Lucara Diamond Corp. (OTCPK:LUCRF) Q2 2020 Earnings Conference Call August 11, 2020 10:00 AM ET

Company Participants

Eira Thomas – President and Chief Executive Officer

Zara Boldt – Chief Financial Officer

Ayesha Hira – Vice President, Corporate Development and Strategy

John Armstrong – Vice President, Technical Services

Conference Call Participants

Scott Macdonald – Scotiabank

Paul Zimnisky – PZDA

Richard Hatch – Berenberg

Andre Galvin – Private Investor

Operator

Good morning. My name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to Lucara Diamond Q2 Results Conference call. [Operator Instructions] Thank you. Ms. Eira Thomas, you may begin your conference.

Eira Thomas

Thank you very much, operator and thank you to all of you for joining us today for Lucara’s second quarter report. Before we get started, I just like to remind everyone that we will be making some forward-looking statements and I would like to draw your attention to the cautionary statements included on Slide 2.

The full impact of the COVID crisis manifested in a challenging operating environment combined with dampened diamond demand in the second quarter. Fortunately for Lucara and thanks to the diligent efforts of our leadership in Botswana and Canada, our 100% owned Karowe diamond mine continued to operate more or less according to plan, achieving all forecasted physical metrics and strong performance in respect to safety, health and the environment.

What’s more? Our balance sheet afforded us the flexibility to adjust our sales strategy in response to a weak pricing environment. And we took a deliberate decision not to sell any of our plus 10.8 carat diamonds during the period. Normally, the sale of this segment of our production would account for close to 70% of our revenues. The decision to holdback these diamonds has resulted in lower revenues for Q2 and the achieved average diamond prices are also anomalous and not representative for the period.

Times of crisis often instigate or necessitate change for many businesses. For Lucara, this crisis has simply accelerated the changes that Lucara was in the process of implementing and/or advocating for already, whether it be the incorporation of XRT technology into our mine design or the launch of Clara, our secure web-based digital rough diamond sales platform. Lucara has long been recognized as an innovator and a company that embraces change as opportunity. The restrictions placed on travel during the COVID pandemic compound the rationale behind our industry’s need to modernize and we have seen interest in Clara ramp up dramatically during the first half of the year.

Clara currently stands as the only digital sales platform of its kind allowing customers to purchase individual rough diamonds between 1 and 10.8 carats in size based on their own specific polished needs without the requirement to travel to view them. Our latest move, subsequent to the quarter end, resulted in an off-take agreement for all of our diamonds in excess of 10.8 carats in size and this agreement was done with the HB Group out of Antwerp and is another example of how Lucara is working to transform the supply chain using technology to create efficiencies and unlock value. Another first, this groundbreaking collaboration creates true alignment between the producer and the manufacturer. And I will say a little bit more about that in just a moment.

As a final highlight, I think it is important to reiterate the importance of a strong balance sheet in times of uncertainty. Lucara ended the quarter with cash on hand, no long-term debt and access to the necessary liquidity to manage our business effectively through this crisis. Our longer term outlook for diamond demand remains robust and we believe that our company is well-positioned to benefit as the diamond market stabilizes in the short to medium term and longer term supply constraints begin to manifest in response to declining production from maturing mines.

So, to add a little bit more color on the supply agreement with HB, what we are essentially doing here is using technology to take the guesswork out of buying rough diamonds. And we are creating a more streamlined, efficient value chain. In our traditional tender process, buyers examine each of our plus 10.8 carat rough diamonds individually in-person and estimate the potential polished outcome. The bids received reflect the inherent risks and uncertainty associated with this assessment. And as a result, the winning bid will always incorporate reasonable margin of error. Under the HB agreement, however, we are scanning all of our plus 10.8 carat diamonds upfront, allowing for a more accurate prediction of the highest potential polished outcome. Lucara will then be paid according to this estimated polished outcome, less the commission and the cost of polishing. A true-up based on the actual achieved polished sales at the time of sale will also be paid. In this arrangement, both Lucara and HB are incentivized to maximize the value of the resulting polish creating true alignment between the producer and the manufacturer for the first time. Moreover, polished diamond prices have not experienced the same volatility through COVID as rough diamond prices, creating a superior, more stable pricing mechanism for our plus 10.8 carat diamonds which account for close to 70% of our revenues. The agreement will also smooth out our revenue profile delivering regular cash flow on 5 monthly shipments of these diamonds from the mine. Lucara expects to begin recognizing revenues under this new arrangement starting in Q3 and we have already received an advance of $13.5 million in June.

