Sonida Senior Living, Inc. (SNDA) Q1 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Capital Senior Living First Quarter 2012 Earnings Release Conference Call. Today's conference is being recorded. The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including but not without limitation to, the company's ability to find suitable acquisition properties at favorable terms, financing, licensing, business conditions, risks of downturns and economic conditions generally, satisfaction of closing conditions such as those pertaining to licensure, availability of insurance at commercially reasonable rates and changes in accounting principles and interpretations among others, and other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission. At this time, I'd like to turn the call over to Mr. Larry Cohen. Please go ahead, sir.

Thank you. Good morning, and welcome to Capital Senior Living's First Quarter 2012 Earnings Release Conference Call. I am very pleased to report continued occupancy growth and strong results for the first quarter, which is typically a challenging period. Successful execution of our strategic plan is significantly enhancing shareholder value through a focus on operations, marketing and accretive growth. Our same-store occupancy increased 110 basis points from the first quarter of 2011 and 20 basis points from the fourth quarter of 2011. First quarter EBITDAR margin increased by 130 basis points from the first quarter of 2011. We continue to enhance our geographic concentration by acquiring high-quality senior living communities that generate meaningful increases in CFFO, earnings and net asset value. Since the first quarter of last year, we have added 17 communities to our consolidated total, increasing our ownership by approximately 1,700 units. As the value leader in providing quality seniors housing and care at reasonable prices, we are well positioned to make further gains as a substantially all private-pay business in an industry that benefits from need-driven demand and limited new supply. Since the beginning of 2012, the company has completed the acquisition of 7 high-quality senior living communities for a combined purchase price of $75.6 million. One of these communities is in Indiana and 6 are in Texas, enhancing the company's geographic concentration to resident capacities of approximately 3,600 in Texas and 1,600 in Indiana. These acquisitions are expected to add CFFO of approximately $3.8 million or $0.14 per share, increase earnings by $0.08 per share and increase annual revenue by more than $19.4 million. These 7 communities have 563 units with a mix of independent living, assisted living and memory care. Occupancy at these communities average 93% and average monthly rents are approximately $3,100. These 7 communities were financed with approximately $54.8 million of 10-year fixed rate nonrecourse debt with a blended average interest rate of 4.63%. We have completed due diligence on additional high-quality senior living community in Texas, and subject to customary closing conditions, we expect to complete this transaction later this quarter. We are conducting due diligence on a number of additional transactions, consisting of high-quality senior living communities in regions where we have extensive operations. Subject to completion of due diligence and customary closing conditions, we expect to acquire these communities in the third quarter of 2012. I would now like to review operating activities for the first quarter. I'm pleased to report that in addition to the success we are experiencing with our acquisition program, we are also achieving strong operating results with gains in occupancy and net income. Our results differentiate Capital Senior Living as the value leader in providing quality seniors housing, care and services that are personalized and tailored to meet the individual needs of each community resident at reasonable prices. The company's range of products and services is continually expanding to meet the evolving needs of our residents. We believe we are different from other companies in our peer group, with our sole focus being on substantially all private-pay senior living and we are capitalizing on our competitive strengths in operating communities in geographically concentrated regions with larger company economies of scale and proprietary systems in a fragmented industry that are yielding solid operating results. At communities under management, excluding one community that had a recent conversion, same-community revenue in the first quarter of 2012 increased 3.9% versus the first quarter of 2011. Excluding the expenses related to one additional day due to leap year in 2012, for comparability purposes between the periods, same-community expenses increased 2.7% and net income increased 5.7% from the first quarter of 2011. Same-community occupancies were 110 basis points higher than in the first quarter of 2011 and 20 basis points higher than fourth quarter of 2011. I am pleased to report that over the past 2 years, same-community occupancies have increased 350 basis points, and average monthly rates have increased 7%. Our attrition in the first quarter of 2012 decreased to 38% from fourth quarter rates of 40.2%, with independent living attrition rates falling to 33.5%, the lowest levels since first quarter 2010. On a same-store basis, we had 55 more move-ins and 63 fewer move-outs during the quarter, resulting in a net gain of 110 units for the first quarter of 2012, compared to first quarter of 2011. Same-store average monthly rents were 2.2% higher than the first quarter of 2011 and 50 basis points higher than fourth quarter of 2011. These results compare favorably to recently released NIC MAP top 100 MSA data, which report same-store first quarter 2012 occupancy growth in the top 100 markets of 60 basis points year-over-year and down 10 basis points sequentially from fourth quarter 2011, with average daily rate increases of 1.2%. NIC MAP reported inventory growth of only 1.2% and trailing 12-month construction starts were limited to 1.1% of