NuStar Energy LP (NS) 2006 Q2 法說會逐字稿

I would like to welcome everyone to the Valero L.P. second quarter 2006 earnings release conference call. [OPERATOR INSTRUCTIONS] Thank you. I will now turn the call over to Mr. Mark Meador, Senior Manager of Investor Relations for Valero L.P. Please go ahead, sir.

Thank you, operator. Good afternoon. Welcome to Valero L.P.'s second quarter 2006 earnings conference call. With me today is Curt Anastasio, CEO and President of Valero L.P.; Steve Blank, our CFO; and other members of the management team.

If you have not received the earnings release and would like a copy, you may obtain one from our website at valerolp.com. Attached to the earnings release we have provided additional financial information on our business segments. If after reviewing attached tables you have questions on the information that is presented there please feel free to contact us after the call. Before we get started I would like to direct your attention to the forward-looking statement disclaimer included in the press release. In summary it says that forward-looking statements contained in the press release and conference call are intended to be covered by the provisions of the Securities Litigation Reform Act of 1995. Factors that could cause our actual results to be materially different include those we've described in filings we made with the SEC. Curt.

Good afternoon and thank you for joining us today for our quarterly earnings conference call. For the second quarter our results were in line with our expectations and our guidance to investors on the first quarter call. Earnings applicable to limited partners from continuing operations were 27.8 million, or $0.60 per unit, which compares to 17 million or $0.74 per unit recorded last year. Including the effect of discontinued operations, net income applicable to limited partners was $27.5 million or $0.59 per unit.

During the quarter our results were impacted primarily by higher operating and interest expenses. Several planned turnarounds and operational issues at certain of our customers' refineries also had an impact on partnerships results. With respect to outages our results were affect by planned turn arounds at Valero Energy's Paulsboro, Texas City, and Three Rivers refineries as well as Dosoros Mandam refinery in North Dakota. Additionally, unplanned outages at Valero Energy's McKee and Texas City refineries also impacted our results for the second quarter. For the six months ended June 30, 2006, earnings applicable to limited partners from continuing operations were 63.1 million or $1.35 per unit, compared to 34.8 million or $1.51 per unit reported for the same period last year.

Distributable cash flow available to the limit partners from continuing operations was 41.4 million, or $0.88 per unit for the second quarter compared to 22.1 million or $0.96 per unit report for the same period last year. For the six months ended June 30, 2006, earnings applicable to limited to limited partners from continuing operations were 63.1 million or $1.35 per unit, compared to 34.8 million, $1.51 per unit reported for the same period last year. Distributable cash flow applicable -- available to the limited partners from continuing operations was $41.4 million, or $0.88 per unit for the second quarter, compared to 22.1 million, or $0.96 reported for the same period last year.

For the six months ended June 30, 2006, distributable cash flow available to limited partners from continuing operations was $91.8 million, or $1.96 per unit compared to $45.2 million, or $1.96 per unit for the six months ended June 30, 2005. The $0.885 per unit distribution declared by our Board is payable August 14, to unit holders of record on August 7. Distributable cash flow available to limited partners from continuing operations covers the distribution to the limited partners by 1.0 times for the second quarter and 1.11 times for the six months ended June 30, 2006. The increases is in income and distributable cash flow compared to the second quarter of last year were primarily due to the Kaneb acquisition completed on July 1, 2005. Of the $23 million increase in operating income, $17.7 million, or over 75%, was attributable to the Kaneb deal.

Our balance sheet continues to be in great shape. Our debt to capitalization ratio was 38% at the end of the second quarter, well below the MLP Pure Group average of around 50%. With our incentive distribution rights capped at 25% providing a significant cost of capital advantage we're well positioned to follow through with our growth strategy going forward.

As I have done in previous quarterly conference calls I'd like to compare the results with the second quarter of 2006 to the first quarter of 2006 since the results for the second quarter of 2005 do not include the results of the former Kaneb businesses. Starting with next quarter's results, I'll begin to provide year-over-year quarterly comparisons since the results of the former Kaneb businesses will then be reflected in the numbers for both quarters. Looking at the second quarter 2006 throughput by segment, crude oil pipeline, refined product pipeline, and refined product terminal throughput were all up compared to the first quarter of 2006.

