter last year and to pick high deliveries did benefit from the resolution of logistical issues that had arisen because of the pandemic.
One precious metal asset, which contributed significantly less go's this quarter and prior year is Pamela.
As you know, we have a 3% royalty and a 50% net profit interest on a portion of the underground mine.
If asked that had a tough third quarter with significantly lower production.
This lower production, along with lower gold prices and higher operating costs resulted in a sharp decrease in <unk> and revenue recorded for the quarter.
As previously disclosed we did expect the NPI revenue received by Franklin, Nevada to decrease as the year progressed, but the third quarter payment is lower than expected.
We do expect the hemlo NPI to be minimal for fourth quarter of 2021 as well.
With respect to other mining act at Geos, our iron ore investments delivered strong results the.
The company recorded $21.7 million in revenue related to the valet iron ore royalty.
This was a combination of $16.1 million in revenue accrued for third quarter of 2021, and an additional $5.6 million related to an Andrew cruel from second quarter.
In total the company recognised just over 12000 years, but the valley royalty during the quarter.
The first cash payment received by the company from the royalty was actually on October 1st Post Court correct.
Our investment in Labrador Iron ore royalty Corporation continued to pay strong dividends.
With a dividend up $2.10 Canadian being declared for third quarter, which resulted in 5 million being recorded as revenue.
Just under 6000 Geos.
Slide for highlights are total revenue and adjusted EBITDA amounts for the three nine months ended September 30th 2000 22021.
As you can see from the bar charts revenue and adjusted EBITDA has increased significantly year over year to.
The company recorded $316.3 million in revenue in third quarter, and 269 $8 million, an adjusted EBITDA margin of 85, 3% was achieved.
Third quarter continued to strong contribution from the energy assets as revenue increased from $22.8 million a year ago to $55 1 million this quarter.
The increase was due to the rebound in energy prices from a year ago.
West, Texas intermediate oil price averaged $70.52 per barrel trying the quarter at 72% increase from prior year.
Natural gas prices also increased significantly with Henry have mcf averaging $4.32.
And third quarter compared to $2.14, an mcf a year ago.
Our last two energy transactions were focused on natural gas the range resources acquisition in 2019, and the recent Haynesville acquisition. These assets contributed $21.1 million in revenue for the quarter.
As you turn to slide five you will see the key financial results for the company.
We have achieved many records on a year to date basis, which we expect to continue for the full year.
As mentioned increase in revenue and adjusted EBITDA was due predominantly to the increase in Geo sold along with a significant increase in energy revenue.
On the cost side for the quarter cost of sales was higher at $42 million versus $45 million a year ago.
The increase was due to an increase in stream out as being delivered year over year.
Depreciation was also higher at $73 million versus 56 $8 million last year.
Due to the increase in Geo sold a large portion be from higher depletion stream asset.
In addition, third quarter of 2021 does include depletion on the new acquisitions made this year Honda Stoplight, Haynesville and nathalia royalty.
Adjusted net income and adjusted net income per share increased to 165 6 million or 87 cents per share in third quarter increases of approximately 80 increase of approximately eight 7% for both over prior year.
Franco Nevada, as both a royalty and the streaming humpbacks.
Slide six breaks down the mix between streams and royalty wrapping for third quarter of 2021.
Streams of the largest component of revenue generating $176 2 million or 55, 7% of revenue for Franklin Nevada.
However, it is royalties, whether mining or energy, which generate higher margin and thus cash flow from operations.
As you can see the costs related to royalties are minimal with a combined cost of 3.1 million related to the $142 million in revenue generated by royalties.
We believe are diversified business model of both stream and royalty assets will allow us to continue to achieve pier, leading EBITDA margins.
With respect to margins to chart on slide seven illustrates how the margin for the company increases as the gold price increase.
Our mining cost structure, which we reflect on our cash cost per geos sold a foods our cost of sales less costs associated with the energy business, which are minimal.
Cash cost per Geo sold was $2 269, this quarter compared to 290 per geo and prior year and.
And a rising gold price environment, we expect to benefit fully as the cost per Geo sold should not increase significantly in fact back in Q3 hundred 2019, the gold price average 14 74 per ounce and our cash cost per Geo was 276.