existing inventory. These metrics compare favorably to NIC MAP annual absorption rates of 2.1%, with absorption exceeding inventory growth for the past 8 quarters. The number of our consolidated communities increased from 70 in the first quarter 2011 to 87 in first quarter 2012. Financial occupancy of the consolidated portfolio averaged 85.7% in the first quarter of 2012, 10 basis points higher than fourth quarter 2011 and 90 basis points higher than first quarter 2011. Average monthly rents in the first quarter of 2012 increased 6% over first quarter 2011 to $2,942 per occupied unit. Occupancies and rates continue to trend positively and I'm optimistic that fundamentals will continue to improve this spring and summer, which are typically good periods. As of last Friday, on a same-store basis, we had 136 more occupied units as compared to the same week in 2011. Our positive results demonstrate that our team, with it's disciplined focus and attention to detail, is successively executing our operating strategy and confirms that Capital Senior Living is different from other senior living providers. Successful senior living operations require well-located communities with the right on-site team, supported by strong regional and corporate resources. We are fortunate to continue to recruit and retain many of the best operations in sales and marketing professionals in the senior living industry. They are attracted to our culture, our operating philosophy, they're hearing from their peers about our achievements, they're receiving state-of-the-art training at Capital Senior University and they are impressed with our company-wide respect for residents and family. I thank our dedicated on-site regional and corporate team, as well as the members of our Board of Directors for their commitment, passion, focus and accomplishments in serving our residents so well and contributing to our positive results. We are excited about our growth initiatives as seniors housing is a needs-driven product, with new supply at a very limited level and demographic demand growth is driven by an aging population. These favorable demographic and supply/demand trends should allow for continued occupancy and rate growth. We have improved our operations by implementing in 2011 Internet marketing and social media initiatives, as well as software programs for care plans and level of care charges. We are also benefiting from our investment and cash flow enhancing renovations, refurbishments and conversions of units to higher levels of care. These initiatives, combined with the operating leverage in our prudently financed business, are expected to increase our revenues, margins and cash flow. Each 3% increase in average monthly rent generates the more than $8.5 million of incremental revenue. Each 1% improvement in occupancy is expected to generate $3 million of revenue, $2 million of EBITDAR and $0.05 per share of CFFO. We have completed conversions of 165 consolidated units to higher levels of care in 2011, and we are in the process of converting an additional 73 units from independent living to assisted living. When stabilized, these conversions are expected to add more than $6 million of incremental revenue and approximately $3.6 million of EBITDAR. Additional conversion opportunities are currently under review. As we execute our strategic business plan, we are enhancing our geographic concentration with expanded care to residents, maximizing our competitive strengths and lowering our cost of capital. Our strategy is focused on generating attractive returns, enhancing free cash flow and maximizing shareholder value. The $75.6 million of acquisitions completed since the beginning of 2012 are expected to generate greater than an 18% initial return on our invested capital. As you can see, our ability to complete off-market acquisitions on strategically located, high-quality communities in the current favorable interest rate environment is yielding outstanding returns. Our acquisition pipeline remains very active and we are conducting due diligence on a number of transactions, consisting of high-quality senior living communities for regions where we have extensive operations. Such as completion of due diligence and customary closing conditions, we expect these acquisitions to be completed in the third quarter of 2012. When completed, these acquisitions are expected to be accretive to CFFO and earnings and lead to further improvement in our EBITDAR margin and operating metrics. The 130-basis-point improvement in first quarter 2012 EBITDAR margin compared to first quarter 2011 reflects the benefit we derive from executing on our strategy of acquiring communities in geographically concentrated regions. We are able to leverage our nimble operating platform and benefit from economies of scale, our group purchasing program, our proprietary proactive expense management and other systems, as well as our focused marketing programs to integrate acquisitions in a highly accretive manner. Our success in acquiring high-quality senior living communities on attractive terms validates Capital Senior Living's competitive advantage as an owner/operator with a geographic focus able to successfully assimilate acquisitions with minimal incremental costs. And our liquidity is solid, allowing us to have the capacity to comfortably fund our working capital, maintain our communities, retain prudent reserves and have the equity to fund more than $75 million of additional acquisitions in 2012. I am optimistic about our outlook and I am confident in our team's ability to successfully execute on a well-conceived strategic plan. We expect continued significant growth in cash flow from operations, earnings and net asset value that will lead to a meaningful increase in shareholder value. Our fundamentals are solid, and I am excited about the company's prospects as we benefit from need-driven demand growth with limited new supply. I would now like to introduce Ralph Beattie, our Chief Financial Officer, to review the company's financial results for the first quarter of 2012.

