Lennox International Inc (LII) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Lennox International Q3 2013 earnings call.

For the conference, all the participant lines are in a listen-only mode.

There will be an opportunity for your questions.

Instructions given at that time.

(Operator Instructions)

And, as a reminder, today's call is being recorded.

With that being said, I'll turn the conference over to the Vice President of Investor Relations, Mr. Steve Harrison.

Please go ahead, sir.

Good morning, thank you for joining us for this review of Lennox International's financial performance for the third quarter of 2013.

I'm here today with Chairman and CEO, Todd Bluedorn, and CFO Joe Reitmeier.

Todd will review key points for the quarter and Joe will take you through the financials -- the company's financial performance and outlook.

Financial results in prior periods have been revised to reflect sold businesses and discontinued operations.

In the earnings release we issued this morning, we have included the necessary reconciliation of the financial metrics that will be discussed to GAAP measures.

You can find a direct link of the webcast of today's conference call on her our website at www.lennoxinternational.com.

We will archive the webcast on that site and make it available for replay.

I would like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements.

For information concerning these risks and uncertainties, see Lennox International's publicly available filings with the SEC.

The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Before I turn the call over to Todd, I would like to announce the date of our annual investment community meeting will be the morning of Wednesday, December 18, in New York City.

Please mark your calendars, invitations and more details will follow.

The event will also be webcast.

Now, let me turn the call over to Chairman and CEO, Todd Bluedorn.

Thanks, Steve, good morning everyone and thanks for joining us.

The company's strong business momentum continued in the third quarter with 8% revenue growth at constant currency and earnings-per-share from continuing operations up 34% from prior-year quarter.

Both adjusted and GAAP EPS from continuing operations were $1.30 which set a new record for GAAP EPS for Lennox International.

Total segment profit margin expanded 190 basis points and also set a new record at 11.9%.

The company's growth continued to be led by our residential business, but we also saw an acceleration in our commercial business in the third quarter.

In residential, revenue was up 13% at constant currency and segment profit grew 51%.

New construction revenue is up high single digits and for the second quarter in a row we were pleased to see replacement business grow even faster at 13%.

As most of you know, replacement business contributes more than 75% of residential segment revenue and has a richer product mix than new construction.

For the third quarter in a row we saw a step up in 14 plus SEER shipments from the prior-year quarter.

These high efficiency systems were 38% of residential cooling product shipments in the third quarter, up three points from the third quarter a year ago.

Within minimum efficiency 13 SEER equipment shipments low-end R-22 equipment continued to trend down from a year ago.

Replacement revenue growth was strong in the third quarter despite cooling degree days being down a double-digit percentage from last year in the key summer months of July and August.

We continue to see some of the pent-up demand build up over the last year start to flow back and contribute to robust residential growth.

However, I would note that pent-up demand relates to cooling products as a result of elevated repair rates on compressor bearing units over recent years.

Gas furnaces are typically replaced and not repaired.

So, we do not expect to see the same impact from pent-up demand in the winter months as we have seen in the summer months.

What we do expect to see through the winter, however, is ongoing market share gains as we continue to win dealers over to Lennox with our expanded distribution network innovative HVAC systems and controls and strong dealer support.

The fourth quarter is off to a solid start.

In our commercial business, revenue was up 8% at constant currency and profit was up 21%.

Segment margin hit a record 16.4%.

In North America, revenue was up double digits at constant currency in the third quarter.

As expected, we realized a pickup in national account equipment revenue growth on the strength of new national account business.

We continue to win in the marketplace with 29 new national accounts last year and 15 more so far this year including 9 in the third quarter.

Our Lennox national account services business continue to see an especially strong growth as we leverage our national [power] relationships.

In the emergency replacement market we continue to see good momentum from our new product Raider as well as from our expanded distribution footprint as we attack this $1.4 billion market segment opportunity.

In Europe, our commercial HVAC business was up for the first time in a year despite the soft market conditions still in that region.

Revenue was up low single digits at constant currency.

In refrigeration, revenue was down 2% at constant currency and profit was down 5%.

Refrigeration continued to experience soft market conditions in Europe with revenue down mid-single digits at constant currency.

In Australia, we have seen the economy slow in third quarter.