The average gold prices now 17, 89 per ounce, having increased over 20%, while the cash cost per gov's actually decrease straw.
Strong margins is one of the strengths of our diverse portfolio.
The other cash component the other cash cost component for the company. Besides cost of sales is our corporate administration costs.
We'd like to stress the strength of our business model and the scalability.
The chart on slide eight clearly illustrates are focused on being is cost efficient as possible and managing this business.
Here, we have highlighted our quarterly revenues and our quarterly corporate administration expenses since our IPO.
As you can see revenues have grown significantly over the period, Sean while corporate costs have remained stable.
Q3, 2021, corporate admin costs, including stock compensation was four $6 million or less than 2% of revenue.
Management beliefs, we can continue to add to our portfolio and grow our business would have added safety significant overhead to the company.
Slide nine highlights the diversification of the portfolio, which we considered one of the strengths and Differentiators of Franklin Nevada.
As shown 83% of our Q3 2021 revenue was generated by mining assets.
The geographic revenue profile has revenue being source, 91% from the Americas with South America being the largest at 33%.
With respect to asset diversification Cobra, Panama was our largest revenue generator at 17% of total revenue for the quarter followed by our other three core asset candle area and to put an end to Mina all being at 8% no other single asset generated more than 8% of revenue.
The chart also highlights our operator diversity, our largest exposure to revenue being generated by any one operator is again, 17%, which is first quantum.
Operates Cobra Panama.
On slide 10, we have provided updated guidance for 2021 as you will recall, we had previously narrowed our geo sold guidance to 590000 to 615000 with the strong start to the year from our mining assets. We are maintaining this range for fourth quarter, we expect to.
To benefit from the ramp up at Colgate, Panama and strong strong production from eight to Nina.
With respect to the energy business, we're pleased to again raise our revenue guidance by over 20% to 195 to 205 million from the previous $155 million to $170 million. This increase in guidance is due to the strong rebound in energy prices, we have seen this year and the strong performance from our assets.
We have assumed to $70 per barrel wty price and $4 Mcf natural gas price for the remainder of 2021.
As of today as seen on slide 11 with respect to available capital on hand, the company has liquidity of $1.6 billion. We have a strong cash position that continues to grow and remain that free and.
And now I will turn it over to Michelle happy to take any questions.
Thank you Sir late.
Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
If you would like to withdraw your question. Please press star too please.
Please remember if you are using a speakerphone to lift the handset before entering any keys.
One moment. Please for your first question.
Your first question comes from Adam Joseph Keybanc. Please go ahead.
<unk>. Good morning, Thank you for taking my questions.
Adding Adams.
Good morning City. One question on your <unk> guidance has your thinking in terms of where your your fall within that range changed at all compared to last quarter given your experience at hemlo in the.
The other issues you mentioned.
Yeah, Hey, Adam at we've kept the guidance range the same.
Typically the midpoint, it's sort of where everybody estimate the company coming in I think the beauty of our model is our is our portfolio has a lot of asset so even though hemlo might.
Former another asset by underperformed, there's always other assets that outperform so.
We're expecting to be somewhere in that range, probably closer to the higher end, but.
We'll see how it all plays out.
I. Appreciate all you mentioned you talked about the energy shortage and I know this came up on your last call, but have you seen her or heard anything about what you're what some of the producers of the oil and gas producers are doing with respect to Capex next year beyond if anything just I I know that.
Company has been been focused on being much more discipline than they have historically so.
How do you see this playing out and and what impact would you expect that to have on your business over the next year or thereafter for that matter.
Adam We've got Jason Mcconnell here, who heads up the energy side of our business have that to him.
Yeah. Thanks for the question in terms of what we're seeing from the operators and their their capital spending on our assets I think what you've seen over the course of the last year.
Had an increase in activity rates, particularly in the shale plays in the us.
If you look at what happened to rig counts in the primary basins. They they fell through a very low level.
Following the Covid shock and they have since returned to levels that are probably 50% of the highest that we saw in 2019.
So we're keeping a close eye on on how the.
