Good morning. My name is Robert, and I will be your conference operator today. At this time, I'd like to welcome everyone to Dollar General's Second Quarter 2022 Earnings Conference Call. Today is Thursday, August 25, 2022. [Operator Instructions] This call is being recorded. [Operator Instructions] Now I'd like to turn the conference over to your host, Mr. Donny Lau, Vice President of Investor Relations and Corporate Strategy. Mr. Lau, you may begin the conference.

Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO; Jeff Owen, our COO; and John Garratt, our CFO. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News & Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such a statements about our financial guidance, strategy, initiatives, plans, goals, priorities, opportunities, investments, expectations or beliefs about future matters and other statements that are not limited to historical fact. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning under Risk Factors in our 2021 Form 10-K filed on March 18, 2022, and any later filed periodic report and in the comments that are made on this call. You should not unduly rely on forward-looking statements, which speak only as of today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. At the end of our prepared remarks, we will open the call up for your questions. [Operator Instructions]. Now it is my pleasure to turn the call over to Todd.

Thank you, Donny, and welcome to everyone joining our call. We are pleased with our second quarter results, and I want to thank our associates for delivering another quarter of strong performance and for their dedication to serving our customers, communities and each other. The quarter was highlighted by comp sales growth of 4.6%, a slight increase in customer traffic, accelerated growth in market share of highly consumable product sales, including in both dollars and units, and double-digit growth in diluted EPS. Our Q2 performance was led by stronger-than-expected sales in our consumable category. This increase was partially offset by a decline in our combined non-consumable categories, which we believe reflects the evolving consumer demand during a period of inflation and economic uncertainty. During the quarter, and from a position of strength, we made targeted investments in both incremental labor hours and wages to further enhance the customer experience and build on our sales momentum. We believe these investments contributed to an improvement in our overall in-stock position and our strong sales results. And despite challenges from rising product cost inflation and ongoing supply chain pressures, our teams remain focused on controlling what we can control, while continuing to deliver value for our customers, which we believe is seen even more important in the current environment. To that end, we remain committed to offering products at the $1 or less price point, and we're pleased with the strong performance of this program during Q2, especially in the latter part of the quarter. Importantly, we continue to feel very good about our price position relative to competitors and other classes of trade. And with more than 18,500 stores located within 5 miles about 75% of the U.S. population, we believe we are well positioned to navigate the current environment, while continuing,…

Thank you, Todd, and good morning, everyone. First, let me take a moment to thank Todd for his tremendous leadership and passion for our customers, our culture and this company. He has been a wonderful mentor and friend, and we wish him all the very best as he prepares to begin this new chapter. And let me also add my congratulations to Jeff, who I have known and worked closely with for several years. He is a highly respected leader throughout the organization, and we look forward to his leadership in the years ahead. Given Todd has taken you through a few highlights of the quarter, let me now take you through some of its important financial details. Unless we specifically note otherwise, all comparisons are year-over-year. All references to EPS refer to diluted earnings per share and all years noted refer to the corresponding fiscal year. As Todd already discussed sales, I will start with gross profit. For Q2, gross profit as a percentage of sales was 32.3%, an increase of 69 basis points. This increase was primarily attributable to higher inventory markups, partially offset by a higher LIFO provision, a greater proportion of sales coming from our consumables category, as well as increases in markdowns, transportation costs, distribution costs and damages. Of note, product cost inflation was greater than anticipated, resulting in a LIFO provision of approximately $144 million during the quarter. SG&A as a percentage of sales was 22.6%, an increase of 82 basis points. This increase was driven by expenses that were greater as a percentage of sales, the most significant of which were retail labor, repairs and maintenance, utilities and payroll taxes. Moving down the income statement. Operating profit for the second quarter increased 7.5% to $913 million. As a percentage of sales, operating profit…

