Graco Inc (GGG) 2002 Q4 法說會逐字稿

Good morning, and welcome to the fourth quarter and year-end 2002 Conference Call for Graco Incorporated. If you wish to access the replay for this call, you may do so by dialing 1-800-428-6051, or 973-709-2089, with an ID number of 281744. The replay will be available through January 26th, 2003.

At this time I'd like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

At the request of the company, we will open the conference up for questions and answers after the presentation.

During this call various remarks may be made by the management about their expectations, plans and prospects for the future. These remarks constitute forward-looking statements for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. Actual results may differ materially from these indicated as a result of various risk factors, including those identified in Exhibit 99 to the company's 2001 annual report on Form 10(k) and its most recent 10(q).

I will now turn the conference over to Mark Sheahan, vice president and treasurer. Please go ahead, sir.

Good morning. Welcome to our fourth quarter conference call. This is Mark Sheahan. I am here with Dave Roberts, our President and chief executive officer. I'll quickly review some of the highlights of the release that we put out this morning, and then we'll turn the call over to your questions.

First of all, we are pleased to report another net sales increase this quarter. The 6 percent sales growth in the quarter represents our third consecutive quarter of sales growth. In fact, our sales in the second half of 2002 were 6 percent higher than the same period last year. And on a full-year basis our sales were up 3 percent.

The higher sales revenue in the second half of 2002 was the result of a 7 percent increase in industrial automotive, and a 9 percent increase in contractor equipment.

In the fourth quarter, spending held back our earnings growth to 5 percent, but we are pleased to report a 16 percent increase in net earnings for the full year.

Exchange rates helped our sales and earnings in the quarter and for the year. The weaker U.S. dollar, when compared to the same periods last year, added approximately 2 cents to the earnings per share for the quarter, and 3 cents for the full year earnings per share amount.

Quickly looking at the segments, worldwide industrial automotive equipment sales were up 6 percent in the fourth quarter, and 2 percent for the full year. For the fourth quarter and the full year, higher sales in Europe and Asia were the primary drivers for the improved results. Exchange rates had a favorable impact on reported results for the quarter and the full year. This business has yet to experience any significant rebound from the slowdown in North American industrial production that began to occur in the second half of the year 2000, and occurred throughout 2001 and 2002. Profitability for the industrial automotive equipment segment was strong in 2002, with the business reporting an 11 percent increase in operating earnings. The business also launched several new products in the fourth quarter of this year, including our extreme mix, which is a plural component sprayer, and our reactor, which targets a new market for the company in fast-set foam. These products have been well received and should help to contribute to our growth in 2003.

Turning next to the contractor business, sales were up 12 percent in the fourth quarter, and 6 percent for the full year. In the fourth quarter, North American sales were higher in the professional paint store channel and were essentially flat in the home center channel. Sales this quarter were also higher in both Europe and the Asia Pacific regions with good acceptance of new products in both areas.

For the year, this business has also done a nice job improving profits, with year-to-date profits up 14 percent. In the fourth quarter, operating profit declined in the contractor business from the third quarter by approximately 600 basis points. This decline was due to factors including higher spending for new products, where eight new products were launched in the fourth quarter of 2002, versus one new product that was launched in the fourth quarter of 2001.

Other factors included higher incentives, reflecting the higher sales and earnings that this division has posted in 2002 versus 2001; and, lastly, more discretionary spending in the fourth quarter of 2002 with sales meetings, travel and things of that nature versus last year where there was significant caution after the September 11th attacks.

While spending was high in the fourth quarter for the contractor business, we expect higher sales in 2003 from all of the new products and the strong ad markets and the dollars that were spent. We also expect that 2003's profitability will be more in line with the full year 2002 profit rate of 22.5 percent.

Sales in the lubrication equipment segment declined by 13 percent in the fourth quarter, and year-to-date sales are down 7 percent. Year-to-date profits were down 21 percent versus last year, due to the lower sales volumes as well as some planned incremental product development spending, which should add to 2003 sales.

The vast majority of the decline in lubrication sales in 2002 can be attributed to the incremental Sears and Wal-Mart installations that occurred in 2001, and we have discussed in previous press releases and conference calls.

