Franklin Electric Co Inc (FELE) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Franklin Electric fourth-quarter and fiscal 2012 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference is being recorded. I would like to introduce our host for today, Mr. Patrick Davis, Treasurer. Sir, please go ahead.

Thank you Karen, and welcome, everybody, to Franklin Electric's fourth-quarter and full-year 2012 earnings conference call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, SVP and President, International Water Systems; and Gregg Sengstack, President and COO. On today's call, Scott will review our fourth-quarter and full-year business results and then John will review our fourth-quarter and full-year financial results. When John is through, we will have some time for questions and answers.

Before we begin, let remind you that any forward-looking statements contained herein, including those related to market conditions or the Company's financial results, cost, expenses, expense reductions, profit margins, inventory levels, foreign currency translation rates, liquidity expectations, business goals, and sales growth involve risks and uncertainties.

These risks and uncertainties include but are not limited to, general economic and currency conditions, various conditions specific to the Company's business and industry, new housing starts, weather conditions, market demand, competitive factors, changes in distribution channels, supply constraints, effective price increases, raw material costs, technology factors, integration of acquisitions, litigation, government and regulatory actions.

The Company's accounting policies, and future trends and other risks which are detailed in the Company's SEC filings and are included in item 1A of part 1 of the Company's annual report on Form 10-K for the fiscal year ending December 31, 2011, exhibit 99.1 attached thereto and in item 1A of part 2 of the Company's quarterly reports on Form 10-Q.

These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available and except as required by law, the Company assumes no obligation to update any forward-looking statements. I will now turn the call over to our Chairman and CEO. Scott?

Thank you, Patrick. I am pleased to report that the fourth quarter 2012 was our thirteenth consecutive quarter of year-over-year earnings per share improvement. With EPS after non-GAAP adjustments of $0.56, an increase of 12% compared to the prior year. Additionally, our consolidated operating income margin after non-GAAP adjustments improved by 170 basis points compared to the fourth quarter prior year.

We attribute much of the margin improvement to leverage on excellent sales performance from our management teams in developing regions. Over the past eight years, we've increased our business base in developing regions from about 16% of sales to 40% of sales in the fourth quarter. We are continuing to expand in developing regions in order to take advantage of burgeoning demand growth for our water and fueling product lines in Latin America, the Middle East and Africa, and Asia-Pacific. During the fourth quarter, our water and fueling organic sales growth in developing regions was a healthy 16% and drove much of our earnings gain in the quarter.

Turning to a review over water business in each level region of the world, our Water Systems sales in the US and Canada represented 34% of our consolidated sales and increased by 10% during the quarter. However, excluding acquisitions and the impact of foreign currency translation, US-Canada sales declined organically by 4% in the fourth -- compared to the fourth quarter prior year.

During the fourth quarter of 2011, two of our large OEM customers in the US ordered a higher-than-normal percentage of their annual motor requirements primarily in order to buy ahead of a price increase. So in 2012, our fourth-quarter sales to these customers were down sharply. Excluding these two customers, our organic sales growth in the US and Canada would have been 4%, due in part to higher wastewater pump sales in the Northeast and growing demand in the residential market for our groundwater pumps.

Our Water Systems sales in Latin America represented 15% of our consolidated sales and increased by 10% compared to the fourth quarter prior year. Excluding acquisitions and foreign exchange, our Latin American sales increased organically by 18% during the quarter, driven in large part by strong sales growth from our company in Brazil, Franklin Motobombas.

Over the past 18 months, our Motobombas team has introduced new Franklin submersible groundwater pumps and motors in the Brazilian market and the customer reception has been excellent. Our Brazilian team has also recently launched a line of high-efficiency centrifugal pumps which are growing rapidly. In addition, our distribution center in Chile is enabling us to grow rapidly in that market. We anticipate opening a new distribution center in Columbia during the first quarter of this year which will enable us to expand our sales based in that country as well.

Our Water Systems sales in the Middle East and Africa represented 12% of our consolidated sales and grew by 8% compared to the fourth quarter prior year. Excluding acquisitions and foreign exchange, our Mideast and Africa sales increased organically by 11% during the quarter. In mid-2011, we acquired Impo, the leading Turkish groundwater pump and motor company. Since then, Impo's organic sales growth performance has exceeded our expectations and this continued to be true during the fourth quarter.