Thank you, John. Let me take a moment to express my appreciation for all Todd has done for this company throughout his 14-year career. He's led us through a transformational period and has positioned us extremely well for the future. On behalf of the entire Dollar General team, we want to sincerely thank him for the impact he has made on our business. I am fortunate to have been able to learn from him, and I look forward to his ongoing counsel. And as Todd noted, we are excited to announce that John has been promoted to President, while continuing to serve as CFO. John has made many significant contributions to Dollar General during his time leading our finance and corporate strategy teams, and I look forward to his continued leadership and partnership as he steps into this new role. Finally, let me also say how humbled and privileged I am by the opportunity to serve this great team as the next CEO of Dollar General. I couldn't be more excited about our future and all that we can accomplish together. Now let me take the next few minutes to update you on our operating priorities and strategic initiatives as we continue to create opportunities for meaningful growth. Our first operating priority is driving profitable sales growth. We continue to make progress executing against our robust portfolio of initiatives. Let me take you through some of the recent highlights. Starting with our nonconsumable initiative, or NCI, which was available in nearly 15,000 stores at the end of the second quarter. We continue to be very pleased with the strong sales and margin performance we are seeing across our NCI store base. This treasure hunt offering continues to resonate with value-seeking customers as approximately 80% of the assortment is priced at…

[Operator Instructions] Our first question comes from Rupesh Parikh with Oppenheimer.

So first, Todd, congrats on all the success over the years. And Jeff and John, congrats on your well-deserved promotions.

Thank you.

Thank you.

So I was hoping to first touch just on your price position. So how do you feel about your pricing position today in light of some of the competitive actions that are taking place right now and are expected to happen going forward?

Yes. Rupesh, this is Todd. I'll take that one. We feel great about our price position. I just want to remind everybody, well over a year ago, we took a very aggressive price stance, as you may recall me talking about over the last 18 months or so. And it positions us so well in the pandemic and now exiting the pandemic time frame. And we feel great about where we are on prices against all classes of trade, and of course, against even our chief competitors, we're in really good shape. And obviously, as we continue to move forward with this environment, we'll continue to look at how we service our customer. The fabulous thing is we're in a great position, and our customers are really showing through our increase in trips that we saw for the quarter that they rely on our everyday low price here at Dollar General always first before anything else.

Great. And then my 1 follow-up question, maybe for John. So there was pretty significant deleverage on more than 4% comp. So anything unusual to happen in Q2 that doesn't repeat for the back half of the year? And then just any more color in terms of how to think about SG&A for the back half.

Thanks, Rupesh. As you look at SG&A, nothing unusual there. One thing we had talked about was from a position of strength and given the sales outperformance and momentum that we were going to be making targeted proactive investments to build on that momentum, to help drive sales, as well as an enhanced customer experience. So really, it was consistent with that. The most notable one was adding some labor hours to help further improve our in-stock levels as well as that customer service. We really like what we're seeing there. Also, to a lesser extent, we did make targeted investments in wages in the physical box itself. But I would say more normal course proactive actions to drive the business. We also did see some inflation on utilities and did have some higher-than-normal R&M expenses associated with the weather. But I think when you look at just overall operating margin, we feel really good about what we're doing. We feel great about the gross margin expansion. A lot of the investments we make in SG&A really drives that gross margin expansion, which was up 69 basis for the quarter, and importantly, 1.5 points above where we were 3 years ago. So we really like to look at operating profit overall because, as we said before, the geography and the leverage changes a little bit as we spend a little bit on SG&A to drive more on gross margin as you look at the implied guidance with the sales and the strong bottom line guide for the year, that implies operating margin expansion over the back half. So we feel well positioned that we're making the right trade-offs and investments to drive that sales growth.

Our next question is from Matthew Boss with JPMorgan.

Congrats on another great quarter, guys. So first, could you just speak to the top line acceleration that you're seeing despite the tougher backdrop for low-income households that, I think, broadly, we're seeing. How best to think about the inflection back to positive traffic that you saw this quarter? And what are you seeing from retention of new customers that you've recently acquired?