As I mentioned in my opening remarks, the case for Clara has never been stronger and interest in the platform has grown dramatically over the quarter. We have completed a total of 30 sales for a value of $14.2 million. And we are in the process of completing our 31st sale. And we are now really ramping up on the frequency of these sales. Our focus through COVID really has been on adding manufacturers to the platform and we have now grown from 4 to 46 customers and our focus now going into Q3 is really on growing supply. And we are pleased to report that we are now moving forward with trials of third-party supply in the coming weeks.

On Slide 6, we have summarized our response and ongoing actions in respect to the COVID crisis. And I would like to reiterate that even as we continue to operate at full capacity to protect the financial health of our organization, our top priority remains protecting the health and well-being of all of our employees, contractors and our local communities of interest. We also continue to work closely with the Government of Botswana and have received their permission to temporarily sell our diamonds outside of Botswana as a result of travel restrictions. The government has also been fully supportive of our efforts to sell diamonds through HB and Clara in combination with our traditional tender process.

Before I turn it over to Zara, it looks like this slide – may taking a little bit of time here to load, Zara will review our financial and operating performance for the quarter. I did want to close on this slide, which we include quarterly to track the performance of our resource in respect of our production of specials, which are of course diamonds in excess of 10.8 carats in size. The lower right chart, which I hope is loading on your screens, looks at the cumulative recovery of these diamonds beginning in 2013. And what you will notice is that the frequency of these diamond recoveries has increased over time as we have mined deeper in the ore body and the mine plant has become more self-load focused. In 2020, the resource continues to perform very well and the recovery of specials remains consistent and on track with our expectations.

And now, I would like to turn it over to Zara to take us through some financial and operating highlights.

Zara Boldt

Thanks very much, Eira. Good morning….

Eira Thomas

Sorry, Zara, just bear with me, I think we discovered that this slide actually had some animation which was not clicking through. There we go. Over to you, Zara.

Zara Boldt

Thank you very much. Good morning and good afternoon, everybody. Slide 8 sets out several financial highlights for the 3 months ended June 30, 2020 and 2019. As a reminder, our results are reported in U.S. dollars. As Eira has just explained, we deliberately did not sell any of our plus 10.8 carat stones in the second quarter. Instead, that high value part of our production forms part of our new supply agreement with HB. We expect to recognize revenue from the sale of those polished diamonds and the corresponding inventory cost in the third quarter, because we sold none of our production of diamonds greater than plus 10.8 carats in the second quarter. The financial highlights set out on this slide are not directly comparable to previous quarters.

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In the second quarter this year, we received cash inflows of $21 million consisting of a $13.5 million deposit from HB, which has been recognized as deferred revenue and sales proceeds of $7.5 million generated through the second quarter tender of stones smaller than 10.8 carats, that tender was held on June 18 in Antwerp. Sales on Clara continued throughout the second quarter with 5 sales completed and that has provided a measure of additional liquidity for the company during the period of unprecedented travel restrictions. During the second quarter, we sold 68,979 carats in size classes below 10.8 carats, with an average price per carat sold of $109. The achieved price in the second quarter for the stones in those smaller-sized classes reflects an overall erosion in rough market prices. We recorded a net loss of $13.9 million during the quarter and adjusted EBITDA of negative $10 million. The decrease in total revenue predominantly from the deferral of sales of stones greater than 10.8 carats in size have the most significant impact on the current quarter’s results.

Operating expenses decreased from $17.7 million in the 3 months ended June 30, 2019 to $12 million in the current quarter due to a lower number of carats sold we were less 32% and reduced waste mining costs. Operating expense per carat sold was comparable at $170 per carat in both periods. As each carat holds the same cost to produce, the impact of the lower average price per carat sold reduced the operating margin per carat sold from $243 for the 3 months ended June 30, 2019 to negative $65 per carat for the 3 months ended June 30, 2020. As the higher value plus 10.8 carat production deferred from the second quarter is recognized in revenue in subsequent quarters as part of this new agreement with HB, the margin should adjust – pardon me, accordingly.