In addition, we achieved strong sales growth for irrigation pumping systems in southern Africa as we are seeing robust summertime demand for our products in that part of the world. During the second quarter of this team, our team in southern Africa will be opening a new distribution center in Zambia. Which we well-positioned to service growing mining and agricultural markets in that part of Africa.

Our Water Systems sales in Europe represent 9% of our consolidated sales and increased by 6% compared to the fourth quarter prior year. Excluding acquisitions and foreign exchange, our European sales increased organically by 7% and were led by sales of stainless steel pumps and components from the Company's recently acquired Vertical business unit. We are in the process of expanding our distribution footprint in Europe as well.

Recall that we acquired controlling interest in Pioneer Pump during the first quarter 2012. Pioneer sells a highly successful line of mobile pumping equipment primarily to pump rental companies in North America. We believe that the United Kingdom is the next-largest pump rental market outside of North America. After conducting market research, we've concluded there is an attractive opportunity for us to open our own pump rental outlets in the UK and offer to ramp and sell our Pioneer product line through these outlets.

As a result, we are planning to initially invest about $8 million to open three rental facilities in major UK pump markets. Through the acquisition of Pioneer and success recruiting local management talent, we've assembled a management team with deep pump rental expertise. We are exploring the possibility of opening additional pump rental outlets in the UK and elsewhere in the world. We will provide more color on this venture over the course of the year.

Water Systems sales in Asia-Pacific represented 7% of our consolidated sales during the quarter and grew by 11% compared to the fourth quarter prior year. Excluding acquisitions and foreign exchange, our Asia-Pacific sales increased organically by 7% during the quarter. Most of our fourth quarter sales growth in the Asia-Pacific region occurred in Australia and Southeast Asia.

In Australia, demand for our ground water pump and motor product lines grew at double digit rate as summertime weather conditions are hotter and drier than last year and spending for Water Systems is increasing in both the residential and agricultural markets. At the end of 2012, we completed the beta test phase of our project to develop a proprietary oil and gas well fuel liquification system.

A gas field owned by Exxaro Gas in southern Africa was one of our principal beta test sites. We are encouraged that immediately after we declared the system commercial, Exxaro placed an order for seven systems. Over the next six to nine months, we expect to be installing qualification systems with major oil and gas well owners and operators in the United States, Australia, and southern Africa. With success, this new product line has the potential to contribute significantly to our bottom line in 2014 and beyond.

Fueling Systems sales were presented 23% of our consolidated sales during the quarter and grew by 10% compared to the fourth quarter prior year. Excluding acquisitions and foreign exchange, our Fueling Systems sales grew organically by 8%.

As with our water business, the highlight for our fueling business during the quarter was the rapid sales growth that we achieved in developing regions. Our fourth quarter Fueling sales in developing regions grew by 22% compared to the prior year. The rapidly growing population of motor vehicles in these countries is driving increased investment in filling station infrastructure. In addition, we continue to benefit from the long-term trend for station owners in international markets to convert from suction pumping systems to Franklin's pressure pumping systems.

In November, our fueling team in the United States completed the acquisition of Flex-ing Incorporated. Flex-ing had sales of about $13 million in 2012 and enjoys a high share of the market for various filling station hardware products and therefore represents an excellent bolt-on addition to the Franklin fueling product portfolio. We expect to combine the Flex-ing manufacturing and headquarters facilities and other Franklin facilities by mid-year, fully integrating the manufacturing, administrative, and selling infrastructure by that time.

Looking ahead to the first quarter of 2013, we are currently forecasting that our Water Systems sales and operating income will both increase by 7% to 11% compared to the first quarter prior year and that our first-quarter fueling sales and operating income will increase by 16% to 20% compared to the prior year. This operating income growth would lead to an 8% to 12% EPS growth for the Company compared to the first quarter 2012. I will now turn the call over to John for more discussion of the fourth quarter in 2012 results. John Haines, our CFO.