And, after latest Australian election and government changeover, lawmakers have drafted legislation to repeal the carbon tax in that country.

We have experienced a slowdown in our refrigeration wholesale business in that country including in our refrigerated operations.

Australia revenue was down low double digits at constant currency in the third quarter.

In North America, revenue was up slightly but continued to be negatively impacted by push outs from supermarket customers.

Previously, we expected a pickup in North America shipments in the second half of 2013, but we now expect this business to fall into 2014.

In emerging markets for refrigeration we continue to see strong growth.

South America revenue was up double digits and China was up well over 50% at constant currency.

Before I turn it over to Joe, let me update you on a couple of our strategic initiatives.

In residential, we added 3 new Lennox PartsPlus stores to our distribution network in the third quarter and are on track with plans to add a total of 28 of these wholesale stores this year.

We now have 130 PartsPlus stores and they continue to be one of the keys to the success we are seeing in our residential business.

Within these stores, about 75% of the sales are HVAC equipment and 25% of the sales are parts and supplies.

In our commercial distribution expansion, we now have 31 regional and local distribution centers as we continue to invest to provide the high level of same-day next-day delivery that customers require for emergency replacement.

We are on track with our plans to have at least 32 commercial distribution centers in place by the end of this year.

In addition, we are often leveraging PartsPlus stores for smaller commercial rooftop units like our new Raider product for the emergency replacement market.

While it is still early, we are pleased with the momentum we are seeing with Raider in serving the emergency replacement market.

In the third quarter, we continue to invest in the business introducing new products and expand residential and commercial distribution as well as return cash to shareholders.

We paid $12 million in dividends to repurchase $33 million of stock in the quarter.

Year-to-date we've repurchased $66 million of stock.

For the full-year, we are raising our stock repurchase guidance from $100 million to $125 million including plans to repurchase $59 million in the fourth quarter.

Currently, we have $305 million remaining under our existing stock repurchase authorizations.

Now, I'll turn it over to Joe.

Thank you, Todd, good morning, everyone.

I'll provide some additional financial details and comments on the business segments for the quarter starting with residential heating and cooling.

In the third quarter, revenue from residential heating and cooling was $434 million, up 12%.

Foreign exchange had a negative one point impact on revenue growth, volume was up 9%, combined price and mix was up 4% with both price up and mix up.

Residential profit in the third quarter was $57 million, up 51%.

Segment profit margin was 13.1%, up 330 basis points from the prior-year quarter.

Residential results were positively impacted by higher volume, favorable price and mix, and lower material costs with partial offsets from higher SG&A and investments in our distribution expansion.

Commercial heating and cooling segment revenue in the third quarter was $239 million, up 9%.

Foreign exchange had a positive 1 point impact on revenue growth, volume was up 8% and combined price and mix was flat.

Commercial segment profit in the third quarter was $39 million up 21%.

Segment profit margin was a record 16.4%, up 160 basis points from the prior-year quarter.

Commercial results were positively impacted by higher volume and lower material costs, with partial offsets from higher SG&A and investment in our commercial distribution expansion.

In our refrigeration segment, revenue in the third quarter was $195 million, down 4% from the prior-year quarter.

Foreign exchange had a negative 2-point impact on revenue growth, volume was down 2% and combined price and mix was flat.

Refrigeration segment profit was $24 million, down 5% from the prior-year quarter.

Segment profit margin was flat at 12.3%.

Refrigeration results were impacted by lower volume and SG&A investments with partial offsets from lower material costs and productivity initiatives.

Looking at special items after tax in the third quarter, the company had $700,000 for the net change in unrealized gains on unsettled futures contracts and a gain of $100,000 for other items net partially offset by a $500,000 special legal contingency charge.

SG&A was $137 million in the third quarter compared to $126 million in the prior-year quarter on higher selling expenses and higher incentive compensation expense.

Corporate expense was $17 million in the third quarter, up from $14 million in the prior-year quarter.

Cash from operations was $153 million in the third quarter, up from $75 million the prior-year quarter.

Capital spending was $18 million compared to $12 million in the prior-year quarter.

Free cash flow in the third quarter was $136 million, up from $63 million in the third quarter a year ago.

Total debt was $435 million, and our debt to EBITDA ratio was 1.3, ending the quarter within our targeted range of 1 to 2 times.