Turning next to the gross profit margin, for the year Graco's gross profit margin expressed as a percentage of sales was 51.4 percent versus 49.7 percent last year. In the fourth quarter gross profit margin was 51.8 percent versus 49.5 percent last year. Price increases, higher sales, exchange rates and manufacturing cost improvement activities all contributed to the higher gross margins.

Looking at the operating expenses, overall operating expenses were $5.1 million higher than last year's fourth quarter, which was exceptionally low due to caution that existed after September 11th. Some of the incremental expenditures that were made in the fourth quarter of 2002 were listed in the press release, and with indicated dollar amounts. Items such as employee incentives, new products, foreign costs and miscellaneous general and administrative expenses were all responsible for the increase year over year.

The effective tax rate was 32.2 percent for the fourth quarter, which is in line with where we were at for the first nine months.

Some other comments. Cash flow from operations was approximately $20 million for the fourth quarter, and $93 to $94 million dollars for the full year. Depreciation and amortization was approximately $4.2 million for the fourth quarter, and $18 million for the full year. The backlog at the end of the year was $13 million, versus $12 million at the end of last year.

At this time I'd like to turn the call over to any questions that you have.

Thank you, sir. The question-and-answer session will begin at this time. If you are using a speaker phone, please pick up the handset before pressing any numbers. Should you have a question, please press "*" "1" on your push-button telephone. If you wish to withdraw your question, please press "*" "2." Your questions will be taken in the order that they are received. Please stand by for your first question, sir.

Sir, your first question comes from Michael Schneider from Robert W. Baird. Please state your question.

Good morning, guys. Mike, congratulations again on a great year.

Thank you.

It really is impressive in a tough environment. Clearly I think the swing factor relative to most models are the SG&A expenses, and you laid them out nicely in the press release. My question though is if you break it down between selling G&A and development, it looks like the $5 million SG&A increase year over year, almost, well, over $4 million of it was due to just the selling line. And I am trying to reconcile that selling $4 million to your comments about employee incentives, additional new product development, et cetera. I would have thought the money would have been much evenly distributed between development, selling and G&A.

No, Mike, I think what you saw is that during the year we were spending at levels which frankly were higher than we originally planned coming into 2002 on the development side. The spending in the final quarter in product development primarily were the final tests, the launch, and so on and so forth. What really affected product launch were the expenses that we had on the selling and marketing side. We had a number of sales meetings, promotional activities, so on and so forth that took place, and that's the reason that the selling-marketing line was higher, in addition to the incentives that were paid based on how well the year came off from a revenue standpoint.

Okay. And then looking forward, to use some specific numbers, SG&A in total has been about 28.2 percent of revenue now for three years running. You obviously launched a lot of new products in the fourth quarter, and I presume you expect some revving momentum from it. Could we finally start to see some SG&A leverage in 2003? And can you ballpark it for us?

You know, honestly I think you are going to see levels at the same rate as they were in the last three years. I don't see anything incrementally changing, unless revenue increases dramatically, and then we'll get additional leverage from that. But nothing fundamentally has changed in the business, you know, during the fourth quarter that would cause us any concern going into 2003.

Okay. Then final question just on the contractor side. You mentioned that the professional side was strong relative to the retail side, and that certainly comports with Home Depot's shortfall. Could you give us some sense of why that you believe the professional channel is acting significantly better?

Well, I think it goes back to housing starts, Mike. If you look at the latest information that came out, housing starts are now 1.8 million. I think they averaged 1.7 million in 2002. We have got tremendous momentum from that. And I think there's a general feeling in the marketplace that commercial real estate, even though it's been down during the last year and a half, it's somewhat stabilized or reached the bottom. And we only see upside on the commercial side.

And in addition to, you know, we are in a marketplace that frankly is driven by new product. And, you know, the breadth of the product line that we introduced January 1st of this year we think is going to give us some great momentum going in with people replacing existing product.

Okay, I'll get back in line. Thanks.

Okay.

Sir, your next question comes from Jerry Broadwin from CSFB. Please state your question.

Jerry here. Good morning, guys, nice quarter.

Thank you.

Thanks, Jerry.

Couple questions. Sales look to be okay. I mean, in an industrial economy when you are up 6 percent organically, that's not too shabby these days. But I'd like to kind of go after on the auto side here. You've not experienced a slowdown. I mean, do you have any idea why that's holding in there so well?