Thank you, Scott. Our fully diluted earnings per share were $0.55 for the fourth quarter 2012, an increase of 10% compared to the $0.50 fully diluted earnings per share the Company reported in the fourth quarter 2011. As we note in the tables in the earnings release, there were some non-GAAP adjustments in the fourth quarter 2012 that impacted operating income and EPS that were not operational in nature. We believe presenting these matters in this way gives our investors a more accurate picture of the actual performed -- operational performance of the Company.

In the fourth quarter 2012, the non-GAAP adjustments were primarily related to certain legal expenses incurred by the fueling system segment of $0.4 million pre-tax and reduced EPS by $0.01. There were no non-GAAP adjustments in the fourth quarter of 2011. So after considering these non-GAAP items, fourth quarter 2012 adjusted EPS is $0.56 which is $0.12 -- which is 12% higher than the $0.50 adjusted EPS the Company reported in the fourth quarter 2011.

For the full year 2012, diluted earnings per share were $3.46, an increase of 31% compared to 2011 diluted earnings per share of $2.65. Adjusted earnings per share were $3.14, an increase of 16% compared to the $2.70 adjusted earnings per share in 2011. Water Systems revenues were $157.5 million in the fourth quarter 2012, an increase of $13.6 million or about 9% versus the fourth quarter 2011 sales of $143.9 million.

Sales from businesses acquired since the first quarter of 2011 were $10.4 million or 7%, Water Systems sales were reduced by $3.5 million or about 2% in the quarter due to foreign currency translation. Water system sales growth, excluding acquisitions and foreign currency translation, was about 5%. As Scott mentioned, developing regions was the principal driver of the quarterly sales growth.

Water Systems operating income after non-GAAP adjustments was $22.2 million in the fourth quarter 2012, an increase of 19% versus the first -- fourth quarter 2011. The fourth-quarter operating income margin after non-GAAP adjustments was 14.1% and was up 120 basis points compared to the fourth quarter of 2011. This increase was primarily a result of margin improvement due to reduced direct labor and variable cost partially offset by higher raw material cost.

Fueling Systems sales were $47.7 million in the fourth quarter 2012, an increase of $4.4 million or about 10% versus the fourth-quarter 2011 sales of $43.3 million. Sales from businesses acquired since the fourth quarter of 2011 were $1.2 million or about 3%. Fueling Systems sales were reduced by $0.3 million or about 1% in the quarter due to foreign currency translation. Fueling System sales growth, excluding acquisitions and foreign currency translation, was about 8%.

Similar to our Water Systems business, Fueling Systems sales grew -- growth was led by sales increases in developing regions compared to prior year. Fueling Systems operating income after non-GAAP adjustments was $11 million in the fourth quarter of 2012 compared to $9.2 million after non-GAAP adjustments in the fourth quarter of 2011, an increase of 20%.

The fourth-quarter operating income margin after non-GAAP adjustments was 23.1% and increased by 190 basis points compared to the 21.2% of net sales in the fourth quarter of 2011. Operating income margin after non-GAAP adjustments improved in Fueling Systems primarily due to leverage on fixed costs from higher sales volume. As Scott mentioned, in an agreement dated November 16, 2012, the Company added to its Fueling Systems segment by acquiring 100% of the common stock of Flex-ing Incorporated for approximately $10.4 million in an all-cash transaction.

The Company's consolidated gross profit was $68.5 million for the fourth quarter of 2012, an increase of $7.6 million or about 12% from the fourth quarter of 2011 gross profit of $60.9 million. The gross profit as a percent of net sales was 33.4% in the fourth quarter of 2012 and 32.5% for the fourth quarter of 2011, a 90-basis-point improvement. The gross profit margin increase was primarily due to productivity improvements in the Company's manufacturing facilities and a slowing of the rate of raw material inflation.

Selling, general, and administrative expenses were $47.4 million in the fourth quarter of 2012 compared to $44.4 million from the fourth quarter of prior year, an increase of $3 million or about 7%, entirely attributable to businesses acquired since the fourth quarter of 2011.

During the fourth quarter 2012, the effective tax rate for the Company was 27.7% versus 25.2% in the fourth quarter 2011. This 250-basis-point increase in the tax rate was due to the completion of certain tax planning initiatives and resulted in a benefit which was recognized in the fourth quarter of 2011. The tax benefits from these initiatives were realized more evenly throughout 2012. Also in the fourth quarter 2012, the Company recognized foreign currency losses of $0.1 million versus having a foreign currency gain in the fourth quarter of 2011 of $0.5 million.