Rebound continues there's obviously a theme with energy companies too.
Maintain capital discipline and returned cash to shareholders.
That's another inch or elements and how it all plays out.
But we are encouraged to see the activity coming back.
Obviously, it's a benefit to our assets over the longer term and we'll watch it play out here over the next couple of years.
I appreciate that there isn't just one more for you Jason in terms of the sensitivity to changes in oil and gas prices I notice.
And the last caused while but can you remind us what your sensitivity as to changes in and W. T I and and Henry hub prices I know, you're assuming $70.
And $4, respectively for the year.
Sure I think when you're when you're thinking about sensitivity you need to consider the fact that our energy mix.
Is about 50% oil right now.
About 40% gas and the remainder is ngls.
For the gas assets the sensitivity is roughly one to one there's not a lot of leverage in those assets. So.
Change in in Nymex has come.
Commensurate increase in revenue for the gas assets.
For our oil assets the overall leverage to the oil assets is about one three to one.
And that comes mostly from our Canadian assets, where we have the waiver and NRI, which has capital and operating cost exposure.
Whereas the remainder of our U S assets as they're mostly one to one as well so on the oil side. It's about one three to one on a blended basis on the gas side, it's roughly 121.
Great. Thanks, very much Jason.
Sure.
Your next question comes from Tyler Langton J P. Morgan. Please go ahead.
Good morning, Thanks for taking my questions.
Just a follow up on energy.
In terms of the the increased guidance and sort of improved results is that more just.
Just sort of the benefit of higher prices or are the higher prices sort of also translating into sort of higher production.
The assets, where you have the royalties.
Hey, Tyler I think for our increased guidance. It's the increase in the guidance is primarily driven by higher prices at this stage.
There will if prices maintain the level of threat right now I think what we would expect to see is increased activity from additional capital spending that will take some time to play out.
So the guidance that we've provided is primarily a function just to be increasing commodity price.
Assuming our our volume stay at similar levels.
Okay and then just.
On the valet royalty and I know this quarter.
Benefit from revenues from previous quarters can you just give us some guidance in terms of how to think about revenues from the royalty going forward obviously.
Iron ore prices have come down, but obviously, there's there's some lag and then I don't know if you'd still get sort of any sort of vegas revenues from previous quarters.
That would be great.
Sure Tyler in here.
I think going forward.
In the queue for we have seen pretty high freight costs and overall deductible transportation for the royalty.
Top of very volatile.
Prices.
So.
I don't think at this point, we're expecting any any carryover.
But in terms of our guidance for the year overall.
Should be poor.
The higher end of our guidance.
Boy royalty debentures.
Great. Thanks, so much.
Your next question comes from Cosmo Chew of CIBC. Please go ahead.
Thanks, Paul Sandy and team.
Maybe on the R&R asset again, I saw that four Q3 as.
As you mentioned 3100 deals were related to of course have as an accrual under accrual Sandy does that do to prices or was it due to you know final variances on production.
So it's the Cosmos, it's a combination of both.
Ballet releases on Sept, released on September 30th their dividend amount.
And it's a combination of production as well as sales price for us for that accrual again. It was just an estimate and obviously we were conservative in our estimate and touristy adjustment for $5 $6 million.
Mmk for sure and then going forward how.
How would you include for is it you know if you can work through the math with me is it based on I guess spot prices averaged spot prices during the quarter and that's how you estimate.
And that's how you get paid in terms of the.
The iron ore royalty and then what we expect the other corrupt.
When we get closer to the March 31st 2022 payment date, yes.
So in terms of the accrual.
We've made the accrual for third quarter now will make another accrual for fourth quarter on March 31st Ballet will adjust are released the dividend amount for that six month period at that time, we would that make an adjustment to what we've recorded for the six months. So that we should that will likely be a true up because obviously, we can't predict exactly.
What that dividend payment is kennedy, but in terms of pricing it's a combination.
We take the average for the quarter and enters deductions Akane state to come up with and that revenue amount.
Sure well, maybe switching gears, a little bit on taxes, our favorite topic here global minimum taxes looks like it's it is kind of moving ahead.
