Materion Corp (MTRN) 2018 Q2 法說會逐字稿

Ladies and gentlemen, greetings and welcome to Materion Corporation Second Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Shamrock. Thank you, you may begin.

Good morning. This is Steve Shamrock, Vice President, Corporate Controller and Investor Relations. With me today is Jugal Vijayvargiya, President and Chief Executive Officer; and Joe Kelley, Vice President and Chief Financial Officer. Our format for today's conference call is as follows. Jugal Vijayvargiya will provide opening comments on the quarter and an update on key strategic initiatives. Following Jugal, Joe Kelley will review detailed financial results for the quarter and then we will open up the call for questions.

Before we begin, let me remind investors that any forward-looking statements made in this announcement, including those in the outlook section and during the question-and-answer portion, are based on current expectations. The company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning.

Additionally, comments with regard to operating profit, net income and earnings per share reflect the adjusted GAAP numbers shown in attachment number 5 in this morning's press release. The adjustments are made in both the current year and prior year periods for comparative purposes and remove certain non-recurring legacy, legal and environmental matters, certain income tax adjustments, CEO transition costs, cost reduction actions and merger and acquisition costs.

And now, I'll turn it over to Jugal for his comments.

Thanks, Steve, and welcome, everyone. I'm pleased to report that for the second quarter, we delivered the highest level of value-added sales, operating profit, earnings per share and net cash in the last 5 plus years. Value-added sales came in at $190 million with operating profit at $15.2 million, resulting in an EPS of $0.54. Net cash for the quarter was nearly $40 million. This marks the 6th consecutive quarter of year-over-year top and bottom line growth. I have been with the company for a little over a year now and I continue to be impressed with the core capabilities and long-term potential. We have a new leadership team energize to deliver today and capture the potential for tomorrow. Leadership responsibilities have been realigned to better suit our opportunities around the world. We have a clearly defined strategy and action plans are underway globally. Companywide, the team is driving a performance-based culture focused on results. Joe will review the financials, but let me share some perspective on a level performance our global team is delivering. Value-added sales were up 8% year-over-year and 5% sequentially. This is a third quarter in a row of record value-added sales and fourth time in the past 5 quarters. PAC segment had value-added sales of greater than $100 million for the third straight quarter. Sales into sixth of the seven end markets have grown double-digit for the first half of the year.

New product sales came in at $31 million, helping to fuel the overall growth. Operating profit was $15.2 million for the quarter, up 26% year-over-year and 9% sequentially. This represents an 8% operating profit, highest level in past 11 quarters. PAC segment delivered 11.2% operating profit, highest level in past 15 quarters. This is the second consecutive quarter of double-digit profit for the segment, which positions us to deliver double-digit profit for the full year, a long awaited milestone.

Net income was $11.1 million or $0.54 per share, up 29% from an adjusted $0.42 per share from the second quarter last year. This is the fourth consecutive quarter with earnings north of $0.50.

In addition to achieving sales and profit milestones, we delivered an all-time record in working capital at 24.3% of sales. You may recall that we had set a target of 25%. Net cash for the quarter was nearly $40 million compared to a net debt position of $8 million in second quarter last year. Our multi-pillar strategy is helping to deliver record results for growth, profit and cash. We will continue to focus into the second half and are improving our full year guidance to $2 to $2.15. We're leveraging the power of one Materion to drive global growth and achieve greater performance. Our results for the past 6 quarters give us confidence that the strategy is working. We have the momentum required to carry us into the future quarters and years. I look forward to sharing more about our performance in future calls.

Now, I'll turn the call over to Joe to cover the financial details.

Thank you, Jugal, and welcome to everyone joining us on the call today. During my comments, I will cover second quarter 2018 financial highlights, review profitability by segment, provide brief comments on the balance sheet, cash flow and modeling assumptions, and finally cover the earnings outlook for 2018. Following my remarks, we will open the line for questions. I am pleased to report strong second quarter 2018 financial results, which represent the sixth consecutive quarter with year-over-year growth in both value-added sales and adjusted operating profit. Second quarter 2018 value-added sales, which excludes the impact of pass-through precious metals, was $189.9 million, an all-time record for any quarter and up 8% versus the prior year second quarter and up 5% sequentially. The increase was driven by new product sales, improved product mix and favorable end-market demand.