Yes, Matt, thanks for the question. Yes, I would tell you that as expected, the customer is reacting just like we thought she would. And that is she's shopping closer to need. She's being very intentional in her shopping patterns, as well as her shopping while she's inside the 4 walls of the Dollar General store. It is a little bit more skewed to need based, which we thought would also occur. But the great thing is what we're seeing is that if we do have the right product out there, which we do, on the discretionary side, she's shopping that as well. As an example, our harvest in Halloween is off to a fabulous start, well over what we expected. So again, you got to have the right items at the right value, and that's what Dollar General is all about as you know. With that more intentional shopping, we also see her buying more private brands. So our private brand sales have continued to increase quarter-over-quarter as well as year-over-year. And so we're seeing that. And then the all-important $1 price point. By the way, the $1 price point was one of, if not, the fastest-growing subcategory we had here at Dollar General in Q2. And we're seeing that it is so much more important for her today than ever before to be able to feed her family toward the end of the month. So we're definitely leaning in both in private brand and the $1 price point. You may remember, I mentioned a couple of quarters ago, that we anticipated this, so we started to bring in more of this type of product, as well as our merchants under Emily Taylor and her group to really highlight that in off-shelf displays, end caps and that has been ongoing. And we'll continue to press forward on that as we move to the back half of the year because, again, we believe that $1 price point will be very, very important. And then lastly, just like we thought, again, trips being up, so she's coming more often, but spending less on each trip. And again, that's a reversal to what we saw there in the pandemic. So she's really coming back to where we suspected she would. But the great thing about Dollar General is our price is fabulous. Our price position, as I mentioned earlier, couldn't be better, and she's showing it within those trips that she's bringing to Dollar General. So more to come as we move through the back half of this year and into '23. But I would tell you, I've never felt better about our positioning as we are here to help that customer through probably the toughest time she's seen in quite a while.

That's great. And then maybe, John, on gross margin. How best to think about the components in the back half if we're thinking about mark on LIFO or mix? And then just larger picture, holding the earnings guide today despite the better sales outlook, so is this solely the targeted investments that you cited that's holding back incremental model flow through?

Sure. I'll start with gross margin. We didn't give specific guidance on gross margin. But to give you some color around the puts and the takes, we do expect to continue to see mixed pressure over the course of the remainder of the year as sales outperformance exceeds -- on consumables, exceeds nonconsumables, as everybody is seeing. And we also do expect to see ongoing supply chain pressures, including higher fuel costs, as well as increased product cost inflation. So we expect that to continue. But I would tell you, on the transportation side and supply chain in general, we are seeing moderation there, and we do get an easier lap in the back half as we lap pretty substantial and growing supply chain inflation last year. And we're doing a lot of good things to help mitigate that. As Jeff mentioned in the prepared comments, doubling the size of the private fleet, really has a meaningful impact on that where we save about 20% on a per driver basis there. The other thing we called out was markdowns, but I would tell you, with the markdowns, that's really a function of normalization. We were lapping unusually low clearance markdowns and promotional markdowns last year. If you look at where we're at now, still well below pre-pandemic levels, but that lap will continue to be a bit of a pressure to us. But as we look at the back half of the year, in addition to the easing inflationary pressures, particularly on the supply chain and some other areas and the actions we're taking, we're continuing to see growing benefits from our strategic initiatives, which go after the top line and the bottom line other actions to help mitigate that. And as I mentioned previously, when you look at operating…

Congrats again, best of luck.

Our next question is from Simeon Gutman with Morgan Stanley.

Probing a bit on the sales guidance for the back half, I recognize that the 1-year comp is guided to accelerate. If we look at the 3-year stack, it looks like Q2 accelerated quite a bit and that the second half actually doesn't imply much of an acceleration. So curious given the trade down and, I guess, where the customer is going, seems to benefit you right now. Any assumptions other than conservatism that you're thinking about in terms of sales for the second half?

Yes. As you look at sales in the second half, I mean, when you do the squeeze on that, that's quite healthy sales, not only on a 3-year basis, but as you look at the 1-year basis. To your point, we did see accelerating comps, we saw accelerating comps throughout the quarter. So we feel really good about the momentum of the business going in. We feel really good about the new customers and basket size growth that we've been able to retain coming out of the pandemic. And we are starting to see signs of more customer trade down, that's contemplated in the guidance. I wouldn't say we have a significant impact from that built into the guidance. But based on what we're seeing, that is contemplated in there. We're seeing a bigger impact, as big as ever impact from our real estate with the strong performance of remodels and new units, which are exceeding our pro forma, and the initiatives are delivering. So we feel really good about where we're at, the momentum of the business, the fundamentals, and I think the guidance reflects that, as well as a little bit in there contemplated around that trade down.