Any comments that you can make in terms of.
Global minimum taxes, and how that could impact Franken, Nevada.
Sure you are right. It's gained lots of momentum the countries signed onto it I believe on the weekend.
For US obviously, we do have a business legal entity in a lower tax jurisdiction in Barbados, which holds a number of our international streams. So if it does get passed and I think it will take a.
A bit of time, because each country has to pass the legislation.
It would apply to us there and so that would be that top up.
And so we'll just have to wait and see what the detail is between what all the countries do release and how it's going to work.
From our perspective, when we look at the company, we try to manage risk in one way to do that is to have a diverse corporate structure. So Barbados is the one entity that would be impacted but it is less than 50% of our revenue.
We have legal entities in Canada, United States, Australia, where we have our royalties, where we pay higher taxes. So those will not be impacted.
But our revenue on our income from Barbados will be impacted.
For sure maybe one last question for me it'll Paul as you mentioned the beauty of the royalty model is that you are protected from inflation inflation clearly is of concern to a lot of investors and just the ordinary people. These days.
Could you confirm will remind us.
It's really only the NPI is within your portfolio that will be impacted and really nothing else you are truly inflation protected.
Absolutely Cosmas site I think in terms of people investing in gold one of the major regions that they are doing it in the first place is they are seeking inflation protection. So.
Think it's.
Tremendous strength of our business model you are absolutely right. There a couple of NPI. So on the gold side or so we do have the of the way.
Net profit interest, but they are fairly small in the context of the overall portfolio.
Great those all the questions I have thanks, Paul says you've been too.
Your next question comes from John Tumazos, John Tumazos Research. Please go ahead.
Thank you very much and congratulations on all of the great results.
Of course, you're focused on precious metals, but some of your most important precious metals contracts or.
Oh.
Part of a bigger copper base metals property.
I'm a little alarmed.
The political and economic changes in China in the last few months.
Don't know exactly what their plans are but.
Very vital the equivalent of 100 glass furnaces are 100 basic oxygen furnaces are one or 200 rowing Nelson steel and so it's 292 million metric tons capacity.
So like the biggest peace time.
Not cyclical voluntary industrial production code I've ever witnessed.
Do you raise the discount rate you use.
For.
Investments in base metals projects going forward.
I'm, a little unnerved biggest space medals consumer is sort of a weird economy or it itself.
John.
I think there are a couple of factors playing out there and absolutely agree with you in terms of the cuts in China and their impact.
But a bunch of other factors there.
One is.
All of this is driven by climate change and.
To achieve that that has to be massive investment in in many of these metal commodities. So.
And many of the base metals copper and and the battery models I think a lot of a lot of capital will have to be spent.
That we can effect change.
So.
Already knows that you got to move in parts there.
I don't think we've contemplated changing now discount rates at this stage.
And that's in terms of investing directly in those other commodities as you pointed out much of our precious metal comes from mines.
Do we have a concern on those minds not at the moment or all of the copper mines that we have our good low cost producers. So I expect regardless of what the price environment is that they will be resilient produces and we'll get good production over time.
I wish I believe things, they say, but I don't.
And they do preach about returned to socialism.
And not liking speculation in commodities here real estate, but I think they were really mad that the Australians of resilience, we're making $125 billion more on the iron ore price.
And for some reason I don't like to bring the Australians anymore.
So I I don't believe any of their cream bullshit.
[laughter].
Eight months on iron ore are less true than their statements on virus.
[laughter].
There are a lot of moving parts that John.
Right right, so I'm not green sold but good luck with it yeah great.
Thank you.
Your next.
Question comes from Stacy each acoustic of Scotiabank. Please go ahead.
Good morning, everyone.
Tonya I think I got called Stacey that task anyway. Thank you for taking my question.
Have that too if I could start maybe with Paul.
Circling back can't comment that you made.
The transaction and you put it accurately.
Which I saw that you are looking at potentially adding other commodity and.
Its assets way to come to market I, just wanted to come back and cause you didn't have that in Q2 in these and I just wanted to come back and ask if you are seeing more non gold assets come to market than you were a quarter ago.
