Quaker Chemical Corp (KWR) 2012 Q4 法說會逐字稿

Greetings and welcome to the Quaker Chemical Corporation's fourth quarter and full year 2012 results conference call. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Barry, Chairman, Chief Executive Officer, and President for Quaker Chemical Corporation. Thank you. Mr. Barry, you may begin.

Thank you, Kevin. Good morning, everyone. Joining me today are Margaret Loebl, our CFO, and Robert Traub, our General Counsel. After my comments, Margaret will provide the details around the financials, and then we will address any questions that you may have. We also have slides for the conference call. You can find them in the Investor Relations part of our website at www.quakerchem.com. I'll start it off now with some remarks about the fourth quarter and then I'll follow with some comments on the full year as well.

Overall, I am pleased to be able to report that we had a solid quarter and we did sell in a challenging environment. Let me now try to give you a sense of what we experienced in the quarter, and I will start with sales. Our overall sales were relatively flat in the quarter but were relatively impacted by 2% from foreign exchange rates. Our volumes were up year-over-year by 3% despite weak markets in Europe and South America. We believe our business strategies are largely responsible for this increase and we are benefiting in two ways. One, we continue to make acquisitions and, two, we have grown our volume by executing our business strategies and taking share in the marketplace. So, the combination of both the acquisitions and new organic growth is the reason we have -- continue to grow our volumes under very difficult circumstances.

Going around the regions, Europe is one of our most challenging regions from a sales perspective. Sales were down approximately 7% primarily due to foreign exchange rates and weak end markets. This excludes the impact of our recent acquisition of NP Coil Dexter. We are fortunate that we have been able to pick up share in the market place which has helped us to partially offset the inherent steel and industrial market declines in this region. In South America our sales were down 8% but when adjusted for foreign exchange rates our sales were actually up 5%. This increase is primarily due to price and mix effects rather than volume mix increases.

Steel and automotive markets continue to be very challenging in Brazil. Recently, the Brazilian government has put initiatives in place to help drive growth. We may see some positive impact from this in 2013. So, while Europe and South America were down, our two other large regions, North America and Asia Pacific, were both up 2%. Again, a good portion of this growth is due to our business initiatives. Looking sequentially, fourth quarter versus third quarter, our sales were down by 4% with all four regions showing declines. This was expected as we typically experience seasonality effects in the fourth quarter.

On our gross margins, we saw them expand by 1.5 percentage points. This was primarily due to a relatively stable raw material environment. So, all things considered, we are pleased with our fourth quarter performance. I do want to mention a few items concerning our full-year results. 2012 was another good year for Quaker. We had all-time record sales -- records in sales, net income, EBITDA, and cash flow. Our already strong balance sheet got stronger as well as our cash now exceeds our debt. These positive results were achieved despite the impact of negative foreign exchange rates and the inherently soft or weak markets we experienced in Europe, Brazil, and China.

In 2012, we continued to strengthen ourself strategically as well. All of our key business initiatives, including our acquisitions, are doing well. We made another strategic acquisition and we also launched our revised brand for Quaker. Externally, we were named by Forbes to be one of the top 100 best small companies in America based on earnings growth, sales growth, and return on equity. And from an investor perspective, our return to shareholders for the year was 41% as we continued both dividend and share price appreciation.

Looking forward, we continue to expect uncertainty and a challenging global economic environment, especially in Europe. We also expect raw materials to rise from the increase in crude oil at the beginning of the year. Of course, we plan to keep our margins at the proper levels for the longer term, but during a rising raw material environment there is typically a three to six month lag affect. On the positive side, we do expect to see continued recovery in North America and China as well as growth from our strategic initiatives. So, there are definitely both positives and negatives as we enter 2013.

In summary, we remain committed to delivering good results through the execution of our business strategies. As I've mentioned before, I tend to think of our business initiatives in baseball terms where we have numerous initiatives in all regions that are like singles. We tend to string a series of these singles together to generate our runs or earnings growth. I believe we are seeing this effect in our current results as our many singles are helping us to offset the negative impact of slower global economic activity and foreign exchange and are a big reason for our success over the past few years. The bottom line is that I continue to be confident in our future. We have demonstrated in the past that we can manage through uncertainty and we expect 2013 to be another good year for Quaker.