New product sales in the second quarter of 2018 were $30.7 million or 16% of value-added sales in the quarter. Our largest end-market consumer electronics increased 6% year-over-year despite an inventory correction in the display portion of this market, which began in the first quarter and continued in the second quarter. We have now delivered year-over-year growth for 9 consecutive quarters in this end market. Defense sales were also robust, reflecting overall demand increases and new program wins. Our focus on commercial performance initiatives related to new product introductions and improved product mix, combined with increased end-market demand continued to drive above market growth. Gross profit margin was $61.8 million in the second quarter, an increase of 13% from $54.8 million in the prior year second quarter. Expressed as a percent of value-added sales, gross margins expanded 140 basis points to 32.5%, driven by performance improvements and leveraging the sales growth. Selling, general and administrative expense totaled $38.5 million, up $600,000 over the prior year second quarter of $37.9 million, due primarily to strategic investments to drive our long-term strategy. As a percentage of value-added sales, SG&A expense decreased to 20% in the second quarter of 2018, down from 22% in the prior-year period. Operating profit totaled $15.2 million in the second quarter of 2018, up 26% compared to the prior-year second quarter adjusted operating profit of $12.1 million. As a percentage of value-added sales, operating profit margin in the second quarter of 2018 was 8%, the highest quarterly profit margin percentage since 2015. Performance improvements related to commercial and operational initiatives combined with sales volume growth led to the year-over-year increase. Net income for the second quarter of 2018 totaled $11.1 million or $0.54 per diluted share, up 29% from an adjusted $0.42 per share recorded in the second quarter of 2017. We have now delivered $0.50 a share or more for 4 consecutive quarters. Looking at income taxes, we recorded $2.9 million of tax expense in the second quarter of 2018, an effective tax rate of 20.9%, higher than our full year guidance, due to timing of some items. Our guidance on the full-year effective tax rate continues to be in the range of 16% to 18%.

Now, let me review 2018 Second quarter performance by business segment. Starting with Performance Alloys and Composites. Value-added sales were a record $110.1 million, up 19% versus the second quarter of 2017 and up 10% sequentially. Value-added sales in this segment have now exceeded $100 million for 3 consecutive quarters. The increase in value-added sales is due to new product introductions, commercial execution and improved end-market demand. The defense market was particularly strong with orders being released, which were previously bottlenecked in 2017.

Operating profit in the second quarter of 2018 totaled $12.3 million, the highest level ever for this segment. Expressed as a percentage of value-added sales, operating profit was 11% in the quarter. PAC's year-to-date operating profit of $22.2 million exceeds the amount of adjusted operating profit generated for all of 2017. The PAC recovery plan launched in 2016 is clearly working. Our performance on the commercial and operational improvement initiatives has delivered profit improvements ahead of schedule. We remain focused on these recovery plan initiatives and others to drive sustained double-digit profitability in this segment.

Looking at the Advanced Materials business segment. Value-added sales in the second quarter 2018 were $57.3 million compared to second quarter 2017 value-added sales of $62 million. Value-added sales declined 8%, due primarily to softer demand and the display portion of the consumer electronics end market continued to phase out of the 4G applications and timing related to the customer re-qualification process associated with the move of the Heraeus high-performance target materials business to a new state-of-the-art target manufacturing facility in Alzenau, Germany. We have completed the move and are ramping up production at the new facility in the third quarter.

Operating profit for the second quarter 2018 totaled $5.6 million compared to adjusted operating profit of $9 million in the prior-year quarter. The decrease in segment operating profit was due to softer demand, unfavorable product mix and relocation and integration expenses related to the Germany facility move. Turning finally now to the Precision Coatings segment. Second quarter value-added sales were $23.4 million, up 4% compared to $22.6 million in the second quarter of 2017. Sales of optical products were up 13% year-over-year, driven by new program wins in defense and strength in the projector display portion of the consumer electronics end market.

The growth in optical products more than offset the decrease in large area coating products sold into the medical end market. Operating profit for the Precision Coatings segment totaled $2.2 million in the second quarter of 2018 compared to $2.3 million in the second quarter of 2017. As a percentage of value-added sales, operating profit margin was approximately 10% in both periods.