Cash flow used in operations in the second quarter totaled $4.9 million This compares to cash flow earned from operations of $6.5 million in Q2 2019 largely due to the decrease of $35.1 million in comparable revenue between the periods and an increased outflow for tax payable relating to 2019 tax payments required in 2020. This resulted in negative cash flow per share of $0.02 during the quarter.

Moving to Slide 9, we have financial highlights for the 6 months ended June 30 2020. Our financial results for the 6 months ended June 30, 2020 also reflect our deliberate decision not to sell any stones greater than 10.8 carats in size during the second quarter. During the first half of this year, we recognized revenue of $41.6 million from the sale of just over 155,000 carats at an average sales price per carat of $268. We recorded a net loss of $17.1 million and adjusted EBITDA was negative at $1.8 million. Adjusted EBITDA was also affected by the decrease in total revenue, but as well in part due to market conditions for the smaller growth goods sold, particularly in the second quarter tender held in June. Operating expenses per carat sold totaled $189 per carat in the 6 months ended June 30, 2020, up from $171 per carat sold in the comparable period last year. Total carats sold were approximately 21% less by volume than in the same period last year.

As previously stated, adjusted EBITDA and the average price per carat sold were significantly affected by our deliberate decision not to sell our large high value diamonds in the second quarter. Cash flow from operations was nil for the 6 months ended June 30, 2020 and we ended the period with $13.7 million in cash and $19 million drawn on our credit facility. Our operating costs per ton processed was $27.14 for the 6 months ended June 30, 2020, which is below our initial full year forecast cash cost of $32 to $36 per ton processed and 13% lower than the comparative quarter last year. The operating cash costs per ton processed was positively impacted by depreciation of the Botswana pula against the U.S. dollar and the benefits of cost optimization efforts undertaken in the second half of 2019 offset by a 9% decrease in tons processed when compared to the second quarter of 2019.

Moving to Slide 10, we present our operational highlights for the second quarter. The Karowe mine has continued to operate throughout the COVID-19 pandemic and delivered strong production results in Q2. Consistent with the original 2020 plan and below guidance, adjustments were made to the original 2020 mine plan by reducing waste and our mine through the second quarter to ensure the health and safety of our employees operating in a pit and to reduce variable costs. The process plant continued at full capacity, with additional safety measures in place processing ore almost entirely from the South Lobe. Overall performance during the second quarter remains consistent with the strong operational results achieved over the past 2 years.

Operational highlights from the second quarter include ore and waste tons mined of 0.7 million tons and 0.6 million tons respectively, 0.7 million tons of ore processed resulting in just over 101,000 carats recovered achieving a recovered grade of 14.3 carats per hundred tons. 201 Specials, which are individual diamonds greater than 10.8 carats in size, were recovered from direct milling during the second quarter and represent 6.4% weight percentage of total direct milling recovered carats, which is in line with mine plan expectations. 9 diamonds greater than 100 carats in weight were recovered, including 2 diamonds greater than 200 carats in weight. Total tons processed in 2020 are expected to be slightly less than the record 2.8 million tons processed in 2019 due to several plans multi-day shutdowns to upgrade the XRT technology, which is a key part of the recovery circuit at the Karowe mine. Despite the challenges presented by COVID-19, the Karowe mine continues to operate at full production levels, with social distancing and other critical health and safety measures designed to limit the spread of the virus being observed.

Moving to Slide 11, the current operational performance remained consistent and stable through the second quarter. We ended the quarter with cash on hand, no long-term debt and access to the necessary liquidity to manage our business effectively through the crisis. Our longer term outlook for diamond demand remains robust and we believe that Lucara is well positioned to benefit as the diamond market stabilizes in the short, medium term and longer term supply constraints begin to manifest in response to declining production from maturing mines. Revenue generated from our groundbreaking supply agreement with HB will be recognized beginning in the third quarter this year. And we expect that the unique pricing mechanism in this agreement will deliver regular cash flow for this important segment of our production profile at superior prices.