In closing, I want to thank all of our associates whose dedication and expertise helps to create value for customers and differentiate Quaker in the marketplace. And now I will turn it over to Margaret Loebl, our CFO, so that she can provide more details behind our financials and after that we will address any questions you may have.

Thank you, Mike. Turning to the financial portion of the call today, I will reiterate that Quaker continues to report strong results in the fourth quarter of 2012 and full year of 2012. As you know, we announced net sales and earnings per diluted share of $172.9 million and $0.99 per diluted share for the fourth quarter of 2012 compared to fourth quarter 2011 net sales and earnings per diluted share of $173.3 million and $0.80 per diluted share. Net income for the fourth quarter of 2012 was $13 million compared to net income of $10.4 million for the fourth quarter of 2011.

Full year net sales and earnings per diluted share were $708.2 million and $3.63 per diluted share for 2012 compared to net sales and earnings per diluted share of $683.2 million and $3.66 per diluted share for 2011. Full-year 2012 net income was $47.4 million compared to 2011 net income of $45.9 million. Changes in foreign exchange rates negatively impacted the full-year 2012 net sales by $26.8 million or 4% and net income by $1.7 million or $0.13 per diluted share.

As a general comment, the strong US dollar versus the euro and Brazilian real have been negatively impacting Quaker's reported income and net income. These movements in exchange rates impact Quaker primarily from a translations perspective but also from a transactional perspective. Also, Quaker had a change in accounting method during 2012. Specifically, the Company acquired an increased ownership percentage in Primex, a captive insurance company. Due to the increased ownership percentage and other factors, the Company changed its method of accounting for its investment in Primex from the cost method to the equity method of accounting. As a result, the Company recast its consolidated balance sheet, its consolidated statement of income, and its consolidated statement of cash flow for the fourth quarter and year ended December 31, 2011. I will highlight the impact on our 2012 and 2011 results in my comments to follow.

Now, moving into a deeper look at the financials, key items to note related to the fourth quarter of 2012 are as follows. The fourth quarters of 2012 and 2011 include equity income in associated companies of $0.4 million and $0.6 million respectively, or earnings per diluted share of $0.03 and $0.05 respectively from the Company's ownership in a captive insurance company which I just described. The Company's low effective tax rate in the fourth quarter of 2012 reflects a reduction of valuation allowances on certain domestic deferred tax assets and other contributing factors. The point here is to consider the ultimate fourth quarter 2012 18% effective tax rate versus the outlook for the 2012 effective tax rate, a rate in the upper 20% area which we had communicated to investors at the end of the third quarter 2012.

As it relates to our 2010 Summit Lubricants acquisition, the fourth quarter 2012 included higher other income related to the change in fair value of a contingent consideration liability of $1.7 million or $0.09 per diluted share compared to $0.6 million or $0.03 per diluted share in the fourth quarter of 2011. This item relates to an update to potential consideration that was negotiated at the time of the acquisition. In addition, the fourth quarter results include other uncommon expenses totaling $0.06 per diluted share largely consisting of severance and related items and costs associated with the launch of the Company's new revitalized brand.

Key items to note related to the full year 2012 are as follows. The full years of 2012 and 2011 include equity income from the Company's investments in a captive insurance company noted earlier of $1.8 million and $2.3 million respectively, or earnings per diluted share of $0.14 and $0.19 respectively. The Company's low effective tax rate for the full year 2012 reflects a decrease in the reserves for uncertain tax positions, a reduction of valuation allowances, uncertain domestic deferred tax assets, and other contributing factors. The 24.7% actual 2012 effective tax rate again compares to the high 20% area we communicated to investors at the end of the third quarter of 2012.

The full year 2011 results include other income of $2.7 million or $0.22 per diluted share related to the revaluation of the Company's previously held ownership interest in its Mexican affiliate to its fair value prior to our buyout of the JV partner. The full-year 2012 includes higher other income related to our Summit Lubricants acquisition I mentioned in connection with the fourth quarter results. The full-year 2012 results also include other previously disclosed uncommon expenses largely consisting of severance and related items, certain customer bankruptcies, CFO transition costs and costs associated with the launch of the Company's new revitalized brand.