Throughputs in our crude oil pipeline segment were up 13,000 barrels per day, or 3% primarily due to the unplanned outages that had occurred at the Valero Energy McKee and Three Rivers refineries. Throughputs on our refined products pipeline segment increased 8,500 barrels per day due to higher throughputs on our Bally pipeline which connects refineries in the Corpus Christi, Texas area to our Edinburg and Harlingen, Texas terminals. Recall that we had previously expanded the capacity at the Valley Mine in anticipation of higher throughputs which we are now enjoying.

More recently we completed the 25-mile pipeline extension from our Harlingen, Texas, terminal to Citgo's Brownsville, Texas terminal in mid-March. Throughputs on our legacy Valero L.P. refined product terminals business segment were higher by 13,000 barrels per day or 5%, primarily due to operational issues that occurred at Valero Energy's Mckee and Three Rivers refineries in the first quarter, as well as higher seasonal asphalt demand in the second quarter. Storage throughputs on our crude oil storage assets were lower in the second quarter compared to the first by 29,000 barrels per day or roughly 6% mainly due to the planned turnaround at Valero Energy's Texas City refinery that began in the first quarter and extended into the second. Subsequent operational problems experienced at that refinery also impacted throughputs in the storage asset business during the second quarter. Operating expenses increased 8.1 million to 79.2 million compared to the first quarter. During the second quarter we experienced higher costs related to a problem with a hose change-out at our -- St. Eustatius terminal. This problem has been resolved. The hose has been changed out and the terminal is now fully operational.

We also experienced higher power costs due to increased throughputs on our system and higher internal overhead costs. Additionally, operating expenses were higher in the second quarter as we accrued for terminal reimbursement projects performed on behalf of our customers. For those types of projects we are reimbursed by our customers with the offsetting amounts reflected in revenues. We expect third quarter operating expense to be in the range of 80 to 85 million, primarily due to catch-up maintenance expenses on the former Kaneb assets. In the fourth quarter we expect operating expense to be lower, in the range of 75 to $76 million.

General and administrative expense increased 1.8 million to $10.4 million compared to the first quarter and were in line with our guidance that we provided in the first quarter. Going forward we expect quarterly G&A expense to be in the range of 11 to 12 million. Depreciation expense increased $650,000 to $24.8 million from the first quarter of '06 relating to the completion of the valuation exercise for purchase accounting on the former Kaneb assets. We expect depreciation expense to be in the range of 24.5 to 25 million per quarter going forward. Interest and other expense increased $1.4million to $16.9 million. Going forward we expect quarterly interest expense to be in the range of 16.5 to 17.5 million, as we expect interest rates will continue to rise.

Last, income tax expense decreased $1.6 million to $492,000 primarily due to lower taxable income at several of our taxable entities during the second quarter. We expect the effective tax rate to be in the range of 4 to 6% going forward. Looking at our capital expenditures for the year, we are now anticipating expenditures to be around $180 million. This is higher than the previous guidance we provided of 125 to 140 million primarily due to more strategic growth projects scheduled for the second half of this year. Of the $180 million in total CapEx for '06 we expect to spend around $135 million for strategic growth projects and 46 million for reliability projects.

For the six months ended June 30, '06, the partnership incurred $51 million in total CapEx, of which 35 million was for strategic growth capital, and 16 million was for reliability capital. Of the 35 million in strategic growth capital, 19.3 million was for the Burgos pipeline project, which I'm pleased to report we have now completed. In total, the CapEx for this project was nearly $59 million and we expect incremental throughputs of 36,000 barrels per day and an annual EBITDA contribution of around $8.2 million. The remainder of strategic growth capital for '06 of about $100 million is primarily related to terminal expansion projects we have started or will start shortly in the second half of this year. We expect all of the terminal expansion projects we have planned, including projects at Texas City, Texas, Portland, Oregon, the New York Harbor area, Jacksonville, Florida, Savannah, Georgia, St. Eustatius, in the Caribbean, and elsewhere will start contributing to the partnership's results during 2007.

I would now like to provide some more detail on the nearly $300 million of strategic growth projects we've identified for the next 2.5 years. As I mentioned in last quarter's conference call, the 300 million of strategic growth projects includes more than $250 million of terminal expansion projects, over 30 million of ammonia pipeline projects, and approximately 13 million of ethanol blending and biodiesel projects. The 250 million of terminal expansion opportunities focuses on meeting the growing demand for terminal capacity in certain of the markets we serve. Most of our terminals we are expanding are nearly 100% leased, so our capacity is tight. As a result, our customers are signing up long-term deals, anywhere from one year evergreens to ten year contracts for additional storage at our facilities.