And maybe the follow-up, just honing on the gross margin a bit. Q2 was quite good and at a structurally higher level. Can you talk about the sustainability of this? And if there was some -- maybe some puts in and takes, but it feels like we're run rating at a higher level, and not thinking about guidance into '23, but are the drivers actually accelerating? You mentioned some relief on input costs. Are the drivers accelerating such that this is only going to build from here?

Yes. Again, I don't want to get too specific around gross margin guidance. But again, as you do the squeeze in the back half, it implies healthy, positive operating margin expansion and gross margin. We feel good about where we're at here in terms of sustainability over the long term to drive that. The biggest driver when you look, again, you go back to pre-pandemic levels where we're up 1.5 points in this quarter. It's the initiative is a huge piece of that. The ongoing benefit of DG Fresh and NCI, as we optimize and scale those, that's the gift that keeps on giving other things around the DG Media Network, just while promotional activity was a little bit higher versus pandemic where there was none. We remain very targeted in that and are doing a great job minimizing the clearance activity. So I think as you think the fundamental drivers of the initiatives, as you think about the other levers we've talked about, the efficiencies we're driving in supply chain, including the private fleet and the other levers we've talked about. And we do see spots where the inflation is starting to moderate, particularly around carrier rates ocean freight, we're seeing moderation there. It remains to be seen what happens to inflation overall with vendors, but we'd expect over time that growth, that pace of increases to start to moderate as well. And again, as you get to the back half of the year, we're lapping pretty substantial increasing supply chain inflationary laps. And so as we see some moderation and get easing laps, that will help as well. And that's all contemplated in the guide.

Our next question is from Michael Lasser with UBS.

Todd, Jeff and John, congratulations on all your new endeavors. My first question is the success of Dollar General over many years has been driven by not only a superior execution and formal strategy, but also some of its competitors in the small-box value retail space being on a long journey to try and find their way. And now there could be some changes in the competitive environment. We're seeing Family Dollar make price investments, it could be the perception that you're making investments in store hours, store labor as another way to beef up in the event that you are now going to face a stronger competitor, so the net result of all this could mean that the profit rate, the operating profit rate in small box retail has peaked as now 2 competitors that are going to be stronger and well positioned, are fighting a little bit harder against each other. Why or why not is that the case?

I'll start it out, Michael. I would tell you that obviously, you're zeroing in on our chief competitor there. So I'll just say this that it's been not only a long journey for them, I would say it's been even tougher than that. We've heard over the last 7 years that they're getting traction and they're doing this and doing that, and we're still talking about that. So I think we're still talking about it. What we are here to do, as you know us pretty well, Michael, is controlling what we can control and forging ahead on our initiatives. We have left our chief competitor completely in the dust that will take years, years to catch up. And I would also tell you that we feel very, very strongly that peak margins haven't yet been obtained and that we have a lot of room to grow. You've heard from John, not only short term but long term. Our initiatives alone are driving a tremendous amount of that growth and that confidence. And I would tell you that Jeff and the team, as we go forward, have got a lot of initiatives in the hopper that we haven't even talked about yet that are percolating. So we're looking out as we promised everyone 6 years ago, when we started the strategic journey that we've been on, that we would look out 5 to 10 years down the road and around the corner. And I think you've seen from us that we've done that. And I think you've seen the fruits of that as we continue to roll out these initiatives. And to your point, have some of the best execution in the retail industry against initiatives. Lastly, being here for 14 years and thinking back to the last time we had the recession and we had the customer that was really strained, the 1 thing that Dollar General had is that we had already fixed a lot of the basic railroad by the time we really hit stride in late '09 and '10. I would hate to be trying to fix the railroad right now. It would be like one of the toughest times to do it. And so I would like to just point out that we're in such a great position that as we continue to move forward, we believe we'll be able to capitalize on that trade down that we're already seeing. And that trade down is coming from income levels that are upwards of $100,000 which we really are encouraged in seeing a younger consumer, a little bit more affluent, and again, very digitally and tech savvy.

Super helpful. My follow-up question is on the outlook for this trade down. Your comp in the quarter was obviously well above your algorithm, you're guiding conservatively for the back half of the year seemingly so. You have a lot of inventory. Why wouldn't this above algorithm comp continue well into next year, assuming that the macro environment stays where it is, and if it gets a little worse that trade-down benefit will be even greater?