Cash and cash equivalents were $38 million at the end of September.

Before I turn it over to Q&A, I'll review our current outlook for 2013.

For the industry, we continue to expect North America residential HVAC shipments to be up high single digits for the full-year.

We still anticipate North America commercial unitary shipments to be up low single digits for the industry in 2013.

And, we continue to expect Europe HVAC and refrigeration markets -- market shipments to be down low single digits for the full-year.

Obviously, we are in an environment of high political and economic uncertainty.

But, based on the company's performance year-to-date and current outlook, our guidance for 2013 revenue growth remains 6% to 8% with a neutral impact from foreign exchange on a full-year basis.

We now expect residential product mix to be flat for the full-year versus our prior-year guidance of a negative $5 million.

We now expect $35 million -- a $35 million benefit from price and lower commodity costs for the full-year versus $30 million previously.

However, these two favorable adjustments to guidance are largely being offset by the choppiness we are seeing in the refrigeration markets which is presenting more of a headwind than expected in our previous outlook.

We continue to be on track for approximately $30 million in material cost savings for the year through a combination of source initiatives and engineering lead cost reductions.

And, we still expect corporate expenses of approximately $85 million for 2013.

Incorporating third quarter results, we are raising the low end of our 2013 guidance for adjusted EPS from continuing operations from a range of $3.45 to $3.75 to a new range of $3.50 to $3.75.

GAAP EPS from continuing operations guidance moves from a range of $3.38 to $3.68 to a range of $3.43 to $3.68.

To wrap up with a few other guidance points for 2013, we continue to expect net interest expense of approximately $15 million for the full-year.

Our tax rate is still expected to be between 34% to 35% on a full-year basis.

Our fully diluted share count for 2013 overall is still expected to be approximately 51 million shares.

And, for capital spending, we continue to target approximately $60 million in 2013.

And with that, let's go to Q &A.

(Operator Instructions)

Keith Hughes, SunTrust.

Yes, thank you.

A couple of questions, one specifically within commercial.

Was the strength on renovation, was it new construction?

And, just any details there.

And, also in residential, have you seen any changes in your business here in October in terms of pace of growth given all the events that have been in the news in the last several weeks?

First, on commercial, our mix of business, as you know, Keith, is two thirds replacement and that was the trend that we saw in third quarter.

So, the growth is in planned replacement as well as in emergency replacement.

We saw good growth with Raider and investments we've made there both in product and distribution paid off.

So, it was replacement growth.

In terms of Q4, we continue to win in the marketplace on residential and we are off to a solid start.

As I mentioned in the call, pent-up demand is primarily an air-conditioning heat pump event not a furnace event.

And, we sell, as a percentage of our mix, more of those in the summertime.

So, we won't see -- I don't think we'll see the same pent-up demand unleashed in fourth quarter but we are off to a solid start.

Okay, thank you.

Rich Kwas, Wells Fargo.

Yes, hi, good morning, everyone.

Just a question on price cost and as you think about commodity improvement next year.

Just remind us where you are with your hedging activity.

And then, it seems like you haven't seen the full benefit from lower commodity costs that were realized earlier in the year.

So, I know it's early for '14, but just conceptually how should we start thinking about that?

Our hedging program as you know, Rich, is we are hedged on copper and aluminum and we are hedged 50% -- about 50% for purchases 12 months out is the way to think about it.

So, yes, there is some lower cost hedges that are flowing through our books than there were this time a year ago.

But, I think at the same time, I would point out that steel pricing is trending up and we think that will be some headwind as we go into next year.

In terms of the broader price cost equation, this industry and we've done a good job over the last couple of years, more specifically this year, of being able to get price to offset commodity increases during the cycle.

And, we expect we will do something very similar as we go into 2014, announce a price increase and pass on to customers to offset steel increases, freight increases, cost increases we have in our businesses.

And then, so as you think about '14, with this level, the magnitude of the spread this year, is it fair to say that you're going to try to offset the higher cost depending on what steel does here going forward but then there's going to be some benefit coming through?

So, net/net something similar is potential for next year in terms of the spread benefit?

Or is that just -- would that be too optimistic?

We will tighten up the guidance in December.

I'm not trying to be too cute with you, but we will play that out a little bit as we get closer to December on that particular point.