You know, I think as we look at our industrial business, you know, we constantly go through this trying to understand the dynamics of the marketplace and what's happening. North America is relatively flat, but we are seeing some very nice growth coming out of Europe and also Asia. You know, our China sales this year were up in the area of about 35 percent. And conversations we have had around here, the question is; Is so much manufacturing moving into Asia that we won't see a major rebound in North America, instead we'll see people moving into Asian countries, and we'll see a bigger increase in revenue there? It's the only thing that I can tell you, Jerry. It's relatively flat in North America, but we are seeing some very nice activity in Asia, and also Europe.

Okay. And operationally what are you doing to capture that growth going forward?

Well, there are a number of activities that are underway. You know, we have talked in the past about the opening of a warehouse in Shanghai to really focus on China. If you look at Asia in general, China is up, Korea is up, Australia has been up for us, and Southeast Asia has been up. Japan is still a problem. I think Japan was down between 15 and 20 percent this year, as compared to the past. So we have got infrastructure in place in China to support the growth there, and we are taking some steps to I guess improve the management structure that we have in Japan, to try to capitalize on, or at least get some growth going there, compared to what we have had in the past.

Okay, great. Now, moving over to the contractor or contractor side here, home center that makes sense. Paint centers are doing well. I think clearly the housing starts are driving that. Margins though, I am wondering if you are getting some pressure from the Home Depots of the world to the margins. And I missed a little bit of what Mark said regarding in '03 expecting to get back to a 22.5 in the margin. And then if you could give us an update on any other discussions with Lowe's or anybody else out there, expand this distribution network.

Well, I think that the, not only Home Depot but the other major paint channel folks, we're getting, we could constantly get pressure from a price standpoint. We have been able to counteract that with some improvements that we've made in manufacturing to improve gross margins. So we had I think it was a 4 percent improvement in gross margins in our housing or our home center product line this year. So that has helped us. And we have made some steps or taken some steps on the paint channel side as well.

You know, going forward I think we are still going to have cost pressure or price pressure from the Home Depot marketplace as well as the paint channel marketplace.

As far as Lowe's and the other home centers, Menard's I guess would be the next largest, we continue to focus on those. We have nothing to announce. You know, certainly they are a target for us, and we will continue to go after those markets.

So is it safe to say that we can get back to 22.5 mainly on the SG&A type items in '03?

Yeah, I think so.

Yeah, I think that my comments, Jerry, if you missed, were really the 600 basis point drop-off we have identified as expenses that were due to some new products that we were launching. And I said that we introduced eight new products in the fourth quarter of '02, versus one. And there's a lot of product spending, marketing spending and related support associated with that, as well as just higher discretionary spending versus a year ago. So we are comfortable with a more comfortable operating profit in that 22 type percent range going forward here.

Okay. And they all kind of wind up this quarter and first quarter '03 we are okay then?

There's always stuff that's being spent, but ...

Okay.

... but the quarter was higher than what you would normally expect for the business.

And as far as the comps and the lube then, the Sears and the Wal-Mart business that we picked up in '01, first quarter '03 those comps should be behind us.

Right.

Yup.

Okay, I think that's it. I'll get back in line. Thanks.

Great, thanks.

The next question comes from John Franzreb from Sidoti and Company. Please state your question.

Good morning, guys.

Hi, John.

A lot of my questions I guess have been answered about the SG&A line, because I was looking back to 2000, and it looked like you were running more at a $20 million rate on that $120 million revenue line. So I think what you are kind of saying there, Mark, is that you probably expect selling and marketing costs to be about 20 million bucks going forward on that line.

We're expecting that they will be more in line with what we did the first nine months going forward, than what we were here in the fourth quarter.

Okay. Secondly, the product introductions, you said that's high. What's a normalized product introduction rate for the contractor business?

Geez, John, I don't know if there is a normal rate. You know, this year we redid what we call our SD Pro Line, and that was ... it's a major product line for us, that plus the Ultra Line. So we had I guess more products that were introduced at the start of this year as compared to last year. We still, our strategy is still to renew our product lines every three years, and then to come through with a breakthrough product every fifth year. And we are still operating in that mode. There is nothing changing. We have got again a number of new products that we are working on this year that we think will have an impact on follow years, but I don't think there really is a normalized mode in product introduction.