Moving now to the balance sheet and cash flow. The company ended the second quarter of 2018 with a net cash position of $39.5 million compared to a net debt position of $8.1 million at the end of the second quarter of 2017. Operating cash flow year-to-date improved $29 million in 2018 compared to the prior year due to stronger earnings and improved working capital efficiency. We continue to maintain a very strong balance sheet and have significant available liquidity to support capital allocation priorities mentioned on previous calls, including organic growth opportunities, further inorganic growth opportunities and consistently return capital to shareholders.

In the second quarter of 2018, we announced an increase to our quarterly dividend of approximately 5%, representing the 6th consecutive year of increasing the shareholder dividend. For financial modeling purposes in 2018, capital spending should run approximately $30 million to $35 million. Mine development investments should be $5 million to $10 million. Annual depreciation and amortization should run approximately $35 million to $40 million.

And finally, now earnings outlook for 2018. We have now delivered 6 consecutive quarters of year-over-year top-line and profit growth, driven by commercial and operational performance improvements, including new product sales growth, favorable product mix, manufacturing efficiencies and an improved cost structure. Based on our current order activity, performance improvement initiatives and our view of end-market demand for the remainder of 2018, we are raising our full year 2018 earnings guidance range to $2 to $2.15 per share. The midpoint of this range represents a 21% improvement over 2017 adjusted earnings.

From our quarterly guidance perspective, we expect third quarter 2018 earnings to be comparable to second quarter 2018 earnings. This concludes our prepared remarks. We will now open the line for questions.

(Operator Instructions) Our first question comes from the line of Martin Englert from Jefferies.

Hi, good morning, everyone, congratulations on the strong results. You seem to be making quite a bit of progress on a number of fronts here. So that's good. Question here on the relocation and integration expenses, how much was that for the quarter and what can we expect in 3Q and possibly 4Q?

So when you look at the quarter for AM and the operating profit there, it's a combination -- the year-over-year decrease is a combination of 3 things, Martin, it's one, it is the relocation as we moved out of the Heraeus facility into our newly constructed German plant and then second, it was softness as it related to the sales due to that move and inability to sell during that period of the move. And then when you look at going forward and also I would tell you it's the display market, sort of the third factor is the unfavorable mix in the quarter that impacted profits, as the display market would continue the destocking, particularly around the OLED screens. That we anticipate to start improving here in the second half. As it relates to the facility cost, we won't have the relocation in the second half, but we will have the ramp-up in the qualification as we look at that factory. Good news, we did ship our first product on July 16th out of the new factory to a large area glass customer. But here during the second half, we will continue to have some inefficiencies as it relates to ramping up that factory, but fully anticipate by the end of the year getting to our mobile run rate.

So no specific -- I understand there is a number of different factors there that impacted everything from the top line as well as this being on relocation.

No specific number, but when you look at the decrease in operating profit on a year-over-year basis, I would tell you those three factors that I referenced probably can -- all contributed equally to the year-over-year decrease.

And moving onto the new located Performance Alloys and Composites. Can you discuss your expectations in the back half of the year for the value-added sales and profitability here based on what you're seeing today?

Yes, Martin. As you know, we've had now 3 quarters of strong sales in that business well over $100 million for 3 quarters in a row and we are determined to continue to push as a trend. And so our focus is to make sure that we continue that and we would expect based on the order entry rates that we have and the general market trends that we have that continuing well on sales. From a profit perspective, as Joe indicated in his remarks, we've had 2 good quarters, really good quarters here in the first half. We want to make sure that we continue the double-digit performance that we've demonstrated in the first 2 quarters into the second quarter. We've communicated in the past that we want to exit the year at a double-digit level and that is where we're focused on. And then afterwards, we'll see, I mean we'll see how this business continues to progress into more of an advanced materials type of a business, but at this stage, we hope to continue the double-digit trend for the second half. We have really good second quarter on the defense side, as some of the bottlenecks in DC opened up. However, I'm not sure if we can continue at that rate for the second half, but in general, I would say that we expect to have a good positive trend on sales as well as operating profit.

And anything that you're seeing or expecting to see related to holiday demand this year, if you can talk about that some?