Turning to chart 4. Product volume in the fourth quarter of 2012 was consistent with seasonal trends. For the full-year 2012, product volumes were up 5% versus 2011. Looking at our financial snapshot in chart 5 and looking at our fourth quarter 2012, net sales for the fourth quarter of 2012 were $172.9 million, a decrease of less than 1% from $173.3 million in the fourth quarter of 2011. Product volumes, including acquisitions, increased revenues by approximately 3% which were offset by decreases due to foreign exchange rate translation of $3.7 million or 2%, and a slight decrease due to selling and price mix of less than 1%. Net sales for the full-year 2012 were $708.2 million, an increase of 4% from $683.2 million in 2011.

Product volumes, including acquisitions, increased revenues by approximately 5% in selling and price mix were reduced by approximately 3% while foreign exchange rate translation decreased revenues by approximately 26.8% or 4% -- $26.8 million or 4%. Gross profit for the year increased approximately $2.5 million or 4% from the fourth quarter of 2011. The increase in gross profit on a consistent sales was due to an improvement in gross margin to 34.2% compared to 32.7% for the fourth quarter of 2011 and 32.7% for the third quarter of 2012. The increase in gross margin is primarily the result of some stabilization and raw materials costs experienced in the fourth quarter of 2012 allowing margins to return to more acceptable levels.

Gross profit increased by approximately $16.1 million or 7% from 2011 with gross margin improving to 33.7% from 32.6% for 2011, reflecting some stabilization in raw material cost experienced as noted above. Gross profit -- gross margins are summarized in chart 6 for your reference.

Selling, general, and administrative expenses increased approximately $0.2 million compared to the fourth quarter in 2011 primarily related to acquisitions and higher selling, inflationary and other related costs which were partially offset by a decrease in foreign exchange rate translation and lower incentive compensation. SG&A as a percentage of sales was slightly up at 26.3% for the fourth quarter of 2012 compared to 26.1% for the fourth quarter of 2011.

For the full-year 2012, SG&A increased by approximately $10.7 million or 7% compared to 2011, primarily related to acquisitions and higher selling, inflationary, and other costs on increased business activity which were partially offset by decreases due to foreign exchange rate translation and lower incentive compensation. Also, SG&A for 2012 includes charges of $0.06 per diluted share for certain customer bankruptcies in the US, $0.03 per diluted share related to CFO transition costs, and certain uncommon charges of $0.11 per diluted share that largely consists of severance and related items and costs associated with the launch of the Company's new revitalized brand. As a result, SG&A as a percentage of sales slightly increased to 24.8% from 21.1% in 2011.

In addition to the other income related to the Summit acquisition that I previously discussed, other income includes a separate increase of approximately $1 million or $0.08 per diluted share related to the change in fair value of an acquisition related liability recorded in the fourth quarter of 2012. This $1 million increase relates to our NP Coil Dexter acquisition and was negotiated to offset any profitability setbacks related to the early integration phase of the project. Hence, we do not conceptualize this other income item as an uncommon item.

The increase in equity in net income of associated companies was caused by improved performance over the majority of the Company's equity affiliates in the fourth quarter of 2012 as compared to the fourth quarter of 2011. In particular, in our Japanese affiliates partially offset by lower income from the Company's equity investments in its captive insurance company. Changes in foreign exchange rates negatively impacted the fourth quarter of 2012 net income by approximately $0.3 million or $0.02 per diluted share.

The Company's 2012 and 2011 effective tax rates of 24.7% and 24% respectively reflect decreases in reserves for certain tax positions due to the expiration of applicable statutes of limitations for certain tax years, or approximately $0.17, and $0.16 per diluted share respectively. Although the Company expects its 2013 effective tax rate to be in the high 20% range, the Company has experienced and expects to further experience volatility in its effective tax rate due to the varying timing of tax audits and the expiration of applicable statutes of limitations as they relate to the uncertain tax positions among other factors. For perspective as an example of the varying items in play, the Company is in the normal three-year renewal cycle of its designation as high-technology enterprise in China which brings with it a reduction to the statutory tax rate.

We enjoyed the status for the past three years and expect to be renewed for the next three years. However, until it is renewed by the local authorities in China, the Company is to record its China income tax expense as a higher statutory rate, namely at a higher rate in the first two quarters of the year versus the lower rate in the second two quarters of the year after receiving the renewal. Earnings per diluted share for 2012 of $3.63 reflects an approximate $0.11 per share dilutive effect as a result of the Company's equity offering in May 2011.