With respect to the underground expansion project at Karowe, we continue to see that program as an important part of our growth strategy. Although the recently announced supply agreement with HB is expected to provide regular monthly cash flow for the remainder of the year, some uncertainty does remain around estimating revenue for that period. As a result, the underground expansion program for the remainder of this year has been re-scoped and reduced from the previous budget of $53 million and will focus on long lead time critical path items. The underground expansion program as previously announced has an estimated capital cost of $514 million and a 5-year period of development with flexibility to adjust capital spending depending on market conditions. We continue to expect to finance part of the capital costs for this expansion with debt and the balance is expected to come from cash flow generated from operations. Thank you for joining our earnings call today. We have all 4 members of the Lucara executive team on the call today and we are happy to answer your questions. At this time, I will turn the call back to the operator for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from Scott Macdonald from Scotiabank. Please go ahead.

Scott Macdonald

Hi, good morning, everyone. Thanks for taking my question. Just wanted to ask first about Clara and then a couple of questions about how the second half of the year might look. I know you haven’t given new guidance, but just starting with Clara, can you give a sense of what the scale of the third-party production trial will be like what kind of volumes you might be trying to move on there and what the next steps will be if the trial is successful?

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Eira Thomas

Sure. Thanks, Scott. Basically because they are trial, Scott, I don’t think the size of the trials is going to be very relevant. It’s really going to inform kind of the decision of these third-parties on how they would like to go forward at Clara and how much future volume they might want to sell through Clara. So, I think the best way to think about it is that pre-COVID we had a number of trials planned. Those were necessarily delayed. I think everyone is feeling a lot more comfortable with the diamond price outlook now and recognizing that Clara is the obvious way to gain reach with customers in the time of COVID and travel restrictions. So there is widespread interest. And we do have third-party goods coming on to the platform starting this next sale. But I – we can’t really predict what that’s going to lead to in volumes just yet, but we will certainly keep you informed.

Scott Macdonald

Okay. Do you expect you will have multiple third-parties participating or is it just one that you sort of got locked in at this point?

Eira Thomas

No, we are feeling hopeful about more than – more than one at this stage and we are having widespread discussions. And I think you will have seen kind of from the messaging of other diamond producers, including De Beers, that there is a growing recognition that the sales process is going to have to adjust post-COVID. So, we think we are extremely well positioned to benefit from that. We have got a big head start having commercialized this more than 1.5 years ago now. And so we are feeling very kind of optimistic about where Clara could potentially go for the remainder of the year.

Scott Macdonald

Excellent. Well, that sounds great. That’s a big milestone for the platform. Just looking at sort of the second half of the year, I know this is going to be tricky, but maybe I will just start on the cost side, obviously, your operating costs per ton were down significantly this quarter and you laid out a couple reasons why? One of which was looked like you reduced the mining activity to really focus on the South Lobe. Is that reduced level of mining activity expected to – are expected to continue with that beyond Q2 or was that just a one quarter thing and maybe just talk a bit about how much flexibility you have in your mine plan to reduce the level of waste stripping you are doing before you sort of have an ore pinch?

Eira Thomas

Sure. I mean, I will turn this over to Zara and/or John to jump in, but obviously, we were very focused on driving down variable costs and really protecting the balance sheet through this period. However, our long-term mine plan is not going to be impacted by the decisions we took in 2020. We feel an opportunity to kind of catch up on where we want to go with ore and waste stripping, but maybe I will turn it over to Zara to specifically talk about some of the costs there.

Zara Boldt

Sure. Thanks, Eira. Scott, as Eira mentioned, it was a deliberate decision taken in the second quarter as a way to manage our variable costs. The focus really has been on there’s no impact to access the ore the focus really has been around reducing ore re-handling and movements to and from the stockpile. We do expect a lower volume of ore in waste tons mined, I think, for the rest of the year. And I think that should translate into a lower overall cost per ton process, or certainly at the lower end of the guidance that we have rescinded. We will need to catch up some of that mining in 2021. But from an operations perspective, it has no the changes that we have made have no impact on our ability to process and the current recoveries that we are anticipating for this year.

Scott Macdonald

Okay, so you have the flexibility to at least for some of that mining into next year?

Zara Boldt

Absolutely

Scott Macdonald

Okay. Then maybe just on CapEx, I know you haven’t re-guided on your spending on the underground project for this year, but do you expect it will be sort of similar amounts of spending for quarter that like for Q3, and Q4 as compared to the first half of the year or could you give any sense on how we should think about the capital spending for the rest of the year?