Yes, I mean obviously the whole consumer electronics sector, we'll see how things play out here as we enter the second half. I would say at this rate, we're not seeing anything negative that would concern us in the second half, but I would say -- also say that it's probably a little bit too early to tell in terms of the pull-through. So as we get more into the third quarter, we will have a better feel for, but in general things tend to be stable, I would say, in that market, we're not seeing anything negative.

Okay. And one last one there if I could. With a lot of activity on the trade policy front and I understand a good portion of this is not directly impactful for you, but any comment regarding any implications that you are seeing for the company if you're seeing any impact to your customer base or changes in the supply chain and how that's being managed?

So first of all, with all the things that are going on in the trade side, as we all know, there's a lot of development on a daily basis. Of course, another development last night with the European Union and the United States. We are monitoring that very closely. We have a very disciplined process to understand what's happening to all the procurement that we're doing and if there is any impact on the trade side and then we're also looking to see if some of our end customers may be impacted. And I can tell you that based on our current understanding of the imposed tariffs and perhaps what's at least at this stage being talked about, we do not have and do not see a material impact. But I want to caution all of us on the fact that there are developments every day in this arena and so it could change any time. But at this stage, I would say it's not really a material impact to our company and to the end customers that we're working with.

Our next question comes from the line of Edward Marshall from Sidoti & Company.

I just wanted to follow up on Martin's final question about the tariff situation and more importantly, I guess, hammering home inflation. I know you do value that revenue and a lot of pass-through on that line, but can you talk about any inflation that you're seeing in the business lines and maybe what you're doing to kind of offset that?

Yes, I would say 2 things. Let me first actually start with what are we doing in case if we do have inflation, I mean we've got a very, I would say, disciplined robust process of understanding if we are seeing any inflation and through our commercial excellence process, making sure that we are able to work with our customers on any issues that come up. So I think we've got a very good process that our teams are employing. With regard to any impact, I mean again I don't experience and we haven't experienced early any meaningful impact on just general inflation. I can certainly have Joe comment a little bit more on it, but nothing of material impact.

The only thing I would tell you that's been little bit material is the increase in the palladium lease rates and so we've been actively managing that in terms of our precious metal and consignment in the palladium lease rates, and working with our customers to pass that through as aggressively as possible. But when you look at our gross margin percent, which we monitor and you can see here at 32.5% gross margin, that's along with the highest levels that we've seen in the last 5 years. So we are effectively, I would say, managing that on a daily basis.

And then on Performance Alloys and Composites, I thought it was a cost exercise, not necessarily a top-line exercise, which -- I'm sure you'll say it's both and that's fine, but it looks like revenues are outperforming, specifically defense and energy and maybe even telecom to some extent. Can you talk about maybe what's going on in there and then also could you break out what the hydroxide sales were year-over-year?

Yes, so any time that we go through a recovery plan, certainly cost is a big factor in the recovery plan, but my view on it is that the top line has to be an integral part of any recovery plan. We can only take so much cost out and at some point, there is not much more to take. So, the top line is a critical part of any recovery plan and we've really put some strong disciplined activities in place to attack certain segments, focus on some of our key products that we have, that is an example being tough met in this business and to drive the top line. As I said, I mean that has to be an integral part of recovery plan. Defense, as we indicated, was a good quarter for us. I'm not sure that level of performance can be sustained in the second half of the year, but we will say was a really good really good quarter. Good recovery in the oil and gas, I mean the rig count is up. Last year the -- at this time, it was around 940, it's coming in around 1,047 in Q2, so good pickup on the rig count which does help us on the oil and gas. We're gaining share on the telecom side. So I can definitely tell you that top-line growth is a critical part of the recovery plan in this business.

And Ed, to answer your question on the hydroxide sale, you recall last year is when we signed the contract, so there was 3 quarters of shipments last year. This year it's spread out over 4th quarter. So in the quarter -- Q2, hydroxide was actually down about $2 million in terms of value-added sales.

And what was the actual number?

Approximately $3.5 million.

$3.5 million, okay, great. And then on AMT, what's the plan for the balance of the year. You mentioned kind of the shift and softness due to the relocation. When I look consumer electronic section, it was only down 2.5%. It looked like broad-based declines across the entire -- across most of the business lines that are in that advanced materials. So kind of looking at that, what's -- when you look at your guidance both from an EBIT, I guess, and [your] perspective, can you talk about what you built into your plans for the remainder of the year for that business line?