Turning to our balance sheet and cash flow. With respect to capital expenditures, Quaker invested $12.7 million of capital expenditures. In this regard, while we invest to maintain the business and the various initiatives, Quaker invested in a new plant in China both last year and early this year which will be operational early in the second quarter of 2013. Also, in July 2012, the Company acquired NP Coil Dexter Industries for net cash considerations of approximately $2.7 million. Cash on hand is up $15.6 million from year-end 2011.

Looking at chart 8, Quaker has steadily improved its balance sheet over the 2008 - 2012 timeframe after funding various acquisitions over the past years and issuing equity in 2011, Quaker ended 2012 in an approximate positive $1 million net cash/debt position. Specifically, consolidated Quaker had $32.5 million of cash on hand versus $31.5 million of debt. Our consolidated leverage ratio remains strong under one-time EBITDA.

Quaker continues to have a strong balance sheet with sufficient financial flexibility to support its strategic initiatives and future acquisition plans. In the calendar year 2012, the Company's net cash provided from operations was a record of $62.9 million which is up $43.2 million or 220% versus $19.7 million in 2011 and $21.3 million about previous record cash flow in 2009. In conjunction with continued improvement in earnings, the strength in cash flow is attributed to management's focus on effectively managing working capital.

In chart 7, adjusted EBITDA of $80.9 million is up 11% in 2012 versus 2011. Further, adjusted EBITDA has reached record levels at $80.9 million in 2012 versus $40.1 million in 2008, more than doubling over five years. At the end of the day, Quaker continues on its journey to grow the Company profitably.

The Quaker Board of Directors declared its quarterly dividend of $0.245 per share payable on April 30, 2013 to shareholders of record at the close of business on April 16, 2013. Quaker has paid a dividend consistently since the Company went public in 1972. As noted by Mike Barry, shareholder return was 41% in 2012. This reflects the change in stock price and dividends paid in 2012.

Further, as reported in our 10-K -- Form 10-K filed yesterday, Quaker's cumulative five-year return -- total returns exceeds that of the stocks Chemicals Index, and the stocks comprising the Materials Group Index. Going forward, we continue to have a strong growth story leveraging our industry leadership, sales to growing markets, a diverse geographic footprint, customer intimacy, and strategic focus. We will continue to push for growth through increased share and acquisition.

As noted by Mike, we are, however, cautious with respect to the continuing economic challenges in the market, especially in Europe. We do, however, look for continued recovery in North America and China. We also believe there will be pressure on our fourth quarter 2012 gross margin levels as crude oil prices increase. Finally, as discussed earlier, the Company is currently estimating an increased effective tax rate versus the 24.7% rate for 2012.

In conclusion, I too, would like to take this opportunity to thank all of the Quaker associates around the world for their never-ending commitment to our customers and contributions to the success of Quaker Chemical Corporation. This concludes my prepared remarks for today. I will now turn the call back over to Mike Barry.

Thank you, Margo. At this stage, we would like to address any questions from any of the participants on the conference call.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Laurence Alexander from Jefferies & Company.

Just a couple questions. First, giving the cautious commentary on Europe, do you think it's reasonable to think that that will be enough to offset the normal seasonal bounce that you see in Q1 and Q2, thinking sequentially from Q4?

From Q4, well, the way we look at Europe, we see Europe kind of throughout 2012 continually got worse in our market space and the steel markets, automotive markets, and the fourth quarter was kind of at a low point. With Europe we do not expect to see much improvement throughout the year in the inherent markets that we are dealing with. We do continue to expect that we will take share and have some growth there. So, we expect to have some improvement ourselves in Europe as we go forward, but the inherent markets we don't think will come off too much. They are a low point. And as I said, when you look at Quaker overall, of course we don't give guidance but we did mention that we do expect North America and China to continue to do pretty well for us.

Some of the European auto companies are talking about fairly severe destocking in the first part of 2013. If you think about the leads and lags for your business, was that part of what you saw in Q4 of last year or do you think that there was going to be your customers respond to that in the middle of the year? How should we think about the leads and lags?

That's a great question. It's hard for me to get perfect visibility in that. I really don't have a really total visibility on the but we did see, especially in Europe, when we came to the end of the year that a number of our customers did take extended downtimes to I think lower their inventory level.