At 10, a yes or no as as we said the focus of our team is very much on on precious metals.
But we are seeing.
The medals.
Opportunities coming to market.
We are open to those opportunities.
So what does that mean in terms of a commodity mix.
Do expect a commodity mix will evolve over time.
As we grow larger but there is the possibility that the diversified assets would make up a larger part of the portfolio.
That doesn't take away from precious metal is the current focus it'll always be the number one focus.
But we are open to those other mining commodities and that's.
It's it's base, it's battery metal sets the box.
Right.
A bit of the commentary withdrawn was just do see a lot of capital will need to go into what I'll call would re metals, if that's battery in base metals together.
I think that we will be seeing good opportunities in that area.
On the energy side.
No current plans to increase energy is part of our portfolio.
But we'll see longer term if the portfolio grows larger potentially there may be more room.
If we do that's more likely on the natural gas site.
Okay, and just coming back kom.
The precious metals you had mentioned in the last quarter that you were seeing things.
Opportunities in the $100 million to $300 million range and the precious metals is that still the case.
Again, a hand that to M I T.
Tenure that is still the case tenure in terms of the bracket, where we're looking at things. The team is very focused on precious metals right now we actually think it's great environment.
For us to do some precious metals deals and people are back to the point, where they are looking to build lines. So.
So that's quite exciting and we also have it as you probably know fairly tepid equity market for gold companies. So that is a good backdrop for us to hopefully add on the precious metal side.
And on the other metals.
Sort of deal range are you seeing there.
It certainly is less of a focus right now.
But.
In that medium size.
Get as well.
Again as medium size around 500 million 300 of five.
Yeah up too.
Up to five.
And then just lastly, not to kick that's any further but Paul when you mentioned that you look at your portfolio and you look at a diversification of up the portfolio over time, you had always talked about precious metals being over 80% in.
Precious metals.
20%.
Are you talking now about changing that Max.
Yes.
Expect an evolution in that commodity Amyx Tonya.
Longer term.
Expect that commodity mix would at least be 80% mining assets.
But in the short term.
As we well know that two things commodity prices move up and down.
The advantage of a diversified portfolio as you get the benefit of when prices move up and down so.
We know that.
It will fluctuate in the short term.
The other aspect is.
We don't control the timing on when good assets come to market.
You want to acquire the good assets when they are available.
And managed commodity makes over time.
Okay now I appreciate that and I understand it's just that looked like it was a little bit of a chain chef when I when I read that.
<unk> and your and your quarterly maybe if I could turn to two sandeep and just follow back on the global minimum tax and now Cosmos ask you about it we have seen more of come out on that.
136 countries, we've seen you know.
More details with respect to Lamb.
Some of the information.
Tangible assets and weather extremes would be considered tangible assets, because we do get a bit of a tax relief. There. If that's the case how are you interpreting that for Franco.
So right now we're looking at a tenure to be honest with you. We haven't drawn a conclusion of whether it's trees would fall under that tangible asset category and get that at 8% deduction.
So for US right now we're just looking at on a conservative basis that the incremental tax between up to 15% less what we paid Barbados would be applicable, but as I said, we have to wait to see what actually gets passed in legislation by each of the countries and then make an assessment at that time.
Just from artwork and I just wanted to see if we're in the ballpark on this.
We have an impact if we assume the worst case scenario, which is going to the 15% minimal tax rate in your offshore subsidiary that the impact would be about 3% to naff.
Are we in the ballpark on that.
Yes on a conservative basis, if you assume to fold difference between the 15 and what we pay in Barbados you are in the ballpark.
And then if we were to implement the tangible asset screens, a tangible tangible assets, it's probably going to be half of that impact would that be fair I haven't really looked at it myself, but definitely last yes.
Okay, great. Thanks, a lot Sir Sandy.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one now.
There are no further questions from the phone lines I will turn the conference back over to your host for final remarks.
Thank you Michelle we expect to release, Eric 2021 year end results aftermarket closed on 992022 with a conference call held the following morning. Thank you for your interest in Franklin Nevada.
Okay.
Ladies and gentlemen that conclude your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
[music].