Yes, so let me just talk a little bit about the performance. Your comment about the end markets and kind of where it stands for the second quarter. I mean second quarter for us was an absolute record, last year. So we have really tough comps, I think, just for the second quarter alone. But when you look at on a year-to-date basis, I mean for the first half of this year, you'll see that really all of our end markets in that business are up except telecom which is the -- a continued phase out of the 4G business. So on a year-to-date basis, all the markets are up, certainly on Q2 the decline was across a number of markets. What we see as we go through here in the second half of the year is we continue to see the recovery in the consumer electronics side, particularly in the display business. We continue to see the recovery after the destocking that happened here in the first half of the year. We continue to see now the ramp up in the relocation and so, yes, there will be some inefficiencies and some ramp up costs that we will deal with, but we continue to see a ramp-up in the second half of the year. And so we would see a continued improvement in that business in Q3 into Q4. Our expectation is that really entering 2019 as if the business was on a steady state performance that it has done over the last few years. So that's pretty much what we have built in into our guidance and into our plan for the second half of this year.

Our next question comes from the line of Marco Rodriguez from Stonegate Capital Partners.

I was wondering if we could talk a little bit more about the top-line growth and some of the main drivers you're kind of seeing there, understand that at least for the first 6 months, you've had some pretty decent end-market demand. Obviously you put forth for the last year some different strategic focuses that have obviously proven out fairly well here, so I was wondering if maybe you can kind of parse a little bit if possible. When you look at the market demand, it's kind of allowing everybody to kind of regional shift, if you will excuse that phrase, versus kind of the strategic focus is that you've been putting into play in terms of taking share or increasing wallet share. If you can maybe kind of talk a little bit about those 2 sort of dynamics and how that played out for your growth rates?

We can certainly do that. I think there's a number of things that we put a lot of focus on for the top-line. That of course would be in addition to just the general end-market pull that raises all the shifts so to speak. One is, continued growth on new product sales. We have a tremendous focus on that. We've actually shifted R&D expense from, if you look at the R&D expense that we had a year ago versus the R&D expense we have now, we've actually increased our R&D in the company to really accelerate our new product development and new product growth. We have focused on commercial excellence and commercial excellence has a number of things. I mean, one is making sure that we're getting the right return for the value that we're providing to our customers. In many cases, that was -- we weren't there and so we really focused on that.

Another aspect of commercial excellence is making sure the right product mix, so we can have a lot of impact on the mix of our product rate rather than just simply the market having the impact. And so we've been focused on that making sure we're dedicating our sales and marketing resources and our technical sales resources to push in the areas that give us the right return and so product mix is a big factor. So I think there's a number of things that we've been involved in new product sales, getting the right return for the value that we're providing, influencing the product mix and then frankly I mean we've actually changed our organization where we've set up regional organizations in Europe and Asia. We've appointed presidents in those 2 regions. We were setting up an organization underneath them that can push growing sales in the regions. Our customers have been, I think, reacting very favorably. We mentioned last time we received 2 customer awards, one from Skyworks and one from Texas Instruments, recognizing, I think, the performance we are delivering and so delighting the customer is a key part of trying to gain sales as well. So Marco, I think there's a number of things that we're pushing on to directly influence what we can do from a sales perspective rather than simply relying on the general GDP growth or market trends that may be out there.

Got it. That's very helpful. And Jugal, maybe if you can talk a little bit about again coming back to the 4 pillars of your strategic focus here that you've implemented over the last 12 months or so. What specifically maybe have you learned over this period of time that perhaps might need to be drilled down a little bit further maybe in the next 12 months, let's just say?

Yes, I think really in all of our pillars, we have a great opportunity, and as I indicated, I think, in my remarks. I mean I continue to learn that we have tremendous amount of core capabilities and core strengths and it's a matter of just unleashing and sort of untapping the potential that is there in each of these things. So whether it's commercial excellence or the operational excellence, whether it's innovation excellence or M&A that we are focused on, we are looking at each one of those items. We're trying to look at a one Materion focus for customer access, one Materion focus for industry access, one Materion focus for functional excellence to drive in our company. So I think that is starting to take really a strong foothold now as we've had the leadership team in place for about 3, 4 months now, the full leadership team that we put in place. We are modifying our organization, so that there can be that one Materion focus globally across whether it's customers, regions, markets capturing on the industry trends. So I think those are all things that we have the opportunity to drill deeper on over the next 12 months. I think the enthusiasm that we have from our employee base is really energized and motivated employee base. [On the base] -- the performance that we delivered over the last 6 quarters of the top-line growth, bottom-line growth, it's, as they say, I mean, sometimes can be contagious and I think we're -- I'm glad we're catching this bug.