Some of the trends we see in the market that are providing greater terminaling opportunities for us include the high commodity prices which in relative terms makes logistics cheap compared to the value they deliver, volatility in the energy markets, and the willingness of energy traders to take physical positions at storage facilities in order to enhance profits. Persistent [Contango] markets which are also supporting demand for storage, and last but not least, strong refining fundamentals that are expected to remain good for some time. Strong refined product demand, tight refining capacity, and the challenge to product supply presented by the move toward cleaner burning fuels are all bullish factors for refining. Strong refining profits and higher refinery utilization rates tend, of course, to be supportive of throughputs through our pipelines and terminals.

The markets where we are investing to increase storage are mainly strategically located marine terminal facilities on the east, west, and Gulf Coast, of the United States, as well as internationally at our facilities in St. Eustatius in the Netherlands, Antilles, Point Tupper in eastern Canada, Amsterdam, and the United Kingdom western Europe. For example, on the Gulf Coast we believe we can double the size of our Texas City terminal, a 2 million barrel facility, we're planning to take advantage of the strategic location of the terminal which is in the midst of several major refineries. We're changing the strategy of the prior ownership there to provide world-class service to a smaller number of large customers rather than attempting to do many things for a large number of small customers. At our Jacksonville, Florida, terminal, a 2.1 million barrel facility, we'll be adding 500,000 barrels of additional storage. In our Savannah, Georgia, terminal, a 900,000 barrel facility, we're returning to service around 400,000 barrels of storage capacity. Both of these projects are supported by long term commitments from customers.

On the East and West Coast we'll be adding an additional 250,000 barrels of storage and improved pipeline connections at our Linden, New Jersey terminal in the New York Harbor area. We are returning to service around 875,000 barrels at our Piney Point, Maryland terminal, which serves the Washington D.C. area. Adding at least 200,000 barrels of Queen product storage at our Portland, Oregon terminal. Additionally, we expect to increase storage capacity at our Stockton, California, and Vancouver, Washington terminals where we are seeing stronger customer demand.

Internationally at our St. Eustatius facility, which is our largest single terminal facility at 11.3 million barrels, we recently signed a long-term deal to support the construction of another 1.7 million barrels. This is a key facility for us that provides for the storage and transshipment of crude oil and refined products and also has a processing plant. Last year we had around 1,250 vessels visit the deepwater terminal. At our 7.5 million barrel Point Tupper facility in Nova Scotia, we're planning to add close to 2 million barrels of storage and are evaluating a major dock expansion.

In Amsterdam, our 1.1 million barrel facility situated in the Harbor with water connections to the North Sea and down the Rhine into Europe, we're planning to more than double the capacity of the terminal by adding an additional 1.7 million barrels. This busy port location supports a strong fuel oil business as well as gasoline blending for export to the United States and other markets. Our ammonia pipeline is the premiere ammonia pipeline in the United States. It has the capability of transporting offshore product from the Gulf of Mexico, source for places like Trinidad, Latin America, and other Gulf Coast locations. We have several debottlenecking and pipeline extension projects planned to accommodate the increasing business we anticipate on this system.

Bullish factors supporting the ammonia beta business include higher natural gas prices which have shut in land-based gas plants promoting longer hauls of ammonia on our pipeline system and the growth of ethanol and biodiesel, which is supportive of foreign plantings as well as farming of other agriculture products which is driving increased utilization of fertilizers like ammonia. Our strategy is to further accelerate growth of what is already a strong base business by diversifying to industrial end users who want to use the pipeline system to provide feedstock to chemicals plants. We're looking to build a pipeline connection to a new origin in southern Louisiana. We're also looking to build several pipeline delivery laterals to industrial users on the east leg of our ammonia system and in southern Louisiana. We have begun installing a new booster prompt to allow us to capture incremental tariff revenue by increasing throughput volumes to both existing and new customers. The booster pump product should be operational next month, while we expect the lateral expansions to be of service starting in 2007.