Okay. And then on raw materials, you are pretty clear on the petrochemical side. What is happening on the vegetable oils and mineral oils?

On the vegetable oils, they are at a low point currently and they have been there for a while. We do envision from what we are seeing and hearing that we do expect some up ticks in vegetable oil prices.

Okay, thanks. I'll drop back in queue.

Thank you, Laurence.

Mike Sison from KeyBanc.

High good morning and congrats on another good year.

Thank you.

In terms of North America and Asia you noted that you are looking for improvement. Have you seen some of the improvement to date or is it still sort of coming?

Well, first, North America has been -- in 2012 was our highest performer from a growth perspective. The other markets around the world, Europe and Brazil and even China, were soft and were declining dependent upon which one of these you talk about, but North America did very well for us this year. We expect North America to continue to do well and grow. Auto sales seem to be going up. Steel capacity utilization is creeping up. So, we expect to see some continued growth in North America this year and in China we do expect the same thing, some continued recovery and China also was relatively soft last year with very little growth in steel production.

Okay. And then in terms of raw materials you talked about going up, can you give us to some degree how much is it up? Mid single digits, high single digits, and in terms of timing, will you sort of catch up in terms of your pricing issues in 90 days, 120 days, quicker?

Right. It's hard to give you that kind of guidance on how much because the way it tends to work in our industry is there is a lag effect between we even get these price increases and we're starting to see early signs that maybe some of our base oils will start to creep up. I just mentioned earlier vegetable oils will probably go up. Based on what we know now, it's not going to be a dramatic double-digit increase or anything from what we've seen, but it will be an increase from where we are today and things always change.

And to the second part of your question, once we get the increases, then we -- two things can happen. Some of our contracts have automatic indexing to them and depending upon when those increases come through and how that's indexed, there is a lag effect. Other contracts and really the majority of our business is really negotiated with our customers and once we get the actual price increases in hand, then we can go to our customers and talk about price increases and generally that process takes a while. So, when you put all that together, once we see price increases hit us, it's probably about a three- to six-month time period where this is a lag effect in there.

Okay. And then in terms of acquisitions, given that the overall industry seems kind of sluggish or the economy seems sluggish, a lot of chemical companies are taking advantage of current interest rates to be more aggressive and grow their company. Do you have opportunities that could be transformative or bigger in scale that could be a good acquisition -- a good transaction for you?

We do continue to look at acquisitions at all levels. We don't have any I would say right now that are transformative and that would be major, major, although we continue to look at opportunities, and those bigger ones tend to be more opportunistic as -- depending upon what the seller wants to do, but we are in constant discussions. We are looking at a number of smaller ones and we would love to do more acquisitions, but we will only do ones that make good sense for our shareholders of course.

Got it. Thank you.

Thank you, Mike.

Thank you. (Operator Instructions) Liam Burke from Janney Montgomery Scott.

Thank you. Good morning, Mike. Good morning, Margo.

Good morning.

Mike, can we talk about Europe again? Western Europe obviously you've got lower steel and auto production. However, their pockets in for instance Eastern Europe looks like steel production is firm to slightly up. Are you seeing any kind of relief in any other parts of the region outside of Western Europe?

Yes. Western Europe -- when we think of Europe we call it EMEA and that includes all aspects of Europe and Africa and Middle East region. Western Europe we definitely believe will be down year over year, but as you point out, there are pockets in there in the Middle East and Russia, of course Russia has significant steel production and we believe Russia will show growth this year. So, when you put it all together, we see a relatively flat type of environment in Europe. And of course what I'm talking about now is market, inherent market and our plans are to try to get growth ourselves by taking share in the marketplace.

Okay. And in 2013, your CapEx, Margo, was almost $13 million or $12 million plus. Are there any significant projects you anticipate and would CapEx go down a little bit or do you expect it to be at that $12 million, $13 million level?

We have a plant we are building in India. That will be going on throughout 2013. We have some additional things, a couple other special projects going on. I do not -- I expect to see some uptick potential to the current level. I don't think it will be game changing for us.

Great, thank you.

Thanks Liam.

Laurence Alexander from Jefferies.