Finally, in the fourth quarter of 2011, the Company included $0.4 million of earnings from equity investments in the other income line from its minority equity interest in Pioneer Inc. In March of 2012, the Company acquired a controlling interest in Pioneer, and Pioneer's earnings are now included in the Company's consolidated operating income. These three below-the-line factors are the primary reasons why the Company's adjusted earnings per share grew at a rate of 12% in the fourth quarter 2012 while its adjusted operating income grew at a rate of 31% during the same period.

As we look forward to the first quarter of 2013, we believe a reasonable a tax rate estimate for the Company is 27.6%, and at this is also a reasonable estimate for the entire year of 2013. Also in the first quarter of 2012, there was approximately $600,000 of earnings from equity investments included in the other income line related to the Company's minority interest in Pioneer before the Company's acquisition in March 2012 of a controlling interest.

Additionally, the Company currently estimates that total non-GAAP adjustments to full-year earnings in 2013 will be approximately $2 million to $2.8 million, resulting primarily from restructuring activities related to the Flex-ing acquisition, the relocation of the Company's headquarters, and other miscellaneous manufacturing realignments in North America and certain international locations. The Company will continue to provide quarterly reconciliations and explanations of all non-GAAP related items.

The Company ended the fourth quarter of 2012 with a cash balance of about $103 million, which was $50 million less than the end of 2011. The cash balance decreased from prior year primarily as a result of the Pioneer, Cerus, and Flex-ing acquisitions, which in total were about $64 million in 2012.

In 2012, the Company committed approximately $43 million to capital expenditures driven in large part by the new corporate quarters and product develop center in Fort Wayne, Indiana. The Company expects 2013 capital spending to be approximately $63 million, due to the completion of the Fort Wayne facility, the substantial completion of a new manufacturing facility in Brazil, investments in pump rental equipment in the United Kingdom, and other productivity investments made by the Company in its facility in Linares, Mexico. The Company believes that in 2014 capital spending levels will decline sharply.

In the first quarter 2013, the Company, Allen County, Indiana, and certain institutional investors entered into a bond purchase and loan agreement with an aggregate principal amount of $25 million. The Company borrowed this amount to partially finance the cost of the new Indiana facility. The new borrowing bears interest at 3.6% annually with principal and interest due and payable in aggregate semiannual installments commencing on July 10, 2013, and concluding on January 10, 2033.

The agreement provides that property taxes paid by the Company on the new Indiana facility will be applied to satisfy the principal and interest payments of this new borrowing. The Company had no outstanding balance on its primary revolving debt agreement at the end of 2012 or 2011.

The Company announced on January 28, 2013, that the Board of Directors declared a quarterly cash dividend of $0.145 per share payable tomorrow, February 21, 2013, to shareholders of record on February 7, 2013. Full-year 2012 sales were $891.3 million, an increase of about 9% compared to 2011 sales of $821.1 million.

Overall, 2012 revenue, gross profit, operating income, net income, and earnings per share were all of records for any year in the Company's history. The Company's annual 10-K for 2012 will be issued on February 27. This concludes our prepared remarks and we'd now like to open the call up for questions.

(Operator Instructions)

Matt Summerville, Keybanc.

A couple questions. First in Q1, can you talk about why you don't anticipate getting much in the way of incremental leverage off your revenue growth down to operating income, what are the pluses and minuses in there?

We have actually, Matt, we've got a number of projects going on right now that are causing our fixed costs to increase. We are starting up this three pump rental venture in the UK. We are starting a new warehouse in Columbia. We have a couple of distribution centers. We have a couple of other smaller distribution expansions, and I'd say it is primarily because of growth initiatives causing our fixed spending to grow at a rate that is about in line with our sales growth.

It has been our practice and philosophy here to allow our fixed spending to grow anywhere from 50% to 70% of the rate of growth of our sales to see operating leverage. I think over the next several quarters that will temporarily be suspended in light of the initiatives that we are undertaking.