Thanks, Larry, and good morning. I hope everyone has had a chance to see the press release, which was distributed last night. In the next few minutes, I'm going to review and expand upon highlights of our financial results for the first quarter of 2012. A copy of our press release is available on our corporate website at www.capitalsenior.com. If you would like to receive future press releases by e-mail, there's a place on our website for you to provide your e-mail address. For the first quarter of 2012, the company reported revenue of $72.2 million, compared to revenue of $59.8 million for the first quarter of 2011, an increase of $12.4 million or 20.7%. Resident and healthcare revenue increased from the first quarter of the prior year by $14.1 million or 24.8%. We consolidated 87 communities on our income statement this quarter versus 70 in the first quarter of the prior year. The year-over-year growth of 17 consolidated communities reflects the 13 communities that we have acquired since July of 2011 and the 4 Spring Meadows properties, previously held in joint ventures, that we began leasing in the second quarter of last year. Financial occupancy of the consolidated portfolio averaged 85.7% in the first quarter of 2012, compared to 85.6% in the fourth quarter of 2011, a sequential improvement of 10 basis points. Financial occupancy increased 90 basis points compared to the first quarter of the prior year. Average monthly rent was $2,942 per occupied unit in the first quarter of 2012, an increase of $166 per occupied unit, 6% higher than the first quarter of 2011. On a same-community basis, occupancies were 110 basis points higher than the first quarter of 2011, and increased 20 basis points sequentially. Same-community average rents were 2.2% higher than the first quarter of 2011. As a percentage of resident and healthcare revenue, operating expenses were 59.8% in the first quarter of 2012, compared to 59.9% in the first quarter of 2011, an improvement of 10 basis points. We achieved this improvement despite the fact that the first quarter of 2012 reflected one additional day of expenses due to leap year. We estimate that operating margin would've improved 60 basis points if the number of days had been equal between the 2 quarters. Excluding transaction costs associated with the acquisition process, general and administrative expenses as a percentage of revenues under management were 4.5% in the first quarter of 2012, transaction costs were approximately $400,000 in the quarter. Adjusted EBITDAR for the first quarter of 2012 was approximately $25.7 million, and adjusted EBITDAR margin was 35.6% for the period. EBITDAR increased $5.2 million and margin improved 130 basis points from the first quarter of 2011. Adjusted net income for the first quarter of 2012 was $1.9 million or $0.07 per share, excluding the nonrecurring and noneconomic items reconciled in the press release. This was an increase of $0.2 million or $0.01 per share from the first quarter of 2011. Adjusted CFFO was $6.5 million or $0.24 per share in the first quarter of 2012, compared to $5.8 million or $0.21 per share in the first quarter of 2011, an increase of 13.2%. As Larry indicated earlier, we acquired 6 communities in the quarter, all in the month of March, so the cash flow from these acquisitions will begin to be reflected in the second quarter. We acquired one community in April of this year and expect to close on one more later this quarter. We further expect our due diligence process to result in additional acquisitions in the third quarter and beyond, so quarterly comparisons should continue strong on both a year-over-year and sequential basis. Capital expenditures for the quarter were approximately $2.3 million, representing $1.3 million of investment spending and $1 million of recurring CapEx. If annualized, the company spent approximately $450 per unit on recurring CapEx in the first quarter of 2012. The company ended the quarter with $26.8 million of cash and cash equivalents, including restricted cash. We invested $13.4 million of cash as equity to acquire $56.4 million of properties in the first quarter. We project an annual cash on cash return on this investment in the mid-to high teens. As of March 31, 2012, the company financed its 38 owned communities with mortgages totaling $276.6 million at fixed interest rates averaging 5.6%. None of the company's mortgages mature before July of 2015. We also closed in the first quarter a supplemental financing on existing communities, with proceeds of $5.6 million at a fixed rate of 4.47%. An additional $20 million of supplemental financing is expected to close in the second quarter. Since the original mortgages were placed with Fannie Mae and Freddie Mac, the communities have increased in value and a portion of the principal has been amortized. We can then go back and take out additional proceeds one time for each mortgage. The supplemental debt is coterminous with the original loan and is priced off the treasury rate for the remaining term. The company has additional owned communities that have appreciated in value since the original mortgages were placed and we could pursue additional supplemental financing in the future. Cash on hand, cash flow from operations and proceeds from these supplemental financings are expected to be sufficient for working capital, prudent reserves and equity to fund the company's 2012 acquisition program. We would now like to open the call to questions.