Yes. So I would tell you that I will first start and just say that we feel that, that trade down will continue to come in and benefit us. As it relates to the inventory levels, we couldn't be happier with where we sit today on inventory. We did all the right things early on, Michael, as you would imagine, coming from a Dollar General. We were well ahead of any inventory issues that may pop up unlike some of our competitors out there. We canceled orders as early as December because we saw where the customer was headed. We actually have canceled orders not only into Q2, but into the back half of the year. And all of our guidance is contemplated on that. So we feel very strong. The quality of our inventory couldn't be better. And as we move forward, we believe that will benefit us as we move into the back half of this year and into next year.

Our next question is from Kate McShane with Goldman Sachs.

I just wanted to go back on the trade down commentary. If there are certain categories being sought out by the higher-end consumer. And what categories are you seeing heavier trade down to with regards to private label? And then just as a follow-up, with the higher-end consumer coming into the store now, how long do they traditionally stick around and how might you be trying to keep them as more permanent customers?

I would tell you, what we're seeing on that higher-end consumer is that she does shop a more holistic part of the store. And I made mention on the harvest and Halloween as an example, very discretionary, but doing extremely well. And some of that comes from that trade down, right? Because that consumer does have a little bit more money to spend. And as you think about how sticky that customer is, well, dial the clock back just a bit to the pandemic and now coming out of the pandemic, we've retained a lot more of those customers than we thought we would. So we're very happy on that retention. So we know that they're sticky because, again, that consumer -- was that consumer making -- the majority of them making that 50 to 75 range. So this one extends up to 100. But again, the experience is very, very similar to those, for those consumers when they come in. So we believe that, that will be sticky as well. So when you think about our market share in just discretionary items. I also want to point out that, that was positive as well for the quarter. So we're picking up share even in a very tough environment on the discretionary side. And then lastly, your other question was around what type of items are we seeing as well. Even from our core customer, trading down -- trade down doesn't always mean just trading down from other retailers. It also is trading down when you get inside the box, and our core customer has been buying more private brands, that $1 price point, very, very important to her. If you think about things that have accelerated greatly over the last quarter, if you think of basic proteins that our core customer needs, so what we've seen is 15% to 20% increases over the last couple of quarters in canned meat, seafood, dry pasta, soups, rice and beans. So those core proteins, eggs, all those things that the consumer needs to feed her family but can do it at a much reduced price. So we're seeing that trade down effect as well, and we're in great position to take advantage of that, both from our everyday low retail price stance, as well as our supply chain is much more healthier there than we were last year at this time.

Our next question is from John Heinbockel with Guggenheim Partners.

Congratulations. Todd, I wonder if you can talk to, you referenced this strategic journey, which is one of the most significant things I think you brought in. Where are we on that in terms of the pipeline of things? Well, First of all, I think you're looking out, right, 2 or 3 years with that effort. Where is the pipeline versus where it's been historically, right? Is it fuller? And then where do you think -- you're not going to talk specifics, but when you think about kind of functional areas, right, merchandising, marketing, where do you think there's the most fertile ground, right, to use those strategic ideas to further the DG brand?

Yes. Let me start, and I'm going to turn it over to Jeff as well. But I would tell you that, John, we feel great about those strategic initiatives. And to your point, not only a couple of years out, but 5 and 10 years out is the look. And if you look at the majority of them, there -- for instance, NCI, as an example, while we're close to the end of that rollout journey, the next phase of that, that optimization phase, is just starting. I would tell you, we're probably in the fifth inning in NCI. We're in the late fourth inning in the fresh piece of the business, with produce being a big unlock yet to come as an example. And then we're just starting the journey. We're just getting up to the plate to use the analogy in both Mexico and in our health initiative. And as I mentioned earlier, we've got others we haven't even talked about ready to push into the pipeline. And Jeff, you may want to jump in just briefly.