Okay. That's helpful. And then both of you mentioned the pre-buy impact, if you want call it pre-buy, in the fourth quarter of '11 on the part of a couple of pump OEM customers. Is there any quantification that you can put around that, at least on revenue impact? If my back of the envelope is correct, it was not an income sequential number.

Well, I think the year-on-year difference was about $5 million. $4 million to $5 million. So in other words, and we don't -- we don't expect their 2013 purchases to be lower than their 2012 purchases. It is strictly a timing issue as far as that goes, but it hurt our fourth quarter as far as US and Canada is concerned as far as organic growth.

Then just maybe one more and I will get back in queue. For Pioneer, it looks like revenues have fallen off pretty -- fairly precipitously in that business. Can you talk about where the annualized run rate of that business is from a top line standpoint and whether that's also diluting the Company's earnings?

We would not care to disclose the Pioneer pump sales run rate. That's a number that we have not disclosed. I will acknowledge that in the back half of last year, Pioneer sales were below our expectations. As you know, they had grown very rapidly since we acquired roughly 35% of the business five or six years ago, and a lot of that growth was rental equipment into the oil and gas market.

The oil and gas market has slowed and so that equipment is coming -- instead of being rented and out in the field generating revenue for our pump rental customers in North America, the equipment has come back to their lot and they are not purchasing as much. So our sales fell in North America last year at Pioneer compared to what they were in 2011. We are expecting and I know our Pioneer management team is expecting that the sales will rebound from 2012 levels to between 2012 and 2011 levels in 2013. Okay?

That's helpful. Thank you.

Mike Halloran, Robert W. Baird.

Could you talk a little bit about the ag side of the business for you guys? How that tracked through the quarter and then more importantly as you look at '13 here, obviously a couple strong years of growth behind you. What is the market outlook looking like as it stands today? And then secondarily, maybe just a little bit of a discussion of how you see mix in particular in the ag side tracking for you as you work through the year and impacting your margin profile?

Okay. First you have to say that we, living here in the United States, are inclined to be very attuned to what's going on in the ag market here in the US. But the ag market in the US only represents less than 40% of our global ag product sales. So for us, the ag market is not only the ag market in the US but what's going on globally. Globally, our ag sales in 2012 were up about 6%.

Now they were up substantially more than in the US, but there were other regions of the world where it was not a particularly strong ag sale, particularly sales -- particularly in the southern hemisphere where while it was hot and dry up here, it was last year during the ag season, rainy. So our ag sales were down a little bit in those regions, so overall it was a decent year, but not an extraordinary year globally as far as ag sales are concerned.

In the fourth quarter, our ag sales were up about 1%. So we anticipate this year we are seeing a stronger ag business in the southern hemisphere right now because we are coming through that season right now so we are seeing pretty good ag sales in the southern hemisphere. In the fourth quarter, our ag sales in the US and Canada were actually down a little bit. So however, I will say that our conversations with customers, distributors in that segment of our business are advising us to expect another strong agricultural equipment sales year in North America.

So right now, we were a little surprised to see ag sales in North America off a little bit, a small amount in the fourth quarter, but our sales people still have quite a bit of confidence that it is going to be another good ag sales year in North America and we think we're going to see a little bit of a rebound in some of the other regions of the world.

And then maybe shape that conversation in the context of your water margins and how you are thinking about the mix impact as you look in the first quarter and beyond.

Well, certainly the ag business is a higher than average profitability business for us. It is not extraordinarily higher than average. I right now think that our margins are going to be driven probably more by the success we have with price increases and the impact of raw material inflation than by mix as we look out. Mix is an important factor, but right now I think we are encouraged that we've been successful pretty much everywhere in the world that we've gone after price this year and at the end of 2012 and so far in 2013. And we are encouraged that the raw material inflation that we experienced in 2011 and through the first part of 2012 is flattened out.

So we think that will be good for margins. I would say that if anything our mix might pressure margins a little bit. I think we're going to see a much stronger wastewater sales year this year than we had last year. And we may see a somewhat softer ag market this year. I don't think -- it is a little early to tell there. And that trade-off would mean -- would penalize earnings a little bit, but I think the big drivers are going to be price and raw material inflation and we are pretty -- we are feeling pretty good about that equation right now.