[Operator Instructions] And we do have a question from Drew Jones from Stephens Inc.

Larry, you touched on it a little bit. It sounds like trends are looking good into April -- through April. Could you talk about that -- those incremental 130 units, the occupied units, is that more a factor of lower attrition or the move-ins? You guys are doing a good job of converting interest to move-ins?

It's both, Drew, but I will tell you, I am very encouraged by the activity that we've been seeing in our properties. We had a very strong April. We have properties that have hit levels that we haven't seen in 6 years throughout the country. There's a lot of momentum. We had -- just for example, Santa Barbara, California is a property that was full for years, had a lot of attrition and had some competition went back up over 90%. Here in Mesquite, Texas, a property that hasn't been at the 90% level in 6 or 7 years is back over up to 92%, 154 units. Ohio has had a really strong quarter of the lease of properties, particularly Dayton, with 12 deposits and 8 move-ins last month. So we're just seeing very good activity, good momentum, and it's coupled with the move-outs coming down. It's interesting, not only do we have better metrics first quarter year-over-year -- and remember, last year, we were coming off the horrific weather in the wintertime, particularly February and March, Texas, the Northeast and the Midwest, but what was surprising and very unusual this year, we had more move-ins and fewer move-outs in the first quarter of 2012 than in the fourth quarter. So the trends continued to be very positive, and again, we're very encouraged with what we're seeing so far in the second quarter. And now just beginning to come into what are traditionally the best periods for our industry, being spring and summer.

You guys talked a little bit last quarter and gave some metrics about -- just to give a view of the number of deals that you guys were getting a look at. Did that flow or the pace changed at all quarter-to-quarter?

Actually, I think the flow is actually up this year, which is interesting. Again, we're being very selective as we look at the properties. We're very pleased that we've completed $75 million through April, then we set a target for $150 million for the full year. And in the first third, we've already exceeded half of that, and the pipeline is sufficient, quite frankly, to get us very close to that objective. So we continue to find transactions, principally off-market. In regions where we operate, economics look very solid. And the other thing about these properties is I can't stress strongly enough how pristine they are. In fact, one of our lenders is putting out -- or maybe just put out a press release on the portfolio that we closed in March, and all of those buildings were completely renovated in 2010, 2011. So we've been buying properties, some of which were built within the last 3 years. The others have all been significantly renovated and we have third parties come in and do engineering reports. I think the CapEx requirements are like $1,000 for asphalt [ph]. I mean very, very minor. So we're very pleased to buy properties, very strong performance, great condition and what's remarkable is that these are very small operators that have no systems. So once we get in there and put in our insurance programs, our group purchasing and other programs, as well as our marketing programs and care plan, we think there's a lot of upside to what are extremely high-performing properties that we are acquiring.

Okay. And so it sounds like as long as you guys are -- continue to get these great returns, that your #1 use of CapEx is still going to be acquisitions, and conversions will probably be on the back burner for a while?

We'll do both. I mean, we have enough cash to do both. We're going to -- we always maintain our buildings. I will tell any investor on the call, if you go on our website and look at the map and throw a dart, you're welcome to visit any community at any time and we'd be very proud of the appearance. So we maintain our properties in high-quality condition. We are constantly maintaining those buildings to the standard which we expect our properties to perform. And maintaining our existing properties are as important as buying properties, and we're allocating our resources appropriately so that we can get the incremental growth, both from acquisitions, the refurbishments, as well as organic growth from our existing properties.

Okay, and last one. With the increased flow of deals coming across your desk, any change in competition?