I think the message I would leave you with is we are committed to getting price in 2014 just like we did in 2013.

Other things I would put in the model is on our commodity cost to the side, our material cost reduction efforts, we are going to get plus or minus $30 million this year.

I would use that as a placeholder for next year as our material cost reduction program continues to play out.

The mix benefits that we got this year I'd expect us to continue to drive mix in 2014 with all the investments that we've made.

Okay, and then, last quick one.

Just on non-residential, are you seeing any signs on the construction side of increased quoting activity?

There's been some chatter out there amongst some companies that things are starting to pick up.

So, just curious what you're seeing on your front.

Sort of on the margins.

As I said to Keith earlier, at least in our commercial business, we -- our commercial businesses we have seen it in the replacement side of the business, the new construction may be percolating a bit, but corporates are still, and many of our customers, more specifically in the grocery segment of refrigeration, are a little cautious right now about new investments.

Okay, thanks.

Appreciate it.

Rob Wertheimer, Vertical Research Partners.

Quick question on the share buyback which was up a little bit, especially with a little bit of extra weight into 4Q.

Is that any kind of an indicator as to your view on the attractiveness of the acquisition environment or is that just business as usual until or unless something were to happen?

The second.

It is business as usual, something in case -- until something happens.

In a more positive way I would talk about it as we had a really good cash quarter.

And so, we, as we've said about, I'm never embarrassed to give -- we're never embarrassed to give cash back to our owners.

And so, we thought it was just prudent and almost a housekeeping event of raising it in line with what we over delivered in a very good summer quarter.

Great, and it was a great quarter.

One of the things we struggle to model a little bit is the corporate and other line which has bounced a little bit around.

It was down this quarter, I think the implied guide is up next quarter.

Is there anything -- can you maybe explain the volatility in that line a little bit?

I had thought maybe we stepped up to a higher level last couple quarters and then this one was lower.

I think we were still up year-over-year in third quarter.

We may not have been as high as what you had in your model, but I think we're up.

I mean -- fourth quarter is going to be a big corporate expense quarter for us.

And, if you do the backward math it's $25 million, $30 million in fourth quarter.

And, this is primarily related to higher incentive comp and our annual plans as well as our long-term plans and we are triggering higher incentive comp.

Q4 tends to be a true up quarter for us.

The honest answer is year-over-year it bounces around because of STI and LTI, or short-term incentive and long-term incentive.

But, full year, the guidance is $85 million and I think that is consistent with what we said on the last call.

Indeed.

Okay, thanks, very much.

Josh Pokrzywinski, MKM Partners.

Just back on the price cost and sourcing benefits for this year.

I understand some of those are getting diluted by the refrigeration headwinds, but I would have thought we would've seen a little bit more margin expansion, particularly in residential, off that growth this quarter.

Is that somehow weighted more to 4Q?

Or was there more investment in the PartsPlus stores sequentially that was diluting that?

I guess just any color there or any timing there in for fourth quarter would be helpful as well.

No, I guess I just struggled little bit with the premise, Josh.

I know maybe it didn't tie to your model, but we thought residential had a great quarter with earnings up 50% and margins up dramatically.

In commercial, same-same.

And then, in refrigeration, even in some tough end markets and revenue of constant FX down 2%, they had constant margins on a year ago basis.

So, I would argue that we're seeing the incremental drop through that people had expected and certainly what we committed to.

And, we saw that in third quarter.

And, I think if you project out our guidance we'll see it in fourth quarter.

Okay, I guess just the way I was looking at it, though, was versus 2Q in residential, it looked like a normal seasonal progression in the margin, the step down quarter-to-quarter.

And, if I had remembered it right, it seemed like a lot of those benefits on sourcing and price-cost were weighted to the second half.

Is that true or did I miss something there?

I think you broadly had it, but again, I think we will see some more of those material -- if that's your question, we will see some more of those material cost reductions in fourth quarter.

But yes, we are still committed to the 30% -- $30 million sourcing cost reduction where two-thirds of it or so in the second half of the year.

Okay, that's helpful.

And, as you guys think about the pricing environment heading into next year, I know fourth quarter is usually an announced price increase.

Do you think the appetite for price is still there in the market with commodities being flattish?