A longer term trend we will study that might drive significantly more non agricultural demand on the system is a projected increase in the use of ammonia by utilities who seek to burn more coal as a proportion of their fuel mix and diversify further away from expensive natural gas. Stricter air pollution rules coming into play over the next several years require utilities to invest to control emissions from burning coal and will require them to abate NOx emissions. It turns out that ammonia in the presence of certain catalysts is very effective in abating NOx emissions and therefore presents a potentially large long-term opportunity for us that we intend to explore. Finally, we recently completed nearly all of the $13 million of growth projects related to ethanol and biodiesel, specifically at our Linden and Paulsboro terminals on the East Coast, our Southlake terminal in the Dallas area, and our Glasgow, Grangemouth, and Grace terminals in the U.K. These projects converted our terminals to allow for receiving, storing, and blending ethanol and biodiesel. We're expecting an annual EBITDA contribution from these projects of nearly $3 million. And with the 2005 energy bill calling for the first ever renewable fuel standard requiring increased use of ethanol and biodiesel we expect these projects will be good contributors to earnings going forward.

Now turning to our outlook for the remainder of 2006, for the third quarter we expect to benefit from increased pipeline tariffs that took effect July 1, higher volumes from the Burgos project, and higher seasonal demand for asphalt and refined products. However, we expect to continue to be negatively impacted by scheduled turnarounds at refineries we serve, and higher maintenance expenses. A couple of the turnarounds at the Valero Energy refineries we serve originally anticipated to occur in the first half were deferred and are now expected to take place in the third quarter, including turnarounds at Valero Energy's Ardmore and McKee refineries. We also expect to be impacted in the third quarter by an extended turnaround at NCRA's McPherson, Kansas refinery.

Additionally, we expect third quarter maintenance expense to be higher as we start several of the maintenance projects on the former Kaneb assets. Keep in mind several of these projects we planned were expected to start in the second quarter, but have deferred primarily to the third quarter, some to the fourth. As a result we expect third quarter earnings to be similar to the second quarter. However, for the fourth quarter, we expect operations and results should improve significantly that the partnership benefits from fewer turnarounds, lower maintenance expense as we will have completed several of the maintenance projects in the third quarter, and the seasonal increase in bumper fuel sales. We continue to expect the results for the second half of 2006 will exceed the financial performance for the first half of 2006.

In closing, I continue to remain very optimistic about the opportunities we have at Valero L.P. to continue to grow the partnership and more important to increase unit holder value. Bullish factors are driving demand and pricing in our business. Continuing growth in energy demand, tight supply demand, higher energy prices, and volatility, geopolitical events, higher refinery utilization rates, and the move to clear burning fuels are all adding up to strong growth for companies like ours that have the right assets in the right places and the financial wherewithal to capitalize on the opportunities we see before us. We are well positioned to take advantage of this strong market with our diversified and solid asset base. And with significant number of growth projects going forward, the majority of which come from the Kaneb assets we acquired, we substantially enhanced our opportunity set to grow our customer base and throughputs across our system.

We previously announced our target to grow our distribution by 7 to 8% annually. We increased the distribution by $0.03 per unit in the first quarter of this year, which represents a 3.5% increase over the 2005 distribution. Given our current view of the business we expect to be able to recommend a further distribution increase to the Board in the second half.

Before I open it up to the Q&A I'd like to discuss the recent IPO Valero G.P. holdings and what that means to our unit holders. Valero G.P. holdings LLC, a wholly owned subsidiary of Valero Energy Corporation, recently completed its public offering of approximately 41% of its outstanding units. Included in the Valero G.P. holdings are all of Valero Energy's interests in Valero L.P. including the 2% general partner interest, 100% of the incentive distribution rate, and approximately 10.2 million common units, or around 21% limited partner interest in Valero L.P. Valero Energy currently holds the remaining 59% interest in Valero G.P. holdings and has stated its intent to eventually sell all of its interest including the general partner interest pending market conditions and subject to a 180-day lockup agreement.

The primary reason Valero Energy has decided to sell its interest in Valero L.P. is to allow both companies to grow independently going forward. Our separate companies continue to be viewed as one and analyzed on a combined basis by the regulatory bodies which is particularly a problem when we target a significant acquisition. We saw this issue arise in the Kaneb deal when Valero L.P. had to divest certain assets because they overlapped with certain Valero Energy assets, not Valero L.P. assets. Given the unprecedented growth that both Valero Energy and Valero L.P. have experienced over the past three years, it's become increasingly apparent that the companies must be separated in order for each to pursue an independent growth strategy. We expect that the eventual separation of economic interest between Energy and L.P. will significantly mitigate antitrust risk going forward and position us well on the acquisition front.