Yeah, I would just say that eight is a high number. One is a very low number, which is what we did last year. Normal, if you had, if I had to throw one out, I would guess somewhere in the middle there, you know, three to four products, something like that. Eight is on the high end.

The other thing, John, is that's the contractor side. We had eight introduced contractor products. We introduced three new products in industrial, as well as we introduced a brand-new product in lubrication. That's the first new product we introduced in lubrication in a number of years.

How is it being received?

Actually very well. We have had some great reception for that product. It was introduced very late in the quarter, and we are having some very positive impact in the marketplace with the product.

One last question, because most of mine have been answered. Regarding the cash, any thoughts about changing dividend policy or can you maybe update us on what the acquisition outlook is?

Well, you know we constantly state that we have three objectives for the cash. Acquisitions: we are constantly looking for acquisitions. I assume we'll continue doing that. Share buy-backs is the second. And then dividends are the third. I think that we'll monitor what's happening with the new tax laws and what legislation and what that will do to impact the dividend. And if appears to be positive for our shareholders, we could possibly do something with dividend policy this year.

Good, thank you. Good quarter, guys.

Thanks, John.

Thanks.

Your next question comes again from Michael Schneider. Please state your question.

Just following up on the dividend question, if you look at the cash you have on the balance sheet and the cash flow you guys are kicking off, you guys could easily sustain probably a 2 percent yield right now. That would imply about $25 million a year. Obviously you have $100 million on the balance sheet, and you're kicking off over $60 million in free cash flow. I guess, Mark, I know you run the numbers in every way in your model. Does that seem unsustainable to you, and is it something that's realistic?

I don't think it's unsustainable, Mike. I think Graco is a tremendous cash flow generator, and we have got a good problem, and that's that we generate more cash than we can plow back into the business internally. And we are doing our best to identify internal initiatives that we can use some of that cash flow that generates high returns. In addition, we are trying to look at some external things, like acquisitions. But notwithstanding those two comments, I think there's still some opportunities for the company to evaluate the other financial things, like dividends and share buy-backs. And you can expect that those are issues that we wrestle with and think about internally every day.

Okay. And then switching gears to Europe, Dave discussed Asia and the strength there as a result of your strategy. But Europe, I just spent a week over there again, and they're probably the only people that are more down in the mouth than we are here in the U.S. It just shocks me you guys had 8 percent internal growth over there. Could you give us some insight, maybe by country or by division, I presume it's all industrial automotive, just to explain why you're bucking the trend?

Well, you know, it really is, has been driven by the industrial and the automotive division, but we have had a nice increase also in the contractor business. If you look at it by country, Germany has had a very difficult year, and frankly is projected to have a difficult year next year also, or this year being 2003. France has been okay for us. You know, our two largest markets are Germany and France, and France has been in pretty good shape for us.

I guess one order of note that we got was an order for a new plant that BMW is building in East Germany. So we have got the paint circulation equipment for that in the fourth quarter. But, you know, we hear the same things you are, and we see the same things you are from an economic standpoint. But frankly our people have just done a very nice job, and not excepting that the economy is down, in driving for sales.

It pretty much came from everywhere in the quarter, Mike, like Dave said. Industrial is up as well as the contractor business was up, and it was fairly broad-based among the countries that he mentioned. The only exception is Germany is still pretty soft, and that is a big piece of the equation for Graco and a lot of companies. And so, you know, when we look at '03 for Europe, I think that we are expecting really very, very small underlying growth there economically speaking, and then a very nice pick-up in the currency, if we continue to be at this level of 1.07.

Okay. And then just on the contractor side, what has the initial success been in targeting some of the smaller paint stores beyond the Sherwin Williams and ICIs? I know you guys are trying to move into this middle market of paint stores. Is it underway? Have you been successful? Just some feedback there.

We're still working those markets. We have had some success. But frankly the majority of our success this year came from our larger paint store customers.

Sure.

But, yes, we are still working down market. You know, we have had some success in that area, but nothing really to talk about.

Okay, and then a final question. Just what percent of sales came from new products as you defined them this year?

We don't have that figure, Mike, but it's probably going to be pretty close to 40 to 45 percent.

Right.

I don't have the exact number.

And if, Mike, if you were to look at the contractor business, it's probably going to be in the area of 65 to 70 percent new products.

Okay, thanks again.