Zara Boldt

Yes, the project definitely has some flexibility our efforts have really been focused on maintaining critical path items for the schedule, and so the bulk of that relates to deposits on long lead equipment. We had quite a slow start in the first quarter. Obviously things didn’t progress much more quickly in the second quarter, because of the restrictions around the pandemic and an assessment of where we were going I would expect our spending to ramp up in the third and fourth quarter. But we are certainly not looking at spending the full $53 million this year it should be, probably a third to half of that amount I would expect.

Scott Macdonald

Okay, great. Thanks. That’s helpful. Okay, then maybe just on the on the revenue side I must appreciate that there is a lot of uncertainty here. Maybe we will just start with the volumes, terms of your volumes to HB obviously, you didn’t sell your key to production of special stones yet. So do you expect there will be like a bit of a catch up in Q3 in terms of that sort of accumulated inventory of specials or will that just kind of be spreading out your sale of your specials to HB be more or less evenly over the remainder of the year. What sort of the cadence of the sales do you expect?

Zara Boldt

Yes. So we are expecting a bit more of a bump I think through August and September, as those initial shipments start to work their way through. Thereafter they should even out we are expected to deliver shipments of plus 10.8 carats, about twice a month. And the terms of our agreement allow us to be paid for those shipments 60 days after they were delivered to HB. So there was an initial payment that’s done 60 days after delivery. There is a true up on the payment if the diamond is sold in excess of that initial payment. There is no true down. So, the initial analysis that HB is expected to do effectively twice a month will have some inherent conservatism in it, because they won’t have to. They are unable to recover amounts for which their estimate exceeds their actual selling price. But we their focus is really on manufacturing polished diamonds for which there is a clear demand and for which we can get the best polish prices. So, I think there will be a bit of a bump sort of August in September and thereafter it should it should settle down into kind of a more regular steady state which will be quite positive for us. Given that normally we our cash flow is quite chunky around the quarterly tenders. This should be quite positive in terms of managing our cash flow as we move forward.

Scott Macdonald

Okay. Now, I don’t know whether you have started getting any pricing indications or made any deliveries yet, but are you able to give any kind of sort of directional guide on how you see the average prices looking over the remainder of the year? Like perhaps in comparison to Q1 average prices? I think were around 400, like do you expect they will be lower than that because of a market weakness or could that potentially be higher because of capturing some of those Polish price margin?

Zara Boldt

Yes, Scott, maybe I will jump in there. It is a little bit too early. But what I will stress is that one of the really attractive aspects of this arrangement is that we are essentially being paid for our diamonds in Polish terms now and if you look at how the polished on the market has weathered COVID compared to the rough diamond market, we have not seen the same deep discounts on the polish. So what I can tell you is for the diamonds that are starting to sell through now there have been no big surprises on what we have achieved, what that’s going to translate into for Lucara compared to previous periods where we are selling rough is something that we just we need more time to be able to demonstrate to you how those to essentially separate kind of sales paradigms will compare. But stay tuned on that when in the in the coming weeks, and by the third quarter, we will have many more data points that we can refer you to.

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Scott Macdonald

Okay, that sounds good. I will leave it there. Thank you very much.

Zara Boldt

Thanks very much, Scott.

Operator

Your next question comes from Paul Zimnisky from PZDA. Please go ahead.

Paul Zimnisky

Hi, everyone. Congrats on the HB agreement.

Zara Boldt

Hi. Paul. Thank you.

Paul Zimnisky

I guess regarding recoveries of material exceptional stones in the coming quarters, is this something that you will still possibly press release? Or is it something that will be kept more private now given the agreement with HB? And then, I guess, secondly, more generally speaking, is the agreement with HB more of a response to the impact of the pandemic? Or is this more just the general direction that you want to take the sales process given the efficiencies that you mentioned?

Zara Boldt

Yes, maybe I will start with that last question. First, Paul and I think that we will long been advocating for a transformation and supply chain and we have long recognized that the current supply chain is quite frankly a little broken, where you have a participants along that value chain really making their margins on the backs of someone else. So we have long recognized the importance of creating better alignment. I think Clara was the first step for us in that journey really focused on the bread and butter goods between 1 and 10 carats in size. And we feel that this HB agreement is really the next step. So, yes, we have been thinking about this for a long-time. The whole move I think was definitely accelerated through the COVID piece and motivated us to kind of get moving. But I think it’s important to stress that we are not trying to throw the baby out with the bathwater here, we recognize that, these different sales channels can work together and that there are times that it would make sense and it’s very appropriate to tender goods. And there’s other times when it makes more sense to sell goods through Clara or through an agreement like HB, but we definitely feel the harmonization within the supply chain is necessary and that this is where the whole industry has to start going.