Not really. Again, it's -- what's happened now is most of the deals are coming to us before they go to market or off market. And no, it's a very fragmented industry and our strategy of making acquisitions in kind of that $10 million to $30 million or $40 million range is too large for most of the smaller operators and too small for the healthcare REIT, the larger operators, to make a difference. So they are -- they definitely move our needle, are significantly contributing to our operations and financial results. And that [ph], we're really not seeing competition. In fact, we're getting transactions coming to us before they would consider to go to market because they know we are the most likely and credible buyer in the market.

And we will now take our next question from Daniel Bernstein from Stifel, Nicolaus.

I guess the question I have is on the expansions you had -- you're looking at doing. What is the timeline to complete those and what may be the timeline to ramp up? Is that really more of a 2013 impact than 2012?

Dan, actually, we're not looking at expanding...

I mean the conversion.

The conversions. We will continually look through the portfolio. We're actually now going back this year in increasing licensure to assisted living, some properties that we've already converted. For example, we just licensed the entire building at Santa Barbara, California. That was the building that had IL and AL. It's now fully licensed. We're adding more licensed units in Ohio because those leased-up properties were full in AL, so we're adding more units. We're going back into Omaha, Nebraska on a conversion that we successfully completed last year to convert more units. So we continually -- and the regional and the on-site staff are continually looking at their portfolio and their communities to determine how they best can serve their residents and the ability to increase the care levels to extend length of stay, and obviously, improve the profitability of the operations.

When you're converting to AL, AL usually has lower margins than an IL product, but you -- I think you're converting some of your empty units as well. Are you finding the property operating margins are going down or are they going up? I just wanted to understand...

They're actually going up, Dan. The incremental margin on the converted units is typically 60%. By having multiple levels of care within the same building, we have an Executive Director, we have the kitchen staff, we have the wait staff, you have a separate dining room. But really, the incremental cost is minimal relation to the revenue that is being generated, whether it be because there are vacant units, or whether because we're just getting a higher utilization of units. So you're right that in a freestanding environment, comparing IL to AL, AL will have lower margins, but by converting units in the existing property because we have all the utilities are being paid for, the real estate taxes are being paid for, just so many of those costs are fixed, that the -- we're talking about more caregivers. The other aspect, which I think is interesting to think about is, we always will look at conversions and the efficiencies of the number of units to be conforming with licensure patterns. So for example, if we have to have 1 caregiver for 15 units, so that's the best efficiency on the labor cost and the shifts will typically convert in 15-unit increments or in memory care, there'll be 7-unit increments. So it's all being done very thoughtfully in ways that we look at with the operating focus of our business to maximize the margins and the cash flows.

Okay. On the acquisitions that you're looking at for this year, the second quarter and the third quarter, can you quantify the dollar size of those acquisitions?

Most transactions, I said, are going to be in the $10 million, $20 million, $30 million type range, very consistent what we've done. Economics were very comparable to what we already completed. They all had very good stable occupancies, good rents, good margins, and they're within the locations in which we operate. We're looking -- again, we mentioned that we have one property, again, in Texas that will close this quarter. The others are Southeast, kind of Midwest, Central Southwest, again, the regions where we have strong presence. And again, we're looking at how we can best utilize our existing operating infrastructure with our regional support to be able to have the oversight for those properties and maximize their cash flow contribution to the company and to our shareholders.

Okay. And then one last question here. When you refi -- do those onetime refinancings with Fannie Mae and Freddie Mac, I'm trying to understand about where you're going to from like loan-to-value. Are you going from, say, 50% to 70% or -- just trying to think of the magnitude of how much your assets have appreciated since you've financed.

Dan, generally those mortgages were probably financed originally at about a 70% loan-to-value. We found that because of the appreciation combined with some principal amortization that many of our communities are -- have less than 50% leverage on them today. So we can take that leverage from, say, for example, a 50% LTV back to 65%, so still not overlevering. But the interest rates we're able to achieve are tremendous because we take, for example, the 4-year interpolated treasury rate plus a spread, and we get rates in the 4% range on those supplemental financing.

And the other thing, Dan, which I think your question leads to is the confirmation that we have highly valued real estate or a balance sheet that's not reflected in our stock price. And I appreciate your analysis and the other analysts stressing about the NAV. This is third-party appraisals, these are third-party lenders coming in, making loans based on LTV analyses supporting that. And you would think that, that would be a metric that our shareholders will look at or other investors will look at to look at the intrinsic value of our company.