Yup.

Your next question comes from David Guru from T. Rowe Price. Please state your question.

Hey, actually congratulations on a very nice year in this tough environment. Can you talk a little about the difference between what you are seeing in North America in industrial versus sort of North American auto? If that's flat, and I assume that's a Q4 number, or maybe that's a full year number. What you are seeing on the auto side versus the industrial side, and because it seems like Ford has taken their CAPEX up by a billion dollars, and just again today their CAPEX has gone up. Nissan is bringing plants into the U.S. this year. Can you talk a little bit, does the outlook growth read pretty positive on the auto side of North America?

Well, I think we've had some success this year, this year being 2002, in autos primarily from the transplants, you know, the Nissans, the Hyundai's and the Mercedes here in the U.S. You know, I don't know if there's, in fact as we look at it I don't see any big major opportunities for us out there from new plants being built.

Now, where we derive growth primarily in existing facilities is when they make a model change and they're looking at new sealants and adhesive applications, is where we get a lot of our growth coming from auto plants, other than new facilities being built for finishing. So looking forward we constantly monitor that. I don't see anything changing dramatically from '02 to '03 on the automotive side, and we'll continue to pursue that business.

But if the auto, I mean again if North American industrials is sort of flattish, can you talk about is auto down, industrials up, industrials down, auto up on a year-over-year basis?

We, you know, honestly that's the difficult part of our monitoring our business. I think if you look at the business across the entire spectrum, it's all about the same. Keep in mind we sell to distributors, and it's very difficult to monitor exactly where that equipment is going, you know the final end user. You know, I would think that, you know and this is totally an educated guess, saying that it's probably relatively flat across all sectors.

Okay. Can you also talk, you talk about a two-cent benefit in Q4 from FX. If the euro, and the euro has strengthened beyond Q4 and into Q1, if FX just stays at the current run rate, what kind of earnings benefit would that give you on a year-over-year basis in '03?

I don't know that we've run those numbers specifically, David. I can tell you that today at 1.07 I think that the euro, our average euro conversion rate in the first half of last year was about 90 cents. So if you assume that euro sales are going to be sort of flat with the economic outlook, and you just look at the 20 percent type benefit that we will get from the currency, that's a pretty significant number.

Okay. That's very helpful. Just going back to the home center question. Home center inventories, obviously Depot bought a little bit too much of product, not just your product but everybody's product, and accounts were weaker. Is there an inventory situation also that's impacting your sales in the home center channel right now, or is it more sell through?

I don't think it's an inventory problem. In fact, and I don't have you know complete data on this, but from what we heard is department 24, which is their paint department, actually has been up in their stores, obviously were driven by the amount of paint that they sell. And you know we don't track, it's difficult to track same-store sales, but a preliminary look at it says that we actually were up, same-store sales year over year in Home Depot this year.

And in Q4?

Q4 is pretty flat, yeah.

And just one other question. The unallocated corporate expense, it's sort of all over the map, a little bit lower this quarter. Where should that be on a quarterly run rate going forward? And if you could, I know again it's an amalgamation of a lot of things, but could you just give us a little discussion of where that should be?

Well, that's a difficult one. Last year it was higher because we had some restructuring that we did in conjunction with the ASM acquisition and the Bullhof acquisition, and that drove that number higher. This year we really didn't have any of those activities, so I would say that this year is the more normalized number on a going-forward basis.

I think that's actually everything I had. Oh, I want to ask you one last question. The $5 billion of higher sort of S&G costs, how much of that actually is in the contractor business versus the others? I am guessing the bulk of it is. Could you maybe give a little more quantification of how much of that actually shows in the contractor

I think it's about half.

Okay. All right, that's all I had. Thanks very much.

All right, David, thanks.

Gentlemen, your next question comes from Taroon Kanuf from Wellington Management. Please state your question.

Good morning. I guess most of my questions have been answered. But, Mark, if you could just give us some color on gross margins as we go into 2003. You know, you exited the year with a nice number. Is that sustainable? And you also have introduced a number of new products. What's the impact there, you know, looking into '03?