And then switching gears here onto the Performance Alloys performance year-to-date, obviously it appears as if the goal has been met, if you will, or at least you're tracking ahead of the double-digit goal of returning performance alloys to those margins. Just trying to kind of understand going forward, I kind of get the impression that the main focus now is just on maintaining that low double-digit operating margin on VA sales, is that fair or is there some other potential leverage that you have in there that perhaps can drive that higher?

Well, the first thing I would say is that the main focus, I know you used the word maintaining. Our main focus is not to maintain really anything, our main focus on everything is to improve. And so can we continually improve in Q3 and Q4 at least for this year? I'm not sure, yes, but I can tell you that we are absolutely focused on delivering double-digit performance in the back half of this year. As we go past '18 and in the '19, as we've stated before, we are a advanced materials company. That business as I've learned is, it is a highly complex, highly value-added business. The number of technical resources that we have, the number of PHPs we have, the alloy making capability that we have in that business, the solutions that we're providing for our customers. That business should be generating much better results than the type of results that it has delivered and so that's what we're going to be focused on as we move forward into '19 and on is making sure that our customers realize the value and the solutions that we're bringing forward and that we're able to realize the returns associated with them.

(Operator Instructions) Our next question comes from the line of Michael [Leschak] from KeyBanc.

This is Philip Gibbs. Just a question on the defense market. Now you touched upon it a little bit in terms of being strong this quarter, just wanted to get an idea about what was the math in terms of some specifics on the defense side and whether you've kind of sensed a market change in the last 6 to 12 months under this administration for some of your products?

Yes, so first of all, as we indicated, we had a really good strong quarter in defense. I mean typically our defense quarter, our strength of defense business has been in Q4, but we've been trying to push a more balanced scenario for defense. And I think our team has, first of all, done a good job of that. We have seen an uptick from the administration and I think as the number of jobs that were open were getting filled. And so I think the bottlenecks are being removed. We have a number of new offerings that we've put in place. We've -- we won programs, new businesses by the way, a cyber business, there is EOTS business, which is a system for the F-35. We have a image sensor system, named MS-177. I mean these are all examples of new businesses that we have been able to get with the defense side and are capturing on that. So our share, I would say, on the defense side is increasing, as well as I think the general increasing trend from the administration is certainly helping as well. Our optics business on the defense side is up 30% with some of the Paveway activity that we've been involved in the optical filters on the Paveway side. So I think overall, defense is overall market. We see a promising second half, certainly, as I said, not to the level that we saw here in the second quarter, but definitely in the second -- continued trend in the second half.

So Jugal, that optics business was -- that's in more of the Coatings business or is that--?

No, that's in the Precision Coatings business and we do a race for satellites, we do filters for the Paveway missile program coming out of our coatings business, yes.

And Joe, I think last call you had mentioned your expectations for cash from operations was somewhere $60 million or north of $60 million and given that you've seemingly made a nice meaningful stride in the working capital in the second quarter, is -- and your outlook for EBITDA is a little higher. Is that cash from operations outlook been taken up as well?

We have an updated forecast there, but you are correct. We are mainly exceeding our previously targeted improvements on working capital efficiency and that is helping on the cash flow side. You can see the very strong Q2 or even year-to-date cash flow from ops are up year-to-date, $30 million over the prior year. So we continue to have success on that front, but have not formally revised our full year operating cash flow guidance.

Ladies and gentlemen, we have no further questions in queue at this time, I'd like to turn the floor back over to management for closing.

Thank you. This is Steve shamrock and this concludes our second quarter 2018 Earnings Call. A recorded playback of this call will be available on the company's website, materion.com. We would like to thank all of you for participating on the call this morning and your interest in Materion. I will be available to answer any follow-up questions. My direct number is (216) 383-4010. Thank you very much.

Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for participation, and have a wonderful day.