Even though we will become separate companies, we will continue to maintain an ongoing strategic relationship with Valero Energy. Bill Greehey, who recently stepped down as CEO of Valero Energy will be the Chairman of Valero L.P. and Valero G.P. holding as well as Energy. Under Bill's leadership Valero Energy has become the largest refining company in North American and one of the best and most admired companies in America. And Valero G.P. holdings and Valero L.P. will continue to have the benefit of Bill's leadership and vision in his role as Chairman.

The management teams at Valero L.P. will remain intact and Steve Blank and I and other members of senior management will continue in the same position at Valero G.P. holdings as we have at Valero L.P. Valero L.P.'s operations will continue to be strategically located within Valero Energy's refining and marketing supply chain, serving seven of their refining systems. We will continue to have throughput commitments from Valero Energy under our commercial agreements and additionally having a publicly traded currency at G.P. holdings will help facilitate the ongoing growth of Valero L.P. So it's really a huge positive for our unit holders as it will position the partnership for even greater growth and success in the future. At this time I will open it up for Q&A. Operator.

Yes. [OPERATOR INSTRUCTIONS] Our first question comes from Gabe Moreen with Merrill Lynch.

I had a questions on the maintenance CapEx levels, Curt, and just in thinking about the decline from the third to the fourth quarter and getting it down a little bit further I guess, how should we be thinking about 2007 after you've been through some of these integrity expenses on the acquired Kaneb assets?

I think that what we would say is that the fourth quarter -- everything remains status quo through 2007 that the fourth quarter would be more representative of the maintenance expense run rate than the third.

Are you guys getting any benefit from, I guess being through the first full cycle of pipeline integrity CapEx spending?

Well, that integrity spending, of course, is a regulatory requirement which we have to do, whether there's a financial benefit to it or not, and, yes, the benefit you get is reliable operations, and if you look at our pipeline utilization rates today they are higher than they were in the past. so you get better utilization if you have more reliable assets that have better integrity.

Sorry. I meant in terms of some of those expenditures maybe falling off as time goes forward.

Oh, I'm sorry. Yes, they should. We've gotten -- the large majority of the integrity management that required work that we had to do is behind us. So, of course, it's an ongoing thing, it never really ends. You have to maintain your assets, but most of what we had to do by regulation by mid 2008 is now behind us, something like maybe 90, 95%. Rick [Lime] is here, our head of operations is here. Is that accurate, Rick.

Yes. What we'll see now is just the stagnant effect of us catching up on the integrity issues, and going forward we just anticipate those being lower.

If I could just ask a question on VLO.s ownership of VEH and how you think the regulators are looking at it. If I understood you correctly you think the regulators to see total -- I guess the effects or not to see an impact if VLO were to do an acquisition, you feel that VLO would need to sell out of its entire VEH position as opposed to being, say, under 50%.

The government regulators will never tell you that with a degree of certainty, but we do believe based on conversations we've had and our looking at the situation, and by we I'm also including Valero energy personnel in that. That really what's necessary here is a total economic separation, yes.

Great. Thanks very much.

Okay.

Our next question comes from Kent Green with Boston American Asset Management.

There seems to be about three moving parts here.

Only three?

Well, there's -- no, no, as far as driving distributed cash flow. The savings on K&M plus the -- the so-called unscheduled and scheduled down times, and then the higher costs. Could you kind of quantify which ones of these are completed, which are going to go away, which was nonrecurring, in your opinion?

I'll take a stab at it. The Kaneb stuff by and large is just ongoing. I think as Curt mentioned in his remarks a great percentage of the increase is from Kaneb.

I'm talking about on a per unit basis. I understand a lot more units, a lot more dollars, but obviously those units were distributed, to the Kaneb piece.

Yes. I don't have it on a unit basis.

We'll have to get back to you. This is Mark with Investor Relations, give me a call and I can, feel free to talk about it and I can get some support for you.

You're right, you're going to have to look at the interest expense. You're going to have to look at how many units we laid out in the exchange. We have not worked that out, but we can easily provide that information for you.