Paul Zimnisky

That makes sense. Great. And then just on the potential press release of material stones going forward, is that something that might change given the relationship with HB?

Zara Boldt

Yes. No, I don’t think so. I think what we try and do with more pressure losing our large exceptional stones is just bring comfort to the market that the resources performing as expected. I think that we will continue to communicate in a very open and transparent way about what we are mining and what we are recovering and really is sort of full support for the resource and the potential of the resource as we mine deeper and ultimately into the underground. So you will – you can expect that we will still be announcing these large stone recoveries on occasion.

Paul Zimnisky

Right. Thanks Zara.

Zara Boldt

Thank you.

Operator

Your next question comes from Richard Hatch from Berenberg. Please go ahead.

Richard Hatch

Thanks very much, and thanks for the pull. Appreciate it. And first question, just a point of clarification. So, I am just on OpEx. So obviously, you have managed to pull some OpEx out just through not mining as much but also due to some FX tailwinds as well. I mean, you are able to quantify as to how much of those OpEx savings you think you might be able to hang on to versus sort of the expectation that costs will come back into the second half or into 2021? As you mine more, and the second question is just on the underground. So, if we are dialing back the underground spend for this year where does that leave your sort of thought process around the underground development, the timing of that and sort of how we should sort of think about the CapEx over the next couple of years. Thanks.

Eira Thomas

Thanks, Richard. I will let Zara tackle question number one and then maybe ask John to step in on the underground.

Zara Boldt

Thanks, Hira. Hi. Richard. I think with respect to the OpEx, we should be able to hang on to some of those cost savings as you phrase it for the remainder of the year. We do see the so we don’t see the Botswana Pula strengthening against the U.S. dollar For the remainder of the years, so there’s that part of it. And I think with the fewer tonnes mined that we expect, we talked about that a little bit for the second quarter and then potentially for the remainder of the year, that, that should have an impact on costs as well. So, we do expect our OpEx numbers to be closer to the lower end of the guidance that we had previously released and subsequently rescinded.

Eira Thomas

John, are you there?

John Armstrong

Okay. And then – yes I am here. Okay, Richard, to answer your question, I guess, as it was indicated on the call earlier, we have focused on the procurement around our long lead time items, specifically with respect to the shops thinking and refurbishing some winders and getting our orders in and manufacturing started on some of the specialized equipment in terms of the right now, the timing and the overall CapEx, in terms of the overall CapEx that number hasn’t shifted out with kind of the slowdown in the project. The other components that we have been working on site have been early earthworks and ground prep and the collection of some geotechnical data around the where the surface infrastructure will sit for the shaft complex and the drilling of pilot holes for the ventilation shaft is about 90% complete and then we will start on the production shaft location. So we are basically ensuring that when the opportunity comes for movement of people and the financing to fall in place that we can, that we won’t have lost significant time to the project and certainly, add overall CapEx number hasn’t grown in the term period. We don’t anticipate that it will. And we are also as part of the time that is being spent now doing value engineering to see where there is opportunities within that CapEx to incur some savings in time and money.

Operator

Your next question comes from Andre Galvin, a Private Investor. Please go ahead.

Andre Galvin

Oh, no, thank you very much. My questions have already been answered by previous people. Thank you.

Operator

There are no further questions at this time, you may proceed.

Eira Thomas

Okay, well, thank you very much, everyone for joining our call today. It’s obviously quite a dynamic world out there right now. We at Lucara are focused on really controlling the things that we can control and I really wanted to commend our team for hunkering down through this period and really affecting some positive outcomes for us. The mine continues to operate well and safely and we now have a transformative agreement in place that will guarantee us good solid revenues for the remainder of the year. So, we feel like we are making progress and we look forward to updating you in Q3 as we start to recognize revenues under this new arrangement with the HB Group out of Antwerp. Thanks very much and enjoy the rest of your summer.

Operator

Ladies and gentlemen, this concludes today’s conference call. We thank you for participating and ask that you please disconnect your lines.



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