I think they do, but I'll agree with you. And then one last question. Do you have a -- just a housekeeping question, do you have a CapEx guidance for the year?

I think, Dan, you're probably most interested in the maintenance CapEx. We've been spending something in the -- I'd say based upon the growth in the portfolio, I would expect that number to be approximately $6 million or so in 2012. We spent about $1 million in the first quarter. Typically the year gets off to a slower start, but it had been about $1 million per year based upon the 2011-sized portfolio. But based upon the growth, I'd say that $4 million of annual recurring CapEx is probably more like $6 million.

Okay, so a ramp-up throughout the rest of '12?

I'd expect the subsequent quarters to be a little higher than the first.

[Operator Instructions] And we'll go onto our next question from Todd Cohen from MTC Advisors.

Just going back to Dan's question for a moment on the IL to AL conversions. I know that the margin on the AL is lower than the IL, but is the dollar margin contribution higher on the AL given the higher rents?

Yes, the -- if you look at an NOI per unit for AL to IL, typically the NOI for an IL -- for an AL property will be higher because you're dealing with much higher rents. Our average monthly rents for independent living as of this quarter is about $2,380 a month. Our average assisted living rents in our portfolio is running about $3,670. So you obviously see that difference, even with a lower margin you can have a higher income level. Well, what's interesting about the conversions is we're benefiting from higher rents and higher margins. The incremental margin on the converted units will actually be greater than the IL margins. So what's actually happening is because we're able to get better utilization of those units, we're actually increasing margin, as well as net income...

Yes, I understand that. I didn't quite -- you didn't couldn't quite come across -- I don't think when you were discussing that, so I just wanted to be certain that you're not sacrificing a lower -- for some reason, sacrificing a lower contribution margin. Obviously, you're not. And then on the acquisition that you just recently closed, what type of -- what property type is it?

That was all -- last property we bought was all independent living. That is probably -- that is a truly institutional quality asset. It was actually owned by a major institution with a third-party manager, and we've now taken over the management, obviously. It's in the Dallas Metroplex and it's a fabulous asset, one of the highest-quality properties we operate.

And is there kind of a range on the ROI? You usually kind of put those numbers out when you...

Well we've put it out there. I mean, all the transactions we've done to date are about 18%. So there -- it's kind of very -- again, they're all kind of falling into that same type of range of what we've done. So again we were able to -- the fixed rate financing, I think, was 4.48%, so we actually ended up with fabulous financing on the property, and we're very excited to operate this building.

Okay. And then just to confirm, you indicated that this next acquisition that you hoped to close this quarter is also in Texas?

It's also in Texas, and we will close this -- it is scheduled to close this quarter, yes.

[Operator Instructions] And we do have a question from Brian Lancaster from Clayton Partners.

Can you just discuss the kind of the items in the CFFO calculation that sort of swung against us year-over-year, that just kind of caused the lower CFFO growth relative to EBITDAR?

Brian, if you look at the CFFO, it was actually up about 13% versus the first quarter of 2011. I think if you look at the cash flow statement, one of the big factors that relates to CFFO is the change in the deferred tax asset. I don't want to get overly technical, but that's probably the hardest number to project, is the relative change in the deferred tax asset in the first quarter of 2012 versus the change in the deferred tax asset in the prior year. So I would say that the difference between some market estimates and the $0.24 more than likely related to some of the deferred tax adjustments that took place in the quarter, I don't think those are going to recur later in the year, but there were some minor tax adjustments that probably made a $0.01 or $0.02 difference in cash flow in the first quarter.

Okay. And do you expect that line to basically sort of wash out once you go through 1 whole year, it ends up being sort of a push?

It does. Really, quarter-to-quarter, it's a very difficult number to project. But over the course of 12 months, it's far more predictable, and I would say that whatever potential negative people might have seen in the first quarter cash flow statement will be more than offset through the remainder of the year.

And at this time, we have no further questions in the queue. I'll turn it back over to you, gentlemen, for any additional or closing remarks.

Well, we thank you all. Again, we enjoy seeing many of you over the recent conferences, and we know we'll see more of you in the next month or so at additional conferences and investor meetings. And feel free to give Ralph or myself a call if you have any further questions, and we wish you a very good day. Thank you.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.