I think on net and demand, maybe on a macro basis, being a little anemic maybe outside of residential markets?

Do you still feel like you should prosecute price for '14?

I think as I said earlier, I think -- well let me wrestle you down on the premise.

Our commercial business is up 8% in third quarter.

And, we are getting momentum on planned replacement and the emergency replacement.

So, I think the commercial market is picking up a little bit, certainly the parts of the market we see, and residential strength, I think, continues.

Also, on commodities, I think copper is probably a tailwind as we sit right now, but I think steel is definitely a headwind.

And so, as I said earlier, yes, short answer is we need to get price in 2014.

And, I think we will play out in a similar way to what we did in 2013, announce something going into the year and capture it.

And, I think the industry has done that in the past and we plan on doing it in 2014.

Okay, that's helpful, and just one last one for me.

You guys have talked in the past, I think over the past several years, about thinking about Lennox as a whole as levering up with incremental margins in the low 20% all in.

With the sourcing benefits you've put in place and the PartsPlus expansion, and certainly getting more of a market tailwind here, how should we think about that structurally today and over the next several years?

Does that number shift more into the high 20% approaching 30% or are there other items we should be thinking about?

Last December when we gave a three-year look on the business, the implied drop through was closer to 30% than it was to 20%.

And so, I would've said a year ago, in December when I talked, I would've said use 30% in any medium term model.

We will give an updated view of that when we are together in December.

Okay, that's helpful.

Thanks, Todd.

(Operator Instructions)

Walt Liptak, Global Hunter Securities.

Hi, thanks, good morning, guys, and a good quarter.

Wanted to ask about the comment on the R-22 trending down.

And, I wonder if you could talk about is it cost related or is it sales effort towards more systems sales?

I think it's all of the above.

The R-22 sale really is driven by -- or really driven to a consumer who just can't afford to do what is right for himself on an MPV basis and are just managing short-term cash flow.

And, as consumer confidence has trended up and people are feeling better about the economy in 2013 than they did back in 2011, we have seen the mix up and the system sales go together to help drive down R-22.

And, part of that is the market, part of that are clear actions that we've taken as we talked about 18 months ago that we were going to do around our marketing mix and how we position the product and how we sold the products.

Things like introducing icomfort Wi-Fi, our control system that ties together a whole system, really drive system sales is a big part of what we're doing.

But, also it is because R-22, as we get closer to the formal obsolescence of [Vergent] production, it's harder and harder, I think, for dealers to make that sale to consumers.

And so, in third quarter it was under 10% and heading down.

Okay, great.

And, if I could switch gears and just ask about your outlook for refrigeration in 2014 and I think you're looking for a pickup.

What's that based on?

I think it's conversation with our customers.

It is some of our large grocery customers and our dialogue and conversation with them of pushing things out and moving into 2014.

And, when we get into the December call we will give a little bit more color on that.

But, I think more than anything I'm sending a signal that on last call I talked about being second half of '13.

I think it's more likely the pick up is going to be '14.

Okay, got it.

Thanks.

Jeff Hammond, KeyBanc Capital Markets.

Hi, guys, this is James Picariello calling in for Jeff.

Just a question about Europe, what you guys -- I know it's a smaller piece of pie, but what you guys are seeing out of Europe?

And, also if you could just flush out your comment on the choppiness in emerging markets, particularly what the cadence was in Europe from July through October or September, October?

First, I'll answer the second part of your question first.

In emerging markets, we had great success, Brazil up double digits and China up over 50% for the quarter.

So, emerging markets we did well.

In Europe, it was a story of two different businesses.

And, we are driven in Europe, given the size of our business and what we do there, by -- often by larger orders.

And, in third quarter commercial HVAC was up low single digits.

Our refrigeration business was down single digits.

And, again, we are focused -- our growth strategies are focused on Eastern Europe, North Africa, the Middle East, what traditional Europe, France, Germany, was flattish to slightly down and just continues to tread water is the way I would think about it.

Got you.

All right, thanks, guys.

Samuel Eisner, Goldman Sachs.

Thanks, good morning, everyone.

Just had a couple questions on the commercial business.

It looks as though -- you mentioned that mix, or price mix was flat, but I'm just curious how you're thinking about market share on the commercial product, particularly given, I guess, the seemingly success of the Raider product?