Well, I think that the overall comment is that they are sustainable on a full-year basis. We do have some volatility in the quarters depending on the mix of products, particularly with the contractor business, which tends to be stronger in the second and third quarters, and the gross margins on some of those products aren't as high as some of the industrial products. We are working a lot of initiatives on the factory to continue to drive improvements in manufacturing costs. Quite frankly, they have exceeded most of our expectations in terms of what they have been able to deliver. And the feedback that we get from the factory is that they have a lot of other things that they see, and they are excited about '03. So I think that it's sustainable, and you know perhaps with continued aggressive activities in manufacturing, as well as the benefit again from the currency that we'll get, that having a gross margin equal to last year's should be attainable and there should be some upside.

And are you seeing any impact from, you know, rising raw material prices? I don't know how much oil would be really an input for you guys, but other areas, you know?

Yeah, we have seen some increase certainly of raw material, you know steel, so on and so forth. We've been very aggressive in driving those raw material costs down, either seeking other vendors here in the U.S. or seeking vendors outside the U.S. We've got an ongoing effort to do that. In fact, this past quarter we added two purchasing agents in China to look at sourcing some components out of Asia this year, and we think that will have a positive impact on us going forward from a cost standpoint.

Okay. Excellent quarter. Thank you, gentlemen.

Thanks.

Your next question comes from Eric Ende from First Pacific Advisors. Please state your question.

Good morning. Great quarter.

Thank you, Eric.

Thank you.

I am a little confused by the extra million dollars in incentives that you cite in plain sentence, which are sales related. I would think that you would be accruing against that during the course of the year, and to have this much in the fourth quarter it would either mean that you had sales in the fourth quarter way above your expectations or you had somehow seriously under accrued in the first nine months.

Well, remember that that number is the delta from the prior year. It's not so much from the run rate versus the quarter. So what we tried to highlight were the $5 million differences versus last year. And last year in the fourth quarter sales were declining. And this year they are actually better, so that's really the reason for the swing.

Okay, thank you.

Ladies and gentlemen, if you have any further questions at this time, please press "*" "1." Gentlemen, your next question comes again from David Guru. Please state your question.

Just actually one quick follow-up question. Given how strong sort of Europe has been this year relative to everything else, and also the currency benefit, can you just give us an updated figure before the 10(k) comes out in terms of what percentage of your sales today are actually in Europe, or euro-denominated, I think that's a better way to put it.

Well, I don't know if we can give you the euro-denominated number. I can probably give you a year-to-date Europe number.

That'd be fine.

That's in dollars. It's about $88 million on the $487.

That's principally in the, more heavily weighted in the industrial and automotive, is it not?

Correct.

Yes.

Thank you very much.

Yup, you're welcome.

Gentlemen, your next question comes from Jeff Kaslup from AIC. Please state your question.

Hi, gentlemen, congratulations on the quarter. I just had a question about the seasonality in your business. It looks as if, if you look over the past years, the fourth quarter is really the strongest quarter, and here I see you guys coming off a little bit from the third. You know, is there any kind of change in seasonality of the business, or is that just, you know, a relatively weak sales quarter because of the economy?

I think the difference in our business is that there's seasonality certainly in the contractor business. Generally you start to see contractor wind down at the end of the summer and fall seasons, primarily because there's fewer jobs that are being done during that period of time. But in the past the industrial business has gotten stronger in the fourth quarter. And I don't know if it's because companies have budgets that they wanted to spend, and they were spending them in the fourth quarter not to lose them, or what it was, but I think the softness in industrial over the last few years has impacted that. We haven't seen that major in-flow of order in the fourth quarter as we have seen in the past.

So rather than blowing their budget at the end of the quarter, they are getting rewarded for saving at the end of the year maybe?

Could be.

That might be, I don't know.

A follow-on question. I am interested in the Home Depot and the home center market. I listened to the Home Depot investor day about a week ago, and do you find that organization is in a bit of disarray, or are your dealings the same as they have been over the past few years?

Yeah, I think they're the same as what we have seen over the past few years. I still think it's a very well-run company. You know, they certainly haven't had the growth that they were expected to get, but they're still growing, and they are adding stores. And frankly we see nothing to indicate that they are in disarray or poorly managed.

Remember, we are dealing with the paint department, which has I think done pretty well this year. It may be a bit different than Home Depot as a whole.

Okay, thank you.

Yup.

Gentlemen, I show no further questions.

All right, great. Well, thank you all for participating today, and with that we'll conclude the call. Goodbye.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.