What's not recurring on the scheduled maintenance, that's limited to the distributed cash flow?

Well, the reliability capital spend, or do you want the part of it that came from Kaneb?

We want to make sure we know what you're asking.

Every year there is scheduled down time, and then there is a lot of unscheduled downtime.

Oh, on the refineries that connect us to our five months, yes. And the question is?

Which is usual and which is unusual in dollar amounts?

Well, what happened this year to us, which was unusual, was there was a lot -- more than the normal amount of refinery turnaround or maintenance work because new regulation came in on cleaner fuels and ultra low sulfur diesel, so all refineries in the country, not just Valero Energy had to gear up to make that cleaner burning fuel, and they tended to wait as late as possible to do it and still meet the deadline. So a lot of that that tended to hit us this year mainly second quarter as we said, some got pushed by Valero Energy to third quarter. A lot of that was because they needed to invest in a cleaner burning fuel. So you saw more turnaround activity than normal, for sure this year.

On a longer term basis, all these new refineries in Saudi Arabia and the Mid East on that product, would that be a positive or negative to Valero's since you're tied in with accrued and then product?

My take on it, and of course Valero Energy may have their own take, but my take on it is that this refining business is going to be good for some time to come. I don't see how it really is not going to be good for the next few years. What happens when you start talking about ten years from now or 20 years from now, I tell you, your guess is as good as mine. The Saudis I don't think are going to build any refineries before, I'd say, four, five, six years from now at the earliest. So in that kind of time frame I personally am bullish about the refining industry. Beyond that probably your guess is as good as main.

But one thing -- this is Mary Morgan in marketing and business development. One thing there that we're well positioned for is while domestically we serve the Valero refinery, we're also very well positioned to serve -- say that there are increasing imports coming from anywhere in the world, including Saudi Arabia, our terminals are very well positioned to take advantage of that. So if U.S. refining can't meet the overall needs of product demand in this country and imports increase we'll both be enjoying full utilization on the internal pipeline assets as well as possibly increased demand at our terminals that serve water boring imports.

If you look at -- just going back to my remarks about where we're putting capital dollars, the 250 million of the 300 million I mentioned these days, the kind of exciting project that we're excited about here. 250 million of it is terminal expansion that's almost entirely in the type of marine terminals that Mary is talking about. Which are strategically located to handle imports for example. So that's why you need to -- you need to have the right place, the right types of assets in the right places in this business.

And I'd just add one thing about the Kaneb acquisition. Although we haven't worked it up on a per unit basis, when we did that deal we based it on the '05 budgets for each of Valero, L. P. standalone and Kaneb. Since that time the FTC made us sell a lot of the businesses so we've lost a lot of the originally budgeted EBITDA. But when you make that adjustment and some other adjustments to fine tune things, we're ahead of what we thought that we would get in the way of EBITDA.

The deal has worked out like Steve said, exactly the way we thought it would. Slightly better actually.

Thank you.

[OPERATOR INSTRUCTIONS] And your next question comes from Steven Sugarman with GPS Partners.

Hi, guys.

Hello.

You were talking about your third quarter guidance and lowered it a bit due to delayed maintenance costs, and -- but I didn't see any uptick or outperformance in the second quarter where those costs should have shown up, I would have expected before they were delayed. Can you shed some light on that and tell me, did we miss in other areas?

I think the changeout in St. Eustatius pretty much took from us what we gained from the deferred turnaround into the third quarter. It's always a bit more complicated by that, but the math would work there pretty well.

What was that again?

Well, we had to change out a subsidy hose at our St. Eustatius terminal which is a deepwater marine terminal and we had problems doing it. We had some snafus in the changeout. We had delays, we had shifts being delayed, we had higher costs in making that changeout, which is a complicated thing to do. It's not done very often. It's several years that go by before you do something like that. So we had problems doing it. It's all behind us now, it's all fixed, it's all operational, but that was an unexpected operating problem that we had.

Thank you, guys.

[OPERATOR INSTRUCTIONS] At this time there are no further questions. Mr. Meador, are there any closing remarks?

Yes, thank you, operator. Thank you again for joining us today for the second quarter conference call. If you have any further questions please call me at Investor Relations. Thank you.

This concludes today's Valero L.P. conference call. You may now disconnect.