Yes. I would tell you, John, thank you for the question. And I think, we've never been more excited about the future. And to Todd's point earlier, it's not 2 to 3 years out. I mean, one of the things you got to think about is our, first of all, our pipeline for growth. I mean, that 17,000 additional opportunities, 13,000 general stores, 3,000 pOpshelf stores and 1,000 DGX. So First and foremost, our pipeline is extremely robust, and we're very pleased with this larger store format that we've been rolling out. 80% of our stores this year will be in that larger store format, and we're seeing the sales per square foot perform extremely well. So we're very pleased at how our new store performance is beating our pro forma expectations. And John, you've followed us for quite some time. We have pretty high expectations for our new store growth program. But as you think to the future also, you got to think about digital as well. I mean, our digital strategy and our acceleration there is serving us tremendously well. I mean, when you think about over 80 million profiles that we're able to connect with our CPG firms and our brand partners, and we believe we can expand that beyond traditional CPG and brand partners because we have a unique customer, almost 30% of the United States population in rural America, that's really hard to reach. And with our customer profiles, we're able to really connect multiple partners with that unique Dollar General customer that no one knows better than we do. But as you think down the road, Mexico, we're excited to open stores, and we said this before, we wouldn't be going to Mexico if we didn't think it was a huge opportunity. And then when you think about health, health is one of these where we're -- we just had our first meeting with our advisory panel. It was incredible. And you're going to hear a lot more about health here in the near term and in the future with our Chief Medical Officer, Albert Wu, his strategy and the way we're going to be able to provide access for a customer that's being underserved right now. So when you think down the road, it's extremely bright. And I would tell you, your comment about our teams, where do we have fertile ground? We have the best team in retail. And so when you look at every aspect of this Dollar General team, it's the unique and secret sauce of our success. And our culture has never been stronger. Our teams are energized to continue to move forward. So I think you can tell from my excitement, Todd's excitement, John's, that we see tremendous opportunity in the future. And I can't wait to update you guys in the near future on where we're going.

Our next question comes from Corey Tarlowe with Jefferies.

Congrats to Todd on a successful career with Dollar General, and to Jeff and John for your new elevated roles. So first, there was an announcement intra-quarter about the 3 DC openings out west. Are we to read into that, that there are perhaps the more incremental store opportunity ahead lies in the regions where those new DCs are, in fact, being built out west in the U.S.?

Corey, thank you for the question, and thank you for the well wishes. One of the things we do so well here at Dollar General is we anticipate and look down the road. And we like to think we look around the corner real well, too. So that's exactly what this is. Our distribution strategy is in lockstep, as I mentioned just a minute ago. We have 17,000 additional opportunities, and that's across the entire U.S. And so we're very pleased at our ability to expand our distribution network because what it's going to do for us is it's going to continue to allow us to serve our stores better, make it more efficient, be able to pull cost out of the system and enable us to continue to grow. And as you can tell, we have significant growth prospects in the future. And that's all this is, is being able to make sure that our distribution is in line with our store opening plans, and those 2 teams work very, very well together to plan accordingly.

Great. And then just a follow-up for John. How are you thinking about your expectations for freight expenses throughout the back half of this year within the overall margin guidance that you've given?

Yes. As we touched on earlier, we do see improving conditions there. You're seeing additional supply capacity come online. You're seeing, obviously, demand drop as folks cut orders. And so when you look at both ocean freight and you look at domestic carrier rates, we're seeing those rates come down. And again, actions we're taking like with the private fleet is helping mitigate that as well. And we're coming up on a time where you're lapping increasing supply chain costs as you went from Q3 into Q4 last year. So I think net-net, we're doing a great job mitigating it. And I think that will, over time, switch to a tailwind as we see that moderate.

We have reached the end of the question-and-answer session. I would now like to turn the call back over to Todd Vasos for closing comments.

Yes. Thank you for all the questions, and thanks for your interest in Dollar General. And I do appreciate all the well wishes that you extended. Serving what this team has been the highlight of my professional career, and it's been a blessing and a privilege to serve our customers, associates, shareholders and communities over the past 7-plus years as the CEO of Dollar General. I'm extremely proud of the progress we've made together, and look forward to working with Jeff and the team in an advisory and consulting capacity going forward, as well as continue to serve on the board. I believe we have the best team in retail, our mission and culture are stronger than ever and we are extremely well-positioned to capitalize on the enormous growth opportunities we see ahead. Again, thank you for listening, and I hope you have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.