And last one for me, at the end there you mentioned the wastewater side. It looked like in the fourth quarter there was a little better trend. I don't know if that was Sandy related, so maybe could you just talk about the underlying trends there, what inventory levels look like both from an industry perspective more so than for you guys, but from an industry perspective on the inventory side? And then what makes you feel like 2013 will shape up to be a little bit better than historically bad 2012?

I think it is easy. Comp is the answer. It was last year. I don't know whether you've seen the industry data or not but it was down like 30%. It was an extraordinarily bad year in 2012. So we think it is safe to assume -- 2011 was a pretty good year so that I don't think a bounce back to normal would mean industry unit shipments would be up 30%. It might be up 15% or 20%. So we would expect -- we have generally in that part of our business done better than the industry so we are expecting a nice increase in wastewater sales this year just because of the easy comps.

I will leave it at that. Thanks, guys.

Matt Summerville, Keybanc.

Just a couple quick things. You talked about the gray water market and what your assessment of it was for 2012. Scott, what you think the freshwater market did from a growth standpoint, and what was your performance relative to the market as you see it?

Okay, well, in North America, our largest product category volume-wise is 4-inch submersible pumps and motors. And our unit shipments of those products in 2012 increased by 22% and the balance of the industry increased by 3%. Another important product line, one of our largest product lines, is jet pumps. Our shipments of those products increased by 8%, the balance of the industry declined by 8%.

So unfortunately, we don't get good strong data on our share of the market in very many product lines, but we do get good data on that, and I think it is indicative of the fact that in the pump market we are gaining share and so that's helping us to grow a little faster than our competitors in the clean water segment of the market, particularly in the US and Canada. I don't know whether that answers your question or not, but that some data that we can point to.

Then can you talk a little bit more as to what your expectations are for the -- not with respect to Pioneer, so the newer product you are bringing to market in oil and gas with some of the tests you have running in the US, South Africa, and Australia? How close are you to more of a tipping point in actual getting orders like you started to see in South Africa? I want to understand more on the timing of all this.

Okay. Matt, I think the way this is -- first of all, we are encouraged by what we see because the customer reaction to our product is very favorable and we are working with some customers that have the potential to buy a large number of systems from us, but their attitude is wow, if this is what you say it is, I hope you can make enough of them. Literally we've had those kind of comments. But it is always followed by I want to take two of them, I want to take four of them, and put them in and see how they work for six months or so.

So I think we are going to have that over the next, I would say for 2013 we are not counting on this being an important part of our sales growth story in 2013. But we think it has the potential to be an important part of our sales growth story in 2014 and beyond.

Scott, as you think about and obviously this is early days here, but how would you characterize to your point your ability to get this product out the door? Is this a long-lead-time product? And how would you envision the margin profile of this business comparing to the core Franklin water segment?

Well, it really is comprised of three principal components as far as the product is concerned. There's a Franklin submersible motor that we -- that we have plenty of capacity to make. There is a Franklin submersible motor that we can that we have plenty of capacity to make. Of course, it is a adapted Franklin submersible motor, but it nevertheless those adaptations are things that we can handle in our existing facilities. The pump is a progressive cavity pump and we have installed several million dollars' worth of machining equipment in our factory where we manufacture progressive cavity pumps in South Africa.

That factory is going to be capable, we think, of keeping up with the demand for these and then there's the drive and control unit which we are manufacturing in our existing plant in Grant County and is an adaptation to products that we are currently making. So yes, we think that we can keep up with that.

I want to make a point. One of the things about this market where we may make a million units of some products a year for the Water Systems market. For this market, we are going to make a lot fewer units, but the systems sell for a lot more dollars. The system the Australian customers are considering we sell for $50,000 a system because they are looking at a complete skid-mounted system. Some of our customers in North America are looking at $10,000 systems because we will be selling a different configuration. But nevertheless, you don't need to make as many units when you are selling things for $50,000 or $10,000 a piece in our business.

Thanks, Scott.

We expect the margin profile to be consistent with our other Franklin groundwater pumps and motors-type products.

Got it. Thank you.

Thank you and that concludes our question-and-answer session today. I would like to the conference back over to Mr. Scott Trumbull, Chairman and CEO, for concluding remarks.

Thank you for listening in on our conference call today and thank you for your interest in Franklin Electric. Goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a good day.