Can you give us a little bit more sense of what you're seeing on the coating side of your business in terms of competitive dynamics and regional market trends?

Our coating side of the business tends to fall into two parts. The major part is chemical milling maskants that go into the production of new aircraft and there that has been a very good business for us. It grew last year. We expect aircraft production to continue to increase this year. It's a global business for us and so we expect that to continue to be good for us. The other part of coatings tends to be in our tube & pipe business. This is a business that we sell both our traditional type of metalworking lubricants as well as coatings and this area has been a relatively small area for us at this point, but it's been growing at a double-digit rate for number of years now and we would continue to expect to see similar growth going forward. So, we think coatings is a good business for us, double-digit type stuff, but it's also a relatively small part of our overall business.

And then as you look at the sort of sluggish demand environment in the first part of the year and the raw material headwinds and then you think about the full-year 2013, do you think you are going to see enough margin pressure that we should also start expecting some potential restructuring actions to offset or do you think its going to be manageable and something that you can catch up in 2014?

We don't have any anticipation of any restructuring activities. As I said in my comments, we still, there's -- it's a balancing here. Europe and some certainly raw material activity, it's not that dramatic but it's going to put some pressure on us but at the same time we have our strategic initiatives, the acquisitions we made in North America and Europe. So, we still think overall 2013 will be a good year for Quaker.

Okay, great, thanks.

Thanks Lawrence.

Thank you. (Operator Instructions) Mike Sison from KeyBanc.

Hi, Mike. When you think about Quaker having another good year in 2013, can you frame up a little bit? Do expect operating income or EBITDA to continue to improve year over year despite all the headwinds you noted? Maybe some color on some of the initiatives that could support more sales growth this year. And just want to get a little bit more numbers behind the good if you will.

Yes. And you might notice we don't really say that because we don't really give guidance. I know you are trying to flush that out. Of course our goal for the past several years we've kind of set records year after year, EBITDA and net income and sales and that continues to be certainly our goal. And, yes, we always have challenges and as I mentioned it's our goal to work through those challenges and we have done that and that's our plan to do it again. So, I can't give you too much guidance but I can talk about we made a number of acquisitions, as example, over the past few years all of these relatively modest acquisitions.

Most of these acquisitions we bought technologies in one part of the world and then we can use those technologies in the rest of our world to leverage growth. And in our business, we have long sales cycles, so it takes awhile. It's not something you do overnight and we continue to see and expect to have good progress over the next several years as we continue to roll out these initiatives and grow them and hiring people to help us with that. We are hiring as a Company right now. So, we're pretty -- feel really good about our various business initiatives that we are focusing on, especially the ones we got for the acquisitions as example.

Okay. And when you talk to your large steel customers in terms of their sentiments, do you sort of sense that they're feeling a little bit better as we head into '13 versus '12? Sort of overall?

It might depend where they are located. If you're in Europe, you are still a producer in Europe, you're probably not feeling too great right now and they are taking action, they are doing some shutdowns and consolidations. If you're in the United States right now, you're seeing the overall market continue to uptick and come back. Not dramatically, a few percentage points growth here and there. So, you're seeing steady increases. Certainly in China, China's freight it was a pretty weak year last year for that steel industry. That was a steel industry that was growing pretty dramatically over the past number of years and now it is starting to kind of hit a low point last year and it does seem to be showing signs of good uptick right now. So, it's kind of a mixed bag I would think. I would think some areas would see positive trends and others like Europe not positive.

Right. One last question, Margo. Any thoughts on selling and administrative expenses? Will that continue to go up a little bit in '13 versus '12?

Not dramatically, flat to not dramatically. We continue to invest in our business, so we will continue to invest in it in line with our growth.

Great, thank you very much.

Thank you, Mike.

(Operator Instructions) If there are no further questions at this time, I'll turn the floor back over to management for any further and closing comments.

Given there are no other questions, we will end our conference call now and I want to thank all of you for your interest today. We are pleased with the results in the fourth quarter and for the full year and we continue to be confident in the future of Quaker chemical. Our next conference call for the fourth quarter results will be late April or early May, and if you have any questions in the meantime please feel free to contact Margo Loebl or myself. Thanks again for your interest in Quaker Chemical.

Thank you. This does conclude today's teleconference. You may disconnect your line and have a wonderful day. We thank you for your participation today.