I think we won share in third quarter.

I think we won it both in national accounts and in emergency replacement.

And, the investments that we've made in both those segments on product are paying off.

We've traditionally had strength in national accounts and a lot of the customers we won over the last 18 months -- or some of the customers we won over the last 18 months are picking up some of their buying habits second half of the year.

And, I think clearly in emergency emplacement we picked up some share both in second and in third quarter.

Thanks, that's great.

And then, just lastly on the refrigeration business.

You said that performance there is coming in a little bit weaker than you had expected.

Is that more from a regional standpoint that it's coming in weaker than expected?

Is that just there's some product introductions that are a little bit weaker?

Just help us understand a little bit more where the specific weakness is coming from.

I think it is driven by end markets.

I think our business is performing well both on the innovation of their products and even in a tough revenue environment keeping their return on sales flat, which demonstrates strong operational performance.

I think what we're seeing is Australia, which is a meaningful part of our refrigeration business, 20%, 25% of what we do in our refrigeration segment.

We've seen pressure there.

And, we're a refrigeration wholesaler and the government has pending legislation to eliminate a carbon tax.

And, as often the case when there is regulatory change, the market tends to freeze up as people wait for clarity.

And, we're seeing some of that in Australia business and that's why revenue was down double digits for us there.

And then in the US, we were up, but just a bit.

And, the segment there that we are seeing slowness in is the grocery segment.

And, I think our -- I think that's an industry phenomenon.

I think our team is doing well, I think it is just the customers are pushing out orders.

Got you, I appreciate it.

Thanks.

Rob Wertheimer.

Thanks for the follow up, just a real quick one.

Is the Raider product a material portion of the commercial mix at this point?

Is it additive or dilutive to margin if so?

It is consistent with margin so it is order of magnitude the same margin.

And, if material is defined as 10% or more, it's not material yet.

Okay, perfect.

Thanks, Todd.

Aditya Satghare, Lazard Capital Markets.

Hi, it's Aditya from Lazard here.

Two questions, so you talked about the high-efficiency [investments portfolio mix] being up this quarter versus last year.

Do you expect to see any similar benefit in terms of consumer buying behavior as you go into the winter season?

Yes, we will give guidance on 2014 as we get a little -- at our December analyst day.

But, the investments we've made to mix up are paying off both in product and the way we've handled other elements of the marketing mix.

But, I also think the consumer is stronger than they certainly were a year ago.

And, we are going to do everything we can continue that mix up in 2014 and quite frankly expect it.

Good, next question is on -- when we think about -- you guys are grabbing share on commercial and doing really well on the residential side, but how do you think about potential competitive response in terms of new product introductions?

Or other competitors trying to expand their distribution channels and so on?

How should we think about potential competitor response here?

So, the old line, the other team is being coached too, right?

So, we certainly expect responses.

We see responses and the game is nothing that you do lasts more than the year or two and you have to continue to be adding to it.

And, we continue to innovate on product and we will continue to do that.

We know we have to take costs out to be able to compete, we continue to do that.

I think distribution is tougher for our competitors to do.

We are in a unique position in our Lennox brands that we own all our distribution.

So, we can make our own decisions on what we want to do and what we don't want to do.

And, we've made a decision we want to grow it.

Using independent distribution it's more complicated on how you implement.

So, I think we have a unique opportunity given our distribution strategy.

And, we are going to continue to grow it.

And, lets see how people respond and when they do, we will respond to the responses.

[That's what counts].

So, you have exercised good execution in the quarter.

And, with no further questions in queue I'll turn it back to the presenters for any closing comments.

Great, thanks, operator.

A few points I want to leave you with, we continue to see strong growth in our residential business and we're now seeing pickup in our commercial business as well.

And, we expect refrigeration markets, most specifically in Australia and grocery in the US, to remain choppy for the balance of the year.

Overall, the fourth quarter is off to a solid start and the company remains strategically well positioned to capitalize on growth in our major end markets and drive increased profitability through our operational initiatives.

We look for to our investment community meeting on December 18 in Midtown and we hope to see you there as we discuss our outlook and plans for 2014 and beyond.

I thank everyone for joining us today.

Ladies and gentlemen, that does conclude your conference for today.

Thank you, for your participation.

You may now disconnect.